BRUSSELS (Reuters) - Eight European Union countries and Iceland have written to the European Commission warning that a loosening of state aid rules could trigger a damaging subsidy race both globally and between EU members.
The European Commission has relaxed state aid rules until the end of 2025 to promote investment in a decarbonised economy, although it recognises not all EU countries will be able to subsidise to the same extent as France and Germany.
In their letter, the Czech Republic, Estonia, Finland, Iceland, Ireland, Latvia, Poland, Portugal and Sweden said the new Commission that will start later this year should recognise that a level playing field was at the core of a healthy economy.
"Undertakings need to compete on the market based on their offer and excellence, not with the amount of aid received," said the ministers of the largely pro-free trade group, which includes non-EU Iceland as it is inside the EU single market.
European Commission representatives could not immediately be reached for comment.
State aid has traditionally been focused on the provision of energy supply, roads, railways, housing and general welfare and has not been available for the green and digital transitions.
However, they said, public funds should not crowd out private investment. Any aid should be justified, targeted and proportionate, they said.
It said EU members had seen companies "shopping" for aid to determine where their investments should be, with clear differences in the aid EU members were offering.
The countries said the EU should focus on alternatives, such as simplifying regulations, speeding up permits, better functioning capital markets and free trade and investment agreements.