EU State aid policy in the crisis situation

Over the last few years, the Commission has significantly modernised the State aid rules in order to encourage Member States to target public support better on sustainable investments, thus contributing to the Lisbon Strategy. In this context, particular emphasis has been given to SMEs, accompanied by more openings for granting State aid. In addition, the State aid rules have been greatly simplified.

General block exemption

A new General Block Exemption Regulation (GBER) of the Commission consolidates into one text and harmonises the exemption rules previously existing in five separate Regulations, and enlarges the categories of state aid fulfilling the conditions of compatibility outlined in Article 87(3) of the EC Treaty. The exemption means automatic approval by the Commission for aid in favour of SMEs, research, innovation, regional development, training, employment and risk capital. The Regulation also authorises environmental protection aid, aid measures promoting entrepreneurship, such as aid for young innovative businesses, aid for newly created small businesses in assisted regions, and measures tackling problems, like difficulties in access to finance, faced by female entrepreneurs.

By allowing Member States to grant such aid without first notifying the Commission, the Regulation encourages Member States governments to focus their state resources on aid that is of real benefit to job creation, environment protection and Europe's competitiveness, along the lines of the Lisbon strategy [see section 17.1.3]. The Regulation also reduces the administrative burden for public authorities and the beneficiaries, in line with the Commission's "Better Regulation" agenda and the ''Think small first'' principle [see section 17.2].

The GBER is indeed particularly important for SMEs, in that it provides for special rules on investment and employment aid exclusively for SMEs. In addition, all the 26 measures covered are open to SMEs, allowing Member States to accompany SMEs during the different stages in their development, assisting them in areas ranging from access to finance to research and development, innovation, training, employment, environmental measures, etc.

The GBER applies to transparent aid in all sectors of the economy except for fisheries and aquaculture, agriculture and coal, and except for regional aid in the steel, shipbuilding and synthetic fibres sector, and regional aid schemes targeted at specific sectors of economic activity. It does not apply to export-related activities or to preferred use of domestic over imported goods. It does not apply to ad hoc aid to large undertakings, with the exception of regional investment and employment aid.

In all regions of the EU, Member States may grant aid up to 20% of eligible costs for small enterprises and up to 10% of eligible costs for medium sized enterprises. Eligible costs are the costs of investment in tangible and intangible assets, or the estimated wages costs of employment directly created by the investment project, calculated over a period of two years.

Where the investment concerns the processing or marketing of agricultural products, the maximum aid intensity are the following:

·         75% in the outermost regions [see section 12.1.1];

·         65% in the smaller Aegean Islands;

·         50% in regions eligible under Article 87.3 (a) of the Treaty (areas where the standard of living is abnormally low or where there is serious underemployment);

·         40% in all other regions.

The GBER allows Member States to grant several types of employment aid up to certain thresholds, without prior notification to the Commission, notably in regions eligible for regional aid, to SMEs and for pure social policy considerations, i.e. for the recruitment of disadvantaged workers. It also allows Member States to grant both general and specific training aid to companies totalling up to 80% of the eligible costs. Aid measures not included in the GBER are not necessarily incompatible, but have to be notified to the Commission for clearance on a case-by-case basis.

Other rules facilitating State aid

Other Community rules now offer Member States a wide panoply of aid measures with minimum administrative burden.

Under the "de minimis" rule, aid of less than EUR 200 000 over three years and guarantees of up to EUR 1,5 million are judged not to affect trade between Member States and thus need not be notified to the Commission [Regulation 1998/2006].

Transparent aid granted to small and medium-sized agricultural holdings (farms) active in the primary production of agricultural products is exempted from the notification requirement [Regulation 1857/2006]. The de minimis rule applies in the agricultural sector, under certain conditions, to aid not exceeding €7500 per beneficiary over three years [Regulation 1535/2007].

Community Guidelines on State Aid to Promote Risk Capital Investments in Small and Medium-sized Enterprises set out the criteria the Commission applies in the compatibility assessment of the risk capital measures in accordance with Article 87 (3)(c) of the Treaty. The Guidelines cover risk capital schemes targeting only SMEs, as measures designed to provide or promote equity and/or quasi-equity financing to enterprises in their seed, start-up and expansion phases. In addition, aid for risk capital has been included in the General Block Exemption Regulation (GBER).

New Community guidelines on State aid for environmental protection authorise Member States to grant State aid for renewable energies and cogeneration, energy saving and reduction of green house emissions.

The Community framework for State aid for research and development and innovation encourages Member States to grant aid specially targeted at SMEs, job creation and innovation along the lines set out in the Lisbon Strategy [see section 17.1.3].

Under the existing Community guidelines on State aid for rescuing and restructuring firms in difficulty, Member States can also grant aid to companies justified, in particular, by social or regional policy considerations, by the need to take into account the beneficial role played by small and medium-sized enterprises (SMEs) in the economy or, exceptionally, by the desirability of maintaining a competitive market structure when the demise of firms could lead to a monopoly or to a tight oligopolistic situation.

According to the Guidelines on national regional aid for 2007-2013, regional aid may be granted under a multi-sectoral aid scheme which forms an integral part of a regional development strategy with clearly defined objectives. As a general rule, aid promoting the economic development of areas where the standard of living is abnormally low (Article 87, 3a) is considered as threatening to distort competition less than aid facilitating the development of certain economic activities which may adversely affect trading conditions within the common market (Article 87.3c). Hence, regions with less than 75% of the EU-25 average per capita GDP (i.e. disadvantaged regions) qualify for the highest rates of aid under Article 87, 3a, as well as for operating aid (regional aid aimed at reducing a firm's current expenses) [see section 12.1.1].

Temporary framework for State aid measures

As part of the European Economic Recovery Plan [see section 7.3], the Commission adopted, on 17 December 2008, a Temporary Community framework for State aid measures to support access to finance in the current financial and economic crisis. Without such a framework in the present circumstances, Member States could be tempted to wage a subsidy race to support their companies. The temporary additional measures provided for in the Communication of the Commission pursue two objectives: first, in the light of the exceptional and transitory financing problems linked to the banking crisis, to unblock bank lending to companies and thereby guarantee continuity in their access to finance. The second objective is to encourage companies to continue investing in the future, in particular in a sustainable growth economy.

The Commission Communication outlines a number of new measures as well as the temporary modification of some existing instruments. As regards the new measures, the Commission allows, under certain conditions, Member States to grant:

·         a lump sum of aid up to €500,000 per company for the next two years, to relieve them from current difficulties;

·         new aid for guarantees in the form of a reduction of the annual premium to be paid (-25% for SMEs, -15% for large companies);

·         new aid in the form of subsidised interest rates applicable to all types of loans;

·         new aid in the form of an interest-rate reduction for investment loans related to products which significantly improve environmental protection.

Concerning the temporary adaptation of existing guidelines, the following main simplifications have been put in place: a temporary derogation from the 2006 risk capital guidelines in order to increase the tranche (fraction) of finance per target SME (from €1.5 million to €2.5 million) and a reduction of the minimum level of private participation (from 50% to 30%).

Member States have to notify schemes to the Commission that fully comply with the above-mentioned types of aid, but they need not notify individual grants of aid.

Apart from the exclusion of agriculture and fisheries from the limited amount of aid that can be granted without notification, the Communication does not make any distinction between sectors for the above-mentioned types of aid. The temporary aid measures foreseen by this Communication may not be cumulated with aid falling within the scope of the de minimis Regulation for the same eligible costs. If already received, such aid should be deducted from the aid granted under the temporary measures.

As it is justified by the current exceptional and transitory financing problems related to the actual banking crisis, the temporary framework will be applied by the Commission between 17 December 2008 and 31 December 2010. After consulting Member States, the Commission may review this framework before that date on the basis of important competition policy or economic considerations.

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