What is European Union state aid - and why it is threatening to derail Brexit negotiations?
EU rebuffs eleventh hour UK proposal on state subsidies
The European Union has rejected a pitch by Boris Johnson to end the Brexit deadlock with a set of proposals limiting state aid to British companies.
The UK made a last-minute decision to hand over five new proposals “in a bid end months of stalemate”, but were “rebuffed” by EU negotiator Michel Barnier, the Daily Express says.
A Brussels source told The Guardian that Johnson offered to lay out a series of “principles” on controlling state subsidies as part of an effort to end the logjam over what has become the “most contentious of the outstanding issues” in the negotiations.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
What are EU state aid rules?
State aid rules are set of laws dictating how governments can subsidise businesses.
State aid takes the form of state-backed financial assistance given to private companies, either in the form of direct cash grants or indirect aid such as tax credits, in a manner which could distort market competition.
The EU enforces rules which state that member countries of the bloc are allowed to provide state aid only with approval from the European Commission. But EU rules do not allow governments to give money to save failing companies, for example companies that made recurrent losses in recent years.
Why is it a Brexit sticking point?
Throughout negotiations, the EU has “pushed for the UK to accept the bloc’s state aid rules”, which “do not allow unfair subsidies to be granted”, The Guardian says. But Brussels eventually “made a major concession during the summer, dropping its demand that Britain should continue to follow” its rules directly, The Irish Times adds.
Instead, the EU is now asking the UK to lay out what its state aid rules will look like after 31 December, when the Brexit transition period officially comes to an end.
The bloc also wants London to “outline the terms on which an independent, domestic regulator would operate, and to agree a robust dispute-resolution mechanism with the EU” in the case of allegations of unfair market competition, the paper adds.
This has become a major point of contention, with EU officials warning that any agreement on managing state aid would need to be taken “at the highest level” because it clashes with the bloc’s original trade proposals, The Guardian reports.
Will there be a breakthrough?
UK ministers last week told The Times that they “believe that a deal can be reached on state aid” in which Britain would agree to meet some “baseline rules” over its use. Chancellor Rishi Sunak also thinks that Britain is “likely to get a deal and has been working on proposals for Britain’s post-Brexit state aid regime”, the paper adds.
But while the UK is looking to enter intense talks to seal a deal by the 15 October EU summit, the EU has warned that this will only happen if there is significant movement on the part of the UK.
If Britain does not move towards the EU’s position on state aid, there will be “no deal and the end of the transition period will bring serious disruption to the British economy”, The Irish Times says.
“It will hurt EU member states too, including Ireland, but the biggest cost will be borne by Britain, where a no-deal outcome would hurt the parts of the economy which have been least affected by coronavirus,” the paper adds.
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
-
Today's political cartoons - December 20, 2024
Cartoons Friday's cartoons - founding fathers, old news, and more
By The Week US Published
-
Parker Palm Springs review: decadence in the California desert
The Week Recommends This over-the-top hotel is a mid-century modern gem
By Catherine Garcia, The Week US Published
-
The real story behind the Stanford Prison Experiment
The Explainer 'Everything you think you know is wrong' about Philip Zimbardo's infamous prison simulation
By Tess Foley-Cox Published
-
Will Starmer's Brexit reset work?
Today's Big Question PM will have to tread a fine line to keep Leavers on side as leaks suggest EU's 'tough red lines' in trade talks next year
By The Week UK Published
-
John Prescott: was he Labour's last link to the working class?
Today's Big Quesiton 'A total one-off': tributes have poured in for the former deputy PM and trade unionist
By Harriet Marsden, The Week UK Published
-
Last hopes for justice for UK's nuclear test veterans
Under the Radar Thousands of ex-service personnel say their lives have been blighted by aggressive cancers and genetic mutations
By Sorcha Bradley, The Week UK Published
-
Will Donald Trump wreck the Brexit deal?
Today's Big Question President-elect's victory could help UK's reset with the EU, but a free-trade agreement with the US to dodge his threatened tariffs could hinder it
By Harriet Marsden, The Week UK Published
-
What is the next Tory leader up against?
Today's Big Question Kemi Badenoch or Robert Jenrick will have to unify warring factions and win back disillusioned voters – without alienating the centre ground
By Harriet Marsden, The Week UK Published
-
Was Georgia's election stolen?
Today's Big Question The incumbent Georgian Dream party seized a majority in the disputed poll, defying predictions
By Richard Windsor, The Week UK Published
-
Moldova backs joining EU in close vote marred by Russia
Speed Read The country's president was also pushed into a runoff election
By Peter Weber, The Week US Published
-
What is Lammy hoping to achieve in China?
Today's Big Question Foreign secretary heads to Beijing as Labour seeks cooperation on global challenges and courts opportunities for trade and investment
By Harriet Marsden, The Week UK Published