Sunday, February 25, 2024

The EU is conspiring to protect itself from the protectionist wave of the United States

The fight to keep investments in Europe is fought company by company and project by project. Proof of this is the recent announcement that Germany will mobilize 902 million euros in state aid so that the electric battery giga factory of the Swedish company North bolt will be built on its territory, instead of in the United States. This is the first time that the European mechanism has been activated to ensure clean investments and prevent their flight to the United States. for the ‘green’ incentives offered by the Joe Biden Administration through the Inflation Reduction Act (IRA).

With the economic challenges caused by the war in Ukraine, with rising energy prices and high inflation, this initiative was added in August 2022 where Washington wants to promote its energy transition. Among the consequences, however, too There is the arrival of a new protectionist wave that is putting pressure on the global economy.

Volkswagen announced in March last year that it was considering moving a battery plant it wanted to build in Eastern Europe to the United States. because it will receive aid of 9,474 million euros in loans and aid.

And other companies could follow suit, lured by the nearly $370 billion in subsidies promised by the White House. That was revealed in a list published by the Reuters agency Tesla, Mercedes Benz and energy companies Exxon and TotalEnergies have already changed their plans and they plan to increase their investments on the other side of the Atlantic.

Pressure on States

Brussels is trying to counterattack by making state aid more flexible so that national governments can “uniquely” match aid offered to companies in other countries until 2025.We must act to rebalance the playing field where the Inflation Reduction Act and other measures have created distortions. We need to do our homework here in Europe and, at the same time, work with the US to mitigate competitive disadvantages,” stressed the President of the European Commission, Ursula von der Leyen.

Securing and developing Europe’s industrial fabric is also important for the stability of the bloc in the face of future crises. The so-called “strategic autonomy.” But after the pandemic and the economic consequences of the war in Ukraine, Brussels does not want to borrow to create a stimulus package that will compete with the American one -something that was also rejected by the European Central Bank (ECB), because of the pressure it would put on inflation.

In the end, it was decided to transfer this burden to the treasury of the Member States, who are afraid that this initiative will create an inequality that will affect the Competition in the European market, because whether or not the investments will remain will depend on the financial muscle – and the fiscal margin – In each country; an area where Germany and France have an advantage.

Competition Commissioner Margrethe Vestager defended last week that this initiative was “proportionate, selective and temporary” and that “protects a level playing field in the Single Market”.

The second ‘Trump era’

The competition in Washington will get bloodier starting in November when Donald Trump returns to the White House, a view that worries politicians and economists. The president of the ECB, Christine Lagarde, assured the World Economic Forum in Davos that “the best defense is a good attack” and chose to strengthen the functioning of a single market. German Finance Minister Christian Lindner agreed with Lagarde and defended it The EU needs to improve its economic structure, which – in the end – is the biggest competitive disadvantage compared to the United States.

Meanwhile, Europe looks skeptically at China, another of its major competitors and on which it depends on importing most of the minerals needed for the energy transition. In the previous EU-China summit, Von der Leyen had already warned the Asian giant that they “will not tolerate” unfair competition, in reference to 67,070 million euros in tax exemptions deployed in Beijing.

World Nation News Desk
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