In November In 1994, the parliament prepared for a decisive vote on Finland’s EU membership. Opponents of the membership made marathon speeches in the parliament, the goal of which was to postpone the vote, but in the end, by a vote of 152-45, the parliament approved the EU accession agreement.
For the centre, the issue was difficult and divisive. However, the majority voted in favor of membership, as did the then Minister of the Interior and MP Mauri Pekkarinen. For him, EU membership was supported by two things in particular: security and the internal market.
Whereas the security benefits of EU membership were rather abstract, the internal market promised money and well-being. Finnish companies would get their products to the entire European market at once and would be able to compete equally with European companies.
“When a story was needed to justify why Finland should join the EU, it was a fair internal market. Real, genuine competition that decides the success of companies”, recalls Pekkarinen, current member of the European Parliament.
“It was by far the most important material thing.”
Now the internal market is at risk, he says. The reason is the relaxation of state aid rules in the European Union.
State aid rules are a key part of the fair internal market. Common rules ensure that you do not support unfair competition between companies. Which state has the deepest pockets does not determine which companies will succeed or where investments will go.
This line lasted through Finland’s EU membership, for almost 30 years. Then the corona pandemic hit.
In the spring of 2020, the European Commission, which oversees state aid rules, gave member countries a very free hand to support companies in a crisis.
“Ten billion in direct support, absolutely incomprehensible!”
Soon, Russia invaded Ukraine and began to restrict gas supplies to Europe. Exceptions to state aid rules were continued and expanded so that EU countries could help companies struggling with sharply rising energy costs.
Last spring, state aid rules were changed again, this time so that subsidies can be used to accelerate the green transition of industry. Subsidies can be granted more easily, for example, for hydrogen projects or carbon dioxide recovery.
According to the information provided to HS by the Commission, the EU countries have opened support programs worth about 3,800 billion euros to companies based on exceptions to state aid rules. Of this, 3,000 billion euros are corona subsidies and 750 billion euros are exemptions opened after that. This is the amount that has been available to companies.
The amount of subsidies granted is smaller, just over 1,000 billion euros. However, the Commission’s statistics only extend to the end of 2022, and the amount therefore does not include any subsidies that the member states may have distributed under the exceptions of the green transition.
“During the entire membership, the internal market has not been undermined in a similar way,” says Pekkarinen.
Not at all not all countries support their companies in the same way. By far the biggest supporter is Germany, which has massively supported its industry dependent on Russian natural gas.
However, support is not limited to mitigating the effects of the energy crisis. For example, Pekkarinen takes the subsidies offered by the German government to the chip manufacturer Intel as significant state subsidies. The company is planning a chip factory worth more than 30 billion euros in Magdeburg, and the German government has promised to support the investment with ten billion euros.
“Ten billion in direct support, absolutely incomprehensible!”
In Pekkarinen’s opinion, the exceptions allowed by the Commission have a huge distorting effect.
“It invalidates the relative competitive advantage that Finland has when it is able to offer affordable, clean electricity.”
In his opinion, the situation is harmful to Finland.
“In this race, we are not winners in the long run. The winners are the big member countries and the eastern recipients of EU money.”
Commission has also justified the exemptions of state subsidies by the fact that the EU must respond to the subsidy competition initiated by the United States. President of the United States Joe Biden flagship project Inflation reduction act that is, the IRA offers companies hundreds of billions of dollars in tax and other subsidies for green technology investments.
Pekkarinen thinks the Commission’s argument is bad. He points out that the EU started relaxing state aid rules as early as 2020. The IRA was approved in the US only last year.
“The IRA is actually the result of Europe starting this mess.”
Commission has assured that the relaxation of state aid rules is only temporary. Some of the corona exemptions have already been discontinued. However, exemptions for green transition investments will continue until the end of 2025.
Do you believe that the Commission’s promise will be kept?
“I believe that reason wins here.”
However, the day after the interview, the commission said that it would extend some of the exemptions given under the guise of the energy crisis for half a year. The exemptions were supposed to end at the end of the current year, but at the request of the member countries, the exemptions will be extended until next summer. The Commission justifies the decision by preparing for another crisis winter.
Pekkarinen is not the only one concerned about state subsidies, although in Finland he has been slowly awakened to the situation. Restoring state aid rules to a normal state is also the main goal of the Finnish business community and the government.
This is widely considered to be a very central question for Finland. Pekkarinen even describes the internal market as “sacred”.
Given the current state of the single market, do you regret voting for EU membership?
“I do not regret. It is important that Finland is a member.”
MEP from the center, long-time member of parliament and multiple-time minister.
Born on October 6, 1947 in Kinnula.
Worked as a Member of Parliament between 1979 and 2019.
Member of the European Parliament since 2019.