Annexes to COM(2006)761 - State Aid Scoreboard - autumn 2006 update - - Main contents
Please note
This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2006)761 - State Aid Scoreboard - autumn 2006 update -. |
|---|---|
| document | COM(2006)761  |
| date | December 11, 2006 |
Eight Member States granted aid to the coal sector in 2005: Germany (€ 2.7 billion), Spain (€ 1.1 billion), Poland (€ 219 million), Hungary (€ 38 million), the United Kingdom (€ 37 million), Slovenia (€14 million), Slovakia (€ 2 million) and the Czech Republic (€ 0.3 million). With regard to Germany, the Commission approved the restructuring plan for the period 2003-2005, which foresees a reduction in total aid from € 3.3 billion in 2003 to € 2.7 billion in 2005. For the period 2006-2010, the Commission approved a further restructuring plan which foresees a total amount of aid of some € 12 billion. In December 2005 the Commission also approved the Spanish restructuring plan concerning the period 2003-2005, after having opened an investigation procedure. A new restructuring plan for the period 2006-2010 is currently under investigation. For France, aid measures were approved to cover the costs of closure of the last underground mines which shut in April 2004. For the United Kingdom, the Commission approved an investment aid scheme covering the period 2003-2005 which amounted to just under € 90 million.
Broadly-speaking, coal mining in the EU-10 Member States is more competitive than in the EU-15 Member States. Poland has by far the largest coal industry and produces far more than the other Member States combined. The Commission approved a long term restructuring plan for the period 2004-2010 which also aims at dealing with inherited liabilities of the past. The approved measures for the period 2004-2006 amount to € 1.5 billion. For Hungary, the Commission approved a long term restructuring plan, which contains the granting of production aid, up to the value of €255 million for the period 2004-2010. For the Czech Republic, the Commission approved for the period 2004-2007 aid measures not related to production but to inherited liabilities of the past amounting to € 74 million. With regard to Slovakia, the Commission approved an investment plan for the period 2005-2010 in 2006. State aid for Slovenia has been approved before accession in 2004.
Table 7: State aid to coal mining, 2001 - 2005
[pic]
Source: DG Energy and Transport
In 2005 total aid to the steel sector amounted to €139 million, which was granted by Slovakia as employment aid (€95 million), the United Kingdom as environmental aid (climate change levy - €37 million) and the Czech Republic (€8 million). There is a clear decreasing trend in the aid to the steel sector from an annual average of €426 million in the period 2001-2003 to €378 million in the period 2003-2005. The downward trend can be largely explained by the fact that some Member States (such as France and Sweden) stopped or reduced considerably (the Czech Republic and the United Kingdom) granting State aid after the year 2003 to companies in the steel sector.
State aid to the shipbuilding sector
The amount of State aid to the shipbuilding sector fell from an annual average of €830 million for the period 2001-2003 to €583 million for the period 2003-2005. In 2005, an estimated €264 million was granted to the shipbuilding sector mainly by Germany (28% of the EU total), Poland (17%), the Netherlands (15%) and Italy (11%).
State aid for horizontal objectives
State aid for horizontal objectives, i.e. aid that is not granted to specific sectors, is usually considered as being better suited to address market failures and thus less distortive than sectoral and ad hoc aid. Research and development, safeguarding the environment, energy saving, support to small and medium-sized enterprises, employment creation, the promotion of training and aid for regional economic development are the most prominent horizontal objectives pursued with State aid. Due to data constraints, this section looks at horizontal objectives in the context of total aid less agriculture, fisheries and transport.
In more than half of the EU Member States, more than 90% of all the aid awarded in 2005 was for horizontal objectives
On average, aid earmarked for horizontal objectives, accounted for 84% of total aid less agriculture, fisheries and transport in 2005. The three main horizontal objectives were environment and energy saving (28% of total aid), regional economic development (19%) and R&D (12%) – see Table 8.
The remaining 16% was aid directed at specific sectors: coal (9%), services (2%)[19] and manufacturing (4%) including aid to rescue and restructure ailing firms. In interpreting these figures, however, it is important to bear in mind that some aid measures can not be quantified (see section 1.1 above). Another factor that keeps the volume of sectoral and individual aid artificially low is that Commission decisions which follow an unlawful aid procedure[20] tend to refer to aid that was granted up to several years previously and involve ad hoc awards of aid to individual companies. Although the data for all years are adjusted retrospectively when the Commission takes its decision, the overall level is underestimated.
In thirteen Member States (Belgium, Czech Republic, Denmark, Estonia, Greece, Italy, Latvia, Luxembourg, the Netherlands, Austria, Finland, Sweden and the United Kingdom) more than 90% of all the aid awarded in 2005 was earmarked for horizontal objectives. In another group of six Member States (Germany, France, Ireland, Lithuania, Poland and Slovenia) the share of horizontal aid was between 70% and 90% while in several others the share was significantly lower: Hungary (48%), Cyprus (45%), Portugal (26%) and Malta (3%). The low share of horizontal aid (and thus relatively high share of sectoral aid) in Malta can be explained with a tax relief measure under Business Promotion Act[21], while in Portugal it is due to a large regional aid tax scheme in Madeira which in practice benefits a limited number of sectors. In 2005, Hungary granted sectoral aid mainly through an Investment tax benefit scheme, while Cyprus granted sectoral aid mainly through tax relief under the International Business Enterprises Act.
Large disparities between Member States in the share of aid awarded to various horizontal objectives
When making comparisons between Member States, it is important to bear in mind that aid measures are classified according to their primary objective at the time the aid was approved and not according to the final recipients of the aid. Notwithstanding the measurement difficulties, the data do give an indication as to which horizontal objectives are favoured by Member State (see Table 8). The largest proportion of aid was directed exclusively to the environment and energy saving objectives (28% of the total state aid less agriculture, fisheries and transport), which were extensively supported by Sweden (88% of the total aid in this country), the Netherlands (65%), Germany (47%), Denmark (47%) and Finland (40%). The second most favoured horizontal objective was regional development (19% of total aid), which was mainly supported by Latvia (78% of the total aid in this country), Greece (56%), Slovakia (55%), the Czech Republic (52%) and Lithuania (42%). An additional 12% of the aid went to research and development activities, which was favoured most by Luxembourg (27% of the total aid in this country), the Czech Republic, Austria and Finland (26%), Slovenia (24%), the Netherlands (22%), France and Estonia (21%). Other objectives were supported to a lesser extent: small and medium-sized enterprises (10% of total aid), employment (8%), training (2%) and other horizontal objectives (4%), which include objectives such as commerce and internationalization, innovation, culture and heritage conservation, social aid, natural disasters, and risk capital.
Table 8: State aid for horizontal objectives and sectoral aid as % of total aid, 2005
[pic]
(1) Aid for general regional development not elsewhere classified. (2) Aid for specific sectors awarded under measures for which there was no horizontal objective as well as aid for rescue and restructuring. Source: DG Competition.
Trend in State aid for horizontal objectives and sectoral objectives
In the mid-1990s, when State aid levels were much higher, the share of total aid granted for horizontal objectives was around 50%. In line with the commitments undertaken at the various European Councils, Member States have however continued to redirect aid towards such horizontal objectives. It is encouraging to see that all EU-10 Member States have progressively redirected aid towards horizontal objectives. The share of horizontal objectives in total aid less agriculture, fisheries and transport increased by 11 percentage points between 2001-2003 and 2003-2005 (see Table 9 below). This upward trend was almost exclusively the result of a significant increase in aid for environmental and energy saving objectives (+8 points) and employment aid (+2 points) as well as a reduction in sectoral aid, particularly services (including financial services) (-8 points) and coal (-2.7 points), for some Member States.
Table 9: Trend in share of primary objectives in total aid between 2001-2003 and 2003-2005 as percentage point difference
[pic]
(1) Aid for general regional development not elsewhere classified. (2) Aid for specific sectors awarded under measures for which there was no horizontal objective as well as aid for rescue and restructuring. Source: DG Competition.
The positive trend was observed, to varying degrees, in the majority of Member States. The share of horizontal aid increased more than the average (+11 points) in six countries, particularly in Latvia (+44 points), Lithuania (+33 points), Ireland (+20 points), the Czech Republic (+16 points), Germany (+15 points) and Spain (+11 points).
In contrast, the share of horizontal aid in total aid decreased in Denmark (-3.5 points), due to the large amount of aid awarded to the broadcasting sector[22] in 2004.
Over the period under review, there were appreciable increases in the share of total aid for environmental and energy saving objectives in Sweden (+26 points), Germany (+16 points) and Finland (+11 points). For the Union as a whole, there was no significant change in the share of aid for other horizontal objectives such as R&D and training.
State aid for research and development (R&D)
Investment in R&D is a crucial factor to make the EU economy competitive and to ensure sustainable growth. The Barcelona European Council of March 2002 recognised this by setting the objective for expenditure on R&D to 3% of GDP by 2010. Two thirds of this expenditure should be funded by the private sector. The spring 2004 European Council stressed in particular that besides public funding, increased private funding of investment is crucial to achieve a sustainable level of 3% and accorded priority status to the strengthening of business investment in R&D.
National governments have a range of measures to choose from to fund and consequently trigger R&D, the exact range and balance of which depend on the national context and form the policy mix. These public measures, when granted on a selective basis, might contain State aid. Even though State aid constitutes only a small part of public R&D funding, competition could be distorted by favouring some enterprises over others. On the other hand, State aid may in certain circumstances be the best available option to provide incentives triggering additional private R&D investment. The Commission thus tries to strike a balance through the application of the framework on R&D aid thereby ensuring that R&D is furthered to the largest extent while minimising distortions of competition as far as possible.
Figures for 2004 show that investment in R&D is not sufficient to meet the Barcelona objectives: for the EU-25 as a whole, R&D investment stood at 1.86% of GDP, Sweden and Finland being the only countries to reach the 3% level with 3.70% and 3.51% respectively. Drawing conclusions from the so far sluggish development of R&D investment, it is clear that with growth remaining at the current level, the European economy will not achieve the Barcelona targets by 2010. Rather, growth needs to be accelerated and new impetus given to investment in R&D.
As regards State aid to R&D, total expenditure stood at €5.6 billion in 2005. After a significant increase in 2001, the level of R&D aid has remained rather stable. State aid to R&D represents a relatively small share in public funding (EU-wide, 0.05% of GDP in 2005) although there are significant differences between Member States. In six Member States the R&D aid expenditure relative to the GDP in 2005 was above the average mark of 0.05% of GDP: Czech Republic (0.10% of GDP), Finland (0.09%), Slovenia (0.09%), France (0.08%), Germany (0.07%) and Austria (0.06%).
Table 10: State aid for research and development (R&D)
[pic]
Note: Total aid refers to total aid less agriculture, fisheries and transport. Source: DG Competition and Eurostat
State aid supporting regional development and cohesion
Each Member State targets part of its State aid towards the least developed regions, the so-called ‘assisted regions’. For the Union as a whole, an estimated €11.3 billion of aid[23] was earmarked exclusively for assisted ‘a’ regions[24] in 2005. With the exception of Cyprus, and the cities of Prague and Bratislava which qualify for assistance at ‘c’ level[25], the entire territories of the EU-10 Member States are eligible at ‘a’ level. Although a number of aid measures in these countries are not earmarked for a specific region, the aid is thus deemed to be ‘reserved for’ assisted regions.
The EU-wide figure of €11.3 billion represented 25% of total aid (less agriculture, fisheries and transport for which a regional breakdown is not available). Disparities between the Member States in the levels of aid reserved for assisted ‘a’ regions (Table 11) reflect not only differences in regional policy but also the size of each country’s eligible population as well as the extent to which each Member State grants aid at a sub-central level.
Table 11: State aid specifically earmarked for assisted ‘a’ regions, 2005
[pic]
Note: There are no assisted ‘a’ regions in Belgium, Denmark, Cyprus, Luxembourg, the Netherlands and Sweden. For Czech Republic, Spain, Ireland, Portugal, Slovakia, all measures qualify for either ‘a’ or ‘c’ status. The figures in the table above refer to those measures which were specifically earmarked for ‘a’ regions. In Cyprus, all measures qualify for ‘c’ assisted status. All data exclude agriculture, fisheries and transport for which a regional breakdown is not available. It is therefore not possible to measure aid to assisted ‘a’ regions as a proportion of total State aid. Source: DG Competition.
Aid awarded under the block exemption regulations
With a view to reducing the administrative burden for specific types of aid, block exemptions for aid to SMEs, training aid, employment aid, certain types of aid in the fisheries sector and aid to SMEs in the agricultural sector have come into force over the past few years [26]. Initial results are positive: the number of measures being notified for these types of aid has fallen considerably since 2001 as Member States make increasing use of the possibilities offered by the7 block exemption regulations. By 30 June 2006, Member States had informed the Commission that they implemented almost 1500 block exempted measures since the introduction of the regulations for SMEs and training in 2001 (see Table 12). In 2005 alone, the Commission received more than 400 summary information forms on newly introduced block exempted measures: 198 on aid for SMEs primarily in the manufacturing and services sectors, a further 88 for SMEs in the agricultural sector, 69 on training aid, 26 on aid to employment, and 22 for exempted aid in fisheries. While the number of forms submitted by the Member State in the first six months of 2006 remained stable, the use of employment and agriculture block exemption regulations has increased.
Table 12: Trend in the number of measures for which information forms were submitted under the State aid block exemption regulations, 2001-2006 (until 30.6.2006), EU-25
[pic]
Note: The table excludes cases withdrawn. Figures for the EU-10 are included as of 1 May 2004. Source: DG Competition
The State aid block exemption regulation on SMEs[27] was amended in February 2004 as regards the extension of its scope to include aid for research and development. Member States have increasingly used this possibility. In 2005, around 20% of all block exempted measures for State aid to SMEs included aid for research and development.
See also information about the new block exemption regulation on regional investment aid in the Part IV on Legislative and Policy development below.
As regards expenditure, an estimated €2.9 billion was awarded in 2005 under the three block exemption regulations for SMEs, training and employment[28]. Aid to SMEs accounted for €1.5 billion, €1 billion went for training aid and €0.4 billion for employment aid. In 2005, Italy made up for 31% of total expenditure followed by the United Kingdom (20%), Poland (14%) and Germany (13%).
It is also worth looking at the share of exempted aid in total aid directed at horizontal objectives. EU-wide, aid under the block exemption regulations represented around 8% of all aid directed at horizontal objectives though for several Member States the share was considerably higher: Poland 63%, Portugal (33%), Estonia (29%), Greece (25%) and Austria (20%).
Table 13: Aid awarded under the block exemption regulations, in million €, 2005
[pic]
Figures exclude expenditure for measures submitted under the block exemptions for agriculture and fisheries. Source: DG Competition.
State aid instruments
Most favoured aid instrument in the EU-25 is grant
All State aid represents a cost or a loss of revenue to the public authorities and a benefit to recipients. However, in some cases the actual aid element may differ from the nominal amount as in the case of a subsidised loan or guarantee.
Graph 2: Share of each aid instrument in total aid for manufacturing and services, EU-25, 2003–2005
[pic]
Note: This section on aid instruments excludes the coal sector. Source: DG Competition
During the period 2003-2005, grants accounted for more than 50% of total aid in the manufacturing and service sectors. In addition to aid awarded through the budget, other aid is paid through alleviation from the tax or social security system. Tax exemptions made up almost 40% of the total (Graph 2 and Table 14). Belgium, Denmark, Luxembourg and Austria provided at least 85% of their aid in the form of grants, other Member States tended to make greater use of tax exemptions: accounting for 70% or more of total aid in Portugal, Slovakia and Sweden. A similar instrument is a tax deferral which was used by twelve Member States during the period under review. Tax deferrals accounted for 13% of all aid in Italy compared with an EU average of 2%.
Table 14: State aid to the manufacturing sector by type of instrument, 2003-2005
[pic]
Note: due to rounding not all percentage figures sum up precisely to 100.
There are other forms of aid instrument which vary from one Member State to another. One such category covers transfers in which the aid element is the interest saved by the recipient during the period for which the capital transferred is at his disposal. The financial transfer takes the form of a soft loan or tax deferral (mentioned already above). The aid elements in this category are much lower than the capital values of the transfers. EU-wide, soft loans represented around 3% of all aid to manufacturing and services. In Spain, France, and Austria the proportion was 8% or more.
Aid may also be in the form of state equity participation which represented around 1% of all aid to the manufacturing and service sectors. Finally, aid may be provided in the form of guarantees. The aid elements are generally much lower than the nominal amounts guaranteed, since they correspond to the benefit which the recipient receives free of charge or at lower than market rate if a premium is paid to cover the risk. EU-wide, guarantees made up 3% of total aid. During the period under review, the guarantees were used by Czech Republic (66% of total aid), mainly to the banking sector and in Estonia (18% of total aid).
PART TWO: SPECIAL FOCUS CHAPTER ON RESCUE AND RESTRUCTURING AID
Principles for Rescue and Restructuring aid in the Guidelines
Rescue and restructuring aid is one of the most distortive forms of aid, but may in exceptional circumstances be justified by the countervailing benefits. Such benefits are seen in the restoration of the long term viability of a firm in difficulty and thus the firm’s survival which may be desirable for employment considerations. While the guidelines leave it to the Member States to assess whether it is worthwhile subsidizing the company to reach the desired objectives, the guidelines impose on the beneficiaries strict conditions in order to guarantee that the distortive effects are limited to the minimum.
Legally, the Rescue and Restructuring Guidelines lay down the application of Article 87(3)(c) EC in the particular case of firms in difficulty[29]. On the basis of the Guidelines, State support for such firms may be found compatible with the EC Treaty. This concerns first rescue aid in so far as the ailing firm is provided with ad hoc short term liquidity support to overcome acute financial shortcomings or restructuring aid in form of longer term support in order to redirect the company’s operations. In the case of SMEs, rescue and restructuring aid may also be granted on the basis of schemes.
Rescue aid can be provided for a period of six months to help the company cover its immediate liquidity needs and undertake other urgent structural measures. It is limited to temporary support to enable the ailing company to come up with a restructuring plan.
Restructuring aid can be provided on the basis of a comprehensive restructuring plan with the aim to restore long term viability. The plan must define the restructuring period and the restructuring costs as well as the measures necessary to turn around the company. Such measures should imply operative, industrial and financial restructuring.
Further conditions for the granting of restructuring aid are first that the aid is limited to the minimum necessary. To this end, a predetermined minimum threshold for private co-financing of the restructuring is introduced (the so called significant own contribution). As this own contribution normally requires the involvement of external financing it also ensures that the capital markets believe in the restructuring project’s ability to restore long term viability. Secondly, in order to compensate for the distortion of competition caused by the aid, compensatory measures (e.g. divestment of assets, reductions in capacity or market presence and reduction of entry barriers on the markets concerned) are normally obligatory.
Finally, the "one-time, last-time" principle ensures in cases of both rescue and restructuring aid that a firm that has received already rescue and restructuring aid in the last ten years is no longer eligible for any further aid. A firm has thus only one chance to restructure itself with the help of aid.
Changes from 1999 to the 2004 guidelines
The 2004 Guidelines impose a closer scrutiny of the distortion created by aid for rescue and restructuring operations of large firms. They introduced a stricter application of the "one time, last time" principle and reinforced the provision of a significant own contribution by imposing fixed minimum thresholds. The provisions on the avoidance of undue distortions of competition have also been tightened in so far as compensatory measures have become compulsory.
Moreover, the guidelines clarify that aid to companies in difficulty can only be assessed on the basis of the Rescue and Restructuring Guidelines, unless it is automatically exempted by a regulation ( de minimis aid, investment aid to SMEs, etc). The Rescue and Restructuring Guidelines reiterate that a firm in difficulty cannot be an appropriate vehicle for promoting other public policy objectives (for instance environmental aid). Therefore also aid for other public policy objectives, which would normally be compatible under approved schemes, must be considered as restructuring aid if it is granted to a company in difficulty.
Experience as to the practical consequences of the application of the new rules is nevertheless limited by now. So far the Commission has taken on the basis of the new Guidelines only a few rescue aid decisions, two no objection decisions as regards restructuring aid and no negative decision.
The new guidelines also introduced two procedural novelties:
- First, a simplified procedure for rescue aid was introduced, under which the Commission will decide within one month. However, given that this is tied to certain thresholds the usage has been limited.
- Second, the Commission has left the scrutiny of restructuring plans of SMEs to the Member States who are now expected to assess and approve the plans themselves before they notify them to the Commission. However, Member States appear to be rather reluctant to make use of that provision and seem to prefer to rely on the Commissions assessment in any event.
Commission decisions on rescue and restructuring aid 2000-2005
There are two possible ways to look at Member States’ use of rescue and restructuring aid. One is based on the number of rescue and restructuring decisions taken by the Commission in the reference period, 2000–2005, whereas the second is based on actual expenditure reported by Member States. The decision-based approach also includes measures under which expenditure was made before 2000 (unlawful aid) as well as measures under which aid was (or will be) granted after 2005 (due for example to the time needed for Member States to complete its own granting procedures). The second, reporting based approach shows aid measures under which expenditure was made between 2000 and 2005 even if the Commission’s decision was taken before 2000 or after 2005. This section (3.3) presents facts and findings based on the first approach while sections 3.4 – 3.7 are based on the expenditure approach. As data for the EU-10 Member States[30] prior to accession in May 2004 are not fully comparable with EU-15 data, this section focuses on aid granted by the EU-15 Member States.
The vast majority of aid for rescue and restructuring is awarded on an individual (ad hoc) basis to ailing firms, thus being the type of aid which is most prone to distort competition. While some Member States have frequently awarded such aid over the period under review, the majority have clearly not adopted such a policy. Looking at the 115 decisions (involving compatible and incompatible aid measures) taken on ad hoc rescue and restructuring cases[31] between 2000 and 2005, Germany tops the list with 74 decisions followed by France with 13, Italy 9, Spain 7, the United Kingdom 3, Belgium 3, Portugal 2 and the Netherlands 2. Greece and Austria each have 1 case leaving five EU-15 Member States (Denmark, Ireland, Luxembourg, Finland and Sweden) with no cases at all.
Table 15: Number of decisions on rescue and restructuring cases, 2000-2005
[pic]
It is important to note that approximately three-quarters of German cases concerned the restructuring of former East German companies for which aid was awarded in the late 1990s. Most of the decisions on these cases were taken in the period 2000 to 2002 under the 1999 guidelines which contained some special clauses for assessing restructuring aid. This largely explains the drop in the number of ad hoc rescue and restructuring cases for EU-15 on which the Commission took a decision[32] over the period 2000-2005.
Table 16: Trend in the number of decisions on rescue and restructuring cases, 2000-2005
[pic]
Although the EU-15 figure in 2005 is relatively low, there were an additional 5 cases for the EU-10 Member States and, more significantly, there are currently around 30 rescue and restructuring cases being examined by the Commission. Around half of these cases concern the EU-10.
Of the 115 decisions on ad hoc cases, 35 concerned rescue aid and 80 restructuring aid. As regards rescue aid, Germany accounted for 21 cases with 6 other EU-15 Member States making up the total of 35. By the end of October 2006, the Commission had taken 3 decisions on rescue cases involving one of the EU-10 Member States (Poland).
As regards restructuring aid, again Germany accounted for more than half of the 80 cases. In addition to the EU-15 Member States, the Commission had, as of October 2006, taken 9 decisions on restructuring aid measures in the Czech Republic, Lithuania, Poland and Slovakia.
Unlawful aid
More than half of the ad hoc rescue and restructuring decisions over the period 2000-2005[33] concerned unlawful aid, i.e., aid which Member States failed to notify to the Commission or aid notified but awarded prior to Commission approval. Such aid is granted without respecting the standstill obligation under Article 88 (3) of the EC Treaty. It is important to bear in mind that a case is classified as ‘unlawful’ if at least part of the aid has not been notified or has been implemented prior to the Commission decision.
Unlawful aid occurs more often in the context of larger cases and is more prevalent in restructuring cases than rescue cases. It is well recognised that Member States may be under significant time pressure to rescue an ailing firm with immediate action being perceived as the only way to keep a firm afloat, although this cannot justify a breach of the Treaty. This reason of time pressure cannot to the same extent be applied to restructuring aid where there is a need to prepare a restructuring strategy which should solve a firm’s problems in the longer term. However, despite the possibility to grant rescue aid, many restructuring cases involving unlawful aid do not make use of such an option which would allow to keep a firm afloat while at the same time complying with the Treaty obligations.
Compatible versus incompatible aid
Around 30 of the 115 cases were found to be incompatible (fully or partly) though only 7 of these were negative decisions on notified aid and thus never implemented. Of the negative decisions, two-thirds were taken in the period 2000-2002 and mostly concerned aid to former East German companies. On top of the negative decisions, there were 4 cases where the notification was withdrawn after opening of the formal investigation procedure.
It is important to note that in reaching a positive (compatible) decision, the Commission does not necessarily approve the aid project as notified or presented by the Member State. After a first consultation, Member States often modify the aid measure in order to have it approved by the Commission. In this way, the Commission’s scrutiny contributes to reducing the (potential) distortion of competition.
Expenditure on rescue and restructuring aid
For the period 2000-2005, ad hoc rescue and restructuring aid amounted to €24 billion. Excluding the EU-10 Member States for which data are not fully comparable, the EU-15 figure was around €15.5 billion or, on average around 7% of total aid[34]. This figure, however, presents only part of the picture due to two main reasons:
- Firstly, there is the important but difficult issue of how to quantify the advantage (known as the ‘aid element’) to an ailing firm which has received aid in the form of a loan or guarantee. Such forms of aid account for the majority of rescue and restructuring measures. At present, various methods are used by Member States to calculate the aid element, some of which tend to underestimate the advantage to the company in difficulty. The rescue and restructuring Guidelines define a company in difficulty as one that without aid is unable to stem losses that “will almost certainly condemn it to going out of business in the short or medium term.” This implies that the aid element could be as high as 100% of the loan or guarantee. The Commission services are currently exploring ways in which the calculation of the aid element could be improved and harmonised to a greater extent.
- Second, there are a number of cases that are difficult or impossible to quantify, e.g., part of the aid to France Telecom[35], and are therefore not included in the Scoreboard figures.
The overall volume of rescue and restructuring aid tends to be driven by a limited number of large cases such as the Bankgesellschaft Berlin AG in Germany, Alstom and Bull in France, British Energy in the United Kingdom, Alitalia in Italy and the Spanish shipyards. Altogether, the ten largest cases in the reporting period account for more than 90% of total rescue and restructuring aid.
The figures per Member State reveal that the five largest EU-15 Member States account for more than 95% of the aid. Germany made up 56% of total rescue and restructuring aid, followed by France (21%), Spain (8%), United Kingdom (7%) and Italy (5%). A second group of five Member States (Belgium, Greece, Netherlands, Austria and Portugal) awarded relatively small amounts of aid while five Member States (Denmark, Ireland, Luxembourg, Finland and Sweden) did not award any ad hoc rescue and restructuring aid to ailing firms between 2000 and 2005.
In relative terms (per mille of GDP), the 6 biggest grantors of rescue and restructuring aid were Germany (0.65‰), France (0.32‰), Spain (0.26‰), Belgium (0.20‰), Greece (0.11‰) and United Kingdom (0.11‰).
Table 17: Rescue and restructuring aid, total expenditure 2000-2005, in million €
[pic]
The total amount of restructuring aid awarded by the EU-15 Member States over the period 2000-2005 is estimated at €13.4 billion. By comparison, cases of rescue aid account for a small proportion of the total - €2.2 billion over the period under review awarded by six of the EU-15 Member States. Although the amount of rescue aid is relatively low, it is worth noting that a significant number of restructuring cases, which were not preceded by rescue cases, also included a rescue component. This rescue component is then assessed together with the restructuring part of the aid.
Sectoral distribution
Although a sectoral distribution is largely dependent on the large aid cases, it nevertheless provides an indication of the sectors benefiting from rescue and restructuring aid. Due almost entirely to the Bankgesellschaft Berlin AG case, 55% of total rescue and restructuring aid granted between 2000 and 2005 was awarded to the financial services sector. A further 32% of the total went to the manufacturing sector in nine EU-15 Member States. The non-manufacturing sector, made up largely of aid to British Energy, accounted for 7% while the transport sector (less railways) accounted for 6%. More than half the aid to this sector was awarded to the airline Alitalia.
Table 18: Rescue and restructuring aid by sector, 2000- 2005, in million €
[pic]
Aid instruments
The type of aid instrument varies considerably from one Member State to another and between rescue aid and restructuring aid. Over the period 2000-2005, soft loans accounted for 77% of total rescue aid followed by guarantees (23%). In contrast, guarantees made up 50% of total restructuring aid followed by grants or capital injections (37%) and equity participation (11%).
Table 19: Rescue and restructuring aid by type of instrument, 2000-2005, in million €
[pic]
SMEs in difficulty
In addition to ad hoc awards of aid, eight EU-15 Member States made use of the possibility in the rescue and restructuring Guidelines to award aid to SMEs in difficulty through schemes. The Commission took a decision on just over 30 such schemes over the period 2000-2005. The vast majority of schemes were approved. The total amount of aid awarded through such schemes was estimated at €1.1 billion.
Part Three: RECOVERY OF UNLAWFUL AID [36]
Article 14 (1) of Council Regulation 659/1999 states that “where negative decisions are taken in cases of unlawful aid, the Commission shall decide that the Member State concerned shall take all necessary measures to recover the aid from the beneficiary.”
As of 30 June 2006, there were 80 pending recovery decisions, compared to 84 on 31 December 2005. In the first half of 2006, 8 pending recovery cases were closed, whilst four new recovery decisions were taken (Table 20). The geographical distribution of pending recovery cases remains relatively stable: Germany accounts for the largest number of pending recovery cases (30%). Taken together, Spain, Italy and France account for a further 53% of all pending recovery cases. There are no pending cases in 13 Member States.
Table 20: Pending recovery cases by Member State, first semester 2006
[pic]
Source: DG Competition, DG Fisheries, DG Energy and Transport.
Table 21 provides data on the amounts of aid to be recovered under the 114 recovery decisions adopted since 2000[37]. For 80 of these decisions, relatively accurate information exists on the amount of aid involved. This information shows that the total amount of aid to be recovered on the basis of decisions adopted between 1/1/2000 and 30/06/2006 is € 9.3 billion[38].
Table 21: Trend in the number of recovery decisions and amounts to be recovered, 2000-1 st semester 2006
[pic] (1) Only for Decisions for which the aid amount is known. (2) Amount excluding interest. Source: DG Competition, DG Fisheries, DG Energy and Transport.
For 34 of the recovery decisions adopted since 2000, the Member State concerned has not yet submitted reliable information on the aid amount involved. The availability of information on amounts to be recovered is particularly limited in the case of aid schemes, especially tax or quasi-tax aid measures, and aid measures involving guarantees. The Commission continues its efforts to obtain information from the Member States on the aid amounts involved.
Of the € 9.3 billion of aid to be recovered under decisions adopted since 2000, some € 6.0 billion (i.e. 67.6% of the total amount) had been effectively recovered by the end of June 2006. In addition, € 2.1 billion of recovery interests had been recovered and a further € 281 million of aid was lost in bankruptcy proceedings. A further € 1078.5 million of illegal and incompatible aid have been registered in ongoing bankruptcy proceedings.
Recovery of incompatible State aid is a lengthy process: 16 of the recovery decisions still pending at the end of June 2006 were adopted before the year 2000. Of the 114 decisions adopted between 2000 and first half of 2006, only 51 have been closed by the end of June 2006 (Table 22).
Table 22: Trend in the closure of recovery cases
[pic]
Source: DG Competition, DG Fisheries, DG Energy and Transport.
As underlined in the State Aid Action Plan (SAAP), the effectiveness and credibility of State aid control presupposes a proper enforcement of the Commission’s decisions. The Commission therefore announced in the SAAP that it will seek to achieve a more effective and immediate execution of the recovery decisions, which will ensure equality of treatment of all beneficiaries. To this effect, the SAAP announces that the Commission will monitor more closely the execution of the recovery decisions by Member States. Where Member States do not take all measures available to implement such decisions, the Commission will more actively pursue non-compliance under Articles 88(2), 226 and 228(2) of the Treaty.
Table 23 below gives an overview of the pending recovery cases for which the Commission has decided to initiate action under Art. 88 (2) or Art 228 (2) EC Treaty.
Table 23: The pending recovery cases for which the Commission has decided to bring the case before the Court of Justice
[pic]
Source: DG Competition, DG Fisheries, DG Energy and Transport.
PART FOUR: LEGISLATIVE AND POLICY DEVELOPMENTS
State Aid Action Plan
Following an extensive consultation process, the Commission has begun to implement various aspects of the State aid Action Plan (SAAP)[39], which set out in June 2005 the guiding principles for a comprehensive reform of State aid rules and procedures over the next five years. Since the last Scoreboard was published in the spring, the Commission has adopted the following final or draft legislative texts:
Guidelines for risk capital
The Commission adopted in July 2006 Community guidelines on state aid to promote risk capital investments in small and medium-sized enterprises[40]. The rules will facilitate access to finance for SMEs in their early stages of development, particularly where alternative means of funding from financial markets are lacking. Better access to capital should spur their growth and create more jobs in the EU. The Guidelines form part of the Commission’s efforts, announced in the SAAP, to encourage Member States to focus state aid on improving the competitiveness of EU industry, in particular through innovation, and on creating sustainable jobs, while minimising distortions of competition. The Guidelines include a ‘safe harbour’ of €1.5 million investment per SME over 12 months (below which a market failure has been found to exist), a light assessment procedure for clear cut cases fulfilling certain conditions and assessment criteria which ensure that state funding will leverage private investment, target market failures and be proportionate.
Block Exemption Regulation (BER) for Regional Investment Aid
In October 2006, the Commission adopted a new block exemption regulation for regional investment aid[41]. The Regulation is based on the new Guidelines for regional aid 2007-2013 which were adopted in December 2005. The objective of the new Regulation is to simplify administrative procedures for Member States, while reinforcing transparency and legal certainty. The Regulation exempts Member States to notify regional investment aid schemes to the Commission under Article 88(3) of the EC Treaty, if the scheme complies with the regional aid map and fulfils certain conditions. The Regulation will in particular block exempt transparent forms of regional investment aid, that is schemes for which it is possible to calculate precisely the aid intensity as a percentage of the investment costs ex ante without the need for a risk assessment. Regional aid schemes involving public shareholdings, risk capital and state guarantees will in principle remain subject to prior notification to the Commission. The Commission has also adopted new notification forms for regional aid schemes that do not meet the conditions of the new Regulation (e.g. schemes providing for operating aid) and thus still have to be notified individually to the Commission for endorsement prior to their implementation.
Regional aid maps 2007-2013 approved for a first group of Member States
By the end of November 2006 the Commission has approved under EC Treaty State aid rules the regional aid maps covering the period 2007-2013 for Estonia, Greece, Hungary, Latvia, Luxembourg, Malta, Poland, Slovakia, Slovenia, the Czech Republic, Ireland, Lithuania and Germany . These decisions form part of a wider exercise to review regional aid systems in all Member States. A regional aid map defines the regions of a Member State eligible for national regional investment aid for large enterprises under EC Treaty state aid rules and establishes the maximum permitted levels of such aid in the eligible regions. The adoption of the map for the Member State concerned is a pre-condition to ensure the continuity of the regional policy and Structural Fund programmes after 2006, as all current maps will expire on 31.12.2006.
Community framework for State aid for research and development and innovation
In November 2006, the Commission adopted a new State aid Framework for Research, Development and Innovation. The new Framework will help Member States wishing to use State aid as a complementary instrument to boost Research, Development and Innovation. The Framework sets out a series of guidelines for specific types of State aid measures – such as aid for R&D projects, aid to young innovative enterprises and aid to innovation clusters – that could encourage additional R&D&I investments by private firms, thus stimulating growth and employment and improving Europe’s competitiveness. These guidelines allow individual Member States to tailor aid measures to particular situations, subject to the overall test that the aid must address a defined market failure, must be well designed and that the identified benefits must outweigh the distortions to competition resulting from the aid. The new Framework is due to apply from 1st January 2007.
Commission Regulation on de minimis aid
The Commission adopted in September 2006 a revised draft regulation reviewing Commission Regulation No 69/2001 on de minimis aid[42]. Interested stakeholders were invited to comment on this proposal by October after which it was discussed with Member States experts in an advisory committee in November. Currently, discussions are ongoing as to the possibility to include the transport sector in the scope of the regulation. The Commission aims to adopt a final text by the end of 2006.
Prolongation of block exemption regulations
The Commission adopted in July 2006 a draft Commission Regulation[43] to extend at least by one year, the period of application of Regulations (EC) No 2204/2002 on State aid for employment, (EC) No 70/2001 on State aid for small and medium sized enterprises and (EC) No 68/2001 on training aid. The prolongation of the validity of these regulations is sought to allow for the necessary period of preparation of a future single block exemption Regulation, which will regroup the current regulations and possibly add other areas, as announced in the State Aid Action Plan. The proposals were discussed twice with Member States experts in advisory committees while stakeholders had the possibility via the internet to comment. The Commission aims to adopt a final text by the end of 2006.
State Aid to the Transport Sector
One of the main objectives of the common transport policy is the promotion of environmentally friendly modes of transport in order to achieve a reduction of road transport. For this purpose, two elements are essential. First, Member states need to encourage cleaner modes of transport and measures to increase energy efficiency. This has been underlined in the Commission green paper on energy efficiency from May 2005 and in the proposal for a Commission directive to promote the purchase of clean vehicles by public authorities, adopted in December 2005. Apart of encouraging modal shift to less polluting transport means, the Commission also approved State aid schemes to fill the gap left behind the community's regulatory framework aiming at producing cleaner new vehicles in the present and future, by allowing for subsidies to retrofit particulate filters on highly polluting old vehicles. During the ongoing revision of the guidelines for State aid for environmental protection, the Commission should pay particular attention to the promotion of clean transport and energy-efficient transport. Second, the revitalisation of the railway sector is considered as a key element in the Community’s common transport policy. Rail transport has to be made, once again, competitive enough to remain one of the leading players in the transport system in an enlarged Europe. By 2007, the entire European freight network, both internationally as well as nationally, will have been opened up completely to competition. The arrival of new railway companies should make the sector more competitive and encourage the national companies to restructure. In this context, specific guidelines for the railway sector will be developed in 2007 with a view to establishing a common approach to public contributions to the railway sector. It is necessary from both a legal and a political point of view that national authorities, companies and individuals are made aware, in a clear and transparent way, of the rules applicable to the railway sector in this new more competitive environment. This initiative will significantly increase transparency and legal certainty.
ONLINE STATE AID SCOREBOARD, REGISTER AND OTHER REPORTS ON STATE AID
The online Scoreboard contains electronic versions of this and previous Scoreboards as well as a set of key indicators and a wide array of statistical tables: http://europa.eu.int/comm/competition/state_aid/scoreboard/
Any queries or requests for data should be sent to the scoreboard mailbox atStateaid-Scoreboard@ec.europa.eu
State aid Register – a second transparency tool
The Commission’s State aid Register has been online since 2001. The Register provides detailed information on all State aid cases which have been the object of a final Commission decision since 1st January 2000 as well as block exemption cases published in the Official Journal. It is updated daily and thus ensures that the public has timely access to the most recent State aid decisions. It is available on the homepage of the Competition Directorate General’s Internet site:
http://europa.eu.int/comm/competition/state_aid/register/
Following an extensive review, a major revamp of the Register is foreseen and should be fully operational in early 2007.
Annual Competition Report
The Commission publishes an Annual Report on Competition Policy which summarises the most important legal developments and case-law of the year as well as statistical data on the Commission’s work during the relevant year.
http://europa.eu.int/comm/competition/annual_reports/
Competition Policy Newsletter
A Competition Policy Newsletter is also published three times a year by the Competition Directorate-General of the European Commission. It aims at describing and discussing in more detail legislative developments as well as interesting case-law and covers generally the preceding four months.
http://europa.eu.int/comm/competition/publications/cpn/
State aid E-News
State aid e-News is issued every week to present the latest developments in the area of State aid. It features information on new legislative texts and proposals, decisions of the European Commission and the Courts of the European Union and other state aid-related documents and events.
http://ec.europa.eu/comm/competition/state_aid/overview/newsletter.htmlhttp://ec.europa.eu/comm/competition/state_aid/overview/newsletter.html
Methodological Notes
The Scoreboard covers State aid as defined under Article 87(1) EC Treaty that is granted by the Member States and has been examined by the Commission. Accordingly, general measures and public subsidies that have no effect on trade and do not distort or threaten to distort competition are not dealt with in the Scoreboard as they are not subject to the Commission’s investigative powers. For example, a general tax break for expenditure on research and development is not considered as State aid although it may well appear in Member States national budgets as public support for research and development. Furthermore, Community funds and instruments are also excluded. See also box on “What is a State aid” on page 11 of the spring 2005 update of the Scoreboard.
All State aid data refer to the implementation of Commission decisions and not cases that are still under examination. There may be discrepancies with figures published in previous Scoreboards for a number of reasons: first, provisional or estimated figures may now be replaced by final data; second, when the Commission takes a decision on a non-notified aid measure, the aid in question is attributed to the year(s) in which it was awarded. In cases that result in expenditure over a number of years, the total amount is attributed to each of the years in which expenditure took place. All data are provided in million (or billion where appropriate) euro at constant 1995 prices but have been re-referenced on the year 2005.
This autumn 2006 edition of the Scoreboard focuses largely on the year 2005. As in previous years, State aid data collected for the Scoreboard are grouped according to primary objectives which may be either horizontal or sector-specific. Information on the objective of the aid, or, the sector to which the aid is directed, refers to the time the aid was approved and not to the final recipients of the aid. For example, the primary objective of a scheme which, at the time the aid was approved, was exclusively earmarked for SMEs is classified as aid for ‘SMEs’. In contrast, aid granted under, say, a regional development scheme may ultimately be awarded to SMEs, but is not regarded as such if, at the time the aid was approved, the scheme was open to all enterprises.
The following symbols have been used in the Scoreboard:
n.a. not available
- real zero
0 less than half the unit used
Further information on methodological issues may be found on the online Scoreboard:
http://europa.eu.int/comm/competition/state_aid/scoreboard/conceptual_remarks.html
[1] Data are not yet available for agriculture and fisheries.
[2] C13a/2003 (ex N779/2002) Commission Decision of 2 August 2004 on the State Aid implemented by France for France Télécom (notified under document number C(2004) 3060) http://ec.europa.eu/comm/competition/state_aid/register/ii/by_case_nr_c2003_000.html#13a
[3] The proportion of unlawful measures was highest in the period 2000-2002 due to the influence of the East German cases but even in the period 2003-2005 it remains above 50%.
[4] COM(2005) 141 final, 12.4.2005http://europa.eu.int/comm/economy_finance/publications/european_economy/2005/comm2005_141en.pdf
[5] The total covers aid to manufacturing, services, coal, agriculture, fisheries and part of the transport sector but excludes aid to the railway sector, aid for compensation for services of general economic interest.
[6] In spite of the Member States’ obligation (in the Commission Regulation No 794/2004 of 21 April 2004) to report State aid expenditure figures for the year t-1, some Member States are able to report figures for some measures only for year t-2. In addition, unlawfully granted State aid is included in the Scoreboard data only after Commission’s decision on particular unlawful aid case and retroactively added to the year in which the aid was granted. Therefore, overall aid levels tend to be underestimated for the most recent years.
[7] Only EU-15 is presented here because the transport aid figures for EU-10 are not comparable for the pre-accession period.
[8] Total State aid less railways.
[9] The high total State aid figure in 2002 can be explained by exceptional large amount (¬ lained by exceptional large amount (€6.2 billion) of restructuring aid for Bankgesellschaft Berlin AG.
[10] As there is a break in the times series for agriculture data, it is not possible to draw conclusions on a trend. For conclusions on trend the State aid less agriculture, fisheries and trend time series are more appropriate.
[11] C 28/2002, Restructuring State aid for the Bankgesellschaft Berlin amounted to €8 billion (granted in 2001 and 2002).
[12] The corporation tax rate in Ireland has been lowered progressively in recent years and is 12.5% from 2003. This has reduced the comparative value of the preferential 10% rate to the manufacturing sector, therefore contributing to the decline, in monetary terms, of aid to this sector.
[13] For the purposes of the Scoreboard, the manufacturing sector includes aid for steel, shipbuilding, other manufacturing sectors, aid for general economic development and aid for horizontal objectives including research and development, SMEs, environment, energy saving, employment and training for which the specific sector is not always known. As a result, data on aid to manufacturing may be overestimated.
[14] Other non-manufacturing includes aid for mining and quarrying, oil and gas extraction, aid for electricity gas and water supply and aid for construction.
[15] Regulation (EEC) No. 1191/69 of the Council of 26 June 1969 on action by Member States concerning the obligations inherent in the concept of a public service in transport by rail, road and inland waterway.
[16] Regulation (EEC) No. 1107/70 of the Council of 4 June 1970 on the granting of aid for transport by rail, road and inland waterway.
[17] Regulation (EEC) No. 1192/69 on common rules for the normalisation of accounts of railway undertakings is particularly important from a State aid monitoring perspective as it exempts from the notification procedure a number of different compensations from public authorities to railway undertakings.
[18] Aid under the SME-Regulation No 70/2001 remains possible with the exception of larger projects as defined in Art. 6 of the said SME-Regulation.
[19] These percentages exclude those measures with a horizontal objective that are nevertheless earmarked for the manufacturing and services sectors
[20] Such cases are denoted by a ‘NN’ case number
[21] MA/6/2002
[22] N 313/2004 Recapitalization of TV2 Denmark.
[23] This figure includes all aid specifically earmarked for assisted ‘a’ regions regardless of the overall objective of the aid. However, due to an absence of data on the final beneficiaries of the aid, it is not possible to quantify the amount of aid granted through nation-wide schemes from which assisted regions will also clearly benefit. See spring 2003 update of the Scoreboard for further information on methodological issues.
[24] Article 87(3)(a) provides that aid “to promote the economic development of areas where the standard of living is abnormally low or where there is serious underemployment” may be considered compatible with the common market. The ‘a’ regions are largely identical to the Objective 1 regions under the EU Structural Funds.
[25] Article 87(3)(c)
[26] Commission Regulation (EC) No 70/2001 of 12 January 2001 on State aid to SMEs (OJ L 10, 13.01.2001, pages 33-42) and No 364/2004 of 25 February 2004 amending Regulation (EC) No 70/2001 as regards the extension of its scope to include aid for research and development (OJ L 63, 28.02.2004, pages 22-29);
Commission Regulation (EC) No 68/2001 of 12 January 2001 on training aid (OJ L 10, 13.01.2001, pages 20-29) and No 363/2004 of 25 February 2004 amending Regulation (EC) No 68/2001 (OJ L 63, 28.02.2004, pages 20-21);
Commission Regulation (EC) No 2204/2002 of 5 December 2002 on State aid for employment (OJ L 337, 13.12.2002, pages 3-14);
Commission Regulation (EC) No 1/2004 of 23 December 2003 on State aid to SMEs in the agricultural sector (OJ L 1, 03.01.2004, pages 1-16);
Commission Regulation (EC) No 1595/2004 of 8 September 2004 on State aid to SME active in the production, processing and marketing of fisheries products (OJ L 291 of 14.09.2004, page 3-11).
[27] Commission Regulations (EC) No 70/2001 of 12 January 2001 on State aid to SMEs (OJ L 10, 13.01.2001)
[28] Data are not yet available for agriculture and fisheries.
[29] The meaning of «a firm in difficulty» is defined in the point 2.1. of the Community guidelines on State aid for rescuing and restructuring firms in difficulty OJ C 244, 1.10.2004, p. 2–17. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:52004XC1001(01):EN:NOT
[30] The total for the EU-10 Member States is estimated at €8.3 billion though aid to the Czech banking sector accounts for around 80% of this figure.
[31] Excluding a small number of rescue and restructuring cases in the agricultural field
[32] This includes no objection decisions and final decisions after a formal investigation procedure. It therefore excludes decisions to open proceedings, injunctions, etc.
[33] The proportion of unlawful measures was highest in the period 2000-2002 due to the influence of the East German cases but even in the period 2003-2005 it remains above 50%.
[34] The relevant total used for this calculation is total aid less railways, agriculture, fisheries and coal
[35] C13a/2003 (ex N779/2002) Commission Decision of 2 August 2004 on the State Aid implemented by France for France Télécom (notified under document number C(2004) 3060)
http://ec.europa.eu/comm/competition/state_aid/register/ii/by_case_nr_c2003_000.html#13a
[36] Excluding recovery cases in the agriculture sector.
[37] On 30/06/2006, there were still a further 14 recovery decisions pending that were adopted before 1/1/2000.
[38] The autumn 2005 Scoreboard reported a total of €9.4 billion. This discrepancy is due to the fact that some Member States submitted a revised estimate of the amounts to be recovered under some schemes.
[39] COM(2005) 107 final, 7.6.2005,http://europa.eu.int/comm/competition/state_aid/others/action_plan/
[40] OJ C 194, 18.08.2006, pages 2-22
[41] OJ L 302 of 01.11.2006, p. 29
[42] See State aid reform section of the DG Competition website.http://ec.europa.eu/comm/competition/state_aid/reform/reform.html
[43] OJ C 172 of 25.07.2006, p. 6