The EU Commission actually only wanted to take stock of how the dispute over the American subsidy program for green products is progressing after the European-American Trade and Technology Council on Monday in Washington.

That's what she announced six weeks ago.

But now Commission President Ursula von der Leyen actually anticipated this in a speech on Sunday and outlined a European response to the "Inflation Reduction Act" (IRA).

Despite his assurances to French President Emmanuel Macron at the end of last week, apparently no one expects US President Joe Biden to address the concerns of the EU.

Henrik Kafsack

Business correspondent in Brussels.

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The IRA will provide $369 billion in grants and tax breaks for energy security and climate protection from 2023 – much of which is conditional on the funded goods being manufactured in the United States.

This applies to the premiums for the purchase of electric cars and preliminary products for wind turbines.

According to Commission estimates, $231 billion of the package violates World Trade Organization (WTO) rules.

There is great concern that companies will shift investments to America and that the EU will fall behind in competition.

The Swedish company Northvolt, for example, has questioned the construction of a battery factory in Schleswig-Holstein, citing the IRA.

Europe with its own fund

Von der Leyen has therefore not only once again brought its own new EU fund into play.

In her State of the EU address in September, she had already called for a “sovereignty fund”.

She has also spoken out in favor of further relaxing the rules on state aid, away from promoting cutting-edge technology and towards mass production of "green products".

Neither is surprising.

Driven by France, von der Leyen has recently repeatedly suggested new EU debt, whether to support Ukraine, decoupling from Russian gas supplies or how to maintain the EU's competitiveness in the face of high energy prices and IRA.

The Commission, on the other hand, has not strictly applied the strict EU rules for state aid for a long time and has paved the way for even more generous aid with the "EU Chips Act" - also supported by Germany.

von der Leyen does not name specific figures.

The needs analysis of the funds required for decoupling from Russia, which was announced in October, is also still pending.

In fact, there is disagreement among member states as to whether the EU needs a new fund at all.

France has long been in favor of it.

Accordingly, Finance Minister Bruno Le Maire praised von der Leyen before a meeting of the Eurogroup on Monday.

If the EU wants to hold its own between China and the USA, it must provide all the financial resources.

However, Germany and the Netherlands regularly point out that funds in the three-digit billion range have not been drawn from the 800 billion euro Corona development fund.

Finance Minister Christian Lindern (FDP) said that a sovereignty fund should not be a new attempt at joint borrowing.

"That would only be the same solution over and over again in search of new occasions."

economists warn

Economists are also warning of hectic counter-reactions and are calling for more composure.

The dimension of the IRA is far less dramatic than it appears at first glance, emphasizes Holger Görg from the Kiel Institute for the World Economy.

The package is designed for a period of ten years.

The financial incentives for investments in green technologies correspond to less than two per thousand of American economic output.

The Corona development fund alone, which is only set to run for seven years, is much larger in relation to economic output.

Above all, however, Görg has doubts that an exodus of European investments is imminent.

In recent years, the United States has lost a great deal of its attractiveness for foreign investment.

Even the sharp reduction in corporate tax from 35 to 21 percent in 2017 has changed nothing.

Criticism of von der Leyen also comes from the EU Parliament.

"I don't believe in getting the same weapons out of the basement and breaking the international trade rules on our part," says the chairman of the trade committee, Bernd Lange (SPD).

"Wild subsidies with watering cans won't solve the problem and given the financial resources, we can't keep up with the USA anyway." However, von der Leyen received support from the Greens.

"If we don't put any European financial boom on the table, Europe will not win the race for the cutting-edge technology of the future, but the USA or China," says MP Michael Bloss.

In the United States, people are demonstratively relaxed about new European subsidy programs.

So far, the Commission has not received more than a shrug of the shoulders, say EU diplomats.

Even a lawsuit from the WTO is unlikely to deter Washington.

A quick result is not to be expected in this case.