Taranto: The rules deciding whether a government may put public money into a failing company expire on the last day of December, and the replacement now being drafted would do something the current text has forbidden since 2014. It would let steelmakers apply.
The Commission opened consultation on a draft revision of its guidelines on state aid for rescuing and restructuring non-financial undertakings in difficulty in late July, with comments due by 4 September. Adoption is planned before the end of the year, which is tight but not unusual for a file whose deadline is set by the expiry of the instrument it replaces. The current guidelines date from 2014 and have already been prolonged once.
Rescue and restructuring aid is the most grudgingly permitted category in the whole state aid architecture, and for good reason. Money given to a company that cannot survive on its own distorts competition in the most direct way available, by keeping capacity in the market that the market has decided should leave. The guidelines have therefore always been built around constraints rather than permissions. Aid must be temporary and reversible. There must be a credible restructuring plan leading to long-term viability. The beneficiary and its owners must contribute a substantial share of the cost themselves. Compensatory measures, usually divestments or capacity reductions, must offset the distortion. And the one-time, last-time principle bars a second rescue within ten years, so that the instrument cannot become a subscription.
The exclusion of the steel and coal sectors was a deliberate legacy of a period in which European steel restructuring consumed vast quantities of national aid to very little effect. Lifting it is a considered reversal, and the draft justifies it on the basis that the sector now faces pressures, energy costs and global overcapacity among them, that are not of any individual firm’s making. Whether that reasoning survives contact with the compensatory-measures requirement is the interesting question. A plant rescued on condition that it reduces capacity is a plant rescued into a smaller version of its problem, and the political constituency for rescue is rarely enthusiastic about that half of the bargain.
The second substantive change is narrower and points in a different direction. The draft would soften the test by which a company is classified as an undertaking in difficulty, specifically for innovative start-ups. The existing test relies heavily on accumulated losses measured against subscribed capital, an accounting signal that describes a mature company in trouble reasonably well and describes a venture-funded firm three years from revenue very badly. Under the current rules such firms are technically in difficulty and therefore ineligible for most other categories of aid, which has been a persistent irritant in the growth financing debate.
Taken together the two changes point the same way, toward a state aid framework more willing to bend around industrial policy objectives than the one drafted a decade ago. That direction is not confined to this file. It runs through the clean industrial deal state aid framework and through the wider review of the block exemption regulation, and it reflects a Commission that has decided the greater risk now lies in doing too little rather than too much.
What the guidelines cannot do is change the arithmetic that has always governed rescue aid. Somebody has to believe the restructuring plan. Rules written in one city do not make a plant viable in another.
