The European Commission has opened a formal state aid investigation procedure into a decision by the German government to give financial assistance to BMW for the construction of a new car plant in Leipzig in the former East Germany.
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Total investment in the factory is around 1.2 billion euros (about £UK720 million) of which some 418.6 million euros (£250 million) is covered by the planned aid.
The commission said it had doubts both over the level of aid and as to whether Leipzig qualified for it. In effect it has asked Germany to show why Leipzig suffered from a “regional handicap” that made it eligible for the aid under EU state aid regulations compared to BMW’s alternative location in the Czech Republic.
Separately, Brussels has called on the Portuguese government to explain why it has granted some 41.7 million euros (£25 million) in aid for a new Opel factory in the Lisbon region.
The commission said it was not yet certain whether or not the aid respected EU criteria for state aid to the motor industry but was opening an in-depth investigation.
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