(Bloomberg) -- Europe will likely lose out if it tries to compete with the US and Asia by offering more state aid to its companies, according to Denmark’s new economy minister.

Subsidies can’t be the answer to foster long-term competitiveness and growth in the European Union, Stephanie Lose said in an interview on Friday.

“If you have to compete based on the size of state coffers, Denmark will quickly lose out, and Europe will probably too, given the debt situation in large parts of the region,” she said in Ghent, Belgium on the sidelines of a two-day meeting of EU counterparts.

“We’ll have to focus on real competitiveness, and that requires a greater willingness in some countries for reforms that support growth and development, and is not just a question of investing in new things,” she added.

The EU last year relaxed its state aid regime for green investments to counter a US climate law that provides generous subsidies. The measures, which allowed European governments to match funds offered by foreign countries under certain restrictions, have been followed with massive national support packages to bolster businesses driving the green transition.

Read More: Subsidy Wars Heat Up With US Allies Forced to Pay Up or Lose Out

Lose, who was appointed economy minister in Denmark’s majority government in November, cautioned that such an approach risks stoking more internal competition within Europe, rather than boosting the bloc’s ability to take on the US and Asia. 

The Nordic nation itself has introduced a 1 billion kroner ($150 million) subsidy for manufacturers within wind energy and green hydrogen technology for this year. Lose said such state support is not Denmark’s preferred approach, but that the government had to put it in place to avoid companies setting up elsewhere in Europe.

“It’s not conducive to Europe as a whole if the way we spend the money is just a competition between whether the factory should be located in Poland or Germany or France,” she added.

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