European Union leaders are very concerned about the American Inflation Reduction Act. This is a large-scale subsidy scheme run by the United States administration.

It is pulling investment and, in particular, car production from the EU to the other side of the Atlantic. Speaking at the World Economic Forum in Davos, the President of the European Commission announced the preparation of counter measures, reports euronews.com

Among them is the Clean Industry Act, which should “simplify and accelerate the authorization of new production sites using clean technologies.”

Ursula von der Leyen, meanwhile, advocated the creation of a common financial instrument by member states.

“To avoid fragmentation of the single market and to support the transition to clean technologies across the Union, we must do increase the financing of the EU economy. For the medium term, we will prepare a European Sovereignty Fund and present it when we revise our budget later this year,” she said.

But Brussels admits it will be difficult to determine the balance between Union-level subsidies and national aid, whose rules were relaxed during the pandemic. Six countries – Denmark, Finland, Ireland, the Netherlands, Poland, Sweden and Denmark – have urged the European Commission to be more cautious on the issue so that state aid to business does not undermine the domestic market.

An Italian MEP warns that not every company is able to absorb such aid.

“State aid alone will not benefit all countries, but only some of them, such as Germany or France, which have more space and opportunities. That’s why we think it is necessary now to create a new Recovery Fund,” Tiziana Beghin ommented.

Indeed, some EU members have more money than others and can therefore afford to subsidize their own industrial sector. Germany and France, for example, account for 77% of the 672 billion euros of total state aid for the cornavirus crisis.

The French Minister of Economy and Finance would like to spend more on the introduction of clean technologies.

“Hydrogen, electric batteries, solar panels, semiconductors should be included in the list of strategic industrial projects for which state aid should be larger. They need subsidies as well as tax credits,” said Bruno Le Maire.

The European Commission expects to present concrete proposals to counter the U.S. Inflation Reduction Act by the end of January, so that the discussion can take place at the next meeting of heads of state and government in February.