EU competition commissioner proposes changes to state aid rules –

Margrethe Vestager, the European Commission’s Executive Vice-President and Commissioner for Competition, proposed a temporary crisis and transition framework last Friday (January 13) (A Temporary Crisis and Transition Framework).

If the latter is implemented, it will make it easier for member states to subsidize renewable energy technologies and introduce tax breaks for companies in strategic sectors that risk diverting their investments to third countries outside Europe.

Ms Vestager outlined her proposal in a letter to EU finance ministers on Friday, ahead of a meeting in Brussels on Monday and Tuesday (January 16-17).

In a letter seen by EURACTIV, the Commissioner warns that “The competitiveness of European industry faces a number of challenges” and the US Inflation Reduction Act (The Inflation Reduction Act, IRA) “Risks encouraging some of our EU companies to shift investment to the US”.

The IRA is an American bill that aims to finance the environmental transition through generous subsidies to companies for, for example, electric cars and batteries. Under one of the obligations of this subsidy scheme, products must be assembled in the United States to qualify, EU companies find themselves at a disadvantage.

Thus, Ms. Vestager proposed to change the existing temporary state aid crisis framework, adopted in response to the war and energy crisis in Ukraine, to a temporary crisis framework and transition. He asked for the opinion of the finance ministers regarding this proposal.

According to his letter, the changes will allow “Simplifying the calculation of the aid amount and speeding up its approval”. In addition, the scope will be expanded to include “All renewable energy technologies”.

With the revised framework, Member States should also be able to encourage companies to invest in the European Union rather than diverting their investment elsewhere.

“I plan special provisions to support new investments in production facilities, including tax incentives”, Ms. Vestager explains. He added that it should be supported “Time-limited, it targets sectors where there is risk [de voir les investissements détournés] actually exist and must be proportionate in terms of amounts”.

However, the Liberal Commissioner also pointed out that, due to recent changes to state aid rules and the General Block Exploitation Regulation (GBER), Member States can now distribute most of their state aid to enterprises without obtaining permission from the Commission.

The GBER, first introduced in 2014, exempts certain categories of state aid from the obligation to notify the Commission in advance if the advantages outweigh the possible distortions caused by competition.

Moreover, a considerable amount of state aid has already been allocated within the framework of this temporary crisis.

“The commission so far [approuvé] 672 billion euros in national funds within the framework of the temporary state aid crisis”Ms. Vestager wrote.

More than half of this aid was distributed and reported in Germany. “53% of state aid is approved in Germany, about 24% in France and over 7% in Italy”, Ms. Vestager wrote, pointing to the very uneven distribution of national subsidies, especially in the EU. Indeed, while the rest of the bloc accounts for 45% of the Union’s GDP, it accounts for only 16% of reported state aid.

“Member states do not all have the same budgetary room for maneuver when it comes to state aid. This is a fact. And a risk to the integrity of Europe”, warned Mrs. Vestager. The Commissioner further stated that the Commission “REPowerEU is looking for ways to further strengthen the plan” and “Creating a collective European Fund to support countries in a fair and equitable manner”.

However, the creation of a new collective European fund is causing great controversy among Member States, especially within the German government, which has been one of the fiercest opponents of the proposal.

German Social Democratic Party (Sozialdemokratische Partei Deutschlands) and Greens (Bundnis 90/Die Grünen), which is part of the country’s ruling three-party coalition, may be a supporter of the new collective European fund, the Liberal Democratic Party ().Free Democratic Party, FDP) is very critical. Liberals fear that German taxpayers will be forced to fund other EU member states.

While Mrs Vestager herself has warned of the danger to the integrity of the single market from excessive national subsidies, she writes that “The scale of the challenges we face can compel us to do more for a greener future.”

Ms Vestager said she would hold a formal consultation on the proposed changes in the coming weeks.

Luca Bertuzzi contributed to this article.

[Édité par Anne-Sophie Gayet]

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