Massive state subsidies are not the only solution to Europe's growing energy crisis and the ongoing trade dispute with the United States, EC Vice President for Competition Margrethe Vestager said.

Vestager announced the European Commission's upcoming proposal for a new sovereignty fund to mitigate the impact of rising energy prices, but said "public support" cannot solve all of Europe's problems. 

“State aid is a powerful solution to the current challenges, but you can’t build competitiveness out of subsidies,” she said.

“Only a seamless, strong and well-functioning single market can provide for sustainable, long-term growth,” Vestager said, adding that to this end, she supports the lifting of “remaining barriers to the single market.”

The single European market is the most valuable asset of European competitiveness, she said.

The comments came as EU leaders gathered in Brussels to discuss the European response to the U.S. Inflation Reduction Act, a $369 billion package of environmental subsidies and tax breaks, which EU officials said was an anti-competitive and protectionist move that could disrupt international trade.

Larger European countries such as France and Germany want Europe to embark on an ambitious green industry subsidy program to compete with Washington's efforts.

The Dec. 14 draft Council conclusions, seen by POLITICO, called on the Commission to make proposals in early 2023 to mobilize all relevant national EU instruments and tools, as well as to improve the framework conditions for investment.

On the previous day, European Commission President Ursula von der Leyen outlined plans to improve Europe's competitiveness by channeling funds into European green industry and relaxing state aid rules for decarbonization projects. She also announced that a European Sovereignty Fund would be unveiled next summer.