Annexes to COM(2010)701 - State Aid Scoreboard Report on State aid granted by the EU Member States - Autumn 2010 Update -

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dossier COM(2010)701 - State Aid Scoreboard Report on State aid granted by the EU Member States - Autumn 2010 Update -.
document COM(2010)701 EN
date December  1, 2010
annex.

3.4. Aid granted under the Temporary Framework

Context and scope

As a response to the tightening on access to credit which companies faced as a result of the financial crisis, the Commission adopted on 17 December 2008 the Temporary Framework[41]. It put focus on, first, maintaining continuity in companies' access to finance and, second, providing the ground for sustainable long-term growth by encouraging investments. Furthermore, rules of existing guidelines were simplified, e.g. higher ceilings for risk capital investments were introduced. The Temporary Framework is open to support all sectors of the economy but excludes aid that would remedy pre-existing structural problems and hence does not apply to companies in difficulty before the crisis.

The Temporary Framework is to be seen as a part of a wider Commission response to the economic crisis, the European Economic Recovery Plan[42].

Measures approved under the Temporary Framework

Between 17 December 2008 and 1 October 2010, the Commission approved 73 schemes[43] under the Temporary Framework and 4 ad hoc aid measures, amounting to a total approved volume of aid to € 82.5 billion (0.7% of EU-27 GDP). The majority represents schemes for aid up to € 500 000 per company (23 schemes in 23 Member States), 18 subsidised guarantee measures (14 Member States), 8 schemes for subsidised loan interests (7 Member States), 5 schemes offering reduced interest loans to businesses investing in the production of green products (5 Member States), and 6 risk capital schemes (5 Member States). Moreover, 12 Member States facilitated export activities through 13 export credit schemes[44].

Aid granted in 2009

In 2009, the Commission approved measures under the Temporary Framework amounting to in total approximately € 81.3 billion. Following from the annual reports submitted by Member States and their reply to the Commission's questionnaire on the Temporary Framework the aggregated aid element of all aid measures implemented by Member States in 2009 is estimated to € 2.2 billion, which represents 0.018% of EU-27 GDP. Member States seemed to be very cautious in the determination of the budget given the uncertainties as to the depth and duration of the crisis and the need to send the markets a clear signal of public authorities' availability to meet potential demand for support that then turned out to be substantially lower than expected. Moreover, Member States appeared to have applied strictly the conditions of granting the aid, largely in view of budgetary constraints, which in turn have likely kept the number of beneficiaries small.

With respect to the preference of choice offered under the Temporary Framework, most Member States were attracted by the tool of the limited aid amount, followed by the subsidised guarantee and subsidised interest loans.

For more detail, read chapter 3.4 of the Commission Staff Working Document in annex.

4. SIMPLIFICATION OF THE STATE AID RULES

4.1. A new architecture for State aid control

The Commission has the exclusive power to evaluate the compatibility of State aid measures with the TFEU. Accordingly, Member States are obliged to notify all measures to the Commission prior to their implementation[45].

The SAAP announced in June 2005 the Commission's intention to further the use of State aid policy as an effective tool for growth and jobs. The plan launched a review of almost all the State aid rules and procedures[46]. Four guiding principles underpinned the reform programme:

- less and better targeted State aid;

- a refined economic approach;

- more effective procedures, better enforcement, higher predictability and enhanced transparency;

- a shared responsibility between the Commission and Member States.

In some instances, whole categories of aid have been identified as unlikely to have a significant negative impact on competition at the Union level while contributing to the achievement of an objective of common interest. So-called 'block exemptions' have therefore been adopted and measures which fulfil the criteria laid down in these specific instruments may thus be granted without prior notification to the Commission[47]. When a Member State has notified and had approved an aid scheme, it may generally grant individual awards of aid without further notice to the Commission. Only large individual applications of aid schemes exceeding certain thresholds and aid awarded outside a scheme[48] need to be notified individually.

The "3-stream system": block exemption, standard and detailed assessment

In order to ensure an efficient and fast procedure and decision-making, in 2008 the Commission introduced substantial changes to the architecture of its State aid control. This was achieved by subjecting the various aid measures to a level of control which reflects their respective potential effects on competition and trade. The new architecture is based on a "3-stream system": block exemption (and de minimis ), standard assessment and detailed assessment. While the number of block exempted measures has significantly increased over past years, the majority of still notifiable individual cases or schemes are subject to a standard assessment ensuring smooth assessment. In 2009 a detailed assessment was carried out in 4 out of 16 risk capital cases; for R&D&I cases, it was 9 out of 30 cases. No detailed assessment was made for environmental protection cases, and for only 1 out of 59 regional aid cases. No detailed assessment was made in cases falling under any of the other horizontal objectives.

The new simplified procedure and Code of Best Practice

To make even smoother the notification process for a priori compatible cases, the Commission introduced in September 2009 a simplified procedure[49]. The Commission aims to ensure that clearly compatible aid is approved within an accelerated time period of one month, based on a complete notification from the Member State.

The other part of the simplification package was the Code of Best Practice for the conduct of State aid control procedures[50]. It is based on a joint commitment of the Commission and Member States to achieve more streamlined, and predictable procedures at each step of the State aid investigation. As a result, the Commission should be able to adopt more quickly its decisions on State aid cases within the procedural legal framework.

4.2. Assessment of individual cases focused on a small number of large, potentially distortive aid measures

Member States increasingly avail themselves of the possibilities for granting block exempted aid and in particular use schemes on the basis of which aid to individual enterprises can be granted without further notice to the Commission. In 2009, 964 or 76% of newly introduced measures[51] qualified as block exempted aid. 225 schemes (18%) and 86 individual aid measures (6%) were subject to a Commission decision in 2009. This means that 94% of aid measures aimed at industry and services, while being subject to State aid discipline, were granted by Member States without requiring an individual assessment by the Commission at the level of the beneficiary. In terms of reported aid volumes[52], individual aid accounted for only 12% of total aid to industry and services (€ 6.9 billion), while aid granted under schemes amounted to 69% (€ 40.4 billion) and block exempted aid to 19% (€ 10.8 billion).

4.3. Around 19% of aid to industry and services is block exempted

Block exempted aid increased by roughly € 2 billion to € 10.8 billion or 19% of total aid to industry and services in 2009 compared to 2008 (€ 8.9 billion or 19%) and 2007 (€ 6.1 billion or 13%). The biggest contributor was aid earmarked for regional development[53], followed by aid to SMEs, training and employment. Some Member States phased-out aid measures previously granted under the BERs and replaced it by corresponding GBER measures whereby Member States often enlarged the scope of the measure now permitted under the GBER rules.

5. ENFORCING THE STATE AID RULES

Unlawful aid

Article 108(3) TFEU obliges Member States not only to notify State aid measures to the Commission before their implementation but also to await the outcome of the Commission's investigation before implementing notified measures. When either of these obligations is not respected, the State aid measure is considered to be unlawful.

In the period 2000-2009, the Commission took 910 decisions on unlawful aid. In about 22% of unlawful aid cases[54] the Commission intervened by taking a negative decision on an incompatible aid measure. This negative decision normally requests the Member State concerned to recover the illegally awarded aid. In a further 2% of unlawful aid cases[55], the Commission took a conditional decision. This intervention rate of about 24% for unlawful aid is roughly ten times higher than the rate of negative and conditional decisions in duly notified cases. More than half of the interventions were made in the sector of industry and services, slightly less than one quarter in agriculture and the remainder in fisheries, transport and coal.

Recovery of aid

Further progress has been made towards the execution of pending recovery decisions. The total number of pending recovery stood at 54 cases[56] (compared to 94 cases at the end of 2004). The amount of illegal and incompatible aid recovered since 2000 has further increased and amounted to € 12 billion on 30 June 2010[57]. That means that the percentage of illegal and incompatible aid still to be recovered has fallen from 75% at the end of 2004 to around 11% on 30 June 2010.

In addition, the Commission has taken some recovery decisions in the areas of agriculture, fisheries and transport.

Enforcement of State aid Law: Cooperation with national courts

In the follow-up to the Notice on the Enforcement of State Aid Law by National Courts[58], advocacy efforts have intensified by providing for instance an information package published on DG Competition's website[59] and through the publication of a booklet[60] gathering the EU materials most relevant for State aid enforcement in the judges' daily work.

Ex-post monitoring

With the entry into force of the GBER an even higher number of aid measures are no longer subject to the notification obligation. Article 10 of that regulation constitutes the basis for realising ex post monitoring on a sample basis. The result showed that, overall, the part of the existing State aid architecture allowing for the approval of aid schemes and allowing Member States to implement aid measures under the GBER and BERs functions in a satisfactory manner.

ANNEX

Commission Staff Working Document "Facts and figures on State aid in the EU Member States"

[1] http://www.eftasurv.int/information/sascoreboard/

[2] Communication from the Commission to the European Parliament and the Council, Long-term sustainability of public finances for a recovering economy - COM(2009) 545, 14.10.2009 (http://ec.europa.eu/economy_finance/thematic_articles/article15994_en.htm).

[3] Temporary framework for State aid measures to support access to finance in the current financial and economic crisis; consolidated version OJ C 83, 7.4.2009; as further amended by OJ C 261, 31.10.2009, p. 2, and OJ C 303, 15.12.2009, p. 6.

[4] The total covers aid to manufacturing, services, coal, agriculture, fisheries and part of the transport sector but excludes, due to the lack of comparable data, aid to the railway sector and aid for compensation for services of general economic interest. Aid amounts refer to the aid element (or gross grant equivalent in case of guarantees or loans) contained in a State aid measure unless stated otherwise (see methodological remarks in the Commission Staff Working Document, attached to this Report).

[5] EU-27 means all Member States of the EU.

[6] In order to give a complete picture on crisis aid, the whole of the period dating from the adoption of the Commission's crisis measures to a cut-off date of 1 October 2010 is used as the reference period for this part of the report.

[7] EU-15 comprises Member States that joined the EU before 2004.

[8] Coal, as part of sectoral aid, amounted to ¬ 2.7 billion or 3.7% of total aid.

[9] Excluding railways.

[10] Since comparable€ 2.7 billion or 3.7% of total aid.

[11] Excluding railways.

[12] Since comparable data are lacking, it is not included in any of the totals.

[13] See paragraph 2.3.5 of Commission's Staff Working Document "Facts and figures on State aid in the EU Member States".

[14] Crisis measures excluded.

[15] Source: DG Competition; GDP figures: Eurostat.

[16] EU-12 includes Member States which acceded to the EU in 2004 or later.

[17] I.e. to promote horizontal aid versus sectoral aid.

[18] When crisis aid is excluded.

[19] Belgium, Czech Republic, Denmark, Ireland, Greece, France, Lithuania, Hungary, Portugal and Slovakia.

[20] If one were to include crisis measures, the share of horizontal aid would drop to 13%.

[21] Two distinct groups of cases fall in the category environmental aid and energy saving: The first group of cases pursues a direct benefit to environment. The second group comprises reductions or exemption from environmental taxes. For this second group of cases, aid expenditure cannot be taken as a proxy for measuring the environmental benefit as this benefit us pursed by the tax but not by the exemptions thereof. For further details, see Spring 2008 Scoreboard - COM(2008) 304, 21.5.2008.

[22] See Autumn 2009 Scoreboard - COM(2009) 661, 7.12.2009, p. 5.

[23] See Autumn 2008 Scoreboard - COM(2008) 751, 17.11.2008, p. 30.

[24] Rescue and restructuring aid decreased and hence does not contribute to the overall increase in sectoral aid.

[25] These percentages exclude those measures with a horizontal objective that are nevertheless earmarked for the manufacturing and services sectors.

[26] Community guidelines on State aid for rescuing and restructuring firms in difficulty (OJ C 244, 1.10.2004, pp. 2-17), as extended by OJ C 156, 9.7.2009, p. 3.

[27] Since October 2008 the Commission adopted four Communications: 1) Communication from the Commission- The application of State aid rules to measures taken in relation to financial institutions in the context of the current global financial crisis (OJ C 270, 25.10.2008, pp. 8-14); 2) Communication from the Commission — The recapitalisation of financial institutions in the current financial crisis: limitation of aid to the minimum necessary and safeguards against undue distortions of competition (OJ C 10, 15.1.2009, pp. 2-10); 3) Communication from the Commission on the treatment of impaired assets in the Community banking sector (OJ C 72, 26.3.2009, pp. 1-22); and 4) Communication from the Commission on the return to viability and the assessment of the restructuring measures in the financial sector in the current crisis under the State aid rules (OJ C 195, 19.8.2009, pp. 9-20). The latter is applicable until the end of 2010.

[28] For a more detailed analysis of the main notions of these communications and also for a deeper analysis of the context of the crisis please refer to previous editions of the Scoreboard, namely Autumn Scoreboard 2008, Spring special edition 2009, Autumn Scoreboard 2009 and Spring special edition 2010. Also see the Report on Competition Policy for 2009 - COM(2010) 282, 3.6.2010, pp. 4-11.

[29] Some banks may still give rise to liquidity concerns in view of ongoing restructuring and market uncertainties.

[30] See 2981st Council meeting, Economic and Financial Affairs, Brussels, 2 December 2009, 16838/09 (Press 352): http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/en/ecofin/111706.pdf.

[31] Staff working paper on the application of state aid rules to government guarantee schemes covering bank debt to be issued after 30 June 2010, http://ec.europa.eu/competition/state_aid/studies_reports/phase_out_bank_guarantees.pdf.

[32] See 3015th Council meeting, Economic and Financial Affairs, Brussels, 18 May 2010, http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/114495.pdf.

[33] In order to reflect the latest developments, the reference period for approved amounts and decisions taken in the context of financial crisis cases taken in this Scoreboard is from 1 October 2008 until 1 October 2010. Any differences with other Commission documents analysing the approved volumes of aid as guarantees can be explained by a different reference date.

[34] Blanket guarantee schemes were adopted in Denmark and Ireland.

[35] With some of these Member States having the highest GDP levels in the EU-27.

[36] For example, the maximum volume approved by the Commission in the United Kingdom is € 850 billion whereas the figure for Lithuania is € 1.74 billion.

[37] For more information on the distinction between approved volumes, actually used amounts and aid element, read Chapter 3 and the methodological notes in the Staff working document in annex.

[38] Please note that figures for 2008 actual use and aid element are different from the ones announced in the Autumn Scoreboard 2010 because of the data adjustments carried out by Member States (or proposed by the Commission), as for example in the case of Denmark where the figures for the scheme NN51/2008 were included into the year 2008.

[39] The take-up rate constitutes actual use of State aid measures since the beginning of the financial crisis in 2008 until 31 December 2009 relative to the total approved amount in this period. At this stage, the take-up rate cannot be calculated for 2010 as the Commission is not in a possession of the figures on actual use for 2010. These figures will be reported by the Member States in the 2011 Scoreboard exercise.

[40] In the absence of data of actual expenditure and/or estimations provided by Member States, in some instances Member States were asked to confirm estimations made by the Commission's services. For exact estimation methods applied, please refer to the Methodological notes.

[41] The monetary advantage when aid was granted in form of a guarantee or loan, for instance.

[42] Data on aid element is drawn from Member States' annual reports on State aid. For more information on distinction between actual use and aid element, exact definitions of aid element for each aid instrument (guarantees, recapitalizations and impaired assets) in regard of the financial crisis cases, please refer to the Methodological notes of the Scoreboard.

[43] Consolidated version of the Communication from the Commission – Temporary Framework, OJ C 83, 7.4.2009, p. 1; as amended by OJ C 261, 31.10.2009, p. 1, and OJ C 303, 15.12.2009, p. 6.

[44] Adopted in November 2008.

[45] Figure includes only measures that fall under aid to industry and services.

[46] 12 Schemes were granting aid of up to € 15000 for agricultural producers.

[47] Article 108 of the Treaty on the Functioning of the European Union; detailed provisions are contained in Council Regulation (EC) No 659/1999 of 22 March 1999 (OJ L 83, 27.3.1999, p. 1-9).

[48] See table 2 in Annex of Facts and figures on State aid in the EU Member States.

[49] In the following, block exempted aid includes aid granted under the expired block exemption regulations (BERs) which have been replaced by a consolidated text, Commission Regulation (EC) No 800/2008 of 6 August 2008 declaring certain categories of aid compatible with the common market in application of Article 87 and 88 of the Treaty (General Block Exemption Regulation, or GBER), (OJ L 214, 9.8.2008, p. 3). In addition, measures complying with Commission Decision of 28 November 2005 on the application of Article 86(2) of the EC Treaty to State aid in the form of public service compensation granted to certain undertakings entrusted with the operation of services of general economic interest (OJ L 312, 29.11.2005, p. 67), and with Regulation (EC) No 1370/2007 of the European Parliament and of the Council of 23 October 2007 on public passenger transport services by rail and by road and repealing Council Regulations (EEC) No 1191/69 and (EEC) No 1107/70 (OJ L 315, 3.12.2007, p. 1), are also exempt from the notification obligation.

[50] Also known as ' ad hoc ' aid.

[51] Commission Notice on a Simplified procedure for the treatment of certain types of State aid (OJ C 136, 16.6.2009, p. 3-12).

[52] Commission Communication on a Code of Best Practice for the conduct of State aid control procedure (OJ C 136, 16.6.2009, p. 13).

[53] Crisis measures excluded.

[54] Crisis measures excluded.

[55] Since that policy objective was introduced for block exemption in 2007.

[56] 197 cases.

[57] 19 cases.

[58] Period includes the first half of 2010.

[59] The Commission reports about recovery on a cumulative, mid-year basis.

[60] Commission Notice on the enforcement of State aid law by national courts (OJ C 85, 9.4.2009, p. 1).

[61] http://ec.europa.eu/competition/court/state_aid.html.

[62] http://ec.europa.eu/competition/publications/state_aid/national_courts_booklet_en.pdf .