08 May 2012

Joaquín Almunia: Speech on State Aid modernisation

"The Commission has adopted today, on my initiative, a Communication on the Modernisation of our State aid policy. The aim of this Communication is to set out a broad, far-reaching and strategic reform package designed to help Europe’s governments foster economic growth.

But why a reform of State aid control now? There are several reasons.

First of all, as growth will remain sluggish in Europe in the near future, is urgent to enhance the growth potential of a broader and more integrated internal market, while making the best possible use of taxpayers’ money given the need to pursue fiscal consolidation in most of our countries. In this respect, state aid control has an important role to play.

Under the present circumstances, public support to firms is fully justified and needed provided it is efficient, well-designed and addresses a real market failure. This kind of aid can support R&D and innovation, can make access to finance easier for SMEs, can give the right incentives to broadband investment, can contribute to the funding the strategy against climate change or in favour of environmental protection, and can drive investment towards weaker regions. This is what I call "good aid". It does not crowd out investment and creates growth.

By contrast, we should discourage the “bad aid” that generates significant distortions of competition without bringing any real value added. Further, "bad aid" is a waste of taxpayer's money. Public support to non-viable businesses, for example, can become a “bottomless pit” for the taxpayer without any real benefit to the economy. This kind of aid also fails to provide incentives for companies to change their behaviour towards common objectives and becomes "free money" for those companies.

The way of the Commission's exclusive role in controlling state aid needs to be shifting from a mere case-to-case approach to move towards a more structured State aid “policy”. In other words, we can put our experience at the service of Member States to help them design their aid measures in the most effective way, while at the same time preserving a level-playing field in the internal market and avoiding damaging “subsidy races” between Member States.

There are several ways to achieve this. For example I would like to explore the possibility to use the experience we developed in state aid control to better contribute to recommendations addressed to Member States in the coming round of the European Semester. Therefore, through this initiative it is my intention to modernise and develop state aid control and use it as a tool to better focus and coordinate our common efforts towards economic growth and the achievement of the priorities of our Europe 2020 Strategy.

How will the proposed reforms change our policy in practice? First, we plan to revise now until end of 2013 the sectoral guidelines related to the main objectives of the Europe 2020 strategy for growth and better link them with the Financial Framework of 2014. This will be based on the definition of common principles applicable across the board to all state aid, developing the Treaty rules. In particular, we will review the Regional guidelines, the Environmental guidelines, the Risk Capital guidelines, and the guidelines for Research, Development and Innovation. On the other hand, we will review our rules on the Rescue & Restructuring of firms, both financial and non-financial.

Second, I intend to better focus our control in the cases that have a more significant impact on the internal market. This means that we will strengthen our scrutiny of large and potentially distortive aid and – at the same time – simplify the analysis of cases with a limited effect on trade within the internal market. To this end, we are planning to review the regime of exemptions, in particular the General Block Exemption Regulation, the Enabling Regulation, and, if necessary, the de minimis Regulation to simplify and speed-up the treatment of the cases with limited impact. The Procedural Regulation will also be updated so that we can handle the complaints that we receive (about 300 complaints per year) in a way that is consistent with our overall priorities.

Finally, the reform package will also produce a fewer, clearer and more rational set of rules for State aid control that will result in less red tape and faster decisions. This will make our implementation easier for public authorities across the EU and will ultimately benefit the businesses and citizens that are entitled to receive their support.

I want to stress that this simplification effort and refocus of the Commission’s work can only become possible if Member States improve the quality and timeliness of their submissions and ensure compliance with EU rules. The record of Member States in this respect is sometimes far from satisfactory. While Member States must strengthen their own mechanisms to ensure compliance, especially when aid is exempted from ex ante notification, the Commission will also reinforce its own ex-post control. This has been asked by the Court of Auditors.

The policy-making process has started in earnest today with the adoption of the communication by the European Commission. In the next few months we intend to work intensively with stakeholders in a broad dialogue and to start the negotiations with the national authorities. Commission proposals for the Procedural and Enabling regulations should be adopted during fall 2012. Various public consultations on the revision of state aid rules will take place before the end of 2012. By the end of next year, the main elements of the package should be in place."

Full speech

SAM initiative

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