Levelling the single market playing-field

Date: 17/10/1996

NO subject is more guaranteed to arouse the ire of European industry than whether governments should be allowed to prop up ailing businesses with hand-outs from treasury coffers.

Passions are equally inflamed on both sides of the argument whenever the European Commission announces its decision on a particularly controversial case.

It is a debate which pitches those who believe that governments have a duty to intervene in support of key industries in their hour of need against those who argue that such injections of taxpayers' cash fly in the face of the fundamental principle of the single market - that of the level playing-field.

The EU has long acknowledged that the answer to this question is not always cut and dried. That is why, despite a general ban on the payment of such subsidies, separate codes exist to govern how and when aid might be paid in particular sectors.

But in too many cases the rules are ambiguous, allowing firms to win approval for subsidies which others in the same sector regard as an unacceptable breach of EU competition law. The absence of clear cut rules not only encourages firms to exploit the ambiguities in the system to the full, but also makes it harder for the Commission to resist pressure from individual member states for leniency in particular cases to avoid massive job losses.

The growing number of court challenges to decisions on individual state aid cases launched by companies caught in the crossfire is testimony to the urgent need for action to clarify the rules.

Confidence in the single market can only be assured if everyone operating within it is clear about the rules of the game. You cannot have a genuinely level playing-field if the referee's hands are tied by an antiquated rule book. As in any sport, individual players will always be tempted to challenge the umpire's authority while the difference between fair and foul play remains ill-defined.

In today's intensively competitive world, unless there is a shake-up in the rules the current skirmishes over controversial cases are likely to become ever more serious and the battle between the protectionists and free marketeers ever more ugly.

That is why the Irish presidency is right to come forward with proposals now to update the rules. The very success of the single market depends on the outcome of the debate it has sparked.