Federal Finance Minister Christian Lindner (FDP) was not there when his French counterpart Bruno Le Maire announced a "new" Franco-German initiative for a "green European industrial policy" before the meeting of the euro finance ministers in Brussels on Monday.

Le Maire said that he agreed with the German government that the European state aid rules had to be simplified "suddenly" so that the member states could support their industry, especially in the "green transformation".

This is the only way to “reindustrialise” the whole EU.

Werner Mussler

Business correspondent in Brussels.

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In addition, "massive subsidies" should be possible for entire branches of industry, such as hydrogen and fuel cell technology, battery production and the semiconductor industry.

All these sectors should be on a list of "projects of strategic European importance".

Massive state aid for these sectors should be possible both in the form of grants and tax breaks.

How to react to the US billion package?

This initiative is not really new;

Le Maire was referring to a push for a European green industrial policy that he had presented before Christmas not together with Lindner, but with Economics Minister Robert Habeck (Greens).

The Frenchman added on Monday that the common European interest is always an argument to "protect and advance" the green European industry.

The existing rules that allow projects of common interest (IPCEI) to be funded should be simplified so that approvals can be granted much more quickly.

Germany and France want to ensure that European companies receive at least as much state support as American companies.

Since the autumn, the EU has been discussing how to react to the US billion dollar package for green technologies from the summer (“Inflation Reduction Act”, IRA).

With a view to the EU state aid rules, the EU Commission has made its first decisions.

In a letter to EU finance ministers, Competition Commissioner Margrethe Vestager announced that she would allow further exceptions to these rules.

The existing "temporary crisis framework", which the Commission initially created in response to the corona pandemic and adapted last summer to the aid due to the economic consequences of the Ukraine war, is to be expanded into a "temporary "transitional framework".

What is meant by this is that companies that enable the transition to a “greener” economy can be subsidized more generously.

"These new rules should mitigate the risk of investment being unfairly diverted to third countries," writes the commissioner.

"Only" 940 billion euros spent

In line with Le Maire's demands, Vestager also wants to fundamentally simplify the existing rules.

The entire promotion of renewable energies should be easier and faster to be approved in the future.

An extension of the IPCEI rules is also in the works.

However, the commissioner also pointed out that the member states could already grant more than 90 percent of their state aid without a Brussels permit.

According to Vestager, since the summer the commission has approved special aid totaling 672 billion euros to compensate for the economic hardship caused by the Ukraine war.

Of these, more than two-thirds come from two member states, meaning Germany and France.

She still sees dangers for the internal market because not all member states have the same financial leeway to help their economy.

Vestager writes that the EU must find ways and means to remedy this inequality.

“Additional funding” is needed.

These could either come from the Corona recovery plan or from a “common European fund”.

In a similar initial situation - an unequal distribution of national subsidies - the EU Commission proposed joint EU debt for the first time during the Corona crisis in spring 2020, which then led to the reconstruction plan.

According to the previous decision, this should not be extended.

EU Commission chief Ursula von der Leyen has not yet officially decided whether she wants to propose joint debt again for the EU's response to the IRA.

Last week, she said several options were being explored.

If at all, the Commission is unlikely to present its proposal until spring.

EU diplomats pointed out on Monday that government subsidies in 2020 were not distributed as unequally among the EU countries as Vestager portrayed at the time.

The member states reported and approved a total of 3 trillion corona aid that year.

However, "only" 940 billion euros were spent.

Of this amount, 226 billion euros went to Germany, 223 billion euros to France and 205 billion euros to Italy.

The government in Rome in particular had called for debt-financed EU aid at the time, arguing that Italy was being treated unfairly because it could not pay for corona aid from its own resources.