February 03
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The EU is urgently developing plans to support its core industries amid fears that new U.S. subsidies could ruin European business in the future. German Economy Minister Robert Habeck said this, Politico reports.

He said he is working "closely" with officials in Brussels and allies in Paris to develop measures that could include requiring European manufacturers to use locally produced products or technology to qualify for EU government subsidies.

This would be a controversial measure at odds with traditional sets of free-trade rules. But such radical intervention is increasingly seen as necessary in Berlin, Paris and Brussels to avoid a massive outflow of valuable investment from Europe to the U.S. as a result of Joe Biden's tax and subsidy reforms and higher energy prices in Europe.

Habeck said it would be "weeks" before it would be too late to respond to the challenge of the U.S. Inflation Reduction Act, which paves the way for $369 billion in subsidies and tax breaks for U.S. green businesses.

"There are a lot of ingredients in the market, and they are now being quickly put together into a response plan, into a future industrial plan for Europe," Habeck told an industrial conference in Berlin. 

He noted that Europe may have to enact so-called "local content" requirements, a concept that French President Emmanuel Macron called "Buy European."

Such requirements oblige producers to use a certain amount of products, technology or raw materials of their own production in order to qualify for trade benefits such as subsidies.

But Habeck stressed that such EU measures must remain in accordance with World Trade Organization rules. "I will make no secret of the fact that WTO-compatible 'local content' can also be part [of the EU's response to the Inflation Reduction Act]," the economy minister told reporters.

The minister's comments underscore how Germany's position is shifting toward France, supporting such "Buy European" measures when it comes to attracting new investment in clean technologies such as batteries or hydrogen.

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