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As the Hungarian-founded Mathias Corvinus Collegium (MCC) Brussels pointed out in an X post yesterday, the European Commission has attacked Hungarian state subsidies for the construction of the GKN Automotive Hungary Kft. plant. The company is a boost for the economy and creates jobs in the disadvantaged region. However, the EC declared that the government was in breach of EU rules by granting the aid and therefore prohibited it from participating in the investment. The decision could set a dangerous precedent, as the Hungarian government offers significant incentives for foreign auto-industry players in return for setting up camp in the country.
The European Commission said that the Hungarian government’s plan to grant state aid of HUF 15.9 billion (EUR 43.76 million) to GKN Automotive Hungary Kft. (previously Rubin NewCo Kft) was incompatible with EU state aid rules. The company wanted to build a new automotive parts plant in northern Hungary and the government would have supported this investment.
EU state aid rules favor investments that contribute to economic development and employment in a disadvantaged region of the EU. The GKN Automotive Hungary Kft. plant would have met these criteria.
Photo X/GKN Automotive
The Commission’s investigation into the aid for the plant began in October 2022, and raised doubts about its compatibility with the Commission’s regional aid guidelines. The European Commission wanted to know “whether the decision to set up the new plant in Hungary was directly triggered by the Hungarian public support or whether it would have been carried out in that area even without public support.” If the investment would have been made independently of the aid in the location in question, no state aid can be granted under EU rules.
The European Commission concluded that “Hungary failed to prove that the aid was decisive for the beneficiary to locate its investment in Hungary.
The available evidence showed that the beneficiary had decided to invest in Hungary without considering the public support and there was no sufficient evidence that the investment would take place in another location.”
The resolution found that the state aid did not constitute a real incentive for GKN Automotive Hungary Kft. to locate the investment, hence the government cannot grant the company aid of HUF 15.9 billion (EUR 43.76 million) under the common rules.
Commission stops Hungary from supporting a new car parts factory.
The investment has been blocked in line with the EU’s notoriously damaging state aid rules.
Another case of EU interference in national affairs, biased against economic development.https://t.co/iXEtMBcyYj
— MCC Brussels (@MCC_Brussels) June 11, 2024
MCC Brussels had expressed criticism in connection with the European Commission’s decision. “Commission stops Hungary from supporting a new car parts factory.
The investment has been blocked in line with the EU’s notoriously damaging state aid rules.
Another case of EU interference in national affairs, biased against economic development,” reads the think tank’s social media page.
Via ec.europa.eu; Featured image via Facebook/Szijjártó Péter