Why strong EU competition and state aid rules matter

The European economy is at a crossroads. It is recovering from a pandemic and has embarked on two essential transitions: towards carbon neutrality and a digital economy. At the same time, the world has changed.

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Image: ©EZK / EZK

Geopolitical developments drive the EU to think in lines of open strategic autonomy. This means identifying our strengths and weaknesses such as a lack of commodities or unfair competition in the Single Market based on subsidies from non-EU countries. It requires us to decide where we need to uphold and where we need to target our efforts and spearhead innovation and technology at the global stage. This ensures our safety and prosperity against those operators that do not play the game according to a rules-based multilateral order. Not only on the short term but rather for the longer term.  

But we can only do this, by not forgetting that the cornerstone of our economic success is the EU’s Single Market. Fair and open competition ensures a level playing field in a home market of hundreds of millions of consumers. It provides ample opportunities for businesses big and small to grow far beyond EU borders. It has and will provide for the jobs and wellbeing of our European citizens and its future generations. The strength of that Single Market is our key leverage in a geopoliticised world.

In a few weeks’ time, the Commission is expected to publish a review of the EU’s competition toolbox in light of efforts to boost Europe’s economic recovery and tackling the challenges described above. Ensuring that our existing rulebook is fit for new challenges is very important. We need to adapt to enable structural changes such as digitalisation and fighting climate change. However, when modernising the rules, we must not jeopardise the effectiveness and politically independent character of our competition and state aid framework. Relaxation of our rules, as some suggest, is not the right way to tackle new challenges. It could easily lead to negative effects on competition, markets and growth on the Single Market as well as a harmful subsidy race that benefits few and hurts many. It will not strengthen the global competitiveness of European companies and will harm our level playing field at home.

So how should the European Commission protect the level playing field and strengthen the Single Market?

  • First, it should preserve evidence-based and independent enforcement of the competition rules and maintain the strong competition framework on mergers and antitrust. To ensure high quality products and choice at the best possible price, the fundamental principles on which competition rules rest must be upheld. Relaxing the competition framework on mergers and anti-trust is not the solution to deal with global developments or strengthen the EU’s competitiveness and resilience. The Commission has put forward targeted solutions to ensure that the competition toolbox is fit for new challenges. We should await the full effect of these efforts before proceeding with new initiatives.
  • Second, it should ensure that the so-called Important Projects of Common European Interest (IPCEI) target clear market failures and address a restrictive number of strategic objectives and challenges of the Union. IPCEI is an instrument that, in a smart and selective manner, enables member states to provide state aid for projects of broad European importance. It is a justified instrument which we support and participate in, but it also poses risks for the level playing field in the EU. Excessive and non-targeted use of the instrument would lead to subsidy races and unfair competition within the EU. That is why, IPCEIs should be used proportionately, carried out in a fully open and transparent manner, target clear market failures, involve support for neither mass production nor commercial activities, and result from clear and balanced EU long-term strategies. We, therefore, support a larger role for the Commission to streamline the IPCEI processes and to ensure the projects benefit the whole of the EU.
  • Finally, the Commission should formulate the conditions for an exit path from the Temporary State Aid Framework for Covid-19. The Temporary Framework has proved useful to allow support for our economies during the unprecedented coronavirus pandemic – also now with increasing infection rates that require restrictive measures. But once large parts of Europe will return to ‘normal’ life, restrictions will no longer be necessary and our economies will recover from the pandemic, an exit strategy from the temporary framework needs to be in place.

Maintaining a robust competition and state aid framework matters to ensure a level playing field on the Single Market. If we as the EU preach a global level playing field, we should lead by example and set the stage with suitable policies. If we do so, we have the best chance of strengthening our competitiveness, realising sustainable growth through innovation and aspiring to prosperity for all EU citizens. 

By Denmark’s Minister for Industry, Business and Financial Affairs Simon Kollerup, Dutch Minister of Economic Affairs and Climate Policy Stef Blok, Finnish Minister of Employment Tuula Haatainen, Irish Tánaiste and Minster for Enterprise, Trade and Employment Leo Varadkar, Romania’s Chairman of the Competition Authority Bogdan Chiritoiu, and Swedish Minister for Business, Industry and Innovation Ibrahim Baylan.