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.

Some member states have argued that the EU’s strict state aid and merger rules have become a straitjacket for companies wanting to grow and become European champions.

Calls to review the EU rulebook have become stronger in the face of the strong competition posed by US and Chinese firms.

The Commission is assessing whether to loosen the requirements to facilitate public support for key sectors underfunded by private investors.

Since 2014, the EU executive allows public financing for cross-border research and development initiatives crucial for the future of European industry, as was the case with Airbus in the 1970s. Now it is examining whether to ease the conditions further to support the ‘Airbus’ of the future.

Batteries

The latest example of the so-called ‘Important Project of Common European Interest’ (IPCEI) was an initiative funded by seven member states with €3.2 billion in the field of batteries. It was approved by the EU executive in December.

“We have found the right recipe for our 21st-century industrial policy: strong cooperation between industrial actors, concerted action to accelerate lab-to-market innovation, joined-up financial instruments from both, private and public sectors, and a fit-for-future regulatory framework to underpin a stronger European knowledge-based economy,” said the Commission’s Vice-President for institutional relations and foresight, Maroš Šefčovič.

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Member states, however, believe that the Commission is not going far enough in supporting such cross-border projects and should further ease the conditions.

A total of 19 countries requested in December last year, and then again this October, simplifying and accelerating the authorisation procedures for IPCEI projects. They also asked for more clarity on what costs could be financed from public coffers.

France and Germany, which took the lead in pushing for the review of competition rules, insisted on this demand when they launched their joint manifesto for a “European industrial policy fit for the 21st Century” in February.

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“The IPCEI is a useful tool for financing large scale innovative projects, but it is very complex to implement,” the document reads.

“It may be appropriate to revise the implementing conditions to ensure that the IPCEI is easier and more effective to implement,” it added.

Although the batteries initiative – a pet project of France and Germany – was approved in the space of five months, a French government official said their call to introduce more flexibility for the ICPEI framework remains on the table.

Changes coming?

And the EU executive is ready to consider further changes.

A Commission spokesperson told EURACTIV that the IPCEI framework is currently being reviewed, as part of the “fitness check” launched in 2019 to improve EU regulation and cut red tape.

The Commission will take into account the Franco-German position, as member states have been invited to share their views in public consultation.

The conclusions of the review, which is still ongoing, “will inform possible changes to the IPCEI framework,” the spokesperson added.

An EU official told this website that the institution was leaning towards amending the framework to facilitate access to the special state aid regime.

The results are expected to be published in the third quarter of next year, as part of the EU’s “fitness check” exercise.

The Commission, however, has already “drawn and implemented important lessons” from the first two projects, the spokesperson explained.

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The first ICPEI initiative before the batteries project was a €1.75 billion joint enterprise by France, Germany, Italy and the UK to fund research and development in microelectronics. It was approved in December last year.

A third project also related to batteries is in the pipeline. Meanwhile, France and Germany said that IPCEI cooperation “can be envisaged” for other key technologies, such as hydrogen, low-carbon industrial processes, smart health or cybersecurity.

Competition Commissioner Margrethe Vestager said when the microelectronics initiative was approved that “the special state aid rules” were put in place to “enable risky and groundbreaking research and innovation to see the light of day, whilst ensuring that its benefits are shared widely and do not distort the level playing field in Europe”.

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Conditions

In order to qualify for public funds under the IPCEI framework, the projects must fulfil five conditions: contribute to strategic EU objectives; involve several member states; include private financing by the beneficiaries, generate positive spillover effects across the EU, and be highly ambitious in terms of research and innovation, i.e. go beyond what is widely regarded as the “state of the art” in the sector concerned.

One of the key conditions is to ensure that the project does not provide an unfair advantage to companies financed by public coffers, banned by state aid rules.

In the case of the batteries project, the Commission highlighted that the results of the project would be “widely shared” with the private sector and the scientific community.

[Edited by Zoran Radosavljevic and Benjamin Fox]