With a new €10 billion budget, the EU takes its first steps towards a European Sovereignty fund supporting European leadership in strategic technologies.
Following up on the announcement at the end of 2022 of a Sovereignty Fund to support European industry’s green and digital transition, the European Commission (EC) has proposed a first measure in this direction with a somewhat less ambitious Strategic Technologies for Europe Platform (STEP). The STEP regulation will deploy €10 billion in new funding in addition to some redirected existing funds, to support the deployment and scaling up of investments in technologies key to Europe’s leadership. The funds will reinforce and leverage existing EU instruments to quickly deploy financial support to the benefit of business investments.
The objective is in part to respond to the large US government investment in clean-tech industries and value-chains known as the Inflation Reduction Act which is seen in some quarters as a threat to European leadership in key technology areas. The STEP measures would thus mobilise funding available across various EU programmes to stimulate investments in critical technologies and make sure companies grow and flourish in the EU. With the existing funding, and an extra €10 billion raised, the European Union aims to reach up to €160 billion in investments in the coming years. This has been declared only a precursor to a fully-fledged Sovereignty Fund that would be created in the future.
The STEP will build on existing programmes, allocating additional funding for targeted measures. An additional €0.5 billion will go to Horizon Europe, complemented with €2.13 billion of redeployment and use of decommitted amounts from other parts of the programme, resulting in more than €2.5 billion dedicated to growth-stage funding in the EIC Accelerator programme. The funds will be earmarked for a specific compartment of the EIC Fund, allowing for large-scale investments of between €15 million and €50 million, to ensure that the EU can provide fast growing prospective unicorn companies in Europe with the large-scale funding they require, without needing to selling large controlling stakes to overseas investors with deeper pockets.
The EC proposal involves some painful decisions regarding redeployed funding from other parts of Horizon Europe. €0.8 billion are proposed to be redeployed from Pillar II ‘Global Challenges and European Industrial Competitiveness’ for the period 2025 to 2027. €0.13 billion will come from the reflows of the EIC pilot of Horizon 2020, and €1.2 billion are drawn from total or partial non-implementation of research projects supported by Horizon Europe and its predecessors.
Furthermore, €3 billion will be added to InvestEU budget guarantee, allowing for €7.5 billion of direct loans to companies and other financial support to companies and financial intermediaries. €5 billion will be added to the Innovation Fund dedicated to large-scale pilot projects for clean-tech, and €1.5 billion to the European Defence Fund.
STEP will support the development or manufacturing in the Union of critical technologies in three designated fields: deep and digital technologies, covering everything from microelectronics to artificial intelligence and virtual realities, including deep-tech applications for defence and aerospace; clean technologies, such as renewable energy, carbon capture, hydrogen-related technologies, smart energy solutions, and advanced materials; and biotechnologies, spanning areas from biomolecules and its applications, to pharmaceuticals, medical technologies and crop biotechnology.