Smaller EU members denied benefits of state aid

Former Prime Minister Alfred Sant has asked for an audit as to how the European Union’s state aid rules were benefiting smaller, peripheral member states.

The Labour MEP told the Commissioner for competition Margrethe Vestager in an exchange of views that state aid could not be subjected to a “level playing-field” for smaller countries, and asked whether the EU should be auditing the real impact of rules limiting state aid in a bid at promoting economic convergence between the regions and to counter their diseconomies of scale.

“In many cases, state intervention would have minimal to no impact on the single European market. As the Greek crisis has shown, the imbalances resulting from a divergence of economic performance between widely-positioned partners in the Union, can create upheaval. State aid applied according to equivalent rules may be contributing further to economic divergences. What works well to regulate big conglomerates, can become meaningless or counterproductive in peripheral areas connected to distant metropoli through a single currency,” Sant said.

Sant said that economic divergences between EU member states had grown to an extent that it was not becoming a crucial problem for Europe.

“Those parts of Europe which are trailing, lack the instruments that would help them stimulate new activity in their territories. They fail to attract outside investment to their side. And they cannot back directly, through state intervention, their local entrepreneurial ‘champions’, such as they are, in new efforts to create projects and jobs,” Sant said.

“For instance, a state with a booming defence industry has many ways by which to camouflage research and development state aids as part of this industry and of the national security interest. Meanwhile, small states and those which are not in the defence business lack this possibility,” Sant said.

Reacting to Sant’s intervention, Commissioner Vestager said that one of the important issues is that member states can do much more by themselves, within the same set of rules.

“This can be done on two conditions: One is transparency. They have to tell their citizens what they are doing, how they spend taxpayers’ money. Second, governments must evaluate what schemes can actually be decided upon to work and to deliver to the same result. And in doing that I think we can have a much more level playing field,” she said.