France has long provided significant public support to joint projects for small and medium enterprises (called “collective actions”) to encourage their research and business, EurActiv.fr reports.
This can include the financing of competitive clusters (see background), contacts with potential investors, or facilitating exports.
During a July 2011 audit, the European Commission found that EU structural funds in the French region of Champagne-Ardenne were being used to finance projects entirely or overwhelmingly with public funds. The region was found to be violating EU competition rules which mandate that such actions can only be 50% publicly financed.
Similar violations are occurring across France. It is estimated that projects to be re-examined in the country involve at least €150 million of public subsidies tied to the European Regional Development Fund (ERDF).
Research projects threatened
Regional administrations are now reviewing their projects for cases where the contribution of EU regional funds must be reduced to be in line with EU rules.
This is threatening the financing of research centres and competitiveness clusters across France. An official with the Mediterranean Technologies agency in Provence said, “We are not going to disappear, but it’s our entire ecosystem which is at stake, as well as that of the region’s competitiveness clusters.”
The director of a research centre specialised in the environment agreed, saying “All my colleagues have problems linked to their financing structures.” He said they had put off the hiring of new staff due to the failure to receive an expected ERDF funds.
“In other centres, there have actually been interruptions of contracts,” he added.
Local and regional authorities in other member states have also had similar problems. On 14 July 2011, the European Court of Justice ruled that the German state of Saxony’s system to support SMEs was illegal.
The state’s authorities had decided to pay for up to 60% of SMEs’ costs in participating in business fairs and up to 80% for the creation of “cooperation offices” to help multiple SMEs to find export markets
In some French regions, all public aid has been temporarily blocked. It’s the case of Champagne-Ardenne, where €14 million is concerned.
This has affected the competitiveness cluster Materalia, which brings together academic researchers and businesses working on materials, such as nanotechnologies, metalworking and composites. Materalia had to receive an emergency loan from the French metallurgical federation to make up the non-payment of €400,000 from the ERDF.
“We almost died because of this story,” said Olivier Bonnet, Materalia’s director-general.
Regional authorities hope to unfreeze these funds starting in June. Jean-Paul Bachy, regional president of Champagne-Ardenne, said, “The issue is not blocked, at least we hope not. The government seems to be receiving a benevolent attitude on the part of the [the EU] and there should not have to be any reimbursement of [already-disbursed] funds.”
The anomalies identified in the financing of collective actions will lead to a reduction of European subsidies in 2012 for certain organisations, including innovation agencies and chambers of commerce.
“We are pushing on the breaks when we should be pushing on the accelerator because the instructions given by the [French] administration were not good,” said Bachy.
Contacted by EurActiv France, the French territorial management agency (DATAR) and the Ministry of the Interior declined to comment.
Research centres and SMEs are reacting to this through various administrative acrobatics.
On 6 February, DATAR gave recommendations to regional prefects to secure public funds for collective actions: If they intervene with over 50% public financing, then they must apply a regime of small-scale financing (up to €200,000 over three years), which is too small for Brussels to consider it a violation of competition rules.
These kinds of actions do not please everyone. “It’s horrible,” said one chamber of commerce official. Because they receive funds given by a plethora of public organisations including the EU, national government, public financial institutions and start-up funds, “no one has a clear idea of what a given company is benefiting from in terms of public support.”
Those agencies and clusters with more than €200,000 in support would see their financing cut. EU legislation requires that these kinds of subsidies be temporary and decline over time.
“We know that the clusters need to be more autonomous than they were before,” said one Provence-based cluster official. “But we fulfil a role that needs to be done and that no one wants to pay for.”