28th Mar 2023


More money, more problems in EU answer to US green subsidies

  • President Joe Biden's Interest Relief Act (IRA) has set the cat amongst the pigeons in Europe (Photo: ec.europa.eu)
Listen to article

Money, yes, but any new European industry strategy must go beyond money alone.

Europe is facing a turning point. After years of growth and success based on free trade, we are seeing the two of the world's largest economics setting out a vision based on subsidies and 'Buy National' acts. Seeking ways to steal industry.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

  • Dita Charanzová: 'Throwing money at our problems to match the IRA or any other national subsidies will not solve them' (Photo: Wikimedia)

So which way do we go? Do we follow or stick to the status quo? Neither. We need to find a third way and it had better be a European level one.

For the moment, the answer from Germany and France has been to throw national subsidies at their industries. In the case of Germany, €356bn approved since March 2022. 80 percent of all European subsides come from these two countries, as confirmed in a letter from commissioner Margrethe Vestager.

It sounds like a lot (and it is), but there are two problems.

Firstly, no other European countries can match it.

These are amounts higher than some member states' GDPs. Yet Germany and France account for only 38 percent of European industry, according to Eurostat.

Industrial sectors, especially energy intense sectors, outside Germany and France will not move to the US. They will go out of business, as they cannot compete in such a fragmented single market. To save industry in two member states, we will kill the rest.

Secondly, even if you look in global competition terms, these massive amounts can still never match the subsidies from the likes of the United States and China. If we are going into a subsidies trade war based on money exclusively, we cannot win it.

We therefore need a united European solution. One that protects the single market, while supporting our companies in all member states equally and strengthening European supply chains.

While supporting a just low carbon transition, this may require us to support carbon intensive industries in the short term before net zero is possible. The premature closure or withdrawal of support would harm European sovereignty and increase our dependences on third countries, merely helping countries like China and harming us in this global struggle.

However, we must do more. We want items made in Europe, but we want them to be made here because the business environment, our skilled workers, and our regulations make businesses want to grow here. We do not want businesses to take subsidies and once the subsidies end, to leave.

This means a re-thinking of not just our educational and training programmes but also our huge regulatory programmes that add administrative burdens without giving businesses a way to meet those burdens without losses.

The last piece of the European answer is still trade with global partners. While the era of ever expanding global free trade may be over, this does not mean that Europe should or even could turn inwards towards protectionist isolation.

Among other reasons, we do not simply have the critical raw materials. According to Eurostat, the US is Europe's largest exporting market and China the largest source on imports. Exports account for one in five jobs in Europe. It is still vital to preserve an open Europe, based on open trade with like-minded nations.

The key now is to seek new partners besides the US and China. In addition to Africa, we must especially focus more on our relationships with Latin America. Such new partnerships, based on mutual respect, must be part of our planning and solution.

We need to recognise that member states, especially large ones, looking inwardly and seeking national solutions to European problems will not work. If the European Commission allows uncoordinated national measures that fragment the single market, member states will be shooting themselves in the foot, as the British did by leaving the single market altogether.

Let us not kill the golden goose that keeps our Union united. Instead, let us invest in it and strengthen it, for the sake of our citizens and businesses. Europe will and must act to defend growth and jobs in Europe.

But let's get this right. Millions of Europeans are counting on us. Throwing money at our problems to match the IRA or any other national subsidies will not solve them. We must do more.

Author bio

Dita Charanzová is a vice-president of the European Parliament and Renew Europe rapporteur of the parliament's resolution on the issue, and a former diplomat in charge of international trade for the Czech Republic's first EU presidency. She is also Renew coordinator in the parliament's internal market and consumer protection committee and an active substitute on the international trade committee.


The views expressed in this opinion piece are the author's, not those of EUobserver.

'The race is on', EU Commission warns on green tech

The EU Commission is expected to detail its plans on Thursday as part of the Net-Zero Industry Act on industrial incentives, and the Critical Raw Materials Act, which seeks to reduce EU over-reliance on China.


Okay, alright, AI might be useful after all

Large Language Models could give the powers trained data-journalists wield, to regular boring journalists like me — who don't know how to use Python. And that makes me tremendously excited, to be honest.

How much can we trust Russian opinion polls on the war?

The lack of Russian opposition to the Russo-Ukrainian War is puzzling. The war is going nowhere, Russian casualties are staggering, the economy is in trouble, and living standards are declining, and yet polls indicate that most Russians support the war.

Latest News

  1. Biden's 'democracy summit' poses questions for EU identity
  2. Finnish elections and Hungary's Nato vote in focus This WEEK
  3. EU's new critical raw materials act could be a recipe for conflict
  4. Okay, alright, AI might be useful after all
  5. Von der Leyen pledges to help return Ukrainian children
  6. EU leaders agree 1m artillery shells for Ukraine
  7. Polish abortion rights activist vows to appeal case
  8. How German business interests have shaped EU climate agenda

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic and Baltic ways to prevent gender-based violence
  2. Nordic Council of MinistersCSW67: Economic gender equality now! Nordic ways to close the pension gap
  3. Nordic Council of MinistersCSW67: Pushing back the push-back - Nordic solutions to online gender-based violence
  4. Nordic Council of MinistersCSW67: The Nordics are ready to push for gender equality
  5. Promote UkraineInvitation to the National Demonstration in solidarity with Ukraine on 25.02.2023
  6. Azerbaijan Embassy9th Southern Gas Corridor Advisory Council Ministerial Meeting and 1st Green Energy Advisory Council Ministerial Meeting

Join EUobserver

Support quality EU news

Join us