Brussels
According to the Confederation of Finnish Business (EK), there is an urgent need for Finland and the European Union to develop new strategies to enhance their competitiveness in the digital and green investment sectors. The EK worries that the European Union is at risk of falling behind in the global technological race, especially in comparison to China and the United States.
Additionally, changes are taking place in competition policy within the EU itself. Germany, for instance, is making significant strides and has even overtaken France in the state aid competition. As an example, Germany has granted a substantial support of ten billion euros to Intel for semiconductors, as stated by Jyri Häkämies, the CEO of EK.
With regards to Finland, the EK believes that its competitive position can be bolstered through the implementation of a temporary tax incentive. The decision to prepare such an incentive should be made during the government’s framework meeting in April.
The EK is advocating for the introduction of a tax relief or tax exemption model in Finland to attract foreign investments. This model would temporarily exempt companies from corporate tax. According to Häkämies, this method of supporting investments has been successfully implemented internationally.
The tax model should be transparent, open and adhere to clear criteria. The support would only be realized retroactively, once the investment has been made and the business operations are up and running. Häkämies expresses hope that the Finnish government will consider this proposal and thereby strengthen Finland’s competitive standing.
Furthermore, the business interest organization also suggests that Finland should determine its stance this spring on how the EU should attract strategic investments from companies in the future. One of the options could be to create an EU financial instrument aimed at enhancing Europe’s investment competitiveness. The EK estimates that the size of this instrument could range from 400 to 500 billion euros.
Häkämies believes that establishing a European fund to address these issues would be a better alternative than engaging in rigorous state aid competition. However, he stresses that this fund should be distinct from the EU’s recovery package during the corona pandemic, which was distributed to member countries based on economic figures. He concludes with the statement, “May the best innovation win.”
The EU is unlikely to revert to the old normal
The EK has commissioned a report on the EU state aid competition from Raimo Luoma, the former head of the Ministry of Labor and Economy. The report highlights that the EU’s state aid policy has undergone significant changes since the mid-2010s, with the revised rules allowing for a more aggressive pursuit of national industrial policies.
Germany and France, in particular, have capitalized on the increased support opportunities in their industrial policies. Luoma notes that the difference in support received by the wealthiest and poorest EU member states is strikingly large.
The report concludes that it is highly unlikely for the EU to return to an industrial policy that emphasized freedom of competition in the current decade. Luoma states, “We are at a crossroads. During the new parliament and commission, the EU’s multi-year financial framework will be re-evaluated.”
The report’s final conclusion is that the changing EU industrial policy must be factored into national decision-making processes. To achieve this, a closer and more profound dialogue between the government and businesses is crucial.
