The euro and US dollar banknotes are pictured in Madrid, Spain, Aug 23, 2022. (MENG DINGBO / XINHUA)
BERLIN – In the context of the debate over a European response to US President Joe Biden's subsidy programs entailed in the Inflation Reduction Act of 2022, the European Investment Bank is considering the creation of a new fund.
"During the COVID-19 crisis, we set up a guarantee fund that ensured the survival of companies in 22 European Union member states," EIB President Werner Hoyer said in an interview with the German Spiegel magazine, which was published on Tuesday.
"That could be the model for a similar guarantee fund to safeguard European industry," he said.
The $369 billion package is the single largest investment in "green initiatives" in US history. Its official aim is a 40 percent reduction in US greenhouse gas emissions by 2030 compared to the 2005 levels
Many companies in Europe are "under intense pressure to move their production and in particular their development departments to the United States," Hoyer said. The fear of the EU that the IRA would pull green investment from Europe to the United States is "justified."
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The $369 billion package is the single largest investment in "green initiatives" in US history. Its official aim is a 40 percent reduction in US greenhouse gas emissions by 2030 compared to the 2005 levels.
However, critics argue that the IRA also contravenes free trade principles on international markets under the banner of climate protection and anti-inflation measures.
The IRA is a "wake-up call that we should hear," Hoyer told Spiegel.
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A broad subsidy race with the United States, however, should be avoided, he added.
"I am sceptical if the EU states now want to shower the economy with money with the big watering can," Hoyer said. Instead, the EU should respond with targeted aid that enables technological leaps.
There is a need to provide young German companies with venture capital to prevent them from migrating to the United States, according to Hoyer.