On state aid, EU shouldn’t get bogged down on little things

Public measures do not fall into EU state aid regulations unless their impact extends across borders into other EU member states, writes Margrethe Vestager, the EU competition commissioner

WHEN the EU takes action, it has to add clear value — create jobs; protect the environment; and make a coherent difference in Europe and the world.

It can, of course, remove burdens on companies by allowing them to deal with a single set of rules instead of 28 different ones. Some decisions should, therefore, be taken at European level — just as well as some issues are better decided at national or regional level. This is a firm principle of European democracy and the EU Treaty.

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This principle also applies to EU state-aid policy: Here, the commission focuses on cases which can significantly hinder trade across national borders and have the largest potential negative impact on the EU single market. EU state-aid rules, therefore, exempt the large majority of public support measures from scrutiny by the commission.

This is because most of them are likely to be unproblematic. Filtering these out reduces the administrative burden for EU states and increases legal certainty for both public authorities and companies.

It also allows the commission to focus its resources on those public measures most likely to distort the level playing field in the single market. An example of such a distortion could be if a member state favours its national champion at the expense of more efficient competitors, and ultimately at the expense of consumers.

Several decisions last month represent examples of this approach. In seven cases, the commission found that the public measures fell outside the scope of EU state-aid rules.

Why?

Because they only had local impact. The state subsidies did not adversely affect investment flows between member states or opportunities for firms to establish themselves abroad.

Even though we did not take any decision concerning Ireland, I would like to illustrate the principle in more specific terms: For example, we decided that if the city council in Kiel in Germany wants to provide public funding to a consultancy to stimulate investment and economic activity in a less-developed part of the city, and this does not have an effect outside of the country, EU state-aid rules do not apply.

Similarly, in relation to UK corporation tax exemptions for sports clubs, which qualify as “community amateur sport clubs”, the commission concluded that these cater for the local community. Clubs which have significant revenue from non-member players and could, therefore, compete with golf courses outside Britain cannot benefit from the breaks. The tax breaks, therefore, fell outside the scope of EU state-aid rules.

The decisions taken provide further guidance to member states on which national support measures do not affect trade between EU states. Where they don’t, the national authorities can go ahead with the measure, without involving the commission.

In turn, it also means the commission can focus on other things — those initiatives that can be most effectively and efficiently done by the EU. To achieve this goal, my colleague, vice president Frans Timmermans, has just presented a better regulation package. Better regulation can be achieved by more open processes and by listening more carefully to citizens and businesses. Also the small ones.

When it comes to state aid enforcement, a lot has already been done. The state-aid rules have been modernised in the past two years. A lot of aid measures no longer require assessment by the commission. As a result, now more than 80% of compatible aid measures can be implemented by EU member states without notification.

That said, changing the rules is only half the battle. One of the key challenges of my mandate is to make sure that state aid modernisation works in practice. I intend to do this by co-operating closely with national authorities.

Of course, less scrutiny by the commission requires member states themselves to take responsibility: To show citizens where public funds go and what their impact is. The commission is ready to provide guidance in this respect to national authorities, and to enable the sharing of knowledge.

We have to work together to make sure that when it comes to state aid the commission can be “big on big things and small on small things” to the benefit of EU citizens and companies.

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