Monti’s warning: Easing subsidy rules is dangerous

Easing state aid rules to help European industry compete worldwide is a "dangerous" approach, warns Mario Monti.

"It is important that rules come back," even with minor changes, the former Italian prime minister and EU antitrust chief told POLITICO in an interview. "The longer a drug addiction phase is allowed to last, the more difficult it will then be to deprive the subject of it," he said of the European Union's massive state aid binge.

The European Commission relaxed state aid rules during the pandemic to allow governments to help companies suffering from the sudden drop in business activity. It again relaxed the rules last year to help cover higher energy costs in the wake of Russia's invasion of Ukraine.

It is now weighing another loosening to match United States' multibillion Inflation Reduction Act to boost green industry.

Monti said it may be time to draw a line in the sand.

"There is no point in keeping the single market free of anti-competitive distortion by firms — such as cartels, abuses of dominant positions, anti-competitive mergers — if countries can then distort that single market," said Monti, who also served as internal market commissioner.

"There is some kind of categorical imperative, which is spreading around Europe, but mostly started in France, according to which we should respond to the American IRA with a tit-for-tat," Monti said. This fails to take into account the billions of euros the EU has spent with its post-pandemic NextGenerationEU plan, he said.

"It is pointless for us to chase each other on both sides of the Atlantic, we all know that it will be necessary to move toward more coordinated state aid control someday," he said, calling for some ideas on "transatlantic control on respective state aid."

Monti also worries that the current Commission isn't doing enough to safeguard the single market.

"I cannot think about big in-depth initiatives to give more incisive teeth to the Commission to overcome the obstacles that member states often put in the way of completing the single market," he said. "Every single market commissioner had done that in the past."

"It doesn't seem like this caught the attention of the current internal market commissioner," Thierry Breton, or he would "pay more attention before making proposals on removing state aid control, which would be like shooting himself in the foot," Monti said.

Monti said the experience of the last three years has "allowed all of us to do a sort of laboratory experiment on what Europe would look like without state aid control."

Italy, traditionally a subsidy-enthusiast, is now warning against looser state aid rules that could undermine the single market — a concern shared by smaller EU countries such as the Nordics and Belgium as well as liberal-minded EU commissioners.

"Countries that used to complain of state aid rules are now complaining that those rules are not in place," he said.