The Brief – Europe’s new industrial climate spin takes shape

The EU is embracing an industrial competitiveness deal for the rest of the decade, with key actors floating proposals like deeper European integration or just wholesale deregulation, while key conflicts are resurfacing.

European industry is in bad shape.

The European Roundtable for Industry (ERT) finds that the bloc’s share in global aluminium production has fallen from 30% in 2020 to 5% in 2022. Europe went from net steel exporter to net steel importer in the past ten years. Net chemical industry exports have dropped to a fraction of their erstwhile heights.

At this point, boosting industry will certainly be at the heart of the next European Commission’s agenda. The question on everybody’s mind is: what will the industrial competitiveness deal look like? And will EU countries decide it all next week?

Some aspects of the programme are mostly universally agreed upon: Red tape must be cut, the European single market deepened, a capital markets union created—like by harmonising tax law and integrating financial markets—and energy prices brought down. 

But beyond the headlines, plans for the rest of the decade are not so straightforward.

For EU countries, the bigwigs – France, Germany and Italy – have banded together to set the agenda with a declaration near Paris on Monday (8 April). But they are being quietly opposed by a loose alliance of smaller countries. 

Their main bone of contention? State aid.

Europe’s successive crises have unleashed large countries’ ability to dole out generous government grants to companies that the ‘smalls’ can’t match. 

“We need to return to a stricter state aid regime,” the Swedes say. In the Council draft for a ‘New European competitiveness deal’ – to be discussed next week and seen by Euractiv – state aid is not prominent. 

For large countries, being able to hand out bags of cash is a priority.

They want more IPCEIs—when technology is deemed crucial, state aid guidelines can be circumvented by claiming projects are “Important to the Common European Interest”—and the “prolongation” of the temporary crisis and transition framework, a crisis response law that reduces Brussel’s ability to oversee state aid.

On power, they clash, too.

The Belgian proposal includes a call for “achieving a genuine energy union,”—echoing Brussels-based think tank Bruegel’s finding that more grid integration would cut power prices. The think tank deemed the Iberian Peninsula, with its rich renewable energy resources, as crucial.

Meanwhile, the French – who love to export electricity but not so much to import it – have ensured that “the Iberian Peninsula remains largely an energy island that can hardly participate in the European electricity market,” as the Commission finds. 

Then, clashes occur between Europe’s influential employer associations and their civil society counterparts, which are backed by generous US philanthropic funding.

Businesses are pressing for an “Omnibus” law to “reduce burden by eliminating contradictions and unnecessary complexity” and champion a bold free trade agenda – the lobby group BusinessEurope sells its push as “Reboot Europe.”

Civil society groups like the Corporate Observatory Europe say employers benefit from privileged access to leaders to push an agenda to the detriment of workers and consumers. NGOs regularly challenge even the EU’s most progressive trade agreements, like the deal with New Zealand. 

In between it all is the Letta report, authored by the former Italian prime minister, that will be presented to leaders on 17 April. He argues for state aid but also says a deeper energy union is indispensable, so his points may not be well received by everyone.

And then there’s the Commission.

Last year, Maroš Šefčovič —the commissioner in charge of the Green Deal—began canvassing Brussels for ideas and floating them in front of various audiences, testing what worked and what didn’t, creating a starting point for the work on an industrial deal.

His chats surfaced “five building blocks for a reinforced industrial approach to delivering the Green Deal,” he said on Wednesday (10 April) when presenting his results. 

That means “an effective and simplified regulatory framework” – here, the Commission is eyeing a 25% cut in requirements like annual reports, although the big countries want to go further. 

He added that the second concern of all industries consulted was “stable energy prices.” Third is “modern infrastructure,” particularly distribution grids that leave companies that look to electrify in limbo—like has happened in the Netherlands already. 

Fourth is “easier access to finance,” which Šefčovič says can be achieved by integrating capital markets and providing targeted stimuli like the European Hydrogen Bank. 

Fifth, he champions “a stronger single market” to improve demand for clean technologies and “consequently reduce the need for public support” – taking a slight stance against the state aid bonanza of big EU countries.

“This is the Commission’s contribution to the upcoming European Council,” the Green Deal chief concluded – as is tradition, EU countries will have to hash out their differences behind closed doors.

The Roundup

If the European Parliament endorses the Asylum and Migration Pact on Wednesday, the EU will get closer to a revamped scheme for processing irregular migrants and asylum seekers at EU borders, but lawmakers and civil society are unhappy with the final text, heralding a complicated implementation.

The European food retail sector is showing early signs of recovery after years of tight spending due to inflation, though consumer behaviour remains divided, according to a report by McKinsey released on Wednesday.

The European Commission vindicated the scientific robustness of the new legislation on new genetic techniques for bred plants at a hearing before the European Parliament’s Environment Committee on Tuesday (9 April), countering the critical remarks of French food agency Anses.

The campaign to find the new chairperson of the EU’s highest military body, the EU Military Committee (EUMC), has started, with three countries fielding candidates for the post one month before the European elections.

For more policy news, check out this week’s Green Brief and the Health Brief.

Look out for…

• Commissioner Nicolas Schmit and ILO Director General Gilbert Houngbo in Moldova on Thursday, meet PM Dorin Recean.
• Enlargement Commissioner Olivér Várhelyi participates in Delphi Economic Forum in Greece on Wednesday-Thursday.
• European Parliament plenary in Brussels on Wednesday-Thursday.
• Eurogroup on Thursday.
• Commissioner Wopke Hoekstra exchanges with Bundestag Climate and Energy Committee in Berlin on Thursday.

Views are the author’s

[Edited by Rajnish Singh/Alice Taylor]