MNI BRIEF: No Backing For EU Borrowing For Sovereign Fund

EU leaders meeting today tasked the European Commission with coming up with proposal to safeguard European industry in response to the United States’ USD379 billion Inflation Reduction Act, though they stopped short of backing common borrowing to fund a proposed European Sovereign Fund.

While draft conclusions from a Brussels summit “stressed the need to develop our own strategy to safeguard Europe's economic, industrial and technological base,” they offered no way to finance the fund proposed by Commission President Ursula von der Leyen. (See MNI INTERVIEW: EU Needs Cheap U.S. LNG To Avert IRA Trade War)

The summit conclusions referred only vaguely to mobilising “all relevant national and EU tools.”

As part of her ESF proposal, meant to make the EU a leader in clean technology, the Commission chief also urged an easing of state aid rules, but some leaders worry that this will further fragment the EU single market as only countries with fiscal space would be able to take advantage of changed regulations .

One way to pay or a fund might be to repurpose existing facilities, including the NextGenerationEU programme, officials have said.

The Commission was also asked by leaders to present a strategy to boost competitiveness and productivity in early 2023.