State subsidies are a delicate matter: they are normally frowned upon by competition authorities due to their distorting effect. Even if approved, they can come into play only to a limited extent. For European law compliance, this is capped at a maximum of 30-40% of the total project volume. This means companies must come up with at 60-70% of the funding on their own.

But is there a way around this restriction, a loophole of a sort? Enter a special EU tool called IPCEI, short for Important Project of Common European Interest.

“It has been called the ‘Rolls-Royce of EU state subsidies’ for a reason,” Géza Kovács-Dobák, partner and IPCEI expert at Investment and Business Services Hungary (IBSH), tells the Budapest Business Journal. “IPCEI is not an intensity-based subsidy tool; it is meant to address a finance gap. This implies that 70% or more of financing needs can be covered by it, which makes it absolutely unique on the subsidy landscape.”

In other regions of the world, things work differently. Take China’s unscrupulous subsidy framework or the fully market-driven VC finance available in the United States. In the EU, the IPCEI is currently the best, underrated shot for companies to maximize state funding for their operations.

The key term to watch out for here is “common European interest.” That’s what applicants need to supply evidence of to get the green light. Eligibility is well defined: the program aims to help the European Commission and Member States build European value chains in selected sectors. Bottom line: trans-European collaboration is expected to be achieved by building consortia that use breakthrough technologies and can access state subsidies with EC approval.

One specialty of the instrument is that it can fund not only research and development, but also “first industrial deployment,” to use the EU’s official term.

Zsombor Tóth, CEO and partner at IBSH.

Crucial Bridging

“This is super critical from the aspect of European competitiveness since otherwise no funding is available to bridge a crucial phase of a product lifecycle: grants either target R&D, which doesn’t include prototype manufacturing, or investment that, in turn, presupposes active production. The transitionary period between research and mass production cries for outside help, and here it is,” Kovács-Dobák adds.

In Western Europe, stakeholders have become increasingly aware of the power of IPCEI, which has mobilized EUR 100 billion of public and private investments to date.

“You need to underpin your application with commitments that your effort would serve common European interests; that’s what the commission wants to see,” Zsombor Tóth, CEO and partner at IBSH, notes. Again, the scope of IPCEI can’t be a simple project; it must fit into an entire EU market industry value chain.

In practice, this means member states can issue an agreed call for expressions of interest for the IPCEI-targeted industry and then grant funds from their respective budgets to the beneficiaries. The idea is that the EC and the member states jointly drive this effort and thus push large-scale, cross-border collaboration forward.

“Any given industry’s development is therefore boosted in different EU countries with the aim of finding synergies and evolving into potential industry unicorns,” Tóth says.

As Kovács-Dobák notes, the evergreen question for export-savvy Hungarian firms is how to position themselves abroad. Being part of the IPCEI ecosystem helps tremendously, since businesses can gain insight into what foreign counterparts in the same industry are doing, which can also inspire them to shape their own plans.

The fact that IPCEIs can be granted from national budgets highlights the key role of governments and the need for their openness. As the experts stress to the BBJ, in Western European countries, allocating funding for this purpose has become business as usual. However, in the CEE region, an ad hoc approach has prevailed.

Deeper Integration

“We need predictability here, but it won’t happen without the government’s active involvement,” Kovács-Dobák says. He believes the extensive, targeted use of IPCEI could be key to Hungary’s deeper integration into the EU market.

“We somehow need to motivate stakeholders to participate and make the effort for that very reason and make them aware of the potential IPCEI has. It won’t happen overnight, though,” Tóth admits.

Lawmakers at the European level have taken the first step to boost awareness. The upcoming Multiannual Financial Framework (MFF), the EU’s seven-year budget plan, proposes a new European Competitiveness Fund that aims to subsidize industry from direct EU funds, and IPCEIs can benefit from those sources. And governments that have the ability and willingness to plan well ahead should be factoring that in already.

“Up till now, IPCEI has not been a priority for the Hungarian government, to say the least. It’s high time that this approach changes,” Kovács-Dobák says.

Indeed, a total mind shift is long overdue, both from the administration and private sector stakeholders. As to the latter, SMEs might find it harder to benefit from the scheme, but certain rules expressly favor them.

“Even they can find their way, provided they are technology- and research-driven organizations that seek opportunities to scale,” Kovács-Dobák concludes.

This article was first published in the Budapest Business Journal print issue of October 30, 2026.