The numbers tell the story. Since the European Union relaxed its state aid rules to help members weather Russia’s war in Ukraine, Germany has captured 49.33% of all approved subsidies. France took 29.92%.
Italy got 4.73%. Spain got 1.86%.
Those figures, contained in the EU’s own records, are the raw arithmetic of a political crisis that will dominate the bloc’s summit on February 9-10 in Brussels. The immediate cause is the U.S. Inflation Reduction Act, signed by President Biden in August 2022. It offers $369 billion in tax credits and grants for electric vehicles, batteries, and solar technology.
European leaders fear their green industries will simply move across the Atlantic to collect the money. So the EU is now considering its own subsidy package to keep those industries at home.
That plan, however, has ripped open a wound that runs deep in the European project. The single market, built over decades, depends on fair competition among all 27 member states. A company in Bulgaria is supposed to compete on roughly equal terms with a company in Germany.
Big subsidies in one country tilt the board. They give its firms an advantage that rivals in poorer states cannot match. Sweden, which holds the EU presidency, has been blunt about the danger.
Industry Minister Ebba Busch warned against “a competition on who can deliver the biggest state aid.” She said such a race would “distort the internal market’s competition and disadvantage, in particular, the union’s smallest states.” The warning carries weight because Sweden is not one of the small states. It is a wealthy, export-driven economy that could afford to play the subsidy game.
Its objection is an admission that the game itself is toxic. The conflict is familiar. It is the old fault line of the European Union: big states versus small states.
Germany and France have far deeper pockets than Portugal or Bulgaria. They always have.
But the relaxed state aid rules, introduced as a temporary emergency measure for the Ukraine war, have given them a permanent-seeming advantage. The numbers on approved subsidies are not an accident. They are a pattern.
And that pattern alarms officials who spent their careers trying to limit such imbalances. The summit now faces a choice. The EU can match the U.S. with a massive, centrally funded green subsidy program — but that requires borrowing or new contributions from member states, which the wealthier nations resist.
Or it can let each country go its own way, which means a fragmented response and a weakened single market. The third option, doing nothing, would likely mean losing industries to America.
None of the options are clean. The U.S. challenge is real. Washington’s $369 billion package is a magnet.
But Europe’s internal divisions are older and more stubborn than any American legislation. The February summit will test whether the bloc can act together when its core economic rules are at stake.
The small states are watching. The numbers on state aid are already in. They do not look good for unity.
