Italy points to “illegal state aid” as Embraco announces relocation to Slovakia

The decision to shift production follows in the footsteps of US conglomerate Honeywell, which reportedly also plans to close its Italian plant and move to Slovakia.

Embraco plant in Spišská Nová VesEmbraco plant in Spišská Nová Ves (Source: TASR)

Slovakia has become involved in the Italian election campaign. Following the information that Embraco plans to shift production to the country, the Italian industry minister claimed that European Union rules are helping less wealthy nations swipe jobs from their bigger partners, the Reuters newswire reported.

Embraco, a Brazil-based firm controlled by US domestic-appliance giant Whirlpool, has announced it will close a factory in northern Italy that makes compressors for fridges, at a cost of 497 jobs, and relocate to eastern Europe.

Confirmation of the move came on February 19, less than two weeks before a March 4 election, and was seized on by opposition parties like the far-right League, which have long blamed the EU for Italy’s many economic woes, Reuters reported.

Funds for luring multinational operations?

In an effort to halt the relocation, Italy’s Industry Minister Carlo Calenda flew to Brussels to try to persuade European Commissioner for Competition Margrethe Vestager to declare Slovak enticements to Embraco as illegal state aid.

“There is a clear issue of the system not working as it should,” Calenda told reporters after his meeting, as quoted by Reuters.

Smaller economies could offer lower operating and labour costs than bigger ones because they receive EU economic aid, he added.

“It is one thing to compete with France and Germany or Spain, with levels of taxation that are different but don’t depend on the level of development,” Calenda said, as quoted by Reuters. “It is another thing to compete with those who have much lower cost structures.”

Italy says Slovakia is set to receive €20 billion in EU structural funds between 2014 and 2020 to stimulate its economy, which in turn helps it lure multinational operations.

Vestager is due to address the issue at a news conference on February 21, Calenda said.

More companies to come

Embraco’s planned relocation follows in the footsteps of other firms that have decided to quit Italy to cut costs, Reuters wrote. This includes US conglomerate Honeywell, which has said it will close its Atessa factory in Italy and, like Embraco, move to Slovakia.

The tax wedge, which measures the gap between what employers take home in pay and what it costs to employ them, is 47.8 percent in Italy against 41.5 percent in Slovakia, according to the Organization for Economic Cooperation and Development.

Businesses in Italy say suffocating bureaucracy and a lethargic legal system also deter investors, as reported by Reuters.

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