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July 2, 2019

EC probes Spain EUR20m support for PSA in Vigo

Brussels has opened an in-depth investigation to assess whether Spain's plan to grant EUR20.7m (US$23.4m) of public support to PSA for investing in its existing car plant in Vigo is in line with EU rules on regional State aid.

By Rhodri Morgan

Brussels has opened an in-depth investigation to assess whether Spain’s plan to grant EUR20.7m (US$23.4m) of public support to PSA for investing in its existing car plant in Vigo is in line with EU rules on regional State aid.

“Public investment is important to foster economic growth in disadvantaged regions in Europe,” said Competition Policy Commissioner, Margrethe Vestager. “However, we need to avoid harmful subsidy races between Member States.

“The Commission will carefully investigate if Spain’s planned support is really necessary for Peugeot to invest in genuinely innovative production processes in Vigo and if it will further develop the region without unduly distorting competition or harming cohesion in the EU.”

PSA is investing around EUR500m in production lines for the launch of new vehicles, as well as in process improvements in the existing plant of Peugeot Citroën Automobiles España in Vigo. The work on the new production lines and processes started in April, 2015.

In November, 2017, Spain notified the Commission of its plans to grant EUR20.7m of public support for the project. EU State aid rules, in particular the Commission’s 2014 Regional State Aid Guidelines enable Member States to support economic development and employment in the EU’s disadvantaged regions and to foster regional cohesion in the Single Market.

In order to be approved, the measures need to fulfil certain conditions to make sure they have the intended positive effect. This includes the support must incentivise private investment, be kept to a minimum necessary and must not lure away investment from a region in another Member State, which is as or more disadvantaged (‘anti-cohesion effect’).

The Commission noted it had “doubts at this stage” the planned aid support of EUR20.7m in Vigo complies with all criteria of Regional State Aid Guidelines: “The Commission has concerns the Spanish public support might have attracted the investment project away from an economically more disadvantaged region in another Member State, or that PSA would have carried out the investment in any event in Vigo, even without public support from Spain,” added a statement from the EC.

“Under applicable rules on regional aid, investments by large companies in existing production facilities are generally not eligible to receive regional investment aid, except if the investments enable fundamental, innovative changes in the production process that are applied for the first time in the sector concerned in the European Economic Area (EEA).

“At this stage, the Commission has doubts on whether the planned production process is sufficiently innovative to qualify for this exception; – the Commission also has doubts in relation to the public support’s contribution to regional development and on its appropriateness and proportionality; and – the Commission cannot, at this stage, exclude the aid would have negative effects on competition in certain segments of the passenger car market targeted by the investment.”

The Commission will now investigate further to determine whether or not these initial concerns are confirmed.

The opening of an in-depth investigation provides Spain and interested third parties with an opportunity to comment on the measure. It does not prejudge in any way the outcome of the investigation.

PSA was not immediately available for comment.

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