The European Union has had to go into emergency mode to ready a big subsidy push in order to prevent European industry from being wiped out by rivals in the United States.
President Joe Biden is also rolling out a massive $369 billion industrial subsidy scheme to support green industries under the Inflation Reduction Act.
Now officials in the European Union fear businesses will have irresistible pressure to put new investments into the U.S. rather than in Europe. EU industry chief Thierry Breton is warning that Biden’s new subsidy package poses an “existential challenge” to Europe’s economy.
The European Union is now working on an emergency scheme to funnel money into key high-tech industries.
There is a tentative solution being prepared in the E.U. to counter the subsidies in the U.S. It will include a fund for Europe’s own subsidies. A “European Sovereignty Fund” will help businesses invest in Europe and meet ambitious green standards.
The European Union needs to act quickly in order to counter the U.S. subsidies. Companies are already making decisions on where to build and invest in.
It is not the only blow coming to Europe from the U.S. Energy prices look set to remain permanently far higher than those in the U.S. Energy prices have skyrocketed in Europe due to Russia’s invasion of Ukraine.
Reviving European industrial policy in order to counter rising energy prices has been called for by the French and German governments.
German and French Economy Ministers Robert Habeck and Bruno Le Maire said they were “firmly resolved to work together to provide an adequate response to the most vulnerable economic sectors” in a statement released by their ministries.
France and Germany will make a joint purchase of gas in order to bring down energy prices. The two countries are also in favor of structural reform of the electricity market in order to achieve sustainable control of energy prices.