EU industry bail-outs top €50bn

European member states have given €49 billion of state money in 2002 to fund new industrial projects and keep cash-strapped companies in business.

Although this is drop of €1bn on figures from the previous year, the European Commission remains concerned that some EU countries “are continuing to award aid that is particularly distortive of competition”.

European regulators, led by competition commissioner Mario Monti, frown upon cash boosts, rescue loans and tax breaks given by governments to ailing industries, fearing that such support impedes competitiveness.

And Brussels admitted there were “significant disparities” between member states on giving aid, according to an EU paper out on Tuesday.

Denmark, along with Germany, Spain and Portugal, head a run-down of big spenders in the latest ‘state aid scoreboard’ to be published by the EU executive.

Whilst Copenhagen spends 0.72 per cent of the EU’s wealth on aid, Berlin, Madrid and Lisbon all weigh in close behind at 0.55 per cent of GDP.

In contrast, the United Kingdom, Finland, the Netherlands and Sweden enjoy good ratings on the scoreboard with the lowest level of aid spending of all 15 member states at only 0.2 per cent.

However, in absolute terms, Germany came out top with €13bn spent on aid, followed by France at  €10bn and Italy at €6 billion.

France, despite high-profile and controversial industry bail-outs involving companies such as Alstom, Bull and EDF, holds surprisingly steady with a mid-ranking position in the list of countries.

The state aid analysis chart adds there is a general downward trend in spending across Europe, with the average pan-EU standard falling from 0.5 per cent GDP in 2000 to 0.39 per cent in 2004.

The drop is experienced by 14 out of the 15 EU states, with Portugal and Ireland showing the greatest percentage fall.

Brussels will see the decline as a statistical vindication of its clampdown on illegal state aid, despite temporary leeway offered to European industries in dire straits such as shipbuilding and mining.

Indeed the scoreboard adds that manufacturing, fisheries, coal and transport are the four sectors experiencing most state aid activity.

The decline in aid help however is not as sharp as the fall in the early 1990s; before the payments started to rise again between 1997 and 1999 due to an increase of regional aid in Germany and Italy.

The report also sees the EU executive classify state funding into two distinct lists - so-called ‘good aid’ and ‘bad aid’.

Whilst ‘good aid’ reflects monies given to research and environmental projects in the EU, ‘bad aid’ signifies financial bail-outs, rescue plans and restructuring funds.

Just as Brussels is keen to promote the former scenario, aid falling into the second category remains a favourite bug-bear of the EU competition watchdog.

And the paper reports a rise in ‘good aid’, expressed as a percentage of the total average across the EU, with ‘bad aid’ falling to a lower level.

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