He did not reiterate the bold stance the European Commission has taken on the Recovery Fund in the event of a European response to competition from $369 billion in US state aid to its industries in the context of the Inflation Reduction Act (IRA).

The related proposal, which he presented last week, is limited to measures to ease state aid rules in strategic sectors for a green transition, like their American counterparts, but does not bring back the idea of ​​a new European Sovereignty Fund. For this purpose, he left open only the possibility of recycling existing resources, such as unused loans from the Recovery Fund, approximately 250 billion euros.

The problem is that weaker countries, such as Greece, will not be able to adequately support their industries, no matter how the relevant EU rules are relaxed, since they do not have “fiscal space”. In this way, community sources say, Europe risks fragmenting the single market and exacerbating inequalities among its member states. In other words, European powers such as Germany and France, in an attempt to counter American competition and prevent their businesses from fleeing there, will generously subsidize their businesses by killing their competitors in other, smaller European countries. Germany has already announced a 200 billion euro state aid package since last October.

“We must avoid the race for state aid,” said competition commissioner Margrethe Vestager, but it is not yet clear how this will be done. According to him, more than 75% of the state aid provided since March last year under the temporary, weakened state aid regime due to the Ukrainian crisis went to Germany and France (see chart).

Major European powers such as Germany will subsidize their businesses by destroying their competitors in other, smaller countries.

The development is also of concern to the Greek industry, which indicated in a corresponding letter to the Prime Minister that EU members are “increasingly applying effective measures to support their industry”, which creates additional differences between states.

This issue will be discussed at the EU summit. next Thursday and Friday, but sources from the Greek side are not yet waiting for a final decision. As they note, member states are divided into several groups:

• Germany and France were the first to call for relaxation of state aid rules. Germany, however, is opposed to bringing in new EU funds and claims “money is available” from Recovery Fund loans. On the contrary, France is in favor of new funds in the EU, and Italy agrees to the creation of a “European Sovereignty Fund”, as originally proposed by Commission President Ursula von der Leyen.

• Other countries oppose changing state aid rules, either because they fear unfair competition from their powerful partners or because they believe it will ultimately come at the cost of reducing the competitiveness of the European economy. Finland, Czech Republic, Denmark, Estonia, Ireland, Austria in their letter argue that state aid can lead to a reduction in competition, and also oppose any new funding.

The Greek side is inclined to believe that “a European response must be given”, as Prime Minister Mr. Mitsotakis said. Therefore, he would be willing to discuss changing the state aid rules, but in parallel with additional EU funding, since there is no room in the Greek budget for new spending if he wants to return to primary surpluses.