The best thing that can be said about the shambles surrounding the grant package for Intel is that it constitutes an economic growing pain. It should come as no surprise that the European Commission wanted to subject to the highest level of scrutiny a plan by what is now its second richest member - in terms of economic output per head - to give more than €50 million to the world's largest computer chip maker.
The Government's decision to withdraw the grant rather than face an 18-month investigation is a tacit acknowledgment that the case for the Republic being allowed to subsidise inward investment, once so compelling, is now much harder to sell. Our prosperity may not be the precise reason for the commission's lack of enthusiasm for the project but it forms the backdrop.
The actual reason advanced by the commission for wanting to review the grant was that Intel already enjoys a dominant position in the European market and that this would be furthered by the proposed State aid. The Government had hoped to rely on a clause incorporated - at its request - into the relevant EU legislation which allows investment under these circumstances when genuinely new technology is involved. It now appears the Government did not believe that this hurdle could be jumped. ...
The most serious, and immediate, threat raised by the commission's stance has thankfully been lifted. Intel has committed itself to completing the €1.6 billion Fab 24-2 project, but has indicated that the new EU aid regime will make further investment less likely.
What holds for Intel no doubt holds for the other large multinationals which are the primary target of the IDA. The agency has made it clear that it does not see the commission's stance as either helpful or logical in the context of the Lisbon agenda. It argues that it puts the European Union as a whole at a disadvantage relative to competitors such as China.
The commission is adamant that its position has not closed the door on further significant inward investment in Ireland. It point out that only grants in excess of €50 million must be referred to it and indeed only one project in the current IDA pipeline falls within its scope. There is also a subtext that the Republic will have to make more sophisticated arguments in seeking to secure commission approval in future. This raises the prospect that the current project might have been passed by the commission had the Government adopted a different tack, although the failure of a ferocious lobbying campaign undertaken by the Government since last summer would tend to suggest otherwise.
Fundamentally, the Intel decision serves to confirm the necessity to transform the economy from one that is dependent on inward investment and manufacturing to one that relies on innovation, especially by internationally focused indigenous firms. This is already established policy and yesterday's events are a reminder of the crucial need to make much more significant progress.
