(Bloomberg) — The European Union must provide tax credits in addition to subsidies as it looks to shake up industry policy to counter competition from China and the impact of a major US climate law, French Finance Minister Bruno Le Maire said.
(Bloomberg) — The European Union must provide tax credits in addition to subsidies as it looks to shake up industry policy to counter competition from China and the impact of a major US climate law, French Finance Minister Bruno Le Maire said.
He said EU aid is currently too slow and complex, and called for a “simplification shock” to enable projects to be realized in a maximum of six months.
Support from governments must also be “a lot more massive” for certain clearly identified sectors, he told reporters in Brussels, adding that hydrogen, electric batteries, solar panels and chips should figure on a list of “strategic industrial projects.”
“If you want to be efficient, you have to think not only about subsidies,” Le Maire said ahead of a meeting of euro-area finance minsters. “You also need to think about tax credits because tax credits provide visibility and stability to investors.”
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He said a major change in European industry policy is the urgent priority for 2023, adding that it must be in the interests of all 27 EU member states, and not just its leading economies, Germany and France. He hoped the European Commission, the EU’s executive arm, would make proposals at the end of January that member states can study at the start of February.
How to Respond
“Today, we can clearly see China’s policies that it’s had in place for several years in favor of its industry,” Le Maire said. “We can clearly see the decisions taken recently by the US administration with the Inflation Reduction Act. There isn’t a second to lose to put in place a new European industrial policy.”
European leaders have been looking at how to respond to President Joe Biden’s legislation that includes billions of dollars of subsidies and provoked concerns it may lure some production across the Atlantic. EU officials have become increasingly skeptical about the US offering any major concessions.
EU finance ministers will hear an update on work carried out by a US-EU taskforce set up to address differences over the legislation in Brussels on Tuesday. Later in the day, EU trade commissioner Valdis Dombrovskis will raise the issue with US counterpart Katherine Tai, he told reporters.
This will be an opportunity to discuss what Europe’s policy response should be, the commission vice president said.
“There are some elements that are making progress, notably tax credits for electric vehicles and how they are applied,” Dombrovskis said. “We are continuing to work on, for example, supplies and inputs into batteries and how to make some progress there. There are some other areas. But of course we need to also look what we do at the EU level.”
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