Brussels’ response to the US targeted support for green technologies has come under fire from one of its own top officials, who said the constant revision of EU state-aid rules created too much confusion for businesses.
Internal market commissioner Thierry Breton spoke out as EU leaders prepare for a fraught summit on Thursday discussing how to respond to $369bn worth of US tax breaks and other incentives under the Inflation Reduction Act.
Breton, a key ally of Emmanuel Macron, president of France, told the Financial Times in an interview that the relaxation of state-aid rules outlined last week did not give businesses enough clarity to plan for the future.
The EU has amended its subsidy regime three times in as many years, first in response to the Covid-19 pandemic, then the energy crisis, now the IRA, Breton said, “a succession of temporary fixes”.
“We are living in a permacrisis era,” he said. “We can’t continue to have a well functioning single market if every two years we release these discussions — big countries can do it, small countries cannot do it — this is an issue.”
Responding to concerns from Italy, Poland and other less-affluent member states, Breton said lending guarantees issued by the EU would be the way to ensure all governments can support their industries. That idea, however, has little traction in Berlin and other fiscally prudent capitals.
“We need a tool to bridge the gap,” Breton said. “To make sure that we will have an answer for every single member state.” He suggested the European Investment Bank could provide part of the estimated €100bn required.
Breton favours converting annual extensions to the temporary relaxation of rules into a longer-term regime. In his view, the bloc’s support should not be limited to research and development, but also include manufacturing plants.
Last week, the EU said €250bn is “immediately available” for countries to offer tax credits and subsidies for green sectors to counter the massive range of tax breaks offered by the US.
His comments came as businesses said higher subsidies should be coupled with cuts to regulation to help boost the EU’s chances to counter the IRA.
In a letter to leaders ahead of the summit, the European Round Table for Industry, a lobbying group that represents major European companies, said: “Just relaxing state-aid rules is not a sustainable, long-term solution to help European industry compete worldwide.”