What will be the future of EU economic policy? – EURACTIV.fr
In 2023, the EU’s economic policy agenda will likely focus on responding to the US’s Deflation Act (Detease Act).Inflation Reduction Act, IRA), a package of measures in favor of green technologies. The bloc’s policymakers will also look at tax regulations, trade policy, the reconstruction of Ukraine, as well as financial stability.
The American law on reducing inflation, which came into force on January 1, caused concern throughout the Union. The latter plans to widely distribute subsidies for the production of electric cars and other technologies essential to the industry’s environmental transition.
Germany and France are particularly concerned about the protectionist nature of measures limiting subsidies for US-made electric cars. On December 29, the United States eased those obligations slightly by agreeing that subsidies for commercial electric vehicles would also be available for vehicles manufactured in the EU.
Industrial policy and fair competition rules
The EU’s response to the US law is likely to dominate economic policy talks early in the year. The European Commission has announced both a relaxation of state aid rules and the creation of a European Sovereign Fund, which is very broad in definition and should help finance the expansion of green industries.
During the negotiations, Germany will compete with other Member States that are less inclined to provide large subsidies to companies or have less financial capacity to do so. Small member states fear that the level playing field in the single market will be disrupted if large member states such as Germany and France start subsidizing their large industries.
A European fund that intends to support European green industries can balance this uneven playing field in the market.
However, doing so would require centralizing more purchasing power in Brussels, which Germany’s liberal finance minister, Christian Lindner, already opposes. This solution may also raise doubts among small and medium-sized Member States who do not want to further increase the power of the European executive.
Most EU member states would agree on the need to find a more amicable solution with Washington. However, this can be costly.
The US’s greater autonomy in green and other technologies stems from its desire to become more independent from China. So if the United States wants companies in the bloc to benefit from its industrial policies, it may also find the EU more independent from China.
The geopolitics of supply chains
China will undoubtedly play a role in other EU political debates. Member states and the European Parliament are currently negotiating an instrument to combat coercion. This instrument will allow the Union to take more effective countermeasures if a country tries to pressure a Member State for economic purposes.
The Commission presented its proposal in December 2021 and Parliament and Member States have already defined their negotiating positions. One of the main issues in the negotiations will be the extent of the powers given to the Commission.
The Single Market Instrument for Emergencies (IUMU), which the Commission proposed last autumn, looks at another aspect of the more geopolitical business environment.
IUMU aims to ensure the supply of strategically important goods through greater control over critical supply chains. This year, this dossier will be discussed both in the Parliament and by the Member States.
Some Member States and industry representatives criticize the amount of information companies are required to provide, along with the power the Commission will gain.
At the end of March, the EU executive is expected to introduce a European law on critical raw materials, which aims to strengthen the security of supply of the most important raw materials for European industry.
Duty of Vigilance and Free Trade Agreements
Pushing for higher levels of control over raw materials and critical products may nevertheless hinder the achievement of the EU policy objective: the sustainability of supply chains.
Last February, the Commission presented its proposal for a Corporate Sustainability Due Diligence Directive (CSDDD), which aims to hold companies operating in the EU market accountable for violations of human rights and environmental issues in their value chains.
The bloc’s member states agreed on a watered-down version of the proposal last December, and the European Parliament hopes to reach an agreement early this year. However, industry associations and civil society organizations are very vigilant and can carry out extensive lobbying on this file.
In addition, since the business environment ifThe Commission, which has deteriorated due to geopolitical tensions in recent years, is trying to revive free trade agreements.
After completing negotiations with New Zealand and Chile in 2022, the Commission wants to submit a free trade agreement with Mercosur, the South American trade bloc under the Spanish presidency, to the EU Council in the second half of this year.
To support this move, the Commission is expected to present a new agenda for Latin America and the Caribbean in April. At the same time, negotiations are underway with India, which is a very important potential trade partner, but which has traditionally shown a very protectionist position in the market.
Too high prices and not enough workers
Many uncertainties remain at the macroeconomic level. Fears of a new recession still seem remote, but they could still become a reality if gas and power shortages are experienced next winter.
With the recent reopening of China’s economy and Beijing ending its “zero Covid” policy, the recession may be averted. However, this recovery in the Chinese economy could also stimulate energy prices and therefore increase inflation. This is one of the key macroeconomic questions of this year, and there is currently no answer.
Some unions say a price-wage spiral is unlikely in the EU, despite unemployment figures currently at record lows.
A low unemployment rate goes hand in hand with a shortage workforce what qualification does he have to suffer many companies. Commission 2023 “year European Skills’ and should present a digital skills and education package in February.
However, if inflation continues, the attitude of the European Central Bank (ECB), which regularly raises interest rates, could be a concern for companies and highly indebted Member States, which will have to refinance their debt with interest rates.
Fiscal regulations and financial stability
In late autumn, the Commission presented guidelines for EU Member States on the reform of outdated tax rules, which aim to give Member States with high debt-to-GDP ratios more flexibility and time to reduce their debts and thereby stimulate investment.
However, some governments oppose this approach and the Commission has not yet proposed any changes. Any changes to tax rules must be finalized before member states set their budgets for 2024, which is September at the latest.
If the changes are not approved quickly enough, the Commission could be pressured to overturn existing tax rules using the general escape clause for the fifth year in a row.
These pressures may intensify if Member States are forced to provide more state aid to their companies due to subsidy competition with the United States, such as France and Germany.
As for stability, the Commission could revisit another central issue for the stability of the euro area: the stability of the banking system. In March, the EU executive is expected to present a package of measures on banking crisis management and deposit insurance to fix flaws in the EU’s financial stability framework.
Meanwhile, Member States and Parliament are negotiating capital requirements for banks and insurance companies. This year, the two sides should reach an agreement on these two files. Moreover, for these two files, civil society organizations are demanding stricter rules, especially regarding the risks posed by climate change to financial stability.
On the other hand, many players in the financial sector require more flexibility.
under the EU budget observation
Budgetary challenges affect national governments, but also the EU budget.
2022 has shown some promising signs that the EU’s budgetary conditional mechanism on the rule of law may be useful in forcing autocratic member states to implement certain reforms. We’ll see if Hungary actually participates this year a work of art He promised reforms to open up his share of EU funds.
In addition, the long-term EU budget, called the Multiannual Financial Framework (MFF), will also be reviewed in the middle of the year. In fact, after a series of crises and price increases, the Commission and the Parliament consider that the existing financial resources are no longer sufficient in view of the tasks ahead.
But since the budgets of the Member States are also under pressure, it will be difficult to raise new resources at the EU level.
The issue of EU general debt or other types of EU own resources is likely to come up again, especially since two new major financings are potentially required: the European Sovereign Fund and several hundreds of billions of euros for the reconstruction of Ukraine. .
It has already become very difficult in 2022 to approve several billion euros of urgently needed macro-financial assistance to Ukraine through the guarantees of the member states.
Moreover, this year there will be much more talk about whether to end the war in Ukraine and the need for large-scale reconstruction, or whether to continue it and support the Ukrainian war. economy.
Silvia Ellena, Jonathan Packroff, and Luca Bertuzzi contributed to this article.
[Édité par Anne-Sophie Gayet]
