Public Support for the European Car Industry: An Integrated Analysis

Abstract

We provide an overview of public support for the European car industry during the past decade. First, we identify the most relevant instruments of public support, and review their economic assessment. The European Commission increasingly recognizes the role of economic analysis in controlling public aid to the car industry, although the degree of economic assessment varies across dierent instruments of public support and individual state aid cases. Moreover, the state aid legislative framework is open to derogations and interpretations. In particular, the Temporary Framework, approved by the Commission to tackle the last …nancial and economic crisis de facto implied a relaxation of the state aid rules and foresaw no formal control of individual state aids. Second, we aim to estimate the amount of public support for European car manu- facturers. Three factors complicate the overall quanti…cation of public support for each instrument: (i) the Commission does not scrutinize, and hence does not quantify all public support measures; (ii) the available information depends on whether the state aid is granted to individual companies or in the form of general schemes; and (iii) the available information depends on whether the aid is granted in the form of a grant, soft loan or guarantee. Our lower bound estimate of state aid suggests that the aid