EC To Investigate German Regional Aid Schemes

by Ulrika Lomas, for LawAndTax-News.com, Brussels

29 June 2006

The European Commission on Tuesday announced that it has opened a formal investigation into all German regional aid schemes, following Germany’s refusal to accept the Commission’s December 2005 guidelines on the application of EC Treaty state aid rules to national regional aid from 2007 onwards.

Regional aid granted by Member States after 1 January 2007 must comply with the new rules, and Member States were invited to close regional aid schemes operating under the old rules by 31 December 2006, the expiry date of the previous guidelines.

All Member States except Germany accepted the Commission’s new guidelines, which are in line with EU cohesion policy and European Council requests for less and better targeted state aid.

Competition Commissioner Neelie Kroes announced that:

“I am very pleased that 24 Member States accepted our proposal to end the application of their existing regional aid schemes by the end of this year, and to replace them by adjusted schemes as from 2007."

However, she added:

"I regret that Germany could not agree. By opening the formal investigation against Germany, the Commission has taken the first step to ensure that the same rules apply to firms in all Member States.”

On the basis of Article 87(3) of the EC Treaty, state aid granted to promote the economic development of certain disadvantaged areas within the European Union may be considered compatible with the Single Market.

In order to ensure the equal treatment of Member States and the transparency and predictability of its decisions, the Commission periodically establishes guidelines laying down the criteria for the assessment of such aid. The 1998 guidelines applicable to regional aid were replaced in December 2005 by a new set of rules, applicable for 2007-2013.

To ensure that all regional aid schemes are in accordance with the new guidelines, and to give Member States the opportunity to review their existing regional aid schemes, the Commission asked all Member States to phase out their existing schemes by 31 December 2006 and to adopt new schemes for 2007-2013.

While accepting large parts of the new guidelines, Germany objected to the obligation to phase out all existing aid schemes, especially as regards guarantee schemes.

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