‘War is declared’ between Montebourg and Almunia

Arnaud Montebourg, May 2012. [Reuters]

The tone between the French industry minister, Arnaud Montebourg, and the EU's competition commissioner, Joaquín Almunia, is becoming increasingly heated, as the pair exchanged inflammatory letters last week, euractiv.fr reports.

“Obsolescence, radicalism, autism, self-isolation” are the words used by the French minister for industrial revival to describe Almunia, whose jobs includes the approval of mergers and state aid to industry across the 28 EU member states.

“This time war is declared,” Montebourg told a group of journalists in Paris last Wednesday (22 January).

The week before, on 14 January, Montebourg replied to a letter from Almunia, which had questioned the minister’s management of state aid in France. (Read the letter exchange here and here).

“I decided to step into the arena because the Commission is locking itself into its own ideological radicalism. Many of us demand a reform of the state aid system so that the EU can adapt to globalisation – and we get nothing!”

According to a source in the Commission, the bone of contention concerns the maritime company SNCM, which links Corsica to France's mainland. The EU executive has requested the company to reimburse part of the state aid it received from the French authorities, triggering the ire of Montebourg, who is seeking ways to maintain the company afloat.

French 'caricature'

“I deplore the caricature you make of the state aid control policy,” the commissioner replied in a letter, dated 19 December.

Almunia was referring to an interview Montebourg gave to La Tribune in which he called on the commissioner to review his “radical doctrine” of state aid.

“Far from being a radical doctrine, this policy has proved to be useful and flexible,” Almunia adds.

The French minister sees things differently, however. For Montebourg, the Commission is responsible for high-profile failures of European industry, including Alcan's takeover of French aluminum conglomerate Pechiney and the failed merger between Schneider and Legrand. Meanwhile, the USA and China have their hands free to create their own champions, Montebourg claims.

Preventing the 'collapse of Rome'

It is not the first time that Montebourg has attacked the Commission's competition policy. In an interview with euractiv.fr in October, he called the EU's competition and state aid rules "stupid and counter-productive".

Montebourg considers that Europe can only survive if it is able to compete in the innovation race. Public subsidies happen everywhere except in Europe, he argues, citing China which spends 6% of GDP to help its companies and the United States, which spends 1%. In Germany, high-tech strategy represents only 0.3% of the country's GDP, while in France the recovery programme announced last September represents 0.2% of GDP.

“We are far from what competitors do while the EU is stuck in obsolete and unadapted views,” Montebourg said, claiming the situation was serious.

“It’s the story of Rome surrounded by the Barbarians… We are all waiting for the collapse of Rome!”

Under current rules, the European Commission has to be notified as soon as state aid exceeds €200,000. France is questioning the logic behind this low threshold, which has led the Commission to investigate small projects like aid for setting up a driving school in the Netherlands.

“While the world’s industry is being subsidised by billions, our bureaucracy is led by men who have not understood that the world has changed,” Montebourg said, proposing to review the threshold downwards.

An alliance against DG Competition

France has repeatedly asked for more flexibility from the competition directorate, the Commission department which scrutinises mergers and state aid to European companies.

Other EU countries, including the UK and Germany, have made a similar request to the Commission, asking for the state aid threshold to be reviewed.

To coordinate their initiatives, Montebourg has established a group called “friends of industry” where industry ministers from European countries meet on a regular basis. Twelve countries were represented at the group's first meeting on 23 October, including Britain and Germany. Montebourg hopes to gather even more at the next meeting in Rome, on 30 January.

One of the issues debated at those gatherings is how to better control the Commission on competition matters.

The French minister deplores that competition matters, which have “such significant consequences" for the economy and jobs, are being decided by "legal experts who apply – and even invent – rules, rather than by elected politicians responsible for making choices and expressing the preferences in the name of the European people.”

France has already pushed for the establishment of an appeals body in the EU Council to avoid abuses by the Commission.

A more flexible interpretation of the doctrine

The Commission relies on legal principles that France disputes, like that of the "prudent investor", a legal notion which calls on the states to act prudently, like a private company does.

“It’s not in the treaties," Montebourg said of the notion. "This concept means acting like a banker, while the banks are too cautious,” he argues.

The reciprocity notion could also be interpreted differently.

“Europe's competitors such as China or the US spend hundreds of billions of euros in technological innovation, while our services do everything to prevent us from doing the same. What should we think of this Commission that is handcuffing us and shackling our industries while our competitors are using drugs to run faster?” the minister wrote in his letter.

Voters will make their choice

Asked by euractiv.fr to comment on the risks of criticising the Commission in the run up to the EU elections, Montebourg stressed the importance of having a democratic debate.

“We will bring this issue to the elections, reducing the Commission’s powers is a transnational challenge,” he said, adding that asking for a more democratic Europe is to defend it.

State aid is defined by the European Union as an advantage in any form whatsoever conferred on a selective basis to undertakings by national public authorities.

Therefore, subsidies granted to individuals or general measures open to all enterprises are not covered by this prohibition and do not constitute state aid (examples include general taxation measures or employment legislation).

To be considered state aid, several need to fulfil the following criteria:

  • there has to be an intervention by the state or through state resources which can take a variety of forms (e.g. grants, interest and tax reliefs, guarantees, government holdings of all or part of a company, or providing goods and services on preferential terms, etc.);
  • the intervention gives the recipient an advantage on a selective basis, for example to specific companies or industry sectors, or to companies located in specific regions
  • competition has been or may be distorted;
  • the intervention is likely to affect trade between member states.

Despite the general prohibition of State aid, in some circumstances government interventions is necessary for a well-functioning and equitable economy.

Therefore, the EU treaty leaves room for a number of policy objectives for which state aid can be considered compatible. The legislation stipulates these exemptions.

The laws are regularly reviewed to improve their efficiency and to respond to the European Councils' calls for less but better targeted state aid to boost the European economy. The Commission adopts new legislation is adopted in close cooperation with the member states.

European Commissions

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