EU clears German industrial aid

At Slovalco, Slovakia's only aluminium smelter, the promise from government was presented as a rescue of last resort. Nearly €470m would be found between now and 2030 to help cover electricity costs and keep the furnaces lit (Denník E). Then Germany arrived with a much bigger version of the same story.

On 8 July, the European Commission approved an expansion of Berlin's electricity-price compensation scheme. The programme pays energy-intensive factories back for the carbon costs that electricity producers pass through in power prices. About 20 more sectors, from glass to batteries, can now claim support, while companies already covered will get slightly more generous relief (Spiegel, BBH Blog).

It was the second German expansion in a matter of weeks. In June, Brussels also allowed Germany to combine this compensation with a separate industrial electricity programme, adding about €1bn in extra budget costs (Zeit).

The legal basis is not the hard part. Article 107 TFEU generally bans state aid that gives firms in one member state an unfair advantage, but it also allows exceptions where intervention prevents a worse outcome. In this case, the argument is that without compensation, factories may leave Europe altogether to escape carbon costs. The Commission accepted that argument.

The harder question is what happens when the same EU rulebook is applied to countries with very different pockets.

How carbon costs crack the single market

The mechanism is simple enough. Under the EU's Emissions Trading System, power plants buy permits for the carbon they emit. They pass that cost through into electricity prices. A factory that uses large amounts of electricity can therefore face higher costs even if its own production process is not directly emitting the carbon in question.

Governments then collect billions by auctioning those permits. EU rules allow them to recycle some of that money back to exposed industries, cushioning the blow of higher electricity prices.

That discretion is where the single market starts to fray. Germany plans to spend €2.9bn on industrial electricity compensation in 2026, about 67% of its projected €4.3bn in ETS auction revenue (Ariadne). France spent 44% of its auction revenue on the same purpose, Belgium 33%, and Slovakia roughly 5% (Aktuality).

On paper, every government has the same option. In practice, Germany's manufacturing base gives it a larger auction pot, while its fiscal position gives it more room to spend the money. A government already borrowing heavily to keep ordinary spending going cannot match that, even when Brussels says the door is open.

For Irish readers, the issue will have a familiar ring. EU rules often look neutral until they meet the uneven fiscal reality of member states. The question is not whether Berlin has found a loophole. It is whether a subsidy that is lawful in Brussels still leaves smaller or weaker economies competing on anything like equal terms.

The factories that feel the difference

The gap becomes visible on the factory floor. In Romania, Dacia's chief executive said the country has Europe's highest industrial energy price, linking cost uncertainty to a 64% fall in investment and almost a thousand fewer employees in a single year (Ziarul Financiar). In Poland, industry estimates put all-in energy costs for the largest industrial users at about 170 EUR/MWh, roughly 45% above the EU average, with warnings of annual manufacturing output losses running into billions of zloty (WP).

There is a limit to what those comparisons can prove. No public dataset shows what a subsidised German glass plant or an uncompensated Polish steelworks actually pays once national relief, taxes, network charges and hedging contracts are all counted. Eurostat publishes non-household electricity prices, but the final bill is built from layers that no single table captures.

Even so, the pattern is hard to miss. Countries with healthier public finances can absorb more of the carbon-transition cost for their industries. Countries with deep deficits cannot. Romania's deficit reached 9.3% of GDP in 2024, according to HotNews, leaving Bucharest with far less room to follow Berlin.

The Commission has not broken the single market. But by approving national aid at this scale without a common floor, it is allowing the green transition to become a test of government balance sheets as much as industrial efficiency. The smelter in Slovakia has its lifeline. For factories in member states that cannot write those cheques, Brussels has not yet offered a convincing answer.