The $370 billion US subsidy package designed to boost investment in green technologies has alarmed businesses and leaders in Europe. Because the so-called Inflation Reduction Act (IRA) favors countries with which the US has free trade agreements, such as Canada and Mexico. Fears of subsidy competition are on the rise. German Chancellor Olaf Scholz is now demanding that Washington not discriminate against Europe. “We don’t want to be treated worse than Mexico and Canada,” Scholz said Friday evening after a meeting with Italian Prime Minister Giorgia Meloni.
In view of the EU countermeasures, Scholz also warned of international and intra-European subsidy competition. You don’t want to start one. With a view to the special EU summit next Wednesday and Thursday, Meloni expressed her concern about premature decisions. From an Italian point of view, it is important that the use of existing EU funds be made more flexible. German Economy Minister and Vice Chancellor Robert Habeck will travel to the US with his French counterpart Bruno Le Maire on Monday and Tuesday to discuss the impact of IRA.
Berlin had initially requested an analysis of the effects on European industry from the European Commission. On Wednesday, the Commission then presented a package of measures. In concrete terms, state aid rules must be relaxed, unused resources from the Corona aid pot must be used differently, ecological projects must be approved more quickly and trade agreements to secure scarce raw materials must be enforced.
Warnings from German industry
German industry has long warned against missing the boat – which at least some economists consider an exaggeration. Michael Hüther, head of the employer-related Institute of German Business (IW), sees US subsidies as a legitimate means of increasing climate protection. According to a study, Europe has its own location conditions in its own hands. Production relocations may take place in individual cases. In practice, however, they depend on many factors, not just individual subsidies, which can be significantly reduced by a Republican president even after 2024. “Energy price differences are a much more important factor for energy-intensive companies.” And Europe could also benefit from hydrogen production in the US in the long term, because Germany in particular will depend on cheap import options here.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
