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German economy ministry calls for joint EU response to U.S. inflation act

FILE PHOTO: Illustration shows U.S. and EU flags

BERLIN (Reuters) - Germany wants a joint European response to the U.S. Inflation Reduction Act that would involve simplifying rules on state support and expanding funding opportunities, according to a German economy ministry document seen by Reuters on Friday.

The European Union could set up a programme to promote green technology by combining various funding elements to avoid budget constraints: the Innovation Fund could increase support for large-scale projects for clean technologies, for example, or the European Investment Bank (EIB) could take on more risk through guarantees, it said.

The ministry document also suggests member states could anchor sustainability criteria more firmly in public tenders at the national level as well as extend or increase traditional subsidy programmes, but warned against local content requirements which favour domestic industry.

These would not only likely contradict World Trade Organization (WTO) law, according to the document, but also contribute to "a further erosion of the world trade order".

While European Union countries welcome Washington's investment drive for green technology, they claim 200 billion euros ($207 billion) of U.S. subsidies tied to locally produced content could break WTO rules by disadvantaging their companies.

The EU and Washington have established a joint task force in hope of resolving the dispute over the $430 billion act.

(This story has been corrected to specify that the document is from the economy ministry, not finance ministry; and to clarify in the headline that the ministry calls for, not lays out, a joint response.)

(Reporting by Christian Kraemer and Markus Wacket; Writing by Miranda Murray; Editing by Rachel More)