Blog by Nate Archives: Investment Incentives in the EU (March 14, 2013)

[Did you follow my old blog and loves the dozens of investment incentive posts?  You want them reposted on my new blog?  Sure.  You’re welcome.]

Investment Incentives in the EU: State Aid to the Auto Industry

As part of a book project with Eddy Malesky I did a little poking into financial incentives offered to firms investing in the EU.  The EU governs incentives through “state aid” rules, constraining the ability of wealthier regions from giving aid to firms.  The conventional wisdom is that these rules limit the fiscal bidding wars for firms.

I was surprised to see so many large incentives given over the past 10 years.  Here is a quick list just from the European auto producers over the past 10 years.

  • In 2004 Fiat received grants of €8 million, €33 million, and €47 million for investments in Italy.
  • In Spain, Renault received grants of two grants of €30 and one of €33 for in 2004, €45 million in 2005, €13million and €32 million in 2006, and €17 and €18 million in 2010.
  • Puegeot received a €58 million grant for their investment in Galicia, Spain in 2006.
  • Volvo and Volkswagen got €4 and €9 million incentives for a Spanish investments in 2005 and 2006.
  • BMW received €14 for their investment in the Ober-Österreich region of Austria and €4.9 million for an investment in Warwichshire, UK.
  • In 2008, Renault obtained a comparatively modest €3 million in France and a massive €25.5 million direct grant from Romania.
  • The Czech Republic has gave a €22 million grant and €29.5 million tax exemption to Skoda in 2008 and 2011.
  • Volkswagen and Fiat received €16 million and €26.99 million in grants from Poland
  • Opel grabbed €20 and 22.5 million in grants and tax benefits from Denmark and Hungary in 2010.
  • The Rolls-Royce Group (ok, not all auto production) have racked up a total of €49 million in grants and other incentives in the UK between 2010-2012.

These examples are just from the operations of European auto producers, ignoring the massive incentives given to Ford, GM, Nissan and Toyota, among others.  It also doesn’t address the massive incentives offer to other iconic manufacturing companies such as: Abbott, Alcoa, Amazon, BP, Bridgestone, Caterpillar, Coca-Cola, Cadbury, Caesars Hotel, H&M, Dell, Dupont, Eli Lily, GlaxcoSmithKline, Hewlett-Packard, IBM, Intel, Johnson and Johnson, Merck, Michelin, Pfizer, Pirelli Tyres, Samsung, and Sony.

My favorite ones is cash strapped Greece providing a €28.9 million subsidy for a Formula One race track in 2012.