Finland says EU’s state subsidy bonanza has ‘gone too far’

BRUSSELS — European Union policies that allowed governments to pump cash into companies during recent crises “have gone too far,” according to Finland’s economy minister.
Wille Rydman told POLITICO that rules that helped governments navigate the Covid-19 shutdowns and energy shocks after Russia’s invasion of Ukraine risk negative aftereffects, with countries competing against each other to dole out cash, undermining the single market.
While big EU countries such as Germany, Spain and Italy want to extend the EU’s state aid frameworks, frugal nations such as Finland and Sweden want to call time on the subsidy splurge.
“It’s a somewhat unhealthy situation that European countries are competing with each other by paying state aid for investors,” he said. “I don’t think it’s developing the single market in an optimal way at the moment, and that’s why I also think it’s a matter of competition and competitiveness to make an exit from this kind of state aid policy.”
“There are several voices that are promoting more active industrial policies from the public side and from the EU side, which implies, of course, greater state aid to be paid to the companies,” he added. “I hope that we will find a way where the state aid policy will remain limited.”
Swedish Foreign Trade Minister Benjamin Dousa agreed with Rydman, saying in a statement that “we need to return to a strict state aid regime,” with tighter control to protect a level playing field across the EU.
The long-term complaint of defenders of the single market is that generous state aid regimes are unfair and give an advantage to deep-pocketed big countries that can bankroll their local champion companies to the detriment of rivals from poorer nations.
To the frustration of the frugals, some EU governments want to keep subsidizing companies, as allowed by temporary state aid rules, echoing European Commission President Ursula von der Leyen who has called for a new framework to help the green transition.
Governments asked for — and received — EU permission to stand ready with some €2 trillion in state aid to help their economies weather the Covid-19 shutdowns in 2020. Russia’s shock invasion of Ukraine in 2022 triggered a surge in energy prices that led to EU governments pushing for rule changes that could let them pay companies’ costs.
The Commission is now phasing out most of its Temporary Crisis and Transition Framework after granting more time for governments to help farmers, aid which is currently set to end on Dec. 31. Green transition measures are in place until the end of 2025.
Hungarian state secretary Máté Lóga told reporters on Thursday that some governments had called during that day’s Competitiveness Council to extend some parts of that temporary framework.
Other governments had called for such help to be permanent, saying they “should stay alive and should be a general policy tool in the new state aid frameworks as well.”
The EU’s largest states and those with the biggest financial firepower have been foremost among countries looking for more state aid flexibility. Germany is keen to extend higher aid limits for renewable energy and critical industries, one government official said on condition of anonymity. Spain and Italy are also looking for extensions, the official said.
Commission President von der Leyen is trying to offer the best of both worlds, calling for a new EU Competitiveness Fund that would help funnel cash to companies working in strategic industries.
She also told her candidate for a competition chief, Teresa Ribera, to come up with a “new state aid framework to accelerate the roll-out of renewable energy,” decarbonized industry and ramp up clean tech production.
At the same time, Ribera should make sure that state aid control is strong – meaning that governments should not unfairly favor one firm over others – and that countries don’t get into a subsidy race where one outspends the others.
The current state aid boss, Margrethe Vestager, acknowledged this difficult balance in a June speech to EU governments, calling for state aid to “fulfil its mandate to avoid undue distortions to competition” while also answering calls to allow funding for innovation and poorer regions and to help pay for the costly shift to a greener economy.