EU leaders back support for car industry [fr] [de]

Meeting in Brussels on 15-16 October, the 27 European leaders gave their support to a France-inspired plan to support Europe's ailing automobile industry and instructed the Commission to come up with proposals to support all European industries before the year's end.

"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.

Positions

"What is not acceptable would be that the European governments, member states, would not support their own car industries in the very same way if the US is willing to do it, because we would lack competitiveness," said Luxembourg Prime Minister Jean-Claude Juncker.

Italian Prime Minister Silvio Berlusconi agreed, saying: "Since the United States of America intervenes massively to support its auto companies, it shouldn't create outrage if some of our states find it necessary to consider giving support - I don't know of what type - to their auto industries."

Czech Prime Minister Mirek Topolanek however pointed out that "no specific solution" had been agreed as yet and that "there probably will be more negotiations. It was backed mainly by the Italians, French and Germans - logically."

Sigrid de Vries, director of communications at ACEA (the European Automobile Manufacturers Association), told EurActiv that the car industry welcomed Sarkozy's comments and "the recognition of the fact that industry needs a more realistic framework to cope with the deterioration of economic circumstances and legislative pressure". The banking sector has received support and it is now time to support the real economy, she said, adding that the car industry was in "a special situation" due to the legislative pressure that the sector had already been facing for years. 

Folker Franz, senior advisor on industrial affairs and the environment for the European employers organisation BusinessEurope, also welcomed Sarkozy's remarks, saying: "European industry cannot master the climate change challenge without a step-change in support for R&D." According to him, revenues incurred from auctioning pollution permits under the EU Emissions Trading Scheme should be returned to industry in the form of support for R&D for new technologies. 

The European Cement Association (Cembureau)  also "welcomed the recognition by the French Presidency that there is an indispensable need to provide clear answers to the problem of carbon leakage". It further called on the EU to lay down "precise quantitative criteria making it possible to establish by 2009 a list of the sectors and subsectors exposed to a significant risk of carbon leakage". Without support measures, the industry simply risks being "wiped out", it warned.

Next Steps

• 11-12 Dec. 2008: EU summit to discuss support measures to European industry, including specific measures for the automobile sector.