German finance ministry lays out joint EU response to U.S. inflation act

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German finance ministry lays out joint EU response to U.S. inflation act © Reuters. FILE PHOTO: Chess pieces are seen in front of displayed U.S. and EU flags in this illustration taken January 25, 2022. REUTERS/Dado Ruvic/Illustration

BERLIN (Reuters) – Germany wants a joint European response to the U.S. Inflation Reduction Act that would involve simplifying rules on state support and expanding funding opportunities, according to a German finance ministry document seen by Reuters on Friday.

The EU could set up a programme to promote green technology by combining various funding elements to avoid budget constraints: the Innovation Fund could increase support for large-scale projects for clean technologies, for example, or the European Investment Bank (EIB) could take on more risk through guarantees, it said.

The ministry document also suggests member states could anchor sustainability criteria more firmly in public tenders at the national level as well as extend or increase traditional subsidy programmes, but warned against local content requirements which favour domestic industry.

These would not only likely contradict World Trade Organization (WTO) law, according to the document, but also contribute to “a further erosion of the world trade order”.

While European Union countries welcome Washington’s investment drive for green technology, they claim 200 billion euros ($207 billion) of U.S. subsidies tied to locally produced content could break WTO rules by disadvantaging their companies.

The EU and Washington have established a joint task force in hope of resolving the dispute over the $430 billion act.

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