Finance ministers from the 19 Eurozone countries accused the US-announced anti-crisis plan in Brussels on Monday. The Joe Biden administration will implement the “Inflation Reduction Act”, a fund of 370,000 million dollars which will focus primarily on the energy transition.
European governments denounce that it includes protectionist measures and that if they are not withdrawn they will respond with commercial retaliation.
Ministers gave the European Commission the order to prepare a complaint before the WTO and the European Commissioner for the Internal Market, Thierry Breton of France, announced that if Washington does not back down, the complaint will be filed.
Funds from the US plan will go to subsidize the production and installation of wind or photovoltaic power systems or to subsidize the purchase of electric cars.
subsidies
The problem is that while European governments’ plans on the same matter do not discriminate against what can and cannot be subsidized on the basis of their origin, the United States, for example, will only give the subsidy ($ 7,500) to buy cars that are manufactured. in factories in the United States and whose battery also was manufactured in the United States.
Europeans fear that this will lead to a drain on industrial production. Several major European car brands have factories in the United States and should simply relocate the production of their electric models there.
The criticisms were made by the two Eurozone heavyweights, France and Germany. Frenchman Bruno Le Maire said that these are “massive subsidies that can lead to distortions of free competition”. German Christian Lindner said the American plan “It is a challenge for European industries and the United States must be aware of its consequences ”.
The European Commission does not want to use that expression, at least not yet, but it is already on the lips of some governments. Frenchman Le Maire spoke of the “risk of a trade war” and the head of the German government, Olaf Scholz, said that there was a “huge risk of a tariff war”. It wouldn’t even be the first time.
In recent decades, the United States and the European Union have always had open trade conflicts. Some, such as that of the airlines Airbus and Boeing, they never closed despite WTO reports and rulings.
recession in sight
The European economy will deteriorate in the coming months. The European Commissioner for Industry, Paolo Gentiloni, said on Monday that in the coming months there will be “contraction of economic activity”. The commissioner highlighted the employment data as very positive and confirmed to expect a mild recession, close to -0.9% which give the forecasts of the European Central Bank for 2023.
Gentiloni continues to stress, like the other European institutions, that fiscal support measures should focus on households and businesses most vulnerable to inflation and the energy crisis. Right now 70% of the measures are universal, they benefit families without resources and families of the upper class.
The councilor understands that politically it is easier to make them universal and technically it is also easier and faster, but he believes that they are a mistake.
Valdis Dombrovskis, Vice President for Economic Affairs of the European Commission, believes that inflation in the Eurozone is peaking: “We hope it follows a downward path because energy has peaked ”and because the European Central Bank“ is doing its job ”(raising rates).
PB
Source: Clarin
