EC summit: Belgium's PM warns of the deindustrialisation of Europe

Belgium's PM Alexander De Croo (Open VLD) called for a European response to high energy prices and US government support for renewable energy. He did so on his arrival at the European summit in Brussels on Thursday. "We are at a point where we risk the deindustrialising Europe," he warned.

As European industry groans under sky-high energy bills, the US government's Inflation Reduction Act from January will give more than $400 billion in tax breaks and financing to US companies that help switch to renewable energy. This threatens to put companies in Europe at a significant competitive disadvantage, increasing the risk of relocation. ​

Deindustrialisation

"We are at a point where we risk deindustrialisation in Europe. The impact would be significant, also for Belgium," warns De Croo. The Belgian prime minister accuses member states of trying to steer their national industries through turbulent times independently. "It is a competition of whom has the deepest pockets. Still, at a certain point, everyone will be at the end of their reserves."

That is why De Croo advocates a European response. "We understood during the corona crisis that we are stronger together. For energy, we urgently need to do the same," he said.

In response to the IRA, European Commission President Ursula von der Leyen proposed temporarily relaxing European state aid rules. However, De Croo is reluctant to do so. "The common market is our greatest asset, and we must protect it," he said.

Belgium is keener on von der Leyen's proposal to create a new fund for green change. "Common funds can be very effective. Today, European countries steal each other's cherries, while the United States takes everything behind our backs," the Belgian prime minister argued.

France

French President Emmanuel Macron calls on the European Union to respond "much faster and stronger". "That presupposes that we simplify our rules, have a macroeconomic response and bring our aid at European and national level to an equivalent level to what the Americans are doing," Macron argued.

According to the head of state, such financing can take the form of "guarantees, loans, grants", but "we must not allow financial fragmentation of Europe".

Germany

Germany, the member state with the best financial papers, has traditionally been averse to joint European debt. Chancellor Olaf Scholz, therefore, kept a low profile when he arrived in Brussels. He praised the United States for its transition to "an economy that wants to stop climate change and modernise", but "that must be done in a way that maintains competitiveness".

Scholz did suggest a "consensual solution" on energy prices, as Germany is stuck in negotiations on a mechanism to limit price spikes in gas markets. On Monday, energy ministers will make a fresh attempt to agree on this.

Looming problems

Europe's response to the energy crisis and US subsidies should have been the summit's focus, but problems still loom in the background. For instance, member states were supposed to agree on a new package of sanctions against Russia before the start of the summit.

According to diplomatic sources, however, there is still discussion about the impact of sanctions on Russian exports of fertilisers and agricultural products to third countries. Those exports should remain possible, and Belgium, among others, wants to enshrine this more clearly in legislation. Countries like Poland, however, dismiss these reports of blocked shipments as Russian propaganda and do not want to know about any adjustment.

Loans to Ukraine

Surprisingly, the €18 billion loan to Ukraine also causes problems. Early this week, the deal seemed to be done. Hungary was to abandon its veto against the loan and the introduction of a minimum tax for multinationals after the other member states promised Budapest European aid money and would suspend slightly fewer European subsidies for the country than initially proposed. But to everyone's surprise, Poland stuck to its position on the minimum tax on Wednesday night, meaning there is still no green light for the whole package.

^{Belgian Prime Minister Alexander De Croo answers journalists' questions as he arrives in a European Council Summit in Brussels, on December 15, 2022. ​
​© John THYS / AFP}