Negotiations are now underway to form an informal coalition between the EPP, S&D, Renew and – the news of the day – the Greens. Ursula von der Leyen sat down with the leaders of the Greens’ parliamentary group on Monday evening. Shortly afterwards, it was announced that the Greens are on board and are now also negotiating the content for a stable democratic majority in the European Parliament.
Von der Leyen is canvassing for votes in the political groups. She will be there for two days when the new EPP Group meets in Cascais, Portugal, on Wednesday and Thursday to decide on its political guidelines for the legislative period. If you like, the government program of by far the largest force in the formation.
The parliamentary groups of the other two parties in the Platform, as the informal coalition is known these days, are also discussing their demands. The Socialists, for example, are insisting on a social public procurement law with compliance with collective bargaining and simplifications in state aid law for social housing.
Some Social Democrats want to threaten to withhold their consent to the laws, which also include the MEPs of the conservative ECR. They can make this point at the S&D Group meeting next Tuesday, at which von der Leyen has already announced her attendance. Her participation in the Renew Group is also set in stone for next week.
There is not much time left for the “coalition negotiations.” The election of the Commission President is due to take place in Strasbourg on July 18 or 19. The content of the talks will be conducted personally by the heads of the political groups. Sub-working groups, as is usual at the national level, are not planned.
In the end, a document will be drawn up in which the EPP, S&D, Renew and now also the Greens record the results of their negotiations. The coalition agreement of the Berlin traffic light coalition has 144 pages, the agreement of “Von-der-Leyen”-II is likely to have a single-digit number of pages. Have a good start to the day.
July 2019, Emmanuel Macron is at the zenith of his power in the EU: France’s president is masterfully pulling the strings after the European elections, preventing EPP lead candidate Manfred Weber from becoming EU Commission President and instead installing Ursula von der Leyen and Belgian liberal Charles Michel as Council President. In doing so, he secures influence over the two top politicians who owe their posts to him.
In July 2024, Emmanuel Macron is no longer kingmaker. When it comes to awarding the top posts, the French president and his liberal party family have settled for the post of foreign affairs envoy, which offers comparatively little room for maneuver. The foreseeable defeat for Macron’s camp in the early parliamentary elections is likely to further reduce the influence of the French president – and his country – in Brussels.
The president’s authority there has suffered greatly recently. EU diplomats have described the decision of Macron to dissolve the National Assembly in response to the victory of the Rassemblement National in the European elections three weeks ago as a “disaster.” Célia Belin, head of the Paris office of the European Council on Foreign Relations (ECFR), speaks of a “self-sabotage” with which Macron has accelerated the rise of the far right by months or years.
How many seats the political blocs will receive in the National Assembly will be decided in the run-off elections on Sunday. The parties of the left-wing alliance announced on Monday that they would withdraw their own third-placed candidates in the constituencies and recommend the alternative to the RN candidates. However, Macron’s ensemble alliance was unable to make such a clear recommendation for the candidates of the Nouveau Front Populaire, which could contribute to voter confusion.
Forecasts predict that the RN will win up to 280 seats, an absolute majority would be 289. It is also conceivable that none of the three major camps will win a majority. Nils Schmid, foreign policy spokesman for the SPD parliamentary group, assumes that Macron will also “emerge significantly weakened from the parliamentary elections” in this case. France has no experience with coalitions, which will make day-to-day business more difficult. The same would apply in the event of another minority government, said the Chairman of the Franco-German Parliamentary Assembly.
The impending paralysis is also likely to weaken French influence in Brussels. Important posts below the top jobs in the EU institutions will be distributed in the coming weeks and months. Behind the scenes, Paris is laying claim to filling the post of Secretary-General of the EU Commission with a Frenchman. Long-standing EU ambassador Philippe Léglise-Costa, for example, is said to have ambitions.
However, Ursula von der Leyen is unlikely to give in to the pressure if she is elected by the European Parliament for a second term of office: Instead, she will probably stick with Ilze Juhansone as Secretary General, according to reports in Brussels. She has already worked closely with the Latvian in the past five years.
In addition, the president and the government in Paris could become entangled in a legal dispute over who is allowed to nominate the new French commissioner. Macron tried to drive in a stake when he nominated Internal Market Commissioner Thierry Breton for a second term of office last week. However, Marine Le Pen is contesting the decision: “It is the prime minister’s prerogative to appoint the EU Commissioner,” she said.
Breton has been responsible for a very large area of responsibility in the Commission to date, ranging from the internal market to industrial and digital policy to the defense industry. According to reports, Paris would like to fill a similarly extensive dossier in the new Commission, again with a focus on industry. However, the area is also coveted by other member states, and von der Leyen’s relationship with Breton was severely strained when he openly criticized her appointment of Markus Pieper as Commissioner for SMEs.
The outcome of the election could also limit France’s room for maneuver in the Council. As President, Macron sets the tone in the European Council and in foreign and security policy. However, his ability to intervene in the individual Councils of Ministers is limited if the new government does not come from his camp. There, prime ministers and ministers for specific areas set the tone.
In this scenario, day-to-day business in Brussels would also become more difficult, warns SPD politician Schmid. “Right-wing populist ministers from Le Pen would suddenly be sitting at the negotiating table in the EU and the French RN could join forces with Meloni’s people.” The conclusion of free trade agreements could then no longer be expected at all, as there would be resistance from right to left.
French influence in the new European Parliament is also likely to be significantly limited. Only just over 30 of the 81 MEPs from France sit in one of the three political groups, which will probably once again organize the majorities in the votes via a joint platform. Macron’s Renaissance camp lost ten of its previous 23 seats in the liberal Renew group in the European elections in June.
With six MEPs, the center-right party Les Républicains has hardly any weight in the largest group of the EPP, where the CDU/CSU set the tone with 29 MEPs. Only among the Socialists did the French delegation make significant gains. The RN, on the other hand, has 30 MEPs, but has so far been left out of the important posts and decisions due to the cordon sanitaire. With Birgit Jennen
When the European Commission proposed the extension of temporary trade facilitation measures for Ukraine in January, a months-long dispute ensued. It was largely sparked by the trade status for agricultural imports. The extension was passed at the last minute. In order to avoid a repeat of such a nail-biter, the European Commission wants to agree a longer-term arrangement with Kyiv.
The plan is to adjust customs duties as part of the association agreement between Ukraine and the EU. The Commission argues that this will support the war-torn Ukraine economically and prepare for its integration into the EU single market.
However, the schedule for an agreement is tight. The current transitional trade facilitations expire in June 2025. If the agreement has not been updated by then, Ukraine will be subject to regular customs duties and import quotas as before the war. Preliminary talks are currently taking place with Ukraine at senior official level, a Commission spokesperson told Table.Briefings. The negotiations have not yet begun.
There is also time pressure due to the fact that the new Commission still has to form after the European elections. In addition, Hungary will take over the presidency of the EU Council in July 2024 and Poland in January 2025. Both are considered to be fierce critics of free trade with Ukraine. The Hungarian presidency is said to want better protection of European farmers from Ukrainian imports.
Almost all sides are in favor of establishing new trade rules in the long term. But in terms of content, the desired scenarios of the various parties involved are far apart.
European farmers’ representatives want an agreement that is close to the original association agreement. Temporary relaxations that have applied since the start of the Russian invasion of Ukraine would be scaled back accordingly. Many agricultural products, such as wheat and corn, would once again be subject to quotas. Currently, safeguard clauses only apply to products classified as sensitive, such as sugar or eggs. The argument of the farmers’ representatives: If only certain products are protected, large Ukrainian farms could simply switch to other goods.
The Ukrainian side takes a different view. Alex Lissitsa, President of the Ukrainian Agribusiness Club (UCAB), argues that safeguard clauses are damaging Ukrainian agriculture. Import quotas for sugar or oats are too restrictive, he says. These are already exhausted after just a few months. Lissitsa calls for Ukraine’s accession to the EU to be prepared by dismantling trade barriers.
Such a perspective is essential for the Ukrainian agricultural sector. Also in order to remain attractive for investors. “If the EU countries are also supporting us with billions of euros via the Ukraine Facility to help us adapt to EU standards, it would be contradictory not to give us the prospect of ever better access to the European market,” Lissitsa adds.
From the perspective of trade expert and former Director at the EU Commission John Clarke it would also be in the EU’s interest to prepare for the accession of the large agricultural country by progressively liberalizing trade. “Free trade agreements usually provide for a seven-year transition period for the liberalization of particularly sensitive products such as beef, poultry or sugar,” he explains. “For Ukraine’s accession, such a transition period could be created in advance, so to speak, by gradually liberalizing trade for products subject to import quotas over the next few years.”
EU farmers’ representatives are skeptical about this. They prefer a transitional period after accession. Clarke points out that in the past, market access was only restricted if newly acceded members did not yet meet phytosanitary standards, for example. As Ukraine has committed to meeting all EU standards by the time of accession, it would be unfair to make them wait any longer.
In view of the polarized debate, Clarke believes it is realistic to continue the current transitional arrangements. In other words: suspension of quotas and tariffs coupled with safeguard clauses for sensitive agricultural products. “We have a working solution here, even if it doesn’t really satisfy either side,” he argues. Continuity is created for investments and Ukraine continues to receive support in the face of the ongoing war.
Stephanie Kröger, foreign trade expert at Der Agrarhandel, takes a similar view. Continuing the current regulation is “a viable instrument for the coming years because it provides a certain degree of protection for the internal market through appropriate measures,” she concludes.
The ailing competitiveness of European industries is one of the major challenges facing Ursula von der Leyen at the start of her second term of office. The heads of state and government of the European Union agreed on Thursday to nominate her for a second term as President of the European Commission. The European Parliament’s approval, which is still outstanding, is highly likely. This means that the political shuffling after the European elections is now over.
The crisis mode that has dominated political action over the last five years and which has caused long-term socio-economic progress to fall behind must now be overcome. At the top of her agenda is the promotion of industries that Europe needs to maintain long-term prosperity.
These industries must not only become more competitive but must also be transformed into sustainable and future-proof industries in view of the ecological crises. Accordingly, the EU’s Strategic Agenda, adopted last week and setting out the priorities for the next five years, emphasizes the importance of competitiveness for the success of the green and digital transformations.
The key challenge: important industries for Europe’s green transformation and competitiveness are currently dominated by China. The country has increased its EV exports by 70 percent since 2022 and produces almost nine out of ten solar energy systems worldwide. The recent announcement by US President Joe Biden to impose drastic tariffs on Chinese imports of EVs shows how quickly circumstances can change. This protectionist measure follows the Inflation Reduction Act, an economic package of historic proportions that aims to mobilize up to $1 trillion in domestic renewable energy production by 2031.
In comparison, the EU has acted slowly and hesitantly so far. The Net Zero Industry Act was a first step, but it lacks ambitious targets, financial resources and concrete implementation instruments compared to its Chinese and American counterparts. As a result, the EU runs the risk of falling behind in the development of strategically relevant and sustainable industries. The question of how Europe can regain its competitive advantage and at the same time manage the ecologically necessary transformation is pressing and will occupy the new EU Commission intensively.
One of the fundamental and at the same time little-noticed problems of European competitiveness is the imbalance in economic development: while economically strong countries are modernizing their traditional industrial locations while at the same time investing in new sustainable industries, the potential of economically weaker regions remains largely untapped.
At present, the geographical location of strategically important industries depends less on the economic potential of the member states and more on their fiscal possibilities. Between March 2022 and June 2023, three-quarters of state aid in the EU came from Germany and France alone. In contrast, many other EU countries were barely able to support their economies, if at all. This uneven support promotes the concentration of companies in areas that are already economically strong, leaving out economically weaker regions.
This is economically inefficient, as in many cases these regions have untapped economic potential. One example is the production of solar power. 60 percent of European solar energy is produced in northern countries. However, there is much more sunlight in other EU countries, which makes electricity production there significantly cheaper.
This is very important for the competitiveness of industry, as cheaper electricity can make energy-intensive production processes correspondingly cheaper and therefore the end products more competitive. One example is the steel industry: Economics Minister Habeck recently handed over a national funding decision worth around €1.3 billion for green steel production in Germany. This project also subsidizes energy-intensive production steps, especially iron production.
If the energy-intensive production steps were instead relocated to places with low electricity costs, the price of European steel could be significantly reduced. This would not only make the European steel industry more competitive but also all downstream industries. At the same time, more regions will benefit from the success of industrial value creation and modernization, especially economically weaker and stagnating regions. This is a win-win situation in which competitiveness increases and jobs and more economic added value are created in economically underdeveloped regions.
The success story of the emerging “Heat Pump Valley” in the Polish-Slovak-Czech border region is an excellent example of what regional innovation and production centers for important green industries can look like. It also illustrates the importance of supra-regional European coordination of the economy and infrastructure in order to establish sustainable economic sectors.
A European industrial strategy is needed to make this possible. In the current global economic situation, Europe can no longer afford national fragmentation.
Green production sectors will dominate the markets of the future. Around 60 percent of investments in the technologies required for a climate-neutral EU by 2050 will not pay off in the short term. Temporary government support is therefore required until these technologies are marketable and competitive. Economic policy has a crucial responsibility to ensure that companies have access to adequate infrastructure and skilled labor.
The EU has already shown how effective focused financial support can be, for example with its €723 billion post-pandemic recovery and resilience facility. The financial resources at the EU level support industries in prioritized regions independently of national aid and have thus made a decisive contribution to overcoming the economic consequences of the coronavirus crisis.
It is important that government support is tied to targets – only companies that demonstrate progress in transition and operate efficiently should be supported. In this way, sustainable and efficient use of public funds can be ensured.
A combination of targeted support for high-potential regions and linking this to transition progress forms the basis for a common European industrial strategy. This way, the strength of all European regions can be fully utilized, European competitiveness increased and European cohesion strengthened at the same time.
This will give Ursula von der Leyen a good chance of gaining the cross-border and cross-party support she will need in the coming years to make Europe the leading player in building an economy fit for the future.
Negotiations are now underway to form an informal coalition between the EPP, S&D, Renew and – the news of the day – the Greens. Ursula von der Leyen sat down with the leaders of the Greens’ parliamentary group on Monday evening. Shortly afterwards, it was announced that the Greens are on board and are now also negotiating the content for a stable democratic majority in the European Parliament.
Von der Leyen is canvassing for votes in the political groups. She will be there for two days when the new EPP Group meets in Cascais, Portugal, on Wednesday and Thursday to decide on its political guidelines for the legislative period. If you like, the government program of by far the largest force in the formation.
The parliamentary groups of the other two parties in the Platform, as the informal coalition is known these days, are also discussing their demands. The Socialists, for example, are insisting on a social public procurement law with compliance with collective bargaining and simplifications in state aid law for social housing.
Some Social Democrats want to threaten to withhold their consent to the laws, which also include the MEPs of the conservative ECR. They can make this point at the S&D Group meeting next Tuesday, at which von der Leyen has already announced her attendance. Her participation in the Renew Group is also set in stone for next week.
There is not much time left for the “coalition negotiations.” The election of the Commission President is due to take place in Strasbourg on July 18 or 19. The content of the talks will be conducted personally by the heads of the political groups. Sub-working groups, as is usual at the national level, are not planned.
In the end, a document will be drawn up in which the EPP, S&D, Renew and now also the Greens record the results of their negotiations. The coalition agreement of the Berlin traffic light coalition has 144 pages, the agreement of “Von-der-Leyen”-II is likely to have a single-digit number of pages. Have a good start to the day.
July 2019, Emmanuel Macron is at the zenith of his power in the EU: France’s president is masterfully pulling the strings after the European elections, preventing EPP lead candidate Manfred Weber from becoming EU Commission President and instead installing Ursula von der Leyen and Belgian liberal Charles Michel as Council President. In doing so, he secures influence over the two top politicians who owe their posts to him.
In July 2024, Emmanuel Macron is no longer kingmaker. When it comes to awarding the top posts, the French president and his liberal party family have settled for the post of foreign affairs envoy, which offers comparatively little room for maneuver. The foreseeable defeat for Macron’s camp in the early parliamentary elections is likely to further reduce the influence of the French president – and his country – in Brussels.
The president’s authority there has suffered greatly recently. EU diplomats have described the decision of Macron to dissolve the National Assembly in response to the victory of the Rassemblement National in the European elections three weeks ago as a “disaster.” Célia Belin, head of the Paris office of the European Council on Foreign Relations (ECFR), speaks of a “self-sabotage” with which Macron has accelerated the rise of the far right by months or years.
How many seats the political blocs will receive in the National Assembly will be decided in the run-off elections on Sunday. The parties of the left-wing alliance announced on Monday that they would withdraw their own third-placed candidates in the constituencies and recommend the alternative to the RN candidates. However, Macron’s ensemble alliance was unable to make such a clear recommendation for the candidates of the Nouveau Front Populaire, which could contribute to voter confusion.
Forecasts predict that the RN will win up to 280 seats, an absolute majority would be 289. It is also conceivable that none of the three major camps will win a majority. Nils Schmid, foreign policy spokesman for the SPD parliamentary group, assumes that Macron will also “emerge significantly weakened from the parliamentary elections” in this case. France has no experience with coalitions, which will make day-to-day business more difficult. The same would apply in the event of another minority government, said the Chairman of the Franco-German Parliamentary Assembly.
The impending paralysis is also likely to weaken French influence in Brussels. Important posts below the top jobs in the EU institutions will be distributed in the coming weeks and months. Behind the scenes, Paris is laying claim to filling the post of Secretary-General of the EU Commission with a Frenchman. Long-standing EU ambassador Philippe Léglise-Costa, for example, is said to have ambitions.
However, Ursula von der Leyen is unlikely to give in to the pressure if she is elected by the European Parliament for a second term of office: Instead, she will probably stick with Ilze Juhansone as Secretary General, according to reports in Brussels. She has already worked closely with the Latvian in the past five years.
In addition, the president and the government in Paris could become entangled in a legal dispute over who is allowed to nominate the new French commissioner. Macron tried to drive in a stake when he nominated Internal Market Commissioner Thierry Breton for a second term of office last week. However, Marine Le Pen is contesting the decision: “It is the prime minister’s prerogative to appoint the EU Commissioner,” she said.
Breton has been responsible for a very large area of responsibility in the Commission to date, ranging from the internal market to industrial and digital policy to the defense industry. According to reports, Paris would like to fill a similarly extensive dossier in the new Commission, again with a focus on industry. However, the area is also coveted by other member states, and von der Leyen’s relationship with Breton was severely strained when he openly criticized her appointment of Markus Pieper as Commissioner for SMEs.
The outcome of the election could also limit France’s room for maneuver in the Council. As President, Macron sets the tone in the European Council and in foreign and security policy. However, his ability to intervene in the individual Councils of Ministers is limited if the new government does not come from his camp. There, prime ministers and ministers for specific areas set the tone.
In this scenario, day-to-day business in Brussels would also become more difficult, warns SPD politician Schmid. “Right-wing populist ministers from Le Pen would suddenly be sitting at the negotiating table in the EU and the French RN could join forces with Meloni’s people.” The conclusion of free trade agreements could then no longer be expected at all, as there would be resistance from right to left.
French influence in the new European Parliament is also likely to be significantly limited. Only just over 30 of the 81 MEPs from France sit in one of the three political groups, which will probably once again organize the majorities in the votes via a joint platform. Macron’s Renaissance camp lost ten of its previous 23 seats in the liberal Renew group in the European elections in June.
With six MEPs, the center-right party Les Républicains has hardly any weight in the largest group of the EPP, where the CDU/CSU set the tone with 29 MEPs. Only among the Socialists did the French delegation make significant gains. The RN, on the other hand, has 30 MEPs, but has so far been left out of the important posts and decisions due to the cordon sanitaire. With Birgit Jennen
When the European Commission proposed the extension of temporary trade facilitation measures for Ukraine in January, a months-long dispute ensued. It was largely sparked by the trade status for agricultural imports. The extension was passed at the last minute. In order to avoid a repeat of such a nail-biter, the European Commission wants to agree a longer-term arrangement with Kyiv.
The plan is to adjust customs duties as part of the association agreement between Ukraine and the EU. The Commission argues that this will support the war-torn Ukraine economically and prepare for its integration into the EU single market.
However, the schedule for an agreement is tight. The current transitional trade facilitations expire in June 2025. If the agreement has not been updated by then, Ukraine will be subject to regular customs duties and import quotas as before the war. Preliminary talks are currently taking place with Ukraine at senior official level, a Commission spokesperson told Table.Briefings. The negotiations have not yet begun.
There is also time pressure due to the fact that the new Commission still has to form after the European elections. In addition, Hungary will take over the presidency of the EU Council in July 2024 and Poland in January 2025. Both are considered to be fierce critics of free trade with Ukraine. The Hungarian presidency is said to want better protection of European farmers from Ukrainian imports.
Almost all sides are in favor of establishing new trade rules in the long term. But in terms of content, the desired scenarios of the various parties involved are far apart.
European farmers’ representatives want an agreement that is close to the original association agreement. Temporary relaxations that have applied since the start of the Russian invasion of Ukraine would be scaled back accordingly. Many agricultural products, such as wheat and corn, would once again be subject to quotas. Currently, safeguard clauses only apply to products classified as sensitive, such as sugar or eggs. The argument of the farmers’ representatives: If only certain products are protected, large Ukrainian farms could simply switch to other goods.
The Ukrainian side takes a different view. Alex Lissitsa, President of the Ukrainian Agribusiness Club (UCAB), argues that safeguard clauses are damaging Ukrainian agriculture. Import quotas for sugar or oats are too restrictive, he says. These are already exhausted after just a few months. Lissitsa calls for Ukraine’s accession to the EU to be prepared by dismantling trade barriers.
Such a perspective is essential for the Ukrainian agricultural sector. Also in order to remain attractive for investors. “If the EU countries are also supporting us with billions of euros via the Ukraine Facility to help us adapt to EU standards, it would be contradictory not to give us the prospect of ever better access to the European market,” Lissitsa adds.
From the perspective of trade expert and former Director at the EU Commission John Clarke it would also be in the EU’s interest to prepare for the accession of the large agricultural country by progressively liberalizing trade. “Free trade agreements usually provide for a seven-year transition period for the liberalization of particularly sensitive products such as beef, poultry or sugar,” he explains. “For Ukraine’s accession, such a transition period could be created in advance, so to speak, by gradually liberalizing trade for products subject to import quotas over the next few years.”
EU farmers’ representatives are skeptical about this. They prefer a transitional period after accession. Clarke points out that in the past, market access was only restricted if newly acceded members did not yet meet phytosanitary standards, for example. As Ukraine has committed to meeting all EU standards by the time of accession, it would be unfair to make them wait any longer.
In view of the polarized debate, Clarke believes it is realistic to continue the current transitional arrangements. In other words: suspension of quotas and tariffs coupled with safeguard clauses for sensitive agricultural products. “We have a working solution here, even if it doesn’t really satisfy either side,” he argues. Continuity is created for investments and Ukraine continues to receive support in the face of the ongoing war.
Stephanie Kröger, foreign trade expert at Der Agrarhandel, takes a similar view. Continuing the current regulation is “a viable instrument for the coming years because it provides a certain degree of protection for the internal market through appropriate measures,” she concludes.
The ailing competitiveness of European industries is one of the major challenges facing Ursula von der Leyen at the start of her second term of office. The heads of state and government of the European Union agreed on Thursday to nominate her for a second term as President of the European Commission. The European Parliament’s approval, which is still outstanding, is highly likely. This means that the political shuffling after the European elections is now over.
The crisis mode that has dominated political action over the last five years and which has caused long-term socio-economic progress to fall behind must now be overcome. At the top of her agenda is the promotion of industries that Europe needs to maintain long-term prosperity.
These industries must not only become more competitive but must also be transformed into sustainable and future-proof industries in view of the ecological crises. Accordingly, the EU’s Strategic Agenda, adopted last week and setting out the priorities for the next five years, emphasizes the importance of competitiveness for the success of the green and digital transformations.
The key challenge: important industries for Europe’s green transformation and competitiveness are currently dominated by China. The country has increased its EV exports by 70 percent since 2022 and produces almost nine out of ten solar energy systems worldwide. The recent announcement by US President Joe Biden to impose drastic tariffs on Chinese imports of EVs shows how quickly circumstances can change. This protectionist measure follows the Inflation Reduction Act, an economic package of historic proportions that aims to mobilize up to $1 trillion in domestic renewable energy production by 2031.
In comparison, the EU has acted slowly and hesitantly so far. The Net Zero Industry Act was a first step, but it lacks ambitious targets, financial resources and concrete implementation instruments compared to its Chinese and American counterparts. As a result, the EU runs the risk of falling behind in the development of strategically relevant and sustainable industries. The question of how Europe can regain its competitive advantage and at the same time manage the ecologically necessary transformation is pressing and will occupy the new EU Commission intensively.
One of the fundamental and at the same time little-noticed problems of European competitiveness is the imbalance in economic development: while economically strong countries are modernizing their traditional industrial locations while at the same time investing in new sustainable industries, the potential of economically weaker regions remains largely untapped.
At present, the geographical location of strategically important industries depends less on the economic potential of the member states and more on their fiscal possibilities. Between March 2022 and June 2023, three-quarters of state aid in the EU came from Germany and France alone. In contrast, many other EU countries were barely able to support their economies, if at all. This uneven support promotes the concentration of companies in areas that are already economically strong, leaving out economically weaker regions.
This is economically inefficient, as in many cases these regions have untapped economic potential. One example is the production of solar power. 60 percent of European solar energy is produced in northern countries. However, there is much more sunlight in other EU countries, which makes electricity production there significantly cheaper.
This is very important for the competitiveness of industry, as cheaper electricity can make energy-intensive production processes correspondingly cheaper and therefore the end products more competitive. One example is the steel industry: Economics Minister Habeck recently handed over a national funding decision worth around €1.3 billion for green steel production in Germany. This project also subsidizes energy-intensive production steps, especially iron production.
If the energy-intensive production steps were instead relocated to places with low electricity costs, the price of European steel could be significantly reduced. This would not only make the European steel industry more competitive but also all downstream industries. At the same time, more regions will benefit from the success of industrial value creation and modernization, especially economically weaker and stagnating regions. This is a win-win situation in which competitiveness increases and jobs and more economic added value are created in economically underdeveloped regions.
The success story of the emerging “Heat Pump Valley” in the Polish-Slovak-Czech border region is an excellent example of what regional innovation and production centers for important green industries can look like. It also illustrates the importance of supra-regional European coordination of the economy and infrastructure in order to establish sustainable economic sectors.
A European industrial strategy is needed to make this possible. In the current global economic situation, Europe can no longer afford national fragmentation.
Green production sectors will dominate the markets of the future. Around 60 percent of investments in the technologies required for a climate-neutral EU by 2050 will not pay off in the short term. Temporary government support is therefore required until these technologies are marketable and competitive. Economic policy has a crucial responsibility to ensure that companies have access to adequate infrastructure and skilled labor.
The EU has already shown how effective focused financial support can be, for example with its €723 billion post-pandemic recovery and resilience facility. The financial resources at the EU level support industries in prioritized regions independently of national aid and have thus made a decisive contribution to overcoming the economic consequences of the coronavirus crisis.
It is important that government support is tied to targets – only companies that demonstrate progress in transition and operate efficiently should be supported. In this way, sustainable and efficient use of public funds can be ensured.
A combination of targeted support for high-potential regions and linking this to transition progress forms the basis for a common European industrial strategy. This way, the strength of all European regions can be fully utilized, European competitiveness increased and European cohesion strengthened at the same time.
This will give Ursula von der Leyen a good chance of gaining the cross-border and cross-party support she will need in the coming years to make Europe the leading player in building an economy fit for the future.
