France's oil tax cut deal with protesting truckers will come under scrutiny from the European Commission as government cash assistance to special sectors is required to comply with strict EU competition rules.
The French face two hurdles. The deal, worth some €3,000 a year per lorry, will face a state aids inquiry by the Competition Directorate, which has been clamping down on day-to-day operational assistance to companies.
And they will also have to win approval from the Internal Market Directorate for a derogation from a 1992 directive which sets the minimum rates of excise to be charged by member states on fuel.
The French excise duty on diesel, at €389 per 1,000 litres, is considerably above the EU minimum duty of €245. The concessions on offer to the truckers, totalling around €50, will not bring it close to the minimum.
But the directive also requires that the excise be levied in a way that will not create distortions in the internal market, and so discrimination in favour of one particular sector - commercial drivers - requires special permission. If the Commission thinks it justified, it may recommend a derogation to ministers, who must agree it unanimously.
France already has such a derogation in place for 2000, extended reluctantly by ministers last December, but on the assurance from the French that they did not want to cut the excise below its current level.
Despite that assurance, Commission sources suggest they may get away with a cut in excise this year, but are likely to face objections for the second part of the package, a further cut next year.
The French will certainly face a requirement from Brussels that any rebates offered to French commercial drivers are also available to their international counterparts.
By comparison, Ireland's excise duty on lorry diesel is €325 per 1,000 litres, close to what the new French rate will be. The British rate is by far the highest in the EU at €797 (€751 for low sulphur fuel). Ireland and France both charge VAT at 21 per cent, while the UK does so at 17.5 per cent.
Yesterday the Commission also made an appeal to OPEC to allow for an increase in production quotas to take some of the pressure off the market.
