No C 198/6 Official Journal of the European Communities 7. 8. 90 
STATE AID 
C 28/88 
(Italy) 
(Articles 92 to 94 of the Treaty establishing the European Economic Community) 
(90/C 198/03) 
Commission communication pursuant to Article 93 (2) of 
the EEC Treaty to other Member States and interested 
parties regarding the recapitalization of Dalmine, an 
Italian steel pipe and tube manufacturer, carried out in 
March 1988. 
In the following letter, the Commission informed the 
Italian Government of its decision to close the procedure 
initiated on 26 July 1988 (x). 
The Commission, having received the restructuring plan 
for the Italian public steel industry on 16 June 1988, 
proceeded to examine in detail the capital contribution 
of Lit 143 000 million from Finsider to its subsidiary 
Dalmine, a steel pipe and tube manufacturer. 
The Commission noted in particular that owing to 
Finsider's deteriorating financial position, it was unable 
to carry out this transaction itself. The Commission 
therefore considered that it was in fact the Italian State, 
the owner of Finsider, which was recapitalizing Dalmine. 
In view of the considerable and long-lasting overcapa­
cities which have characterized Community steel tube 
production since the early 1980s, and the financial losses 
incurred by Dalmine in 1986 and 1987, the Commission 
came to the preliminary conclusion that the operation in 
question comprises elements of State aid liable to be 
incompatible with the common market within the 
meaning of Article 92 of the EEC Treaty. Its views were 
based partly on the reserved opinion of independent 
experts on the future viability of Dalmine and partly on 
the fact that the public resources allocated to the 
operation exceeded the original holding. There was thus 
an indication that the capital contribution might not be 
acceptable to a private investor in a normal market 
economy. 
The Commission therefore initiated the Article 93 (2) 
procedure and informed the Italian authorities by letter 
No SG(88) D/9701 dated 9 August 1988. 
O OJ No C 306, 1. 12. 1988, p. 5. The Italian authorities submitted their comments by 
letter dated 27 October 1988, followed by a telex dated 
14 March 1989. As you are aware, the Commission was 
unable to accept the comments in view of the future 
viability of the undertaking which it continued to regard 
as uncertain. 
By letters dated 19 June 1989, 3 August 1989 and most 
recently 13 December 1989, the Italian authorities 
submitted further measures concerning industrial restruc­
turing and improved efficiency likely substantially to 
improve the financial results of the firm and its prospects. 
They concerned the closure of one steel plant in two, 
one mill in two for the production of large diameter 
tubes, a reduction in finishing capacity, further job 
reductions and improved productivity, subject to new 
investments. These measures were examined in detail by 
the Commission in the light of the current results of the 
undertaking. It concluded that, as a result of the restruc­
turing, Dalmine was once again a viable prospect. This is 
demonstrated by the good performance of Dalmine's 
shares on the Milan stock exchange in 1989 and 
afterwards. 
It was also stated that the public holding in the capital 
contribution in question had been reduced to the same 
percentage as the original holding, i.e. 81,65 %, the 
remaining 18,35 °/o being subscribed by private share­
holders. 
The Commission therefore considers that, in view of the 
changed circumstances, a private investor in a market 
economy would have provided the financing for the 
operation. It does not therefore comprise an element of 
State aid within the meaning of Article 92 (1) of the 
EEC Treaty. I therefore have pleasure in informing you 
that the Commission has decided not to object to the 
implementation of the operation. 
7. 8. 90 Official Journal of the European Communities No C 198/7 
The Commission, would, however, point out that, of the 
total amount of Lit 143 000 million, an advance of Lit 
117 000 million was awarded by Finsider to Dalmine in 
1988 in spite of the suspensory effect of the procedure 
provided for in Article 93 (2) of the EEC Treaty. The Commission very much regrets the failure of the 
Italian Government to comply with its obligations under 
the Treaty and must stress that the advance in question 
constitutes an illegal aid.