EU to take ‘decisive steps’, protect continent amid huge US subsidies
Washington’s ‘Buy American’ domestic production requirement threatens businesses in Europe, bloc says
BRUSSELS — The European Union on Jan 16 said it would take “decisive steps” to protect Europe in the face of massive US subsidies that have left the bloc scrambling to find a way to keep businesses on the continent.
Last year, Washington passed the landmark Inflation Reduction Act, or IRA, which contains around $370 billion subsidizing products from batteries to electric cars, solar panels and wind turbines.
EU countries have poured criticism on the IRA, seeing the “Buy American” domestic production requirement as a threat to European jobs, especially in the energy and auto sectors.
European Commissioner for Economy Paolo Gentiloni said during a news conference that the EU would take “decisive steps to safeguard European competitiveness, streamlining our state aid rules while avoiding fragmentation in the single market, including through the establishment of a European sovereignty fund” to support members.
European Commission President Ursula von der Leyen has previously
proposed a new EU fund to support Europe’s green transition.
But Gentiloni made it clear a common fund would take time, it “will not be tomorrow”.
EU nations hope to agree on a way forward before a summit next month in a bid to avoid European businesses rushing to invest in the United States where energy is cheaper.
Europe has been hit hard by high energy prices after the RussiaUkraine conflict.
“There is no time to lose in establishing a new European industrial policy to support green industry and encourage industries to relocate to European territory,” French Finance Minister Bruno Le Maire said before talks with the EU’s finance ministers.
He called for a “simplification shock” to the state aid framework in Europe as well as larger subsidies for sectors including hydrogen, electric batteries, solar panels and semiconductors.
Talk of huge subsidies to prop up companies at home and fears of a race to the bottom that allows domestic production to muscle out competition is set to dominate the EU’s political agenda right up to a special economic summit on Feb 9 and 10.
Talks began late last year between the US and the EU to resolve tensions.
But Brussels has failed to persuade US President Joe Biden to alter contentious parts of the act, with Washington only promising to make tweaks.
In a letter sent to EU ministers dated Jan 13, European Commission Executive Vice-President Margrethe Vestager warned that not all EU countries have the “same fiscal space” for state aid. “That’s a fact. And a risk for the integrity of Europe,” she said.