The European internal market commissioner agreed with Italy's industry minister on Monday that the EU should draft a proposal for an industrial policy at a European level to face challenges from China and the United States.

The EU fears that the $430 billion subsidies in the United States' Inflation Reduction Act (IRA), with its generous tax breaks for domestic production of energy sector components, may lure away EU businesses and disadvantage European companies, from car manufacturers to makers of green technology.

Commissioner Thierry Breton and Italian minister Adolfo Urso agreed that next Thursday's European Council should give the EU Commission a full mandate to draft a proposal on future industrial policy by the end of the year, the Italian ministry said in a statement.