The European Commission is on the verge of ruling that Government grant support for an expansion at the Republic's biggest private-sector employer is illegal, reports said yesterday.
The Commission has been investigating Government grants pledged for Intel's latest expansion at its Leixlip, Co Kildare site, where it employs over 3,400 people.
The multi-national chip manufacturer is building a new €1.6 billion plant, known as Fab 24.2, there. Tánaiste Mary Harney announced details of the expansion mid-way last year. It was one of the biggest foreign direct investment projects announced in the State in 2004 and will create 400 new jobs when it is fully functioning next year.
However, it emerged yesterday that the Commission is set to rule that the grants, given through State development agency IDA Ireland, constitute state aid, which is forbidden under European law.
The Commission's competition directorate has been investigating the package since last year. EU law only allows governments give grants to aid and attract industrial projects in certain circumstances, such as supporting research and development (R&D).
In many cases, the Commission first has to rule that aid given to industry falls within the terms allowed by European law. Reports yesterday said that in this case, the Commission looked likely to rule against the Intel package.
A spokeswoman for the Department of Enterprise, Trade and Employment said it could not comment on the issue, as it had not received any notice of a ruling. "We understand that it is going through a process with the Commission, and that's all we know at the moment," she said.
The IDA has not revealed the value of the grants paid to the company. However, it is known that the company received over €100 million for a facility that it opened last year. It is not clear what implications it could have for the expansion under way.
A ruling against the aid could have implications for other projects. However, since earlier in the decade the IDA has limited grants for industries in developed regions like the east and south to strategically important investments like Intel.
Support for industries locating in the Border area, midlands and west is more generous as these regions have not benefited as much from the State's economic expansion as the east and south while they have lost many of their traditional employers over the last five years.
The IDA has already warned that under a new EU regime due to be introduced in 2007, it will be harder to use grant aid to attract investment.
