BERLIN — German Chancellor Olaf Scholz on Friday defended plans to relax European state aid rules against criticism from Italian Prime Minister Giorgia Meloni, who warned that such changes risk distortion of the EU’s single market.
Speaking to reporters following a joint meeting in the German chancellery, Scholz said he had “seen a lot of good things” in a proposal unveiled by the European Commission this week, which aims to make it easier to access tax breaks for green technologies, redirect cash toward clean-tech industries, and relax state aid rules. EU leaders will meet in Brussels next Thursday and Friday for an extraordinary meeting to discuss the Commission proposals.
Yet Meloni — whose government had already come out against the EU plans earlier this week by warning that they would “jeopardize the unity of Europe” — reiterated her concerns, which boil down to the point that EU countries with less financial leeway like Italy might not be able to offer their companies such lavish subsidies or tax cuts as Germany or France could, which might risk creating economic imbalances.
“I have explained to Chancellor Scholz our position, which is certainly one of caution on the issue of changing state aid schemes in the sense that we all need to maintain in Europe what we call the level playing field, a level of competitiveness that is equal for all,” Meloni said.
Meloni proposed instead to provide “full flexibility” on spending existing EU money from the coronavirus recovery fund, the RePowerEU program that aims to overcome dependencies on Russian energy imports, or regular EU budget funds.
The Italian leader also voiced support for the creation of a new “sovereign fund” financed “by new communal debt” for which all EU states would be jointly liable — an idea that the German government has repeatedly rejected.
Scholz sought to take up some of Meloni’s proposals by suggesting that there could indeed be “quick wins” by using money from the RecoveryFund and the RePowerEU program, but he also sought to rally support for the Commission proposals to relax state aid rules.
“The focus of the discussion is more on how to handle [state aid decisions] in a simpler, more flexible and less bureaucratic way,” the chancellor said. “If you look closely, that is essentially what the Commission has proposed, with a few openings in addition.”
Scholz stressed that “no one has an interest” in EU economies falling behind internationally because the bloc does not change its state aid rules while the U.S. is boosting local business with its $369 billion Inflation Reduction Act.
Yet “we don’t want to get into a global subsidy race,” Scholz said, and added: “I am sure that we can come together.”
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