On January 8, Germany received authorization from Brussels to provide more than 900 million euros to the Swedish company Northvolt, which is going to install a battery factory for electric vehicles in the north of the country. Berlin thus prevented the company from taking the plant – and the jobs – to the United States. The fact contains in itself many of the challenges that the European Union will face in the immediate future and which are being debated in the campaign for the June 9 elections: the need for investments in key technologies for the climate and digital transition , public support for the private sector – especially the industrial sector – so that it does not lose competitiveness or seek support in rival economic areas (United States, China); and, also, the risk that the EU single market will break down between those States that can use the public budget to face the challenges and those that cannot. Because while Germany was able to use its great fiscal capacity, Spain, for example, has difficulty giving aid to the same extent to the car manufacturer Stellantis (Opel, Citroën, Peugeot…) to build similar facilities in Figueruelas, in Zaragoza. , or gives them to Volkswagen in Sagunto (Valencia) with money from the European recovery plan.
To respond to these challenges and ward off risks, the European institutions commissioned two reports from former Italian prime ministers, Enrico Letta and Mario Draghi. The first is already known. Its commitment is based on deepening the internal market, the cornerstone of this club of 27 States that is the EU, but with areas pending much more integration such as telecommunications, stock markets, energy or health. “It is a product of a time when both the EU and the world were ‘smaller’, and many of the current players had not yet entered the scene.” He says it in the plural, but, in reality, the mind always goes to a “protagonist”: China.
The Asian giant, in the mid-eighties, when the current single market began to be designed, barely accounted for 3% of world GDP measured in a comparable way (in purchasing power parity); The United States, just over 20%, and the Twenty-seven together, 25%. Almost 50 years later, the distribution of the pie is very different: China moves around 20%; The United States is above 16% and the EU is behind.
Stopping losing positions, says Letta, by gaining size on the basis of being more united and promoting investment, especially private investment, taking another step in the integration of capital markets (stock market, debt issues, investment funds ), health, telecommunications: a larger market so that there are larger companies with more muscle to invest. The example is always the same: in Europe there are 34 telephone operators (spread across 27 countries), while in the United States there are three and in China, four. Greater size, more financial capacity, more possibility of spending on networks such as 5G, are usually concatenated.
Draghi, for his part, has not finished his work, but announces that he is going to propose a “radical change.” Like his compatriot, he wants to end the pending fragmentation. He points to the United States, which “uses large-scale industrial policy to attract high-value domestic manufacturing capacity within its borders – including that of European companies – while using protectionism to lock out its competitors.” and deploys its geopolitical power to reorient and secure supply chains,” he noted in April.
The former president of the European Central Bank has spoken of huge amounts of money so that the EU does not lose ground in the digital and green transition. In February he explained to Union finance ministers that the annual bill could rise to half a billion. Her successor, the Frenchwoman Christine Lagarde, at the same meeting, added up spending on security and defense and raised it to 800 billion euros. The European Commission estimates a somewhat lower amount, 720 billion. Not everything has to come from the public treasury, of course. The private sector is assigned a relevant role and to promote it there is confidence in the expansion of markets that prevents the flow of European savings to the United States: some 300,000 million cross the Atlantic every year. Yes, the amounts being talked about are almost unimaginable.
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“In Europe there is a savings surplus and it is exported. Single market missing. There is no such thing for savings, nor for telecommunications,” laments Jonás Fernández, PSOE MEP and candidate to repeat starting in June, “companies have a size problem due to fragmentation. The right talks about fewer bureaucratic obstacles; “I, of consolidation of the single market sector by sector.” “There is a problem that arose even before the financial crisis and is linked to current account surpluses, which is nothing more than exporting savings and investment levels are very low,” explains the spokesperson for the European socialist group in the Commission. of Economy of the European Chamber. Fernández warns that what has been said so far applies to the private sector, that its commitment to public investment goes through the EU budget: “Regardless of the new fiscal rules, States have to reduce debt and they cannot do much. “We have to do it at EU level.”
France and Germany, in a joint document released this Thursday, talk about turning to the European Investment Bank and “adding [al presupuesto de la Unión] a wide mix of new own resources.” The thing is that this option, which consists of providing the EU with more direct income through taxes instead of increasing transfers from States, has had little progress so far. Bumps into national governments.
The document of the two large countries does not address the creation of a mechanism that finances community investments after the end of the recovery fund in 2026. This can be interpreted when it talks about more “own resources”, but it is the typical community jargon that ignores the conflict between States due to the difficulty of adjusting opposing positions. It is difficult to imagine the German Finance Minister, the liberal Christian Lindner, supporting such an initiative. Yes, Spain is explicit: the President of the Government, Pedro Sánchez, requested it at the last European Council.
Cinzia Alcidi, from the Center for European Policy Studies, knows that at this point the path taken in the private sector can be retraced. If Germany has the capacity to subsidize its companies and Spain does not, the bankruptcy of the market comes indirectly. “This is a major risk that could lead to fragmentation and even economic divergence. There are compelling reasons to pool EU resources and allocate them to key projects of common interest. But the political challenges are considerable and I see obstacles: it will be very difficult to align national interests/preferences; the appetite to issue new common debt [como ha pasado con el plan de recuperación] “It is very low in many States (the Netherlands, for example, but not only) and unanimous agreement of all EU Member States is a prerequisite for progress.”
When talking about this type of policies, geographical origin usually weighs more than ideology. “Europe is betting on a response to the United States based on state aid. But this entails risks of fragmentation, especially for countries like ours, which do not have the fiscal muscle for large state aid. A common investment mechanism is needed, at the European level, without falling into the implementation errors committed with the recovery funds,” defends Eva Poptcheva, MEP for Ciudadanos Ahora and Spanish PP candidate in June. “This mechanism must be coordinated at EU level, with a true European perspective. The recovery fund, although it is common debt, only finances national projects and even ends up being used for current spending, and many times responds to the electoral needs of governments.”
Filippo di Mauro from the Economic Research Institute of Halle (Germany) joins. “The competitive challenge that Europe currently faces represents a case of jointly financed approaches.” However, this expert student of competitiveness focuses on the business field: “Europe’s real problem is creating competitive markets in which resources (investment and work) are used in the best possible way. Of course, more public and private investment would be essential, but the most important thing is that markets are more competitive and favor creative destruction.”
Daniel Fuentes, professor of Economics at the University of Alcalá de Henares, who is betting on a great investment boost for the EU, moves away from this position. He explains how since that push waned in 2008, the Old Continent has seen its GDP per capita move away from that of the United States until a considerable gap opens up. “It needs that push in quantity and quality. You also have to know where you invest”, and highlights a bleeding reality: “There are no European digital giants.” Meta, Apple, Nvidia, TikTok, Microsoft, Booking, Alibaba, Amazon… All companies that are protagonists of the great technological revolution underway and are from China or the United States.
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