Good morning and welcome to Europe Express.
It’s launch day for the EU’s long-anticipated (and internally disputed) Chips Act, which seeks to bolster the bloc’s production and development of semiconductors with billions in EU and national subsidies. We’ll run you through the latest draft and lay out the issues that still need ironing out.
Still on tech, as the Financial Times reports exclusively, a senior US trade official has written to German MEP Andreas Schwab, who is leading the negotiations on the Digital Markets Act, to lobby for broadening the scope of the regulation so as to include tech companies from other countries.
As for the Russia tensions, after having met Vladimir Putin at a safe distance (and without aides) in the Kremlin yesterday, France’s Emmanuel Macron is getting together with Germany’s chancellor and Poland’s president in the so-called Weimar Triangle in Berlin today. I’ll bring you up to date with where things stand and what this says about Warsaw’s ambition to be seen as a security player.
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Chips with everything
Industrial policy is back as the EU unveils a plan today to spend billions of euros to build semiconductor factories in the bloc, write Andy Bounds and Javier Espinoza in Brussels.
The Chips Act, a draft of which was obtained by Europe Express ahead of publication, will tweak state-aid rules so that taxpayers’ money can fund fabrication plants rather than just research centres.
European Commission president Ursula von der Leyen said last week the bloc foresaw €42bn of mostly public funding for the plans, but commission departments were still squabbling over where the cash would come from last night.
The aid would cover 100 per cent of the funding gap between a company choosing the EU instead of elsewhere. Some governments worldwide offer support worth 40 per cent of the cost of a typical €20bn factory.
To qualify under the EU’s proposed regime, a project would need to meet a “first of a kind” test to prove it is more advanced than any other facility built or set to be built in Europe, the draft documents say.
Thierry Breton, the internal market commissioner behind the plan, told the FT that he had found €12bn to build three pilot production and packaging facilities available to any EU company. “That will benefit everybody. That’s huge,” he said.
One could be in Belgium, he added. Some €6bn would come from the EU budget by 2030, raiding the Horizon research fund and other areas, and the rest from industry and member states. National governments had pledged €30bn more to subsidise factories, he said. Publicly announced commitments from national governments fall far short of this figure, however.
The Chips Act aims to quadruple EU microchip production by 2030 and double its global market share to 20 per cent. Chip shortages have slowed production of cars, computers and other tech products and spurred government intervention worldwide.
The act will also establish a monitoring system allowing governments to restrict exports from EU-based companies that do not prioritise production of chips for the bloc when there is a global shortage. They could be fined for non-compliance. They would also need to provide confidential information about their customers and production methods.
The legislation — which had to overcome internal resistance from more pro-market commissioners — must also be approved by member states and the European parliament.
Some smaller member states fear that EU capitals will end up competing with each other, and that those with the largest budgets — Germany, France and Italy — would outbid others for plants that might have been built anyway.
EU states are wooing Intel, which has committed to $20bn of investment in chip manufacturing in Europe, with the fab itself most likely to go to Germany. France, Italy and the Netherlands are also in the running for a share of chips investments.
“What is the problem we are trying to solve? We have a temporary shortage. The market will respond, ” said one EU diplomat. “There could be overproduction; we could waste a lot of money.”
Chart du jour: Spanish jobs
Spain was the source of more than a third of all eurozone jobs created last year and the country’s youth unemployment is down 10 percentage points on its level a year ago — reflecting a global trend that has defied expectations of huge job losses in the wake of the pandemic. (More here)
A frequent saying making the rounds in Brussels these days is that if anything, Vladimir Putin has managed to bring the Europeans closer together. At least on a diplomatic level, that seems to be the case.
Poland’s president, Andrzej Duda, was in Brussels yesterday showcasing his country’s diplomatic acumen when it comes to Ukraine and Russia. Fears over the situation in Ukraine have even prompted a reappraisal in Warsaw of its battles with the EU, with Duda extending an olive branch last week by proposing a law that could take steps towards alleviating a rule-of-law irritant in EU-Polish relations.
“Good exchange with President Andrzej Duda on the security situation and Russia’s military build-up,” tweeted European Commission president Ursula von der Leyen after meeting with Duda yesterday. “We are co-ordinating deeply our preparedness, including on energy supply, and on sanctions to respond to any further escalation.”
In a follow-up tweet, she added: “We also discussed the objective of having a robust judicial system in Poland, in line with EU standards.”
Today, Duda is joining France’s President Emmanuel Macron, who is just back from Moscow and Kyiv, and Germany’s chancellor Olaf Scholz, who returned from a short visit to Washington yesterday — to compare notes and revive the so-called Weimar Triangle in Berlin.
This loose format was founded in 1991, after the fall of the Berlin Wall, and sought to foster European integration and help Poland join euro-Atlantic structures. At a leaders’ level, it was put on hold for more than a decade, with the last meeting having taken place in 2011.
The three countries got together slightly more often over this period in other formats, with foreign ministers gathering in Paris in October 2020 after an eight-year hiatus, mainly focusing on Belarus’s crackdown following the contested re-election of leader Alexander Lukashenko.
Despite the recent rallying around the flag over security issues, some capitals do have their suspicions about how long Poland will play ball. “I don’t remember the last time a love triangle ended well,” quipped an EU diplomat.
What to watch today
European Commission adopts Chips Act proposals
Germany’s chancellor Olaf Scholz, France’s President Emmanuel Macron and Poland’s President Andrzej Duda attend a Weimar Triangle meeting in Berlin
EU agriculture ministers meet for an informal council in Strasbourg
Costly hawkishness: ECB chief Christine Lagarde yesterday played down the chances of monetary policy tightening to tackle this year’s record eurozone inflation, saying any shift would be gradual. Her remarks in the European parliament came as borrowing costs for southern eurozone governments, Italy and Greece in particular, jumped close to pre-pandemic highs after she suggested the central bank could raise interest rates this year.
Far-right rivals: Far right presidential wannabe Marine Le Pen has seen her party plagued by defections to the camp of Éric Zemmour, in addition to the potential political comeback of her niece and rival Marion Maréchal — all of which complicates Le Pen’s efforts to unseat President Emmanuel Macron.
Credit Suisse trial: The group became the first bank in the history of Switzerland to answer criminal charges yesterday, with the opening of a case alleging money laundering for a Bulgarian mafia between 2004 and 2008.
Polish resignation: In Warsaw, the country’s finance minister resigned yesterday, following weeks of criticism of the implementation of the government’s most recent package of tax reforms.
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