EU Fee’s Vestager proposes change to state support guidelines –


The manager vice-president of the European Fee, Margrethe Vestager, on Friday (13 January) proposed a ‘Momentary Disaster and Transition Framework’ for state support.

If applied, the framework will enable member states to extra simply subsidise renewable vitality applied sciences and to implement tax breaks for firms in strategic sectors which are vulnerable to diverting investments to 3rd nations exterior Europe.

Vestager outlined her proposal in a letter despatched to EU member state finance ministers on Friday (13 January) forward of the ministers’ assembly on Monday and Tuesday in Brussels.

Within the letter, seen by EURACTIV, Vestager warns that the “competitiveness of European business is dealing with quite a lot of challenges” and that the US Inflation Discount Act (IRA) “dangers luring a few of our EU companies into transferring investments to the US”.

The IRA is a invoice pushed ahead by the Biden administration, aimed toward financing the inexperienced transition by the use of beneficiant subsidies, for instance for electrical automobiles and batteries. Part of the subsidy scheme requires the merchandise to be assembled within the US, thus placing EU firms at an obstacle.

Particularly, Vestager proposed to amend the present ‘State Help Momentary Disaster Framework’, which was adopted as a response to the warfare in Ukraine and the vitality disaster, right into a ‘Momentary Disaster and Transition Framework’ – and requested finance ministers’ views on the matter.

Based on her letter, the amendments would “make the calculation of the help quantity easier and the approval quicker”. Furthermore, the scope can be enlarged to cowl “all renewable vitality applied sciences”.

Risking dying by a thousand subsidies

In response to latest crises, and now to the US Inflation Discount Act, the EU is ready to additional open the floodgates of state support, placing the “stage enjoying subject” that underpins the EU’s Single Market beneath heavy pressure.

Underneath the amended framework, member states also needs to be capable of entice firms to put money into the EU as an alternative of diverting investments elsewhere.

“I envisage devoted provisions to help new investments in manufacturing services, together with through tax breaks,” Vestager writes, whereas including that this must be “restricted in time, focused to these sectors the place such danger [of diverted investments] actually exists, and proportionate when it comes to support quantities.”

Nonetheless, the liberal Commissioner additionally identified that, as a result of latest modifications within the state support guidelines and the final block exemption regulation (GEBR), member states can already dish out a majority of their state support to firms with out asking the Fee for permission.

First applied in 2014, the GEBR exempts sure classes of state support from the requirement of prior notification to the Fee, when the advantages outweigh the doable distortions of competitors.

Furthermore, a sizeable quantity of state support has already been paid out beneath the present non permanent disaster framework.

“[T]he Fee has mobilised €672 billion of nationwide funding to this point beneath our State Help Momentary Disaster Framework,” Vestager wrote.

Greater than half of this support was dished out in Germany.

“53% of State support authorized has been notified by Germany whereas France represents round 24% and Italy over 7%,” Vestager wrote, declaring the extensively unequal distribution of state subsidies inside the EU.

“Not all Member States have the identical fiscal area for State support. That’s a reality. And a danger for the integrity of Europe,” Vestager warned. She mentioned that the Fee was “looking for methods to additional enhance the EU’s REPowerEU plan”, and “to arrange a collective European fund to help nations in a good and equal method”.

Nonetheless, a brand new collective European fund is extremely controversial amongst member states, with the German authorities being one of the vital vocal opponents of the proposition.

Whereas the Social Democrats and the Greens within the three-party German authorities is likely to be open to new collective European funding, the liberal FDP is a staunch critic, arguing that this could result in a scenario through which German taxpayers must finance different EU member states.

Regardless of her personal warnings about the specter of extreme nationwide subsidies for the integrity of the Single Market, Vestager wrote that “the magnitude of the challenges forward could require us to go even additional to go greener”.

Vestager mentioned that she would open a proper session on the proposed modifications within the coming weeks.

Luca Bertuzzi contributed to the reporting.

[Edited by Nathalie Weatherald]

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