No subsidies for ‘lame ducks’

BRUSSELS (Reuters) – The EU’s system of state aid should be reformed to benefit the bloc’s poorer countries and smaller companies, Europe’s top competition official said, drawing immediate fire from Germany. «I am talking about less and better state aid, focusing on those regions that really need state aid… focusing on risk capital, research and innovation and on small and medium-sized companies,» Competition Commissioner Neelie Kroes was quoted as saying in the Financial Times yesterday. Jonathan Todd, spokesman for Kroes, confirmed the quotes, adding the European Commission in March or April would present its plans for a review of European Union state aid rules. Kroes, who spoke on Tuesday to the FT, FT Deutschland and Les Echos in Paris – all owned by the Pearson newspaper chain – signaled a move away from allowing larger EU member states, such as Germany, Britain and France, to subsidize firms in economically stricken regions. «Some regions will in the future not get the type of backing they did,» she said. «We need to ask the question of whether the poorer regions within a ‘rich’ country can go on (receiving state aid).» The German Finance Ministry reacted sharply to the reports. «If these statements really do mean there will be a move away from existing state aid practice, then that would be unacceptable for the (German) government,» a German Finance Ministry spokesman told a regular government news conference. Todd said Kroes had not questioned Germany’s aid to help former East Germany catch up with the richer west. «She is in no way putting into question the specific rules in the treaty concerning the east German federal states, and she is not suggesting that there will be different rules applied to different member states according to whether they are rich or poor,» Todd told a daily briefing. Kroes criticized money being thrown at failing large enterprises, saying job losses alone could not justify the granting of subsidies. «State aid that is given to a lame duck (company) without initiative, without innovation, is only relief for the moment. But it is not a positive instrument,» she told the newspaper. Kroes said the reform of state aid was one of the «flagship» projects of her five-year tenure. Todd said the new rules were likely to give member states the right to grant subsidies below a threshold of about 150,000 euros, instead of the current 100,000 euros.