NewsUSAThe battle for the EU sovereignty fund begins: with what money?

The battle for the EU sovereignty fund begins: with what money?

The forces are unfolding, the arguments sharpening, the drums pounding: the battle of the European sovereignty fund to support industry in key sectors is drawing near, and the member countries of the European Union are preparing. With what money to finance it?

The world is advancing in a much more political globalization than the one we have known since the 1990s, with a strong role for the State, in terms of building strategic autonomy, supporting companies in the race in fundamental sectors, with protectionism, restrictions on exports , etc. In this context, there is a broad consensus that the EU must respond to the vigorous initiatives of the United States and China to compete with them and not fall into a dangerous dependency in areas such as microchips, batteries, hydrogen, strategic raw materials. .. But the abstract consensus poses concrete dilemmas: to what extent can we sustain this industrial action with State aid? To what extent to resort to common funds?

In the first section, the EU countries with less room for maneuver fear that a relaxation of the rules will burst the internal market, giving companies from the most prosperous countries a competitive advantage. In the second section, the countries with greater fiscal solidity refuse to support new common debt to finance a generalized industrial boost. Seven of them -Austria, Denmark, Slovakia, Estonia, Finland, Ireland and the Czech Republic- sent the European Commission a letter dated Thursday and to which Reuters had access, in which they flatly reject that perspective. There are three others, of weight, that have not signed, but think the same: Germany, the Netherlands and Belgium. They maintain that a large part of the NextGeneration pandemic funds is still available, that from the beginning they were linked to projects in the digital and green areas and that this is the bag to be thrown away.

But doubts abound as to whether that, together with a limited easing of state aid, is enough. The specific green initiative of the Biden Administration alone measures some 340,000 million euros, almost half of the Next Generation set. On the other hand are the stimulus for new infrastructures, of almost one trillion, and that of microchips and science, of 260,000 million dollars. The Commissioner for the Internal Market, Thierry Breton, for example, speaks openly about the opportunity to issue new debt. In a podium published on Thursday in Financial Times, Commission Vice-Presidents Dombrovskis, Vestager and Timmermans are more cautious, pointing out that the EU Emissions Trading Scheme is expected to raise around €700bn by 2030, that the European Investment Bank can play a role and that “other existing instruments can contribute”.

Aware that the constitution of the sovereignty fund —which she announced in the State of the Union speech last September— will take time, the president of the European Commission, Ursula von der Leyen, promised bridging measures that act quickly and focused. She said at the Davos forum that they would be both as a loan and as an aid. On February 9 and 10, the EU leaders plan to hold a summit that will address these issues.

Countries like Spain and Italy have received a very strong support thanks to the majority allocation of NextGeneration funds. They are not in a comfortable political position to now ask for a new common debt. It is true that much remains to be spent. But in perspective it is seen that the competitors play with enormous magnitudes, and that the EU can maintain this rhythm and its internal balance only with strong community compensation mechanisms. If the world we live in is one of powers with great public interventionism, the EU will inevitably have to adapt as a whole. The alternatives —staying in a perimeter of other decades, leaving it in the hands of the States— mean losing the international race or the cohesion of the bloc.

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