Commission denies plans to soften-up state aid rules

Date: 10/04/03

By Peter Chapman

THE European Commission has denied claims that it is about to soften its state aid rules for firms operating public services in the EU.

They were responding to a newspaper report which suggested that a forthcoming green paper on "services of general interest" would allow operators in sectors such as post and telecommunications a greater degree of protection from regulators, including competition watchdogs.

Competition spokesman Tilman Lüder emphatically denied this, declaring: "It will be business as usual."

He insisted that the green paper would not affect the substance of state aid rules for firms - whether state-owned or private - which fulfil public services.

Member states, Lüder added, already have a right to meet the costs of such services, provided they do not over-compensatecompanies or subsidise forays into other areas deemed to be part of a competitive market.

The key issue is whether countries have to notify such handouts to the Commission before paying them.

Lüder said the European Court of Justice was likely to rule shortly that compensation to cover the cost of public services, such as supply to rural customers, does not constitute "aid" and that in such cases they would not need to notify the Commission.

He said the Commission had tried-and- tested methods for defining whether governments were overpaying operators in the telecoms sector.

These could be turned into general guidelines if need be, he added.

Meanwhile, an aide to Commission President Romano Prodi described reports in the Financial Times on the subject as "a complete misunderstanding", pointing out that competition and state aid were hardly referred to in the green paper.

Far from trying to weaken the existing regulations, the green paper poses the question of whether there is a need for pan-EU regulators to govern operators in some sectors, she explained.

The paper, due to be unveiled before the summer, would instead focus on the far wider issue of how to improve the EU's hotchpotch legal framework on services of general interest.

It floats the idea of a general EU law - likely to be supported by France - to flesh-out provisions in the Amsterdam Treaty, and to widen safeguards already established in specific sector laws.

Officials say a general law may even be deemed surplus to requirements if the Convention on the future of Europe includes an article on services of general interest in the EU constitution.

Early drafts of the green paper also include a section on the controversial issue of media ownership.

It asks whether EU rules should be introduced to combat media concentration in the hands of moguls, such as Italian premier Silvio Berlusconi.

However, officials said this section could be removed from the final version because the issue is too specific and the EU lacks a legal basis for action in the area.

The European Commission has denied claims that it is about to soften its state aid rules for firms operating public services in the EU.