EN    EN  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 16.11.2004 
COM(2004)750 final 
  
REPORT  
State Aid Scoreboard 
 
- autumn 2004 update – 
(presented by the Commission) 
 
EN 2   EN TABLE OF CONTENTS 
Executive Summary .............................................................................................................. ..... 4 
Introduction ................................................................................................................... ............. 9 
1. Part One: State aid in the ten new member states ...................................................... 11 1.1. The economic context prior to accession................................................................... 11 1.2. Enlargement process .................................................................................................. 13 1.3. Overview of the State aid situati on in the ten new Member States ........................... 17 
2. Part Two: Follow-up to the C ouncil conclusions on State aid................................... 29 
2.1. Brief summary of the Council conclusions on State aid............................................ 29 2.2. Member States response to the Council conclusions ................................................. 30 2.3. Improving the effectiveness of aid............................................................................. 32 3. Part Three: Modernisin g State aid control ................................................................. 36 
3.1. Adoption of a pro-active competition policy ............................................................. 36 3.2. Review of the regi onal aid guidelines........................................................................ 36 
3.3. Services of General Economic Interest (SGEI) ......................................................... 37 3.4. Review of the rescue and restructuring guidelines .................................................... 38 3.5. State aid for innovation .............................................................................................. 38 3.6. State aid to cinema ..................................................................................................... 40  
3.7. Improving current procedures and working methods ................................................ 40 3.8. State aid to the agricultural sector.............................................................................. 40 3.9. State aid to the fisheries sector................................................................................... 41 
3.10. State aid to the transport sector .................................................................................. 41 3.11. De minimis aid to the coal sector............................................................................... 42 4. Online State aid scoreboard and register.................................................................... 43 5. Methodological notes................................................................................................. 44 Annex I: Transitional arrangements provi ded for in the Treaty of Accession......................... 45 
Annex II: Country Profiles..................................................................................................... .. 46 
Cyprus ........................................................................................................................ ............ 46 
Czech Republic ................................................................................................................. ....... 49 
Estonia ....................................................................................................................... ............. 53 
 
EN 3   EN Hungary ....................................................................................................................... ............. 55 
Latvia ........................................................................................................................ ............ 59 
Lithuania...................................................................................................................... ............. 61 
Malta ......................................................................................................................... ........... 63 
Poland ........................................................................................................................ ............ 66 
Slovenia ...................................................................................................................... .............. 69 
Slovak Republic ................................................................................................................ ....... 72 
Bulgaria ...................................................................................................................... .............. 74 
Romania ........................................................................................................................ ........... 74 
Annex III: Follow-up to Council conclusions on State aid...................................................... 75 
 
EN 4   EN EXECUTIVE SUMMARY  
The entry of eight central and eastern European countries together with Cyprus and Malta into 
the European Union has brought an additional 74  million citizens to form a single market of 
some 450 million people. The ten newcomers joined formally on 1 May 2004, the culmination 
of a long process of preparation and negotiation.  
Part One: State aid in  the new Member States  
(1) Transition to market economies … stro ng economic growth but still lagging 
behind 
During the 1990s, the eight Central and Eastern European countries u nderwent a difficult 
transition from centrally planned to market economies. Despite the considerable progress 
made in restructuring their economies - GDP grow th in these countries has been consistently 
higher than for the EU-15 as a whole between 1995 and 2003 - th e level of economic wealth 
remains, in general, much lower than in EU -15. In 2003, GDP per cap ita (PPS) in the eight 
Central and Eastern European countries1 as a whole was less than 55% of that of EU-15 
although there are significant differe nces among the new Member States. 
(2) EU competition policy, including State ai d control, was a key component of the 
enlargement process 
As State aid control plays a key role in  creating a well-functi oning economy, effective 
application and enforcement of such a polic y was therefore a crucial component of the 
enlargement process. In practice, before join ing the Union, each of the new Member States 
had to establish a State aid mon itoring authority which screened awards of State resources to 
determine whether or not they constituted Stat e aid as defined under Article 87 of the Treaty 
and whether they were compatible with th e common market. Where identified State aid 
measures were deemed to be incompatible with  the EU acquis, countries  had to either adapt 
them to Community standards, or abolish them or gradually phase them out. By mid-2002, the 
Commission was satisfied with the progress achi eved in each Member State and consequently 
the accession negotiations were concluded in December 2002. 
(3) Screening of measures proposed by the new Member States as “existing aid” 
In order to prevent incompatible aid from be ing “imported” into the EU on the date of 
accession, a system was set up to examine measures which were put into effect in the Acceding Countries before 1 May 2004 and were st ill applicable after that date. This was 
known as the “existing aid” mechanism. The purpose of this mechanism was to provide 
Acceding Countries and economic operators with le gal certainty as regards State aid measures 
that are applicable after the date of accession. Th e system applies to Stat e aid in all sectors, 
except for the transport and agricultural sect ors, for which different provisions apply. 
During the first phase of the existing aid mechanism in 2002, some 222 measures were 
approved by the Commission and listed in the Treaty of Accession. During the second phase, 
the so-called interim procedure, by Se ptember 2004 the Commission had approved 278 
                                                
 
1 In  Cyprus and Malta the comparable figures in 2003 were 78% and 69% respectively 
 
EN 5   EN measures as existing aid. A significant number of measures were submitted right up to the day 
of accession. This is reflected in the 106 measur es that the Commission is still assessing. In 
addition to existing aid, ther e are also ongoing payments af ter accession under a series of 
transitional arrangements laid down in the Treaty of Accession. These arrangements which 
aim to address specific problem areas of the new Member States are limited in scope and 
duration.  
(4) Different provisions apply to existing aid in the agricultural and transport sectors 
According to the Treaty of Accession, aid measures  in the agricu lture and trans port sectors, 
put into effect in a new Member State before th e date of accession and still applicable after 
that date, were regarded as ‘existing aid’  only if the measure was communicated to the 
Commission as 'existing aid' within four mont hs of the date of accession, i.e. by 31 August 
2004. These measures enjoy the protection of an ‘existing aid’ until the date of a so-called 
‘sunset clause’. In effect, the new Member States have until the end of April 2007 to ensure compatibility of those measures with the re quirements of Community State aid rules.  
(5) Annual average of €5.7 billion State aid awarded prior to accession in the new 
Member States 
Total State aid
2 granted by the ten new Member States  during the four-year period prior to 
accession was estimated on average at €5.7 billion per year. The comparable figure for EU-15 
in 2002 was €34 billion. In absolute terms, the th ree biggest countries in terms of population, 
awarded the most aid: Poland (an annual aver age of €2.4 billion) the Czech Republic (€1.9 
billion) and Hungary (€0.57 billion). Together th ey accounted for 86% of total aid in the ten 
new Member States. 
During the period under review, the level of State aid increased each year from €4 billion in 
2000 to €7.8 billion in 2003. The increase was caused by very la rge awards of aid in 2002 to 
the Czech banking sector (€2.4 billion) and in 20 03 to the Polish coal sector (€3.9 billion). 
(6) Prior to accession, the majority of new Member States tended to grant more aid 
as a percentage of their GDP than the EU-15 average …  
For the ten new Member States as a whole,  State aid amounted to  1.42% of GDP over the 
period 2000-2003. This is significantly higher than the EU-15 average of 0.4% in 2002. 
However, if certain measures which are in the process of being phased out are excluded, the average for the new Member states dr ops to 0.67% (see next paragraph).  
(7) … though large disparities exist between the new Member States 
Prior to accession, there were large dispar ities between the new Member States: Malta 
(3.86%), Cyprus (2.85%) and Czech Republic (2.80%) reported aid levels, as a percentage of GDP, well above the average. These relatively hi gh proportions of State aid do not necessarily 
reflect a more lax attitude to State aid control in these countries. Instead, each appears to have 
had its own country-specific s ituation. Faced with  a general banking crisis, the Czech 
Republic paid out €2.4 billion in 2002 in the form  of guarantees in order to restructure and 
subsequently privatise several banks . In Cyprus, aid was mainly granted through tax relief 
under the International Business Enterprises Ac t (almost 60% of total aid over the period 
                                                
 
2 Total State aid less agriculture, fisheries and transport 
 
EN 6   EN 2000-2003). In Malta, restructuring aid to shipbu ilding and the ship repair sector accounted 
for around 50% of total aid. All of the above measures are either being phased out under 
transitional arrangements or limited in time. If the aid amounts given und er these types of aid 
measures are excluded, a different picture emer ges: the overall level of state aid drops to 
0.67% of GDP for the ten new Member States and to 2.08% in Malta, 0.82% in Cyprus and 
0.47% in the Czech Republic. 
In contrast, the three Baltic States had by far the lowest shares: Estonia (0.11%), Lithuania 
(0.24%) and Latvia (0.26%). Moreov er when aid is expressed in per capita terms, a slightly 
different picture emerges with the Slovak Republic joining the three Baltic states below the 
EU-15 average of 94 PPS per person. Furthermor e, Slovenia and Hungary lie only slightly 
above the EU average. 
(8) Support for the Lisbon objectives … th ough situations specific to the new 
Member States may lead to a decrease in aid levels fo r some and an increase for 
others 
In the context of reducing and redirecting aid, it is somewhat premature to draw any 
conclusions due to the structural problems of the economies and the general macro economic 
environment in which the new Member States were operating prior to  accession. Moreover, 
for a variety of reasons, an accurate forecast of future expenditure le vels is not possible. 
Nevertheless, the available data do show that fo r some new Member States, a large part of the 
aid awarded in 2003 was through measures that did not continue after accession. For others, 
the data show that a signifi cant proportion of total aid wa s awarded under a transitional 
arrangement. This implies that aid levels are likely to remain relatively high up to the end of the transitional period but will probably decrease in the long term. On the other hand, there is 
clearly no indication as to what extent the new Member States inte nd to introduce new aid 
measures in the coming years. Furthermore, given that the European Structural funds are 
subject to the so-called “additionality” princi ple, some new Member States have already 
indicated that overall State aid levels are likely to increase, at least in the short-term. 
(9) Share of pre-accession aid to horizontal  objectives was low but 95% of the 
existing aid measures are earmarked for horizontal objectives 
In the context of redirecting aid, prior to accession, aid granted for horizontal objectives
3 
accounted for around 22% of total aid in the new Me mber States. This share is rather low in 
comparison to 73% in the EU-15 Member States  in 2002. The disparity can be explained in 
part by the relatively strong suppor t of several industrie s (e.g., financial sect or, coal and steel) 
before accession in the context of privatisation or to ensure viability. However, it is encouraging to note that 475 of the 500 ai d measures qualifying as existing aid upon 
accession are earmarked for horizontal objectives although this figure overestimates the share of horizontal aid measures for a number of reas ons. In particular, individual aids were less 
likely than schemes to be “applicable after” ac cession so they were less  likely to come under 
the interim mechanism. In addition, the new Memb er States could not ma ke use of the block 
exemption regulations, so that all such measur es, which by their nature fall under horizontal 
objectives, came under the interim mechanism. 
                                                
 
3 Including aid for cohesion  objectives (regional aid) 
 
EN 7   EN (10) Relatively high share of sectoral aid prior to accession though considerable 
variation among the new Member States 
In the period 2000-2003, around 78% of State aid in the new Member States was earmarked 
for the potentially more distortive types of aid su ch as sectoral aid including aid to rescue and 
restructure firms in difficulty. There were large disparities between countries in the share of 
sectoral objectives ranging from around 50% or le ss of total aid in Latvia and Slovenia to 
80% or more in Lithuania, the Czech Republic and Malta. In Estonia,  no aid was earmarked 
for sectoral objectives. 
The financial sector rece ived the most support in  these years (27%), due almost entirely to the 
legacy of a general banking crisis in the 1990s in the Czech Republ ic. A further 26% was 
directed towards the manufacturing sector4, 24% for coal (mainl y in Poland) and the 
remainder (1%) split between other non- manufacturing and service sectors. 
(11) In contrast to the EU average, severa l new Member States tended to award aid 
through tax exemptions and guarantees rather than grants 
For the new Member States as a whole, guarantees were the most frequently used form of aid 
instrument making up 41% of total aid ove r the period 2000-2003. This average, which 
dwarfs the EU-15 average of 3%, may be misl eading as it is due almost entirely to the 
relatively large proportion of gua rantees given to banks in the Czech Republic (78% of total 
aid). Elsewhere, Cyprus, the Slovak Republic and Hungary made widespread use of tax 
exemptions (60% or more of total aid) whil e Estonia, Slovenia and Lithuania tended to use 
grants (40% or more).  
Part Two: Follow-up to Council conclusions (Lisbon process)  
(12) EU-15 Member States responding positi vely to call for less and better aid 
Starting with the Lisbon agenda in 2000 which launched the process of  reducing the general 
level of State aids and shifting the emphasis from supporting individual companies or sectors 
towards tackling horizontal objectives of Co mmunity interest, the Council has adopted a 
series of Council conclusions on State aid. As a response to these conclusions, the 
Commission holds an annual meetin g with State aid experts from the Member States to take 
stock of the Commission’s and Member States efforts to follow-up the conclusions and to 
discuss future work in the area of reduction, re orientation, and measuring effectiveness of aid.  
The latest meeting was held in  July 2004 on the basis of writte n contributions received from 
over twenty Member States detailing recent step s taken to follow-up the conclusions. The vast 
majority of Member States attributed progres s in reducing and redir ecting aid to explicit 
policy efforts. For example, a number of Me mber States including Belgium, Denmark, 
Sweden and the United Kingdom reported that they have placed greater emphasis on 
improving the general business environment, streamlining and rationalising their business 
support schemes and directing support away fr om ‘State aid’ towa rds general measures. 
Others such as France and Germany have opted for budgetary restrictions as a way of meeting 
the commitment to reduce State aid. 
                                                 
4 This figure excludes aid earmarked for the manufacturing sector which also had a horizontal objective 
 
EN 8   EN Several Member States also referred to steps taken to rationalise and improve the organisation 
of state aid at national level th rough a variety of institutiona l changes, legislation, improved 
coordination, better targeting of aid, greater emphasis on e fficacy of aid, strengthening 
awareness and improving transparency. While ma ny of these steps are aimed primarily at 
facilitating access to government by business a nd trying to ensure better value for public 
money, they may also assist in  reducing and redirecting aid. 
Part Three: Modernising State aid control  
(13) In the context of a pro-active compet ition policy, the Commission intends to 
refocus State aid policy so as to eliminat e the most distortive aid while allowing 
Member States more scope to support the Lisbon objectives 
In April 2004, the Commission adopted a Comm unication entitled “A pro-active Competition 
Policy for a Competitive Europe”. In the field of State aid, the reforms already undertaken and those on-going aim at refocusing State aid policy towards a more economic-based 
approach with the purpose of eliminating harmfu l State aid, while leaving the Member States 
with more flexibility to adopt horizontal meas ures to support, in pa rticular, the Lisbon 
objectives. More specifically, in 2005-2006, a large number of  the Commission’s existing 
regulations, frameworks and guidelines come  up for renewal including all the state aid 
exemption regulations, the regional aid gu idelines, the framework for research and 
development aid and the risk capital communica tion. The environmental aid guidelines expire 
at the end of 2007. These factors, together w ith the beginning of a new programming period 
for the Community’s structural funds in 2007, provide an unprecedented window of opportunity for a comprehensive review of the hori zontal State aid rules to take account of the 
horizontal, and particularly Lisbon, objectives, and the new cohesion policy set out in the 
forthcoming Structural Funds regulations, as we ll as to consolidate, and wherever possible 
simplify the rules. 
 
EN 9   EN INTRODUCTION  
This update of the State Aid Scoreboard attempts  to present the state aid situation in the new 
Member States over a four-year period prior to accession. It draws on material provided by 
each of the new Member States in the contex t of a major inventory and data gathering 
exercise in 2004 as well as the annual report s on State aid transmitted by the then Candidate 
countries in accordance with the Europe Agreements.  
A similar but more modest attempt to focus on the Candidate countries was made in the 
autumn 2002 edition of the Scoreboard. While cau tion should still be ex ercised in comparing 
the ten new Member States with one another an d the EU-15 average, comparability has been 
greatly enhanced. For example, the Commission has now been monitoring the situation in the 
new Member States for several years. In the context of the Treaty of Accession and the 
interim mechanism procedure for existing aid, it  has examined several hundred measures in 
the ten new Member States. Furthermore, th e national authorities in each country have 
become much more familiar with the concepts of State aid control and transparency. By looking at the annual average amount of aid ove r a four year period prior to accession (2000-
2003), the Scoreboard therefore gi ves an important and relatively  accurate insi ght into the 
overall state aid situation in each of the new Member States upon accession. 
Nevertheless, disparities between countries sti ll exist and may be explained by the timing and 
extent to which each then Candidate country adapted to a competition discipline by adopting 
national legislation, based on the Community  acquis, and set up State aid monitoring 
authorities charged with enforcing the rules. Moreover, given that the focus is on the period 
post-2000, it is important to bear in mind that Stat e aid levels tended to fluctuate considerably 
around this time, e.g., a number of countries aw arded much larger volumes of aid in 1998 and 
1999, often in the context of restructuring or  privatisation of na tional industries.  
This autumn update of the Scoreboard has thr ee main parts. Part One, which is split into 
several sections, focuses on the ten new Memb er States: the first section describes the 
enlargement process beginning with the transi tion from state-planned to market-oriented 
economies undertaken by the eight Central a nd Eastern European countries, through the 
negotiation process, and ending with the assessmen t of aid measures carried out initially by 
the national monitoring authorit ies and then by the Commissi on in the context of approving 
existing aid measures for the post-accession peri od. The second section then attempts, with all 
the necessary caveats, to compare the new Member States with one anot her and also vis-à-vis the 
EU-15 average. It looks at the overall level of aid, the sectors to which aid is directed and the use 
of various aid instruments. Finally, Annex II incl udes a country-specific profile outlining the 
state aid situation for ea ch new Member State.  
Part Two looks at the steps undertaken by both  the Commission and Member States to follow 
up the various Council conclusions on State ai d. Finally, part three summarises ongoing work 
to modernise State aid control includi ng efforts to support aid for innovation.  
The spring 2004 update of the Scoreboard
5 provided an overview of th e State aid situation in 
the Union and examined the underlying trends based on the latest avai lable data (2002). The 
                                                 
5 COM(2004) 256 final of 20.04.2004 
 
EN 10   EN spring 2005 update will cover the year 2003 and include a section on the financing of public 
service broadcasters. 
In addition to this paper editi on, a permanent online Scoreboard 
(http://europa.eu.int/comm/comp etition/state_aid/scoreboard/ ) consisting of a series of key 
indicators and a range of statistical informati on for the EU-15 Member States was launched in 
2002.  
Conceptual remarks 
Insofar as it was possible, the data in this Score board have been harmonised by applying the same 
methodology as that used for the EU-15 Member Stat es in previous Scoreboards. In principle, this 
Scoreboard covers State aid as de fined under Article 87(1) EC Treaty6 that was granted by the new 
Member States prior to accession in the period 2000-2003. All aid measures approved under the 
interim mechanism for existing aid were examined by the Commission. However, the data also include 
aid measures implemented prior to accession that were assessed only by the national State aid 
monitoring authorities to determine whether or not they constituted State aid as defined under Article 
87(1). For some countries, the data include some me asures that were incompatible. Furthermore, some 
categories of aid may not have been reported to the same extent by all countries. For example, certain 
types of restructuring aid which consist of post poning and, in some cases, the waiving of liabilities 
such as tax arrears, are particularly difficult to measure. It is also worth noting that while some 
countries include State aid granted by local govern ment, others may include aid granted only by 
central government. As a result, the scope and quality of the data in this Scoreboard may vary from 
one country to another. 
General measures and public subsidies that have no a ffect on trade and do not distort or threaten to 
distort competition are not included in the Scoreboard. The distinction between State aid measures and 
general economic support measures should be borne in  mind when interpreting the data. For example, 
the share of State aid allocated to each horizontal ob jective such as employment or training may vary 
considerably from one Member State to another. Th is does not however mean that public expenditures 
on these activities are so different. Instead, some  Member States may support these particular 
objectives through general economic support measur es. Also excluded from the Scoreboard is 
Community funding provided to the new Member States prior to accession7 as well as all aid 
compensating for the provision of services of general economic interest (SGEI)8 and de minimis aid9.  
The new Member States were not required to report aid expenditure for the agricultural and fisheries 
sectors, which were covered by other chapters in the Europe Agreements. There are no comparable 
data either for the transport sector for the pre-accession period. These sectors are therefore dealt with 
in separate sections under 1.3.6.  
Additional remarks of a more technical nature are included under methodological notes (Section 5).  
The above text is without prejudice to the jurisprudence of the Court. 
                                                 
6 A measure constitutes state aid if it is granted by a Member State or through State resources, it distorts 
or threatens to distort competition, it favours certai n undertakings or the production of certain goods, 
and it affects trade between Member States. 
7 The EU's financial planning for 2000 to 2006, adopted by the Berlin European Council in March 1999, 
included €22 billion devoted to 'pre-accession assist ance' for infrastructure and institutio n-building 
(PHARE), environmental and transport infrastructur e (ISPA) and rural development (SAPARD) in the 
applicant countries. 
8 See p8 of State aid Scoreboard spring 2004 update, COM (2004) 256 of 20.04.2004 
9 Under the de minimis  rule, aid to an enterprise that does no t exceed the threshold of €100 000 over any 
period of three years is not consid ered State aid within the meaning of  Article 87(1) of the Treaty and is 
therefore not subject to the notification ob ligation as regards the EU Member States. 
 
EN 11   EN 1. P ART ONE: STATE AID IN THE TEN NEW MEMBER STATES  
1.1. The economic context prior to accession 
Any analysis of the State aid situation in the new Member States prior to accession needs to 
take account of the transition from centrally planned to market economies that took place in 
eight of the countries during the 1990s10. Below is a short descripti on of that process as well 
as a brief overview of the economic situ ation in the ten new Member States. 
1.1.1. The role of subsidies in centrally planned economies 
Prior to transition, subsidies were widely used  in Central and Easter n European countries 
(CEEC). In centrally pl anned economies, subsidies were an integral part of the system and 
were used to connect state budget and quantitativ e plans. Quantitative plans were made by 
governmental planning authorities, which determ ined what kind of goods and services, how 
much, when and where to produce.  Planners also decided the ‘s ocially desirable’ prices of 
goods and services. Thus prices did not refl ect the real cost of production of goods and 
services and led many enterprises to experience pe rsistent losses or large profits which in turn 
were systematically corr ected with budgetary subs idies or taxes. As the production cost varied 
from one enterprise to another, the subsidies an d tax rates also varied and therefore contained 
enterprise-specific elements.  
1.1.2. Transition from centrally planned to market economies 
During the transition process from state-pla nned to market-oriente d economies, the CEEC 
countries began to try to reduce their budgetary subsidies and move towards a liberalization of 
prices. Prices were permitted to reflect market-clearing levels in almost all manufacturing sectors. Only in some sectors, such as tran sport and housing, did prices  remain under control. 
Almost all budgetary subsidies to enterprises in price-liberalized  sectors were abolished. In 
addition, taxes on profit were harmonized, tur nover taxes were rationalized and ad hoc 
exemptions largely eliminated.  
Large-scale changes in the economic environmen t created disturbances  in the economy. Most 
of the state-owned enterprises were faced with  serious difficulties such as a decrease in 
domestic demand due to import liberalization, a d ecrease in exports due to  the collapse of the 
Council for Mutual Economic Assistance
11, liquidity problems due to insolvency of trading 
partners in the former USSR, and rapidly risi ng interest rates. These problems caused a chain 
effect among enterprises and creat ed high inter-enterpris e debts. Furthermore,  there was a risk 
of a significant rise in unemployment.12 
Faced with these circumstances, the governments of  transition countries were forced to help 
companies to survive. This resulted in fina ncial support being aw arded to state-owned 
companies although on a number of occasions th is merely postponed a bankruptcy because a 
                                                 
10 This applies to the eight Central and Eastern European countries, not to Cyprus and Malta. 
11 The Council for Mutual Economic Assistance was organisation created in 1949 for co-ordination of 
economic planning in soci alist states worldwide. 
12 In centrally planned economies, many companies enjoyed a monopoly or o ligopoly position and any 
bankruptcy would create difficulties also for severa l suppliers which depended on the monopoly or 
oligopoly. 
 
EN 12   EN proper restructuring did not take place. While th is inevitably caused some difficulties with the 
overall transition process, it should be noted that, before the Europe Agreements, subsidy 
levels were limited by the relatively low state b udgets as most transition countries tried to 
rationalize taxes and public finances. In most  cases, governments supported enterprises only 
to the extent needed to help them overcome di fficulties or until privatization of state-owned 
enterprises.  
With regard to privatisation, c ountries have tended to use a mix of different methods such as 
auctions or public tenders, management and em ployee buyouts, restitution to former owners, 
mass or voucher privatizations, et c. The problem in transition ec onomies was that the stock of 
private savings was too small to purchase the indus trial assets with fair prices. Thus the state 
also supported entrepreneurs by selling industrial assets with very low prices. In many cases, 
however, privatizations of stat e-owned enterprises were open also to foreign investors, who 
were able to pay higher prices  for the industrial assets. More over, foreign investors brought 
new managerial knowledge and competences, poten tially leading to imp roved efficiency. In 
cases where a privatization failed and where rest ructuring of the enterp rise would not ensure 
its long-term viability, governments often opted  for liquidation. This involved declaring the 
enterprise bankrupt and selling off the asse ts to new owners during the liquidation.  
1.1.3. Economic indicators in the new Member States  
Despite the fact that the Central and East ern European accession countries have made 
considerable progress in restructuring their ec onomies, the level of economic wealth remains, 
in general, much lower than in EU-15. In 2003,  the GDP per capita (PPS) in the eight Central 
and Eastern European countries was less than 55% of that of EU-15. This average however 
masks significant differences among the new Me mber States ranging from 39% in Latvia to 
70% in Slovenia13.  
Even though living standards in the new Member States remain lower, GDP growth in these 
countries has been consistently higher than for the EU-15 as a whole over the last nine years 
(Graph 1). In 2003, GDP growth rates were highe r in every new Member State than the EU-
15 average except in Malta. The highest GDP grow th rates were in Lithuania (9%), Latvia 
(7.5%) and Estonia (5.1%) while the lowest rates were in Sl ovenia (2.5%), Cyprus (2%) and 
Malta (-0.1%). 
                                                 
13 The corresponding figures for  Cyprus and Malta in 2003 were 78% and 69% respectively. 
 
EN 13   EN Graph 1: GDP at constant prices, grow th rate, new Member States and EU-15 
0123456
1995 1996 1997 1998 1999 2000 2001 2002 2003
YearGrowth rate (%)EU-15
New MS
 
Source: Eurostat, Statistics in focus, 17/2004 
1.2. Enlargement process 
Compared to EU-15 Member States, the gove rnments of Central and Eastern European 
(CEEC) transition countries previously had more  flexibility and freedom to grant aid to 
enterprises because they were not bound up by stat e aid rules. A new decade started in the 
mid-1990s14with the Europe Agreements15, which provided a new fr amework for trade and 
related matters between the Union and each CEEC. Under the Agreements, the partner 
countries committed themselves to approximating th eir legislation to that of the EU, including 
the main substantive competition rules which a pplied in areas where trade between the EU 
and a CEEC was affected. 
The Copenhagen European Council in 1993 defined the criteria which applicants had to meet 
before they could join the EU. Among the requi rements were the existence of a functioning 
market economy and the capacity to cope with competitive pressures and market forces within the EU. As State aid c ontrol plays a key role in creating a well-functioning market 
economy, effective application and enforcement of such a policy was therefore a crucial 
component of the enlargement process. The accession negotiations, which opened in 1998, 
determined the conditions under which each applicant country joined the EU. The negotiations focused on the terms under which th e applicants had adopted, implemented and 
enforced the acquis ", i.e. the detailed laws and rules adopted on the basis of the EC Treaty, 
and the granting of transitional arrangements which had to be limited in scope and duration. In practice, each of the new Member States had to establish a State aid monitoring authority 
which screened awards of State resources to determine whether or not they constituted State 
aid as defined under Article 87 of the Treaty a nd whether they were compatible with the 
common market. Where identified State aid measur es were deemed to be incompatible with 
the EU acquis, countries had to either adapt them to Community standards, or abolish them or 
gradually phase them out. 
                                                
 
14 The Europe Agreement came  into force at different times throughout the course of the 1990s: 1994 – 
Hungary and Poland; 1995 – Bulgaria, Czech Republic, Romania, Slovak Republic; 1998 – Estonia, 
Latvia, Lithuania; 1999 – Slovenia. Association Agreements were also in force with the two other new Member States, Cyprus and Malta. 
15 The full text of the Europe Agreements with Cent ral and Eastern European co untries can be found on: 
http://www.europa.eu.int/comm/enlargement/pas/europe_agr.htm 
 
EN 14   EN Progress in the area of State aid tended to be much slower than  in the antitrust field, and it 
was not until the years 2000 and 2001 that a real  State aid discipline began to emerge. 
Companies (including public undertakings) needed to adjust to operating without distortive 
forms of State aid and public bod ies involved in the granting of aid had to get used to State 
aid discipline, including ex ante notification procedures. The clos ure of the negotiations was a 
consequence of the satisfactory efforts undertaken  to adopt appropriate legislation, to set up 
relevant authorities to ensure implementatio n as well as to demonstrate a credible 
enforcement record of the State aid rules. The ne gotiations with regard to all countries, except 
Bulgaria and Romania, were concluded at the European Council in Copenhagen in December 2002 and the Treaty of Accession was signed in Athens in April 2003. The autumn 2002 update of the State aid Scoreboard provides a more detailed overview of the enlargement 
process and negotiations. See also  country profiles (Annex II). 
1.2.1. Transitional arrangements 
Requests for transitional periods were approached with the aim of preserving the integrity of 
the internal market after enlargement, while at  the same time trying to  constructively address 
specific problem areas in the new Member Stat es. For instance, where identified State aid 
measures were deemed to be incompatible with the acquis , countries were at  first instance 
required either to abolish these measures or align them. In some rare cases, special limited 
transitory arrangements were agreed.  
Two types of aid measures proved particularly demanding. The first group consisted of fiscal 
aid regimes incompatible with Article 87 of  the EC Treaty ranging from tax breaks, tax 
holidays and tax credits that are used to attract foreign investments, to off-shore arrangements. A second important issue concer ned aid used to bail out ailing industries, 
consisting of, for example, tax arrears or loan guarantees. 
The negotiations on transitional arrangements we re conducted on the basis of the principle 
that they must be strictly limited in scope  and duration. Estonia, Latvia, Lithuania and 
Slovenia did not request any transitional arra ngements. Annex I presents the other six 
countries’ transitional arrangements in some detail. 
1.2.2. The role of the national monito ring authorities pre- and post accession 
As stated under section 1.2, the Europe Agreemen ts obliged the Acceding States to ensure the 
effective functioning and enforcement of a stat e aid monitoring system in their jurisdiction. 
The Acceding States were however free to ch oose the appropriate body to carry out the 
various tasks associated w ith such a system. By 2000
16, each country had set up its own state 
aid monitoring authority, often operating within the Ministry of Finan ce (see country profiles 
in Annex II for details). It is worth noting that the requirement to set up such an authority has 
no precedent and indeed not all EU-15 Member States have one. 
From the date of accession, the competence to  monitor state aid was transferred from these 
national monitoring authorities to the European Commission. Ne w Member States are thus 
required to notify new aid measures to the Co mmission. As with the current Member States, 
                                                 
16 In some countries, some form of monitoring was car ried out as far back as 1997 although the authority 
was not legally established until later. The exact date setting up each national authority varies somewhat 
from country to country and indeed is not always very significant as it merely formalised existing 
powers. 
 
EN 15   EN the Commission will control the granting of aid by means of a formal and transparent 
procedure.17 
In spite of this handing over of  their decision-making role, the national monitoring authorities 
continue to exist in some form or other in all new Member States. Although the precise role 
varies, each Member State has some type of coordination function in state aid matters and 
also provide annual reports to  the Commission. Thanks to th e considerable knowledge and 
expertise acquired in State aid issues over the years, these au thorities are able to advise 
national state aid grantors on Community state aid rules and facilitate the notification process. 
In addition, all now assess and monitor measur es under the block exemption regulations for 
SMEs, training and employment aid.  
1.2.3. Existing aid and the “interim procedure” 
In order to prevent incompatible aid from be ing “imported” into the EU on the date of 
accession, a new system for Accedi ng Countries was set up to examine measures which were 
put into effect before 1 May 2004 and are still app licable after that date. This is known as the 
existing aid mechanism. The purpose of this mechanism was to provide Acceding Countries 
and economic operators with legal certainty as regards State aid measures that are applicable 
after the date of accession. The system applies to  State aids in all sectors, except for the 
agricultural and transport sectors, for which diffe rent provisions apply (see sections 1.3.6).  
The Treaty of Accession (Annex IV) stipulated that aid schemes and i ndividual aid put into 
effect in a new Member State before the date  of accession and still ap plicable after accession 
should be regarded as existing ai d within the meaning of Article 88(1) EC Treaty if one of the 
following conditions was met:  
• aid measures put into effect before 10 December 1994 were automatically considered as 
existing aid from the date of accession; 
• measures submitted by the Acceding Countries  in 2002 were examined by the Commission 
in the light of the state aid acquis. Measures co nsidered to be in line with the state aid rules 
qualified as existing aid and were included in the list annexed to th e Treaty of Accession. 
This list was finalised in November 2002; 
• for measures not accepted in the Treaty list and for those submitted after its finalisation 
and up to 30 April 2004, the so-called “interim  procedure” for existing aid was introduced. 
Under this procedure, Acceding Countries submitted a series of measures to the 
Commission for assessment. The Commissi on approved all measures which were 
compatible with the state aid rules. When  the Commission had serious doubts about the 
compatibility, it took a decisi on to initiate the formal i nvestigation procedure which 
entered into effect on the date of accession. Th e notion of “applicable after accession” was 
a crucial factor in deciding whether or not the Commission should assess a particular 
measure as it did not have the power to oppose measures that were not “applicable after 
accession”.  
                                                 
17 Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application 
of Article 93 of the EC Treaty, Official Journal L 83, 27.03.1999, pages 1-9;  
 Commission Regulation (EC) No 794/2004 of 21 April 2004 implementing Council Regulation (EC) 
No 659/1999 laying down detailed rules for the application of Article 93 of the EC Treaty, Official 
Journal L 140, 30.04.2004, pages 1-134;  
 
EN 16   EN Basically, the notion covered the following types: 
– Aid schemes were considered to be “applicable after acce ssion” if, from the date of 
accession, aid awards could still be made on th e basis of these schemes and without further 
implementing measures being required; 
– Aid that was not linked to a sp ecific project and th at was awarded before accession to one 
or several undertakings for an indefinite  period of time and/or an indefinite amount18; 
– Individual aid measures for which the preci se amount of State aid was not known at the 
time the aid was granted.  
All measures still applicable after the date of accession, which constitute  state aid but did not 
fulfil the conditions of existing aid set out a bove, have been considered as new aid upon 
accession. The qualification of a measure as ex isting aid as opposed to new aid has very 
important consequences: the Co mmission can immediately initiate  the formal investigation 
procedure with regard to new aid not cleared und er the interim procedure. If the aid is found 
to be incompatible with the Treaty, the Commis sion shall by decision order it to be recovered  
from the beneficiaries. In contrast to new ai d, an existing aid measure is “protected” from 
actions of the Commission since it is subj ect to a co-operation procedure between the 
Commission and the Member State. 
1.2.3.1. Some figures on the existing aid mechanism During the first phase of the existing aid mechanism, i.e. establishment of the Treaty list in 
2002, some 222 measures were approved by the Commission and listed in the Treaty of 
Accession. During the second phase, the so-ca lled interim procedure, the ten Acceding 
Countries submitted a further 559 measures of  which around 175 of them were withdrawn by 
the countries themselves. By September 2004, 278 measures had been approved by the 
Commission as existing aid meas ures. A significant number of measures were submitted just 
before accession on 1 May 2004. This is reflecte d in the 106 measures still under assessment. 
The number of measures varies considerably from one new Member State to another. While 
some opted to create aid schemes, such as Hungary, other countries such as the Czech 
Republic preferred to notify indi vidual aid awards (Table 1). 
Table 1: State aid measures approved as existing aid upon accession 
19 
CZ EE CY L V LT HU MT PL SI SK Total
Approved and listed in 
the Treaty 1 2 0 33 16 32 17 71 59 222
Approved under the 
interim mechanism 96 11 21 19 13 20 1 18 17 62 278
Under assessment as of 
September 2004 4 3 001072 4 3 28 106  
Source: DG Competition 
1.2.4. Candidate countries 
The European Union is currently  engaged in accession negotiati ons with two other candidate 
countries: Bulgaria and Romania (see country profiles in Annex II). The competition chapter 
                                                 
18 These aids are also considered “aid schemes”  under the Procedural Regulation No. 659/99. 
19 The figures include state aid measures to the manuf acturing, service and coal sectors as well as the 
fisheries sector. 
 
EN 17   EN for Bulgaria was provisionally closed in 2004, while negotiations are still on-going with 
Romania. They will join the Union in 2007, pr oviding they meet the required standards of 
readiness in time. Two other candidate countries, Turkey and Croatia, are waiting to open 
their membership negotiations.  
1.3. Overview of the State aid situat ion in the ten new Member States 
This section provides a snapshot of State aid granted in the ten new Member States over the 
period prior to accession (2000-2003). 
1.3.1. State aid in absolute and relative terms 
The population of the ten new Member States stood at 74 million in the year 2003 compared 
with the EU total of 376 million. The largest countries were Poland (38 million), the Czech 
Republic (10 million) and Hungary (10 million), the smallest Malta (0.4 million) and Cyprus 
(0.7 million).  
Total state aid20 granted annually by the ten new Memb er States during the four-year period 
2000-2003 was estimated at €5.7 billion. The comparable figure for the EU-15 Member States in 2002 was €34 billion
21. In absolute terms, the three biggest countries in terms of 
population, awarded the most aid: Poland (an annual average of €2.4 billion) the Czech 
Republic (€1.9 billion) and Hungary (€0.57 billion) . Together they accounted for 86% of total 
aid in the ten new Member States (Table 2). 
During the period under review, the level of State aid increased each year from €4 billion in 
2000 to €7.8 billion in 2003. The increase was caused by very la rge awards of aid in 2002 to 
the Czech banking sector (€2.4 billion) and in 20 03 to the Polish coal sector (€3.9 billion). 
Table 2: State aid in the new Member States, 2000 – 2003(1) 
EU 15New 
MS CZ EE CY LV LT HU MT PL SI SK
Total State aid less agriculture, 
fisheries and transport in million € 34000 5654 1908 7 285 23 34 571 159 2409 139 118
State aid as percentage of GDP (%)0.39 1.42 2.80 0.11 2.85 0.26 0.24 1.04 3.86 1.29 0.69 0.51
Population (million)376.5 74.1 10.2 1.4 0.7 2.3 3.4 10.1 0.4 38.2 2.0 5.4
State aid per capita (PPS)94 150 386 10 497 21 22 114 601 127 100 51  
(1) Unless otherwise stated, the figures refer to the a nnual average over this pe riod. For Malta, the period 
covered is 2000-2002. State aid data for EU-15 refer to 2002. Source: DG Competition and Eurostat. 
In relative terms, State aid may be expressed as a percentage of GDP or as a per capita 
measure. For the ten new Member States as a whole, State aid amounted to 1.42% of GDP 
over the period 2000 – 2003. This is significantly higher than the EU-15 average of 0.4 % in 
2002. There were large disparities between the new Member States: Ma lta (3.86%), Cyprus 
(2.85%) and Czech Republic (2.8%) reported aid leve ls well above the average. In contrast, 
the three Baltic States had by far the lowest shares: Estoni a (0.1%), Lithuania (0.24%) and 
                                                 
20 Total State aid less agriculture, fisheries and transport 
21 As data for the EU-15 Member States are not yet ava ilable for 2003, the year 2002 is taken as the best 
proxy to compare with the annual aver age for the ten new Member States. 
 
EN 18   EN Latvia (0.26%). When aid is expressed in per capita terms (PPS)22, a slightly different picture 
emerges with the Slovak Republic joining the thr ee Baltic states below the EU-15 average of 
94 PPS per person. Furthermore, Slovenia and Hungary lie only slightly above the EU average (Table 2 and Graph 2). 
Graph 2: State aid as a percentage of  GDP in the new Member States, 2000-2003 
0,00,51,01,52,02,53,03,54,0
EU15 New
MSCZ EE CY LV LT HU MT PL SI SK%
Aid given under measures that are being phased out
 
Note: Average 2000-2002 in mio € for Malta. EU-15 figures refer to 2002. Source: DG Competition  
The above data present a very dispersed picture for the new Member States. However, the 
relatively high proportion of State aid in th e Czech Republic, Cyprus and Malta does not 
necessarily reflect a more lax at titude to State aid control in these countries. Instead, each 
appears to have had its own country-specific situation. Faced with a general banking crisis, 
the Czech Republic paid out €2.4 billion in 2002 in the form of guarantees in order to 
restructure and subsequen tly privatise several banks . In Cyprus, the aid was mainly granted 
through tax relief under the International Busine ss Enterprises Act (almost 60% of total aid 
over the period 2000-2003) and exemptions fr om import duties for raw materials in 
manufacturing sector (8% of total aid over the period 2000-2003 but 47% in 2003). In Malta, 
restructuring aid to shipbuilding and the ship repair sector accounted  for around 50% of total 
aid. All of the above measures are either bei ng phased out under transitional arrangements or 
limited in time. If the aid amounts given under these types of aid measures are excluded, a 
different picture emerges: the overall level of state aid drops to 0.67% of GDP for the ten new 
Member States and to 2.08% in Malta, 0.82%  in Cyprus and 0.47% in the Czech Republic. 
To what extent have the new Member States supported (or are likely to support in future) 
efforts the call to reduce the overall level of St ate aid, one of the principal objectives of the 
                                                 
22 State aid per capita are expressed in terms of Pu rchasing Power Standards (PPS) and therefore the 
differences in price levels between countries are taken into account. In general, when PPS are used 
instead of exchange rates, the gap between high-income and low-income countries narrows as price 
levels in low-income countries tend to be low compared to richer countries. 
 
EN 19   EN Lisbon agenda? Notwithstanding the measuremen t difficulties set out below, the data 
presented for the year immediat ely prior to accession, 2003, can be broken down further so as 
to give some sort of indication as to likely future expenditure levels. The country profiles 
(Annex II) present, as a percentage of to tal aid awarded in 2003, the proportion of aid 
awarded under measures that did not continue after accession, i.e. in the case of a scheme 
which expired before 1 May 2004 or an ad hoc award of aid for the year 2003. The residual is 
therefore made up of ai d qualifying as ‘existing’23 or aid awarded under a transitional 
arrangement for which there are likely to be ongoing payments after accession. 
For some new Member States, this breakdown show s that a large part of the aid awarded in 
2003 was under measures that did not continue  after accession. For others, it shows that a 
significant proportion of total aid was awarded unde r a transitional arrang ement. This implies 
that aid levels are likely to remain relatively high up to the end of the transitional period but will probably decrease in the long term. 
Caution should however be exercised in attempti ng to use the data presented here, as a gauge 
for what may happen in the coming years. An accura te forecast of future expenditure levels is 
not possible due to a variety of reasons: first, there is clearly no indication as to what extent 
the new Member States intend to notify new aid measures in the coming years. Second, a 
significant number of new measures have been  submitted under the interim mechanism during 
the first few months of 2004 and consequently are not covered in this ex ercise as there were 
no payments in 2003. Finally, given that the Europ ean Structural funds ar e subject to the so-
called “additionality” principle
24, some new Member States ha ve already indicated that 
overall State aid levels are likely to increase, at least in the short-term.  
1.3.2. State aid by objective 
State aid for horizontal objectives is usually considered as being targeted to recognised 
market failures and as being less distortive than  sectoral and ad hoc aid. R&D, safeguarding 
the environment, energy saving, regional development and support to SMEs are the most 
prominent horizontal objectives pursued with State aid. In c ontrast, aid to support specific 
sectors is likely to distort competition more th an aid for horizontal obj ectives and also tends 
to favour other objectives than identified market  failures. Moreover, a si gnificant part of such 
aid is granted to rescue or restructure compan ies in difficulty, one of the most potentially 
distortive types of State aid.  
1.3.3. State aid for horizontal objectives 
To what extent have the ne w Member States supported anot her key Lisbon objective, to 
redirect state aid towa rds horizontal objectives25? Between 2000 and 2003, aid granted for 
horizontal objectives accounted for around 22% of total aid in the new Member States. This 
share is rather low in  comparison to 73% in the EU-15 Member States  in 2002. The disparity 
                                                 
23 The precise figures should be treated with caution du e to the fact that some aid measures for which aid 
was granted during the period under review were subsequently modified and approved as existing aid. 
24 The additionality principle states th at Structural Funds spending should  not replace, but be additional to 
the spending of national and other public authorities. It implies that the intervention of EU funding does 
not lead to the national planning authorities diver ting resources from other schemes that they would 
have carried out normally, in the absence of Community funding, in order to co-finance the Structural 
Funds’ programme. 
25 Including aid for cohesion  objectives (regional aid) 
 
EN 20   EN can be explained in part by th e relatively strong support of se veral industries (e.g., financial 
sector, coal and steel) before accession in order to complete privatisa tion and reach viability 
(see also section 1.3.4). 
As to likely future trends, given the structur al problems of their economies and the general 
macro economic environment in which they were  operating prior to accession (as outlined in 
section 1.1), it is somewhat premature to draw any conclusions. Nevertheless, in the context 
of redirecting aid, it is encouraging to no te that 475 of the 500 aid measures qualifying as 
existing aid upon accession are earmarked for horizontal objectives although this figure 
overestimates the share of horizontal aid meas ures for a number of reasons. In particular, 
individual aids were less likely than schemes to  be “applicable after” accession so they were 
less likely to come under the interim mechanis m. In addition, the new Member States could 
not make use of the block exemption regulations , so that all such measures, which by their 
nature fall under horizontal  objectives, came under the interim mechanism. In terms of 
expenditure, the share of horizontal objectives in total aid is likely to be much lower due to 
the large amounts of aid awarded for non-horizontal  objectives, i.e. sect oral aid or ad hoc 
awards.26 
During the period prior to accession, there were  large disparities between the new Member 
States in the share of horizo ntal objectives ranging from ar ound 10% or less of total aid in 
Malta, Lithuania and the Czech Republic to 50% or more in Slovenia and Latvia (Table 3). In 
Estonia, virtually all the aid awarded wa s earmarked for horizontal objectives.  
In spite of some measurement difficulties (see methodological notes), th e data do give a broad 
indication as to which horizontal objectives  are favoured by each country. Over the period 
2000-2003, around 20% of all aid in Slovenia wa s specifically granted for employment 
objectives. Estonia and Slovenia directed arou nd 15% of its aid to environment compared 
with a new Member State average of just ove r 2%. The same two countries also granted 
around 15% of their total aid to research and development. Aid to conserve national heritage 
and support culture made up a prominent part (20%) of Estonia’s to tal aid, while another 
Baltic state, Latvia, seems to have specifically favoured its SMEs (32% of total aid compared 
to 3% in the ten countries overall). Finally, C yprus granted almost 10% for cultural purposes, 
theatrical and film producti ons and national broadcasting. 
                                                 
26 A precise figure can not be given due to the fact that a significant number of these schemes were put 
into effect in 2004 and therefore expenditure data are not available for them. 
 
EN 21   EN Table 3: State aid for horizontal objectives  and particular sectors in the new Member 
States, 2000-2003 
CZ EE CY LV LT HU MT PL SI SK
mio € % mio €%% % % % % % % % % %
Horizontal Objectives 24,711 73 1,229 22 10 100 23 55 4 42 5 24 73 24
     R&D 5,179 15 102 22 1 3 0 - 1 3 -1 1 6 4
     Environment 5,283 16 133 22 1 5 1 0 - 3 -2 1 7 1
     SME 4,857 14 127 2 2 1 0 4 2-71 191
     Commerce 318 1 13 0- 8 2 2 2 - 4- - 1
     Employment aid 838 2 218 4 1- ---4- 7 2 1 -
     Training aid 562 2 73 1 0 - 2--10 22 -
     Heritage conservation, 
cultural aid 510 1 39 10 2 0 1 1 - - 1 0 - 1 1
     Natural disasters 33 0 3 0 -- 0 - --- - 2-
     Risk capital 18 0 1 0 - - ---0- - - -
     Regional aid 7,115 23 520 9 3 33 4 50 1 23 - 11 7 17
Sectoral aid (1) (2) 9,294 27 4,425 78 90 - 77 45 96 58 95 76 27 76
     Manufacturing 1,138 3 1,470 2 6 1 0 -n . a .4 5 9 45 38 9 2 01 95 9
        of which shipbuilding 485 1 87 2- - n . a . - 0 - 5 1 0 - 0
        of which steel 90 246 4 4- n . a . - --- 5 6 3 5
        of which motor vehicles 18 0 58 1 1- n . a . - --- 0- 2 4
     Coal 5,432 16 1,373 24 0 - n.a. - - 4 - 56 7 3
     Other Non-manufacturing 773 2 32 11 - n . a . - 2 - 10 - 8
     Financial Services 1,836 5 1,534 27 80 - n.a. - - 0 - - - 6
     Other services 115 0 15 0- - n . a . - - 0 5- 0 0
Total aid less agriculture, 
fisheries and transport in 
million €34,005 100 5,654 100 1,908 7 285 23 34 571 159 2,409 139 118EU-15 New MSAnnual averages
Note: Average 2000-2002 in mio € for Malta. EU-15 figures refer to 2002. For Cyprus, a breakdown of sectoral 
aid is not available (see country profile). The new MS figur es for the sub-categories of  sectoral aid are therefore 
slightly underestimated. (1) Aid for specific sectors awarded under measures for which there was no horizontal 
objective as well as aid for rescue and restructuring. Source: DG Competition.  
1.3.3.1. State aid supporting regiona l development and cohesion 
In terms of aid amounts, the largest horiz ontal objective was general regional economic 
development . Under Article 87(3) of the Treaty, certain areas (regions) may be given 
derogation from the incompatibility principle es tablished by Article 87 (1). Article 87(3)(a) 
provides that aid “to promote th e economic development of areas where the standard of living 
is abnormally low or where there is serious unde remployment” may be considered compatible 
with the common market. In practice, a regi on qualifies for ‘a’ status if, being a NUTS27 level 
II geographical unit, it has a per capita GDP of less than 75% of the EU average.  
The Europe Agreements laid down that each count ry was to be regarded  for five years from 
the entry into force of the Agreement as an ar ea identical to those areas of the Community 
                                                 
27 NUTS is the Nomenclature of territorial units for statistics. 
http://europa.eu.int/comm/eurostat/ramon/nuts/home_regions_en.html  
 
EN 22   EN qualifying for regional aid under Ar ticle 87(3)a. Regional aid maps28 were adopted for each 
country and have since been extended up to 31 December 200629. In effect, virtually the entire 
territory of each new Member State is eligible  for 'a' status, the only exceptions being the 
territory of Cyprus and the capital  cities Prague and Bratislava.30 This has implications for the 
classification of aid for regional objectives in that almost all the aid in the new Member States 
could be considered as regional aid in that it is directed towards assisted regions. For the 
purposes of comparability between Member States , however, all aid measures have as far as 
possible being classified under other horizontal  objectives. Nevertheless, in the period under 
review, an annual average of €520 million (9% of total aid) was granted for regional and 
cohesion purposes, usually in the form of general economic development schemes. There were differences between countries  in the share of regional aid to total aid ranging from less 
than 5% in Lithuania, the Czech Republic, Malta and Cyprus to more than 30% in Estonia and 
Latvia. 
1.3.4. State aid for sectoral objectives 
Aid to support specific sectors, including aid awarded to resc ue or restructure companies, is 
likely to distort competition more than aid fo r horizontal objectives . In the period 2000-2003, 
around 78% of State aid in the new Member Stat es was earmarked for these potentially more 
distortive types of ai d. There were large dispar ities between countries in  the share of sectoral 
objectives ranging from around 50% or less of total aid in Latvia and Slovenia to 90% or 
more in Lithuania, the Czech Republic and Malta (Table 3). In Estonia, no aid was earmarked for sectoral objectives. 
The financial sector rece ived the most support in  these years (27%), due almost entirely to the 
legacy of a general banking crisis in the 1990s in the Czech Republ ic. A further 26% was 
directed towards the manufacturing sector
31, 24% for coal (mainly in Poland) and the 
remainder (1%) split between non- manufacturing not elsewhere cl assified and services other 
than financial. 
There are significant differences between Member States in the sectors to which they directed 
aid (Table 3). Aid to the manufacturing sector accounted for less than 20% in Slovenia, the 
Czech Republic and Poland while in Malta and Lithuania the share was around 90%. The figure for Malta can be explained largely by the vast amount of aid given for restructuring the 
island’s shipbuilding and ship repair sector . The high percentage in Lithuania can be 
explained by the relatively high amounts of rescue and restructur ing aid to various 
manufacturing companies. Aid to coal mining acc ounted for a prominent part of total aid in 
Poland (56%) while aid to the financial sector made up 80% of total aid in the Czech Republic during the period under review. 
1.3.4.1. State aid to the financial sector From 1994 to 1998, the Czech Republic, Hungary and the Slovak Republic faced a general 
banking crisis that affected the whole banking sector, as a result of which governments 
                                                
 
28 The regional aid maps identify the eligibility of regions for regional aid as well as the maximum aid 
intensities allowed in each of these regions, taking acc ount of regional disparities as reflected in per 
capita income. It sets eligible territories and allowable ceilings until a definite period. 
29 The Czech regional aid map is still being assessed. 
30 See more detailed information in the country profiles (Annex II). 
31 This figure excludes aid earmarked for the manufacturing sector which also had a horizontal objective 
 
EN 23   EN intervened in order to restructure and subse quently privatise severa l banks. These measures 
included capital injections, transfers of assets , public guarantees, ring-fence agreements and 
litigation indemnities. The cost  of these bailouts reached an  annual average of €1.53 billion, 
accounting for 27% of the total aid over the period 2000-2003. The highest share was 
observed in the Czech Republic which paid out mo re than €2.4 billion in 2002 in the form of 
guarantees . Relatively smaller amounts were give n in Hungary and the Slovak Republic 
where the restructuring ma inly took place prior to 2000. 
The countries in question notified a series of  cases under the interim mechanism concerning 
aid to banks. To date, the Commission has adopted  18 decisions essentially declaring that the 
measures were (in technical terms) “not applicable afte r accession”. In two cases the 
Commission has opened proceedings because it found that the measures were applicable after 
accession and had doubts as to its compatibility with the common market.  
A “not applicable after accession” decision mean s that a measure was granted in its entirety 
before 1 May 2004, and thus the Commission was neither required nor em powered to assess 
such measures. An individual aid is considered as “applicable after accessi on” if it is likely to 
increase the liability of the st ate after the date of accession. This may be the case for example 
with a state guarantee, if the lia bility of the state is not cl early known. Nevertheless, a “not 
applicable after accession” deci sion does not mean that there would be no longer any further 
payments, within the predefined limits, for those aid measures after accession. 
1.3.4.2. State aid to the coal sector An annual average of €1.4 billion was granted to the coal sector between 2000 and 2003. In 
absolute terms, this amount is relatively lo w in comparison to the EU-15 average of €5.4 
billion in 2002. In relati ve terms, while aid to the coal sect or amounted to 16% of total aid in 
the EU-15 as a whole, in Poland it accounted for 56%. In the case of Poland, however, the annual average of €1.3 billion is rather mislead ing as €3.9 billion was awarded in 2003 alone. 
Four other new Member States granted aid to this sector: Hu ngary (an annual average of €22 
million), Slovenia (€10 million), the Slovak Re public (€3 million) and the Czech Republic 
(€1 million). In most cases, support to the coal industry took the form of closure aid, with the 
costs mainly related to exceptional expenditure  on workers who lost th eir jobs and to the 
rehabilitation of former mining sites. In Poland, however, a large share of the aid (around 
40%) awarded in 2003 was for earmarked for current production. 
1.3.4.3. State aid to the steel sector Steel is an important industrial sector in a num ber of new Member States, especially in the 
Czech Republic and Poland, a fact reflected by the level of employment in the sector and the 
value added generated by steel producers in bot h countries. Over the last decade, significant 
restructuring of the steel industry has b een achieved, thereby strengthening the 
competitiveness of the sector. A large number of  non-viable facilities have been permanently 
closed and existing plants modernised. Changes in management structures have also taken 
place in parallel with the ongoing privatisation and concentration process.  
For many companies in these countries, viabil ity could not have been  achieved up to now 
without financial support of the governments. For this reason, transitional periods were 
negotiated with the Czech Republic and Poland to  allow the granting of state aid to specific 
companies. The maximum amount of aid permitte d corresponds to the financial projections 
 
EN 24   EN made in the National Restructuring Programme s and the Individual Bu siness Plans of the 
companies, which were adopted by the Czech and Polish governments and agreed by the Commission. For the Czech Republic, the maxi mum permissible amount of state aid was 
€413 million for the period 1997-2003 while for Poland it was €769 million.
 These 
exemptions from the EU rules on state aid are conditional on the fulfilment of certain 
obligations that are monitored and reported regularly. Over the period 2000-2003, an annual 
average of €246 million of aid to the steel sector was awarded in four new Member States: the 
highest amount in the Poland (€122 million), followed by the Czech Republic (€75 million). 
Smaller amounts were granted by the Slovak Republic (€41 million) and Slovenia (€9 million). 
1.3.4.4. State aid to the shipbuilding sector Of the new Member States, Poland, Malta and the three Baltic states  have a shipbuilding 
industry, with regard to whic h State aid issues have arisen  or may arise in future. The 
operations in the shipyards in these countries  are to a large exte nt determined by the 
international context, and can be compared to the situation of any other European yard. The 
record world-wide order volumes in the past years have mainly bene fited two countries - 
South Korea and China. The European sh ipbuilding industry is now searching for 
consolidation and reestablishment on the international market through specialisation and innovation. In this respect, the needs of shipyard s in new Member States  are similar to those 
of the EU-15 Member States. In the pe riod under review, €87 million on average was 
allocated each year to the shipbuildi ng sector in the ne w Member States. 
Unlike Malta, Poland, with its relatively larg e shipbuilding industry, did not negotiate any 
transitional arrangements for the application of State aid rules to this sector. Poland’s major shipbuilders in Gdynia and Szczecin are due to  finalise in 2006 and 2004 their financial and 
material restructuring. A total of €24 million wa s paid out to these companies in the years 
2000 and 2002. The sector, histor ically important in Poland, has been characterised by 
overcapacity, insufficient financing facilities, increased labour-costs and insufficient 
productivity levels. Maltese shipbuilding faces similar difficulties, but from the State aid 
perspective, a special transitional scheme closely monitored by the Commission was agreed 
upon in the Treaty of Accession. Under this scheme, an annual average of €81 million, 
representing around half the tota l aid in Malta, was allotted to the Maltese shipbuilding and 
ship repair companies. 
1.3.4.5. State aid to the motor vehicle sector The motor vehicle industry is another significa nt industrial sector in  several of the new 
Member States. Over the period 2000-2003, an annual average of €58 million of aid was 
awarded to this sector in four countries. The highest amounts were  awarded in the Czech 
Republic (€29 million per year) and the Slovak Republic (€28 million). Under its budgetary 
law, Poland granted almost €3 million state aid in 2002 while Cyprus exempted the import of 
raw materials used by the industry to the tune of almost €3 million in total over the period 
under review. These aids were used to bail ou t companies in difficulty and to exempt the 
sector from tax obligations.  
In addition, smaller amounts were given in the Czech Republic and the Slovak Republic to 
support employment and training in the sector ( €3 million per year), as well as to attract 
investments in underdeveloped regions (€5 million per year).  
 
EN 25   EN 1.3.5. State aid instruments 
All State aid represents a cost or a loss of revenue to  the public authorities and a benefit to 
recipients. However, the aid element, i.e. th e ultimate financial benefit contained in the 
nominal amount transferred depe nds to a large extent on th e form in which the aid is 
provided.  
For the new Member States as a whole, guarantees were the most frequently used form of aid 
instrument making up 41% of total aid over  the period 2000-2003. Th is high percentage, 
compared to the EU-15 average of 3%, can be e xplained by the large pr oportion of guarantees 
in the Czech Republic (78% of total aid)32. Tax exemptions (29%) and grants (22%) were the 
two other instruments used predominantly in th e new Member States (Table 4). The tendency 
of the new Member States to use instrument s with a deferred impact on the budget, i.e. 
instruments other than grants, may be expl ained, in part, by budge tary constraints. 
These averages conceal considerable differenc es between the new coun tries: while Cyprus, 
the Slovak Republic and Hungary made widespread use of tax exemptions (more than 60% of 
total aid) in the years 2000-2003, Estonia, Slovenia and Lithuani a tended to use more grants 
(41% or more of total aid). Soft loans accounted  for a significant share of total aid in Malta 
(33%) compared with a new Member State aver age of only 3%. Around 26% of aid in Latvia 
was awarded for the capitalisation of tax debts accrued before  privatisation.  
Table 4: State aid for manufacturing and serv ices by type of aid instrument, 2000 – 2003  
FORM OF AID in %
GrantsTax 
exemptionsEquit y 
participations Soft loans Tax deferrals Guarantees
EU-15* 58.6 24.0 5.6 6.0 2.6 3.2
New MS 22.4 28.5 3.1 2.9 1.9 41.1
CY 17.9 80.9 0.0 0.0 0.0 1.2
CZ 11.7 3.4 5.6 1.3 0.4 77.7
EE 68.6 14.4 0.0 0.2 0.0 16.7
HU 36.8 61.5 0.1 0.6 0.0 1.0
LT 41.1 15.6 9.6 5.2 0.7 27.8
LV 4.0 57.1 26.4 8.7 1.1 2.7
MA 19.1 36.6 0.0 33.4 1.4 9.6
PL* 32.1 34.5 0.5 3.9 6.3 22.8
SI 46.4 33.2 10.8 5.8 0.0 3.7
SK 10.0 72.4 0.0 0.0 0.0 17.6 
Note: * EU-15 and Poland data only for 2000 – 2002. Source: DG Competition   
1.3.6. State aid to other sectors 
1.3.6.1. State aid to agriculture 
State aid to agriculture was not covered by the pre-accession mechanism provided for under 
the Europe Agreements with the new Member St ates. Point 3 of Annex IV to the Treaty of 
                                                 
32 If the Czech Republic’s guarantees for the banking sector are excluded, guarantees make up only 12% 
of total aid in the ten new Member States. 
 
EN 26   EN Accession on the interim mechanism procedure excluded expressis verbis  its application to 
activities linked to the producti on, processing and marketing of agricultural products in 
Annex I of the EC Treaty. State aid granted in the agriculture s ector is subject to a special 
regime under the Treaty of Accession as set out in Point 4 of Annex IV. The regime provides 
for the general rules applicable to all new Member States. In addition, several of the new Member States have obtained special tempor ary derogations from th e State aid rules.  
According to these provisions, aid schemes a nd individual aid granted in the agriculture 
sector, with the exception of fisheries products  and products derived there from, put into 
effect in a new Member State before the date of accession and still applicable after that date, shall be regarded as existing aid within the mean ing of Article 88(1) EC only if the measure is 
communicated to the Commission as existing aid with in four months of th e date of accession, 
i.e. by 31 August 2004. 
These measures enjoy the protection of an exis ting aid until the date of a so-called ‘sunset 
clause’. By 1 September 2004, all new Member State had submitted their existing aid measures which the Commission will publish in due course. The new Member States have 
until the end of the third year after the date of accession, i.e.  end of April 2007, to ensure 
compatibility of those measures with the requi rements of Community St ate aid rules. The new 
Member States shall, where necessary, amend thes e aid measures by the e nd of this three-year 
period. Ultimately, after 31 December 2007, any exis ting State aid that is incompatible with 
the acquis either has to be abolished or modified.  
This provision concerning existing aid is withou t prejudice to the pr ocedures concerning 
existing aid provided for in Ar ticle 88 EC. Therefore the Commission may, even before the 
end of the three years following accession, propos e appropriate measures with regard to 
incompatible existing aid schemes. On this ba sis, it may recommend to  a new Member State 
either to introduce amendments to such a scheme  or abolish it. For such actions, the procedure 
set out in Articles 17 to 19 of Regulation (E C) No 659/1999 applies. Between April and the 
end of August 2004, all new Member  States have submitted their 'existing aid' measures. The 
Commission will now proceed to their publication. Of course, the possibility to maintain an 
aid as existing aid does not authorise a new Me mber State to uphold m easures that are in 
conflict with other parts of Co mmunity law, such as the rule s on the free movement of goods 
or the common organisations for th e markets for agricultural products. 
1.3.6.2. State aid to fisheries State aid to fisheries and aquaculture was not covered by the pre-accession mechanism 
provided for under the Europe Agreements with  the new Member States. During the accession 
negotiations, the Commission stressed to the Acceding countries the importance of bringing 
their State aid measures into co mpliance with Community rules. 
From April 2003, State aid in th e fisheries sector was covere d by the interim mechanism for 
existing aid provided for in th e Treaty of Accession under which measures put into effect 
before 1 May 2004 and applicable after this da te, could be notified. In respect to that 
procedure, the Commission services addressed a letter to all new Memb er States, encouraging 
their authorities to notify the existing measures to the Commission before 1 May 2004. 
During this period, the Commissi on services had on-going contacts with the authorities of the 
new Member States and participated in traini ng meetings with them. In total, 13 measures 
were notified under this pr ocedure (see table below). 
 
EN 27   EN Table 5: Existing aid measures for fish eries and aquacultu re submitted under the 
interim mechanism procedure 
Member State Number of 
schemesDuration Annual budget (mio 
€/year)
Cyprus 1 In State Budget since 
1995€0.008
Czech Republic 6 Unlimited except for 
one scheme expiring in 2006 (1)€23.2 of which €20.7 
for scheme expiring in 2006
Hungary 2 2006 €1.5 in 2004
Latvia 1 2021 €2.24 for overall 
programme of which fisheries is a part
Lithuania 1 2002-2010 €0.8
Poland 1 (individual aid) 1996-unlimited €0.5Slovenia 1 2006 €0.058
 
(1)Aid scheme for renewal, dredging and reconstruction of fishponds and reservoirs. Source: DG Fisheries. 
Based on the information available at present, St ate aid to fisheries and aquaculture in the new 
Member States does not appear to involve heav y funding. It is therefore likely that some of 
the measures which must now be notified unde r Article 88(3) EC Treaty will be excluded 
from this obligation after 1 November 2004, when  the block exemption Regulation came into 
force (see section 3.8 for references and information on the recently adopted de minimis  
regulation for the fisheries s ector). As of 1 September 2004, the Commission had received 
two notifications concerning State aid for fisheries and/or aquaculture, submitted since 1 May 2004.  
1.3.6.3. State aid to transport State aid to the transport sector was covere d by the State aid provisions in the Europe 
Agreements.  
Chapter 3, Article 4 of Annex IV to the Treaty  of Accession provides fo r a particular interim 
mechanism with regard to State aid in the tran sport sector: “As regards aid to the transport 
sector aid schemes and individual aid to the tran sport sector put into effect in a new Member 
State before the date of accession, and still applicable after that  date, shall be regarded as 
existing aid within the meaning of Article 88(1)  of the EC Treaty unt il the end of the third 
year after the date of accession, provided they  are communicated to the Commission within 
four months of the date of accession”. 
It follows from the interim mechanism that aid measures in force in the new Member States 
prior to 1 May 2004 that were communicated to the Commission before 1 September 2004, 
enjoy, until end April 2007, the protection of an  ‘existing aid’. As a consequence, the 
Commission, in co-operation with the new Member States, will review the existing measures 
during the transitional period in order to ensu re compatibility with the common market in 
accordance with Article 88 (1) of the Treaty.  
The new Member States have communicated to  the Commission aid meas ures in force prior 
to accession and provided summary information with regard to those measures. The Commission services will now proceed with th e examination of the measures and, where 
 
EN 28   EN necessary, propose appropriate m easures to ensure their co mpatibility with the common 
market. 
Overall, approximately 150 measures relating to the transport sector have been submitted to 
the Commission by the new Member States under the interim mechanism. The number of aid 
measures in force varies considerably from on e Member State to anot her, with two of the 
three largest countries, Poland and Hungary accounti ng for more than half the total number of 
measures submitted.  
With regard to the different transport sectors, the information received shows clearly that the 
rail sector benefits from most measures while  the remaining aid measures are rather evenly 
spread among the other transport sectors.  
 
EN 29   EN 2. P ART TWO: FOLLOW -UP TO THE COUNCIL CONCLUSIONS ON STATE AID  
In the context of reducing overa ll levels of State aid, the c onclusions of various European 
Councils have called for a shift in emphasis fr om supporting individual companies or sectors 
towards tackling horizontal objectives of co mmon interest, including cohesion objectives. 
Furthermore, the Council invited Member Stat es to “consider befo re granting State aid 
whether it is targeted on clearly identified market failures or directed at horizontal objectives 
… and whether an intervention in the form of State aid is the most appropriate and effective 
way to address these issues.”33 
2.1. Brief summary of the Council conclusions on State aid 
The following is a summary of the key points emerging from the vari ous Council conclusions 
on State aid since the Lisbon agenda was launched in 2000:34 
• The Lisbon European Council of March 2000 set out  to make the EU the most competitive 
and dynamic knowledge-based economy in the world, calling on the Council, Commission 
and Member States “to further their efforts to promote competition and reduce the general 
level of State aids, shifting the emphasis fr om supporting individual companies or sectors 
towards tackling horizontal objectives of Community interest, such as employment, 
regional development, environmen t and training or research.” 
• In March 2001 at the Stockholm European Council, Member St ates pledged to 
“demonstrate a downward trend in State ai d in relation to GDP by 2003, taking into 
account the need to redirect aid toward horizontal objectives  of common interest, including 
cohesion objectives.” 
• Further impetus was provided at the Barcel ona and Brussels European Councils in 2002 
and 2003 respectively. 
• Outside of the European Council summits, mo re specific conclusions on State aid have 
also been adopted. In December 2001, under the Belgian Presidency, the Industry Council 
adopted a set of conclusions in which it invited Member States to continue their efforts to 
reduce aid levels, reor ient aid towards horizontal objectiv es, further develop the use of 
"ex ante" and "ex post" evaluations of aid sc hemes, and improve the transparency and the 
quality of reporting to the Commission. 
• In November 2002, under the Danish Presidency, the Competitiveness Council adopted 
conclusions on “an economic approach towards less and better State aid”35. The main aim 
of the conclusions was to develop a broader ec onomic analysis of the effects of State aid 
by encouraging greater dialogue and exchange of information between the Member States. 
It reaffirmed the need to “closely evaluate St ate aid in order to identify and reduce the most 
distortive types of State ai d, underlining that monitoring  and follow-up of State aid 
                                                 
33 cf. Council conclusions adopted in November 2002 on “an economic approach towards less and better 
State aid”. See Council do cument number 13799/02 
 http://register.consilium.eu.int/pdf/en/02/st13/13799en2.pdf 
34 A full set of the conclusions was included in the autumn 2003 update of the State aid Scoreboard, COM 
(2003) 636 of 29.10.2003 
35 Council document number 13799/02: http://regis ter.consilium.eu.int/pdf/en/02/st13/13799en2.pdf 
 
EN 30   EN expenditures are essential components of State aid policies in Member States and 
Community State aid policy;” In this context, it invited Member States to “consider before 
granting State aid whether it is targeted on clea rly identified market fa ilures or directed at 
horizontal objectives of comm on interest, including econo mic and social cohesion 
objectives, and whether an interv ention in the form of State ai d is the most appropriate and 
effective way to address these issues” and to continue to “develop the use of “ ex-ante ” and 
“ex-post ” evaluations of individual State aid and State aid schemes in order to monitor 
impact on competition and effectiveness of the aid”. 
2.2. Member States response to the Council conclusions 
As a response to the Council c onclusions, the Commission held a first meeting wi th State aid 
experts from the Member States in July 2003 to  take stock of the Commission’s and Member 
States efforts to follow-up the various Council c onclusions on State aid and to discuss future 
work in the area of reduction, reorientation, and measuring the effectiveness of aid. The 
results of this meeting were reported in  the autumn 2003 update of the Scoreboard. 
On the basis of written contributions receive d from over twenty Member States on recent 
steps taken to follow up the various Council conclusions, a second meeting with Member 
States experts was held in July 2004. The follo wing is a summary of the key points addressed 
at the meeting and/or in Me mber States contributions. 
2.2.1. Specific efforts to reduce and redirect aid 
As reported in the spring 2004 update of the Scor eboard, the latest underl ying figures indicate 
that the majority of Member States appear to be responding positively to the call for less and 
better targeted state aid36. Although aid levels are falling less sharply than in the late 1990s, 
the smaller reduction is still in  line with the Stockholm commitment. Moreover, virtually all 
the aid in several Member States (Belgium, Denmark, Greece, Italy, Netherlands, Austria and 
Finland) was earmarked for horizontal (includi ng cohesion) objectives in 2002. It was agreed, 
however, that caution should be ex ercised in reading too much into aggregate indicators. For 
example, not all horizontal schemes are necessarily effective. 
The vast majority of Member States attribut ed progress in reducing and redirecting aid to 
explicit policy efforts (see additional examples in Annex III):  
A number of Member States have placed gr eater emphasis on improving the general business 
environment, streamlining and rationalising their business support schemes and directing 
support away from ‘State aid’ towards genera l measures. These include  Belgium, Denmark, 
Sweden and the United Kingdom who reported that they have cons istently taken a restrained 
line regarding the awardi ng of State aid. Denmark and Sweden  contend that their industrial 
strategy concentrates on  improving the general environment and growth conditions of firms, 
rather than on helping individua l firms directly. Belgium refers  to its strate gy of devising 
alternatives to state aid as pa rt of an overall business polic y. The United Kingdom, too, claims 
that wherever possible, it “moves whatever suppor t is necessary to provide to industry away 
from routes which constitute State aid.” Similarly, Sweden has established an explicit principle of restraint whereby subsidies to co mpanies should never be a first-hand solution for 
                                                
 
36 2002 figures reported in the State aid Scoreboard spring 2004 update, COM (2004) 256 of 20.04.2004  
 
EN 31   EN achieving different aims. Instead, alternative po licy instruments should first be analysed and 
tested regularly.  
Sweden argues that if subsidies are chosen, ne utral solutions as regards competition should be 
developed as far as possible; aid should be aimed inter alia  at deficiencies in the market’s 
operation (e.g., soft loans for SMEs or for fac ilitating innovation) or other efforts which may 
hasten development in socially desirable di rections (e.g., improvement of the environment 
and more efficient use of energy in th e economy). The current Finnish government 
programme states that “aid should be granted only where specially warranted and it should be 
temporary and transparent.” Portugal also draws a distinction between di fferent types of State 
aid, arguing for example, that operating aid, which by its nature is likely to cause greater distortion to competition, ceased many years ago to  form part of panoply of new state aid 
measures in Portugal.  
France has opted for budgetary restrictions as a way of meeting the commitment to reduce 
State aid. With the exception of aid for R& D and SMEs, a good many budget appropriations 
for operations have been either frozen or revised downwards. German y continues to reduce 
subsidies through “greater transparency, tighter assessment and improved control 
arrangements”. In future, financial aid will be  granted only for a limited period laid down by 
law and will, as a matter of principle, be de gressive. Aid levels fo r investment and job 
creation are being reduced in line with the Regional Aid Map 2000-2006 for Ireland. The 
proportion of aid going to investment and job creati on projects is also declining, as there is an 
increased refocusing of aid to, e.g., the funding of R&D a nd training projects. The 
Netherlands contend that as they are managi ng with shrinking budgets, their commitment to 
reducing state aid is being met almost automatically.  
2.2.1.1. Special situation in the new Member States 
While the new Member States have also pledge d their support for a re duction and redirection 
of State aid, it was accepted that  their situation is not direc tly comparable with existing 
Member States. Given that the European Stru ctural funds are subj ect to the so-called 
“additionality” principle
24, some of the new Member States indicated that overall State aid 
levels are likely to increase, at least in the short-term. 
Section 1.3 describes in some de tail the State aid situation in these Member States, including 
the underlying trends and the extent to whic h aid has been directed towards horizontal 
objectives prior to accession. 
2.2.2. Improvements to national State aid set-up 
Several Member States also referred to steps taken to rationalise and improve the organisation 
of state aid through a variety of institutional ch anges, legislation, bette r targeting of aid, 
greater emphasis on efficacy of aid, strength ening awareness and improving transparency. 
While many of these steps are aimed primar ily at facilitating acc ess to government by 
business and trying to ensure better value for public money, they may also assist in reducing 
and redirecting aid. See examples in Annex III. 
2.2.3. Improving transparency and rais ing awareness of State aid 
Denmark and Spain each reported on ongoing work aimed at making state aid more 
transparent. One of the tools currently bei ng developed by Denmark, in cooperation with the 
 
EN 32   EN Norwegian authorities, is a database providing  detailed information on all aid schemes, 
including budgets, aid actually paid out, objectiv es, etc. The database should provide policy-
makers with a better basis for decision-making when aid schemes have to be reviewed or introduced. Greece, Italy and Slovenia also indi cated that similar efforts were underway.  
The United Kingdom described its proactive approach to rais ing awareness of and local 
expertise in State aid which, it argues, will assist in the reorientation/reduction in several 
ways: a greater awareness of the need to comply  with the State aid rules should assist in 
reducing the number of cases wh ere aid is granted without notif ication. This approach should 
also, particularly in combination with advi ce provided by the Department for Trade and 
Industry (DTI), result in more schemes being de signed so that aid is avoided or, where it is 
necessary to include aid, targeted towards horizontal measures. See additional information in Annex III. 
2.3. Improving the effectiveness of aid 
2.3.1. Ongoing work in the Member States Faced with constraints on nationa l public finances, questions have been raised generally in 
most Member States about the di rection of their nati onal State aid policy a nd its effectiveness. 
Furthermore, in the context of a streamlining of aid policy ongoing in several Member States, 
there has been a need to build up a sufficiently  firm knowledge base. Th ere has therefore been 
a greater demand for monitoring and evaluation of existing aid. 
2.3.1.1. Monitoring and evaluation While all Member States carry out some form  of monitoring and evaluation of their aid 
programmes, there is no common benchmark with  which to assess a part icular aid measure. 
Nevertheless some Member States appear to  have adopted broadly similar approaches. 
Monitoring and evaluation of nati onal State aid policy is carried out in different forms and by 
different actors in the public administratio ns. As Sweden points out, the authorities 
responsible for the aid measure are themselves naturally responsible fo r showing the results 
achieved. As well as this decentralised approach, the Swedish Government has also set up a special authority
37 at central level to evaluate Swedish growth policy from all angles. In the 
work on evaluating existing measures in  growth policy, there have been inter alia reductions 
of certain state aid for companies.  
In the United Kingdom, the appraisal of all Government spending (whether this constitutes 
State aid or not) is a fundamental part of the policy development process. Similarly, the Dutch 
authorities have been applying since 2001 a sy stem covering the whole gamut from policy 
preparation to policy accountability whereby, if aid is to be granted, an opinion is given on the 
resources to be used and a statement of accountability is presented at the end. The 
accountability exercise takes place each year in  parliament. See also Annex III for further 
examples. 
                                                 
37 The Institute for Growth Policy Studies exercises responsibility for carrying out analyses and 
evaluations and disseminating knowledge. ITPS has developed a proposal for indicators which can be 
used both in an analysis of the conditions for growth policy efforts and for following the development 
of the effects of those efforts at first hand. 
 
EN 33   EN As the State Aid rules have been in force in  the new Member States for a limited period of 
time, some countries such as Cyprus and Malta pointed out that the effects of many measures 
are not yet visible and it is ther efore difficult to evaluate either  the effectiveness of the State 
Aid measures introduced or their impact on co mpetition. Most of the new Member States 
have however begun (or intend to shortly begin) to carry out evaluation exercises, some of 
which are outlined in Annex III. 
2.3.1.2. Apparent trend towards ‘rep ayable’ State aid instruments 
Partly as a consequence of the growing emphasi s on evaluation of aid measures, there appears 
to be a trend in several Member States to wards providing funding to firms on a repayable 
basis rather than in the form of non-repayable grants. Portugal and Ireland each reported that 
an increasing proportion of funding is being provided to indigenous  firms in this way. As part 
of an overhaul of Swedish regional aid policy38, there is an explicit intention to move from 
grants to loans. In Finland, the current government programme39 is rather explicit in its 
support for loans and guarantees. In Estonia, res earch into the impact of four different aid 
measures on job creation revealed that the most successful was a loan guarantee scheme targeted at SMEs. In response to a request fo r examples of particularly successful aid 
measures, the Netherlands cited a long-standing  scheme that, “at minimum cost, effectively 
promotes entrepreneurial activit ies” by providing state guarantee s for loans to a large number 
of SMEs. Latvia also quoted a measure in wh ich the Latvian Bank issues a large number of 
credits to SME’s leading to  significant job creation. 
In contrast, Germany appears to  take the opposite stance argui ng that in order to prevent 
subsidies from becoming permanent, the general ru le is that only financ ial aid, i.e. aid granted 
directly from the Federal budget; and, solely in justif ied exceptional cases, tax subsidies, will 
be granted. Steps are also to be taken to exam ine to what extent tax relief can be converted 
into direct grants. 
2.3.2. Ongoing work by the Commission 
The Industry Council of Decembe r 2001 invited the Commission to “develop, together with 
the Member States, statistical tools enabling th ese Conclusions to be followed up and devise 
indicators of effectiveness and efficiency”.  In response, the Commission has launched a 
number of studies  in this field. 
2.3.2.1. Improving understanding of the co mpetition effects of state aid 
In virtually all the examples of successful aid measures provided by Member States (see 
above), success was measured sole ly in terms of the effectiveness of the aid as opposed to its 
impact on competition. A full evaluation of the welfare effects of a State aid, however, needs 
to take account of the impact on competition in the affected markets, which may include not only the economic activity directly  targeted by the aid but also neighbouring markets. The 
analysis of the competition effects of stat e aids is therefore important both for the 
Commission, in controlling state aid, and for po licy-makers in the aid-giving bodies in the 
Member States. 
                                                
 
38 A Policy for Growth and Vitality throughout the Country 2001/02:4 
39 "Business support policy shall continue to give priority to repayable aid. Aid should be granted 
primarily in the form of loans or guarantees and should require the company’s owners and other finance 
providers to contribute with financial inputs that ensure adequate commitment."  24 June 2003 
 
EN 34   EN Recognising the need to improve the knowle dge base and better understand the competition 
effects of state aid, the Commission intends to launch a study in the coming months. The main 
aim of the study will be to improve the economic basis for analysing the impact on 
competition of state aid. The study will construc t an analytical framework for evaluating 
competition effects in terms of the impact on  rivals (rent-stealing, foreclosure) and on 
consumer welfare, distinguishing between dome stic effects and cross- border spillovers.  
On this basis, it will define a set of criteria and indicators that can be used (a) to assess the 
importance of the impact of individual aid aw ards on competition, (b) as a starting point for 
developing some general rules that  can be applied to aid schemes, where the identity of the 
beneficiaries is not known in advance, in order to limit the potential harm to competition and (c) to contribute to the developm ent of a method for identifying st ate aids that are unlikely to 
have a significant impact.  
Results of the study are e xpected by the end of 2005. 
2.3.2.2. Assessing the impact of R&D state aid The Spring European Council
40 in 2004 raised concerns ove r the relative weakness of 
European private sector investment in R&D and stressed the importance of increasing R&D 
within the Union. The Commission recognises th at in this area market failures may exist 
which inhibit private investme nt in R&D and innovation gi ving rise to slowdown in 
productivity and competitiveness. The Comm ission has launched a study to prepare the 
review of the R&D aid guidelines41 which has been in force since 1996 and will expire at the 
end of 2005.  
In essence, this study is focussing on the role of  State aid as an instrument to facilitate the 
achievement of the Barcelona objective to de vote 3% of the EU’s GDP to R&D spending. 
More specifically, it will focu s on what types of activities shoul d be considered eligible for 
support, and on appropriate levels of State aid.  
The study has the following five main objectives:  
- to ascertain the role R&D aid plays in th e overall public R&D support context such as 
universities and public research in stitutes in the last decade 
- to describe and analyse functional cha nges of public research establishments 
- to describe and analyse publ ic support for R&D activities us ed by the Community's major 
trading partners 
- to describe and analyse the cate gorisation of research activities 
- to analyse the leverage effect  of R&D aid, i.e. the potential of aid to stim ulate additional 
private R&D investment 
Results of the study are e xpected in the spring 2005. 
Also in the context of R&D State aid, the Scientific and Technical Research Committee 
(CREST) has recommended to the Council and Commission to draw up a track record of 
                                                 
40 Presidency Conclusions of the European Council 25-26 March 2004.  
41 OJ C 45, 17.02.1996 
 
EN 35   EN success on how State Aid has been redirected  towards R&D programmes in some Member 
States, with a view to preparing a guide for other Member States. 
2.3.2.3. Measuring the effectiveness of State aid to SMEs Successive European Councils have recognised the role played by SMEs in stimulating 
growth and creating employment in the Union. Ai d to SMEs clearly falls within the category 
of horizontal objectives, and is justified by well-recognised market failures, typically occurring in capital markets (difficult access to finance especially in the creation/start up 
phase, asymmetric information, etc). There is therefore a need to improve understanding of 
the effectiveness of various types of state ai d measures which Member States use to support 
SMEs.  
In theory, one way of looking at the effectivenes s of state aid would be to measure the extent 
to which it redresses the identified market failure. In practice, this approach has proved 
problematic due to the difficulties associated w ith quantifying market failures. An alternative 
method is to measure the extent to which th e aid in question has met its specific policy 
objective. For SMEs, this coul d include enterprise creation,  SME growth, SME innovation, 
SME turnover, SME employment, etc. This sec ond approach would seem to be more useful 
for policy-makers and more feasible to implemen t. However, in order to make it operational, 
Member States could find it useful to know more about the pros and cons of possible 
methodologies and about the data requirements. 
The Commission therefore recently launched a st udy with a view to id entifying if and how 
Member States evaluate the effectiveness of st ate aid to SMEs, and to make recommendations 
as to the best methodology (or methodologies). Re sults of the study should  be available by the 
end of 2004. 
 
EN 36   EN 3. P ART THREE : MODERNISING STATE AID CONTROL  
3.1. Adoption of a pro-active competition policy 
In April 2004, the Commission adopted a Comm unication entitled “A pro-active Competition 
Policy for a Competitive Europe”42. This document sets out why and how competition policy 
brings about productivity gains and innovation, th erefore increasing Europe's competitiveness 
on the world stage to the benef it of long term economic growth in the Union's single market. 
The document also describes how the instrume nts of EU Competition policy have undergone 
a review in recent years and sets out the challenges that lie ahea d. In the field of State aid, the 
reforms already undertaken and those on-going ai m at refocusing State aid policy towards a 
more economic approach with the purpose of el iminating harmful State aid, while leaving the 
Member States with more flexibili ty to adopt horizontal measures to support, in particular, the 
Lisbon objectives.  
In 2005-2006, a large number of the Commissi on’s existing regulations, frameworks and 
guidelines come up for renewal including all th e state aid exemption regulations, the regional 
aid guidelines, the framework for research and development aid and the risk capital 
communication. The environmental aid guidelines expire at the end of 2007. These factors, 
together with the beginning of a new progr amming period for the Community’s structural 
funds in 2007, provide an unprecedented window of  opportunity for a comprehensive review 
of the horizontal State aid rules to take account of the horizo ntal, and particularly Lisbon, 
objectives, and the new cohesion policy set out in the forthcoming Structural Funds 
regulations, as well as to consolidate, and wherever possible simplify the rules. 
3.2. Review of the regional aid guidelines 
One of the biggest challenges in  the ongoing reform is to redefi ne regional aid policy in an 
enlarged Union, reconciling the overall reduction  of state aid volumes with the Community 
objective of economic and social cohesion within the framework of enlargement. 
A first Working Paper which outlines the approach that the Commission services are 
proposing to follow for the review of the regiona l aid guidelines was sent to Member States 
on 30 April 2004. The main policy objectives of th e review, which fits within the general 
move towards a more economic approach to State aid policy and takes full account of the 
conclusions of the Third Cohesi on Report, are threefold: achie ving concentration of regional 
aid to investment in th e least favoured regions, ensuring an adequate margin of flexibility for 
Member States and regions to  pursue local regional policy, and enhancing the long-term 
competitiveness and growth potential of all European regions.  
This first Working Paper proposes that the a ssisted areas, laid down in regional aid maps, 
would consist, as at present, of regions eligible  to Article 87(3)(a) and Article 87(3)(c). On the 
one hand, the criteria for the designation of Ar ticle 87(3)(a) regions would basically remain 
unchanged, meaning that all NUTS II regions that have a per capita GDP (measured in purchasing power standards) of less than 75% of the Union average would qualify. On the other hand, with regard to the derogation under Article 87(3)(c), it is proposed to limit its use to a 
                                                
 
42 COM(2004) 293 final of 20.04.2004 
 
EN 37   EN number of predefined (‘earmarked’) regions. Article 87(3)(c) regions might therefore only 
include former 87(3)(a) regions (although a di fferent treatment would apply according to 
whether those regions lose their previous stat us due to the statistical effects entailed by 
enlargement, or as a result of an  increase in regional wealth), as well as outermost regions and 
low population density areas, regardless of their current levels of GDP. 
Outside the assisted areas, only SMEs would be able to benefit from State aid to general 
investment. As far as large companies are concerned, the present horizontal rules (many of which will be reviewed before  1.1.2007) should provide Member States with sufficient room 
for manoeuvre to tackle any relevant problems a nd, incidentally, also to differentiate between 
regions where this is considered necessary. Reliance on such a thematic approach in State aid should also contribute to “less an d better-targeted Stat e aid” by playing a ro le in shifting from 
subsidies that temporarily compensate for regi onal disadvantages to th e provision of public 
goods and incentives permanently increasing th e potential of all regions to growth. 
Although the Commission services requested co mments on the proposals laid down in the 
working paper by 30 June 2004, very few Member St ates were able to meet the deadline, and 
most comments were received in July and August (including from regions and regional 
organisations). With a view to continuing c onsultation with Member States and the EFTA 
Surveillance Authority on all major steps of th e review, a first draft of the new regional aid 
guidelines may be discussed at one or two mult ilateral meetings of national State aid experts 
in early 2005. A final version of  the guidelines should in princi ple be adopted by the end of 
2005, in order to leave ample time for Member St ates and the Commission to ensure a smooth 
transition by the end of 2006. 
3.3. Services of General Ec onomic Interest (SGEI) 
On 18 February 2004, the Commission adopted draf t instruments designed to increase legal 
certainty as regards the financing of services of  general economic interest. The first is a draft 
Commission Decision on the applicat ion of Article 86 of the Treaty to state aid in the form of 
public service compensation. The purpose of th e Decision is to set out the conditions under 
which state aid granted to small-scale services of  general economic interest is compatible with 
the Treaty and to exempt such aid from th e prior notification requirement. The second 
instrument is a draft Directive on the transpar ency of financial relations between Member 
States and public undertakings . The Commission services have also drawn up a draft 
"Community framework for state aid in the form  of public service compensation" which sets 
out the conditions under which compensation gr anted to large-scale services of general 
economic interest (i.e. those not covered by the above-mentioned Decision) constitutes 
compatible aid. See spring 2004 update of the Scoreboard for further details. 
The draft instruments have been presented to the Member States, the European Parliament, 
the Economic and Social Committee and the Committee of the Regions for their opinions. Not all of these institutions have yet taken a final position
43. The drafts are available on the 
Competition DG's website44, and all interested third partie s can make known their views on 
them. The drafts will be finalised by the Comm ission in the light of the comments received. 
                                                 
43 The Committee of the Regions adopted its opinion on 29 September 2004. The Economic and Social 
Committee is at an advanced stage of preparing its opinion. The European Parliament has appointed a 
‘rapporteur’ and a first exchange of views took place in early October. 
44 http://europa.eu.int/comm/competition/state_aid/others/  
 
EN 38   EN 3.4. Review of the rescue and restructuring guidelines 
New guidelines on rescue and rest ructuring aid for companies in difficulty entered into force 
on 10 October 2004. The guidelines clarify the appr oach the Commission intends to take in 
individual cases where the State financially supports a rescue and restructuring operation in 
favor of individual enterprises.  In so doing, Commission decisi ons in individual cases should 
become more predictable for comp anies and the public at large.  
The rules clarify the eligibility of the firm: a firm is regarded as newly created (and thus 
ineligible for rescue or restru cturing aid) during 3 years from start of operation. The so-called 
“one time, last time” has been reinforced to ex clude all kinds of repeat ed interventions with 
the exception of restructuring aid following re scue aid within the same operation. The new 
rules also strengthen the Comm ission’s recovery policy through a prohibition of new rescue 
or restructuring aid for firms which do not reim burse aid previously declared incompatible.  
Unlike the current rules, the ne w Guidelines allow for the unde rtaking of the first urgent 
structural measures during the re scue period. However, rescue aid can still only be granted in 
the form of reimbursable liquidity while other interventions, such as capital injections from 
public authorities which cannot be undone, remain  prohibited as rescue aid. Moreover, the 
rescue period is clearly limited to 6 months including the reimbursement of the rescue aid.  
In order to speed up procedures, Member States  have the possibility to opt for a lighter 
procedure to approve rescue aids if the am ount of the aid does not exceed the result of a 
standard formula and, in any event, €10 million. Furthermore, with the aim of concentrating 
resources on those cases that really pose a th reat to competition, the Commission will no 
longer assess the viability of restructuring plans for SMEs.  
To avoid undue distortions of competition, a prin ciple has been introduced that compensatory 
measures are necessary except for small undertak ings. Compensatory measures can take the 
form of divestment of assets, reduction in cap acity or market presence, reduction of entry 
barriers, etc. It is also exp licitly confirmed that activities which would have been abandoned 
anyway are not included in the assess ment of compensatory measures.  
The new Guidelines clarify that the contribution by the beneficiar y should be real and free of 
aid. For small enterprises, it should in principle be at least 25% of the restructuring costs, for 
medium-sized enterprises at least 40%, and fo r large undertakings at least 50%. In exceptional 
circumstances and in case of particular hardship the thresholds can be reduced. 
For agriculture, the rules have been considerab ly simplified. For proces sing and marketing of 
agricultural annex-I products, the normal rules will apply.  
3.5. State aid for innovation 
At the Lisbon European Council in 2000, the Uni on set itself a new strategic goal for the next 
decade: “to become the most competitive and dynamic knowledge-based economy in the world.” The Council has subsequently emphasise d the importance of innovation as the main 
source of competitiveness and economic growth, and its key role in the European Research Area.  
While fostering competition and market openi ng is considered as the most efficient 
instrument to stimulate innovati on, situations exist in which th e market fails to deliver the 
 
EN 39   EN incentives necessary to reach the desirable am ount of innovation activities in view of the 
social returns it generates. In such cases gov ernment interventions may be appropriate to 
correct existing market failures, but the benefits  of State intervention must always be assessed 
against its costs, particularly in terms of distortion of competition.  
In its Communication on “A pro-active competition policy for a competitive Europe” of April 
2004” (see section 3.1), the Commission announced  that it would draw up a vade-mecum or 
‘Practitioner’s guide’ to provide  guidance on measures in suppor t of innovation which can be 
adopted within the existing State aid regulatio ns and frameworks to State aid for innovation. 
The Commission also committed itself to produ cing in 2005 a Communication in which the 
need and potential to expand the possibiliti es to aid innovation will be explored.  
Consequently, the Commission services ar e currently preparing a vade-mecum on 
Community rules on State aid for innovati on. The document is based on an economic 
approach, identifying four  key market failures45 which impede innovation in the European 
economy. The vade-mecum then describes the diffe rent types of State aid measures which 
might be used to try to address those market  failures, using key Co mmission decisions as 
illustrations.  
On the basis of a questionnaire46 that was sent by the Commissi on to Member States in April 
2004, State aid for innovation was also discussed at the above-mentioned meeting with State 
aid experts from the Member States held in July 2004.  
The Commission summarized the issues raised in  Member States replies to the questionnaire 
after which there was a useful exchange of views. The Commission took note of a range of 
market failures cited by Member States, whic h largely confirmed th e Commission’s internal 
analysis (see vade-mecum). A number of Member States expressed the vi ew that it might be 
difficult to reach a commonly-accepted definition of innovation generally applicable for State 
aid purposes. An alternative option could be to define innovation activities relating to 
identified market failures. It also emerged that market failures tend to be larger the smaller the 
company is. Some Member States  floated the idea of allowing special treatment for small and 
micro-enterprises, whereas others warned that this could distort the incentive for enterprises 
to grow. 
Although innovation does not generally develop according to a ‘linear’ model from basic 
research to commercial implementation, it re mains true that, on the one hand, market 
mechanisms are less capable of correctly assessing and adequately funding fundamental 
research, while, on the other ha nd, public support bear s greater risks of distorting competition 
the closer the activity is to its commercialisation phase.  
                                                 
45 (1) the existence of public goods and externalities as a result of which the innovating firm cannot fully 
appropriate the returns on its investment and therefore may give up promising projects; (2) the inefficient dissemination of information leading to low take-up rates for innovation; (3) failures in the 
capital markets leading to insufficient funding for innovation; (4) labour market mis-matches, due to 
lack of skills or mobility of the workforce.  
46 Member States were asked: (1) to describe the mark et failures giving rise to the need for innovation aid; 
(2) to explain how the existing rules prevent them from granting aid for innovation; (3) to provide a definition of what they consider to be innovation/innovatory activities/enterprises; (4) if higher aid 
intensities were to be introduced for innovation aid, to indicate how they could ensure that aid would be 
restricted to ‘innovative’ activities only. 
 
EN 40   EN Against this background, Member States broadly agreed about th e need on one ha nd to adapt 
existing aid instruments to better cover innovati ve activities and, on the other hand, to develop 
instruments that address gaps in the current system. As indicated a bove, the Commission has 
announced that it will address th ese issues in a Communication on State aid and innovation to 
be presented in 2005. In addition, the majority  of the instruments me ntioned in the vade-
mecum (e.g., R&D Framework, Regional aid guid elines, Risk capital communication) will 
undergo a detailed review in 2005-2006.  
3.6. State aid to cinema 
In accordance with Article 87(3)(d) of the EC  Treaty, the Commission may authorise aid to 
promote culture, where such aid does not affect competition and trading conditions to an extent contrary to the common interest. A Communication from th e Commission on certain 
legal aspects relating to cinematograp hic and other audiovisual works (Cinema 
Communication I), adopted in 2001, clarified the criteria used by the Commission when 
applying the exception of this Arti cle to State aid to cinema.  
The Cinema Communication II, adopted on 16. 3.2004, extends the validity  of these criteria 
until the end of 2007.
47 In addition, it announces an extensive economic study on the effects 
of the existing State aid system s. The study should examine in particular the economic effects 
of territorialization requirements imposed by certain Member States. 
3.7. Improving current procedures and working methods 
In March 2004, the Commission adopted implementing provisions48 under Article 27 of 
Regulation (EC) n° 659/199949. The overall objective is to ac celerate, simplify and modernise 
procedures, in particular with  a view to reducing the resour ces expended on routine cases and 
to enable the Commission to concentrate resources on more important cases which present real competition concerns at the Community level. 
The new provisions concern the form, content a nd other details of notifications and annual 
reports to be submitted by Member States to the Commission. The aim is to streamline and 
simplify procedures as well as enhancing tran sparency and legal ce rtainty. The provisions 
also include details of time-limits, the interest rate for the recovery of unlawful aid, as well as other suggestions to improve current procedures  and working methods. For further details, see 
article in the summer edition of the Competition Newsletter.
50 
3.8. State aid to the agricultural sector 
On 6 October 2004, the Commissi on adopted a new Regulation on the applicati on of Articles 
87 and 88 of the EC Treaty for “de minimis” ai d in the agricultural and fisheries sectors.51 It 
foresees that aid up to €3000 per farmer/fisherm an can be granted over a period of three years 
without being notified to  the Commission, provided that th e global amount of  such aid does 
                                                 
47 COM(2004) 171 final. OJ C 43 on 16.2.2002 
48 Reg. EC 794/2004, OJ L 140 of 30.4.2004, p. 1 
49 Council Reg. (EC) No. 659/99 of 22 March 1999, OJ L 83 of 27.3.1999, p. 1 
50 “Reform of procedural rules for state aid case s”, Competition Policy Newsletter 2004 Nr 2 summer 
 http://europa.eu.int/comm/competition/publications/cpn/cpn2004_2.pdf  
51 Commission Regulation (EC) No 1860/2004 of 6 October 2004 on the application of Articles 87 and 88 
of the EC Treaty to de minimis aid in the agriculture and fisheries sectors (OJ L 325 of 28.10.2004 p.4)- 
http://europa.eu.int/comm/agriculture/stateaid/leg_fr.htm  
 
EN 41   EN not exceed 0.3% of production in the agricultural or fisheries sector of the Member State 
concerned. From 1 January 2005, Member States will be  able to grant aid that is in line with 
the Regulation without the Commi ssion having to approve the aid in advance, but they will 
also have to provide informa tion certifying that the two ceili ngs have been complied with.  
3.9. State aid to the fisheries sector 
On 30 June 2004, the Commission a dopted a new set of rules on state aid to the fisheries 
sector. These rules bring state aid policy in to line with the reformed Common Fisheries 
Policy, adopted in December 2002. The new rules provide for a ‘block exemption’52 for 
certain types of aid which will no longer have to be notified to and approved by the 
Commission before Member Stat es can implement them. Aid not  covered by this exemption 
will still have to be notified and assessed by the Commission under guidelines53 also adopted 
on 30 June 2004. They will become applicable from 1 November 2004. 
The measures covered by the block exemption rela te to aid unlikely to threaten conservation 
or distort competition in a manner not in line wi th EU interest and which therefore has never 
given rise to investig ation procedures by the Commission. Th e aid concerned has to comply 
strictly with the criteria set out in the block exemption regulation, which are identical to those 
governing the allocation of EU funds under the Financial Instrument for Fisheries Guidance 
(FIFG). 
The block exemption will apply to aid grante d to SMEs for amounts below €1 million or to 
aid designed to finance measures with a maxi mum eligible amount of €2 million. To ensure 
the proper allocation of such aid, monitoring will take place through a simplified procedure 
comprising ex-ante information of the Commission on the aid to be granted, published on the internet and the Official Journa l, and ex post reporting obligations. Both the block exemption 
and de minimis aid regulations have a re troactive effect explicitly built in. 
See also section 3.8 re de minimis aid in  the agricultural and fisheries sectors. 
3.10. State aid to the transport sector 
State aid to the aviation sector  
In the autumn of 2004 the Commission will be studying draft guidelines aimed at 
supplementing the guidelines on state aid in th e aviation sector adopted in 1994; they will 
take account of the major developments that have  occurred in recent year s in the European air 
transport market. One such change is the emergence of several new Community-scale 
companies with promotional rates supported by a low-cost structure. Another concerns 
airports which in the last few y ears have been particularly active in seeking to attract new air 
routes and have created a real airport mark et with its own case law (Aéroports de Paris 
judgment in 2000). The guidelines cover both aspects. 
As regards start-up aid, the draft guidelines s uggest extending the Commission Decision of 12 
February 2004 on the aid granted to Ryanair at Charleroi by codifying the practice thus 
                                                
 
52 Commission Regulation (EC) No 1595/2004 of 8 September 2004 on the application of Articles 87 and 
88 of the EC Treaty to State aid to small and me dium-sized enterprises active in the production, 
processing and marketing of fisheries products (OJ L291/3 of 14.9.2004). 
http://europa.eu.int/comm/fisheries/doc_et_publ/factsheets/legal_texts/stateaids_en.htm  
53 Guidelines for the examination of State aid to fisheries and aquaculture (OJ C229 of 14.09.2004) 
 
EN 42   EN established and allowing airpor ts, especially regional air ports, provided they comply 
scrupulously with the ru les on transparency and proportional ity, to contribute to the creation 
of new routes. The maximum pe riod envisaged is 5 years and the maximum aid intensity 50% 
of the costs of starting up the routes. 
As regards the financing of air ports, the draft guidelines envisage  to retain the principle that 
the building of airport infrastructure that is op en to all users may come  under the heading of 
the power of public authorities to provide public infrastructure and facilities. On the other hand, the financing must be limited to the installations that are specifically re quired for air 
transport itself and not its commercial adjuncts such as shops, hotels or car parks. Nor must it 
allow airport managers to gain an unfair a dvantage by imposing ex cessive charges which 
could place them in a predatory posi tion in relation to other airports. 
State aid to combined transport  
The Commission is currently preparing a worki ng document in relation to state aid for the 
combined transport sector. The absence of specifi c guidelines for this sector implies a lack of 
transparency and understanding by third partie s of the rules and cr iteria applied by the 
Commission when assessing public financing in this sector. Nevertheless, the Commission 
has through a substantial number of decisions established a constant legal practice which 
could be converted into specific guidelines, th erefore providing the necessary transparency 
and legal certainty that is re quired by interested parties. 
3.11. De minimis aid to the coal sector 
In March 2004, the Commission adopted a draft regulation which would explicitly exclude 
the coal sector from the scope of the de mini mis regulation of January  2001. The coal sector 
has been covered by the EC Treaty only since 24  July 2002, following the expiry of the ECSC 
Treaty. Since then, the sector ha s been subject to specific rule s which prevent the application 
of other exemption regimes. 
 
EN 43   EN 4. O NLINE STATE AID SCOREBOARD AND REGISTER  
The online Scoreboard contains el ectronic versions of this and previous Scoreboards as well 
as a set of key indicators, a wide array of statis tical tables and internet-links to information on 
State aid policy issues of the Member States and the European Parliament. 
http://europa.eu.int/comm/competition/state_aid/scoreboard/  
Any queries or requests for data should be sent to the scoreboard mail box at 
Stateaid-Scoreboard@cec.eu.int  
State aid Register – a second transparency tool 
The Commission’s State aid Register has be en online since 2001. The Register provides 
detailed information on all State aid cases wh ich have been the object of a final Commission 
decision since 1st January 2000 as well as bloc k exemption cases published in the Official 
Journal. It is updated daily and thus ensures that the public has timely access to the most recent State aid decisions. It is available on the homepage of the Competition Directorate General’s Internet site: 
http://europa.eu.int/comm/competition/state_aid/register/
 
 
EN 44   EN 5. M ETHODOLOGICAL NOTES  
The data used in this Scoreboard  were provided by the national administrations of each new Member 
State. Additional data on population, GDP and excha nge rates were obtained from Eurostat. Data for 
2004 are provisional. Annual average exchange rate s were provided by Eurostat and may differ from 
those used by the national authorities. Furthermore,  exchange rates for some of the currencies in 
question have been subject to considerable fluctu ations, which clearly have an impact on the data. 
Total aid excludes agriculture, fisheries and trans port for which comparable data prior to accession are 
not available. See section 1.3.6 for details of the provisions that apply in these sectors for the existing 
aid mechanism. 
State aid expenditure is attributed to the year it was made. In cases that result in expenditure over a 
number of years, the total amount is attributed to  each of the years in which expenditure took place. 
All data are provided in million (or billion where appr opriate) euro at constant 2000 prices so that the 
effects of inflation are removed. Some data for the year 2003 in Cyprus, Hungary, Latvia, Lithuania 
and Poland are provisional. 
In relation to the autumn 2002 update of the Scoreboard54, many of the figures have been subject to 
significant revisions. 
State aid data collected for the Scoreboard are grouped according to primary objectives which may be 
either horizontal or sector-specific. Information on th e objective of the aid, or, the sector to which the 
aid is directed, refers to the time the aid was approve d and not to the final recipients of the aid. For 
example, the primary objective of a scheme which, at the time the aid was approved, was exclusively 
earmarked for small and medium-sized enterprises is classified as aid for ‘small and medium-sized 
enterprises’. In contrast, aid granted under, say , a regional development scheme may ultimately be 
awarded to small and medium-sized enterprises, but is not regarded as such if, at the time the aid was 
approved, the scheme was open to all enterprises.  
The following symbols have b een used in the Scoreboard: 
n.a. not available 
- real zero 
0 less than half the unit used 
NGE net grant equivalent 
New MS new Member States 
R&D research and development 
SMEs small and medium-sized enterprises 
GDP Gross Domestic Product 
See also Conceptual remarks (after Introduction). Further information on methodological issues may 
be found on the online Scoreboard: 
http://europa.eu.int/comm/competition/stat e_aid/scoreboard/conceptual_remarks.html  
                                                 
54 COM(2002)638 of 27.11.2002 
 
EN 45   EN ANNEX I: TRANSITIONAL ARRANGEMENTS PROVIDED FOR IN THE TREATY OF ACCESSION  
Cyprus 
- Phase-out incompatible fiscal aid by the end of 2005 
Czech Republic 
- Restructuring of the steel industry to be completed by 31 December 2006. 
Hungary 
- Phase-out incompatible fiscal aid for SMEs by the end of 2011 
- Conversion of incompatible fiscal aid for large companies into regional investment aid; the aid will be limited 
to a maximum of 75% or 50% of the eligible investment costs depending on the start date of the investment; in 
the motor vehicle industry the aid is further limited, and set at a level that corresponds to 30% or 20% of the 
eligible investment costs respectively.  
- Phase-out incompatible fiscal aid for off-shore companies by the end of 2005 
- Phase-out incompatible fiscal aid gran ted by local authorities by the end of 2007 
Malta 
- Phase-out incompatible fiscal aid for SMEs by the end of 2011 
- Conversion of incompatible fiscal aid for large companies into regional investment aid; the aid will be limited 
to a maximum of 75% or 50% depending on the date of the attainment of tax exemption  
- Aid for restructuring of the shipbuilding sector during a restructuring period lasting until the end of 2008 
- Phase-out of operating aid under the Business Promotion Act by the end of 2008 
Poland 
- Phase-out of incompatible fiscal aid fo r small enterprises by the end of 2011 
- Phase-out of incompatible fiscal aid for me dium-sized enterprises by the end of 2010 
- Conversion of incompatible fiscal aid for large companies into regional investment aid; the aid will be limited 
to a maximum of 75% or 50% of the eligible investment costs depending on the date of the attainment of the 
permit; in the motor vehicle industry the aid is further limited, and set at a level that corresponds to 30% of the 
eligible costs. 
- With regard to state aid to environmental protection, tr ansitional arrangement agreed for investments that relate 
to standards for which a transitional period has been granted under the Chapter Environment and for the duration 
of that transitional period, whereby the aid intensity is limited to the regional aid ceiling 
- Restructuring of the steel industry to be completed by 31 December 2006. 
Slovak Republic 
- Conversion of incompatible fiscal aid to one beneficiary in the motor vehicle manufacturing sector into 
regional investment aid; the aid will be limited to a maximum of 30% of the eligible investment costs. 
- Incompatible fiscal aid to one beneficiary in the steel se ctor to be discontinued at the end of 2009 or when aid 
reaches a pre-determined amount, whichever comes first. 
 
EN 46   EN ANNEX II: COUNTRY PROFILES  
Cyprus 
Year 2004 Annual average years 2000-2003 
Population : 0.73 million Total State aid less agriculture, fisheries and 
transport (national currency) : 165 million CYP 
GDP : € 12.0 billion Total State aid (euro) : € 285 million 
GDP per capita : €16 459 or 18 152 PPS State aid as a percentage of GDP : 2.85 %  
Exchan ge rate : 1€ = 0.582 CYP State aid per ca pita: € 405 or 497 PPS 
State aid legislative, 
administrative and 
enforcement framework  Following the entry into force of the Public Aid Control Law on 30
th April 
2001, the Office of the Commissioner for Public Aid, headed by an 
independent official, the Commissioner for State Aid Control, was established in order to create a proper fr amework for the effective control of 
State Aid (www.mof.gov.cy). The Commissioner took office on 1
st June 
2001. According to the Law and the secondary legislation, no state aid could 
be advanced without the prior approval of the Commissioner. Upon 
accession, Community state aid rules became directly applicable with the substantive control of State aid bein g shifted from the Commissioner to the 
European Commission. The legislative framework was amended accordingly. 
According to the State Aid Control Laws of 2001 to 2004, all competent 
authorities intending to grant any type of aid are obliged to notify all draft aid 
measures to the Commissioner before th eir implementation. If any draft aid 
measure is implemented without the prior approval or opinion of the 
Commissioner, the latter may take a decision  requiring the recovery of the 
aid from the beneficiary. The Commissioner possesses powers and responsibilities in respect of issuing non-binding recommendations on all 
draft aid measures, notification of State aid measures to the Commission, 
assessment and monitoring of all measures under the block exemption regulations, the effective control of de minimis aid and the collection of data. Therefore, the Office of the Commissioner for State Αid Control now acts as 
the national focal point and coordinator for state aid matters in Cyprus. 
State aid in the 
years 2000-2003  Cyprus granted annually €285 million of state aid in the years 2000 – 2003. 
This represented 2.85% of GDP or th e equivalent of €405 per capita. The 
relatively high level of state aid can be attributed to two peculiarities in 
Cyprus, the impact of which will diminish in the coming years leading to an expected reduction in the overall level of  State aid. A fall in the absolute 
amount of state aid can be observed in 2003 due to the beginning of the 
phasing out process of Cyprus’s largest scheme that gives tax reductions to 
International Business Enterprises (see below).  
On average 88% of total aid was gi ven under schemes, while €36 million was 
awarded through ad hoc measures.  
International 
Business 
Enterprises Act  In the medium term, Cyprus’s transiti onal arrangement for its International 
Business Enterprises Act foresees the phasing out of a significant amount of 
tax relief by the end of 2005. This aid is made up largely of tax relief through 
a reduced tax rate of 4.25%, as opposed to the standard rate of 20-25%. Already in 2003, expenditure under this scheme dropped to around €68 million from €219 million in 2002 due to th e new tax code that entered into 
force on 1 January 2003. It eliminated all incompatible fiscal aid with 
immediate effect and abolished the distinction between the onshore and 
 
EN 47   EN offshore sector. For one provision of th e tax code, a transitional period was 
requested by Cyprus until the end of 2005 for existing beneficiaries in the offshore sector. This arrangement accounted for almost 60% of total aid in 
the years 2000 to 2003. 
Exemptions from 
import duty before accession  The other cause for the relatively high  aid levels prior to accession should 
disappear in the short-term, leading to significant reductions in aid expenditure already in 2004. Prior to accession, a system of sectoral exemptions was in force exempting most manufacturing enterprises from payment of import duties for certain raw materials or inputs, provided that 
these raw materials were used for the manufacture of final products either for 
domestic consumption or for export. All these measures were abolished on 
the date of accession. In 2003, the imports of raw materials increased 
substantially (from €9 million in 2002 to €114 million, or 47% of total aid, in 
2003) as a result of manufacturing companies stocking-up by importing large 
quantities of raw materials before the abolition of these measures. 
Given the clear commitment of phasing-out both the above-mentioned cases, 
it is interesting to look at the figures excluding these two schemes: total state aid would have amounted to only €60 million in 2003, representing 0.6% of 
GDP. 
State aid to 
horizontal objectives  Aid for horizontal objectives averaged €66 million per year or 23% of total 
aid in the observed period. Annually,  €31 million (11% of total aid) was 
devoted to the preservation of heritage  and national culture, mainly through 
the financing of national and multina tional film and theatrical productions, 
including national broadcasting. Cypriot state aid policy aims also to enhance human resources development (2%) and to protect the environment (1%). 
Around 4% of total state aid was specifically earmarked to SMEs. 
Regional aid in 
Cyprus  The smooth integration of Cyprus into the Union is constrained by a number 
of special characteristics, namely the large distance of Cyprus from EU markets, the scarcity of water and own energy resources, the small size of its domestic market and some weaknesses in the structure of production. These 
disparities are addressed by a few horizontal, regional aid measures totalling 
€11 million yearly (4% of total aid). According to the Guidelines on national regional aid, the total territory of Cyprus is regarded as an Article 87(3)(c) region providing for a uniform aid ceiling of 20% NGE and 10% for SMEs and covering 100% of the population. Cy prus is regarded as one region at 
each NUTS level. It should be noted that this applies only to the area of the 
Republic of Cyprus under the control of the Government of Cyprus. 
Sectoral and Rescue 
& Restructuring aid  Sectoral aid constituted a substantial part of total state aid in Cyprus 
amounting to an average €219 million between 2000 and 2003 (77 % of total aid). This relatively high percentage can be attributed almost exclusively to the two measures detailed above. No rescue and restructuring was granted in 
the period under review. There are no so-called sensitive sectors in Cyprus. 
Aid instruments  State aid took mostly the form of fiscal instruments. Tax exemptions, 
subsidized rent and other duty relief ma de up 81% of total aid in the period 
2000-2003, followed by grants (18%). Guarantees and soft loans were scarcely used. 
  
 
EN 48   EN Existing aid in 
Cyprus  Cyprus has 51 existing state aid measures through which it can award aid in 
future without prior notification to  the Commission. 31 of these measures 
were annexed to the Treaty of Accessi on while a further 20 were approved by 
the Commission as existing aid under the interim mechanism. These schemes 
are devoted to various horizontal objec tives, especially to the support of the 
film industry and major cultural events. 
Transitional 
arrangements with 
Cyprus  In course of the negotiations, Cyprus re quested a transitional arrangement to 
allow the granting of a grandfather clause to International Business 
Enterprises. Thus the undertakings wh ich were active on 31st December 2001 
and had, by that date, acquired the be nefit of section 28A of the Income Tax 
Law are allowed to maintain the benefit until 31st December 2005.  
Looking to the 
future  ... Due to a number of measurement difficulties set out in section 1.3.1, it is not 
possible to provide an accurate forecas t of future aid expenditure levels. 
However, by looking at the situation in the last year before accession, 2003, it 
can be observed that around €154 million (64% of total aid) was awarded 
under measures that will not continue beyond accession. Aid given under existing schemes (32 out of a total of 158 in 2003), i.e. that are scheduled to continue after 1 May 2004, amounted to €20 million (8% of total aid) in 
2003. Finally, a considerable amount of aid (€68 million or 28% of the total) 
was awarded under transitional arrange ments foreseen in the Treaty of 
Accession. 
State aid for horizontal objectives and particular sectors in Cyprus, 2000-2003 
 
2000 2001 2002 2003
mio € % of total mio € mio € mio € mio €
Horizontal Objectives 66.3 23% 56.7 65.8 89.3 53.3
     Research and Development 1.1 0% 0.9 1.2 1.5 0.7
     Environment 1.7 1% 1.6 1.1 2.2 2.1
     SME 11.9 4% 14.0 13.1 18.4 2.2     Commerce 4.6 2% 4.5 5.5 5.3 3.2     Training aid 5.3 2% 5.6 5.0 5.5 5.2     Heritage conservation, cultural aid 30.6 11% 21.6 30.6 33.3 36.7
     Natural disasters 0.4 0% - - - 1.5
     Regional aid n.e.c. (1) 10.7 4% 8.7 9.3 23.2 1.5
Sectoral aid (2) (3) 219.0 77% 198.5 242.1 247.0 188.5
Total aid less agriculture, fisheries 
and transport in million €285.3 100% 255.2 307.8 336.5 241.8Avera ge 2000-2003
Note: All figures are expressed in euros at 2000 constant prices so that the effects of  inflation are removed. (1) 
Aid for general regional development not elsewhere classified (2) Aid for specific sectors awarded under 
measures for which there was no horiz ontal objective as well as aid for rescue and restructuring. (3) The 
International Business Enterprises scheme benefits vari ous sectors but the exact am ounts are unknown for each 
sector. However, a breakdown of the main sectors in wh ich the benefiting enterprises operate provides a useful 
indication: 53% services other than transport and communication, 25% transport, communication, 21% construction. 
 
EN 49   EN Czech Republic 
Year 2004 Annual average years 2000-2003 
Population : 10.2 million Total State aid less agriculture, fisheries and transport 
(national currency) : 62,137 million CZK 
GDP : € 79.8 billion Total State aid (euro) : € 1 908 million 
GDP per capita : € 7,810 or 15,406 PPS State aid as a percentage of GDP : 2.8 %  
Exchan ge rate : 1€ = 32.059 CZ K State aid per ca pita: € 1 8 7o r  3 8 6P P S  
State aid legislative, 
administrative and 
enforcement framework The Czech Act on State Aid that entered into force in May 2000 contained 
the main principles of Community State aid rules. The State Aid Department 
of the Office for the Protection of Economic Competition (http://www.compet.cz/
) exercised ex ante control over all aid (also regional 
and municipal) granted in the Czech Republic from May 2000 up to accession. Before accession a new Act on the “modification of certain 
relations in the area of state aid” repl aced the previous legal regulation. The 
decision-making functions of the State aid Section of the Office were wound up on 1 May 2004. The new functions of the Office as th e national central 
coordination, advisory and monitoring  unit are to facilitate and accelerate 
notification contents and procedures; advise Czech State aid providers on the EU State aid rules in individual cases;  manage national obligations under the 
block exemption regulations; collect ne cessary data and draft regular or ad-
hoc reports on State aid and to assume the role of a regular national contact point in working relations with the Commission. 
State aid in the 
years 2000-2003  The Czech Republic granted annually €1 908 million of state aid in the years 
2000 to 2003. This represented 2.8 % of  GDP or the equivalent of €187 per 
capita. The relatively high amount of state aid in the Czech Republic can be 
attributed to the measures taken by the Czech government, mainly in the form of guarantees, to resolve the legacy of the banking crisis of the 1990s. The overall state aid level was highest in 2002 and 2003 due to the increased recourse of these state guarantees. 
As a consequence of the rules of the Czech Act on Investment Incentives that 
foresaw an individual assessment of all fiscal aid awards, the Czech state aid system is based on a considerably large number of ad hoc cases, which made up around 90% of all aid measures prior to accession.  
Czech banking 
crisis Between 1994 and 1998, the Czech Repub lic faced a general banking crisis. 
The Government adopted a series of me asures during and after the crisis to 
enable the creation of a viable, privatised banking sector, and in particular to 
ensure the rescue and restructuring of several banks and their successful privatisation. These measures included capital injections, transfers of assets, public guarantees, ring-fence agreements and litigation indemnities. The Czech Republic notified some cases unde r the interim mechanism procedure. 
To date, the Commission has adopted 15 decisions essentially declaring that 
the measures were (in technical terms) “not applicable after accession”. This means that those measures were grante d in their entirety before the accession 
date, and thus the Commission was neither required nor empowered to assess such measures. These aids cannot be  challenged upon the Czech Republic’s 
entry to the EU. Nevertheless, a “not applicable after accession” decision 
does not necessarily mean that there ar e no longer any further payments, 
within the predefined limits, for these aid measures after accession. 
As a condition for the provisional closure of the Competition chapter during 
 
EN 50   EN the accession negotiations, the Czech Republic undertook a commitment to 
create full transparency with regard to  all State aid measures for the Czech 
banking sector taken in the process of its restructuring. It is worth noting that 
prior to accession around 15 banks that were granted restructuring aid now 
cease to exist. Payments from guarantees accumulated to €1 459 million yearly in the period 2000-2003, with th e highest amount (nearly €2.4 billion) 
paid out in 2002. A further €185 milli on of aid was granted in 2000 in the 
form of grants and soft loans. Gi ven the exceptional circumstances of the 
banking crisis inferring the necessary interv ention of the state, it is interesting 
to look at the situation without these payments: state aid would have 
amounted to €388 million, representing only 0.55% of the GDP during the 
period under review. 
Aid for horizontal 
objectives Aid directed towards horizontal objectives amounted to €185 million or 10% 
of total aid in the observed period. A nnually €40 million (2.1 %) was devoted 
specifically to Czech SMEs. State aid policy also aimed to strengthen R&D 
activities (2%) and support environmental protection and energy saving (2%). 
Regional aid in the 
Czech Republic A somewhat higher proportion of horizontal aid was granted under the 
Guidelines for national regional aid. Th e figures show €63 million of regional 
aid corresponding to 3% of total aid ove r the period under review. The Czech 
Republic consists of eight NUTS II regions that have a per capita GDP not 
exceeding 60% of the Community average except for Prague (almost 120%). According to the Community guidelines on national regional aid, the territory of the Czech Republic with the exception of Prague shall be regarded as an 
area identical to those areas of the Co mmunity described in Article 87(3)(a). 
Therefore the intensity of regional aid must in general not exceed the rate of 
50% NGE. The maximum aid intensities vary slightly in the different regions 
of the country (between 46% in Southwest and 50% in Central Bohemia and Silesia). Prague is an area eligible for Art. 87(3)(c) status and the intensity of 
regional aid must not exceed the rate of 20% NGE. All ceilings may be raised by 15 percentage points in 87(3)(a) regions and by 10 points in 87(3)(c) 
regions in the case of aid granted to SMEs. 
Sectoral, rescue and 
restructuring aid Due to the reasons outlined above, rescue, restructuring and other sectoral aid 
outweighed all other types of aid. The aid given to these potentially more distortive objectives amounted to an av erage €1 723 million (almost 90% of 
total aid) over the period under review. The majority of the rescue and restructuring aid benefited the financ ial sector: an annual average of €1 520 
million or 80% of total aid. Between 2000 and 2003, the steel sector also 
benefited from an annual average of € 75 million of aid as part of a general 
restructuring plan (see below). Around 2% of total aid (€29 million per year) was granted to the motor vehicle industry while a relatively small amount of closure aid was given to its coal industry in 2002 and 2003. 
Aid instruments State aid in the Czech Republic took mostly the form of guarantees which 
made up 78% of total aid in the period 2000-2003, followed by grants (12%). Equity participation (6%), tax exemptions  (3%) and soft loans (1%) given by 
the State were used much less frequently. 
Existing aid in the 
Czech Republic The Czech Republic has 214 existing state aid measures through which it can 
award aid in future without prior notif ication to the Commission. 120 of these 
measures were annexed to the Treaty of Accession while a further 94 were approved by the Commission as existin g aid under the inte rim mechanism. 
These measures involve mostly regional investment aid in the form of tax 
 
EN 51   EN exemptions to individual companies and schemes for co-financing the 
Structural Funds. Some of the measures accepted as existing aid under the interim mechanism were mere modificati ons to the already listed measures in 
the Treaty. Some 40 measures are still under assessment. 
Transitional 
arrangements with the Czech Republic Protocol 2 of the Treaty of Accession sets out detailed transitional 
arrangements for the restructuring of the Czech steel industry, with the aim of leading to its viability under normal market conditions by the end of 2006. Steel is an important industrial sector in the Czech Republic. Over the last decade, significant restructuring h as been achieved, reinforcing the 
competitiveness of the sector. Despite these efforts, the restructuring process 
is not yet complete. For this reas on, transitional arrangements were 
negotiated to allow the granting of st ate aid to specific companies. The 
maximum amount of state aid under these arrangements is €413 million for the period 1997-2003. An overall productiv ity comparable to that of other EU 
countries shall be achieved gradually by 2006 under close monitoring of the 
Commission. The amount of state aid granted up to the end of 2003 was lower than the maximum agreed ceiling. In the period 1997-2003, the Czech Republic granted a total amount of  CZK 12 000 million (€371 million), 
which is approximately 85% of the Protocol ceiling. 
Looking to the 
future… Due to a number of measurement difficulties set out in section 1.3.1, it is not 
possible to provide an accurate forecas t of future aid expenditure levels. 
However, aid given under existing measures (54 out of a total of 100 measures in 2003), i.e., that are scheduled to continue after 1 May 2004, amounted to €147 million (7% of total aid) in 2003. Of the remaining 93%, 7% was awarded under measures that will not continue beyond accession and 
8% was awarded to the steel sector under a transitional arrangement which 
was phased out in 2003. The future tr end in the overall level of aid will 
depend greatly on the extent to which payments are made from existing guarantee and indemnity measures to the banking sector which accounted for 78% of total aid in 2003. In this context, the Commission would have the 
authority to assess such aid only if th e Czech Republic were to exceed the 
limits of the already cleared measures under the interim mechanism or if they were to introduce new aid measures. 
 
EN 52   EN  
State aid for horizontal objectives and partic ular sectors in the Czech Republic, 2000-2003 
 
2000 2001 2002 2003
mio € % of total mio € mio € mio € mio €
Horizontal Objectives 185,0 10% 120,1 153,3 228,1 238,4
     Research and Development 33,4 2% 24,0 26,7 42,9 40,1
     Environment 31,6 2% 39,5 25,1 23,3 38,6     SME 40,4 2% 31,6 34,3 56,8 39,0
     Employment aid 9,8 1% 5,8 10,5 15,9 7,0
     Training aid 7,0 0% 2,8 3,7 17,6 3,8
     Heritage conservation, cultural aid 0,1 0% 0,6 - - -
     Regional aid n.e.c. (1) 62,6 3% 15,9 53,1 71,5 109,9
Sectoral aid (2) 1722,8 90% 1448,6 1030,1 2632,0 1780,3
     Manufacturing 190,9 10% 217,9 189,7 188,6 167,2
        of which steel 74,6 4% 117,6 - 16,7 164,1
        of which motor vehicles 28,6 1% - 114,4 --
     Coal 0,8 0% - - 3,2 0,2
     Other Non-manufacturing Sectors 10,9 1% - - 3,2 40,6     Financial Services 1520,1 80% 1230,7 840,3 2437,0 1572,4
Total aid less agriculture, fisheries 
and transport in million €1907,7 100% 1568,7 1183,3 2860,1 2018,7Average 2000-2003
Note: All figures are expressed in euros at 2000 constant prices so that the effects of  inflation are removed. (1) 
Aid for general regional development not elsewhere classified (2) Aid for specific sectors awarded under measures for which there was no horizontal objectiv e as well as aid for rescue and restructuring. 
 
EN 53   EN Estonia 
Year 2004 Annual average years 2000-2003 
Population : 1.4 million Total State aid less agriculture, fisheries and transport 
(national currency) : 113 million EEK 
GDP : €8.8 billion Total State aid (euro) : €7.2 million 
GDP per capita : €6495 or 10798 
PPS State aid as a percentage of GDP : 0.11%  
Exchan ge rate : 1€ = 15.6466 EE K State aid per ca pita: €5 or 10 PPS
State aid legislative, 
administrative and enforcement framework In Estonia, State aid prior to accession was monitored by the State aid and 
Public Procurement Division within th e Ministry of Finance (www.fin.ee
). It 
was regulated by a Competition Act and ten Regulations on special conditions for granting State aid. From 1 May 2004, the State aid chapter of 
the Competition Act was amended and th e ten Government Regulations were 
repealed. The new provisions in the Competition Act determine the national 
procedures for co-ordination, preparation and submission of State aid notifications and State aid reports (including summary information on State aid granted under the block exemption regulations) to the European Commission. Since 1 May 2004, the State aid and Public Procurement Division has a co-ordination and advisory role in the field of State aid. Co-
ordination of State aid issues in the field of agriculture and fisheries is carried 
out by the Ministry of Agriculture and in the field of transport by the Ministry of Economic Affairs and Communications. 
State aid in the 
years 2000-2003  Estonia granted annually around €7.2 milli on of aid in the years 2000 - 2003. 
This represented 0.11% of GDP or the equivalent of €5 per capita. The aid 
was granted through 15 State aid measures, of which 11 were schemes and 4 
ad hoc measures.  
Aid given to 
horizontal objectives In 2000-2003 all aid in Estonia was granted exclusively for horizontal 
objectives. The largest amounts were granted for regional objectives (33% of total aid), heritage conservation and cu ltural objectives (20%), environmental 
objectives (15%) and R&D purposes (13%). Aid for heritage conservation 
and culture totalled annually €1.5 milli on (20% of total aid) and consisted 
largely of grants to support the Est onian film industry and for publishing 
cultural magazines. Environmental aid decreased during the period under review, because the aid was mainly granted through Article 10 of the Pollution Charge Act, which expired on 1 January 2002. In contrast, the aid 
for R&D objectives increased year by year. 
Regional aid in 
Estonia Aid for regional objectives amounted annually to €2.4 million of aid in the 
years 2000-2003. Regional aid was mainly granted via two schemes: a Pollution Charge Substitution Scheme a nd an Investment support scheme for 
development and diversification of al ternative economic activities in rural 
areas. Estonia has a per capita GDP that does not exceed 60% of the 
Community average. All regions are therefore totally eligible for Art. 87(3)(a) status. There are five groups of regions at NUTS III level. For the purposes of drawing up the regional map, the territory is divided into two parts: the NUTS III region of Northern-Estonia and the four remaining NUTS III regions, because the GDP figures in Northern-Estonia are considerably 
higher than in the other regions. The ma ximum aid intensity of the eligible 
costs is 40% in Northern Estonia and 50% in the other regions of Estonia. 
  
 
EN 54   EN Aid instruments Grants were the most frequently used form of aid instrument making up 69% 
of total aid, followed by guarantees (17%) and tax exemptions (14%).  
Existing aid in 
Estonia Estonia has 13 existing state aid measures through which it can award aid in 
future without prior notification to th e Commission. 3 of these measures were 
annexed to the Treaty of Accession while  a further 10 were approved by the 
Commission as existing aid under the in terim mechanism. These aid schemes 
are earmarked for horizontal objectives such as regional development, R&D, 
commerce and internationalisation and aid for SMEs.  
Looking to the 
future… Due to a number of measurement difficulties set out in section 1.3.1, it is not 
possible to provide an accurate forecas t of future aid expenditure levels. 
However, by looking at the situation in the last year before accession, 2003, it 
can observed that 0.7 million (8%) of total aid was awarded under measures that will not continue beyond accession . Aid given under existing schemes, 
i.e., that are scheduled to continue after 1 May 2004, amounted to €7.7 
million (92% of total aid) in 2003. 
2000 2001 2002 2003
mio €% of total mio € mio € mio € mio €
Horizontal Objectives 7.2 100% 4.1 7.5 8.7 8.4
     Research and Development 1.0 13% 0.3 0.5 1.2 1.8
     Environment 1.1 15% 1.8 2.4 0.0 0.1     SME 0.7 10% 0.0 0.6 1.4 0.8
     Commerce 0.6 8% 0.4 0.5 0.3 1.1
     Heritage conservation, cultural aid 1.5 20% 1.3 1.1 1.6 1.8     Regional aid n.e.c. (1) 2.4 33% 0.3 2.4 4.2 2.8
Sectoral aid (2) ------
Total aid less agriculture, fisheries 
and transport in million €7.2 100% 4.1 7.5 8.7 8.4Average 2000-2003
Note: All figures are expressed in euros at 2000 constant prices so that the effects of  inflation are removed. (1) 
Aid for general regional development not elsewhere classified. (2) Aid for specific sectors awarded under 
measures for which there was no horizontal objectiv e as well as aid for rescue and restructuring. State aid for horizontal objectives and particular sectors in Estonia, 2000-2003 
 
EN 55   EN Hungary 
Year 2004 Annual average years 2000-2003 
Population : 10.12 million Total State aid less agriculture, fisheries and transport 
(national currency) : 144 561 million HUF 
GDP : € 80.5 billion Total State aid (euro) : € 571 million 
GDP per capita : € 7 961 or 13 654 PPS State aid as a percentage of GDP : 1.04 %  
Exchan ge rate : 1€ = 253 HUF State aid per ca pita: € 56 or 114 PPS 
State aid legislative, 
administrative and 
enforcement framework   State aid in Hungary has been monitored and controlled by the State Aid 
Monitoring Office and its predecessor w ithin the Ministry of Finance since 
1996 (www.p-m.hu). Due to constitutional concerns against direct applicability of the acquis and the absence of a transposition of Community rules in Hungarian law, the Office was able to base its opinions directly on 
the substantive State aid rules and give binding opinions only from 1 January 
2002, when a bill amending the Act on P ublic Finance and an implementing 
decree containing the substantive rules were adopted. From 1 May 2004, the national state aid rules have been modified and the state aid rules of the acquis became directly applicable in Hungary. The Article of the Act on Public Finance defining the notion of state aid was replaced by a reference to Art. 87 of the EC Treaty. A new procedural decree entered into force that 
aims to maintain the previous notification procedure vis à vis the State Aid 
Monitoring Office as a national (pre-) c ontrol and co-ordination function. The 
Ministry of Finance where necessary notifies aid measures to the Commission. 
State aid in the 
years 2000-2003 Hungary granted annually €571 million of state aid in the years 2000-2003.
55 
This represented 1.04 % of GDP or the equivalent of €56 per capita. This 
amount was stable during the observed four years, except for a slight increase in 2002 mostly due to a higher appropriation for environmental protection purposes.  
State aid system in 
Hungary The Hungarian system differs from tho se of other Member States in that 
almost all aid is granted through a few so-called earmarked schemes within 
which aid grantors publish call for app lications (sub-schemes). These contain 
the more detailed rules for granting aid for a specific objective each year. 
While the number of schemes was between ten and twenty, the number of sub-schemes was over one hundred. Both the major framework schemes taking the form of acts, ministerial or governmental decrees and the sub-
schemes are subject to prior notification to the State Aid Monitoring Office. 
Meanwhile the budgets of the earmarked  schemes are established in the Act 
on the Annual Budget; those of the sub-schemes are determined by the aid granting bodies within the limits of the general scheme. Generally, major 
schemes remain in force for an indefinite  period of time, in contrast to sub-
schemes that are renewed every 6 or 12 months with changing objectives and 
criteria. Ad hoc aid in Hungary can be granted only as a government decision. Aid at local level is granted on the basis of a local decree (scheme) 
or local decision (ad hoc aid). Previously, fiscal aid was obtained automatically if the criteria of the law were fulfilled. These particularities of the Hungarian system are reflected in the share of ad hoc aid to total state aid 
which was 6% on average. 
                                                 
55 The expenditure figure for tax exemptions granted under the Investment tax benefits scheme was 
estimated for 2003 to be €254 million in 2000 constant prices, due to lack of precise data. 
 
EN 56   EN Aid to horizontal 
objectives Most of the above-mentioned earmarked  schemes were directed towards 
horizontal objectives amounting to €241 million or 42% of total aid in the 
observed period. Annually €40 million (7%) was devoted specifically to 
Hungarian SMEs. State aid policy also aims to foster employment (4%), 
support environmental protection and energy saving (3%) and strengthen 
R&D activities (3%). 
Regional aid in 
Hungary A large proportion of horizontal aid was granted through general economic 
development schemes. Thus the figures show an annual average of €134 
million of regional aid, equivalent to  23% of total aid. Yearly €44 million 
(8% of total aid) of regional funding came from local governments in the 
form of tax exemptions.  
The whole Hungarian territory is rega rded as a region described in Art. 
87(3)(a) of the Treaty. The country is made up of three NUTS I level regions, in which 7 NUTS II regions are represen ted. In five NUTS II level regions 
large enterprises may be granted aid up to 50% of the eligible costs of initial 
investment or job creation. There are significant disparities within some regions, notably in Central Hungary and Western Transdanubia. In Budapest, the GDP per capita figure is considerably higher than that of the County of Pest making up the rest of Central Hungary. Accordingly, the aid intensity 
ceiling for the County of Pest is 40% while in Budapest it is 35%. 
Sectoral and Rescue 
and Restructuring aid Despite the growing number of schemes directing aid to horizontal 
objectives, in expenditure terms, sectoral aid still outweighed horizontal aid in the period prior to accession. Aid given to this potentially more distortive objective amounted to an average of €331 million between 2000 and 2003 
(58% of total aid). Much of the sectoral aid is made up of tax exemptions 
allowed under a transitional arrangeme nt that is being phased out (see 
below). These investment tax benefits  accounted for €305 million (53% of 
total aid) per year, benefiting mainly the manufacturing sector. In 2001, the financial sector also benefited fro m around €10 million. No rescue and 
restructuring aid was granted in the period under review. 
Sensitive sectors Some 4% of total aid, i.e. around €22 million per year was granted to the coal 
mines to moderate the impacts caused by their necessary gradual closure. Hungary also has a fairly small steel industry. In the course of its privatisation, the sector received restructuring aid in the mid-1990s. Following this, no incompatible restruct uring aid was granted. Before 2000, 
uncapped corporate tax exemptions were granted to the motor vehicle 
industry, which may not have been in line with the Community’s Motor 
Vehicle Regulations. Under the tran sitional arrangements negotiated by 
Hungary, the sector may continue to benefit from tax exemptions that are limited to 30% or 20%, depending on the start date of the investment, of the eligible investment costs allowed for large enterprises under the same 
arrangement. 
Aid instruments Prior to accession, State aid in Hungary took mostly the form of a fiscal 
instrument. Tax exemptions and other du ty relief made up 62% of total aid, 
followed by grants (37%). Guarantees  and soft loans were rarely used. 
Fiscal aid The issue of fiscal aid was discussed at length prior to closure of the 
Competition Chapter during the accession negotiations with Hungary. Until 1 
January 2003, fiscal aid was outside the control of the State Aid Monitoring 
 
EN 57   EN Office insofar as it was granted automa tically on the basis of provisions 
included in the Hungarian Act on Corporate Taxes and Dividends. The Act foresaw a number of different fiscal aid schemes (tax breaks) e.g., for so-
called high priority regions and entrepre neurial zones. Most of these schemes 
provided incompatible investment aid (i.e. not limited as a percentage of 
eligible initial investment costs). 
Transitional 
arrangements with Hungary The modification of the Act, bringing these schemes into compliance with the 
acquis and the Europe Agreement (i.e. ensuring that no further incompatible 
benefit was granted) by 1 January 2003, was a pre-condition for the EU 
agreeing to any transitional arrangeme nts. Consequently, the EU accepted 
transitional arrangements (1) for the HUF 3 billion and HUF 10 billion investment schemes up to the limit of 75% or 50% of eligible investment cost 
from 1 January 2003; (2) SMEs, whic h were granted benefits by 31 
December 2002 can retain them up to 31 December 2011; (3) under the off-
shore scheme, all individual benef its granted under the scheme by 31 
December 2002 have to be fully phased out by 31 December 2005; and (4) for tax exemptions granted by local aut horities up to 2% of the net receipts of 
an undertaking, which is unlikely to su rpass the de minimis threshold, until 
31 December 2007. The value of these tax exemptions before accession was 
€350 million yearly (61% of total state aid). 
Existing aid in 
Hungary Hungary has 39 existing state aid measures through which it can award aid in 
future without prior notification to  the Commission. 21 of these measures 
were annexed to the Treaty of Accessi on while a further 18 were approved by 
the Commission as existing aid under th e interim mechanism. These were 
mostly the ‘general earmarked schemes’ described above. 
Looking to the 
future… Due to a number of measurement difficulties set out in section 1.3.1, it is not 
possible to provide an accurate forecas t of future aid expenditure levels. 
However, by looking at the situation in the last year before accession, 2003, it 
can be observed that €67 million (13%) of total aid was awarded under measures that will not continue beyond  accession. Aid given under existing 
schemes (16 out of a total of 22 measures in 2003), i.e., that are scheduled to 
continue after 1 May 2004, amounted to 28% of total aid in 2003. Finally, a considerable amount of aid (€293 million or  59% of the total) was awarded as 
investment tax benefits which are set  to continue under the transitional 
arrangements foreseen in the Treaty of Accession. The latter figure implies 
that aid levels are likely to remain relatively high up to the end of the 
transitional period but may decrease thereafter. 
 
EN 58   EN  
State aid for horizontal objectives and particular sectors in Hungary, 2000-2003 
2000 2001 2002 2003
mio € % of total mio € mio € mio € mio €
Horizontal Objectives 240.6 42% 164.0 242.9 332.2 223.2
     Research and Development 14.8 3% 7.2 28.0 20.0 3.9
     Environment 19.7 3% 17.5 9.7 48.0 3.7
     SME 40.0 7% 16.5 41.3 73.6 28.4
     Employment aid 22.0 4% 13.3 24.2 26.0 24.4     Training aid 3.9 1% 0.0 0.8 0.6 14.0     Heritage conservation, cultural aid 5.6 1% - 0.2 7.1 15.3     Risk capital 0.6 0% - - - 2.5     Regional aid n.e.c. (1) 134.0 23% 109.5 138.7 156.9 131.0
Sectoral aid (2) 330.7 58% 418.5 327.9 303.3 273.1
     Manufacturing 304.8 53% 393.2 287.5 284.7 253.7
     Coal 22.3 4% 25.3 29.8 18.6 15.5     Financial Services 2.4 0% - 9.8 - -     Other services 1.2 0% - 0.9 - 4.0
Total aid less agriculture, fisheries 
and transport in million €571.3 100% 582.5 570.9 635.5 496.3Average 2000-2003
Note: All figures are expressed in euros at 2000 constant prices so that the effects of  inflation are removed. (1) 
Aid for general regional development not elsewhere classified. (2) Aid for specific sectors awarded under 
measures for which there was no horizontal objectiv e as well as aid for rescue and restructuring. 
 
EN 59   EN Latvia 
Year 2004 Annual average years 2000-2003 
Population : 2.3 million Total State aid less agriculture, fisheries and transport 
(national currency) : 13 million LVL 
GDP : €10.3 billion Total State aid (euro) : €23 million 
GDP per capita : €4479 or 9790 PPS State aid as a percentage of GDP : 0.26%  
Exchan ge rate : 1€ = 0,6597LVL State aid per ca pita: €10 or 21 PPS
State aid legislative, 
administrative and 
enforcement framework Prior to accession, State aid in Latvia was controlled by the State Aid 
Surveillance Commission, which was set up in 1997. A State aid law on 
“Control of the State and local government aid to entrepreneurial activity” was adopted in February 1998. As of 1 May 2004, the State Aid Surveillance 
Commission ceased its decision-making power on State aid cases due to the transfer of competences to the Europe an Commission. However, the State 
Aid Control Department within the Ministry of Finance (www.fm.gov.lv)
 
continues to work as a contact-point between national aid granting authorities and the Commission. The Department advises national institutions and acts as a filter before notifications on planne d state aid measures are sent to the 
Commission. The Department covers State aid issues regarding the manufacturing sector (including aid to  non-Annex I agricultural products) 
and the transport sector. Due to accession,  the Latvian State aid control law 
was amended in order to be compatible  with Community State aid rules. The 
amended law determines the permissibl e aid objectives, costs to be supported 
and maximum aid intensities, as we ll as national procedures on control of 
State aid. 
State aid in the 
years 2000 – 2003 Latvia granted annually around €23 milli on of aid in the period 2000 - 2003. 
This represented 0.26% of GDP or the e quivalent of €10 per capita. The aid 
was granted through 32 State aid measur es, of which 17 were schemes and 15 
ad hoc measures. 
Aid for horizontal 
objectives Aid for horizontal objectives amounted annually to €13 million or 55% of 
total aid in the period 2000-2003. Around 2% of total aid was granted to 
SMEs mainly through 9 State aid sch emes which had various purposes such 
as the development of non-agricultura l entrepreneurial activities, helping 
Latvian enterprises to participate in international fairs and exhibitions, 
consultations for the start-up of entrepreneurial activity, etc.  
Regional aid in 
Latvia The largest share of horizontal aid (50% of total aid) was awarded to regional 
objectives, amounting to an average of €12 million per year. Regional aid 
was to a large extent granted under the law on foreign investments, and via Special Economic Zones and a Free Ports scheme under which manufacturing companies in free zones received tax relief from the immovable property tax and enterprise income tax.  
Latvia has a per capita GDP that do es not exceed 60% of the Community 
average (35% in 2002). Latvia is theref ore regarded as an area identical to 
those areas of the Community described  in Article 87(3)(a) of the Treaty. 
There are five regions at NUTS III level for which the maximum aid intensity is 50% NGE. This ceiling can be raised by 15 percentage points in the case of 
aid granted to SMEs. 
  
 
EN 60   EN Sectoral and Rescue 
and Restructuring aid In Latvia sectoral aid accounted for 45% of  total aid. It was mainly granted in 
the form of rescue and restructuring aid to firms in difficulties. The bulk of the €7 million was awarded for the capitalisation of tax debts accrued before 
privatisation as well as deferred tax prov isions for pre-privatisation tax debts 
that could not be capitalised.  
Aid instruments In the period 2000-2003, grants were the most frequently used form of aid 
instrument making up 35% of total aid. They were followed by equity participation (25%) and tax exemptions (20%).  
Existing aid in 
Latvia Latvia has 25 existing state aid measures, through which it can award aid in 
future without prior notification to the Commission. 6 measures were 
approved by the Commission as existing aid in the Treaty of Accession and 19 under the interim mechanism. These measures are earmarked for horizontal objectives.  
Looking to the 
future… Due to a number of measurement difficulties set out in section 1.3.1, it is not 
possible to provide an accurate forecas t of future aid expenditure levels. 
However, by looking at the situation in the last year before accession, 2003, it 
can be observed that €4 million (43%) of total aid was awarded under measures that will not continue beyond  accession. Aid given under existing 
schemes, i.e., that are scheduled to continue after 1 May 2004, amounted to 
€5 million (57 % of total aid) in 2 003. Data for 2003 are provisional.  
2000 2001 2002 2003 (3)
mio € % of total mio € mio € mio € mio €
Horizontal Objectives 12.9 55% 14.6 18.1 10.7 8.3
     Environment 0.1 0% 0.4 0.0 0.0 0.0
     SME 0.5 2% 0.5 0.5 0.3 0.8     Commerce 0.5 2% 0.5 0.4 1.0 0.1     Regional aid n.e.c. (1) 11.8 50% 13.3 17.2 9.4 7.3
Sectoral aid (2) 10.5 45% 31.0 9.6 0.6 0.7
     Manufacturing 10.5 45% 31.0 9.6 0.6 0.7
Total aid less agriculture, fisheries 
and transport in million €23.4 100% 45.6 27.7 11.3 9.0Average 2000-2003
Note: All figures are expressed in euros at 2000 constant prices so that the effects of  inflation are removed. (1) 
Aid for general regional development not elsewhere classified. (2) Aid for specific sectors awarded under measures for which there was no horizontal objective as we ll as aid for rescue and restructuring. (3) Figures for 
the year 2003 are provisional. State aid for horizontal objectives and particular sectors in Latvia, 2000-2003 
 
EN 61   EN Lithuania 
Year 2004 Annual average years 2000-2003 
Population : 3.4 million Total State aid less agriculture, fisheries and transport 
(national currency) : 121 million LTL 
GDP : €17.5 billion Total State aid (euro) : €34 million 
GDP per capita : €5079 or 10653 PPS  State aid as a percentage of GDP : 0.24%  
Exchan ge rate : 1€ = 3.4518 LTL State aid per ca pita: €10 or 22 PPS
State aid legislative, 
administrative and 
enforcement framework Prior to accession, State aid in Lithuania was controlled by the Competition 
Council which was set up in March 1999. The Competition Council did not 
form part of any Ministry and was therefore operationally independent from 
all State aid granting authorities. A Law on Monitoring of State Aid to Undertakings was passed on 18 May 2000. On the basis of this law, the Competition Council carried out functions which are now held by the 
European Commission. The above Law was amended on 15 April 2004 and 
changed the role of the Competition Council (www.konkuren.lt/english/index.htm)
 to a co-ordination activity for state aid 
matters. In compliance with the proced ures approved by the Government, it 
now provides advice to state aid providers and gathers information on state aid for submission to the Commission. 
State aid in the 
years 2000 – 2003 Lithuania granted annually €34 million of  aid in the years 2000-2003. This 
represented 0.24% of GDP or the equivalent of €10 per capita. 
Aid for horizontal 
objectives Aid for horizontal objectives totalled annually €1.4 million in the period 
2000-2003, which represented 4% of total aid. The largest amount (€0.7 million) was granted for commerce and internationalization objectives (2% of 
total aid) through a scheme: “Partial payment of insurance premiums in 
export credit”. The purpose of the scheme is to subsidise partially the premiums paid by undertakings for the insurance of export credit (only non-commercial, non-marketable risks are subsidised). A further €0.4 million was granted for R&D activities. 
Regional aid in 
Lithuania Regional aid amounted to an annual av erage of €0.3 million in the period 
2000-2003. This represented around 1% of total state aid and was mainly granted on an ad hoc basis. There was only one regional aid scheme, which provides tax exemptions for investment s in the Klaipeda free economic zone. 
Lithuania has a per capita GDP that does not exceed 60% of the Community 
average and is therefore regarded as an  area identical to those areas of the 
Community described in Article 87(3)(a) of the Treaty. There are 10 regions 
at NUTS III level in which the maximum aid intensity for granting regional aid is 50% NGE. These ceilings can be raised by 15 percentage points in the case of aid granted to SMEs. 
Sectoral and Rescue 
and Restructuring 
aid Aid directed at specific sectors went mostly to the manufacturing sector and 
amounted annually to €33 million in the period 2000-2003. This accounted 
for 96% of total aid. Most of the aid went for the rescue and restructuring of ailing firms. 
Aid instruments Grants were the most frequently used form of aid instrument making up 41% 
of total aid in the period 2000-2003. Guarantees accounted for 28% of total aid, tax exemptions 17% a nd equity participation 10%. 
 
EN 62   EN Existing aid in 
Lithuania Lithuania has 16 existing state aid measures, through which it can award aid 
in future without prior notification to  the Commission. 3 of these measures 
were annexed to the Treaty of Accessi on while a further 13 were approved by 
the Commission as existing aid under the interim mechanism. These aid 
measures are to a large extent ear marked for horizontal objectives. 
State aid for horizontal objectives and particular sectors in Lithuania, 2000-2003 
2000 2001 2002 2003 (3)
mio € % of total mio € mio € mio € mio €
Horizontal Objectives 1.4 4% 1.2 1.5 1.3 1.5
     Research and Development 0.4 1% 0.2 0.6 0.4 0.3
     Commerce 0.7 2% 1.0 0.8 0.5 0.3     Regional aid n.e.c. (1) 0.3 1% 0.0 0.0 0.5 0.9
Sectoral aid (2) 32.6 96% 40.0 13.0 57.4 20.2
     Manufacturing 32.1 94% 40.0 13.0 57.4 18.2
     Other Non-manufacturing Sectors 0.5 2% 0 0 0 2
Total aid less agriculture, fisheries and 
transport in million €34.0 100% 41.2 14.5 58.7 21.8Average 2000-2003
Note: All figures are expressed in euros at 2000 constant prices so that the effects of  inflation are removed. (1) 
Aid for general regional development not elsewhere classified. (2) Aid for specific sectors awarded under 
measures for which there was no horizontal objective as we ll as aid for rescue and restructuring. (3) Figures for 
the year 2003 are provisional. 
 
EN 63   EN Malta 
Year 2004 Annual average years 2000-2002 
Population : 0.39 million Total State aid less agriculture, fisheries and 
transport (national currency) : 64.4 million MTL 
GDP : € 4.3 billion Total State aid (euro) : € 158.7 million 
GDP per capita : € 10,997 or 16,194 PPS State aid as a percentage of GDP : 3.86 %  
Exchan ge rate : 1€ = 0.426 MTL State aid per ca pita: € 404 or 601 PPS 
State aid legislative, 
administrative and 
enforcement framework The concept of State aid was adequately transposed in Regulation 3 of the 
Maltese State Aid Monitoring Regulation.  State aid procedural rules were 
laid down in the Business Promotion Act
56 and in other secondary legislation. 
The State Aid Monitoring Board was set up on 30 June 2000 as an independent body within the Ministry for Economic Services and reached full 
capacity by the second quarter of 2001 (www.mfin.gov.mt). State aid in 
Malta is granted by virtue of legisla tion, administrative policy measures and 
agreements between the beneficiaries and the central Government and its 
agencies. The main aid grantor is the Malta Enterprise Corporation, whereas 
no State aid is granted by local governments. State aid legislation was amended in 2004 to reflect Malta’s accession. The State aid Board has maintained its monitoring function and is  now the point of reference on State 
aid issues in Malta ensuring that compliance with State aid rules and 
principles, regarding for example notifications, is maintained in Malta without impinging on matters which are the Commission’s competence. 
State aid in the 
years 2000-2002 Malta granted annually €159 million of  state aid through around 10 aid 
measures in the years 2000-2002
57. This represented 3.86% of GDP or the 
equivalent of €404 per capita. The Maltese state aid system does not favour 
either aid schemes or ad hoc measu res with each category accounting for 
around half of total aid. The relatively hi gh level of state aid in comparison to 
other Member States can be explained by two aid schemes. 
Business Promotion 
Act Firstly, the manufacturing sector is assisted by means of a scheme of 
incentives under the Business Promotion Act (BPA), which are mainly of a 
fiscal nature. The BPA is a framework scheme, containing a number of sub-schemes, most of them aiming to encourage growth in ‘promising’ manufacturing sectors. Another pursued objective is to provide incentives to encourage the establishment of new manufacturing companies, especially 
those with the potential to be the catalysts for the introduction of new 
technologies and know-how in Malta. A part of the scheme grants fiscal 
incentives to companies licen sed to operate in the Freeport (previously Malta 
Free Ports Act). Most of the Regul ations under the BPA were amended 
before accession and are now mainly in line with the acquis. As part of Malta’s transitional arrangements, a fe w other Regulations of the Act that 
allow for reduced rates of income tax and operating aid will be kept in force 
until the end of the period set in the Treaty of Accession even though they don’t fully comply with Community state aid rules. Between 2000 and 2002 on average 39% of total state aid was granted under the regulations of the BPA in various forms (reduced rate of  income tax, investment tax credits, 
                                                 
56 By Act VI/2001, the former Industrial Developm ent Act and the Malta Freeport Act were renamed and 
merged into the Business Promotion Act. 
57 The observation period in case of Malta was reduced to the years 2000 to 2002 due to late reporting 
obligations of aid grantors. 
 
EN 64   EN soft loans, etc.). 
Restructuring of 
shipbuilding and 
ship repair sector Secondly, the acceptance of Malta’s request for another transitional 
arrangement concerning its shipbuilding and repair sector is and will be 
reflected for the coming years in Malta’s relatively high state aid level. 
Shipbuilding and repair is the biggest individual industrial sector on the island characterised by overcapacity, insufficient financing facilities, increased labour-costs and insufficient productivity levels. In order to 
restructure the two Maltese facilities that are state-owned and are loss making, a special transitional regime closely monitored by the Commission 
was agreed upon in the Treaty of Accession. Within the scope of this scheme, 
Malta is allowed to grant aid up to  a maximum overall amount of 419 million 
Maltese lira (around €984 million) in restructuring aid during the period from 2002 until the end of 2008. Between 2000 and 2002, aid to this sector 
averaged €81 million per year, representing around half the total aid. 
Aid for horizontal 
objectives Aid for horizontal objectives amounted to  a relatively low €8 million per year 
or 5% of total aid in the period under review. The objectives aimed by these aid schemes were backing export activities (4%), training of employees (0.5%) and patronizing SMEs (1%). With the amendment of the Business Promotion Act, incentives linked to exports are no longer provided. 
Moreover, enlarging the types of horizontal objectives, a new scheme 
supporting the Maltese film industry was introduced from 2003. 
Regional aid in 
Malta No support was given purely under the Community Guidelines for national 
regional aid in the period 2000-2002, although Malta qualifies for regional aid in terms of Article 87(3)(a) of th e EC Treaty with regional aid intensities 
for investment aid of 40 % for larg e companies and 55 % for SMEs as its 
GDP per capita was 69% of the EU aver age in 2002. The country has been 
designated as one region at NUTS Leve ls I and II and two regions at NUTS 
Level III consisting of Malta and Gozo-Comino. 
Sectoral, rescue and 
restructuring aid In contrast to horizontal objectives, sectoral and rescue, restructuring and 
closure aid constituted a vast 95% of total state aid in Malta between 2000 
and 2002 (€151 million per year). This re latively high percentage has to be 
attributed to the above-mentioned sectoral weaknesses of the shipbuilding industry and fiscal benefits to manufacturing companies. Apart from the shipbuilding and ship repair sectors, Malta does not grant aid to those sectors considered as ‘sensitive’ in  the Union namely coal, steel, synthetic fibres and 
motor vehicles. 
Tourism sector The tourism sector was another beneficiary of state aid measures in Malta 
(5% or €9 million per year) in the observation period. The Tour operator support scheme that has been in place since 1986, was phased out during the second quarter of 2004. Its main aim was to provide incentives related to package tours sold by United Kingdom and Irish operators. 
Aid instruments State aid took the form of various fiscal and non-fiscal instruments. Tax 
exemptions were the most frequently used aid instrument making up 37% of 
total aid in the period 2000-2002, followed by favourable loans (33%). Grants accounted for 19% of total aid,  while guarantees (10%) and tax credits 
(1%) given by the state were lesser used aid instruments. 
Existing aid in 
Malta Malta has 11 existing state aid measures through which it can award aid in 
future without prior notification to  the Commission. 6 sub-schemes of the 
 
EN 65   EN Business Promotion Act and a cultural aid scheme were annexed to the 
Treaty of Accession while a further 4 measures were submitted to the Commission as existing aid under the interim mechanism. The latter are still 
under assessment. 
Transitional 
arrangements with Malta Malta submitted three transitional requests which after successful 
negotiations were included in the Treaty of Accession. During a transitional period, SMEs, which were eligible for tax exemptions granted by virtue of 
the Business Promotion Act, will be allowed to continue to benefit from this aid until the end of 2011, in light of the legitimate expectations created in this 
respect. For other undertakings, state aid for regional investments can be 
given up to 75% or 50% of the eligible investment costs. Secondly, operating aid under the provisions of the same Act may be given until the end of 2008 within predefined limits. For the arrange ments concerning the ship repair and 
shipbuilding sector see above. 
Looking to the 
future ... Due to a number of measurement difficulties set out in section 1.3.1, it is not 
possible to provide an accurate forecas t of future aid expenditure levels, 
especially as the latest data refer to 2002. However, by looking at the situation in 2002, it can be observed that €84 million (48%) of total aid was 
awarded under measures that will not continue beyond accession. Aid given 
under existing schemes (4 out of a total of 16 measures in 2002), i.e. that 
were scheduled to continue after 1 May 2004, amounted to only €6 million 
(3% of total aid) in 2002. A further 4 schemes submitted in 2004, for approval as existing aid, are still being assessed and are therefore not included in the figures. Finally, a relatively high amount of aid (€86 million or 49% of the total) was awarde d under the transitional arrangements 
foreseen in the Treaty of Accession. The latter figure implies that aid levels 
are likely to remain relatively high up to the end of the transitional period but may well decrease thereafter. 
State aid for horizontal objectives and particular sectors in Malta, 2000-2002 
2000 2001 2002
mio € % of total mio € mio € mio €
Horizontal Objectives 8.2 5% 9.4 7.5 7.6
     SME 1.3 1% - 1.4 2.5
     Commerce 6.1 4% 8.7 5.2 4.3     Training aid 0.8 0% 0.7 0.9 0.7
Sectoral aid (1) 150.5 95% 126.7 156.8 168.2
     Manufacturing 140.7 89% 118.0 146.2 157.9
        of which shipbuilding 81.3 51% 79.9 75.3 88.5     Other Non-manufacturing Sectors 1.2 1% 1.2 1.2 1.1     Other services 8.7 5% 7.4 9.4 9.2
Total aid less agriculture, fisheries and 
transport in million €158.7 100% 136.1 164.3 175.7Average 2000-2002
Note: All figures are expressed in euros at 2000 constant prices so that the effects of  inflation are removed. (1) 
Aid for specific sectors awarded under measures for whic h there was no horizontal ob jective as well as aid for 
rescue and restructuring. 
 
EN 66   EN Poland 
Year 2004 Annual average years 2000-2003 
Population : 38.2 million Total State aid less agriculture, fisheries and 
transport (national currency) : 9937 million PLN 
GDP : €189 billion Total State aid (euro) : € 2409 million 
GDP per capita : €4 965 or 10 421 PPS State aid as a percentage of GDP : 1.3%  
Exchan ge rate : 1€ = 4,5861PLN State aid per ca pita: €63 or 127 PPS 
State aid legislative, 
administrative and 
enforcement framework The Law on the conditions for admissibility and supervising of state aid for 
entrepreneurs came into force on 1 January 2001. Prior to accession, State aid 
in Poland was controlled by the Office for Competition and Consumer 
Protection (OCCP) ( www.uokik.gov.pl/
). The OCCP is not linked to any 
ministry and therefore operationally independent from all aid granting bodies. 
As from 1 May 2004 the competence of monitoring state aid shifted from 
national to Community level. Poland introduced a new Act of 30 April 2004 
on the procedural issues concerning State aid58, which provides guidance on 
drafting state aid notifications for submission to the Commission. The objective of the Act is to ensure that no tifications are prepared in accordance 
with the Community State aid rules. Co-ordination of the work prior to 
submitting an aid scheme to the Commission lies with the OCCP President. 
The Act refers to the procedures to be  followed for new aid, existing aid, 
unlawful aid, recovery of aid, misuse of aid, as well as cases concerning State aid before the Courts. The Act also regulates the issue of reporting on State aid granted to enterprises in Poland.  The entities granting aid and their 
beneficiaries have an obligation to report regularly to the President of the 
OCCP on all cases of awarded State aid. The President of the Office must 
then inform the Commission of the aid. 
State aid in the 
years 2000 – 2003 Poland granted annually around €2.4 billi on of aid in the years 2000 - 2003. 
This represented 1.29% of GDP or the equivalent of €63 per capita. 
Aid to horizontal 
objectives Aid for horizontal objectives totalled annually €577 million and accounted 
for 24% of total aid. It was made up largely of aid for regional objectives 
(11% of total aid) and employment objectives (7%).  
Employment aid amounted annually to €158 million in the period 2000 – 
2003. A significant proportion of employment aid was earmarked for the rehabilitation of working persons with disabilities. In most Member States, employment measures fall under the category of ‘general measures’. 
However, in this case, the measure qualifies as State aid due to the 
discretionary power enjoyed by the aid awarding authorities
.59 
During the period under review, relatively lower amounts of state aid were 
granted for other horizontal objectives such as environment (annually around 
€54 million), training (€54 million), R&D (€24 million), and SMEs (€18 
million). It is expected in the coming years that environmental aid will 
increase, because Poland is allowed to  grant investment aid to achieve 
standards for which a transitional peri od has been agreed. This transitional 
                                                 
58 Journal of Laws No 123, item 1291 
59 See Chapter 2.4 of the Scoreboard Spring 2004 up date on the difference between general measures and 
state aid measures for employment purposes 
 
EN 67   EN arrangement was approved on the grounds that private companies have 
considerable investment costs in order to achieve EU environmental standards. The duration of the aid is lim ited to the transition period while the 
aid intensity is limited to the regional aid ceiling (30-50%) with a 15% 
supplement for SMEs. 
Regional aid in 
Poland Almost half the regional aid, totalling on average €269 million per year, 
consisted of tax exempti ons awarded to undertakings, mainly under the law 
on special economic zones. Under the Special Economic Zones Act of 1994, 
companies located in the zones coul d be granted tax exemptions, which 
constituted operating aid. On 1 Janua ry 2001, the Act was modified and 
brought into line with the EU acquis rega rding regional investment aid so that 
the tax exemptions are limited to a per centage of the initial investment costs. 
However, Poland requested a transitiona l period for those companies, which 
had acquired rights under the old incompatible scheme up to 2017. After 
successful negotiations, these tax exemp tions were allowed until the end of 
2011 in the case of small enterprises and until the end of 2010 in the case of medium-sized enterprises. As for large companies, the aid is limited to a maximum of 75% or 50% of the eligible investment costs depending on the date when the company obtained its zone permit.  
The entire territory of Poland is regarded  as an area identical to those areas of 
the Community described in Article 87(3 )(a) of the Treaty. None of the 16 
regions at NUTS II level in Poland exceeds 60% of GDP per capita. Accordingly the aid intensities (NGE) are as follows: 50% for 40 regions at NUTS III level, 
40% for the regions of Wroclaw, Cracow, Gdansk-Gdynia-Sopot, 
30% for the regions of Poznan and Warsaw. 
These ceilings can be raised by 15 percentage points in the case of aid 
granted to SMEs. 
Sectoral, rescue and 
restructuring aid Around 76% of total aid was aimed at sp ecific sectors or awards of ad hoc 
aid. The coal sector received annually €1.34 billion of State aid in the period 
2000 - 2003, which accounted for 56% of total aid in Poland. It is worth 
noting however that by far the largest amount was granted in 2003 (provisional figure of €3.88 billion). A large proportion of this aid (€1.65 billion) in 2003 was granted to current  production while the remainder was 
directed to general restructuring of the whole sector.  
Over the period 2000-2003, Poland granted on average €122 million to its 
steel sector, which made up 5% of total aid. However, the annual average of € 122 million is rather misleading as the largest amount was granted in 2003 
alone (provisional figure of €458 million). Aid for rescue and restructuring companies in difficulty accounted for more than 13% of total state aid. 
Aid instruments The most frequently used state aid in struments in Poland during the years 
2000-2003 were tax exemptions (34% of total State aid) followed by grants 
(32%) and guarantees (23%). 
Existing aid in 
Poland Poland has currently 25 existing stat e aid measures, through which it can 
award aid in future without prior notification to the Commission. 7 of these measures were annexed to the Treaty of Accession while a further 18 were 
approved by the Commission as existing aid under the interim mechanism. In 
addition, some measures proposed u nder the interim mechanism are still 
 
EN 68   EN being assessed. 
Transitional 
arrangements According to the Treaty of Accession,  Poland has transitional arrangements 
in three areas: state aid for restructuring of the steel industry, fiscal aid in 
special economic zones and state aid for environmental protection (see 
description above and Annex I). 
 
State aid for horizontal objectives and particular sectors in Poland, 2000-2003 
2000 2001 2002 2003 (3)
mio €% of total mio € mio € mio € mio €
Horizontal Objectives 576.8 24% 1186.8 392.2 344.3 383.8
     Research and Development 24.4 1% 23.5 22.6 30.9 20.7
     Environment 53.8 2% 83.3 22.6 35.6 73.8     SME 18.4 1% 1.5 12.7 27.7 31.5
     Employment aid 157.7 7% 452.2 68.5 46.0 64.0
     Training aid 53.7 2% - 117.1 84.1 13.8
     Regional aid (1) 268.8 11% 626.3 148.7 120.0 180.1
Sectoral aid (2) 1832.5 76% 578.0 1285.7 1022.4 4443.7
     Manufacturing 487.9 20% 197.5 589.8 604.4 559.9
        of which steel 121.6 5% 21.0 7.0 - 458.4
     Coal 1337.2 56% 351.2 695.9 417.9 3883.8
     Other non-manufacturing sectors 7.3 0% 29.3 - - -
Total aid less agriculture, fisheries 
and transport in m illion €2409.2 100% 1764.8 1677.9 1366.7 4827.5Average 2000-2003
Note: All figures are expressed in euros at 2000 constant prices so that the effects of  inflation are removed. (1) 
Aid for general regional development not elsewhere classified. (2) Aid for specific sectors awarded under 
measures for which there was no horizo ntal objective as well as aid for resc ue and restructuring. (3) State aid 
figures for 2003 are provisional. 
 
EN 69   EN Slovenia 
Year 2004 Annual average years 2000-2003 
Population : 1.99 million Total State aid less agriculture, fisheries and 
transport (national currency) : 30 432 million SIT 
GDP : € 25.5 billion Total State aid (euro) : € 139 million 
GDP per capita : €12 795 or 17 240 PPS State aid as a percentage of GDP : 0.69%  
Exchan ge rate : 1€ = 239 SIT State aid per ca pita: € 70 or 100 PPS 
State aid legislative, 
administrative and 
enforcement framework In Slovenia, systematic monitoring an d controlling of the allocation of state 
aid has been in place since 1997. In 2000, the State Aid Control Act was 
adopted together with its implementing regulations. Since February 2000, the 
control of state aid has been carried out by the Commission for the Monitoring of State aid (www.gov.si/mf/), an independent body whose members were appointed by the government. Expert, technical and 
administrative tasks were carried out for the Commission by the Sector for 
Monitoring of State Aid at the Ministry  of Finance. Moreover, the system to 
control state aid granted by local authorities in Slovenia by means of reporting or preliminary control was set up in 2002. 
After accession This legislation ceased to exist upon ac cession when the Community state aid 
rules became directly applicable. The national state aid regulation was 
replaced by a corresponding legal act en tering into force. On the date of 
accession the responsibility for the contro l of state aid was transferred from 
the national State Aid Control Commission to the European Commission. Accordingly, the national State Aid Control Commission was dissolved. In 
order not to lose the considerable knowle dge built up in previous years, the 
State Aid Control sector continues to pl ay a role in state aid issues and to 
represent the control, information and coordination point for the Slovenian administration. The staff continues to give support to different Ministries and grantors of state aid in preparing notifications as well as giving opinions on block exemption matters and collecting state aid data. 
State aid in the 
years 2000 – 2003 Slovenia granted annually around €139 m illion of aid in the years 2000-2003. 
This represents 0.69% of GDP or the equivalent of €70 per capita. Significantly higher amounts in the years 2000 and 2001 can be partly explained by a state aid scheme for restructuring the steel sector. Around €35 million of aid, primarily in the form of guarantees, was granted in these years to the steel industry for restructuring the sector which was completed in 2001. 
In 2003 aid grew slightly, particularly within horizontal objectives. On 
average 90% of the aid was given under schemes, while €14 million was awarded under ad hoc measures. 
State aid to 
horizontal 
objectives Aid for horizontal objectives amounted to €102 million or 73% of total aid in 
the period 2000-2003. Environmental aid, largely in the form of tax 
exemptions, accounted for 17% of total aid. R&D measures made up 16% of 
total aid and employment and training activities 23%.
60 
                                                 
60 As the rules for the Slovenian Active employment policy scheme and the measures for co-financing 
education in form of general and special training offer higher benefits to specific sectors or groups of employees, they partially constitute state aid, which is fairly exceptional within aid measures for these 
objectives. See Chapter 2.4 of the Scoreboard Spring 2004 update on the difference between general 
measures and state aid measures for employment purposes. 
 
EN 70   EN Regional aid Aid for regional objectives amounted to €9 million or 7% of total aid in the 
period under review. Slovenia as one single region reaches 70% GDP per capita of the Community average. This means that the whole area of Slovenia 
can be treated as one NUTS II level re gion eligible under Article 87(3)(a) 
whose per capita GDP is higher than 60% but lower than 75% of the Community average where regional aid may be granted up to 40% NGE. The exception is Central Slovenia (the Ljub ljana region), for which the proposed 
ceiling is limited to 35% NGE as the GDP per capita reaches 96% of the Community average. 
Sectoral and Rescue 
& Restructuring aid In the years 2000-2003 sectoral and rescue, restructuring and closure aid 
constituted 27% of total state aid ( €37 million). This relatively high 
percentage can largely be explained by the above-mentioned restructuring 
program within the steel sector as well as closure aid for the coal mining 
sector which represented 7% of total aid. All state aid was allocated to the re-
employment of miners within the scope of the program of gradual closure of 
coal mines. 
Aid instruments Grants were the most frequently used aid instrument making up 46 % of total 
aid in the period 2000-2003, followed by tax exemptions and relief from the payment of social security contributions (33%). Capital investments and 
conversions of debt into equity partic ipation accounted for 11% of total aid, 
while favourable loans (6%) and guarantees  (4%) given by the state were the 
least frequently used aid instruments. 
Existing aid in 
Slovenia Slovenia has 36 existing state aid measures through which it can award aid in 
future without prior notification to the Commission. 15 of these were annexed to the Treaty of Accession. These aid measures were generally 
schemes earmarked for horizontal objectiv es, particularly for environmental 
protection and investments, stimulatio n of development of certain regions 
(Zasavje and Posocje) and promotion of audiovisual media productions. A significant number of schemes were designed to restructure or gradually close mining activities (see above) and boost employment. A further 21 
measures were approved by the Commission as existing aid under the interim 
mechanism. They mostly covered adju stments to the schemes already listed 
in the Treaty of Accession as existing ai d. One example is a scheme designed 
for financing programs and measures fo r stimulating entrepreneurship and 
competition for the years 2002-2006, boosting SMEs, R&D activities and specific regions. This scheme alone am ounted to around €20 million in 2003, 
representing 17% of total aid.  
Looking to the 
future… Due to a number of measurement difficulties set out in section 1.3.1, it is not 
possible to provide an accurate forecas t of future aid expenditure levels. 
However, by looking at the situation in the last year before accession, 2003, it 
can be observed that €36 million (31%) of total aid was awarded under 
measures that will not continue beyond  accession. Aid given under existing 
schemes (23 schemes out of a total of 43 measures), i.e., that are scheduled to 
continue after 1 May 2004, amounted to 69% in 2003.  
 
 
 
   
 
EN 71   EN State aid for horizontal objectives and particular sectors in Slovenia, 2000-2003 
2000 2001 2002 2003
mio € % of total mio € mio € mio € mio €
Horizontal Objectives 101.7 73% 128.8 102.2 82.1 93.6
     Research and Development 22.2 16% 19.8 21.0 22.1 25.7
     Environment 23.1 17% 13.2 25.2 22.9 31.2     SME 12.4 9% 22.9 11.6 6.8 8.5     Employment aid 28.9 21% 64.2 20.1 16.5 14.6
     Training aid 2.5 2% 2.1 3.1 2.6 2.0
     Heritage conservation, cultural aid 0.7 1% - - 0.4 2.4     Natural disasters 2.5 2% 2.0 4.8 3.3 -     Regional aid n.e.c. (1) 9.4 7% 4.5 16.3 7.4 9.2
Sectoral aid (2) 37.2 27% 42.2 69.8 15.0 21.7
     Manufacturing 26.9 19% 30.8 69.6 0.5 6.5
      of which steel 8.8 6% 3.8 31.4 - -     Coal 9.7 7% 11.4 0.2 14.4 12.9     Other services 0.6 0% - - 0.0 2.2
Total aid less agriculture, fisheries 
and transport in million €138.8 100% 171.0 172.1 97.1 115.3Average 2000-2003
Note: All figures are expressed in euros at 2000 constant prices so that the effects of  inflation are removed. (1) 
Aid for general regional development not elsewhere classified (2) Aid for specific sectors awarded under 
measures for which there was no horizontal objectiv e as well as aid for rescue and restructuring. 
 
EN 72   EN Slovak Republic 
Year 2004 Annual average years 2000-2003 
Population : 5.4 million Total State aid less agriculture, fisheries and transport 
(national currency) : 5022 million SKK 
GDP : €25 billion Total State aid (euro) : €118 million 
GDP per capita : €6052 or 11370 PPS State aid as a percentage of GDP : 0.47%  
Exchan ge rate : 1€ = 40.296 SK K State aid per ca pita: €22 or 51 PPS
State aid legislative, 
administrative and 
enforcement framework Prior to accession, State aid in Slovakia was controlled by the State Aid 
Office (SAO), a body set up under the State Aid Act in the year 2000. The 
drafting of State aid legislation belonged under the competence of the Ministry of Finance. The State Aid Act regulated the granting of State aid for 
a wide range of horizontal and sectoral objectives. Upon accession, Slovakia amended this Act. State aid is now directly regulated by the relevant 
Community State aid rules. The Office of State aid Assistance was dissolved 
upon accession though the competences and some employees were transferred to the Ministry of Finance.  The current State Aid Act defines the 
position and competences of the state ad ministration in the State aid area and 
sets out the responsibilities for State aid (including de minimis aid) providers. 
State aid in the 
years 2000 – 2003 The Slovak Republic granted annually around €118 million of aid in the 
period 2000-2003. This represented 0.47% of GDP or the equivalent of €22 
per capita. 
Aid for horizontal 
objectives Aid for horizontal objectives totalled €29 million, which accounted for 24% 
of total aid. The largest proportion of horizontal aid was granted for regional objectives which amounted to an annual average of €20 million during the 
period under review. Around €4.4 milli on was granted for R&D with a 
further €1.6 million for environmenta l and energy saving objectives.  
Regional aid in 
Slovakia The Slovak Republic consists of three regions, in which GDP per capita does 
not exceed 75 % of the Community aver age (Western Slovakia 45%, Central 
Slovakia 42% and Eastern Slovakia 39%)  and of one region, in which GDP 
per capita in PPS is 98% of the Community average (the region of 
Bratislava). According to the guidelin es on regional national aid, the first 
three regions are regarded as areas iden tical to those areas of the Community 
described in Article 87(3)(a) of th e Treaty. Therefore the maximum aid 
intensity is 50% NGE in there regions. The region of Bratislava is regarded 
as an area identical to those areas of  the Community described in Article 
87(3)(c) of the Treaty and the maximum regional aid intensity is 20% NGE. 
These ceilings can be raised by 15 percentage points in the case of aid 
granted to SMEs. 
Sectoral, rescue and 
restructuring aid Aid for sectoral objectives totalled annually €89 million and accounted for 
76% of all aid. Aid for the steel sector, which made up 46% of total aid, is 
likely to continue in the coming years, because the Slovak Republic 
requested a transitional period to protect fiscal aid granted for ten years under the Act No 366/1999 on Income Tax to foreign investors in the steel sector. The aid can be granted only until the end of 2009 or when the aid reaches a pre-determined amount. A further 31% of sectoral aid was granted to the motor vehicles sector. This sector, too, is likely to receive state aid in the 
coming years due to a similar 10-year transitional period to protect tax 
exemptions granted under the Act No 192/1998 to beneficiaries in the motor-vehicle manufacturing sector. This fiscal aid can be granted only until the end 
 
EN 73   EN of 2008 and the aid is limited to a maximum of 30% of the eligible 
investment costs. 
Aid instruments Tax exemptions were the most frequently used form of aid instrument 
making up 72% of total aid in the period 2000–2003. Guarantees accounted 
for 17 % and grants 10% of total aid. 
Existing aid in the 
Slovak Republic Slovak Republic has currently 71 existing state aid measures, through which 
it can award aid in future without prior notification to the Commission. 9 of these measures were annexed to the Treaty of Accession while a further 62 were approved by the Commission as existing aid under the interim 
mechanism. In addition, some measures proposed under the interim 
mechanism are still being assessed. 
Transitional 
arrangements Two transitional arrangements were included in the Treaty of Accession, one 
for the steel sector, the other for th e motor vehicle sector (see description 
above and Annex I).  
Looking to the 
future ... Due to a number of measurement difficulties set out in section 1.3.1, it is not 
possible to provide an accurate forecas t of future aid expenditure levels. 
However, by looking at the situation in the last year before accession, 2003, it 
can be observed that €9 million (8 %) of total aid was awarded under 
measures that will not continue beyond  accession. Aid given under existing 
schemes, i.e., that are scheduled to continue after 1 May 2004, amounted to 
€12 million (11 % of total aid) in 2003. Finally, a considerable amount of aid (€95 million or 81% of the total) w as awarded under fiscal measures for the 
steel sector and motor vehicle manufacturing and which are continuing under the transitional arrangements foreseen in the Treaty of Accession. This implies that aid levels are likely to remain relatively high up to the end of the 
transitional period but may well decrease thereafter. 
State aid for horizontal objectives and particular sectors in the Slovak Republic, 2000-2003 
2000 2001 2002 2003
mio € % mio € mio € mio € mio €
Horizontal Objectives 28.7 24% 66.4 12.0 14.7 21.5
     Research and Development 4.4 4% 8.1 4.9 4.0 0.7
     Environment 1.6 1% 6.5 0.0 0.0 0.0
     SME 1.4 1% 4.9 0.7 0.0 0.0     Commerce 0.8 1% 0.0 0.0 0.3 3.0     Heritage conservation, cultural aid 0.6 1% 0.7 0.0 1.8 0.0     Regional aid (1) 19.7 17% 46.2 6.4 8.6 17.8
Sectoral aid (2) 89.3 76% 73.5 119.2 69.8 94.9
     Manufacturing 69.8 59% 49.2 70.7 64.3 94.9
        of which steel 41.1 35% 18.2 46.3 37.1 62.8
     Coal 3.1 3% 4.3 4.9 3.4 0.0
     Other non-manufacturing sectors 9.2 8% 20.0 14.7 2.1 0.0
     Financial Services 7.2 6% 0.0 28.9 0.0 0.0
Total aid less agriculture, fisheries 
and transport in million €118.0 100% 140.0 131.1 84.5 116.5Average 2000-2003
Note: All figures are expressed in euros at 2000 constant prices so that the effects of  inflation are removed. (1) 
Aid for general regional development not elsewhere classified (2) Aid for specific sectors awarded under 
measures for which there was no horizontal objectiv e as well as aid for rescue and restructuring. 
 
EN 74   EN Bulgaria 
Year 2004  Annual average 2000 - 2003 
Population: 7.8 million  Total State aid less agricultu re, fisheries and transport 
(national currency):  187 million BGN  
GDP:  € 19.6 billion  Total State aid (euro):  € 89 million  
GDP per capita:  € 2,515 or 6,975 PPS  State aid as a percentage of GDP:  0.6%  
Exchange rate:  1€ = 1.9593 BGN  State aid per capita:  € 11 or 37 PPS  
Source: Bulgarian Annual Reports on State aid 2000-2003 
Over the period 2000-2003, total State aid (less agriculture, fisheries and transport)  in Bulgaria 
amounted on average to €89 million, the equivalent  of 0.6% of GDP or €11 per capita. Around 76% of 
the aid was earmarked for sectoral objectives. The relatively large share of aid granted to seven 
companies in the coal and ore mining sector (32% of total aid) has aimed at the restructuring, 
privatisation and closure of ineffective production in  the Bulgarian coal mining industry. Aid to the 
manufacturing sector also constitutes a significant share of total aid. A large proportion of this aid covers the difference between the cost and reta il prices fixed by the Government and was mainly 
granted to 17 district central heating companies. 
Romania 
Year 2004 Annual average 2000 – 2002 
Population:  21.7 million  Total State aid less agriculture, fisheries and transport 
(national currency) : 36.377 billion ROL  
GDP:  € 55.9 billion  Total State aid (euro):  € 1,111 million  
GDP per capita: € 2,576 or 6,850 PPS  State aid as a percentage of GDP:  3,3%  
Exchange rate:  1€=41,071 ROL  State aid per capita:  € 50 or 181 PPS  
Source: Romanian Annual Reports on State aid 2000-2002 
Over the period 2000-2002, total State aid (less agriculture, fisheries and transport)  in Romania 
amounted on average to €1.1 billion, the equivalent of 3.3% of GDP or €50 per capita. Sectoral aid, 
including rescue and restructuring, represented on average 67% of overall aid. Around 30% was 
allocated to the restructuring and privatisation of the Romanian steel sector, which itself accounted for 
the exceptionally high level of aid granted in 2001 . A further 25% was granted for other rescue and 
restructuring purposes. On average, horizontal objectives, including regional aid, accounted for 33% 
of overall aid. Almost all horizontal aid was grante d under general schemes to enhance privatisation, 
modernisation, investment and production.  
 
EN 75   EN ANNEX III:  FOLLOW -UP TO COUNCIL CONCLUSIONS ON STATE AID  
The following summaries of national contributions are provided in addition to the material provided in 
Section 2.2. 
Specific efforts to reduce and redirect aid 
Denmark contends that its industrial strategy co ncentrates on improving the general environment and 
growth conditions of firms, rather than on helpin g individual firms directly. For example, in food, 
agriculture and fisheries the annual appropriations  for R&D projects (under the Innovation Act) have 
been falling steadily. Up to 2003, a subsidy w as given to a number of associations providing 
specialised agricultural advice. In 2004 the subsidy w as cut back, in line with the Government’s policy 
of reducing direct subsidies to trade and industry and placing the emphasis instead on improving the 
general business environment. In this case, the savi ng of €13 million made in 2004 was reflected in a 
corresponding reduction in land taxes for all farmers. 
Portugal also draws a distinction between different  types of State aid, arguing for example, that 
operating aid, which by its nature is likely to cause greater distortion to competition, ceased many years ago to form part of panoply of new state ai d measures in Portugal. At the same time, economic 
and social cohesion is a central objective of state aid po licy. This is reflected in the fact that the large 
majority of existing aid schemes include a regional objective. 
France has opted for budgetary restrictions as a way of meeting the commitment to reduce State aid. 
With the exception of aid for R&D and SMEs, a good many budget appropriati ons for operations have 
been either frozen or revised downwards. Instead , France is pursuing a policy broadly based on the 
development of research and on support for SMEs. Mo re specifically, support for enterprises today has 
two strategic focal points: First, the stepping-up of  aid for research and innovation will take the form 
of increased public involvement in the emergenc e and development of “competitiveness poles”. The 
aim is to provide back-up, through better coordina tion and a concentration of funds on innovation and 
training, for cooperative and multidisciplinary proj ects which will have the biggest positive impact on 
the industrial and scientific base. The increase in the number of industrial accidents is inducing the 
French authorities to consider redirecting aid towa rds the employment zones hardest hit by industrial 
change, an approach justified on grounds of nationa l solidarity and social and territorial cohesion. 
In Spain, most of the programmes currently un der way in, for example, the Madrid Autonomous 
Region have a horizontal content, with innovation being a key factor when evaluating projects. To 
qualify for aid, SMEs must carry out projects that do not fall within their normal activities, and there 
must be a lower component of investment aid rela tive to aid for activities not funded by companies’ 
current expenses. Specifically in relation to inno vation aid, re-targeting is  being achieved through 
restrictive criteria which are being tightened each ye ar in order to phase out aid for projects in which 
the element of “innovation” may start to become obsolete or has already substantially penetrated the market. For example, aid for implementation of IS O 9000 quality standards has not been granted in the 
last two years since implementation of these st andards is now regarded merely as a market 
requirement rather than an innovative initiative. 
Improvements to national State aid set-up 
In Spain, the recently adopted “General Law on Subsidies”61 establishes a single legal framework for 
state aid as well as making several significant improvements to the current legislative framework. For example, it introduces general improvements in the procedures for managing and controlling state aid, 
                                                 
61 Law 38/2003 of 17 November 2003. Official State Gazette No 276, 18.11.2003. 
 
EN 76   EN clearly defines fraudulent practices and establishes a sy stem of sanctions for such practices; it also 
aims to improve the instruments for evaluating the eff ectiveness of the aid. One intention is to draw up 
strategic plans in the medium term to ascertain th e effects of the aid policy and thus determine the 
priorities for optimising use of the resources, which w ill make it easier to evaluate the effect of state 
aid on the budget. The Law also defines the basic pr inciples of the aid policy stipulating that “when 
the objectives that have been set affect the market, th eir aim must be to correct clearly identified faults 
and their distortionary effects must be kept to a minimum”. 
The DTI (Department for Trade and Industry) in th e United Kingdom has carried out a recent review 
of Business Services. The aim of the Review w as to restructure the manner in which DTI business 
support services were organised, to rationalise the current business support schemes and close those 
which were unnecessary or not achieving their desired results.62 The new business support structure 
consists of a small number of hor izontal products organised in themes that reflect the DTI’s strategic 
priorities, which are aimed at addressing demonstrable market failures and which should also create a more transparent, accessible and understandable syst em for the Department’s end customers. This 
approach should also lead to an increase in the proportion of aid given for horizontal objectives. In a 
similar vein, the Netherlands reports that attempts  are being made to streamline as many schemes as 
possible in order that the panoply of aid instrume nts is more easily accessible for users and more 
transparent. 
Belgium has recently introduced a series of legi slative changes and econom ic policy changes which 
support policies of reduction and redirection as we ll as ensuring greater effectiveness and better 
coherence among various policies. For example, the reform of the Economic Expansion Acts for the 
Walloon Region was finalised in 2004
63. Among the decrees adopted were stricter requirements for aid 
to large firms, increased incentives for SMEs maki ng it easier for them to obtain aid, incentives to 
promote environmental protection and more lasti ng use of energy. The Act also foresees improved 
infrastructure for hosting economic activities, with  provision being made in particular for the 
demarcation of special use areas such as science parks, the establishment of telecommunications 
infrastructures, incubators, etc. The reform theref ore has the twofold aim of reducing the overall level 
of aid – mainly to large firms – and of shifting the focus to horizontal aid (SMEs, the environment, etc.), as well as being designed to ensure greater ef fectiveness on the part of aid and better dovetailing 
between Walloon business policies. The Flemish region has also reviewed its economic aid policy 
concluding that “the roles of, and the division of responsibility between, government and the other 
economic actors is changing considerably. In today's society, government has mainly an activating and 
framework-setting role, which stimulates stakeholde rs to implement community interests.” This 
requires government action that uses new types of po licy instrument such as measures to support life-
long learning in firms and other forms of aid to improve entrepreneurship. 
In France, the Government intends to develop t ools making it possible both to increase familiarity 
with, and hence keep under control, aid measures im plemented by local and regional authorities and to 
delegate responsibilities to those authorities. A new law on local freedoms and responsibilities
64 
provides that the regions should draw up each year  both a quantitative and a qualitative review of aid 
granted in their territory by all local and regi onal authorities. These censuses are designed to enable 
local and regional authorities and the State to better assess the effectiveness of the economic 
intervention tools used and hence to refocus them in  a more coordinated and more strategic direction, 
the aim being, not to grant aid, but to act in a targeted manner in support of actions which shape the 
economic development of France. 
                                                 
62 By 2002, there were around 180 separate schemes and projects operating in support of business in the 
UK. 
63 New legislation on economic growth has also been adopted by both the Flemish Government and the 
Brussels Region. 
64 Number 2004-809, adopted 13 August 2004 and published in the Official Journal in France n°190 of 17 
August 2004, p.14545 (c.f. Article 1). 
 
EN 77   EN The Slovak Republic reported on how it has set the im plementation and development of the objectives 
of the Lisbon strategy as one of its priority tasks. It has defined the following instruments, including among the objectives the continuation of a state aid policy aimed at reducing the volume of state aid 
granted in Slovakia: reform of public finances and of  the public sector; a fiscal policy based on three 
pillars, transparency (i.e. timely, accurate and complete information on ongoing public finance 
processes), responsibility and increased efficiency. 
Poland has included a programme to re-target Stat e aid towards horizontal objectives in its National 
Development Plan for the years 2004-2006. In this  respect, State aid shall be directed at the 
strengthening of competitiveness of enterprises through the support of research and investments 
serving the innovativeness and improvement of products  and services. The aid, hitherto concentrated 
on large state-owned enterprises, shall primarily  be granted to SMEs which conduct innovatory 
activities. Such efforts will continue in the Na tional Development Plan for 2007-2013, during which 
aid directed to individual sectors of the economy is expected to decrease. 
The Ministry of Economy in Lithuania contends th at one of the main reasons for the success of state 
aid given so far is “the thorough and appropriate evaluation of project s that have been considered for 
funding, as well as careful monitoring during the course of the project.” This can be illustrated by the success of many firms which have participated in the Eureka
65 projects. 
The Estonian Competition Act imposes an obligation on all State aid grantors to ensure transparency 
and monitor the effectiveness of State aid. The Mini stry of Finance as the co-ordinating body on State 
aid issues in Estonia has planned to deal  with this matter in the near future. 
Slovenia has set up a system to monitor and allocate st ate aids, to ensure transparency and to measure 
the effectiveness and efficiency of State aids. In this context, the Slovenia Government has recently 
introduced a set of “instructions” to help in the assessment of each aid measure. These include 
defining the precise aims of the aid and a series of indicators as well as carrying out an annual evaluation. The first results of this evaluation exercise are expected by mid-2005. 
As pointed out in particular by Cyprus, the competent authorities when drafting new measures “have 
been largely guided by the experience gained from the implementation of prev ious measures and the 
feedback from the beneficiaries of such measures. ” They have also been willing to take into 
consideration the views and suggestions of organisat ions representing the interests of beneficiaries and 
other interested parties such as the Employers and Industrialists Federation, the Cyprus Chamber of 
Commerce and Industry, etc. 
Improving transparency and raising awareness 
Spain has also taken concrete steps to improve tran sparency and now obliges aid grantors to make this 
aid public. The new General Law on Subsidies (see above) provides for the State Public Accounts 
Department to create a national database in order to  make aid more effective, prevent the cumulation 
or concurrent granting of different aid schemes and facilitate planning, monitoring and follow-up 
measures. This will provide the economic players with more information on aid and enhance aid 
control and effectiveness by making it easier to eliminate the aid schemes with the most adverse 
effects on free market conditions. Among the new Member States, Slovenia reports on recent work to build up a detailed database of all State aid measure s and of the obligation on aid grantors to ensure 
transparency. 
The United Kingdom described its proactive approach to raising awareness of and local expertise in 
State aid. The aim of these activities has been “to in crease wider knowledge of the State aid rules, help 
them to build consideration of the State aid rule s into the design of their schemes at the earliest 
                                                 
65 EUREKA (European research, development and cooperation programme) 
 
EN 78   EN possible stage and to encourage/assist aid administra tors to find approaches to their projects which are 
in harmony with the Government’s policy on reorienta tion and reduction of State aid”. In practice, this 
entails providing advice to officials in various depart ments and offices to assist them in designing aid 
schemes so that, wherever possible, they either do no t contain State aid or may be incorporated within 
the State aid block exemptions. Where this is not possible assistance is provided in the notification of 
aids. In addition, the Government operates training and awareness raising activities.  
Improving the effectiveness of aid 
Work in Finland has focussed primarily on develo ping a qualitative evaluation of aid. In Finland 
evaluating aid programmes is a statutory duty. This means that the authorities have an obligation to 
monitor the conduct of aid programmes and to have evaluations carried out to report on the objectives 
of the aid and its effectiveness. A long-term objectiv e is to standardise evaluation practices and, as far 
as possible, introduce a common monitoring system for the different authorities. One related project is 
the project launched by the Government Institute for Economic Research entitled “Taxation, State Aid 
and Business Conditions”. The research focuses on the real competitiveness of the Finnish economy 
and the key factors influencing it. The purpose is to map changes in the structure of business and 
production as well as the processes of privatisation.  The focus is on using what powers the public 
authorities have to improve real competitiveness th rough economic and industrial policy and business 
taxation. The aim is also to analyse the trend in bu siness aid granted by the State and its effectiveness. 
Greece is in the process of developing a methodol ogy for assessing the effectiveness of aid and its 
contribution to the improvement of the compe titiveness of the Greek economy. The Ministry of 
Economic Affairs and Finance, which is responsible  for monitoring state aid, is at the stage of 
commissioning a study of the subject. 
In the United Kingdom, the appraisal of all Government  spending (whether this constitutes State aid or 
not) is a fundamental part of the policy developmen t process. This is written into both Departmental 
funding systems and HM Treasury’s advice to Departments and wider Government (“The Green Book: Appraisal and Evalua tion in Central Government
66. These formal appraisal processes ensure 
that, before resources are granted, the rationale , objectives and proposed methodologies of all support 
measures have been scrutinised. This helps ensure that the d esign of the instrument  is such that both 
the likelihood of success of the instrument and va lue for public money are maximised. The appraisal 
protocols also require ongoing monitoring and eval uation of the support instruments so that, should 
they be seen not to be achieving their expected resu lts, the reasons for this can be examined and any 
necessary changes made. 
                                                 
66 http://www.hm-treasury.gov.uk/E conomic_Data_and_Tools/greenbook/data_greenbook_index.cfm