Eleven EU countries urge 'great caution' in loosening state aid rules

Eleven European Union countries urged "great caution" in relaxing the bloc's state aid rules in a bid to support Europe's green industry in a global race, saying that risked damaging competition inside the bloc, a document showed.

The document dated Feb. 10 was sent to the bloc's executive European Commission and signed by Denmark, Finland, Ireland, Poland, Sweden, the Netherlands, Hungary, Latvia, the Czech Republic, Slovakia and Belgium.

The Commission proposed easing EU restrictions on state aid for investments in renewable energy or decarbonising industry, partly in response to the U.S. Inflation Reduction Act. The signatories, however, worry about unduly benefiting those with the deepest pockets in the 27-nation bloc.

"State aid for the mass production and commercial activities can lead to significant negative effects including the fragmentation of internal market, harmful subsidy races and weakening of regional development," read the joint position paper, which was seen by Reuters.

"These harms can be greater than the positive effects. We, the co-signing member states, urge the Commission to exercise great caution."

The European Commission did not immediately reply to a request for comment.

The 11 countrries urged the Commission to consider whether other policies could better achieve the goal of promoting green investment, as well as analysing the risks thoroughly before making any "fundamental changes".

"EU state aid rules should be designed taking into account the value added at the level of EU as a whole. EU state aid rules should protect the level playing field on the EU internal market," it said.

The EU's competition chief Margrethe Vestager said this month that France and Germany - the bloc's two biggest economies - accounted for almost 80% of the state aid approved since the Commission first eased previous limits to help economies weather the COVID-19 pandemic.

The 27 national EU leaders discussed the matter last week in Brussels, hoping to be able to settle their differences on subsidies before their next summit due March 23-24.

Speaking separately at a gathering of EU finance ministers in Brussels on Tuesday, Germany's Christian Lindner said: "The German government is not interested in more spending and expanding subsidies... I can assure all member states that Germany will keep a fair, level playing field."

"I invite them to consider with us how to foster competitiveness without spending more and more money - we cannot fight with the United States, which is able to and can afford to pay more subsides."

The European Commission initially also proposed creating a special fund meant to help poorer EU countries dole out more state aid. That is not, however, expected to take shape this year, if at all.