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Germany hesitant on Intel subsidies

The project for an Intel plant in Germany has become significantly more expensive than the original version
(photo: Walden Kirsch/Intel)

Germany’s finance ministry opposes an increase in subsidies to build an Intel chip factory in the country. Inflation in the last two years led the American corporation to review the financial parameters of the project and request more subsidies from the German government.

Intel’s project to build a plant in Magdeburg, Germany, promised to be the largest foreign investment in the country’s industry in more than seventy years, but is now running into controversy between the American investor and German authorities. The company claims to increase the amount of subsidies, and the German authorities strongly oppose this.

According to the original project, Intel needed 17 billion euros to build the plant, of which 6.8 billion euros would be provided by the German authorities. The company is now pushing for an increase in subsidies to 10 billion euros, citing increased energy and construction costs, the Financial Times reported.

German Finance Minister Christian Lindner said the country’s budget is short of money and should be cut, not expanded. On the other hand, German Economy Minister Robert Habeck is a supporter of the idea of ​​increasing subsidies for the development of the national semiconductor industry, choosing as a benchmark the US initiative to allocate 52 billion dollars to support chip manufacturers.

Habek, along with Federal Chancellor Olaf Scholz, supports the proposal for more subsidies for Intel, provided the company increases the scale of construction. Finance Minister Lindner, however, opposes the idea of ​​increasing budget expenditures, pointing out the lack of sources for additional funding.

The current German authorities are not ready to increase the tax burden as well as external loans. The country’s budget is already facing a deficit of $20 billion, so the finance minister has urged his colleagues to impose spending limits for next year, except for defense spending.

In May, Economy Minister Habek proposed subsidizing the price of electricity for industry, but the implementation of such a program by 2030 would require 25 to 30 billion euros of budget funds. Finance Minister Lindner considers such an idea a waste of taxpayers’ money.

By the way, the idea of ​​subsidizing electricity costs is also being discussed in the talks with Intel. According to the idea of ​​the Minister of Economy, these funds were to be taken from the stabilization fund, which was formed during the years of the pandemic to support the national economy in times of crisis.

Lindner believes that covering the difference in electricity costs for industrial enterprises is a misuse of the fund’s resources.

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