EC Unveils Five Year State Aid Reform Plan

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

09 June 2005

The European Commission announced on Tuesday that it has adopted a State Aid Action Plan outlining the guiding principles for a comprehensive reform of state aid rules and procedures over the next five years.

In particular, the Commission revealed that it intends to use the EC Treaty’s state aid rules to encourage Member States to contribute to the Lisbon Strategy by focussing aid on improving the competitiveness of EU industry and creating sustainable jobs, on ensuring social and regional cohesion and improving public services.

The Commission also aims to rationalise and streamline procedures, so that the rules are clearer and less aid has to be notified, and to accelerate decision-making.

Competition Commissioner Neelie Kroes explained that:

“The state aid reforms outlined in the Action Plan aim to ensure Member States have a clear, comprehensive and predictable framework, so that they can provide state aid which contributes to cohesion, competitiveness and high quality public services. But before I make concrete proposals for change, I want to see the results of the broad consultation - including businesses, Member States and the European Parliament – that we are launching on the basis of this Action Plan.”

The State Aid Action Plan is based on the following elements:

• Less distortive and better targeted state aid, in line with the European Council’s repeated declarations, so that public money is used effectively to the benefit of EU citizens in terms of improving economic efficiency, generating more growth and sustainable jobs, social and regional cohesion, improving services of general economic interest, sustainable development and cultural diversity;
• A more refined economic approach, so that less distortive aid, particularly where money is less easily available from financial markets, can be approved more easily and quickly and so that the Commission concentrates its resources on the cases liable to create more serious distortions of competition and trade;
• More streamlined and efficient procedures, better enforcement, higher predictability and enhanced transparency. For example, Member States currently have to notify the Commission most of the state subsidies they want to give. The Commission proposes to exempt more measures from this notification obligation and to simplify procedures; and
• A shared responsibility between the Commission and Member States- the Commission cannot improve state aid rules and practice without the effective support of Member States and their full commitment to comply with their obligations to notify any envisaged aid and to enforce the rules properly.

Interested parties are invited to submit comments on the Action Plan until 15 September, after which detailed reform proposals will be presented.

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