The western governments are anyway a great mess. But, Senile Biden’s subsidy game has turned Europe into a gigantic economic mess. How? Watch till the end.
From 2020-2022, the world, especially the west saw two massive catastrophes, first the COVID-19 pandemic and second, the Ukraine war. These two events have undoubtedly taken a massive toll on global economies.
Europe to be particular suffered the most. While the first shocker was somehow managed through bailout packages and resilience funds, the Ukraine war ensured the mess continues to stay on the ground. When there were chances to recover from the ashes of the war, US President Joe Biden came up with something more heinous than NATO unity.
That is the Inflation Reduction Act, also known as IRA.
Signed into law in 2022, the US allocated new federal spending and subsidies to lowering healthcare costs, funding the Internal Revenue Service, and enhancing taxpayer compliance, in addition, boost business prospects in the USA. This was a subsidy treasure trove that businesses had always coveted.
However, as was already mentioned, the EU did not support the US’ IRA. The first country to speak out against discriminatory laws was France. Others joined the motion as well, but the feeling of unanimity was lacking and is still lacking. The crippling effects of the Inflation Reduction Act, however, have already begun to manifest.
Because they believe the US is currently more profitable than Europe, businesses in Europe are trying to arm-twist the governments. The likelihood of a deindustrialization in Europe is at an all-time high.
The mess up in EU economies
According to a media report by POLITICO, big European businesses are cashing in on Europe’s fears of industrial decline and so, they are coercing Brussels to take a firm stance.
Business leaders are threatening to leave Europe and move to the US if they don’t receive more state funding, which has left Brussels officials fuming.
For instance, Thomas Schmall, head of batteries at Volkswagen, posted a list of demands on LinkedIn this month, including capped energy prices from the EU. Mr. Schmall cautioned that the EU must comply with these demands or risk losing the business chain.
One EU diplomat expressed his dissatisfaction on the matter stressing, “These god-damn demands just keep coming. “Are these concerns real, or are businesses simply seizing the opportunity to see how far they can push things?”
Joe Biden has introduced a vast package of government subsidies under the Inflation Reduction Act (IRA) and this has tempted many big European industrial players — like VW and battery supplier Northvolt — into considering shifting their businesses to the U.S.
Brussels’ initial response to Biden’s reforms was calling for more freedom for EU nations to inject more state aid into their economies and goals for greater self-sufficiency amid worries that European industry is facing an existential decline.
But, that wasn’t enough. Then, French President Emmanuel Macron himself arrived in the US to talk about the IRA. Even that didn’t work out. So recently, EU’s queen, commissioner in chief, Ursula Von Der Leyen, arrived in the US to talk about the IRA.
Instead, Biden and his chaps gave her a googly with new trade deals, and the IRA remained untouched. And, the old lady with her smile happily returned to Brussels. The challenge for European economies still remains intact.
At their final EU summit of 2022 in December, EU leaders insisted they had heard the call. The meeting produced an instruction to the European Commission to rapidly draw up proposals “with a view to mobilizing all relevant national and EU tools” to address the dual energy and competitiveness crises hitting European industry.
Read More: EU heading towards another ‘Great Depression’
The stakes are too high
Sadly, no strict action is taken. The inept and dill-witted European politicians are still not able to understand precisely what they are going to lose if the European governments continue to cash in on ignoring the IRA.
Not only the future viability of European manufacturing is at risk, but also the very foundational ideas of free-market economics, upon which the EU was established are at risk.
The danger for EU governments is that if their efforts remain ineffective, businesses will move forward anyway or fail, and enormous sums of taxpayer money will be lost in the process.
If one remembers, there were already reports back in 2022 that Germany might face de-industrialization.
In addition, in December 2022, European manufacturing — and in particular the continent’s industrial powerhouse Germany — weathered the worst of the winter energy crunch, cutting gas consumption by around 15 percent.
Unemployment also rose dramatically in several scenarios. Whereas, the economic output indicates that several economies of Europe will be in recession in 2023, which means more closures and lower output.
Adding insult to injury, there are still chances that Europe will continue to scramble for gas in 2023’s winter.
Due to an energy shortage, many factories in Europe were already in hibernation mode in December 2022. Because it was simply too expensive to purchase the gas needed to keep it running at full blast. One can’t produce anything if there aren’t enough supplies.
This is the only reason why European businesses are living in fear and anxiety over the double whammy of recession and energy shortages. So, they are lobbying for the Inflation Reduction Act.
Read More: EU attempted to ‘Avoid Trade’ with Russia, failed miserably!
What will the USA gain?
If these businesses decide to leave Europe and go to the US, indeed this will be a big win for Washington as it will only make Europe more dependent on it.
For the unaware, Europe is already switching from dependency on Russian gas to dependency on liquefied natural gas (LNG) from the United States. And now, European businesses will also be dependent on the US entirely.
Subsidies are undoubtedly attractive, especially at a time when businesses are adhering to losses. The Inflation Reduction Act seems to do exactly what every business wanted. The subsidy race.
Hence, European businesses including multinationals are also using those announcements to pressure the EU or national governments.
Read More: Germany is fast approaching its economic doomsday, the worst the country has ever seen
Therefore, the EU either has to open a subsidy floodgate or need to stop the IRA at any cost. Or else, they must wait for Biden to make the EU their complete vassal state entirely.
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