September 27. 2023. 12:53

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EU’s Breton wants Sovereignty Fund to buy out firms of systemic importance

Internal Market Commissioner Thierry Breton renewed his call for a broad European Sovereignty Fund to finance companies in strategic sectors, and help buy specific firms of “systemic importance” at a French parliamentary hearing on Thursday (1 June).

The idea of a European Sovereignty Fund was first floated by Commission chief Ursula von der Leyen in her State of the Union speech in September 2022, as part of a response to the US Inflation Reduction Act (IRA).

The goal of such a fund, according to a Commission communication published in February, is to “preserve a European edge on critical and emerging technologies relevant to the green and digital transitions”.

The new fund, the negotiations for which should start alongside the review of the Multiannual Financial Framework (MFF) in July, must be there to “support companies within strategic sectors, especially in health and energy”, Breton told French MPs.

More importantly, the fund could be used to buy out specific companies which hold “key strategic, if not systemic, roles” within European value chains.

This buying firepower, Breton stressed, is currently “lacking” in the EU’s toolbox, and would prevent such companies from falling “in the hands [of others] where we could no longer intervene”.

From his statement, however, it is unclear how this buying firepower would be used and by whom.

“At this stage, these are only personal reflections,” a source close to the matter told EURACTIV.

Breton has always been a staunch supporter of a fund. Back in September 2022, he claimed such a financing tool would bring Europe’s strategic autonomy “to the next level”.

In the hearing, he further said that this instrument is a means to reduce international dependencies and power Europe’s reindustrialisation.

Industrial policy: Will the EU have the money to finance its ambitions?

The European Commission put forward ambitious proposals last week that aim to position the EU as a global leader in green industry growth, yet how the plans will be financed remains an open question.

Financing still unclear

This conversation is more broadly rooted in the development of a European “industrial sovereignty”, which is now part of EU’s “DNA”, Breton said.

As a response to both the US IRA and Russia war in Ukraine, the EU has taken steps to secure critical value chains and expand the EU’s industrial capacities. This notably looks to increase support for low-carbon technologies through a loosening of state aid rules.

To counteract the distortionary effects of ramping up national subsidies, the EU Commission discussed the idea of a European Sovereignty Fund to also help member states with limited fiscal firepower to finance critical green transition projects.

How this fund will be financed remains very much in the air, however. So far, officials and political leaders suggest that the money could come from existing pots of cash that stem from the EU’s Next Generation EU (NGEU) fund, an €800-billion joint debt instrument formed to support the economic recovery after the pandemic.

Another option could include increasing the EU’s own resources. There are already several proposals on the table to increase them – most notably through the EU Emissions Trading System, the carbon border adjustment mechanism (CBAM), or the new OECD tax that targets profits from multinational companies.

As for a new round of joint borrowing, Breton himself ruled out the option in March, having previously been openly in favour, as EURACTIV reported.

“We are in a context of urgency, and it will be easier to find a political agreement as part of the revision of the MFF [Multiannual Financial Framework] than through joint borrowing,” he said at the time.

EU’s Breton: Joint debt for green transition no longer a priority

Joint borrowing is currently not an option to help member states finance the green transition, Internal Market Commissioner Thierry Breton said on Monday (13 March), marking a shift from previous calls for ‘mutualised tools’ at the European level.

Read more with EURACTIV

France’s Le Maire goes full out to avoid S&P credit rating downgrade

France’s Le Maire goes full out to avoid S&P credit rating downgrade

The French government is fighting tooth and nail to prove to Credit Rating Agency S&P Global that it should not downgrade the country’s rating in spite of high debt and deficit levels, opening up complex questions on financing the green transition.

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