France’s explosive project in response to America’s IRA

France clearly wanted the European bazooka in response to the US Inflation Reducing Act (IRA)’s massive subsidies. In a ten-page document submitted to the European Commission, which has been notified to “Les Echos” – like other media outlets, in particular Handelsblatt -, Paris outlines a “Made in Europe strategy” aimed at responding to the $369 billion in subsidies that have been decided by the United States. to be allocated to its green industry.

The message was clear: we must act very, very quickly and a lot of money will be needed… Paris wants to send a strong signal to enterprises, while the Old Continent trembles at the thought of having to face a massive relocation movement and some no longer hesitate to point out the threat of “deindustrialization”. .

“emergency fund”

Highly offensive from the start on the matter, the French advanced a series of surprise actions. Especially in terms of financing, the response was ambitious. “This is an effort of about two points of GDP”, launched Emmanuel Macron last December, addressing the issue during a press conference at the end of the European Council.

So, faced with hundreds of thousands of dollars about to rain down on American companies, Paris advocated for a sovereign fund – already subject to friction between Member States -, as Ursula von der Leyen, president of the European Commission.

For France, for it to go fast, it had to be launched in two stages. With an “emergency fund”, created “in the very short term on the basis of existing funds”, which will preempt a “full” sovereign fund that should be operational before the end of 2023. Paris specifically cited all or part of the 365 billion from the Recovery and Resilience Facility (Recovery and Resilience Facility/RRF) “allocated and undisbursed” (Recovery and Resilience Facility/RRF) that can be reallocated to EU strategic sectors.

So that each Member State can use the funds fairly, Paris is campaigning for the adoption of tools similar to SURE, temporary support to protect jobs during the Covid-19 outbreak.

“Surprise of modernization and simplification”

At the same time, France called for a “surprise modernization and simplification of the State aid framework”, reforms which are underway in Europe. Obviously, it is necessary to extend the Covid-19 crisis mechanism temporarily after 2023 and to authorize “temporary and targeted support in the form of counters, for sectors that need it in the short term”. This provision is in line with those considered by Margrethe Vestager, the European Competition Commissioner in charge of this reform.

Similarly, for PIIEC (Essential Projects of European Common Interest benefiting from subsidies) multiplying in Europe, Paris wants to reduce processing time to four months, where currently it can take up to two years. Tax credits granted by IRAs soon…

Dependence on batteries and hydrogen

Paris also wants to end Europe’s dependence, particularly in sectors that will suffer the consequences of American law such as photovoltaics, batteries, hydrogen and critical materials.

France deems necessary “production targets to be achieved by 2030” and sectoral legislation such as the one drafted for the “Chips Act”, which makes it possible to spend billions to increase chip production in Europe to reduce its dependence on Asia. .

Paris is once again making ongoing energy market reforms a top priority for the coming months. Bruno Le Maire also recently indicated that Paris would be tough on these reforms.

“Complete and fast mobilization”

Europe under attack? So we need a “full and rapid mobilization” of trade defense instruments, some of which have been created recently, we can still read about in the documents. EU “credibility” is at stake, France insists, while, for example, new regulations allowing Brussels to control subsidies provided by third countries to the EU that are likely to distort competition within the internal market have just been introduced.

Ursula von der Leyen is coming soon – perhaps this Tuesday morning during her Davos speech – a new stage in the EU’s approach to fighting American law. After that, the extraordinary Council of Europe on 9 and 10 February should be the subject of concrete announcements by EU leaders.

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