More state aid to big firms, no special provisions for the SMEs

Joaquín Almunia, Vice-President of the EC in charge of Competition, gave a press conference on several decisions on State aids, adopted on the same day by the European Commission. He notably announced the launch of a public consultation on a proposal for revised and understandably more relaxed State aid rules. The big multinationals are to take advantage of that. That’s why Almunia speaks in front of some market board. (EC Audiovisual Services, 18/12/2013).

Joaquín Almunia, Vice-President of the EC in charge of Competition, gave a press conference on several decisions on State aids, adopted on the same day by the European Commission. He notably announced the launch of a public consultation on a proposal for revised and understandably more relaxed State aid rules. The big multinationals are to take advantage of that. That’s why Almunia speaks in front of some market board. (EC Audiovisual Services, 18/12/2013).

Rules for state aid covering research, development and innovation investments (R&D&I) are already relaxed in the European Union, in order to facilitate growth and job creation. Mind you that in this case the bending of competition rules is not confined to very small businesses, the SMEs and mid cups, but covers the entire constellation of the European business sector, including the multinationals. Now the EU Commission tries to further facilitate state aid on R&D&I. Let’s see if this new Commission initiative is as it looks like or it is drafted to help only the big guys.

Favouring the multinationals

In the case of multinationals, most of big groups tend to locate their research and development departments or their specialised affiliate companies on European soil, in order to profit from the high educational and technical standards of the labour force and the always increasing EU subsidies on R&D. This new European Commission initiative further facilitate the conditions under which member states can grant state aid for research, development and innovation activities (R&D&I). By the same token the Commission is very probably aiming at supporting the EU multinationals, a target which is not necessarily negative.

Of course the Commission would not accept that its new proposal is aimed to further help only the big groups. Nevertheless the most important item in this package is the doubling of the threshold above which a clearing is required. Whilst currently, aid for experimental development of up to €7.5 million can be granted without prior Commission approval, under the proposed new rules member states would have to seek Commission approval only if the aid exceeds €15 million per project and per beneficiary.

Last week Commission Vice President in charge of competition policy, Joaquín Almunia, said: “The new Framework we propose means more effective R&D&I aid, fewer distortions of competition and less red tape. It will help Member States reach the targets of the Europe 2020 Strategy for smart, sustainable and inclusive growth. Well-designed public support to R&D&I will enhance competitiveness and will help address the societal challenges the EU is facing.”

Undoubtedly, €15 million per project and per beneficiary is not at all a small amount. It surpasses by far the abilities of SMEs and even of mid cups. Let alone that loan demands for such projects are usually rejected by banks, if the inquiring part is an SME or mid cup firm in the south of Eurozone. It’s not the same for the multinationals, which have many options to finance themselves, while for the SMEs it’s only the banks.

No special provision for the SMEs

The relevant Press release issued by the Commission last week stressed that this new threshold of €15 million refers “to aid for experimental development”. But this category is so broad and becomes even broader with the fact that the above ceiling refers to the aid and not to the total cost of the project. This means the interested party can receive also aid from EU R&D support programmes. In short, the entire cost may exceed the double of the above mentioned threshold.

The Commission doesn’t hesitate even to state it clearly that the whole affair is to support the large company groups. It states, “The proposed framework on state aid for R&D&I is not a stand-alone act but is complementary to the General Block Exemption Regulation (GBER) which sets the conditions for certain aid measures – including R&D&I-aid – to be exempted from prior notification to the Commission. The Framework, in turn, sets the standard for large R&D&I aid that goes beyond the GBER’s limits and requires individual scrutiny by the European Commission before being granted. The GBER is also currently under revision and a new draft has been submitted to public consultation on 18 December 2013. Both the GBER and the framework will offer Member States more possibilities to channel state aid towards boosting innovation, growth and jobs…”.

The Commission insists that this is to help growth and job creation in general, but still no particular support is provided for the R&D&I of SMEs. It should be reminded that 85% of the new jobs in the EU are created by very small firms and SMEs. It’s not only that though. The doubling of the ceiling of aid, above which an announcement to the Commission is required, helps only the wealthy countries, which can afford such expensive aid schemes.

This doesn’t mean that the proposal in question will necessarily trigger negative developments overall. The problem is that no special attention is paid to the needs of the SMEs and mid cups in crisis countries like Greece, Italy, Spain, Portugal and why not Ireland. Given that the available financial options of practically all SMEs are restricted to lenders, and that the banks in the south of Europe are not according any new loans, the Commission initiative is obviously introducing new inequalities and increases the fragmentation within the EU economy.

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

5 surprising ways to reuse coffee grounds

These 5 countries are home to more than half the world’s forests

IMF – World Bank meetings: US – Germany clash instituted, anti-globalization prospects visualized

Could Rwanda become Africa’s healthcare leader?

Inequality threatening human development, new global UN report warns

Big oil’s climate pledges will fail without workforce equality

Taxation: Commission refers Hungary to the Court for failing to apply the minimum EU excise duty on cigarettes

Human health – litmus paper for the climate change?

EU Commission and ECB rebuff Germany on the Banking Union

Wednesday’s Daily Brief: Women boost work profits, saving biodiversity, UK loses Chagos Islands vote, Gaza funding, malaria-free in Argentina, Algeria

Bold measures needed to protect cross-border and seasonal workers in EU, MEPs say

How young people are turning the tide against corruption

At COP24, countries agree concrete way forward to bring the Paris climate deal to life

6 ways social innovators are responding to the COVID-19 pandemic

Russia won’t let Ukraine drift westwards in one piece

Can agroforestry save India’s rivers and the farms that depend on them?

‘Historic’ moment: Palestine takes reins of UN coalition of developing countries

‘Ground Zero’: Report from the former Semipalatinsk Test Site in Kazakhstan

Hiring more female leaders is good for profits. Here’s the evidence

In Marrakech, UN chief urges world leaders to ‘breathe life’ into historic global migration pact

Air quality: Commission takes action to protect citizens from air pollution

Cloud computing under scrutiny in the EU?

One good reason to feel less blue about the future of our oceans

How TV has brought mental health issues into the light – and helped to banish stigma

German opposition win in Lower Saxony felt all over Europe

Human rights: breaches in Russia, the Rakhine State and Bahrain

COVID-19: Why we must take the widescreen view of workforce uncertainty

Libya’s migrants and refugees with tuberculosis ‘left to die’ in detention centres

EU long-term budget deal must be improved for Parliament to accept it

European Commission Joint Research Centre opens world-class laboratories to researchers

UN chief welcomes start of Church-mediated national dialogue in Nicaragua

Longer hours, more emails and shorter meetings – working from home in the time of COVID

European Business Summit 2014: The role of youth entrepreneurship education in EU’s Strategy for Competitiveness

The Fourth Industrial Revolution needs a social revolution, too. Here’s how we can make this happen

Livelihoods of millions in East and Southeast Asia at risk from Swine Fever epidemic

Commission welcomes political agreement on the ESF+

So different, so close – for two twinning cities

Technology companies have power. They must assume responsibility

Renewable energy could power the world by 2050. Here’s what that future might look like

Around 260,000 children in DR Congo’s Kasai region suffering severe acute malnutrition

Trump’s Pandemic Failure: A Missed Opportunity

Unity, regional cooperation and international support needed for Horn of Africa to develop sustainably

Brexit: Britain and the Continent fighting the battle of Waterloo again

This is what happened to CO2 emissions in the EU last year

Can China deal with climate change without the U.S.?

How COVID-19 might help us win the fight against climate change

New UN agriculture agency report underscores value of fishing in fight against global hunger

‘Protracted crisis’ in Venezuela leads to ‘alarming escalation of tensions’: UN political chief

What living abroad does to your self-awareness

Climate change is speeding up. Our response needs to be even faster

Parliament: No consent to EU budget until €11.2 billion unpaid bills are settled

Repression, use of force risk worsening Bolivia crisis: UN human rights chief

How quantum computing could beat climate change

Long-term EU budget: It is not possible to do more with less, say MEPs

As we switch to cleaner energy, there are three dangers we must not overlook

The issues of practicing medicine in Pakistan

Technological innovation can bolster trust and security at international borders. Here’s how

The China-US trade deal will be signed on time; the path is set

More Stings?

Advertising

Comments

  1. Like to know more about your funding and donors services

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s