The chief vice-president of the European Fee, Margrethe Vestager, on Friday (13 January) proposed a ‘Short-term Disaster and Transition Framework’ for state assist.
If applied, the framework will enable member states to extra simply subsidise renewable power applied sciences and to implement tax breaks for corporations in strategic sectors which can be susceptible to diverting investments to 3rd nations outdoors 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 trade is going through quite a few challenges” and that the US Inflation Discount Act (IRA) “dangers luring a few of our EU companies into shifting investments to the US”.
The IRA is a invoice pushed ahead by the Biden administration, geared 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 corporations at an obstacle.
Particularly, Vestager proposed to amend the present ‘State Help Short-term Disaster Framework’, which was adopted as a response to the battle in Ukraine and the power disaster, right into a ‘Short-term Disaster and Transition Framework’ – and requested finance ministers’ views on the matter.
In keeping with her letter, the amendments would “make the calculation of the help quantity easier and the approval sooner”. Furthermore, the scope could be enlarged to cowl “all renewable power applied sciences”.
Underneath the amended framework, member states must also be capable of entice corporations to spend money on the EU as a substitute of diverting investments elsewhere.
“I envisage devoted provisions to assist new investments in manufacturing services, together with by way of tax breaks,” Vestager writes, whereas including that this ought to be “restricted in time, focused to these sectors the place such danger [of diverted investments] actually exists, and proportionate by way of assist quantities.”
Nonetheless, the liberal Commissioner additionally identified that, because of current modifications within the state assist guidelines and the final block exemption regulation (GEBR), member states can already dish out a majority of their state assist to corporations with out asking the Fee for permission.
First applied in 2014, the GEBR exempts sure classes of state assist from the requirement of prior notification to the Fee, when the advantages outweigh the doable distortions of competitors.
Furthermore, a sizeable quantity of state assist has already been paid out underneath the present momentary disaster framework.
“[T]he Fee has mobilised €672 billion of nationwide funding to this point underneath our State Help Short-term Disaster Framework,” Vestager wrote.
Greater than half of this assist was dished out in Germany.
“53% of State assist permitted has been notified by Germany whereas France represents round 24% and Italy over 7%,” Vestager wrote, stating the broadly unequal distribution of state subsidies throughout the EU.
“Not all Member States have the identical fiscal area for State assist. That’s a reality. And a danger for the integrity of Europe,” Vestager warned. She mentioned that the Fee was “searching for methods to additional enhance the EU’s REPowerEU plan”, and “to arrange a collective European fund to assist nations in a good and equal means”.
Nonetheless, a brand new collective European fund is very controversial amongst member states, with the German authorities being one of the vocal opponents of the proposition.
Whereas the Social Democrats and the Greens within the three-party German authorities is perhaps open to new collective European funding, the liberal FDP is a staunch critic, arguing that this may result in a state of affairs by 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]
