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Discussions with the US over its Inflation Reduction Act (IRA) will intensify when EU trade ministers meet tomorrow (November 25) to avert a subsidy race against the financial and industrial powerhouse across the Atlantic.
The IRA is legislation signed into law by the US Congress this summer and aims to bring costs down for North America through a range of measures, including generous subsidies for electric vehicles, batteries and renewable energy projects.
However, many of the subsidies are paid only for US-made products – for example, favoring US Teslas over electric BMWs or favoring US steel for wind farm projects.
In late October, the European Commission set up a task force to urgently discuss the issue with the US government, and in early November, EU finance ministers meeting in Brussels expressed concern, arguing that US measures were hurting European industry threaten.
“I wasn’t sure whether the American side fully understood how great our fear of the consequences was,” said Federal Finance Minister Christian Lindner at the time.
Tomorrow, EU trade ministers will discuss the progress of the US-EU working group on the IRA, which has met three times since it was set up a month ago.
According to Commission Executive Vice-President Valdis Dombrovskis, the EU’s aim is to treat them similarly to Canada and Mexico, which are exempt from discriminatory subsidy conditions.
However, EU diplomats are skeptical that this can be achieved as the law was passed by the US Congress. In October, US Treasury Secretary Janet Yellen lowered expectations, saying the law must be implemented as written.
With a satisfactory settlement to the dispute with the US unlikely, the question for trade ministers to discuss at their meeting in Brussels is how to respond.
French and German economy ministers met on Tuesday and said Europe must “find a common response to the inflation-cutting law” and step up work on a “new European platform for transformative technologies” to help European companies compete to pass.
Meanwhile, Commissioner Thierry Breton he has called a “Made in Europe” industry that lives up to its reputation as a supporter of a more protectionist EU industrial policy.
However, EU trade ministers are not expected to go so far as to announce their own festival of subsidies to European industry.
“Instinctively, we try to avoid any kind of massive subsidy program,” an EU diplomat told reporters ahead of tomorrow’s meeting, arguing that it could lead to an escalation in the subsidy race with the US and other countries.
Additionally, it’s unclear how the EU would fund its own subsidy regime to compete with the US model given the lack of appetite for a big new EU cash package and leaving member states to do the same could become even harder do. the game. areas within the internal market.
One option would be to respond with new EU trade defense instruments, such as a new regulation on foreign subsidies that distort the internal market. The regulation has yet to be officially adopted by the Council of the EU, but could soon come into use.
But regulation would only serve to penalize US companies, which benefit from market-distorting subsidies when trying to buy EU companies, or in public tenders, limiting its impact.
Perhaps the reality is that the subsidy race has already begun. And the EU is lagging behind.
Governments across the EU have unveiled billions in aid packages to avert an energy crisis.
However, according to a report by the European Commission, two-thirds of government measures to support households and businesses in the eurozone did not target the most vulnerable groups in society.
The report, presented in Strasbourg on Tuesday (22 November) as part of the ‘European Semester’, an annual review of member states’ budgets, urges governments to limit their support to those most in need and warns against a simultaneous Fiscal expansion of high inflation could push prices up further. You can read our report here.
The chart below shows how much eurozone governments have spent on crisis relief this year, according to the Commission, minus the extra revenue they’ve gained from new taxes and levies like the Windfall Tax.
The European Parliament has finally approved gender quotas on company boards. On Tuesday (November 22) the European Parliament finally approved legislation that will introduce quotas to strengthen gender balance on company boards across the bloc. The Women on Committees Directive, first proposed by the European Commission a decade ago, introduces quotas for the proportion of board seats occupied by the “underrepresented sex” – 40% for non-executive positions only, or 33% for both non-executive positions executive as well as executive positions seats. board post. Continue reading.
MEPs approved new revenue streams for the EU budget. On Wednesday (23 November), the European Parliament voted to amend the ‘Own Resources’ law governing EU revenue, which introduces three new revenue streams for the EU budget: Emissions Trading Scheme (ETS) revenue, sources from the emissions trading. the proposed EU Carbon Border Adjustment Mechanism (CBAM) and profit-sharing by large multinationals. The amendment still needs to be approved by the EU Council and ratified by 27 member states. The Commission is expected to present a proposal for new own resources by the end of next year.
The European Parliament has approved the EU budget for 2023. On Wednesday (23 November), EU lawmakers approved an EU budget for 2023 of €186.6 billion in commitments and €168.7 billion in payments. The council already approved the budget on Tuesday (22 November).
On the occasion of the “European Day of Basic Necessities” the Commission registers a European Citizens’ Initiative. On Tuesday (22 November) the European Commission registered a new European Citizens’ Initiative (ECI) aiming to mark a ‘European Day of ‘Whatever It Takes’, in line with a famous statement by former European Central Bank President Mario Draghi hold on 26 July 2012. According to the organizers, this day would celebrate the EU’s institutional resilience and represent a “symbolic act of pan-Europeanism”. The organizers of the initiative have six months to collect signatures. If they manage to reach a million supporters from at least seven EU countries within a year, the Commission must take this initiative into account.
Spanish Government, Banks to Facilitate Mortgage Conditions for Vulnerable Citizens. The government and banking sector officials on Tuesday announced an agreement to help a million vulnerable citizens mitigate the negative impact of inflation on their monthly mortgages. Continue reading.
Brussels worried about ‘overvalued’ property prices in Portugal. The European Commission on Tuesday expressed concern over rising property prices in Portugal, which showed signs of overvaluation. Continue reading.
The Hungarian Central Bank and the Minister of Economy met to discuss interest rates. While Hungary’s central bank has pledged to maintain tight monetary conditions and high interest rates, the Ministry of Economic Development has capped interest rates for larger institutional investors, a move some experts fear will undermine the effectiveness of money transit and support efforts the Central Europeans could hinder region. Worst performing currencies. Continue reading.
Bulgaria accepts Russian Lukoil’s tax money for EU export bids. Bulgaria’s interim government and Lukoil Neftochim Bulgaria have agreed that, despite warnings from the European Commission that it would violate the bloc’s sanctions regime, it can continue to operate and export oil products to the EU until the end of 2024, as long as it pays full taxes. Continue reading.
French unions are outraged by the cut in unemployment insurance duration. People temporarily unemployed face a 25% cut in unemployment benefits from February next year, Labor Minister Olivier Dussopt said on Monday, angering French unions and the political left. Continue reading.
General practitioners and paediatricians are on strike in the Madrid region. Thousands of general practitioners and paediatricians called an indefinite strike in 430 Madrid health centers on Monday to protest working conditions. Continue reading.
The Commission criticizes Slovakia for not including spending limits in the budget. The Commission confirmed that not including spending limits in the new Slovakian budget would reverse the already completed first milestone of the national recovery plan and would have reputational and financial consequences. Continue reading.
The Romanian government has announced a pension increase. Pensions in Romania will increase by 12.5% from January 1, 2023, and low-income pensioners will receive additional financial support next year, Prime Minister Nicolae Ciuca said on Monday. Continue reading.
Macedonians face a cold winter due to pellet prices. More than 45,000 families in North Macedonia risk being left without heating after the government decided to cap pellet prices to €6.50, a price at which wholesalers refused to sell. Continue reading.
Sunak’s government rejects reports of Swiss-style relations with the EU. Rishi Sunak’s government has been forced to deny reports that it plans to overhaul UK-EU relations by agreeing a trade partnership based on Switzerland’s deal with the bloc. Continue reading.
Finland should proceed with structural reforms, says IMF. In its final statement on the country’s economic outlook on Thursday, the International Monetary Fund advised Finland to continue structural reforms to support long-term growth. Continue reading.
CER Podcast: Will the Commission’s Fiscal Rules Plan Work? In this 20-minute podcast, Sander Tordoir of the Center for European Reform explains very well the Commission’s recently announced plan to reform the EU’s notorious fiscal rules.
War, Conflict and Forced Migration: This column by Anina Harter and Cevat Giray Aksoy gives an overview of forced migration worldwide, with a special focus on the situation of Ukrainian refugees in Europe.
Property diversification and product pricing incentives: In this article, Albert Banal-Estanol, Jo Seldeslachts, and Xavier Vives show that the more passive investors (e.g., BlackRock or Vanguard) own a public company, the more likely its brands will grow.
Silvia Ellena and Jonathan Packroff contributed to this report.
[Edited by Nathalie Weatherald]