Ursula von der Leyen’s plan to set up a European sovereignty fund has stalled, as member states oppose the idea and the European Commission turns its attention to fund critical technologies through existing facilities.

Almost two years ago, Von der Leyen promised in her state of the union address to push to create a new sovereign wealth fund (SWF) for Europe to make the continent resilient and independent when it comes to strategic industries.

Thus, in June last year the Commission proposed a regulation on the Strategic Technologies for Europe Platform (STEP), in force since 1 March, using funds from 11 existing European Union programmes on digital innovation, defense and health, among others.

Now, the EU is focusing on implementing STEP to reinforce competitiveness in clean tech, bio tech, digital and deep technologies for years to come, making sure EU funding is used to its full potential, according to a source.

Ursula von der Leyen, European Commission president

Ursula von der Leyen at European Commission

The Commission saw STEP as a “testing ground” to create a fully-fledged sovereignty fund, it said.

A possible proposal for a fully-fledged EU SWF is in the hands of the Commission which has the right of initiative, an EU official told IPE.

Concrete proposals have not been tabled so far for the establishment of a “European sovereign wealth fund” by the Commission or other institutions at EU level, a spokesperson for the German finance ministry told IPE.

Opposition to the EU SWF

Some EU member states have already blocked the introduction of such a fund, said Henrike Hahn, member of the European parliament for Germany’s Green party.

“The refusal of some member states, including a German finance minister, is completely inappropriate and fails to recognise the seriousness of the situation […] I hope that the negotiations for the next Multiannual Financial Framework will provide an opening to introduce a fully-fledged and permanent fund at European level,” she added.

The German finance ministry thinks that new EU financing instruments are not necessary, the spokesperson added.

“Substantial [funds] are already flowing from the budget of the Union into programmes to increase European competitiveness. The Next Generation EU programme was launched to deal with the economic consequences of the COVID-19 pandemic. There are still significant funds available from this programme,” the spokesperson added.

Other member states, like Ireland and Italy, are proceeding to establish their own sovereign funds.

In Italy the National Strategic Fund – under the ‘Made in Italy’ draft bill – could be set up as a fund of funds to support the extraction, processing and recycling of critical raw materials, according to reports.

The partly state-owned investment bank Cassa Depositi and Prestiti and Invimit (Investimenti Immobiliari Italiani) – a company run by the Ministry of Economy and Finance managing closed-end real estate investment funds – have been shortlisted to run the the Italian SWF.