— This is the script of CNBC’s financial news report for China’s CCTV on January 31, 2023.

A number of European leaders have publicly expressed their concerns over the U.S.’s Inflation Reduction Act (IRA).

The European Commission, the EU’s executive arm, said in a statement on Dec. 29 that this scheme contains discriminatory provisions.

The EU is now showing signs of hitting back at the US’s $369 billion Inflation Reduction Act. According to a draft plan seen by the Financial Times, the European Commission plans to relax state-aid rules to support green investments. There is also a possibility of redirecting some of the €800bn it has allocated for the NextGenerationEU Covid-19 recovery fund to tax credits. In response to the Coronavirus pandemic, the EU developed NextGenerationEU, an €800 billion temporary recovery instrument to support economic recovery.

The move to loosen state aid rules touches on controversial territory within the EU. With this move, each of the 27 nations of the bloc will be able to provide public funds to its industry.

However, not all countries can afford the same amount of aid, which tilts the playing field on the EU’s single market. Germany, for example, is better able to offer fiscal incentives than its fiscally stretched southern counterparts.

There is a split among member states regarding whether and for how long big exemptions from state aid rules should be allowed.

Thus, the draft proposes repurposing some of the money the EU has already committed to raising jointly for its post-coronavirus pandemic recovery fund.

The draft is not finalized and may change in the future. Nevertheless, it demonstrates the EU’s determination to respond to US legislation.

Alexander De Croo
Prime minister of Belgium

“The last thing we want to end up with is with some kind of subsidy wars between the United States and Europe, but the real answer we should have as Europeans is have our own IRA, we will not call it that, that way, we will also make something which is not a copy. I mean, it shouldn’t be built on the strengths that we have. But yeah, we should come up with our own scheme, to incentivize greening of energy, greening of industry, and making sure that the industrial base in Europe can remain and can be competitive.”

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Originally Appeared Here