EU leaders have opened the way for further relaxation of state aid rules in the European Union (EU), but in a “targeted, temporary and proportionate” manner. This decision aims to support strategic sectors for the ecological transition, while avoiding fragmentation of the single market. A joint declaration by European heads of state and government stated that procedures for state aid must be simplified, accelerated and more predictable, to allow for rapid deployment of support in these sectors.
Supporting European industry
European leaders met in Brussels to discuss ways to support their industry, which is threatened by Chinese competition, soaring energy prices and the U.S. “green” subsidy plan.
The European Commission is responsible for translating President Ursula von der Leyen’s plan to strengthen the continent’s green industries into legislative proposals. The European executive wants to give more flexibility to Member States to grant aid to companies involved in renewable energy and decarbonization of industry.
Divisions among member states
However, this idea is greeted with caution among member states, divided between supporters of the free market and advocates of state intervention. Moreover, not all countries have the same financial leeway to help their companies.
The final declaration of the EU-27 stresses the need to maintain a level playing field within the EU, while ensuring fair access to finance. However, the increased relaxation of national subsidies could benefit large, wealthy countries, such as Germany and France, at the expense of EU competitors.
To avoid this risk, some voices, such as those of Italy and several small countries, are calling for a support mechanism that is as targeted and limited as possible. Dutch Prime Minister Mark Rutte observed that “we have to compete with the Americans” in innovation and green technologies.
