The EU is Very Worried About Biden’s Inflation Reduction Act (IRA)

Really Worried about IRA

Eurointelligence writes Industry is Really Worried about IRA.

Whether you talk to European industrialists in Brussels or German industrialists in Berlin, you get the same message these days. They are really worried about the US inflation reduction act. At the BDI conference in Berlin, it was the dominant subject. FAZ quotes the president of the German federation of industry as saying that more than a fifth of German medium-sized companies they had polled were considering packing up and leaving the country. We cannot recall ever seeing such a figure. The main reason he cites are the high energy costs. Despite recent market moves, end user energy prices will not revert to the pre-war times on a sustained level. Many privately-owned industrial companies are operating at the limits of their pain thresholds with low profit margins. But it is one thing for a company to pull through a recession, with their owners forgoing income for a year, or for the owners to conclude that the business model is no longer viable in its current form. The German government’s gas price break is not going to make the difference between viability and non-viability. It will help struggling, but viable businesses to tide themselves over. The time horizon when cheap renewable energies will shift the viability calculations for companies is still outside all planning horizons, even for long-term oriented private company owners.

Robert Habeck [Vice-Chancellor of Germany] said he was considering stricter local content rules, as the US has been doing, and a series of other measures. One of them are contracts for difference, where companies that invest in low-carbon technologies get subsidised by the state. There are national and European schemes, but they are much less effective than comparable US schemes. Habeck said that what takes two years in Germany takes two months in the US. Agility is the real threat of inflation reduction act. Europeans, too, are no strangers to subsidies. But the Americans deploy them faster.

What’s Really Going On?

Under WTO rules, much of Biden’s IRA is really an illegal subsidy. The EU cannot do in 5 years what the US can pass in a session if one political party is in clear control.

In addition to Biden’s free clean energy handouts, the US is largely energy independent while the EU desperately needs Russian energy.

All the EU can do is bitch to the WTO and that will take many years as well. 

Germany Should Blame Itself

Germany should blame itself for scrapping both nuclear and fossil fuels and increasing its dependence on Russia.

The EU is also to blame because it take 27 nations to agree to do nearly anything.

Mandating more local content will do nothing but drive up prices. How can that possibly reduce inflation either in the US or EU?

But Biden’s clean energy subsidies will create winners and losers in the US whereas the EU has nothing but losers and losers and a self-inflicted dependence on Russia.

Importantly, Germany is upset because the US is handing out free money clean energy subsidies despite WTO rules and it can’t.

And not having learned anything from Russia, Germany is now cozying up to China.

Germany’s export model is now burnt toast. 

There’s more than a bit of irony here. Without trying, Biden has had more success than Trump in actions that splinter the EU.

This post originated at MishTalk.Com.

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