Fri Sep 20 11:56:39 UTC 2024: ## Europe’s Economic Future: A Debate Between French Dirigisme and Finnish Innovation
**Brussels/Berlin** – As President Ursula von der Leyen unveils her new team of Commissioners, the focus is squarely on restoring Europe’s competitiveness. The new economic priorities, however, are sparking a debate between two contrasting approaches: French-style industrial policy and Finnish emphasis on research and development (R&D).
Von der Leyen’s “competitiveness” focus reflects the urgency felt by member states, with many wanting a strong economic portfolio for their representatives. While the appointment of Frenchman Stéphane Séjourné as executive vice-president for prosperity and industrial strategy signals a potential for more state-directed industrial policy, the effectiveness of this strategy is being questioned.
Recent examples in Germany highlight the risks of heavy reliance on subsidies. Despite €10 billion in state aid, chipmaker Intel has “paused” its plans for a new factory in Magdeburg, citing financial difficulties. Similarly, steelmaker ThyssenKrupp and battery producer Northvolt, both crucial to Germany’s industrial strategy, are also facing challenges despite receiving substantial state aid.
Timo Jaatinen, Permanent Secretary of the Finnish Ministry of Economic Affairs, argues for a different path. “In Finland, we see that research and innovation are truly the heart of industrial policy and competitiveness policies,” he stated, advocating for EU funding focused on R&D. Finland’s success in this area, with R&D spending as a share of GDP competing with the US, is seen as a model for Europe.
Jaatinen criticizes the reliance on subsidies, stating, “Instead of direct state aid, we should emphasize more research and innovation in new sectors.” This debate over funding priorities will be crucial in the upcoming negotiations on the next Multiannual Financial Framework (MFF) starting in 2028. Germany, as the largest net financial contributor, will play a decisive role in shaping Europe’s economic future, choosing between the French and Finnish models.
The EU’s new clean industrial strategy also promises a “big debate on funding,” as officials acknowledge the need for a balance between protecting key industries and creating a strong business case for clean products.
Meanwhile, Intel’s decision to halt its factory plans in Germany and Poland is a setback for the EU’s ambitions to boost its domestic chipmaking capacity. The EU Chips Act, aimed at doubling Europe’s share of global semiconductor manufacturing by 2030, is facing an uphill battle.
The coming years will see a crucial battle for Europe’s economic future. The choices made on funding priorities and industrial policy will determine whether the EU can successfully navigate global economic challenges and secure its place as a global leader.
First Piper 