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Msg  497733 of 497901  at  11/24/2022 4:09:22 PM  by


 In response to msg 497726 by  W
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Re: France & Germany Squabble While US Steals Industry From Both

EU could become industrial desert

Because of high gas prices and new lavish subsidies for American competitors, European industry is in a state of emergency.

According to two senior EU officials, the EU is in emergency mode and is preparing a large subsidy push to prevent European industry from being wiped out by US competitors.

The United States has delivered a double hammer blow to Europe.

If Russia’s war in Ukraine isn’t enough to keep energy prices far higher than in the United States,

U.S. President Joe Biden is also launching a $369 billion industrial subsidy scheme to support green industries under the Inflation Reduction Act.

EU officials are concerned that businesses will face almost irresistible pressure to relocate new investments to the United States rather than Europe. Thierry Breton, the Commissioner for the Internal Market of the EU is warning that Biden’s new subsidy package poses a “existential challenge” to Europe’s economy. The European Commission and countries such as France and also Germany have realized that they must act quickly to prevent the continent from becoming an industrial desert. According to the two senior officials, the EU is currently developing an emergency plan to channel funds into key high-tech industries.

According to the two senior officials, the tentative solution being prepared in Brussels is to counter the US subsidies with an EU fund of its own. This would be a “European Sovereignty Fund,” as mentioned in Commission President Ursula von der Leyen’s State of the Union address in September, to assist businesses in investing in Europe while meeting ambitious green standards.

Senior officials stated that the EU needed to act quickly because companies are already deciding where to build future factories for everything from batteries and electric cars to wind turbines and microchips.

Another reason for Brussels to act quickly is to avoid individual EU countries spending emergency funds on their own, officials warned. The chaotic response to the gas price crisis, in which EU countries responded with a slew of national support measures that threatened to undermine the single market, remains a sore point in Brussels.

European Commissioner Breton, in particular, has led the charge in sounding the alarm. According to those present, Breton issued his warning about the Inflation Reduction Act’s “existential challenge” to Europe during a meeting with EU industry leaders on Monday. Breton stated that it was now critical to “reverse the deindustrialization process that was taking place.”

Breton was echoing warnings from business leaders across Europe that a perfect storm was brewing for manufacturers. “It’s similar to drowning.” “It’s taking place quietly,” said BusinessEurope President Fredrik Persson.

The Inflation Reduction Act is especially vexing for EU carmakers like France and Germany because it encourages consumers to “Buy American” when it comes to electric vehicles. Brussels and other EU capitals see this as undermining global free trade, and Brussels wants to strike a deal in which its companies can benefit from the same American advantages.

With a diplomatic solution appearing unlikely and Brussels wishing to avoid a full-fledged trade war, a subsidy race appears to be a contentious Plan B.

To do so, Germany and the more economically liberal commissioners, such as trade chief Valdis Dombrovskis and competition chief Margrethe Vestager, will be critical.

Brussels hopes to get more clarity from Berlin on whether they are willing to break their subsidy taboo at a meeting of EU trade ministers on Friday.

France has long advocated for a counter-offensive against Washington by channeling state funds into European industry to assist the continent’s industrial champions. This notion is now gaining traction in Berlin, which has traditionally been more economically liberal.

German Economy Minister Robert Habeck and his French counterpart Bruno Le Maire issued a joint statement on Tuesday calling for a “EU industrial policy that enables our companies to thrive in global competition, particularly through technological leadership,” and adding that “we want to coordinate closely a European approach to challenges such as the United States Inflation Reduction Act.”

Aside from the trade ministers’ meeting on Friday, the idea will be discussed informally among competition ministers next week. According to one official, European leaders will also discuss it on the sidelines of the Western Balkan summit on December 6, as well as at the European Council in mid-December.

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