Europe seeks to close a detonating response to Joe Biden’s “green subsidies” plan

During his recent visit to the United States, President Emmanuel Macron advanced to his counterpart Joe Biden the European anger at the “protectionist” plan launched by Washington. (JONATHAN ERNST/)

The Old Continent trembles at the idea of ​​having to face a massive movement of companies leaving when the consequences of Covid-19 do not end and, even less, of the war that is taking place in Europe. The warnings coincide in pointing out the threat of deindustrialization that the heyday of the law could cause “protectionist” launched by the government of Joe Biden.

The “Inflation Reduction Act” (IRA), a regulation approved by the Biden administration in August and that foresees massive investments for the energy transition – accompanied by generous subsidies for electric vehicles, batteries and renewable energies produced in the United States – ignited European fury. For the Twenty-seven, hundreds of billions of dollars of investment will be put on the table, which will manifest itself, for example, in aid to individuals who will buy electric cars “Made in USA”.

But the answer above from Brussels. The European government unveils a new state aid reform aimed at simplifying and accelerating processes, as well as providing faster and more targeted support for production in key strategic sectors for the green transition.

french president Emmanuel Macron tried, on his last visit to Washington in front of his peer Joe Bidenstop this law that the European Union (EU) considers it “protectionist” and that dumps 369,000 million dollars in subsidies to the Americans. The Frenchman argued that he runs the risk of “fragmenting the West” and worried that “Europe and France will become a kind of adjustment variable” in the rivalry between that country and China.

Therefore, according to the sources of the European Comissionhis President Ursula von der Leyentake advantage of the Davos summit, to discover the next steps in Europe’s response to the IRA, some advances about the end of 2022.

Within this framework, a ten-page document, reported by the Parisian newspaper “The Echoes” – like other media, in particular the German economic “Handelsblatt”-, the Élysée Palace defends a strong line to develop a strategy “Made in Europe” destined to do battle with the millions of dollars in subsidies from the White House.

Also this Tuesday, during an economic meeting in Madrid, the European Commissioner for the Internal Market, Thierry Breton, assured that he was “working” on measures “comparable” to those of the United States but aimed at European companies. The official, preventing the risk of a plan that could “distort” competition, defended the need to react: “It is not too late. We need to send a strong message to our industry,” he explained.

The European initiative, in the first place, seeks to create “an emergency fund” that is sustained by existing financing, to then give way to another “sovereign” package that should be operational before the end of 2023. Although the second does not have the sufficient guarantee, France recalls the 365,000 million of the recovery and resilience mechanism (FRR) “allocated and not yet disbursed” that could be reallocated to strategic sectors of the EU. In all cases, it is a question of imposing for the distribution the same schemes used to fight the coronavirus pandemic.

From the beginning, France has been tough on the US inflation reduction law.  President Emmanuel Macron hopes that from the European Commission, Ursula Von der Leyen will give details of an inflexible response from the EU
From the beginning, France has been tough on the US inflation reduction law. President Emmanuel Macron hopes that from the European Commission, Ursula Von der Leyen will give details of an inflexible response from the EU (POOL /)

“Every day they tell me examples” of companies that have given up “investing in Europe”, he admitted Thierry Breton on Tuesday. This argument is extended among the Twenty-seven, who demand “coordination” from Brussels in the face of fear that their companies could relocate to the other side of the Atlantic.

Europeans consider the IRA a threat. The Czech Industry Minister Jozef SikelHe argued that it is “unacceptable.” The Minister of Foreign Trade of the Netherlands, Liesje Schreinemacherdescribed it as “worrying”, while for the French economy minister, Bruno LeMaire, It is “unbalanced”. In some cases, the amount of subsidies that Washington is proposing is four to ten times the maximum amount authorized by the European Commission.

To explain the possible impact, the risk for the automotive industry is repeated. One of the biggest points of tension is the subsidy of up to $7,500 that is granted for the purchase of an electric vehicle manufactured in the United States, Canada or Mexico. This subsidy leaves out the European manufacturers, producing great losses. “This will create an unacceptable trade barrier and contrary to the rules of the World Trade Organization,” Breton judged.

In detail, the response presented by the Commission to the IRA will consist of “three parts”, the European Commissioner said on Tuesday. A regulatory component, aimed at accelerating the development of “green technology” in the common market; a financial aspect, so that all Member States have access to resources to support this sector; and finally the creation of a “sovereign wealth fund” capable of investing in European industrial projects.

According to Breton, the first two parts will be presented at the European Council of the February 9 and the third could rather be defined during the second half of the year.

Meanwhile, von der Leyen estimated in early December that the EU should take “rebalancing” measures to iron out the “distortions” generated by the US plan. Despite the fears, the partners are divided on the volume of the response, advocating greater dialogue, and remembering that they are allies to confront Russia in the invasion unleashed on Ukraine, that is, on European soil.

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