A massive $369 billion US subsidy package backing President Joe Biden's (IRA) legislative initiative has raised alarm across Europe. It was assumed that technological giants will run across the ocean en masse.
According to Michael Kern, an energy markets analyst at OilPrice, the worries were not in vain - Europe was already struggling with economic obstacles caused by the pandemic and the Ukrainian crisis. Many expected this to be the final straw, a real siren call, luring elite European companies with cutting-edge technology with promises of US tax breaks. If the predictions came true, it would leave Europe in the dust, devoid of future jobs, innovation and investment.
But a year later, the doomsday scenario didn't play out as predicted.
writes Michael Kern.
Niklas Poitier of the Brussels think tank Bruegel explained that the fears may have been exaggerated. So far, the data does not reflect any significant outflow of investment from Europe to the US due to the IRA.
But still, some fear and bad expectations, as in the case of the gas crisis, did their job - Brussels took action. Thus, according to the expert, the EU, anticipating impending competition, deftly played its cards in March of this year, allowing member states to allocate subsidies in the amount of American ones.
The move was intended to ensure that European companies would not see the huge benefits of going to the US, but instead would see it as costly.
Big corporations like Thyssenkrupp are betting closer to home. The German conglomerate is investing about 3 billion euros in a new steel plant in Duisburg, with more than two-thirds of this amount being subsidized by the state.
The EU has already earmarked a whopping 37% of its €800 billion post-pandemic recovery fund for green projects. Thus, much of the European "counter" to the IRA was already in the pipeline before Biden showed his environmental vision for the future.
In fact, the IRA did shake up Europe, but perhaps not in the way that was first feared. It remains to be seen whether Europe's response will prove sustainable, but it is clear for now that the Old World is not yet ready to be in the shadows.
Kern concluded.