The European Commission is investigating whether Slovakia’s plans to provide €125 million to the British carmaker, Jaguar Land Rover (JLR) that plans to build its new plant near Nitra, are in line with the European Union’s rules on regional aid.
Though it is good when public investments stimulate economic growth in member states, it is necessary to avoid harmful competition between them, said the European Commissioner for Competition Policy Margrethe Vestager.
“The Commission will thoroughly investigate whether the planned support from the Slovak Republic is really necessary for Jaguar Land Rover to place its investment in Nitra, whether this aid is limited to the minimum necessary extent, whether it does not distort competition, or damage cohesion in the EU,” Vestager said, as quoted by the SITA newswire.
JLR plans to invest €1.4 billion into its new plant near Nitra and employ about 3,000 people. The construction works started last autumn and are expected to be completed at the end of 2018. In the first phase, JLR should produce about 150,000 cars a year.
Slovakia notified the EC of its intention to provide the carmaker with state support amounting to €125 million, which is the maximum amount of aid that may be awarded for such a project, last May. The EC however casts doubt on whether in the current phase such a measure stimulates private investments. It will look at whether the decision of Jaguar Land Rover to invest in Slovakia was impacted only by the amount of the investment aid, SITA reported.
Moreover, it will also scrutinise the use of a further €0.5 billion the Slovak government spent on necessary investments linked to the plant in Nitra, like the purchase of land, the construction of roads and the transhipment point, the Sme daily reported.
If the EC decides that JLR should receive less money or that the investments paid from the state budget were not justified, the government will have talks with the carmaker about its stay in Slovakia, Sme wrote.
Economy Minister Peter Žiga (Smer) considers the steps of the EC legitimate.
“It will check whether or not some competitiveness principle was violated and whether state aid was necessary and whether the investment aid made Jaguar opt for Slovakia rather than Mexico,” Žiga said, as quoted by SITA, adding that it is not complicated.
He also promised to cooperate with the EC and provide all necessary documents.
JLR’s spokesperson, Lisa Palmer, said they expected the investigation due to the amount of the state aid. She also said they are ready to cooperate with the EC closely, Sme wrote.
The investigation will now last several months and may have several outcomes. If the investment aid is acceptable, JLR will continue with its activities in Slovakia. If it decides that the carmaker should receive less money, the government and JLR will have to discuss what to do next. The most pessimistic scenario is that they would not make a deal, the contract would be terminated and JLR would leave Slovakia, Sme wrote.
If the EC claims the governmental investments linked to JLR’s arrival was also the state aid, the government would probably have to claim the money from the carmaker, according to the daily.
25. May 2017 at 6:24 | Compiled by Spectator staff