The Government believes Intel will go ahead with its expansion of its Leixlip plant despite the forced withdrawal of a grant following pressure from the EU Commission, the Minister for Enterprise Micheál Martin said today.
The Government u-turn on support for the construction of the €1.6 billion Fab24.2 facility comes in the wake of the Commission decision to open a formal inquiry into the grant which could take up to 18 months to complete. There are clear indications from the Commission that the aid will not be approved at the end of that process.
Mr Martin said the decision not to grant the aid had been taken in agreement with the computer company and the IDA.
However Mr Martin is confident that the prohibition of aid will not halt the project. Mr Martin said work on the project has already commenced at the Leixlip site, and added "it's our understanding at this time (that the project), will continue to plan."
The Minister said that he was "disappointed" with the outcome to the aid notification as the project will create new jobs and will have generate significant benefits for the local economy.
"As such, I would have thought it is precisely the type of project that EU Regional Aid provisions, which, of course, we are fully entitled to avail of, were intended to encourage.
"It seems inconceivable that an investment of this size by such a company would not involve substantial innovation, both process and product innovation, and a significant amount of this innovative activity will occur in Leixlip.
"Indeed, in all of my discussions on this case, I have emphasised the vital importance of attracting this type of investment in leading-edge technologies to the EU if we are to make progress in relation to the Lisbon Agenda, which President Barroso has so strongly supported since becoming President of the Commission."
A spokesman for Intel said: "Obviously we're disappointed. We'll factor this development into future plans for increasing investment in Ireland."
Intel makes about 80 per cent of the microprocessors which provide the brains of Windows PCs, with the rest made by Advanced Micro Devices.
EU rules do not preclude State aid for the provision of services of general economic interest or regional development provided the grants are notified and cleared by Brussels.
The decision indicates the harder line being followed in Brussels under new competition commissioner, Neelie Kroes.
Mr Martin stated that Ireland was the only location in the EU considered by Intel for this investment. "Had Ireland not succeeded in winning the project, it would have been lost to the EU," Mr Martin claimed.
Since 1989 Intel and the Government have invested €5 billion in the Leixlip operation.
Correspondence and high level meetings between the Government and the Commission indicate a simmering row over Ireland's liberal interpretation of State aid which has been successful in attracting foreign investment but has irked other member states.