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Germany’s Habeck pessimistic about US trade dispute, calls for EU measures

Germany’s Habeck pessimistic about US trade dispute, calls for EU measures

Europe fears massive new American subsidy package will drain investment out of the EU.
German Economy Minister Robert Habeck voiced skepticism on Wednesday that the EU could still reach an agreement with the U.S. over a contentious industrial subsidy package and suggested that Europe should respond with its own industrial support measures.

The EU has less than six weeks to convince the U.S. to amend to its Inflation Reduction Act, which grants $369 billion worth of subsidies and tax breaks to U.S. green businesses but is seen by the European side as discriminatory, particularly for encouraging consumers to "Buy American" when it comes to electric vehicles. The Europeans fear this will suck investment out of the EU, and want to qualify for the same terms.

“A solution [with the U.S.] must now be found in a few weeks, otherwise we will be forced to go another way,” Habeck told an economics summit organized by German newspaper Süddeutsche Zeitung.

At the same time, Habeck expressed doubts such a solution could be found, and referred to the fact that a previous trade dispute between the EU and U.S. over airplane subsidies for Boeing and Airbus dragged on for many years.

Elaborating on what alternative path the EU could take, Habeck said that the EU must act to “establish a level-playing field” with the U.S. on incentives for green technologies.

He remarked that the EU had already devised industrial policy measures to boost home-grown production, and offered as an example the European Chips Act that seeks to increase European semiconductor production with public and private investments.

“That's the blueprint of a response” to the U.S. law, Habeck said, adding: “That would be something that I would support.”

German Finance Minister Christian Lindner also raised the possibility of tax cuts on Wednesday to spur investment.
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