Ursula von der Leyen’s term as president of the European Commission has been the most left-wing mandate yet. This is not only because of the Green Deal and the expensive ‘climate’ policies—like mandatory building renovations, which will be a financial burden for ordinary Europeans. Nor is it because of the EU’s €800 billion COVID recovery fund, which the European Court of Auditors believes presents a significant risk of financial misuse.
The EU’s response to President Biden’s Inflation Reduction Act (IRA), which involves a green subsidy splurge and relaxing the EU ban on state aid, is even more extreme. The leftist competition commissioner, Margrethe Vestager, has been reluctant to police EU state aid rules, which constitute the core of European cooperation and enable companies from different member states to compete on a level playing field. Now, she has loosened state aid rules, even though they were relaxed at the start of the pandemic and again after Russia invaded Ukraine. Given her actions, it’s easy to think that Vestager is merely looking for an excuse not to do her job.
These new rules are laid down in the so-called Temporary Crisis and Transition Framework (TCTF) details when EU member states are permitted to subsidise technologies deemed ‘sustainable,’ for example batteries, solar panels, or wind turbines. It should be stressed that all of those have considerable environmental downsides.
Vestager’s failing legacy
Vestager, who’s been commissioner since 2014, has never been keen on the EU’s ban on state aid. At the beginning of her mandate, she stated that she found “it only natural that competition policy is political.”
When the French government nationalized a shipyard in 2017, to prevent it from being taken over by an Italian competitor, she simply waved the white flag. In that same year, she oversaw a €5.4 billion Italian bank bailout.
With the new framework, she leaves the door for cronyism wide open. Lorenzo Fiorilli, a state aid lawyer at the climate NGO ClientEarth, points out that there is a nine-day deadline for the European Commission to approve state aid measures once they are notified by member states: “This means that notifications will not be assessed in depth. … In practice, this will be a box-ticking exercise.”
ZOE (The Institute for Future-Fit Economies) highlights that “it’s a problem if state aid is granted more to richer regions than to poorer regions.” In an open letter to the European Commission, the Balanced Economy Project, the Open Markets Institute, and the European Digital SME Alliance called for “strict safeguards … to ensure that the TCTF does not worsen market concentration both within and across EU member states.”
This policy fundamentally undermines the single market, and worst of all, it is driven by the European Commission. Interestingly, at the February EU Summit, only France and Germany fully supported these changes. It was opposed by the other 25 EU member states, including relatively protectionist Southern Europe, where politicians fear the subsidy firepower of the EU’s two biggest economies. Despite this, the EU Commission is simply continuing on its fateful path, even if member states haven’t given their final blessing.
Arbitrary application of state aid rules?
The problem with Vestager’s policy is not only that the EU Treaty ban on state aid is often simply not applied, but also that its application seems arbitrary. For example, Spain has been embroiled in controversy over its refusal to compensate investors in renewable-energy installations, despite having been ordered by arbitration courts to do so. This is because a Spanish support scheme for renewable-energy investment, initiated in 2007, was drastically trimmed between 2012 and 2014, after Spain was virtually bankrupt and obtained a eurozone bailout.
It is one thing to scrap subsidies, but it is another to unilaterally break contractual agreements. Investors sued the Spanish government, which has lost most of these cases. Today, it is still desperately trying to avoid paying up. Spain is performing as poorly as Argentina, Venezuela, and Russia when it comes to complying with arbitration rulings, as it still owes $700 million (€663 million), according to one estimate.
It is deeply troubling that Spain enjoys the support of the European Commission in its refusal to comply with the court’s ruling. The Commission even goes so far as to reinterpret an award granted by an arbitration tribunal as ‘state aid,’ pretending that this grants the investor an advantage equivalent to those from the 2007 Spanish scheme.
Notably, Vestager was once dubbed the ‘tax lady’ by Donald Trump for her attempts to reinterpret tax rulings that were used mainly by successful U.S. companies as ‘illegal state aid.’ When it comes to taxing companies, Vestager is all for policing state aid.
Thankfully, over the years, the EU competition commissioner has been overruled a few times by the top EU court for her state aid approach. The ECJ lower court for example stated in 2020 that the EU Commission failed to demonstrate “to the requisite legal standard” that Apple enjoyed preferential treatment which amounted to illegal state aid.
The EU is far from perfect, but there was a time when its supporters could maintain that despite overregulation, failure to open up trade, and massive waste of resources, it at least supported a framework that guaranteed free and fair competition between member states. It is tragic to see the European Commission itself undermining this very thing.
The European Commission Is Undermining EU Cooperation
Margrethe Vestager
Ursula von der Leyen’s term as president of the European Commission has been the most left-wing mandate yet. This is not only because of the Green Deal and the expensive ‘climate’ policies—like mandatory building renovations, which will be a financial burden for ordinary Europeans. Nor is it because of the EU’s €800 billion COVID recovery fund, which the European Court of Auditors believes presents a significant risk of financial misuse.
The EU’s response to President Biden’s Inflation Reduction Act (IRA), which involves a green subsidy splurge and relaxing the EU ban on state aid, is even more extreme. The leftist competition commissioner, Margrethe Vestager, has been reluctant to police EU state aid rules, which constitute the core of European cooperation and enable companies from different member states to compete on a level playing field. Now, she has loosened state aid rules, even though they were relaxed at the start of the pandemic and again after Russia invaded Ukraine. Given her actions, it’s easy to think that Vestager is merely looking for an excuse not to do her job.
These new rules are laid down in the so-called Temporary Crisis and Transition Framework (TCTF) details when EU member states are permitted to subsidise technologies deemed ‘sustainable,’ for example batteries, solar panels, or wind turbines. It should be stressed that all of those have considerable environmental downsides.
Vestager’s failing legacy
Vestager, who’s been commissioner since 2014, has never been keen on the EU’s ban on state aid. At the beginning of her mandate, she stated that she found “it only natural that competition policy is political.”
When the French government nationalized a shipyard in 2017, to prevent it from being taken over by an Italian competitor, she simply waved the white flag. In that same year, she oversaw a €5.4 billion Italian bank bailout.
With the new framework, she leaves the door for cronyism wide open. Lorenzo Fiorilli, a state aid lawyer at the climate NGO ClientEarth, points out that there is a nine-day deadline for the European Commission to approve state aid measures once they are notified by member states: “This means that notifications will not be assessed in depth. … In practice, this will be a box-ticking exercise.”
ZOE (The Institute for Future-Fit Economies) highlights that “it’s a problem if state aid is granted more to richer regions than to poorer regions.” In an open letter to the European Commission, the Balanced Economy Project, the Open Markets Institute, and the European Digital SME Alliance called for “strict safeguards … to ensure that the TCTF does not worsen market concentration both within and across EU member states.”
This policy fundamentally undermines the single market, and worst of all, it is driven by the European Commission. Interestingly, at the February EU Summit, only France and Germany fully supported these changes. It was opposed by the other 25 EU member states, including relatively protectionist Southern Europe, where politicians fear the subsidy firepower of the EU’s two biggest economies. Despite this, the EU Commission is simply continuing on its fateful path, even if member states haven’t given their final blessing.
Arbitrary application of state aid rules?
The problem with Vestager’s policy is not only that the EU Treaty ban on state aid is often simply not applied, but also that its application seems arbitrary. For example, Spain has been embroiled in controversy over its refusal to compensate investors in renewable-energy installations, despite having been ordered by arbitration courts to do so. This is because a Spanish support scheme for renewable-energy investment, initiated in 2007, was drastically trimmed between 2012 and 2014, after Spain was virtually bankrupt and obtained a eurozone bailout.
It is one thing to scrap subsidies, but it is another to unilaterally break contractual agreements. Investors sued the Spanish government, which has lost most of these cases. Today, it is still desperately trying to avoid paying up. Spain is performing as poorly as Argentina, Venezuela, and Russia when it comes to complying with arbitration rulings, as it still owes $700 million (€663 million), according to one estimate.
It is deeply troubling that Spain enjoys the support of the European Commission in its refusal to comply with the court’s ruling. The Commission even goes so far as to reinterpret an award granted by an arbitration tribunal as ‘state aid,’ pretending that this grants the investor an advantage equivalent to those from the 2007 Spanish scheme.
Notably, Vestager was once dubbed the ‘tax lady’ by Donald Trump for her attempts to reinterpret tax rulings that were used mainly by successful U.S. companies as ‘illegal state aid.’ When it comes to taxing companies, Vestager is all for policing state aid.
Thankfully, over the years, the EU competition commissioner has been overruled a few times by the top EU court for her state aid approach. The ECJ lower court for example stated in 2020 that the EU Commission failed to demonstrate “to the requisite legal standard” that Apple enjoyed preferential treatment which amounted to illegal state aid.
The EU is far from perfect, but there was a time when its supporters could maintain that despite overregulation, failure to open up trade, and massive waste of resources, it at least supported a framework that guaranteed free and fair competition between member states. It is tragic to see the European Commission itself undermining this very thing.
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