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Date: 21 July 2001
On the 19 July 2001 the European Commission adopted its Ninth Survey on State Aid (COM (2001)403 final) and unveiled a new State Aid Scoreboard. Following on from the launch in March 2001 of the State Aid Register these developments highlighted a new impetus to reduce overall state aid levels in the EU Member States through a process of transparency and peer review.
Background
Aid granted by an EU Member State to a commercial enterprise (public or private) or to a region or economic sector in that country (such as shipbuilding, textiles, railways, air transport, coal mining, steel production, fisheries, agriculture, financial sector, motor vehicles, tourism etc), which distorts competition within the EU, is deemed illegal by the Treaty establishing the European Community. Article 87(1) of that Treaty says:
Save as otherwise provided in this Treaty, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, insofar as it affects trade between Member States, be incompatible with the common market.
While recipients of state aid could well argue that such aid is necessary for the survival of an enterprise or region and, in particular, for the maintenance of employment or even perceived national interest, it is argued that, overall, the competitiveness of the European economy is enhanced when state aid is not employed to prevent inevitable and necessary economic restructuring. Furthermore, it is unfair for companies that do not receive state aid to have to compete against companies which do.
As the European Commissioner with responsibility for Competition, Mario Monti, said in a speech in March 2000:
We have learnt from history that distortion or restriction of competition has never done any good. Neither large-scale subsidisation of companies or industries nor the control of innovative growth markets by individual companies can lay the necessary foundations for dynamic development and future employment. Competition is the driving force behind dynamism and innovation. Subsidies distort it, and only delay the necessary structural change. Moreover, subsidies granted by individual Member States or regions are simply not compatible with increasingly integrated markets
Nevertheless, it is accepted within the EU that there are circumstances when some form of state aid is acceptable. Article 87(2) outlines cases in which state aid is allowed, or may be considered acceptable in certain circumstances:
aid having a social character, granted to individual consumers, provided that such aid is granted without discrimination related to the origin of the products concerned;
- aid to make good the damage caused by natural disasters or exceptional occurrences
- aid granted to the economy of certain areas of the Federal Republic of Germany affected by the division of Germany, insofar as such aid is required in order to compensate for the economic disadvantages caused by that division.
- aid to promote the economic development of areas where the standard of living is abnormally low or where there is serious underemployment;
- aid to promote the execution of an important project of common European interest or to remedy a serious disturbance in the economy of a Member State;
- aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest;
- aid to promote culture and heritage conservation where such aid does not affect trading conditions and competition in the Community to an extent that is contrary to the common interest;
- such other categories of aid as may be specified by decision of the Council acting by a qualified majority on a proposal from the Commission.
Member States must submit details of state aid schemes to the European Commision: this, and any subsequent European Commission response, is covered by Article 88 of the EC Treaty:
The Commission shall, in cooperation with Member States, keep under constant review all systems of aid existing in those States. It shall propose to the latter any appropriate measures required by the progressive development or by the functioning of the common market.
If, after giving notice to the parties concerned to submit their comments, the Commission finds that aid granted by a State or through State resources is not compatible with the common market having regard to Article 87, or that such aid is being misused, it shall decide that the State concerned shall abolish or alter such aid within a period of time to be determined by the Commission.
If the State concerned does not comply with this decision within the prescribed time, the Commission or any other interested State may, in derogation from the provisions of Articles 226 and 227, refer the matter to the Court of Justice direct.
On application by a Member State, the Council may, acting unanimously, decide that aid which that State is granting or intends to grant shall be considered to be compatible with the common market, in derogation from the provisions of Article 87 or from the regulations provided for in Article 89, if such a decision is justified by exceptional circumstances. If, as regards the aid in question, the Commission has already initiated the procedure provided for in the first subparagraph of this paragraph, the fact that the State concerned has made its application to the Council shall have the effect of suspending that procedure until the Council has made its attitude known.
If, however, the Council has not made its attitude known within three months of the said application being made, the Commission shall give its decision on the case.
The Commission shall be informed, in sufficient time to enable it to submit its comments, of any plans to grant or alter aid. If it considers that any such plan is not compatible with the common market having regard to Article 87, it shall without delay initiate the procedure provided for in paragraph 2. The Member State concerned shall not put its proposed measures into effect until this procedure has resulted in a final decision.
For many years the European Commission, as part of its objective of improving the competitiveness of the European economy and of creating a Single Market, has been concerned about the levels of state aid existing in the EU. The latest figures published in the Ninth Survey on State Aid says that annual state aid in the period 1997-1999 was on average €90bn across the EU. This is down from an annual average of €102bn in the period 1995-1997, but is still considered to be far too high.
In the Presidency Conclusions adopted during the European Council in Stockholm in March 2001 it was said:
The level of state aids in the European Union must be reduced and the system made more transparent.
To that effect:
- the Council and the European Parliament are invited to adopt procurement rules before the end of the year;
- Member States should demonstrate a downward trend in State aid in relation to GDP by 2003, taking into account the need to redirect aid toward horizontal objectives of common interest, including cohesion objectives;
- the Commission will ensure that a publicly accessible State aids register and Scoreboard are available on line by July 2001 and will clarify how state aid rules will be applied to measures designed to promote risk capital to improve the financial environment for SMEs
Current European Commission priorities in the area of state aids
The Ninth Survey on State Aid (COM (2001)403) published in July 2001 says that the European Commission's current priorities in the area of state aid policy are:
- to increase transparency (through such measures as the new State Aid Register and State Aid Scoreboard, as well as the annual survey on state aid)
- to modernise the state aid control rules (revision of group exemptions, for example)
- enforcing state aid effectively outside the EU (primarily through evaluation of state aid rules in the countries currently negotiating to join the EU, but including tracking developments in other countries)
- faster recovery of illegal aid
Further details of the information contained in the Ninth Survey on State Aids is available. To follow the progress of the Communication through the policy making process and to find the reaction of the EU Institutions use PreLex
State Aid Register
This was the first of the two 'transparency instruments' launched by the European Commission during 2001 in the area of state aid. The Register provides details on state aid cases dealt with by the European Commission. Part I presents summary information in tabulated form of state aid cases brought since 1 January 2000 broken down by Member State. Part II provides detailed information on Commission Decisions in state aid cases registered since January 2000. It is possible to search for types of Decisions (by such criteria as case number, aid instrument, case type, decision type, EU legal base, Member State, region/province, primary objective, sector/activity.
It is planned to extend the Register to cover 1999 Decisions and to allow access to the most recent Commission decisions. Further details of the Register are available.
State Aid Scoreboard
The second of the 'transparency instruments' launched by the European Commission during 2001 in the area of state aid was the State Aid Scoreboard (COM(2001)412). The Scoreboard is a source of information on the state aid situation in the EU and on the state aid control activities of the European Commission. The Scoreboard is divided into five sections:
- an overview of state aid in the EU over the last ten years
- a forum for Member States to present their own state aid policy
- the Member States' compliance with state aid rules
- trends in current state aid poliucy
- the effects of state aid on the internal market
Further details of the Scoreboard are available. To follow the reaction of the other EU Institutions to this Communication use PreLex.
Further information within European Sources Online:
European Sources Online: Topic Guides
- The competition policy of the European Union
European Sources Online: European Voice
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Further information can be seen in these external links:
(long-term access cannot be guaranteed)
European Commission: DG Competition
European Commission: DG Press and Communication
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Recent Press Releases, and related material, on competition issues (including individual state aid decisions) can be accessed on RAPID. A selection of the most important state aid Press Releases issued recently include: |
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30.03.00: |
The Community's state aid policy (SPEECH/00/113) |
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11.04.00: |
State aid still too high despite decrease, says annual survey (IP/00/367) |
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13.06.00: |
Commission extends the period of validity of the existing car framework State aid rules to the automobile industry (IP/00/604) |
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28.06.00: |
Extension of the validity of guidelines on state aid for environmental protection (IP/00/676) |
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26.07.00: |
Commission relaxes its policy on state aid in the outermost regions (IP/00/845) |
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06.12.00: |
Commission adopts group exemptions for State aid (IP/00/1415) |
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21.12.00: |
Commission adopts report on application of guidelines concerning state aid for employment (IP/00/1520) |
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21.12.00: |
Commission adopts new Community guidelines on state aid for environmental protection (IP/00/1519 + MEMO/00/125) |
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22.03.01 |
Commission unveils EU Register on State aid (IP/01/430) |
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27.03.01: |
Commission adopts its report on the implementation in 2000 of the Steel Aid Code (IP/01/445) |
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23.05.01: |
Commission adopts Communication on state aid and risk capital (IP/01/739) |
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11.07.01: |
Commission launches large scale state aid investigation into business taxation schemes (IP/01/982) |
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17.07.01: |
Commission unveil EU scoreboard on State aid (IP/01/1032) |
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17.07.01: |
State aid movement in the right direction (IP/01/1033) |
European Commission: DG Press and Communication: SCADPLUS: Union Policies
European Commission: UK Representation
European Parliament: Fact Sheets
European Court of Justice
World Trade Organisation
Organisation for Economic Co-operation and Development
United Kingdom: House of Commons: Environment, Transport and Regional Affairs Committee
FT.com
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Homepage |
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22.05.01: |
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06.06.01: |
Brussels boost for business start-up scheme |
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13.06.01: |
Brussels examines EdF for state aid |
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06.07.01: |
Brussels urged to crack down on Landesbanken |
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10.07.01: |
Monti briefs Brown on Brussels moves to tighten state aid rules |
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20.07.01: |
Government subsidies declining across Europe |
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21.07.01: |
Sabena is staying in the air but its course is far from certain: Cash injections aside, carrier's task is daunting |
Further and subsequent information on the subject of this In Focus can be found by an 'Advanced Search' in European Sources Online by inserting 'State aid' or 'State aids' in the keyword field.
Ian Thomson
Executive Editor, European Sources Online
Compiled: 21 July 2001
On the 19 July 2001 the European Commission adopted its Ninth Survey on State Aid (COM (2001)403 final) and unveiled a new State Aid Scoreboard.
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