Von der Leyen II and Ribera I – What is in store for State aid policy?

The new European Commission officially took office on 1 December 2024. After significant political manoeuvring and some last-minute compromises among political groups, Commission President Ursula von der Leyen successfully secured approval for her new College of Commissioners. This marks the end of Margrethe Vestager's tenure, who also oversaw the digital agenda, and ushers in Teresa Ribera as the new Competition Commissioner. 

Ribera holds one of the biggest portfolios within the von der Leyen II Commission (listen to our latest podcast on this nomination here) because she is also the Executive Vice President for a Clean, Just and Competitive Transition. As such, she will be overseeing the work of other Commissioners in charge of energy, environment and climate, a dual role which might be an indication of the sectors that would benefit from her attention and, some may say, get a preferential treatment. 

The von der Leyen II Commission takes office at a time in which Europe’s need for growth is manifest. EU companies face increased challenges resulting from the energy crisis, high production costs and the expensive transition to “greener” business models. At the same time, EU leaders are increasingly concerned about the competition EU businesses face from third countries, with many arguing that public funding and less regulation is helping other economies overtake the EU. 

Following the recommendations outlined in the much-discussed Draghi report published in September 2024 (click here for our previous blogpost), the EU intends to use the upcoming five years to strengthen the EU industry and to ensure that it remains competitive on the global stage including via State aid policy. 

In this blog post, we explore what the von der Leyen II Commission and a DG Competition led by Commissioner Ribera might have in store for State aid enforcement, which industries might benefit from streamlined procedural rules, and how the EU plans to enhance its competitiveness while maintaining a level playing field.

Ribera’s priorities on State aid for the next five years

While there may be political calls from various directions for a more lenient State aid framework that allows for more public spending, it may not be Ribera who will open the floodgates, or at least not in all sectors. 

Strong State aid control to remain the rule …

The mission letter President von der Leyen sent to Ribera is clear in emphasising that public spending will remain subject to strong State aid control. Ribera does not seem to believe in “free for all” State aid. She made clear that State aid should be used only in case of market failures and that the EU should avoid overcompensation as well as “a subsidy race between Member States, because that undermines decades of construction of the single market”.

But that does not mean that nothing will change in the next five years.

Ribera already recognised that State aid has evolved “considerably to align with the EU’s policy objectives, including enabling the green and digital transitions and resilience”. 

It is therefore possible that the Commission will continue to adapt the State aid rulebook so that certain sectors may benefit, if not from a free pass, at least from more lenient or simplified rules – and thus more State aid opportunities. 

… but with (even) more lenient rules for certain chosen sectors …

A first step towards a revised State aid framework could already be presented as part of the upcoming Clean Industrial Deal (CID) – a package expected to be delivered on 26 February 2025. The CID is seen as the Green Deal successor, but it will likely focus more on making the decarbonisation of the EU industry an instrument for increased EU competitiveness rather than an end in itself. 

This gives some further insights into the sectors that will likely be targeted in priority. The three main objectives of the CID are: (i) accelerating further the roll-out of renewable energy generation; (ii) deploying industrial decarbonisation and energy efficiency, in particular for energy-intensive sectors; and (iii) ensuring sufficient manufacturing capacity for clean tech in Europe, especially where there is a risk of such investments being diverted to third countries due to subsidies available there. The CID “should identify priority sectors for lead markets, paving the way for public support mechanisms at EU and national level” in order to “stimulate investment and drive demand for green products”, as recently detailed by the EU Climate Commissioner, Wopke Hoekstra, who will work under the supervision of Ribera. 

So, it seems clear that the Commission will be particularly mindful of enabling speedier and more efficient control for aid measures with a ‘clean’ aspect, whereas ‘clean’ is being interpreted very broadly. 

… with procedural simplification …

State aid procedures can be difficult to navigate for businesses, and the length and complexity of review processes can be a hurdle to the development of EU projects and ultimately the growth of the EU economy. Ribera seems receptive to such arguments, and already announced that “simplifying and speeding up State aid assessment procedures” will be a priority for the years to come.

We heard that a reform of the State aid framework would also draw on lessons from the COVID and energy crises during which the Commission adapted its rules to better help struggling companies. This could suggest more (not so temporary) frameworks for priority sectors with lenient ‘tick the box’ rules.

Simplifying the State aid framework could also benefit the Commission administratively. DG Competition is known to have limited resources and to already struggle to enforce new legislation from the previous mandate. This resource reshuffling impacts all units and may necessitate procedural simplification and a focus on the most distortive types of State aid.

… and for joint financing through IPCEIs and the European Competitiveness Fund

Last but not least, the new Commission wants to increase and reinforce the so-called “Important Projects of Common European Interest” (IPCEIs), notably by making the assessment procedures quicker and easier. IPCEIs enable a group of Member States to come together and devise cross-European funding targeted at specific industries and have in the past been established for e.g. batteries, semiconductors, cloud or hydrogen. While the French Executive Vice President Stéphane Séjourné will lead the work on the set up of new IPCEIs, Ribera will have to make the State aid review of these projects faster and simpler. 

IPCEIs appear as the perfect compromise between State aid sceptics that lament the “deeper pockets” of some Member States, and industrial strategy enthusiasts that want to solve all economic problems with State aid. Ribera said that “[State aid] through cross-border solutions could be better because we could be in a position to create much more in terms of ecosystems and reducing the vulnerabilities in terms of industrial value chains, than just concentrating on who is going to pay more in terms of subsidies.” 

Ribera and Séjourné also confirmed that they are willing to study the proposal made by Draghi to use IPCEIs for innovation in (other) strategic sectors, such as 6G or zero-emission planes 

But that is not all. In order to beef up IPCEIs, von der Leyen promised to put forward a new European Competitiveness Fund in the next EU budget cycle (known as the next multiannual financial framework or MFF). This fund would complement other existing EU funds (many with a sustainable or cohesion aspect).. Séjourné would be in charge of its development, with the support of Ribera who should ensure its “coherence” with State aid policy. Séjourné has outlined three principles that will guide the creation of the European Competitiveness Fund: (i) “Strategic focus” to invest in the development and manufacturing of strategic technologies in Europe, such as artificial intelligence, space, clean tech and biotech; (ii) “Flexibility” to invest “where EU action is most needed and with the most impactful and flexible toolbox” with a view of de-risking private investment too; (iii) “Simplicity and speed” i.e. having fewer programmes but with quicker and easier access to funds.

So, it seems that more support opportunities will arise – or at least get Commission’s support – for businesses active in the sectors considered as strategic.

Key takeaways for business 

The State aid instrument has traditionally been more of an ‘enabling’ instrument than a ‘steering’ one, as initiatives must first come from Member States. But that is not to say that State aid policy cannot steer economic activities in a given direction. Recurring themes in official State aid documents and speeches are clean (aka the new green) – and just – transition, strategic autonomy and simplification. In addition, with the “Green Deal” becoming the “Clean Industrial Deal”, would we see a stronger focus on economic growth, and speedier approval proceedings in State aid policy? Time will tell.

Besides, in light of the geopolitical landscape and EU leaders’ repeated calls for the EU’s strategic autonomy, State aid for strategic industries –flexibly defined and ranging from semiconductors to defence, automotive, tech, AI or even telecoms – always appears possible and benevolence towards State interventionism can be expected. IPCEIs will have a role to play in this. Interestingly, these are also all the sectors which seem to face increased scrutiny under the new Foreign Subsidies Regulation (FSR), confirming the EU’s ambition to create an international level playing field of its home companies. 

Finally, cutting red tape has featured prominently in previous EU mission statements as well – yet, many State aid documents have tended to double in size after revision. Whether Commissioner Ribera will live up to the promise of “simplification” remains to be seen, but some scepticism appears justified.

In conclusion, while we do not foresee a ‘State aid revolution’, European businesses can prepare for a (very much welcome) evolution of State aid instruments in support of key EU sectors, if not in form, then at least in substance.