Brussels, Berlin It was a matter of overcoming a precarious dependency and strengthening Europe’s sovereignty, even then. The “Plan Calcul”, put into effect by French President Charles de Gaulle in 1966, was intended to help build a local computer industry and break the dominance of US companies such as IBM. The initiative cost hundreds of millions of francs and was discontinued in 1974. The “Plan Calcul” was a failure.
Now the Europeans want to try again, with a plan whose ambitions put all previous industrial policy programs in the shade. It’s not just about computers, but about promising products of all kinds: microchips, batteries, heat pumps, wind turbines and solar cells.
On Thursday, EU Commission President Ursula von der Leyen wants to present the “Net Zero Industry Act”, which is intended to direct investments in the mass production of climate-neutral technologies. It follows the “Chip Act”, with which the EU wants to locate chip factories in Europe, and is flanked by the “Raw Materials Act”, the aim of which is to promote the mining and processing of important raw materials.
The legislative offensive is a reaction to the subsidy programs of the USA and China – and it means a reorientation of European economic policy. The Commission, which for a long time saw its task as tearing down market barriers, is breaking with its liberal traditions. This is uncanny for many economists: regulatory policy is being pushed aside by dirigisme, openness by import substitution.
“We are experiencing economic nationalism at EU level,” criticizes Jeromin Zettelmeyer, director of the Brussels economic think tank Bruegel. The legislative proposals are “a European protectionist answer to protectionist efforts by the USA”.
>>> Read here: The 215 billion project – South Korea wants to create semiconductor empire
What characterizes the EU plan are concrete production targets: By 2030, Europe should be able to produce 40 percent of the annual demand for emission-free technologies itself. With this, the EU goes even further than the “Inflation Reduction Act”, the subsidy law of the USA. “The Americans specify the means,” emphasizes Zettelmeyer. “We set quotas.”
China dominates the market with photovoltaic systems.
(Photo: IMAGO/Westend61)
Brussels diplomats are meanwhile blaspheming about “Ursula’s Gosplan” – in the style of the central planning committee of the Soviets. “There is too much attempt to steer the economy by the state,” complains DIHK President Peter Adrian. The economic policy change is also controversial in the Commission. It is important “that we do not fall into green protectionism and make the green conversion of the economy even more expensive,” says an EU official.
>>> Read here: Inflation Reduction Act: Biden’s concessions come at a cost
But von der Leyen remains undeterred. She points to Europe’s economic blackmail potential. “The pandemic and the war in Ukraine have taught us a bitter lesson in terms of dependencies,” she said in the European Parliament on Wednesday. Europe gets 98 percent of its rare earths, 93 percent of its magnesium and 97 percent of its lithium from China. From the point of view of the head of the commission, this is an intolerable risk. Because without these raw materials, no new wind turbine will turn in Europe, no e-car will roll off the assembly line.
Federal government develops plans for photovoltaic modules
The federal government is also concerned about the dependency on China. The Economics Ministry is developing plans to expand its own production capacities for photovoltaic modules, wind turbines, power grids, electrolysers and heat pumps – and in doing so cares little about the liberal principles of the social market economy to which the house has previously felt committed.
The example of photovoltaic modules shows how strong China’s position is. According to the state-owned German Energy Agency (Dena), China already provides more than 80 percent of the global production capacity for photovoltaic modules across all stages of the value chain. To compare the dependencies: In 2021, i.e. the year before the start of the Ukraine war, Germany obtained 55 percent of its natural gas from Russia.
Germany was long considered a photovoltaic pioneer. But China has taken over the market. The country created a solar industry with massive government support. In Germany only remnants are left.
>>> Read here: Europe counters the subsidy policies of China and the USA
Politicians now want to turn it into something big again. Dena has drawn up a catalog of measures on behalf of the Ministry of Economic Affairs. The central point should be state purchase guarantees for European producers. In the Dena paper, this model is outlined using the example of wind energy: state guarantees should “make it possible to start purchasing components and plant production before the project developer receives the plant order,” it says. Similar models are being discussed for the solar industry.
It should not fail because of a lack of money. The Dena paper states that the federal government should “at least ensure that sufficient capital is available for the successful revival of a European photovoltaics industry”. The extent to which this also applies to the expansion of production capacities for wind energy and grid expansion must be examined.
The EU laws should form the framework for stronger national funding. The Commission has already presented a relaxation of the state aid rule; the “Net Zero Industry Act” and the “Raw Materials Act” also provide for a drastic reduction in the approval processes for strategic investment projects.
USA deliver theoretical superstructure
US Treasury Secretary Janet Yellen, who propagates a “modern supply-side economy”, provides the theoretical superstructure for the new interventionism. The idea behind it is to increase national productive capacity with targeted investments and thus “strengthen America’s leadership in the industrial sectors of the future for many years to come”.
Critics like Bruegel boss Zettelmeyer see in the “modern supply economy” only the “recast of an ancient concept” – industrial policy of yesterday, the return of the “plan calcul”.
No wind turbine runs without raw materials such as rare earths. China also sets the tone for these important raw materials.
(Photo: dpa)
But von der Leyen took over Yellen’s thinking. Breaking a taboo or not, one has to ask oneself how far one has come with pure teaching, which has left everything to the free play of market forces. That’s what the top of the commission thinks now.
The authority receives encouragement from practitioners. Criticism of EU proposals “straight back to the 1990s, when democratic countries had a comfortable technological advantage and the multilateral world order worked,” argues Ann Mettler, European head of investment firm Breakthrough Energy. Mettler used to work on the Commission herself, and she knows the economically liberal spirit that has shaped the institution for a long time.
China and Russia used Europe’s dependencies as leverage
But laisser-faire no longer works in times of geopolitical tension, says Mettler today. Powers like China and Russia used Europe’s dependencies as leverage. An argument that economists are now making. “We have to face new realities,” says Armin Steinbach, professor at the HEC Paris business school. “A logic that is only based on cost efficiency does not sufficiently reflect our vulnerabilities.”
In any case, there is political support for the economic policy reorientation. Even the liberals, who should be suspicious of state-controlled production, can find something positive to say about the ideas. “It’s about time that not only the patents, but also the products came from Germany,” says the energy policy spokesman for the FDP parliamentary group, Michael Kruse. The promotion of production is therefore correct.
More: A question of security – USA and EU lay foundation for far-reaching raw material alliance