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While the EU economy mimicks the weather by cooling down a little more than would be comfortable (at least in Western Europe), various economic policy debates are certain to heat up this autumn.
In every corner of the large tent of European economic policy, there is a lot of activity that feels dominated by an uneasy mixture of uncertainty and urgency.
In one corner, we have a fight over the new fiscal rules.
German Finance Minister Christian Lindner and his frugal friends reject the Commission’s proposal of more flexible fiscal rules, while it is at the same time inconceivable that France and Italy would accept a return to the old, stricter, rules.
Desperately needed climate investments, a flurry of subsidy programmes (the necessity of which is less clear), and rising interest rates add to the pressure on public budgets, making an agreement more complicated.
Also, the new rules should be in place by the start of the new year.
Next to the fiscal policy corner is the monetary policy stall. There you’ll see the European Central Bank’s (ECB) leaders racking their brains over how to govern in a world of supply shocks in which the old playbook is no longer really adequate, as ECB President Christine Lagarde alluded to in her Jackson Hole speech last week, alas, without proposing a new playbook.
At the heart of the tent, you might see Germans wanting to heavily subsidise energy prices, so that their industry does not flee the country, in a fight with advocates of the EU’s level playing field that has already been shaken quite badly.
In the trade corner, scores of EU bureaucrats are trying to finalise all the important trade deals with Mercosur, Australia, and India, as is the Commission’s announced intention, before EU elections and more trade-sceptic Council presidencies put trade negotiations in the freezer again in 2024.
In the remaining four months, they somehow have to find the middle ground between reluctant national governments that are unwilling to go against their farmers’ interests and foreign governments that, shockingly, are not rejoicing at the prospect of having to adapt to EU standards
In the very same corner, you’ll see a team working on somehow finding an agreement with Washington over critical raw materials, as well as an agreement on green steel. If the latter is not done by the end of October, Trump-era steel and aluminium tariffs will be back in no time.
Running all over the tent, you’ll find business representatives dressed as humble beggars, some more convincingly than others, crying out for subsidies or at least a reduction of the regulatory burden in the name of almighty competitiveness.
Ok, enough of the tent metaphor, or else we might get as disoriented as much of the EU economy currently feels.
For all the rest, keep reading EURACTIV, as we’re trying to keep you oriented amid the turbulent autumn that is to come.
As China is experiencing an economic slowdown in efforts to deflate its real estate bubble, some effects appear to show up in the EU’s trade statistics.
The two charts below both show monthly data for trade in goods between China and the EU. The first chart depicts the value of the trade flows.
Over the course of 2021 and 2022, EU imports from China rose much faster than EU exports to China. which stayed more or less flat in euro terms.
The second chart, depicting a trade volume index instead of the value of traded goods, shows that EU export volumes to China have not only remained flat but have actually been falling since mid-2021.
There is not much appetite for EU goods in China, it seems. As Bruegel economist Alicia Garc?a-Herrero told EURACTIV in an interview, however, this does not only have to do with the economic slowdown in China but also with China’s self-reliance strategy, by which it wants to become more independent from other suppliers.
It seems that in this, the Chinese are more successful than the Europeans with their de-risking strategy, as EU imports from China were growing strongly until the end of last year. Especially in the sectors critical for the green transition, the EU is very reliant on Chinese products.
Nevertheless, the beginning of this year showed a drop dent in the EU’s imports from China. Sadly, this does not necessarily mean that the EU’s de-risking strategy is successful. It could also just be a sign of the EU’s own struggling economy.
You can find all previous editions of the Economy Brief Chart of the week here.
Still no German position on CSDDD trilogue. One week ahead of the next trilogue meeting on the EU’s Corporate Sustainability Due Diligence Directive (CSDDD), the German government is yet to find a position on the outstanding issues. The “process of opinion-forming in the federal government continues,” a spokesperson for the German labour ministry, which is in charge of the negotiations, told EURACTIV on Wednesday afternoon. The EU’s draft law is contentious within the government coalition, as it faces serious resistance from business associations, who complain that rules might be tightened again compared to Germany’s own due diligence law that came into force only this year. The government announced on Tuesday the start of an initiative against EU reporting obligations for companies, which in their view strain businesses’ resources. Read more.
German coalition seeks economic reset, but no agreement on energy subsidies. At a two-day government retreat in Castle Meseberg, the German government also discussed how to bring its economy back on track. While adopting a previously delayed tax relief package, as well as a law that aims to reduce bureaucratic efforts for companies, the government failed to reach an agreement on electricity subsidies. Economy Minister Robert Habeck (Greens) had previously said this was an urgent matter as Germany otherwise might have “no industry” anymore. Scholz’s own party, the SPD, also called for a subsidy for key industries – a call so far not echoed by the Chancellor himself. Read more.
European Parliament to fight Council’s cuts to EU budget for 2024. Members of the European Parliament’s budget committee criticised EU countries’ cuts to the proposed EU budget for 2024 on Wednesday (30 August). In particular, MEPs expressed concerns over the limited margins that the cuts would leave to address possible crises as well as the Council’s decision to reduce the budget line for the repayment of the pandemic recovery funds. EU lawmakers will likely reject the Council’s cuts in their position on the 2024 budget and during the upcoming negotiations with member states. Read more.
France unveils new export boost plan. France “can and must become again a leading trade country,” all the while closing existing current account deficits, especially in goods trade, French Trade Minister Olivier Becht announced on Thursday (31 August), unveiling a newly-dubbed “dare-to-export” plan. It sets the goal of reaching 200,000 exporting SMEs by 2030 and closing the EUR54 billion trade deficit. The focus will be on recruiting new talents, and providing promising firms with tailored schemes to boost export. “It’s a matter of sovereignty,” the minister said, calling French businesses to move to “offence, and have the world for their horizon”.
Additional reporting by Silvia Ellena, Th?o Bourgery-Gonse, and Jonathan Packroff.
[Edited by Zoran Radosavljevic]
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