Europe will damage its economy if it enters a “subsidy race” with the US and China, and policymakers should focus instead on reaping gains from lifting internal barriers to EU trade, the IMF has warned.
Trying to copy the US Inflation Reduction Act, a package that includes $369bn of subsidies and tax credits for clean energy technologies, would permanently knock 0.6 per cent off EU gross domestic product, the fund said in its latest European Economic Outlook published on Friday.
But reducing the cost of internal EU trade barriers by 10 per cent would boost the region’s long-term growth by 7 percentage points, it estimated.
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