EU set to relax state aid rules to compete with US

The European Union should relax its state aid rules to compete with mass US subsidies for green technology, the head of the European Commission has said.

Ursula von der Leyen, commission president, paved the way for Brussels to “improve” its powerful competition and anti-trust rules in order to “rebalance the playing field” on investment in green technologies following a subsidies spat with the US.

The Biden administration has angered Brussels and European capitals with a $369 billion package of tax breaks for US industries under Washington’s Inflation Reduction Act (IRA). Europeans have complained that the Act will favour the US electric vehicle producers and could lure some European companies to relocate to America to take advantage of the preferential treatment.

“To keep up in the clean tech race, we need to do our homework in Europe and rebalance the playing field where the IRA and others create distortions,” von der Leyen told an audience at the College of Europe yesterday.

“If we see that investments in strategic sectors are leaking away from the European Union, this would only undermine the single market. And that is why we are now reflecting on how to simplify and adapt our state aid rules,” she said.

Biden said the IRA could be “tweaked” to alleviate European demands, when he met France’s President Macron last week. There has been speculation that the subsidies rules could be widened to include European companies, after similar exemptions were made for US trading partners like Canada and Mexico.

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EU set to relax state aid rules to compete with US