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Commission to ease state aid straitjacket as recovery fund kicks in

Written by The Frontier Post

BRUSSELS (euractiv): The European Commission will present in the second half of this year a wide-ranging review of its state aid rules to facilitate public funding to strategic areas, as member states await the first transfers of the EU’s recovery funds.

Europe’s crusade to lead the ‘green’ transition and catch up in the global digital race has driven the Commission to launch a broad review of its strict state aid rules.

The revision of the restrictions to pump in public resources into economic sectors, to avoid distortions in the internal market, became more necessary as member states are getting ready to receive an unprecedented amount of EU funds to finance the recovery.

The reviews have been in the making since 2019, including various public consultations with stakeholders, and will cover climate, research and cutting-edge cross-national projects, among other areas.

The new set of rules, which will be adopted in the second half of this year, aim to clarify the legal situation of what can be done with public funds not only for national authorities but also for companies and private investors.

The series of evaluations conducted by the Commission over the past months concluded that the state aid rules are fit for purpose, but targeted adjustments are needed to better align them with the EU’s overarching green and digital priorities.

Against this backdrop, the Commission is conducting a “targeted review” of the General Block Exemption Regulation.

This regulation contains a series of sectors that can receive state aid without going through the normal notification and approval processes under some circumstances, such as regional airports, SMEs, or culture and heritage conservation.

The Commission explained that the targeted review wants to improve the interplay between EU funding rules and state aid rules and streamline state aid control of national funds.

The Commission also consulted with national governments about an extension of the General Block Exemption Regulation to cover the implementation of the Recovery and Resilience Facility, the main pillar of the EU’s 800 billion recovery fund.

The goal is to ensure a smooth implementation of the facility, in particular to achieve the green and digital targets.

In addition, the revision of this regulation will take into account the changes in various guidelines currently being modified, including regional aid; climate, energy and environmental; risk finance; research, development and innovation.

This is how Europe is opening the floodgates to ‘green’ money

The European Commission launched on Wednesday (6 February) a consultation with member states, the European Parliament and other stakeholders to review the EU’s fiscal rules, the Stability and Growth Pact.

On the climate front, the EU executive launched on 7 June a public consultation on the revision of the guidelines on state aid for environmental protection and energy. The adoption of the guidelines is foreseen for late 2021.

“Europe will need a considerable amount of sustainable investments. Although a significant share will come from the private sector, public support will play a role in ensuring that the green transition happens fast,” said Commission executive vice-president responsible for Competition, Margrethe Vestager.

“The revised rules will enable member states to fulfil the EU’s ambitious environmental objectives of the European Green Deal while keeping possible competition distortions to a minimum,” she added.

As part of its recommendation, the Commission proposed broadening the scope of the guidelines to cover new areas, such as clean mobility or circular economy, and all technologies supporting the Green Deal. Public aid could fully cover the funding gap to support initiatives in this fields.

Bureaucracy will be also streamlined and there will be safeguards to ensure that the public resources go where necessary, and do not distort the internal market.

Innovation

The EU executive also wants to improve the framework for research, development and innovation. After concluding a public consultation in early June, the adoption of the new framework will also come in the second half of this year.

The Commission proposed updating the definition of research and innovation that could receive public funding, in particular for digital technologies.

It also introduced new provisions to allow for public support for technologies to incentivise investments, especially in small and medium-sized enterprises, and cut down the red tape.

The Commission also conducted similar reviews for regional aid guidelines, to support companies in the development of disadvantaged areas. The revised framework will enter into force next January.

The EU executive will also adopt updated guidelines to promote risk finance investments by the end of the year and is considering whether the rules must be revised to support the rollout of the broadband network.

Finally, the Commission will present in the second half of this year revised rules for Important Projects of Common European Interest, such as the batteries or the hydrogen project.

The European Commission is considering reviewing its state aid rules to support cutting-edge projects financed by several member states, as requested by national capitals in order to strengthen Europe’s industrial might.

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