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26/01/2023
Mr. Valdis Dombrovskis
Executive Vice-President and
Commissioner for Trade
European Commission
Dear Valdis,
We are writing to you to express our concerns relating to the debate regarding the EU response
to the United States’ Inflation Reduction Act (IRA) as well as the increasingly difficult competitive
environment globally, largely driven by the Russia’s war of aggression against Ukraine and the
increasing geopolitical tensions. We are facing these challenges as the EU celebrates the 30
th
anniversary of the single market – our shared achievement and ongoing project that is worth
defending in the changing geo-economic landscape.
A number of instruments and measures are being discussed as a way to reduce the impact of
the deteriorating competitive environment and IRA on the EU investments. It is crucial that the
EU response is based on a careful analysis of the situation. Member states have already provided
views on the Commission consultation on the state aid framework in their letters to Commissioner
Vestager. As ECOFIN Ministers, we want to weigh in to this discussion with the emphasis on the
goals of further ensuring effective competition in the internal market as well as avoiding negative
effects on trade.
First of all, we should be ambitious in increasing the attractiveness of the EU for private
investments. The investment bottlenecks for the green and digital transitions need to be removed.
The Commission should carefully analyse the EU investment environment. Overregulation, slow
permitting procedures and disproportional red tape reduce the attractiveness of the EU. We need
to ensure access to labour and skilled workforce. The key to securing EU competitiveness is a
fully functioning single market, especially the free movement of capital and labour.
EU’s competitiveness and better investment environment rests on ensuring strong, adaptable
economies and sound public finances that can foster private investment and innovation. It cannot
be built on permanent or excessive non-targeted subsidies. This endangers level playing field of
the internal market as well as fiscal sustainability and risk leading to harmful subsidy competition
that is non-sustainable for individual Member States and are detrimental to the EU as whole.
Support to companies where market failures are not evident risks leading to inefficiencies,
reduced competition and, hence, worsened consumers’ choice, and distracts the allocation of
both capital and employment and increases prices in the long run. Furthermore, from the
consumer point of view subsidies are too often inefficient and likely to increase costs even if state
aid could be needed in specific and exceptional situations such as the pandemic.
Second, we need to act decisively to bring down the high inflation. With existing supply constraints
and strong labour market, we have to ensure that the economy can better absorb the already
agreed EU funding for investments through NGEU and REPowerEU as well as the various
existing investment programs. So far, only around 100 billion euros of the total of 390 billion euros
of the RRF grants have been used. Further, there is still an unused loan capacity available in the
RRF. Any additional measures should be based on a thorough analysis by the Commission of
the remaining financing gap, and no new funding should be introduced. The deepening of the
CMU, aiming at more efficient capital markets while ensuring sufficient level of investor protection
is key for accessing private sources of funding. Also, the EIB has an important role in crowding-
in private investments, and already highly ambitious plans for the near future.