The ‘Binary’ Nature of the Economics of State Aid

Abstract:
This article reviews the application of the balancing test to determine the compatibility of state aid with the internal market. On the basis of the decisional practice of the Commission so far, this article puts forth two propositions. First, the balancing test does not attempt to reduce the impact of state aid to a single measure of its net effect. Second, the balancing test can better be described as a series of questions, which on the positive side the answers must be yes and on the negative side the answers must be no. This is a ‘binary’ method of assessing the compatibility of state aid.