Delors, Schäuble and Europe’s misdiagnosed competitiveness problem

Summary:

The EU has relaxed constraints on national state aid, allowing rich member-states to splurge on counter-subsidies for companies considering investments in the US. Meanwhile, Commission President von der Leyen’s proposed fund for common EU industrial state aid, which was meant to provide an EU-level instrument to counter the US Inflation Reduction Act, came to nothing. Combining Delors’ market-building interventionism with Schäuble’s dislike for EU level financing has created a sort of Frankenstein’s monster. There is now a subsidies race between member-states, in which larger or deeper-pocketed countries outspend the others. This undermines the level playing field between firms in the European market – key for competition and innovation – and threatens to disrupt European political cohesion.  Today’s EU should draw on Delors’ thinking to build common institutions that can wield cash to counter industrial competition from United States and China; and on Schäuble’s for strict rules to prevent member-states from doing the same things on a national basis, to prevent the EU internal market – which accounts for 56 million European jobs – from unraveling.

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