Together we aid, divided we aid: Mapping the flexibilization of the EU state aid regimes across GBER, IPCEIs and Temporary Frameworks

Donato Di Carlo, Andreas Eisl (andreas.eisl@sciencespo.fr) and Dimitri Zurstrassen
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Donato Di Carlo: LEAP - Luiss Institute for European Analysis and Policy, Université Libre de B
Andreas Eisl: CEE - Centre d'études européennes et de politique comparée (Sciences Po, CNRS) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, Institut Jacques Delors
Dimitri Zurstrassen: LEAP - Luiss Institute for European Analysis and Policy, LSE - London School of Economics and Political Science

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Abstract: This joint JDI-LUHNIP Policy Paper addresses the pressing issue of fragmentation within the EU Single Market resulting from the growing use of state aid by Member States. It provides an in-depth analysis of three key domains of the EU state aid regime, namely aid under the General Block Exemption Regulation (GBER), aid for Important Projects of Common European Interest (IPCEIs), and aid under the Temporary Frameworks introduced to respond to the COVID-19 pandemic and the energy crisis. The analysis reveals significant cross-country variation in both the levels and composition of national state aid across these three domains. The lack of supranational fiscal and political capacity to govern state aid in Europe exacerbates disparities among Member States, leading to an uneven subsidy race. To address these challenges, the paper proposes several policy solutions. First, the paper advocates for phasing out temporary crisis frameworks by the end of 2025. While these schemes have helped to mitigate short-term economic disruptions, their continued use risks entrenching fragmentation within the Single Market. Instead, the EU should prioritize consolidating permanent state aid instruments, such as GBER aid and IPCEIs, to balance policy flexibility and pan-European strategic coordination. Second, the paper underscores the need to strengthen the IPCEI instrument, with an enhanced role for the European Commission in ensuring that projects are selected based on merit rather than Member States' fiscal capacity to provide subsidies. Ideally, this EU approach to state aid would include common funding mechanisms allowing the Union to co-finance IPCEIs alongside national governments. National contributions could then benefit from the exemption for the co-financing of EU-funded programs under the new fiscal rules of the Stability and Growth Pact.

Keywords: Industrial policy -- Europe Union Countries; State aid; Flexibilization (search for similar items in EconPapers)
Date: 2024-11
Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-04834621v1
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