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Belgium calls out Europe’s ‘subsidy war’

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This article is part of the Belgian Presidency of the EU special report.

BRUSSELS — Belgium plans to push back against looser European Union state aid scrutiny when it takes the helm of the Council of the EU next year, a regional minister warned.

“In order not to disrupt the internal market, I think it’s important that we’re able to halt the looming subsidy race … a subsidy war, as it were,” Jo Brouns, economy minister of Belgium’s region of Flanders told POLITICO in an interview.

Subsidies have become a point of tension among EU governments ever since the European Commission allowed more state support to help companies during the COVID-19 pandemic and the war in Ukraine, which sent energy prices soaring.

France and Germany recently won a fight to prolong energy aid rules set to expire this year. Germany in early November said it was also planning “massive relief for the manufacturing industry” of up to €12 billion. Spain and Italy last year protested German plans to spend €200 billion to cushion its businesses from high energy prices.

While Brouns is the regional minister of Belgium’s northern, Dutch-speaking region of Flanders, he will lead ministerial meetings on industrial policy as part of Belgium’s presidency from January through June. He warned that allowing more state aid may ultimately favor projects or companies based in deep-pocketed EU countries rather than projects deserving it.

Belgian Prime Minister Alexander De Croo said earlier that rethinking Europe’s industrial base is an overall priority during the presidency.

The Flemish government is currently drafting a position paper on the future of the EU’s industrial policy that it will present during an informal meeting of industry ministers in early February. This will focus on how smaller and larger EU countries can compete fairly when using subsidies, and on how state support can trickle down to smaller firms.

“We’ve seen that it’s necessary in times of crises, that there are temporary frameworks to loosen the reins of the rules around state aid. But that needs to be limited,” Brouns said. Projects should be evaluated on their merits, and not be dependent on the “size of the subsidy injection” of a certain member state.

Nordic countries have voiced similar concerns around extended state subsidies. But Brouns could face objections to limiting subsidy rules from France and Germany.

One of the areas where Flanders itself is benefiting from EU subsidies is semiconductors. The Flemish government has earmarked €750 million for Belgian microchips research center Imec, and is expecting the EU to match that figure with funding from the bloc’s Chips Act.

Camille Gijs contributed reporting.

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