EU state aid still too high

EU countries are still spending too much state money propping up businesses, the European Commission revealed on Friday.

The 25 EU member states spent a total of €62 billion in state aid in 2004 – around 0.06 per cent of European GDP, roughly the same as the previous year.

European capitals have pledged to reduce the amount of state aid as part of their commitment to encouraging economic growth and creating jobs.

“I am disappointed that the overall level of aid in the EU has not fallen,” said Competition Commissioner Neelie Kroes.

Germany and France are the biggest users of state aid, with payments of €17.2 billion and €8.9 billion respectively in 2004.

But national differences mean that some smaller countries spend a proportionally high amount of their GDP on state aid.

Poland, for example, has invested heavily in propping up its coal sector, while Finland spends a lot on agriculture.

But Kroes welcomed the fact that member states were moving away from direct payments to ailing companies and towards funding for sectors such as the environment.

These so-called horizontal aid payments now account for 76 per cent of total aid, with regional economic development and small businesses among those benefiting.

However, the commission remains disappointed that national governments are not directing more state aid to key sectors such as research and development.

Just 0.05 per cent of European GDP – some €5.5 billion – was invested in R&D projects in 2004, despite the fact that boosting R&D spending is a key target for the commission.

Brussels wants EU member states to invest three per cent of their GDP in R&D by 2010, although two-thirds of this figure is expected to come from the private sector.

Germany invests the most in R&D, with aid payments of €1.6 billion in 2004, well ahead of France and Italy, which spent around €950 million.

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