Germany and France warn of the impact of Biden's anti-inflation law in Europe: "We cannot get into a trade war"

The French Minister of Economy and Finance, Bruno Le Maire, during the videoconference with his German counterparts.

On the screen, German Economy Minister Robert Habeck. ERIC PIERMONT (AFP)

The Inflation Reduction Act, the star legislative project of US President Joe Biden, worries European governments.

“We are seeing how there are companies that leave Europe for the United States because of the enormous subsidies that are being paid there,” German Economy and Climate Minister Robert Habeck said on Wednesday.

And he warned: "We cannot get into a trade war at a time like this."

Habeck, who appeared together with the Finance Minister, Christian Lindner, and his French counterpart, Bruno Le Maire, stressed that Europe and the United States are "partners, even on both sides of the Atlantic" and that, although talks are under way with Washington, Europe has to give a “strong response”.

The Franco-German financial and economic council was held in its 52nd edition by videoconference this Wednesday, the same day that the postponement of a face-to-face summit between the two countries that was being prepared for the 26th was known, officially due to scheduling problems of some ministers, but which has brought to light the disagreements between Paris and Berlin on key issues such as energy and defence.

The Ministers of Economy and Finance have agreed on the concern about the competitiveness of the block of Twenty-seven in a press conference after their meeting.

Le Maire has defended the need to work on "adequate European responses" to avoid being "hit" by the effects of Biden's law.

The Law to Reduce Inflation is a gigantic package that includes investments to promote green energy, raises taxes on companies and is expected to generate revenues of some 740,000 million dollars.

In Europe it causes many misgivings due to the impact it may have on the community industry.

“It's a good sign, a great sign, that the US government is now fighting climate change.

But this package must not destroy the equality of opportunities between our two economies, the American and the European”, Habeck affirmed, in the most forceful declarations that have been heard so far by a European government.

The green minister added that Germany and France are talking about "several measures" in response.

The ministers have also shown Franco-German consensus on the introduction of a minimum corporate tax.

Germany, France and several other countries have been pressing for months to achieve the unanimity of the Twenty-seven, necessary to adopt the measure at the community level because it is a fiscal matter.

Le Maire has recalled that if this consensus is not achieved by the end of the year, both Paris and Berlin will adopt it in their national legislation.

The French minister has expressly mentioned Hungary as the country that is blocking the agreement in Brussels.

Ministers also underlined the importance of accelerating the capital markets union.

German no to joint European debt

The German Finance Minister, Christian Lindner, has reiterated, to questions from journalists, his refusal to issue new joint debt in the EU to deal with the economic consequences of the energy crisis, according to a proposal by France and Italy.

The current situation, the leader of the German Liberals has assured, is not the same as when the SURE and NextGeneration funds were created, and therefore the response should be different.

"We don't have a problem of demand like during the pandemic, but of supply and inflation," he assured.

“We don't need new European fiscal instruments, but to make good use of those we already have, which are very powerful”, he added, recalling that there are 300,000 million still unused.

Berlin is under the scrutiny of the rest of its European partners after unilaterally announcing an injection of up to 200,000 million euros into its economy to help cushion the blow of energy prices to households and industry.

Paris, Rome and Madrid have warned that an intervention of this caliber would create an unfair imbalance in the single European market because other countries cannot support their productive fabric to the same extent.

The German chancellor, Olaf Scholz, has defended the aid package assuring that it lasts for several years, is similar to that of other European countries and corresponds to the size of the German economy.

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