How Europe learned to love subsidies

Stop for a moment: in recent years, Europe — historically obsessed with competition and allergic to state subsidies — has started spending billions on public aid for its businesses. The European Union, which for decades has viewed any state intervention with suspicion, is now distributing subsidies as if it had discovered a new economic superpower. The classic narrative was clear: more state means less efficiency, more distortions, and less innovation. But today, the very institutions that preached the free market are subsidizing strategic industries for fear of losing ground to China and the United States. The reversal is this: what Europe has always seen as poison — that is, the State entering the economy — is now being administered in massive doses, convinced that it is the only antidote against global competition. At the center of this turnaround are figures like Margrethe Vestager, the European Commissioner who for years fined Google and Apple for abusing their dominant position. Today, however, her job is no longer just to rein in the giants, but to decide who can receive billions of euros in "state aid" without breaking the rules. Vestager once declared: "Competition is the heart of Europe." Today, she finds herself defending exception after exception, while France pushes to save its energy companies and Germany invests billions in electric cars. One episode says it all: in 2023, Berlin promised 10 billion euros just for a new Intel chip factory, an amount that until a few years ago would have been unthinkable and considered a threat to the level playing field between European countries. But Chinese pressure on electric cars and the massive U.S. subsidy plan — the so-called "Inflation Reduction Act" — have changed the rules of the game. The Commission has loosened the reins, authorizing public aid in key sectors, even though it knows that this risks splitting the single market. A figure that gives pause for thought: in 2022, the amount of state aid approved by the Commission tripled compared to 2019. The Dutch, who have always defended the hard line against subsidies, are now protesting because they fear that the German and French giants will stifle internal competition. Yet, without this turning point, many fear that Europe will remain squeezed between Chinese factories and the American technological push. A point that is often overlooked: in the name of the global "war," the new race for subsidies could end up accentuating the differences between rich and poor countries within the Union, risking undermining the very single market it wanted to defend. The real question, therefore, is not whether subsidies are needed or not, but whether Europe will manage not to lose itself in the race. You can sum it up in one sentence: Europe has learned to love what it had feared for years, but it risks falling in love with the cure rather than the disease. If this change of perspective has struck a chord with you, you can press I'm In on Lara Notes — it's the way to mark that this idea is now part of your vision. And if in a few days you find yourself discussing it with someone at a dinner or in the office, on Lara Notes you can tag those who were there with Shared Offline: a record of a real conversation remains. This story comes from the Financial Times, and listening to it like this saved you several minutes of reading.