Portugal’s finance minister warns against creating competition between small and large EU states.

This week Portugal’s finance minister warned that the EU’s response to the US stimulus package for green tech should use financing instruments that ensure equality between all member states.

In an interview on Tuesday, Fernando Medina told Reuters that the new EU financing program should avoid favouring the bloc’s most industrialized nations at the expense of smaller members.

The minister’s remarks come in response to a speech given by European Commission President Ursula von der Leyen at the World Economic Forum in Davos. Von der Leyen announced a so-called ‘Net-Zero Industry Act‘ that would “focus investment on strategic projects along the entire supply chain”.

Countering the threat from North America

The president’s remarks are the latest in a series of announcements of new EU initiatives to counter the perceived threat of the US Inflation Reduction Act (IRA). The law includes a $369 billion subsidy package to support climate-friendly investment in North America. EU officials worry that the new program will entice businesses to leave Europe for greener pastures in the US.

“To keep European industry attractive, there is a need to be competitive with the offers and incentives that are currently available outside the EU”, Von der Leyen said. She added that, to support a clean tech transition across Europe, “we must step up EU funding”. Furthermore, the president noted that the bloc would “prepare a European Sovereignty Fund as part of the mid-term review of our budget later this year”.

Subsidy distribution

Some EU member states — like Portugal — are concerned that more state aid will only create more problems for smaller countries, as the biggest EU economies can afford much more support than others.

For example: out of €672 billion of state aid approved by the European Commission this year, 77 percent was given to Germany and France.

“It has to be implemented through European mechanisms that ensure equality within the European space”, Portugal’s Medina said. “The smaller European countries cannot lose to the larger countries in an internal competition.”