Seven EU states warn Commission against subsidy race with U.S

FILE PHOTO: U.S. and EU flags are pictured during the visit of Vice President Pence to the European Commission headquarters in Brussels

BERLIN/PRAGUE (Reuters) - Seven European Union member states from the north and east of the bloc have written to Valdis Dombrovskis, vice president of the European Commission, to warn against a subsidy race with the United States, the Czech Finance Ministry said on Tuesday.

The ministry confirmed an earlier report in Der Spiegel magazine that said the finance ministers of Estonia, Finland, Austria, Ireland, the Czech Republic, Denmark and Slovakia had written to Dombrovskis saying that too far-reaching financial support for companies "not justified by clear market failures" could lead to a dangerous "subsidy race".

Czech Finance Minister Zbynek Stanjura also said it would be wrong to "escalate a trade war with the United States".

"Introducing retaliatory protectionist measures will threaten the fiscal stability of EU countries and will lead to disruption of the internal market," Stanjura said on Twitter.

"We have to find with the U.S. side a compromise solution that will maintain a fair competitive environment."

The EU said in December it would adapt its state aid rules to prevent an exodus of investment triggered by the U.S. Inflation Reduction Act, which it feared might lure away EU businesses and disadvantage European companies.

(Writing by Paul Carrel in Berlin and Jan Lopatka in Prague, editing by Rachel More and Gareth Jones)