EN Official Journal of the European Union C 115/6

Opinion of the Committee of the Regions on the State aid Action Plan — Less and better targeted State aid: a roadmap for State aid reform 2005–2009

(2006/C 115/02)

THE COMMITTEE OF THE REGIONS,

Having regard to the Communication from the Commission State aid Action Plan — Less and better targeted State aid: a roadmap for State aid reform 2005–2009, COM(2005) 107 final;

Having regard to the decision of the European Commission of 8 June 2005 to consult it on the subject, under the first paragraph of Article 265 of the Treaty establishing the European Community;

Having regard to the decision of its Bureau of 22 February 2005 to instruct its Commission for Economic and Social Policy to draw up an opinion on this subject;

Having regard to the Commission Decision of 18 July 2005 on the application of Article 86(2) of the Treaty to State aid in the form of public service compensation granted to certain undertakings entrusted with the operation of services of general economic interest, the Commission Directive …/.../EC, amending Directive 80/723/EEC on the transparency of financial relations between Member States and public undertakings and the Community Framework for State Aid in the form of public service compensation;

Having regard to its opinion on the revision of the guidelines for regional state aids (CdR 77/2005 fin);

Having regard to its opinion on the Commission decision on the application of Article 86 of the Treaty to State aid in the form of public service compensation, the draft directive amending Commission Directive 80/723/EEC on the transparency of financial relations between Member States and public undertakings and the draft Community framework for State aid in the form of public service compensation (CdR 155/2004 fin) (1);

Having regard to its opinion on the White Paper on services of general interest (CdR 327/2004) (2);

Having regard to the Resolution of the Committee of the Regions on revitalising the Lisbon strategy adopted on 24 February 2005;

Having regard to its Draft Opinion CdR 225/2005 rev. 1 adopted on 23 September 2005 by its Commission for Economic and Social Policy (Rapporteur: Mr Gabor Bihary, Member of the General Assembly of the Capital, President of the European Integration and Foreign Affairs Committee of the General Assembly of the Capital (HU/PSE));

adopted the following opinion at its 62nd plenary session, held on 16/17 November 2005 (meeting of 16 November).

The Committee of the Regions' views

The Committee of the Regions

Welcomes the approach by the European Commission to establish a series of large consultations on the reform of State Aid Policy and to involve European local and regional authorities through the Committee of the Regions.

Reiterates its previous position with regard to the revision of the guidelines for regional state aids.

1. A modernised State aid policy in the context of the Lisbon strategy for growth and jobs

The Committee of the Regions

1.1 welcomes that the State aid policy should be closely linked to the objectives of Lisbon strategy and similarly welcomes its reorientation towards more selective horizontal approach (without disregarding the needs of specific targeted regions) and its focus on key policies such as innovation and R&D, human capital, entrepreneurship, services of general economic interest, regional aid, sustainable environment, transport, energy and information and communication technology infrastructures;

1.2 feels that the criterion of market failure developed by the Commission to justify State aid is an interesting approach, but it is not based on the EC treaty, is not clearly defined, and cannot be applied in those cases where there are no existing markets. It therefore objects to the idea of giving market failure a key role as a criterion for assessing the admissibility of State aid. Furthermore, application of the criterion of market failure is only acceptable if Member States and regional and local authorities, in keeping with the subsidiarity principle, retain adequate scope for manoeuvre in defining market failure and in deciding how to respond to it;

1.3 recalls that the CoR Resolution on Revitalising the Lisbon Strategy, adopted on 24 February 2005, points out that ‘instead of pursuing the objective of a quantitative reduction in State aid, the EU should focus on better State aid with regard to long-term high-quality delivery of services’; considers it indeed to be wrong to focus on the global costs of State aid without differentiating the types of State aid and their respective benefits in terms of common interest;

1.4 points out that State aid, if sufficiently targeted and effectively managed, can contribute significantly to meet the requirements in terms of public service obligations set by local and regional authorities, and believes that the reform of State aid rules should consider this fact in parallel with the impact of State aid on market functioning;

1.5 notes that the objective of Articles 81 and 82 EC Treaty on competition rules applying to undertakings is to protect competition on the market as a means of enhancing consumer welfare. Considering that the definition of ‘competition’ has to be homogenous and coherent throughout the Treaty, the Committee of the Regions regrets therefore the absence of any reference to the objective of consumer welfare within the State Aid Action Plan;

1.6 is worried to note that the concept of non-affection of trade between Member States is not used any more as a priority criterion for granting State aid. The CoR considers indeed that subsidies by local and regional authorities to companies carrying out public service obligations do not necessarily affect trade in the single market between Member States or do seriously impede competition, i.e. create or reinforce a dominant market position of the relevant company/ies;

1.7 underlines the need for the European Union to be internationally competitive in attracting inward investment and considers that the State aid rules must better reflect business reality in an open globalised economy and provide sufficient flexibility to allow regions in the Member States to compete for foreign (non-EU) investment projects against regions from outside the Union which are heavily aided;

1.8 believes that the role of State aid is more important in periods with lesser economic growth, therefore suggests considering flexible rules, which could take this into account;

1.9 also believes that, within an economically integrated area, the less economically developed a Member State is, the more State aid might be justifiable as a percentage of GDP in order to develop public services or to provide similar public service standards as in the other Member States; furthermore, it considers that, within a Member State, some regions (notably less developed regions and regions in transition) should benefit from specific enhancements;

1.10 suggests that the European Commission should strengthen the impact analysis of its own decisions in the field of State aid, especially given the fact that the State Aid Action Plan is built upon an ‘economic approach’ of State Aid analysis;

1.11 regrets that the State Aid Action Plan does not reflect the specificity of private-public partnerships with regard to State aid.

2. Focusing on the key priorities

The Committee of the Regions

2.1 welcomes the intention to simplify and consolidate block exemption regulations for training and employment aids and draws attention to the fact that this also gives the opportunity to harmonize definitions such as e.g. the definition of ‘disadvantaged worker’ which varies from one block exemption to the other;

2.2 believes that the distinction between specific training and general training is mostly artificial in practice and therefore suggests not to differentiate State aid intensity based on this in the future;

2.3 welcomes the efforts by the Commission to complement the uncertainties remaining after the Altmark judgement (3) by adopting a set of measures concerning the rules for financing public service obligations. The Committee of the Regions considers that these measures, by obliging local and regional authorities to define their public service contracts better, will lead to greater transparency and democratic accountability in the management of services of general economic interest;

2.4 is pleased to note that in this context the European Commission agrees with the Committee of the Regions' demand to exempt State aid granted for hospitals and social housing companies from the notification procedure;

2.5 highlights that a proposal for a legal framework on public services which should facilitate a definition of positive principles remains more necessary than ever. Such a framework should include for instance: — criteria for distinguishing between Services of General Economic Interest (SGEI) and non-economic Services of General Interest (SGI); — principles and general obligations of SGI, such as universal service, continuity, quality, efficiency, accessibility and user and consumer protection; — criteria for curbing trade distortions; — the recognition of the right of local and regional authorities to provide services of general economic interest themselves, and guiding principles for financing; — evaluation mechanisms;

2.6 welcomes the Commission's intention to issue a general block exemption regulation to exempt certain categories of aid from the obligation to notify the Commission and believes that this future regulation will ensure better governance;

2.7 supports the intention to broaden block exemptions to integrate aid to support SMEs and R&D;

2.8 believes that due to its procedural requirements the ‘de minimis’ exemption is very difficult to apply in practice. Any increase of the de minimis threshold should therefore go together with a simplification and clarification of the current rules governing the de minimis regulation, notably by explaining: (i) whether the threshold for de minimis aid applies to independent undertakings or separate legal entities, (ii) how operations in more than one Member State by the same legal entity obtaining de minimis aid in different Member States are taken into account and (iii) what is the status of EC aid when determining whether the de minimis threshold has been reached; therefore supports the increase of de minimis aid threshold and requests this to be based on the cumulate inflation since the last increase in 2001;

2.9 considers that, due to the huge increase in state aids granted to non-profit bodies, the Commission should make a clear and explicit reference to such bodies, in keeping with the relevant case-law of the Court of Justice;

2.10 believes that the improvement of Information and Communication Technology (ICT) infrastructure will have the same significant importance as the improved transport and energy infrastructures; notes, however, that market conditions for ICT development are different, therefore draws attention to the need for specific guidelines allowing greater flexibility in granting aid for developing ICT in general;

2.11

2.11.1 welcomes that the European Commission has launched an 24 August 2005 a public consultation on the Review of the Guidelines for State Aid for Environmental Protection but regrets that the tight deadline for replies set on 10 October 2005;

2.11.2 expresses its support for extending the scope of the current guidelines to ‘consumer health’, which in the view of the Committee of the regions encompasses the notions of ‘safety of civilians and their environment’, ‘safety of employees’ and ‘health of employees’;

2.11.3 supports explicit rules for environmental investment aid to companies in order to deal with pollution caused by other companies;

2.11.4 advocates maintaining higher aid intensity for SMEs;

2.11.5 considers that it is necessary to maintain higher levels of aid intensity for those regions which due to economic transformation are lagging behind in meeting the requirements of the acquis communautaire in the field of environment.

2.12 welcomes that the European Commission has launched on 21 September 2005 a public consultation on the reform on the rules on State aid for innovation (COM(2005) 436) but regrets the tight deadline for replies set on 21 November 2005;

2.12.1 the Committee expresses, in line with the objective of simplification, its support to integrating innovation in the current Community framework for State aid for research and development (4) as opposed to creating a new specific ruling;

2.12.2 it supports the objective to target innovation-related State aid towards small and medium-sized enterprises;

2.12.3 it pleas for retention of the current allowed cumulation of aid for innovation and regional aid;

2.12.4 the Committee wonders, with regard to innovative start-ups, why only ‘exemptions of [50 %] on social contributions and other local/regional taxes (i.e. not linked to profits)’ are envisaged;

2.12.5 it welcomes that ‘State aid to SMEs and/or to activities far away from the market may qualify for lighter procedural rules, and could be exempted from notification’ COM(2005) 436 (recital 24);

2.12.6 questions however the focus given by the Commission to ‘market failure’. The Commission admits indeed that innovation related-activities are specific in that they are often distant from the market: ‘Experience shows that it is very difficult to know in advance which innovative products and services will become successful in the market.’ COM(2005) 436 (recital 18).

3. Modernising the practices and procedures of State aid

The Committee of the Regions

3.1 welcomes the Commission's proposals to ensure better governance of State aid; in particular supports issuing best practices guidelines after consulting Member States as well as the involved parties;

3.2 points out that shared responsibility with Member States is one of the key issues of State aid reform, and welcomes therefore the elements of the State Aid Action Plan, that strengthen the Member States' commitment;

3.3 believes that there should be an evaluation of the proposal to create independent State aid monitoring authorities in individual Member States, in terms of procedural benefits and the roles these authorities would undertake, and asks that local and regional authorities be consulted in such an evaluation;

3.4 calls for the establishment of a network of national State aid authorities, to enable the continuous flow of information and exchange of best practices, which could increase Member States' commitment and promote better governance;

3.5 supports the outlined system of a certain flexibility combined with a strict timetable, differentiating simple cases from those needing deeper investigation;

3.6 calls with regard to the announced overhaul of the Procedural Regulation 659/1999 for a strengthening of the rights of third parties (beneficiaries and plaintiffs) in the procedures following the initiation of proceedings;

3.7 requests to be consulted on the assessment or modification of the rescue and restructuring aid guidelines, indicated by the Roadmap for 2007/2008, as well as on other relevant reforms which affect local and regional authorities.

Brussels, 16 November 2005. The President of the Committee of the Regions Peter STRAUB

(1) OJ C 43 of 18.2.2005, p. 13.

(2) OJ C 164 of 5.7.2005, p. 53.

(3) Case C-280/00 of 24.7.2003.

(4) Official Journal C 45, 17.2.1996, pp. 5-16.