The meeting of Ministers of Economy and Finance (Eurogroup) this Monday in Brussels launched a depth charge against the anti-crisis plan announced by the United States. The Biden Administration is going to launch the ‘Inflation Reduction Act’, of 370,000 million dollars, focused mainly on the energy transition. European governments denounce that it includes protectionist measures and that if they do not withdraw they will respond with measures of the same caliber. Community sources say that the European Commission is studying the possibility of filing a complaint with the World Trade Organization (WTO). The European Commissioner for the Internal Market, Frenchman Thierry Breton, confirmed in an interview with the French channel BFM that the complaint will be filed if Washington does not respond to European criticism. The funds from the US plan will go to subsidize the production and installation of energy systems wind or photovoltaic or to subsidize the purchase of electric cars. The problem is that while the plans of the European governments for the same matter do not discriminate what can and cannot be subsidized according to their origin, the United States, for example, will only give the subsidy (7,500 dollars) to buy cars that are manufactured in plants of the United States and whose battery was also manufactured in the United States. Europeans fear that this will lead to a drain on industrial production. Several major European car brands have plants in the United States and should simply move the manufacturing of their electric models there. Ministers criticized President Joe Biden’s plan. Frenchman Bruno Le Maire said that they are “massive subsidies that can lead to distortions of free competition” and that he hopes “that the European Commission will make proposals to respond forcefully to this policy.” German Christian Lindner said the US plan “is a challenge for European industries and the United States needs to be aware of its consequences.” A trade war? The European Commission does not want to use that expression, at least not yet, but it is already on the lips of some governments. The Frenchman Le Maire spoke of “the risk of a trade war” and the head of the German government, Olaf Scholz, said that there is an “enormous risk of a tariff war”. It wouldn’t be the first time either. In recent decades, the United States and the European Union have always had some open trade conflict. Some, such as the aeronautical companies Airbus and Boeing, never finished closing despite reports and rulings from the WTO. Recession in sight The European economy and with it the Spanish economy are going to get worse in the coming months. The European commissioner for the industry, Paolo Gentiloni, said on Monday that in the coming months there will be “contraction in economic activity.” The commissioner highlighted the employment data as very positive and confirmed that they expect a mild recession, in line with the -0.9% given by the ECB’s forecasts for 2023. This Friday the European Commission will present its autumn economic forecasts. Gentiloni continues to point out, like the other European institutions, that fiscal support measures should focus on households and companies that are most vulnerable to inflation and the energy crisis. Right now, 70% of the measures are universal, benefiting households without resources as well as millionaire households. The commissioner understands that politically it is easier to make them universal and technically it is also simpler and faster. His colleague Valdis Dombrovskis, who also has responsibilities in economic matters but with a more orthodox and conservative sensibility, was harsher with these universal measures, such as the discount in Spain on fuel: “We carried out an evaluation of how temporary and specific (the measures put in place by the governments) and unfortunately most of them are not specific”. Dombrovskis, Vice President of the European Commission for Economic Affairs as well as Commissioner for Trade, believes that inflation in the Eurozone is peaking: “We expect it to continue on a downward path because energy reached maximums” and because the European Central Bank “is doing its work” (raising interest rates). The Vice President and Minister of Economy Nadia Calviño requested that these measures to control inflation be compatible with economic growth and the reduction of unemployment. Calviño believes that inflation in Spain will be around 7% in the coming months and will drop during 2023. Neither the Spanish government nor the European Commission estimates that the Spanish economy will enter a recession next year. According to Eurostat data, in October only France had less inflation than Spain of the 19 Eurozone countries.
