OK - I admit I'm wrong on the legal aspect. The last time I looked at formal EU texts my eyes recoiled in horror and then my brain went to sleep...
I maintain that in general, there would have to be something of an anomaly for a national Govt to want to subsidise a route to a different country. Then again, PSO routes are essentially for where the unfettered market isn't working as desired anyway, so PSO routes have a higher propensity to be anomalies already. Are the Irish Govt prepared to chuck money at a Waterford-London route ?