VW tempted by US subsidies as EU readies green plans

Today’s top stories

• The eurozone economy flatlined in the fourth quarter of last year, according to new figures that were revised down from an initial estimate of slight growth. European Central Bank policymakers are at loggerheads over the future of interest rates. Martin Wolf discusses the future of the EU in an era of economic crises, pandemics, deglobalisation and great power conflict.

• US Federal Reserve chief Jay Powell warned of a return to bigger rate rises if the economy continued to grow too quickly. Attention now turns to Friday’s non-farm payroll and unemployment data.

• TikTok laid out new measures to protect users’ data in Europe, as the Chinese-owned social media app attempts to address growing security concerns from governments around the world. A US Senate bill could pave the way for a ban on TikTok and other apps that pose security threats. Germany is reviewing the security risks posed by China’s 5G technology

For up-to-the-minute news updates, visit our live blog

Good evening.

We reveal today that Volkswagen is pausing plans for a battery plant in eastern Europe and prioritising a facility in North America in the latest fallout from Joe Biden’s green tech incentives, which are tempting European companies across the Atlantic.

Europe’s largest carmaker estimated it could receive €10bn of help for the facility. The news comes after its announcement last week of a new $2bn electric vehicle plant in South Carolina, following similar deals from Hyundai, Honda and Toyota to take advantage of the American subsidies. To benefit, vehicles have to be substantially made in the US and exclude materials from specific countries, notably China.

VW said it was waiting to see how the EU responded to the US package: Brussels is set to unveil its Net-Zero Industry Act on March 14 as part of its wider Green Deal Industrial Plan, loosening rules on state aid and potential EU-level subsidies.

In a draft seen by the Financial Times, the EU said production capacity in five key sectors — solar, wind, heat pumps, batteries and electrolysers — should be able to meet at least 40 per cent of the bloc’s requirements as part of its moves to reach net zero emissions by 2050.

As our recent Big Read highlights, the Inflation Reduction Act, to give Biden’s package its official name, is aimed at turning the US into the world’s cleantech superpower.

And while the IRA affects manufacturers in several sectors, EU executives are particularly worried about its impact on the autos industry: Europe is home to more than a quarter of global EV production, and 20 per cent of the supply chain, while the US has just 10 per cent of EV production and 7 per cent of battery production capacity.

In the short term, however, the US and the rest of the world will still be reliant on China, which produces two-thirds of the world’s batteries for electric cars and accounts for 60 per cent of the world’s refining of lithium, an important battery component.

Next week’s EU announcement cannot come too soon for member states that have accused the US of an aggressive push to attract their companies. For its part, the US has said it makes “no apologies” for prioritising American jobs.

Despite the transatlantic trade tensions, there are hopes that the US and EU initiatives, in addition to new reporting and regulatory measures, could make 2023 a turning point in the battle against climate change.

Read our special report: Road to Net Zero

Need to know: UK and Europe economy

Swati Dhingra, one of the external members of the Bank of England’s Monetary Policy Committee, made the case for holding UK interest rates steady at 4 per cent.

Columnist Helen Thomas examines whether there’s any truth to the assertion from the boss of games company Activision Blizzard that the UK was more Death Valley than Silicon Valley when it comes to tech start-ups.

The FT editorial board said the UK had to slash barriers to regional development if it was to address its flagging international economic performance.

Ukraine denied any involvement in last year’s explosions that damaged the Nord Stream gas pipelines connecting Russia and western Europe after press reports had suggested they were the work of “pro-Ukrainian sabotage groups”. German investigators said they had ordered the search of a ship in connection with the blasts.

Need to know: Global economy

China announced overhauls of its ministries to take on the west in tech and tighten financial oversight. It also warned the US of potential conflict if Washington continued with its efforts to contain China. Chinese companies are choosing Switzerland over the US and UK as political tensions grow.

Mexico’s peso is the top-performing major currency this year, benefiting from relatively high interest rates, tight fiscal policy and investment opportunities from its proximity to the US.

South Africa’s economy shrank 1.3 per cent in the final quarter of last year after a battering from rolling electricity blackouts. The outages, which have since intensified, led president Cyril Ramaphosa to declare a state of disaster and appoint a new electricity minister to tackle the crisis.

International donors, including the World Bank, have pledged $8bn to make Pakistan climate-resilient in the wake of devastating floods last year. Our Big Read discusses whether the recovery fund could be a test case for funding “loss and damage” in developing countries.

Need to know: business

Here’s a cautionary tale if ever there was one: Adidas has had to slash its dividend after recording a fourth-quarter operating loss of €724mn, thanks partly to unsold piles of Kanye West “Yeezy” trainers.

Executives at Switzerland’s biggest banks say rich Chinese clients have become much more worried about parking money in the country because of its tough approach to sanctions against Russia. “We were not just surprised but shocked that Switzerland abandoned its neutral status,” said one director.

Oil industry executives warned of higher prices now that Opec was back “in charge”.

A $5.5bn loan from private equity firms to buyout group Carlyle highlighted the growing power of private credit providers as tougher capital requirements for banks make it harder for them to fund risky takeovers.

The World of Work

International Women’s Day provides an appropriate moment to note that US women typically earn 82 cents for every dollar earned by men — a gap that has changed little in 20 years. Progress in making workplaces more balanced between men and women has also stalled.

Would trainers and T-shirts lure women back to the office? Why are tight skirts and high heels deemed more “professional” than clothes that are easy to work in? And what do parents need from the British government on childcare provision? Read more in our special report: Women in Business.

“If you were trapped at work for days or weeks chained to a desk, there would be outrage, so why do we let it go on in vessels?” Commercial seafarers might be the workforce that people rely on the most but think about the least, writes columnist Sarah O’Connor.

Some good news

Amid some of the bad press surrounding the use of artificial intelligence recently, some more encouraging news: AI could be helpful in detecting signs of Alzheimer’s disease in routine brain scans.