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News > Germany

Europeans Worried About US Inflation Reduction Act

  • Image representing inflation in Europe.

    Image representing inflation in Europe. | Photo: Twitter/ @Isabelenred

Published 14 December 2022

European politicians and businessmen envision that the U.S. economic policies will lead towards deindustrialization in Europe.

As Europe suffers the consequences of the energy crisis and high inflation, the United States Congress passed the Inflation Reduction Act (IRA) in August.


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As the IRA aimed to promote the production and use of electric vehicles and other green technologies in the United States through protectionist subsidy policies. The move prompted the European Union (EU) to cry foul.

Business leaders across the EU argue that the IRA threatens EU industries and that the reindustrialization of the United States should not bring about deindustrialization in Europe.

According to a survey conducted by the Association of German Chambers of Industry and Commerce (DIHK), 39 percent of its member companies in the United States plan to increase investments in the coming months, while only 17 percent are reducing their investments.

Currently, several EU companies are concerned about the new U.S. tax incentives in the automotive and environmental sectors, which only apply to production in the United States, and thus discriminate against German companies and, according to experts, clearly violate World Trade Organization (WTO) rules, Volker Treier, head of foreign trade at the DIHK, said.

DIHK's business survey also shows that one in five companies active in the German automotive supply industry is planning to build up production abroad, especially because of the country's particularly high energy prices.

Siemens Energy believes that a quick response from Europe's economic policymakers to the IRA is necessary to keep energy infrastructure capacity on the continent. In absence of such a reaction, manufacturing capacities would be built up in the U.S. rather than in Europe. "This is an absolutely critical time," Christian Bruch, CEO of Siemens Energy, said.

Sweden-based electric vehicle battery maker Northvolt is considering delaying its plans to build a factory in Heide, northern Germany, according to a Reuters report.

Under the IRA, Northvolt could receive up to US$842 million in U.S. aid to build a factory, which is four times what the German government is offering, Reuters reported, quoting Northvolt CEO Peter Carlsson.

Olivier Joris, executive manager of the Federation of Enterprises in Belgium (FEB/VBO), called the U.S. subsidies "a protectionist stab in the back from the Americans".

"What worries us is that the investments will be directed more towards the United States than to Europe because of these local content obligations," he told the Belgian newspaper L'Echo.

According to Professor Bruno Colmant, member of the Belgian Royal Academy, Washington's protectionist measures have shaken the EU industries. The U.S. has always had doctrines that suit its own interests. "Their multilateralism is an argument of circumstance."

The tweet reads, "Over 115,000 UK postal workers are on strike to demand higher wages amid 11 percent inflation. To satisfy its subjects, the British power is betting on a war against Russia led by NATO and Washington in Europe."

Recalling the global financial crises of 1971 and 2008, both of which started in the United States, Colmant said that Washington never ends its wars or pays off its debts.

Paris is implementing the France 2030 investment roadmap to support the country's ecological and economic transition, but since the outbreak of the energy crisis, the reindustrialization related to energy transformation and technological innovation has slowed down.

France is particularly dissatisfied with the "super aggressiveness" of the U.S. industrial subsidy policy towards European companies. Addressing business leaders and the U.S. Congress on Nov. 30, President Emmanuel Macron warned that "Perhaps (the IRA) will solve your problems, but it will make ours worse."

Later that day, Macron again spoke of the "discriminatory" subsidies of the U.S., saying that the IRA could cause "problems" in Franco-American relations and "will fragment the west."

Discussing the IRA, France's newspaper Les Echos asked "how can we accept that Europeans should pay five times more for gas from Texas than American consumers? Especially when we are the first to suffer the consequences of the sanctions against Russia." It is time to consider America as not only a "necessary partner", but also a "systemic rival", it said. 

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