Two senior EU officials told POLITICO that the union is “in emergency mode”. They confirmed that the bloc is preparing to offer massive subsidies to prevent European organizations from being overshadowed by US competitors.
It seems that the US has dealt their supposed EU allies a ‘one-two punch’. First, the sanctions on Russian gas imposed by Washington after Russia invaded Ukraine have caused energy prices to skyrocket in the EU. Part of Europe’s gas requirements, previously supplied by Russia, now have to come from US providers.
The problem is that the liquid natural gas (LNG) shipped to Europe by the US often costs five times more than its Russian counterpart. While EU energy prices soar, the Biden Administration rolled out a $369 billion industrial subsidy scheme to support green industries under the Inflation Reduction Act.
EU officials now fear that the combination of pressures — higher energy costs in the EU and industrial subsidies in the US — will make companies shift new investments to the US rather than Europe. EU industry chief Thierry Breton warned that Biden’s new subsidy package poses an “existential challenge” to Europe’s economy.
EU subsidies on the horizon
Two senior officials told POLITICO that the European Commission aims to offset US subsidies with a fund of its own. The money would come from the ‘European Sovereignty Fund‘, which Commission President Ursula von der Leyen mentioned in her State the Union address in September.
The goal of the EU fund would be similar to that of the US: help businesses invest in Europe and meet ambitious green standards.
The two officials said the EU has to act quickly, as companies are already making decisions on where to build their future factories for everything “green”, from batteries and electric cars to wind turbines and microchips.