State aid, cohesion policy and PNRR: (re)thinking industrial policy

State aid, cohesion policy and PNRR: (re)thinking industrial policy

In recent years, state aid spending has been directly correlated to the fiscal capacity of the various European countries. The European Commission has repeatedly stressed that one of the most important determinants of aid expenditure is precisely the Gross Domestic Product. The gap in aid spending has also widened during the pandemic, during which countries with greater economic and fiscal potential have been able to support their economies more easily. Furthermore, a similar dynamic has reverberated at the regional level. In the Italian case, in fact, during the recessions, the Northern Regions managed to support their production system to a greater extent than the Southern Regions, thanks to a greater availability of their own resources.

Today the need to respond to the push that the United States and China are giving to investments, the race for independence and technological sovereignty and the challenges posed by the ecological and digital transitions are leading to a new configuration of the rules on state aid (see Temporary Framework and new general category exemption regulation) which can even more favor asymmetric development paths between northern and southern Europe.

State aid evolution

For over a decade, state aids have disappeared from the public policies of European countries, since on the one hand they were considered to be of little use in supporting strategic sectors, and on the other, harbingers of distortions in the functioning of the common market. More generally, industrial policy has been set aside in favor of horizontal policies, such as incentives for research and innovation activities, as they are deemed more effective and consistent with the need to ensure competition in the common European market. For some years, and more forcefully in recent years, the European Commission has definitively re-launched a European industrial policy, also thanks to the new regime in favor of state aid which, we recall, is allocated by individual Member States in favor of technological sectors deemed strategic. In this area, the European Union does not act alone.

For years, China has set up a powerful industrial policy aimed at making itself autonomous from the West in high-tech sectors, such as the case of semiconductors, for example. The Biden Administration recently did the same in the United States, promulgating measures aimed at supporting the chip production chain in the country.

What is the relationship with cohesion policy and the PNRR?

It is necessary to reflect whether and how the political, economic and regulatory levers used to promote greater competitiveness of European companies risk limiting the effects of cohesion policy, also contradicting the cross-cutting objectives of the recovery and resilience mechanism, it is in other words, to promote homogenous growth and bridge development gaps. available under the “Next Generation – EU” (NGEU) program - represent a solid basis for allowing a relaunch of investments in southern Italy, on the other hand, there is no doubt that the new European industrial policy can displace cohesion policy by favoring greater concentration of economic activity, driven as mentioned, by the growing centralizing power inherent in new technologies and by the propensity towards agglomeration which, due to endogenous characteristics, have a greater endowment of knowledge and qualified human capital.

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