Historic turnaround on state aid: Scholz pushes the EU to imitate the US green turn with strong public subsidies for green companies

Power. Currency. Weapons. Being strong at global level in these three areas is the basic condition for overcoming the current global crises. The United States and China are well equipped in all three sectors (the United States more than China), and their world leadership, confirmed by the last G20, derives from this. Apart from the single currency, Europe has neither energy nor weapons: hence its political weakness. These factual truths form the leitmotif of Federico Rampini’s latest essay (The long winter; Mondadori), an intelligent and documented analysis of “true crises and false apocalypses”: energy shock, war in Ukraine, climate change, migratory pressures and demographic imbalances. For Rampini, once again the West will be able to overcome crises better than illiberal autocracies, above all thanks to the free market, to its «creative destruction» (Joseph Schumpeter). A conviction that prompts the author to write: “But the state will not save us”.

On this last point I do not agree. The distrust in the State is more than founded if we look at Italy, increasingly incapable of adopting an economic policy in strategic sectors, led by industry and research, since the bonus policy of the last governments is not such, with the squandering of public money, also shared by the current executive on pensions and various handouts. But in other Western countries the state is a serious matter, a democratic entity that thinks, studies and decides the country’s strategies. This applies to the United States, a symbol of the free market, which from 2008 onwards overcame crises, including Covid-19, with large injections of public money into the economy, without which private industry would never have done. A river of money, trillions of dollars, which shows no signs of stopping: in the US, starting January 1, 2023, a package of 369 billion dollars allocated by the administration of Joe Biden will enter into force to support US green companies, convince them to move investments from Europe to the US and encourage consumers to “buy American”.

Faced with this US offensive, the only country in Europe that is trying to parry the blow is Germany. As it happens, a country where the social market economy is accompanied by a strong federal state, undoubtedly the most influential in Europe and which decides almost all of its strategies in the economic field. I write “almost all” and not all because in recent years, despite the attempts by Merkel and Macron to create European champions in the industry to counter China, the Eurobureaucrats in Brussels, led by Margrethe Vestager (EU Antitrust), the they prevented. A historic own goal by the EU, whose chancellor Olaf Scholz would like to avoid an encore: for this reason, faced with the US super-package of state subsidies for green industry, he is trying to convince the EU Commission to do the same.

If implemented, it will be a historic turnaround on state aid, banned for decades by Brussels with the full support of Germany, which has always hindered state aid to other countries in the name of budget austerity, only to discover its saving effect now . Behind Scholz’s movement, of course, there is the German industry, especially the car industry, which sees Biden’s incentives for the US car industry as a nightmare, which risks cutting off the legs of the German export of electric cars to the USA, a business they counted on in Germany. A month ago, as the first step in negotiations aimed at avoiding an EU-US trade war, Scholz launched the idea of ​​a new transatlantic trade and investment treaty, on the model of the failed 2016 TTIP. But the idea was rejected instantly not only from Washington, but also from Brussels, for reasons that have remained mysterious. The clash between Scholz and Macron also dates back to those days, when the two avoided the joint press conference after the meeting in Paris: for some, the ideas of Macron and Scholz did not coincide on various points, above all on defense and energy, but also on trade relations with the United States.

Now, since Biden’s subsidies will come into effect in a few weeks, Politico argues that Scholz has decided not to waste any more time, aiming for a radical plan B, which the EU should adopt: «Instead of an open tariff war with the America, similar to that of the Trump era, the option would be to tear up the classic free trade regulation, and play Washington at its own game, funneling state funds into European industry to breed local green champions like solar panels, batteries and hydrogen.’ In fact, the completion of the EU and German turnaround on state aid, of which robust signs have already been glimpsed: in July, the Berlin government saved the giant Uniper, the main gas distributor, from bankruptcy with 8 billion in public money in Germany, and on 5 August Vestager, faced with protests from the EU parliament, declared herself “ready to urgently evaluate compatibility with the rules on state aid”. But, after three months, all traces of that urgency have disappeared.

Meanwhile, supporters of the Scholz line are appearing in Brussels, led by the French Thierry Breton, commissioner for the internal market: in confirmation of the French line, which has always been in favor of using state funds for industry, he proposes a «European solidarity” to strengthen EU companies in key green sectors (batteries, semiconductors, hydrogen). Basically, a second common debt, after the Recovery Fund. On 29 November Breton will travel to Berlin to discuss various EU issues, including industrial policy. He clears up the suspense: will Germany, hitherto opposed to common EU debts, make a second somersault?

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