"The Commission has been told to come up with proposals by the end of December so that the European automobile industry does not lose out [to its competitors] in terms of competition," said Luxembourg Prime Minister and Eurogroup chair Jean-Claude Juncker.
Competing with the US
The idea has been burgeoning in Europe since the US last month announced the adoption of a $25 billion package of low-cost loans to help Detroit-based carmakers General Motors, Ford and Chrysler to finance plant modernisation.
European carmakers had immediately insisted that a similar scheme be set up in Europe, a call that appears not to have fallen on deaf ears.
Indeed, French President Nicolas Sarkozy, who currently chairs the European Council, told journalists after the summit that EU leaders had agreed to ask the Commission to look into the possibility and that, based on this, France would put forward initiatives before the end of the year.
"Why?" he asked, answering: "For two reasons: The Americans have just agreed on a $25 billion low-cost loan to their three main automobile constructors. So we need to keep an eye on competition – that's one issue. But the other is: Can we ask the European car industry to produce clean cars - to change the whole industrial system in just a few months - without giving them a helping hand?"
It is unclear as yet as to what form the measures will take. European car manufacturers are asking for a low-interest loans package of €40 billion, combined with incentives to scrap vehicles over eight years old so as to accelerate fleet renewal.
State aid all around for industry?
Speaking at the Paris auto show last week, Sarkozy had already expressed openness towards the idea of loosening EU state aid rules to allow governments to better support car manufacturers – and other industries – in undertaking the technological shift to a low-carbon economy.
But Commission spokesman Johannes Laitenberger told EurActiv that state aid would be "one aspect and by no means the main aspect" of the support package, which would go beyond the car sector and cover other European industries too.
Indeed, according to the summit conclusions, the European Council wants to "decide in December 2008 on appropriate responses to the challenge of applying [the EU's climate and energy] package in a rigorously established cost-effective manner to all sectors of the European economy and all member states, having regard to each member state's specific situation.”
Energy-intensive industries in Europe have been warning for months that EU plans to tighten its carbon 'belt' will put European factories out of business as companies are forced to evacuate their operations and jobs – as well as their emissions – to third countries with cheaper labour and less restrictive environmental legislation.
Recession fears
The current economic deterioration caused by the financial crisis and the threat of recession has given new weight to such concerns.
"If we managed to bring a coordinated response to the financial crisis in Europe, shouldn't we also bring a coordinated response to the economic crisis in Europe?," asked Sarkozy.
But it remains to be seen whether his proposals will gather support from traditionally more liberal-minded countries, such as the UK and the Netherlands.
