Europe should discuss new common instruments to counter the impact of the US’s massive clean tech package and boost the bloc´s competitiveness, Eurogroup president Paschal Donohoe said.
(Bloomberg) — Europe should discuss new common instruments to counter the impact of the US’s massive clean tech package and boost the bloc´s competitiveness, Eurogroup president Paschal Donohoe said.
“There is a need for a debate, a need to evaluate instruments like that and consider how they could be funded,” Donohoe told Bloomberg News in an interview on Monday.
European Commission President Ursula von der Leyen suggested last September a sovereignty fund to support cutting-edge sectors in the EU, with a proposal expected this summer. But before discussing a sovereignty fund, or an “equity fund,” Donohoe called for overhauling the existing €800 billion ($866 billion) pandemic recovery fund with “timely and appropriate” changes to face the new challenges.
“How we implement NextGenerationEU and how we make sure that is focused on European competitiveness is what I believe we can do quickly,” he added.
European finance ministers are scheduled to discuss President Joe Biden’s $369 billion package to support the rollout of electric vehicles and other clean tech industries, with incentives aimed at production in the US. The EU is considering some changes to its state aid rules to defend against the relocation of investment and jobs, and is exploring common funding to help member states with less fiscal space.
“I sincerely believe we must act quickly to defend our interests and protect our businesses,” European Council President Charles Michel said Monday in a news conference in Stockholm. “This is also an opportunity to reinforce our European competitiveness for the future.”
Tax Deal
Donohoe, who is also serving now as Ireland’s expenditure and reform minister, said he expects a “speedy implementation” of a minimum 15% corporate tax rate across OECD countries, following EU finance ministers’ agreement in December. However, there are still outstanding issues related to the redistribution of some profits from multinationals. Even so, the implementation of the minimum tax rate will “add a further impetus” to discussions, he added.
Ireland’s government recently warned the impact of corporate tax reforms may exceed its previously forecast €2 billion per year by 2025 due to rising levels of corporate tax receipts. “Any change in the range of loss that we may face at the moment in 2023 or 2024 is only driven by the fact that our corporate tax receipts went up again in 2022,” Donohoe said.
Ireland Sees Rising Corporate-Tax Loss Risk Under Worldwide Deal
Despite rising levels of corporate tax receipts, Ireland’s government has acknowledged that some of this revenue source would be vulnerable to a downturn, particularly within the technology sector, which has seen recent job losses. Receipts from corporations rose almost 50% from a year earlier in 2022 to €22.6 billion, though just 10 companies account for more than half of this revenue.
The government has instigated a reserve fund to offset potential losses, though the growth forecast for foreign direct investment in Ireland “continues to be very very positive,” Donohoe said.
Ireland’s Financial Blind Spot Hit by Mass Tech Job Cuts
–With assistance from Katharina Rosskopf.
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