COMMISSION STAFF WORKING DOCUMENT

Facts and figures on State aid in the EU Member States - 2012 Update –

Accompanying the document

State aid Scoreboard 2012 Update

Report on State aid granted by the EU Member States

TABLE OF CONTENTS

Introduction.................................................................................................................................. 6

State aid in the context of the economy in 2011............................................................................. 6

Purpose, scope and content of the Scoreboard.............................................................................. 6

Scope and content of this Scoreboard........................................................................................... 6

Publication of the Scoreboard....................................................................................................... 7

1........... Overview of State aid expenditure in 2011...................................................................... 8

1.1........ Total State aid in absolute and relative terms.................................................................... 8

1.1.1..... Non-crisis aid................................................................................................................. 8

1.1.2..... Crisis aid granted to the financial sector........................................................................... 8

1.1.3..... Aid granted under the temporary framework................................................................... 8

1.2........ Broad sectoral distribution of non-crisis State aid............................................................. 8

2........... Trends and patterns of non-crisis State aid expenditure in the Member States................... 9

2.1........ Trends in levels of State aid to industry and services........................................................ 9

2.2........ State aid earmarked for horizontal objectives of common interest................................... 11

2.2.1..... Horizontal versus sectoral aid........................................................................................ 11

2.2.2..... Aid for horizontal objectives.......................................................................................... 12

2.2.2.1.. Block-exempted aid..................................................................................................... 13

2.2.3..... Research, development and innovation.......................................................................... 16

2.2.4..... Environmental protection............................................................................................... 18

2.2.5..... Regional development and cohesion.............................................................................. 19

2.3........ State aid earmarked for specific sectors........................................................................ 20

2.3.1..... Rescue and restructuring of firms in difficulty.................................................................. 20

2.3.2..... Shipbuilding.................................................................................................................. 20

2.3.3..... Steel industry................................................................................................................ 21

2.3.4..... Coal............................................................................................................................. 21

2.3.5..... Transport..................................................................................................................... 22

2.3.5.1.. Land transport.............................................................................................................. 22

2.3.5.2.. Maritime transport........................................................................................................ 23

2.3.5.3.. Aviation........................................................................................................................ 23

2.3.6..... Agriculture.................................................................................................................... 24

2.3.7..... Fisheries and aquaculture.............................................................................................. 25

2.4........ Use of the State aid instruments..................................................................................... 26

3........... State aid granted to the financial sector and support for the real economy....................... 27

3.1........ State aid measures for the financial sector...................................................................... 27

3.1.1..... General background..................................................................................................... 27

3.1.2..... State aid measures for the financial sector...................................................................... 28

3.1.3..... State aid per instrument................................................................................................. 32

3.1.3.1.. Guarantees for bank debt.............................................................................................. 32

3.1.3.2.. Recapitalisation measures.............................................................................................. 34

3.1.3.3.. Impaired asset relief...................................................................................................... 37

3.1.3.4.. Liquidity measures other than guarantees....................................................................... 38

3.1.4..... Restructuring................................................................................................................ 40

3.2........ Aid granted under the temporary framework................................................................. 42

3.2.1..... Context and purpose of the temporary framework......................................................... 42

3.2.2..... Aid granted in 2011...................................................................................................... 43

4........... Trends in non-crisis State aid expenditure by type of aid measures................................. 44

5........... Enforcing the State aid rules.......................................................................................... 46

5.1........ Unlawful aid................................................................................................................. 46

5.2........ Recovery of unlawful aid............................................................................................... 47

5.3........ Enforcement of State aid law: cooperation with national courts....................................... 47

5.4........ Ex post monitoring........................................................................................................ 47

Notes on methodology................................................................................................................ 50

Scope of the Scoreboard............................................................................................................ 50

Methodology for calculating non-crisis aid................................................................................... 51

Specific provisions with respect to aid granted under the temporary framework............................ 53

Key figures on State aid expenditure in the EU and Member States.............................................. 54

Figure 41: Total non-crisis aid to industry and services................................................................. 54

Figure 42: Aid to agriculture, fisheries and aquaculture and transport............................................ 55

Figure 43: Non-crisis State aid earmarked for horizontal objectives of common interest and sectoral aid as a percentage of total non-crisis aid to industry and services.................................................................... 56

Figures 44: Financial crisis aid – approved amount per year and instrument................................... 58

Figure 44 a: Guarantees: approved budget................................................................................... 58

Figure 44 b: Recapitalisation: approved budget............................................................................ 59

Figure 44 c: Impaired Assets: approved budget........................................................................... 60

Figure 44 d: Liquidity measures: approved budget........................................................................ 61

Figure 45: Overview of measures adopted under the temporary framework (until 31 December 2011) 62

Figures 46: Aid expenditure by Member State............................................................................. 66

Figure 47: Legislation and communications adopted since the last report....................................... 93

Figures 48: Recovery.................................................................................................................. 94

Figure 48 a: Trend in the number of recovery decisions (aid to industry and services) and amounts to be recovered 94

Figure 48 b: Pending recovery decisions...................................................................................... 95

Figure 48 c: Pending recovery cases in which the Commission has decided to bring the matter before the Court of Justice and in which the illegal and incompatible aid has not yet been recovered (30 June 2012) 100

Summary of rules in the transport sector.................................................................................... 105

Status of reporting by Member States........................................................................................ 106

Introduction

State aid in the context of the economy in 2011

Until mid-2011, the economy in the EU was characterised by a slow recovery following the downturn caused by the financial crisis of 2008-2009. GDP growth was very moderate and stood at 1.5 %. Private and public spending were still at a low level and began to rise only slowly, while public deficits continued to be at high levels. However, the recovery was subdued and sluggish and for the second half of 2011, the economy turned out to be weaker than expected, as evidenced by lower GDP growth that moved towards zero growth by the end of the year[1]. At the same time, unemployment in the EU exceeded 10 % and an intensifying European sovereign-debt crisis also weighted heavily on the EU economy.

Overall, State aid expenditure remained high in 2011 due to the additional support given to the financial sector. The worsening of the sovereign crisis in mid-2011 led the Member States and the Commission to agree on a package of measures to strengthen banks’ capital and provide guarantees on their liabilities (the banking package[2]). On 1 December 2011 the Commission prolonged the State aid crisis measures for the financial sector, clarifying and updating the rules on pricing and other conditions. With respect to crisis aid to the real economy, a substantial decrease was seen in 2011. Chapter 3 provides more detail.

Purpose, scope and content of the Scoreboard

Since 2001, the Commission has published every autumn the State Aid Scoreboard (‘the Scoreboard’), which reports in an aggregated manner on State aid expenditure in the Member States in the previous year and highlights trends[3]. The Scoreboard is the Commission’s benchmarking instrument for providing a transparent and publicly accessible source of information on the overall State aid situation in the Member States and on the Commission’s State aid control activities. Furthermore, the information in the report is used for advanced statistical analysis and represents an important source to which reference is made in speeches, articles and other Commission publications on State aid. The Scoreboard information is also used by external bodies and the Member States.

The Scoreboard information is based on the annual reports provided by Member States. Article 6(1) of Regulation 794/2004 requires each Member State to submit its report on State aid expenditure carried out during the previous year no later than 30 June of the following year. Annex III of that Regulation sets out the scope and format of the annual report.

Scope and content of this Scoreboard

State aid expenditure is expenditure which Member States have actually granted pursuant to Article 107 TFEU[4]. The information in the annual report refers to measures authorised by Commission decisions or being implemented by Member States under block exemption, but excludes measures which are still under examination. General measures that do not favour certain enterprises or sectors, and public subsidies that do not affect trade or distort competition, are not dealt with in the Scoreboard as they are not subject to the Commission’s investigative powers under the State aid rules.

This 2012 report gives updated information on State aid expenditure for all existing aid measures under which Member States granted aid in 2011, covering existing measures and aid newly implemented in 2011[5]. The Scoreboard consists of two parts. While the Report adopted by the College of Commissioners provides a summary of the facts, the accompanying Staff Working Document gives further details on the data and signals trends.

Apart from providing an update on expenditure by the Member States, this edition also reports on the progress achieved in the Commission's State aid control activities, namely on the recovery of unlawful aid.

The Scoreboard presents the State aid situation in five chapters. Chapter 1 provides information on total State aid expenditure in the EU and indicates the broad sectoral distribution of the aid. Chapter 2 reports on the trend and patterns of aid granted to industry and services and includes more detail on horizontal aid and aid to certain sectors of the economy. Chapter 3.1 gives an update on State aid measures to the financial sector and chapter 3.2 supplies details of aid granted under the temporary framework. Chapter 4 shows the trend in State aid expenditure in terms of numbers of measures and corresponding aid amounts. Chapter 5 reports on ongoing efforts to enforce the State aid rules and to recover unlawful aid. Finally, the note on methodology is followed by tables showing key figures on State aid expenditure by Member State. The annexes also provide details of newly introduced legislation, an overview of aid authorised under the temporary framework, and information on the recovery status and the reporting situation by Member States, which as from 2012 are using a new tool to encode information on State aid expenditure and to submit the annual report directly through that system to the Commission.

Publication of the Scoreboard

DG Competition publishes the Scoreboard on its website[6], where previous editions can also be found. Access to key indicators and in-depth statistics covering the EU as a whole as well as individual Member States is provided via the same web address, where further underlying information can be found which supports statements made in this document and is omitted from the individual chapter to avoid excessive length.

The EFTA Surveillance Authority also publishes annually a Scoreboard[7] showing the volume of State aid granted in Iceland, Liechtenstein and Norway.

1. Overview of State aid expenditure in 2011 1.1. Total State aid[8] in absolute and relative terms 1.1.1. Non-crisis aid

Figure 1: Total non-crisis aid[9]

|| In € billion || As a % of GDP || Difference when compared to previous year (in % of GDP) || Trend 2008-2010 (in % of GDP) || Difference when compared to previous trend (2006-2008)

EU-27 || 64.3 || 0.5 % || - 0.06% || 0.58% || - 0.05%

Notified subsidies to railways[10] in 2011 amounted to € 32.6 billion[11], or represent 0.25 % of EU GDP.

1.1.2. Crisis aid granted to the financial sector

Figure 2: Financial Crisis Aid: amount used[12]

|| In € billion || As a % of GDP

Guarantees and liquidity measures || 682.9 || 5.4%

Recapitalisation and impaired assets || 31.7 || 0.25

1.1.3. Aid granted under the temporary framework

Figure 3: Aid granted under the temporary framework[13]

|| In € billion || As a % of GDP || Difference when compared to previous year (in % of GDP) || Trend 2009-2011 (in % of GDP) || Difference when compared to previous trend (2006-2008)

Approved amount || 0 || n/a || || Not applicable since temporary framework has not been in force over a period of three years.

Amount used || 4.8 || 0.037% || - 0.07%

1.2. Broad sectoral distribution of non-crisis State aid

Figure 4: Broad sectoral distribution of non-crisis State aid[14]

Broad sectoral distribution of non-crisis state aid (2011)

EU-27 || In € billion || As a % of GDP || Difference when compared to previous year (in % of GDP) || Trend 2009-2011 (in % of GDP) || Difference when compared to previous trend (2006-2008)

Aid to industry and services || 52.96 || 0.42% || -0.06% || 0.48% || 0.02%

Agriculture || 8.72 || 0.069% || -0.003% || 0.076% || -0.012%

Fisheries and aquaculture || 0.11 || 0.0009% || -0.0002% || 0.001% || -0.002%

Transport || 2.22 || 0.02% || -0.002% || 0.02% || -0.06%

2. Trends and patterns of non-crisis State aid expenditure in the Member States

This chapter examines expenditure on non-crisis State aid granted to industry and services for the year 2011 and looks at the trend over the period 2006 to 2011 by comparing 2006-2008 with 2009-2011 in order to show to what extent individual Member States have (or have not) been able to reduce overall aid levels and were furthermore able (or unable) to redirect aid towards horizontal objectives of common interest.

2.1. Trends in levels of State aid to industry and services[15]

Figure 5: Total State aid to industry and services from 1992 onwards[16]

State aid granted to industry and services further decreased in 2011, both when compared to the previous year and when looking at the trend. It stood at a low overall level of between 0.4 % and 0.5 % of EU GDP, almost reaching the lowest level observed in 2007.

Observing that downward trend in more detail for 2011, on the one hand Member States seem to have continued exercising strict discipline on State aid expenditure and on the other hand some of the Member States substantially cut back expenditure as a result of the economic and financial crisis. A further reason can be found in some Member States where schemes that gave rise to large expenditure in previous years expired and have not been replaced.

Figure 6: Trend in State aid to industry and services as a percentage of GDP[17]

Although the overall total aid granted to industry and services decreased at EU-27 level in 2011, like in 2010, in most Member States, the trend shows that the majority granted more aid in the period 2009-2011 than in 2006-2008. That feature can be explained by looking at Figure 5 which shows relatively low levels of aid for the years 2006 to 2008. A small but non-negligible peak in aid expenditure in 2009 can be accounted for by many Member States granting more aid in the period 2009-2011, as Figure 6 indicates. Nevertheless, it can be noted that increases were small in many Member States, i.e. of less than 0.2 % of their GDP. Moreover, the increase can be mostly accounted for by aid earmarked for horizontal objectives, which is in line with the Europe 2020 Strategy.

2.2. State aid earmarked for horizontal objectives of common interest

The concept of horizontal aid, which is aid that is not granted to specific sectors of the economy, derives from the Treaty. It leaves room for the Commission to make policy choices whereby State aid can be considered compatible with the internal market if it provides effective support for common policy objectives. Most prominent is aid earmarked for research, development and innovation, safeguarding the environment, and fostering energy saving and promoting the use of renewable energy sources; those categories are followed by regional development, aid to SMEs, job creation and the promotion of training.

The long-term trend clearly shows that, following the calls from numerous European Councils, Member States have re-oriented their State aid efforts towards earmarking more State aid for horizontal objectives of common interest.

In that light, some of the Europe 2020 Strategy goals[18] generally fit into the concept of horizontal aid, inter alia to increase employment, to invest in research, development and innovation, to increase energy efficiency and to foster energy production from renewable energy sources.

2.2.1. Horizontal versus sectoral aid

Figure 7: Horizontal versus sectoral aid in the EU-27[19]

Horizontal and sectoral aid, 2011)

EU-27 || In € billion || As a % of total aid to industry and services || Difference when compared to previous year (in % of total aid to industry and services) || Trend 2009-2011 (in % of total aid to industry and services) || Difference when compared to previous trend (2009-2011)

Total horizontal aid || 47.5 || 89.67% || 4.32% || 86.63% || 3.24%

Environmental aid (incl. energy saving) || 12.4 || 23.40% || -1.34% || 24.15% || -0.75%

Regional development || 14.0 || 26.39% || 1.12% || 25.06% || 4.34%

Research and development and innovation || 10.0 || 18.93% || 0.90% || 18.34% || 3.88%

SME || 2.4 || 4.62% || 0.32% || 5.19% || -5.09%

Risk capital || 0.6 || 1.11% || -0.05% || 1.06% || 0.08%

Training || 0.8 || 1.46% || 0.09% || 1.45% || 0.08%

Employment || 1.5 || 2.74% || 0.13% || 3.27% || -2.70%

Other || 6.3 || 11.89% || 3.57% || 8.70% || 3.24%

Total sectoral aid || 5.5 || 10.33% || -4.32% || 13.37% || -3.24%

The trend seen over many years whereby Member States have directed more aid towards horizontal objectives of common interest continued in 2011. Less aid was granted to the coal sector and substantially less aid was granted to other non-manufacturing services.

Member States’ main focus of horizontal aid in terms of aid expenditure was on regional aid, environmental protection, including energy saving, and research and development, which includes innovation. Further details on some individual objectives are given from paragraph 2.3.2 onwards.

Figure 8: Horizontal versus sectoral aid by Member State[20]

2.2.2. Aid for horizontal objectives

Overall, aid earmarked for horizontal objectives of common interest reached about 89.7 % of total aid to industry and services in the EU[21]. However, that level is not uniform in all Member States: while in 21 Member States it was above the EU-27 level, only two Member States did not reach 50 %.

The Czech Republic, France, Finland and Sweden can be referred to as Member States which directed significantly more aid towards horizontal objectives in 2011. In some Member States, less horizontal aid was granted, largely due, however, to the fact that larger aid schemes expired and their renewal has been postponed, probably as a result of stricter budgetary conditions in Member States, or the fact that aid measures were newly introduced under block exemption but with a narrower scope when compared to previously notified schemes.

When looking at the concept of horizontal aid, it is worth stressing that it is the so-called ‘primary objective’ of the aid which classifies the measure under the various horizontal objectives. When Member States notify aid measures and the Commission approves them, or in case of block-exempted aid where Member States inform the Commission of its implementation[22], the aid expenditure is measured by the earmarked horizontal objective and not according to the beneficiary, i.e. the sector of the economy in which it has its activities.

Generally, large disparities exist among Member States in terms of the share of aid earmarked for the various horizontal objectives[23].

At EU-27 level, aid earmarked for regional development accounted for roughly 26.4 % of aid granted to industry and services. Some Member States even granted more than 50 %, notably Bulgaria, the Czech Republic, Greece, Lithuania and Slovakia.

Closely following was environmental aid, including energy saving, which accounted for approximately 23.4 % of total aid to industry and services. Outstanding cases were Latvia, the Netherlands, Austria and Sweden, which spent more than 50 % to provide environmental aid.

In third position was aid earmarked for research, development and innovation, accounting for roughly 18.9 % of total aid to industry and services. More than 30 % of such aid was granted by Luxembourg and the Netherlands.

When those horizontal objectives are grouped together, they account for roughly two‑thirds of total aid to industry and services in the EU-27 and thus represent the most widest use of aid in the EU on average.

Aid earmarked for SMEs, including risk capital, and for training and employment accounted for roughly 9.9 % of total aid to industry and services while the remainder[24] of horizontal aid represented 11.1 %.

2.2.2.1. Block-exempted aid

Figure 9: Block-exempted aid as a percentage of total aid to industry and services (earmarked for the same horizontal objective)[25]

Generally, aid granted under block exemption increased further in 2011. It stood at approximately € 17.2 billion, or 32.5 % of total aid to industry and services. Block-exempted aid represented roughly 41 % of aid earmarked for the same horizontal objective.

Figure 10: Share of block-exempted aid as a percentage of total aid earmarked for the same horizontal objective[26]

Figure 11: Trend in the share of block-exempted[27] aid as a percentage of total aid earmarked for the same horizontal objective[28]

(Expenditure in € billion) || 2006 || 2007 || 2008 || 2009 || 2010 || 2011 ||

Block-exempted aid to SMEs incl. Risk capital || 1.9 || 2.9 || 3.3 || 2.4 || 1.5 || 1.5 ||

Total aid to SMEs incl. Risk capital || 6.1 || 6.2 || 6.6 || 4.7 || 3.3 || 3.0 ||

Share of this aid as a % of total expenditure on this objective || 31.4 || 46.5 || 50.5 || 51.9 || 45.5 || 48.5 ||

Block-exempted aid to Employment || 0.7 || 0.8 || 1.5 || 1.3 || 1.4 || 1.3 ||

Total aid to Employment || 3.8 || 3.0 || 3.2 || 2.8 || 1.6 || 1.5 ||

Share of this aid as a % of total expenditure on this objective || 17.0 || 25.9 || 47.5 || 46.3 || 89.2 || 89.2 ||

Block-exempted aid to Training || 0.7 || 0.6 || 0.7 || 0.8 || 0.7 || 0.7 ||

Total aid to Training || 0.9 || 0.6 || 0.8 || 0.9 || 0.8 || 0.8 ||

Share of this aid as a % of total expenditure on this objective || 74.9 || 86.8 || 92.7 || 87.4 || 83.4 || 86.9 ||

Block-exempted aid to Regional development || 0.2 || 2.5 || 4.3 || 5.3 || 7.2 || 7.0 ||

Total aid to Regional development || 11.2 || 10.3 || 13.5 || 14.6 || 15.1 || 14.0 ||

Share of this aid as a % of total expenditure on this objective || 1.8 || 24.1 || 31.6 || 36.6 || 48.0 || 49.8 ||

Block-exempted aid to Research and development incl. Innovation || 0.1 || 0.1 || 0.1 || 1.0 || 1.2 || 2.2 ||

Total aid to Research and development incl. Innovation || 7.0 || 8.1 || 9.2 || 11.2 || 10.8 || 10.0 ||

Share of this aid as a % of total expenditure on this objective || 0.8 || 1.5 || 1.4 || 9.0 || 10.8 || 21.8 ||

Block-exempted aid to Environmental protection incl. Energy saving || 0.0 || 0.0 || 0.0 || 0.7 || 0.7 || 4.6 ||

Total aid to Environmental protection incl. Energy saving || 15.3 || 12.8 || 13.7 || 15.1 || 14.7 || 12.4 ||

Share of this aid as a % of total expenditure on this objective || 0.0 || 0.0 || 0.0 || 4.4 || 4.8 || 37.1 ||

Total horizontal aid || 46.3 || 43.8 || 49.9 || 52.6 || 50.9 || 47.5 ||

Share of above block-exempted aid as a % of total aid earmarked for the same horizontal objectives || 7.5 || 15.6 || 19.9 || 22.0 || 24.9 || 36.2 ||

Trend ‑ comparison of 2009-2011 with 2006-2008

Figure 12: Trend in the share of horizontal objectives as a percentage of total aid to industry and services[29]

Despite the decrease in State aid expenditure seen in 2010 and 2011 at EU-level, Member States nevertheless seem to be committed to granting aid towards horizontal objectives of common interest, to judge by the trend, i.e. when we compare aid expenditure between 2006-2008 and 2009-2011. In the period 2009-2011, large aid amounts were earmarked for regional aid, environmental aid, including energy saving, and aid for research, development and innovation (R&D&I). When compared to 2006-2008, more aid was granted in particular for regional development and R&D&I during 2009-2011. Aid earmarked for SMEs, training and employment accounted for a much smaller proportion of aid granted to industry and services. Less aid granted to the coal sector and to non crisis-related financial services also contributed to the overall decrease in sectoral aid.

It should be borne in mind that the overall trend as outlined above can be different when looking at individual Member States[30].

2.2.3. Research, development and innovation

Figure 13: Aid earmarked for research, development and innovation[31]

R&D&I has been placed at the heart of the Europe 2020 Strategy[32] as one of its flagship initiatives because of its potential to contribute to strengthening the competitiveness of the EU economy and to ensure sustainable growth, with a target of spending 3 % of EU GDP on R&D by 2020[33]. In its Communication ‘Europe 2020 Flagship Initiative: Innovation Union’[34], the Commission outlined what must be done to boost innovation and to re-focus R&D&I policy to help address the challenges that society faces today, e.g. climate change, energy and resource efficiency, health and demographic change.

In 2011, State aid represented roughly 4 % of overall R&D expenditure[35], equal to € 10.0 billion or 0.08 % of EU GDP. Almost 60 % of total State aid for R&D&I in 2011 was granted by three Member States: Germany (around € 3 billion), France (€ 1.9 billion) and Spain (€ 0.9 billion). In relative terms, R&D&I aid accounted for 18.9 % of total aid to industry and services. Block-exempted aid reported as R&D&I aid amounted to around € 2.2 billion in 2011, which represented 21.8 % of total horizontal aid granted for the same objective. Germany (€ 1.1 billion)[36], Italy (€ 171.2 million) and the United Kingdom (€ 132.7 million) made the most use of that instrument.

The Community framework for State aid for research and development and innovation[37] and the General Block Exemption Regulation (GBER)[38] form the legal basis for the assessment of R&D&I State aid measures. Following the mid-term review[39] of the framework in 2011, the Commission conducted in 2012 a public consultation. Member States and interested parties were invited to submit their input and views on the review of the EU State aid rules for supporting R&D&I ahead of the expiry of the R&D&I framework at the end of 2013.

2.2.4. Environmental protection

‘Sustainable growth’[40], a further flagship initiative under the Europe 2020 Strategy, includes the so-called ‘20/20/20’ environmental protection targets[41] which are part of the long-term action plan entitled ‘A resource-efficient Europe’. State aid in that area can directly or indirectly assist in achieving those objectives, in particular when addressing market failure or plugging the gaps in incentives to improve environmental protection (e.g. general regulatory measures).

In 2011, State aid for environmental purposes, including energy saving, stood at € 12.4 billion or 0.09 % of EU GDP, and represented 23.4 % of total aid granted to industry and services. The largest grantors were Germany[42] (€ 3.6 billion), Sweden[43] (€ 2.4 billion), the United Kingdom (€ 1.4 billion), the Netherlands (€ 0.9 billion), Austria (€ 0.9 billion) and Spain (€ 0.8 billion).

Aid measures, such as to support energy saving and waste management or to improve production processes, pursue a direct benefit to the environment. In 2011, such expenditure was equivalent to around € 4.0 billion. The largest contributors to that amount were: the Netherlands[44] (roughly € 1 billion), Spain[45] (€ 0.8 billion), Sweden[46] (€ 0.5 billion) and Austria[47] (€ 0.4 billion).

Of indirect effect are inter alia reductions in or exemptions from environmental taxes, i.e. tax revenue forgone, which thus cannot be used as a proxy measure of the environmental benefit which the taxes themselves may have brought. In 2011, 20.4 % of environmental aid, equal to around € 2.5 billion, fell into that category. Within that total, Sweden granted most (€ 1.4 billion), followed by Germany (€ 580 million) and Finland (€ 382 million).

Block-exempted aid for environmental protection amounted to € 4.6 billion in 2011, corresponding to around 37 % of total aid for environmental objectives[48]. The share has increased sharply compared to last year, when it represented only 4.8 % of total environmental aid. Slightly more than 80 % of the block-exempted aid in that field was granted by Germany, Luxembourg and Portugal.

Since the environmental aid guidelines introduced new criteria for the necessity and proportionality test for tax exemptions below EU minimum tax levels (harmonised taxes), Member States have to adopt appropriate measures to bring existing tax reductions into line with the environmental guidelines by 31 December 2012, including when taxes are below EU minimum levels.

2.2.5. Regional development and cohesion

Figure 14: Aid for regional development[49]

|| In € billion || As a % of total aid to industry and services || Difference when compared to previous year (in % of total aid to industry and services) || Trend 2009-2011 (in % of total aid to industry and services) || Difference when compared to previous trend (2006-2008)

Aid earmarked for regional development || 14.0 || 26.39% || 1.12% || 25.06% || 4.34%

|| || As a % of GDP || Difference when compared to previous year (in % of GDP) || Trend 2009-2011 (in % of GDP) || Difference when compared to previous trend (2006-2008)

Aid pursuant to Article 107(3)(a) || 15.2 || 0.12% || - 0.04% || 0.13% || 0.01%

Regional aid pursuant to Article 107(3)(c) || 2.9 || 0.023% || 0% || 0.02% || 0.01%

The Commission guidelines on national regional aid for 2007-2013[50], applicable as of 1 January 2007, explain the general approach taken by the Commission in considering whether aid granted to promote the economic development of certain disadvantaged areas within the European Union is compatible with the internal market. The aim of regional aid is to develop the economic, social and territorial cohesion of a Member State and of the EU as a whole.

The Commission encourages Member States to grant regional aid on the basis of multi-sectoral schemes which form part of a national regional policy. Those schemes should lay down the general conditions under which a Member State may grant regional aid, normally without needing to notify individual cases to the Commission. In October 2006, the Commission adopted a block exemption regulation concerning national regional investment aid[51] which remains applicable until the end of 2013, although Member States may also grant regional aid measures under the GBER.

Regional aid can also be assessed when directly authorised under the Treaty, i.e. Article 107(3)(a) and 107(3)(c) TFEU. Article 107(3)(a) TFEU authorises aid that promotes the economic development of areas where the standard of living is abnormally low or where serious underemployment exists; they are called Category A regions. Regional aid under Article 107(3)(c) TFEU relates to aid for facilitating the development of certain economic areas, where such aid does not adversely affect trading conditions to an extent that is contrary to the common interest; they are referred to as Category C regions.

Finally, aid granted to Category A or C regions does not need to have a regional development objective; other objectives are possible. Thus, the aggregate aid volumes of Category A and C regions are different from those quoted under aid earmarked for regional development.

2.3. State aid earmarked for specific sectors 2.3.1. Rescue and restructuring of firms in difficulty

Figure 15: Rescue and restructuring aid[52]

EU-27 || In € billion || As a % of total aid to industry and services || Difference when compared to previous year (in % of total aid to industry and services) || Trend 2009-2011 (in % of total aid to industry and services) || Difference when compared to previous trend (2006-2008)

Rescue and restructuring aid || 0.75 || 1.4% || 0.4 || 1.58% || 0.5%

France, Italy, Poland and Romania kept up their efforts to reduce aid granted for rescue and restructuring during 2009-2011. While overall rescue and restructuring aid decreased by roughly one-third when comparing the period 2009-2011 with 2006-2008, Austria, the Czech Republic and the United Kingdom granted more such aid, accounting for roughly 80 % of all rescue and restructuring aid.

2.3.2. Shipbuilding

Figure 16: Aid to the shipbuilding sector[53]

EU-27 || In € billion || As a % of total aid to industry and services || Difference when compared to previous year (in % of total aid to industry and services) || Trend 2009-2011 (in % of total aid to industry and services) || Difference when compared to previous trend (2006-2008)

Aid to the ship building sector || 0.086 || 0.16% || 0.05% || 0.16% || -0.53%

Aid to the ship-building sector decreased substantially both when compared to the previous year and when looking at the trend; in both instances the decrease represented more than 60 %.

2.3.3. Steel industry

Figure 17: Aid to the steel industry[54]

EU-27 || In € billion || As a % of total aid to industry and services || Difference when compared to previous year (in % of total aid to industry and services) || Trend 2009-2011 (in % of total aid to industry and services) || Difference when compared to previous trend (2006-2008)

Aid to the steel industry || 0.017 || 0.03% || 0% || 0.09% || -0.35%

Since the European Coal and Steel Community (ECSC) Treaty expired on 23 July 2002, general State aid rules have been applied to the steel sector, with the exception that no investment or restructuring aid may be granted to steel production unless it is closure aid[55].

While in 2011 aid to the steel sector decreased slightly compared to the previous year, the trend shows that the aid volume dropped by almost three‑quarters in 2009-2011 when compared to 2006-2008. Only Germany increased steel aid during 2009-2011.

2.3.4. Coal

Figure 18: Aid to the coal sector[56]

EU-27 || In € billion || As a % of total aid to industry and services || Difference when compared to previous year (in % of total aid to industry and services) || Trend 2009-2011 (in % of total aid to industry and services) || Difference when compared to previous trend (2006-2008)

Aid to the coal sector || 2.3 || 4.5% || - 0.98 || 4.62% || -1.54%

Council Decision 2010/787/EU[57] on State aid to facilitate the closure of uncompetitive coal mines was adopted on 10 December 2010 to cover the period starting on 1 January 2011 until 31 December 2018. That Decision permits Member States to grant aid for uncompetitive mines within a closure plan. It provides for only two categories of aid: (i) operating aid for the closure of mines (Article 3) and (ii) aid for exceptional costs (Article 4). Uncompetitive mines must be closed by 31 December 2018 and their coal production progressively reduced over the period. Aid for exceptional costs includes redundancy payments, re-training costs, site cleaning-up or safety costs. The Decision will expire at the end of 2027.

The following Decisions have been taken under Council Decision 2010/787/EU:

– Germany - decision of 7 December 2011, Case SA.24642 (N708/2007);

– Romania - decision of 23 February 2012, Case SA.33033;

– Slovenia - decision of 30 June 2011, Case SA.30907 (N175/2010): only aid to cover exceptional costs under Article 4 is provided;

– Poland - decision of 23 November 2011 Case SA.33013[58]: only aid to cover exceptional costs under Article 4 is provided.

2.3.5. Transport

Figure 19: Aid to the transport sector[59]

EU-27 || In € billion || As a % of GDP || Difference when compared to previous year (in % of GDP) || Trend 2009-2011 (in % of GDP) || Difference when compared to previous trend (2006-2008)

Total aid to the transport sector || 2.22 || 0.018% || -0.002% || 0.02% || -0.06%

Road and combined transport || 0.28 || 0.002% || 0.0004% || 0.002% || -0.06%

Maritime transport || 1.55 || 0.012% || -0.002% || 0.01% || -0.001%

Inland water transport || 0.02 || 0.0002% || 0.0001% || 0.0001% || 0.00003%

Air transport || 0.16 || 0.001% || 0.0003% || 0.005% || 0.001%

State aid to the transport sector is governed by specific rules in the TFEU, as well as secondary legislation and rules of soft law.

Member States spend considerable resources for the provision of Services of General Economic Interest (SGEIs) in the transport sector and on the construction, management and maintenance of infrastructure. EU law provides for a number of mechanisms allowing for and encouraging the provision of such services. Member States must however ensure that the public financing complies with the applicable rules and, in particular, that it avoids overcompensation and undue distortion of competition.

2.3.5.1. Land transport

In 2011, the Commission dealt with several files concerning land transportation.

On 23 February, the Commission approved the new financing system of the Rhine-Ruhr Passenger Transport Network under Article 9(1) of Regulation (EC) No 1370/2007[60] and Article 93 TFEU.

Also in 2011, the Commission approved three aid schemes in support of inland waterway transportation, applicable in Austria, Belgium and the Czech Republic.

On the basis of Article 93 TFEU, public financing of intermodal infrastructure in Ablasserdam (Netherlands), Beverdonk (Belgium), Genk (Belgium) and Le Havre (France), were considered to be compatible with the internal market.

As in previous years, the Commission approved several schemes in 2011 to support rail and combined transport (Austria, Denmark, Germany, Italy, Netherlands and United Kingdom), mainly as aid for the reduction of external costs.

2.3.5.2. Maritime transport

In the course of 2011, the Commission opened proceedings in three maritime cases one of which related to the restructuring aid to SeaFrance (operator on the Calais‑Dover route) which was followed by a negative decision with recovery. An in-depth investigation was also conducted into the non-notified prolongation of existing public service contracts for the benefit of the Tirrenia group, which was operating ferries between mainland Italy and various islands as well as the modalities of the privatisation process of the group. Finally, the Commission launched an investigation into the tax benefits granted by Spain since 2002 for the purchase of ships.

The Commission approved the overhaul of the Finnish tonnage tax system (a decision in which the Commission inter alia clarified its approach with respect to renting ships out without a crew). Similarly, the Commission authorised an environmental support scheme for Finnish shipping companies aimed at encouraging the acquisition of environmentally friendlier ships.

Authorisation was also given to the prolongation of the Irish refund system of social security contributions with respect to seafarers.

There were two cases in which the Commission authorised public financing of port infrastructure (notably the Latvian port cases). Following an in-depth investigation, the Commission also took a final decision to approve equipment transfer procedures under the French port reform (transfer from French public ports to the private sector).

2.3.5.3. Aviation

In the aviation sector, the Commission approved three cases in 2011 concerning projects for financing airport infrastructure (Ireland, the United Kingdom, and Greece). One start-up aid scheme was notified to the Commission by Lithuania and was also approved.

Several Member States have introduced taxes on flights in recent years. In 2011, the Commission undertook a preliminary investigation into the Dutch flight tax and the exemptions for transfer and transit passengers, and decided that no State aid was involved. The Irish flight tax system was also assessed by the Commission in 2011. In this case the Commission concluded that the Irish flight tax entailed State aid and expressed doubts about compatibility. Consequently, the Commission opened the formal investigation procedure for an in-depth assessment.

In 2011, the Commission continued to process its considerable workload involving the examination of a large number of complaints concerning investment aid for airport infrastructure and aid to airlines. While the Commission closed two complaint cases as no grounds were identified for a further investigation, it also opened six formal investigation proceedings. Five of those concerned aid for airport infrastructure and in some cases also aid to airlines (Germany, Romania, France), while one case concerns restructuring aid measures (Czech Republic). In addition to those, the Commission continued the formal investigation procedures opened in 2010.

Furthermore, the Commission approved aid measures notified by Slovenia, which concerned a remediation of damage to airlines and airports caused by seismic activity in Iceland and the volcanic ash in April 2010. In addition, two cases of social aid concerning remote regions in the United Kingdom and the outermost regions of France were also approved by the Commission in 2011.

On 24 March 2011, the General Court delivered its judgement in the Joined Cases T-443/08 and T-455/08 Freistaat Sachsen and Others al. / Commission. The General Court confirmed that the operation of an airport is an economic activity, an inseparable part of which is the construction of airport infrastructure, and that the economic or non-economic character of the later use of the infrastructure necessarily determines the nature of the construction. The General Court therefore agreed that public financing of the construction of airport infrastructure (in particular runways) can constitute State aid. The only exception concerns certain activities that are part of the exercise of public powers (security, police etc.). The General Court also highlighted that for an activity to qualify as economic, it is irrelevant that it is not carried out by private operators or that it is not profitable. At the same time the General Court partially annulled the contested Commission decision ‘to the extent that it fixes the aid amount at € 350 million’ without deducting the costs of a non-economic nature (e.g. security, air traffic control, police and customs), which do not constitute aid. That partial annulment does not affect the part of the decision qualifying the measure as compatible aid.

In 2011 the Commission decided to initiate a revision of both sets of the existing State aid guidelines for the aviation sector, i.e. of the "Application of Articles 92 and 93 of the EC Treaty and Article 61 of the EEA Agreement to State aids in the aviation sector"[61] (1994 Guidelines) and the "Community guidelines on financing of airports and start-up aid to airlines departing from regional airports"[62] (2005 Guidelines).

The revision started with a public consultation on the previous application of the two sets of Guidelines in force[63]. The revision procedure is still on-going. As soon as a public version of the revised guidelines becomes available, the Commission will invite stakeholders to comment.

2.3.6. Agriculture

Figure 20: Aid to the agricultural sector[64]

|| New notifications in 2011 || Decisions in 2011 || New block- exempted measures in 2011

Number of aid measures || 122 || 132 || 188[65]; 192[66]

|| In € billion || As a % of GDP || Difference when compared to previous year (in % of GDP)

Aid granted to the agricultural sector || 8.7 || 0.07% || - 0.05%

Of which is block exempted aid || 1.5 || 0.012% || -0.001%

France and Finland were the largest grantors, with totals of € 1.3 billion and € 1.1 billion respectively.

When comparing expenditure in 2011 with that of 2010, most of the Member States (14) reduced their aid volumes to the agriculture sector, while the remainder showed a slight increase and Romania and Greece in particular showed the highest increase when compared to the previous year in % of GDP.

Block-exempted aid in agriculture

Fewer block exemption measures were implemented by Member States in 2011, continuing the decline in numbers compared to previous years[67]. Until now, only Malta has not made use of a block exemption.

It should be noted that since 2009 all block-exempted aid schemes have been submitted by Member States under the Commission Regulation (EC) No 1857/2006because since the entry into force of the GBER, Member States communicate directly to DG Competition agricultural measures in the fields of research and development, aid in the form of risk capital, training aid, environmental aid and aid for disadvantaged and disabled workers (to the extent that those categories of aid are not covered by Regulation (EC) No 1857/2006). In consequence, measures published under Regulation (EC) No 70/2001 are only recorded until August 2008.

In 2011, block-exempted aid accounted for approximately 17 % of State aid granted to agriculture, which is similar to 2010 (roughly 15 %). Analysing the situation by Member States, Italy granted around 45 % under block exemption, followed by Cyprus with 42 %.

2.3.7. Fisheries and aquaculture

Figure 21: Aid to the fisheries and aquaculture sector[68]

|| New notifications in 2011 || Decisions in 2011 || New block- exempted measures in 2011

Number of aid measures || 9 || 8 || 19

|| In € billion || As a % of GDP || Difference when compared to previous year (in % of GDP)

Aid granted to the fisheries sector || 0.109 || 0.01% || - 0.00003

Of which is block exempted aid || 0.013 || 0.002% || -0.0001

France reported the highest overall State aid expenditure (€ 55.1 million), followed by the Czech Republic (€ 24.2 million), Spain (€ 4.6 million), the Netherlands (€ 4.3 million) and Ireland (€ 4.1 million).

With respect to the number of aid measures, Spain reported the most schemes (17), followed by the Netherlands (16), and France and Italy (13 each).

in all 47 block‑exempted schemes which were notified in 2011 were put in place by no less than 12 Member States. Ireland spent € 4.1 million, followed by the Czech Republic (€ 2.8 million) and France (€ 1.6 million) on block-exempted aid in the fisheries and aquaculture field.

No legislation has been adopted in 2011 as regards State aid in the fisheries and aquaculture sector. In the context of the on-going reform of the Common Fisheries Policy and of the modernisation of State aid, legal instruments in the field of State aid in the fisheries sector will have to be amended in 2013.

2.4. Use of the State aid instruments

Figure 22: Expenditure as per aid instrument[69]

Expenditure as per aid instrument (2011)

EU-27 || In € billion || As a % of total aid to industry and services || Difference when compared to previous year (in % of total aid to industry and services) || Trend 2009-2011 (in % of total aid to industry and services) || Difference when compared to previous trend (2009-2011)

Grants || 30.4 || 57.33% || 2.49% || 53.95% || 3.31%

Soft loans || 1.6 || 2.97% || 0.12% || 3.16% || -0.22%

Guarantees || 1.6 || 2.96% || 0.87% || 2.09% || 0.59%

Equity participation || 0.2 || 0.42% || -0.55% || 1.00% || 0.61%

Tax exemption (incl. tax deferrals) || 19.1 || 35.99% || -3.21% || 39.72% || -4.38%

Other || 0.1 || 0.28% || 0.27% || 0.09% || 0.09%

Across all aid objectives and in all 27 Member States, the direct grant is the instrument most widely used by Member States to grant aid, both in 2011 and during the period 2008-2011, representing roughly 57.3 % and 53.9 % respectively of aid granted. In second position, Member States granted aid through various kinds of tax exemptions, accounting for approximately 35.9 % and 39.7 % respectively. Loans, guarantees and other aid instruments only represented a minor fraction, about 6.8 % and 6.4 % respectively.

The situation changes entirely, however, when looked at from the angle of individual horizontal objectives. For instance, Member States grant aid earmarked for environmental protection or energy-saving mostly through tax exemption, representing about 72 % in 2011 and 73 % during the period 2008-2011. An almost opposite pattern can be seen when looking at R&D&I aid, where Member States granted most aid through grants, about 85 % in 2011 and 80 % during the period 2008-2011, whereas for instance tax exemption does not play a major role. Finally, the form in which regional aid is granted more equally shared between grants and tax exemptions, each accounting for between 38 % and 50 % both in 2011 and during the period 2008-2011.

Again, another pattern occurs when the use of aid instruments is looked at from the perspective of Member States. For instance, Denmark, Cyprus, Luxembourg and the Netherlands granted more than 90 % of aid to industry and services through the instrument of the direct grant in 2011 and more than 80 % during the period 2008-2011. Portugal and Sweden favour mostly tax exemptions which represented more than 80 % of aid to industry and services in 2011 and during the period 2008-2011.

Figure 23: Share of aid instruments as a percentage of total aid to industry and services[70]

3. State aid granted to the financial sector and support for the real economy 3.1. State aid measures for the financial sector 3.1.1. General background

The financial and economic crisis has led Member States to use a sizeable amount of State aid since 2008 in order to cope with the negative effects of the downturn in the European financial sector. Renewed tensions in sovereign and bank funding conditions have required Member States to keep on granting State aid to tackle those effects.

In the second half of 2011, amid an escalation of the crisis in sovereign bond markets and a slow-down in world output growth, the EU entered into recession in the fourth quarter. As a result, EU output growth was 1.5 % in 2011, though there were marked differences among countries, e.g. Germany +3 %, France +1.7 %, Italy 0.4 % and Spain 0.7 %.

In the first months of 2012, crucial political decisions at EU level and massive liquidity support provided by the ECB to the EU banking sector succeeded in alleviating tensions in the financial and sovereign bond markets. In particular the ECB’s decisions to provide unlimited three-year liquidity to banks and to widen the range of eligible collateral have significantly reduced the cost of bank funding and improved market sentiment.

However, the EU banking sector remains fragile since banks face different pressures. They are required to strengthen their capital position in order to build a robust firewall to cope with default and devaluation risks. The latter in particular pose serious risks to banks' balance sheets. The increase in the banks' capital ratio needs to be achieved without disrupting lending to the real economy. Finally, banks need to raise capital in the market in an environment where they face high roll-over requirements.

The escalation in sovereign market tensions has jeopardised the whole European banking system. European banks own a large quantity of European sovereign bonds. Since they were regarded as risk-free assets before the crisis, the banks were not required to set aside capital to face potential losses. The higher the risk perceived by the sovereign bonds, the higher the capital that banks need to raise in order to cover the risk of their holdings. However poor investor confidence decreases banks’ ability to raise capital privately, triggering the need for state support. Since the portfolio of European banks is mainly composed of national bonds, the more the state financial situation deteriorates following intervention in the national banking sector, the higher the perceived risk for banks’ sovereign holdings. Higher risk triggers the need to raise further capital. That vicious circle is commonly called the sovereign feedback loop.

The worsening of the sovereign crisis in mid-2011 led the Member States and the Commission to agree on a package of measures to strengthen banks' capital and provide guarantees for their liabilities (the banking package[71]). On 1 December 2011, the Commission prolonged the State aid crisis measures for the financial sector, clarifying and updating the rules on pricing and other conditions[72]. Once the situations stabilises, a more permanent set of State aid rules for banks is envisaged.

In spring 2012, increased market pressure on Spanish sovereign funding led the Spanish government to call for the recapitalisation of Spanish banks, which produced further turmoil in the sovereign bond markets, leading to a significant deterioration in the GDP growth forecast, with growth expected to stagnate in the EU during 2012[73].

3.1.2. State aid measures for the financial sector

In the period from 1 October 2008 to 1 October 2012[74], the Commission took more than 350 decisions in the financial services sector based on Article 107(3)(b) TFEU, to remedy serious disturbances in the economies of Member States. Those decisions authorised, amended or prolonged more than 50 schemes, and addressed the situation in over 90 financial institutions since October 2008. The Commission has so far taken only one prohibition decision. Financial crisis measures have been introduced in all Member States, apart from Bulgaria, the Czech Republic, Estonia, Malta and Romania.

Worsening economic conditions in the second half of 2011 have prevented most Member States from phasing out State aid support to the financial sector. On the contrary, the mutual reinforcing effect of sovereign tensions and the banking sector's weaknesses has led some Member States to extend or re-activate State aid measures, mainly in the form of guarantees and recapitalisation.

In the period from 1 October 2008 to 1 October 2012 the Commission approved aid to the financial sector for an overall amount of € 5 058.9 billion (40.3 % of EU GDP). The bulk of the aid was authorised in 2008 when € 3 394 billion (27.7 % of EU GDP) was approved, mainly comprising guarantees for banks’ bonds and deposits. After 2008 the aid approved focused more on the recapitalisation of banks and impaired asset relief rather than on guarantees, while more recently a new wave of guarantee measures have been approved mainly by those countries experiencing an increase in their sovereign spreads, such as Spain and Italy. Between 1 January 2012 and 1 October 2012 further aid totalling € 429.5 billion was approved.

Despite a marked decrease in the amount of aid approved in the years 2011 and 2012, the need for state support differs considerably across countries and segments of the European banking sector[75]. The largest amount of aid approved in the last two years is concentrated either in countries whose banking sector is experiencing sovereign distress or in countries where particular segments of the banking sector or single banks are undergoing restructuring.

The overall amount of aid used in the period from 1 October 2007 to 31 December 2011 was € 1615.9 billion (12.8 % of EU GDP[76]). The largest part went on guarantees[77], which amounted to roughly € 1085 billion (8.6 % of GDP), followed by recapitalisation (about € 322 billion or 2.6 % of GDP), impaired assets (about € 119.9 billion or 0.9 % of GDP) and liquidity measures (€ 89 billion or 0.7 % of GDP).

Box 1: The different State aid instruments for financial institutions and how to measure them

Two different concepts are used in this Report to describe the volumes of State aid to financial institutions: the pledged amount of aid and the used amount of aid.

The pledged volume of aid (aid approved) represents the overall maximum amount of State aid measures (such as guarantees, capital injections and others) adopted by Member States and approved by the Commission. That figure corresponds to the upper maximum of support Member States are allowed to grant to financial institutions. However, it neither represents the amounts actually implemented nor the benefits obtained by individual financial institutions.

The used amount of aid (aid used or aid granted) expresses the actual volume of the aid measure implemented by a Member State:

– For recapitalisation: the used amount of aid is equal to the nominal value of the recapitalisation.

– For impaired asset relief: the used amount of aid is the difference between the transfer value paid to the beneficiary and the market value of the asset.

– For guarantees: two different reporting methodologies are included:

– the outstanding volume of guarantee covered by the state in a given year, calculated as the average of outstanding amounts at end of quarter (31 March; 30 June; 30 September; 30 December);

– the overall amount of new guarantee provided in 2011[78].

– For liquidity support: two different reporting methodologies are included:

– the outstanding volume of liquidity provided by the Member State in a given year, calculated as the average of outstanding amounts at end of quarter (31 March; 30 June; 30 September; 30 December);

– The overall amount of new liquidity provided in 2011.

Asset support measures (recapitalisation and impaired asset relief) are recorded at the time of issuance. For liability support (liquidity and guarantees), aid is recorded until the liability matures.

More details on the data coverage of the Scoreboard are provided in the Methodology Notes on page 53.

The tables below show for each Member State and for the whole of the EU the overall amount of approved financial crisis aid to financial institutions, as well as the overall amount of aid used for the different instruments[79].

Figure 27: Approved amounts of aid to financial institutions per instrument and per Member State, 1 October 2008 - 1 October 2012

Member State || Recapitalisation measures || Guarantees || Asset relief interventions || Liquidity measures || Total for 2008 ‑ 2012

In € billion || As a % of 2011 GDP || In € billion || As a % of 2011 GDP || In € billion || As a % of 2011 GDP || In € billion || As a % of 2011 GDP || In € billion || As a % of 2011 GDP

Belgium || 20.40 || 5.5% || 310.00 || 84.2% || 28.22 || 7.7% || 0.00 || 0.0% || 358.62 || 97.4%

Bulgaria || 0.00 || 0.0% || 0.00 || 0.0% || 0.00 || 0.0% || 0.00 || 0.0% || 0.00 || 0.0%

Czech Republic || 0.00 || 0.0% || 0.00 || 0.0% || 0.00 || 0.0% || 0.00 || 0.0% || 0.00 || 0.0%

Denmark || 14.55 || 6.1% || 587.90 || 245.7% || 2.30 || 1.0% || 7.88 || 3.3% || 612.63 || 256.1%

Germany || 114.61 || 4.5% || 455.85 || 17.7% || 66.10 || 2.6% || 9.50 || 0.4% || 646.06 || 25.1%

Estonia || 0.00 || 0.0% || 0.00 || 0.0% || 0.00 || 0.0% || 0.00 || 0.0% || 0.00 || 0.0%

Ireland || 90.61 || 57.9% || 386.00 || 246.7% || 54.00 || 34.5% || 40.73 || 26.0% || 571.34 || 365.2%

Greece || 35.75 || 16.6% || 85.00 || 39.5% || 0.00 || 0.0% || 8.00 || 3.7% || 128.75 || 59.9%

Spain || 209.32 || 19.5% || 320.15 || 29.8% || 13.93 || 1.3% || 31.85 || 3.0% || 575.25 || 53.6%

France || 26.65 || 1.3% || 339.80 || 17.0% || 4.70 || 0.2% || 0.00 || 0.0% || 371.15 || 18.6%

Italy || 20.00 || 1.3% || 110.00 || 7.0% || 0.00 || 0.0% || 0.00 || 0.0% || 130.00 || 8.2%

Cyprus || 1.80 || 10.1% || 3.00 || 16.9% || 0.00 || 0.0% || 0.00 || 0.0% || 4.80 || 27.0%

Latvia || 0.83 || 4.1% || 5.20 || 25.9% || 0.54 || 2.7% || 2.70 || 13.5% || 9.27 || 46.2%

Lithuania || 0.58 || 1.9% || 0.29 || 0.9% || 0.58 || 1.9% || 0.00 || 0.0% || 1.45 || 4.7%

Luxembourg || 2.50 || 5.8% || 6.15 || 14.4% || 0.00 || 0.0% || 0.32 || 0.7% || 8.97 || 20.9%

Hungary || 1.07 || 1.1% || 5.35 || 5.3% || 0.04 || 0.0% || 3.87 || 3.9% || 10.33 || 10.3%

Malta || 0.00 || 0.0% || 0.00 || 0.0% || 0.00 || 0.0% || 0.00 || 0.0% || 0.00 || 0.0%

Netherlands || 37.64 || 6.3% || 200.00 || 33.2% || 22.79 || 3.8% || 52.90 || 8.8% || 313.33 || 52.0%

Austria || 15.90 || 5.3% || 77.84 || 25.9% || 0.50 || 0.2% || 0.00 || 0.0% || 94.24 || 31.3%

Poland || 33.89 || 9.2% || 33.89 || 9.2% || 0.00 || 0.0% || 0.00 || 0.0% || 67.78 || 18.3%

Portugal || 26.25 || 15.4% || 40.67 || 23.8% || 4.00 || 2.3% || 6.06 || 3.5% || 76.98 || 45.0%

Romania || 0.00 || 0.0% || 0.00 || 0.0% || 0.00 || 0.0% || 0.00 || 0.0% || 0.00 || 0.0%

Slovenia || 0.63 || 1.8% || 12.00 || 33.7% || 0.00 || 0.0% || 0.00 || 0.0% || 12.63 || 35.4%

Slovakia || 0.66 || 1.0% || 2.80 || 4.1% || 0.00 || 0.0% || 0.00 || 0.0% || 3.46 || 5.0%

Finland || 4.00 || 2.1% || 50.00 || 26.4% || 0.00 || 0.0% || 0.00 || 0.0% || 54.00 || 28.5%

Sweden || 5.03 || 1.3% || 156.00 || 40.3% || 0.00 || 0.0% || 0.52 || 0.1% || 161.56 || 41.8%

United Kingdom || 114.61 || 6.6% || 458.75 || 26.3% || 248.05 || 14.2% || 51.93 || 3.0% || 873.34 || 50.0%

EU-27 || 777.30 || 6.2% || 3646.64 || 28.9% || 445.75 || 3.5% || 216.27 || 1.7% || 5085.95 || 40.3%

Figure 28: Approved amounts of aid to financial institutions per instrument and per Member State, 2008-2011

Member State || Recapitalisation measures || Guarantees || Asset relief interventions || Liquidity measures || Total for 2008 - 2011

In € billion || As a % of 2011 GDP || In € billion || As a % of 2011 GDP || In € billion || As a % of 2011 GDP || In € billion || As a % of 2011 GDP || In € billion || As a % of 2011 GDP

Belgium || 20.40 || 5.5% || 303.95 || 82.5% || 28.22 || 7.7% || 0.00 || 0.0% || 352.57 || 95.7%

Bulgaria || 0.00 || 0.0% || 0.00 || 0.0% || 0.00 || 0.0% || 0.00 || 0.0% || 0.00 || 0.0%

Czech Republic || 0.00 || 0.0% || 0.00 || 0.0% || 0.00 || 0.0% || 0.00 || 0.0% || 0.00 || 0.0%

Denmark || 14.03 || 5.9% || 580.00 || 242.4% || 0.00 || 0.0% || 6.08 || 2.5% || 600.11 || 250.8%

Germany || 113.68 || 4.4% || 455.85 || 17.7% || 65.40 || 2.5% || 9.50 || 0.4% || 644.43 || 25.1%

Estonia || 0.00 || 0.0% || 0.00 || 0.0% || 0.00 || 0.0% || 0.00 || 0.0% || 0.00 || 0.0%

Ireland || 90.61 || 57.9% || 386.00 || 246.7% || 54.00 || 34.5% || 40.73 || 26.0% || 571.34 || 365.2%

Greece || 15.47 || 7.2% || 85.00 || 39.5% || 0.00 || 0.0% || 8.00 || 3.7% || 108.47 || 50.4%

Spain || 101.10 || 9.4% || 201.15 || 18.7% || 2.86 || 0.3% || 31.85 || 3.0% || 336.96 || 31.4%

France || 26.65 || 1.3% || 336.15 || 16.8% || 4.70 || 0.2% || 0.00 || 0.0% || 367.50 || 18.4%

Italy || 20.00 || 1.3% || 80.00 || 5.1% || 0.00 || 0.0% || 0.00 || 0.0% || 100.00 || 6.3%

Cyprus || 0.00 || 0.0% || 3.00 || 16.9% || 0.00 || 0.0% || 0.00 || 0.0% || 3.00 || 16.9%

Latvia || 0.83 || 4.1% || 5.15 || 25.7% || 0.54 || 2.7% || 2.26 || 11.3% || 8.78 || 43.8%

Lithuania || 0.58 || 1.9% || 0.29 || 0.9% || 0.58 || 1.9% || 0.00 || 0.0% || 1.45 || 4.7%

Luxembourg || 2.50 || 5.8% || 5.80 || 13.5% || 0.00 || 0.0% || 0.32 || 0.7% || 8.62 || 20.1%

Hungary || 1.07 || 1.1% || 5.35 || 5.3% || 0.04 || 0.0% || 3.87 || 3.9% || 10.33 || 10.3%

Malta || 0.00 || 0.0% || 0.00 || 0.0% || 0.00 || 0.0% || 0.00 || 0.0% || 0.00 || 0.0%

Netherlands || 37.64 || 6.3% || 200.00 || 33.2% || 22.79 || 3.8% || 52.90 || 8.8% || 313.33 || 52.0%

Austria || 15.65 || 5.2% || 75.20 || 25.0% || 0.40 || 0.1% || 0.00 || 0.0% || 91.25 || 30.3%

Poland || 4.62 || 1.2% || 4.62 || 1.2% || 0.00 || 0.0% || 0.00 || 0.0% || 9.24 || 2.5%

Portugal || 12.00 || 7.0% || 35.45 || 20.7% || 0.00 || 0.0% || 0.00 || 0.0% || 47.45 || 27.8%

Romania || 0.00 || 0.0% || 0.00 || 0.0% || 0.00 || 0.0% || 0.00 || 0.0% || 0.00 || 0.0%

Slovenia || 0.25 || 0.7% || 12.00 || 33.7% || 0.00 || 0.0% || 0.00 || 0.0% || 12.25 || 34.4%

Slovakia || 0.66 || 1.0% || 2.80 || 4.1% || 0.00 || 0.0% || 0.00 || 0.0% || 3.46 || 5.0%

Finland || 4.00 || 2.1% || 50.00 || 26.4% || 0.00 || 0.0% || 0.00 || 0.0% || 54.00 || 28.5%

Sweden || 5.03 || 1.3% || 156.00 || 40.3% || 0.00 || 0.0% || 0.52 || 0.1% || 161.56 || 41.8%

United Kingdom || 114.61 || 6.6% || 435.71 || 24.9% || 248.05 || 14.2% || 51.93 || 3.0% || 850.30 || 48.7%

EU-27 || 601.39 || 4.8% || 3419.47 || 27.1% || 427.58 || 3.4% || 207.96 || 1.6% || 4656.41 || 36.9%

Figure 29: Used amounts of aid to financial institutions per instrument and per Member State, 1 October 2008 – 31 December 2011

2008 - 2011

Member States || Recapitalisation measures || Guarantees || Asset relief interventions || Liquidity measures other than guarantees || 2008 - 2011

|| || ||

In € billion || As a % of 2011 GDP || In € billion || As a % of 2011 GDP || In € billion || As a % of 2011 GDP || In € billion || As a % of 2011 GDP || In € billion || As a % of 2011 GDP

Belgium || 20.40 || 5.54% || 44.23 || 12.01% || 7.73 || 2.10% || 0 || 0% || 72.36 || 19.65%

Bulgaria || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Czech Republic || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Denmark || 10.77 || 4.50% || 145.00 || 60.61% || 0 || 0% || 1.97 || 0.82% || 157.75 || 65.94%

Germany || 63.24 || 2.46% || 135.03 || 5.25% || 56.17 || 2.19% || 4.75 || 0.18% || 259.19 || 10.08%

Estonia || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Ireland || 62.78 || 40.13% || 284.25 || 181.70% || 2.60 || 1.66% || 0.08 || 0.05% || 349.71 || 223.54%

Greece || 6.30 || 2.93% || 56.30 || 26.17% || 0 || 0% || 6.90 || 3.21% || 69.49 || 32.31%

Spain || 19.31 || 1.80% || 62.20 || 5.79% || 2.86 || 0.27% || 19.31 || 1.80% || 103.68 || 9.66%

France || 22.46 || 1.12% || 92.73 || 4.64% || 1.20 || 0.06% || 0 || 0% || 116.39 || 5.83%

Italy || 4.05 || 0.26% || 10.90 || 0.69% || 0 || 0% || 0 || 0% || 14.95 || 0.95%

Cyprus || 0 || 0% || 2.83 || 15.91% || 0 || 0% || 0 || 0% || 2.83 || 15.91%

Latvia || 0.51 || 2.53% || 0.54 || 2.69% || 0.41 || 2.03% || 0.97 || 4.86% || 2.43 || 12.12%

Lithuania || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Luxembourg || 2.60 || 6.07% || 1.65 || 3.84% || 0 || 0% || 0.19 || 0.44% || 4.43 || 10.35%

Hungary || 0.11 || 0.11% || 0.01 || 0.01% || 0 || 0% || 2.13 || 2.12% || 2.24 || 2.23%

Malta || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Netherlands || 18.86 || 3.13% || 40.90 || 6.79% || 5.00 || 0.83% || 30.40 || 5.05% || 95.16 || 15.80%

Austria || 7.38 || 2.45% || 19.33 || 6.43% || 0.40 || 0.13% || 0 || 0% || 27.11 || 9.01%

Poland || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Portugal || 0 || 0% || 8.54 || 5.00% || 3.10 || 1.81% || 3.81 || 2.23% || 15.45 || 9.04%

Romania || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Slovenia || 0.25 || 0.70% || 2.15 || 6.03% || 0 || 0% || 0 || 0% || 2.40 || 6.73%

Slovakia || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Finland || 0 || 0% || 0.12 || 0.06% || 0 || 0% || 0 || 0% || 0.12 || 0.06%

Sweden || 0.78 || 0.20% || 19.92 || 5.15% || 0 || 0% || 0 || 0% || 20.70 || 5.35%

United Kingdom || 82.39 || 4.72% || 158.22 || 9.06% || 40.41 || 2.31% || 18.55 || 1.06% || 299.57 || 17.15%

Total EU-27 || 322.18 || 2.55% || 1084.83 || 8.59% || 119.88 || 0.95% || 89.06 || 0.70% || 1615.96 || 12.79%

The overall volume of aid used in 2011 for recapitalisation was € 31.7 billion (0.25 % of EU GDP); no further impaired asset measures were used in 2011. With respect to guarantees and liquidity measures, the average outstanding amount for the year 2011 stood at € 565.5 billion (4.5 % of GDP), of which € 521.8 billion (4.1 % of EU GDP) relates to guarantees while € 43.7 billion (0.35 % of EU GDP) relates to liquidity measures.

3.1.3. State aid per instrument 3.1.3.1. Guarantees for bank debt

Guarantees have been the main category of instrument used by Member States to respond to the turmoil in the financial sector. Most guarantee schemes were approved at the onset of the crisis, from autumn 2008 to mid-2009. The bulk of the guarantees were granted through schemes, since they targeted the whole financial system rather than the weaknesses of specific banks. Guarantees, in particular, have proved effective in tackling liquidity constraints arising from the systemic loss of confidence which paralysed the interbank market and caused a sudden increase in the cost of wholesale funding. For that reason those countries hit hardest by the escalation of tensions in the euro bonds’ market in summer 2011 have recently used that instrument to address the loss in investors' confidence and minimise capital flight.

From 1 October 2008 to 1 October 2012, € 3 646.6 billion in guarantees (28.9 % of EU GDP) were approved by the Commission for a large number of countries. Of that amount, € 227.2 billion was approved between 1 January 2012 and the third quarter of 2012. The new guarantees were mostly approved under two schemes re-introduced in that period by Spain (€ 119 billion) and Italy (€ 30 billion), which combine with the extension in duration and scale of the Greek and Portuguese guarantee schemes earlier in 2011. The United Kingdom, Denmark and Latvia are the other countries that introduced guarantee schemes in that period, while two banks (Dexia and West LB) were the beneficiaries of guarantees approved on an ad hoc basis. The former received joint support from Belgium, France and Luxembourg, while the latter was to be restructured through, among other measures, a guarantee provided by the German government.

In terms of the amounts actually used in the EU in the period 2008-2011, a maximum[80] of € 1 084.8 billion (8.62 % of GDP) was granted. The countries that made the largest use of guarantees were Ireland[81] (€ 284 billion) and the United Kingdom (€ 158.2 billion), followed by Denmark (€ 145 billion) and Germany (€ 135.89 billion). By percentage of GDP, Ireland remains the largest user (181.7 %), followed by Denmark (60.6 %) and Greece (26 %).

With respect to the aid actually used in 2011, the average outstanding volume of guarantees amounted to € 521.8 billion (4.1 % of EU GDP). There was a significant decrease in the average outstanding volume of guarantees compared to 2010. That fall is due to the fact that a large amount in terms of financial instruments covered by state guarantee matured in the second half of 2011. Since in a number of countries there was no need to extend the guarantee schemes in place, at least in the first half of 2011, the drop in the outstanding volume of guarantees was widespread across EU Member States (Belgium, Germany, France, Ireland, Latvia, Austria, Slovenia, Sweden and the United Kingdom). The country experiencing the largest decrease in outstanding guarantees was Ireland[82]. However, Ireland is the biggest user in the EU: in 2011 it recorded € 110.5 billion in average outstanding guarantees (70.6 % of GDP), while the United Kingdom had the second‑largest volume of guarantees outstanding (€ 72.2 billion, 4.1 % of GDP).

On the other hand, the average outstanding amount of guarantees increased in 2011 in those countries mostly affected by the sovereign debt crisis in the second half of the year. In countries where sovereign debt is under pressure from the market, state-guaranteed bonds are not issued on the market but are mainly used as collateral for obtaining central bank funding.

A total of € 110.9 billion in new guarantees were issued in 2011[83]. Italy accounted for € 43.7 billion, Greece for € 19.7 billion and Belgium for € 13 billion. The latter amount was not issued under a framework scheme but represents the Belgian share of a larger guarantee provided together with France and Luxembourg for the restructuring of Dexia. In terms of GDP, Greece issued the largest volume of guarantees (9.1 % of GDP) followed by Portugal (6.3 %).

Figure 30: Outstanding guarantees and new guarantees provided in 2011[84]

2008 - 2011

Member States || Outstanding guarantees || New guarantees

2008 || 2009 || 2010 || 2011 || 2011

In € billion || As a % of GDP || In € billion || As a % of GDP || In € billion || As a % of GDP || In € billion || As a % of GDP || In € billion || As a % of GDP

Belgium || 8.96 || 2.60% || 44.23 || 13.11% || 29.37 || 8.32% || 17.35 || 4.71% || 13.00 || 3.53%

Bulgaria || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Czech Republic || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Denmark || 145.00 || 62.14% || 6.45 || 2.89% || 22.29 || 9.51% || 22.95 || 9.59% || 0 || 0%

Germany || 19.09 || 0.75% || 135.03 || 5.61% || 132.03 || 5.28% || 35.33 || 1.37% || 0 || 0%

Estonia || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Ireland || 180.25 || 97.05% || 284.25 || 173.81% || 196.25 || 127.49% || 110.50 || 70.64% || 0 || 0%

Greece || 0 || 0% || 1.50 || 0.63% || 26.68 || 11.59% || 56.30 || 26.17% || 19.70 || 9.16%

Spain || 0 || 0% || 36.13 || 3.44% || 55.83 || 5.25% || 62.20 || 5.79% || 8.19 || 0.76%

France || 8.65 || 0.44% || 92.73 || 4.86% || 91.53 || 4.74% || 60.26 || 3.02% || 7.88 || 0.39%

Italy || 0 || 0% || 0 || 0% || 0 || 0% || 10.90 || 0.69% || 43.72 || 2.77%

Cyprus || 0 || 0% || 0.56 || 3.29% || 2.82 || 16.13% || 2.83 || 15.91% || 0 || 0%

Latvia || 0 || 0% || 0.54 || 2.91% || 0.23 || 1.28% || 0.08 || 0.38% || 0 || 0%

Lithuania || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Luxembourg || 0.44 || 1.21% || 1.65 || 4.36% || 1.42 || 3.41% || 1.19 || 2.78% || 0.65 || 1.52%

Hungary || 0 || 0% || 0.00 || 0.00% || 0.00 || 0.00% || 0.01 || 0.01% || 0 || 0%

Malta || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Netherlands || 0.85 || 0.14% || 36.00 || 6.31% || 40.90 || 6.91% || 33.17 || 5.51% || 0 || 0%

Austria || 2.43 || 0.86% || 15.45 || 5.58% || 19.33 || 6.80% || 12.45 || 4.14% || 7.00 || 2.33%

Poland || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Portugal || 1.19 || 0.71% || 5.24 || 3.12% || 4.99 || 2.89% || 8.54 || 5.00% || 10.83 || 6.33%

Romania || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Slovenia || 0 || 0% || 1.00 || 2.87% || 2.15 || 5.98% || 1.55 || 4.36% || 0 || 0%

Slovakia || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Finland || 0.12 || 0.06% || 0.06 || 0.03% || 0 || 0% || 0 || 0% || 0 || 0%

Sweden || 0.29 || 0.09% || 14.26 || 4.87% || 19.92 || 5.75% || 14.02 || 3.62% || 0 || 0%

United Kingdom || 33.54 || 1.85% || 158.22 || 10.10% || 148.81 || 8.77% || 72.20 || 4.13% || 0 || 0%

Total EU-27 || 400.80 || 3.20% || 833.29 || 7.06% || 794.55 || 6.48% || 521.82 || 4.13% || 110.97 || 0.88%

3.1.3.2. Recapitalisation measures

As shown in Figure 27, the total volume of recapitalisation measures approved in the period from 1 October 2008 to 1 October 2012 was € 777.3 billion (6.2 % of EU GDP). In terms of GDP, Ireland was the country with the largest approved budget (57.9 % of GDP), followed by Spain (19.5 % of GDP) and Greece (16 % of GDP). Most of the other countries that pledged aid for recapitalisation had amounts of aid approved by the Commission in line with or below the EU average. In 2012, an additional amount of € 175.9 billion (1.4 % of GDP) for recapitalisation was approved by the Commission.

The deterioration in sovereign market conditions for several EU countries starting in summer 2011 was transmitted directly to the European banking system, which was still undergoing substantial restructuring. Those banks holding Spanish and Italian government bonds in their trading portfolio experienced substantial market‑to‑market losses as valuations tumbled. In addition, the public-sector involvement in and agreement on Greek public debt trigged higher write-downs on Greek sovereign bonds. As a result, the European Banking Authority (EBA)[85] conducted a capital exercise among 71 banks in autumn 2011 aimed at assessing their capital needs and restoring confidence in the markets. Following the assessment of capital needs, the EBA issued a formal recommendation in December to ensure that all 71 banks build a temporary capital buffer to reach a 9 % capital ratio by 30 June 2012. The exercise showed that a group of 27 banks had a capital shortfall of € 76 billion. Nevertheless, most banks have been able to raise capital from private investors without the need to rely on public support. EBA has reported that a government backstop has so far been used for three Portuguese banks, one Slovenian bank and one Italian bank[86]. In addition, a plan for financial assistance from the European Financial Stability Facility (EFSF) to the Spanish government was approved in summer 2012 in order to address the recapitalisation of several Spanish banking groups[87]. That recapitalisation will take place over the coming months on the basis of a thorough bottom-up asset review and a stress test conducted by an independent consultant.

The total amount of recapitalisation approved by the Commission up to 1 October 2012 does not cover many of those situations. Among the banks making use of government funding, only the Portuguese Caixa General de Depositos has had its recapitalisation approved, while the remainder will be examined by the Commission in the coming months if the banks are not able to address the capital shortfalls themselves through measures such as a private capital increase, divestments or optimisation of their risk-weighted assets determining the capital shortfall. The new amount of recapitalisation approved in 2012 mainly includes ad hoc measures for several Greek banks. However, these were not among the banking groups covered by the EBA analysis, since the evaluation of their capital needs has already been addressed in the Greek programme. The same is true for those banks subject to a full restructuring plan to be submitted by the Member States concerned.

In the case of the aid amounts used in 2008-2011, the overall amount of recapitalisation during that period was € 322.2 billion (2.5 % of GDP)[88]. The countries that injected most capital into their banking system were the United Kingdom (€ 82.4 billion), Germany (€ 63.2 billion) and Ireland (€ 62.8 billion), whereas in terms of GDP, Ireland had the largest capital injections, representing 40.1 % of GDP. Most of the Irish recapitalisations took place in 2010 and 2011. In relative terms, other significant volumes of recapitalisation were observed in Luxembourg (6 % of GDP) and Belgium (5.5 % of GDP).

Figure 31: Recapitalisation

2008 - 2011

Member States || Recapitalisation

2008 || 2009 || 2010 || 2011

In € billion || As a % of GDP || In € billion || As a % of GDP || In € billion || As a % of GDP || In € billion || As a % of GDP

Belgium || 16.90 || 4.86% || 3.50 || 1.04% || 0 || 0% || 0 || 0%

Bulgaria || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Czech Republic || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Denmark || 0.50 || 0.21% || 8.04 || 3.61% || 1.94 || 0.83% || 0.29 || 0.12%

Germany || 20.00 || 0.80% || 32.95 || 1.37% || 6.65 || 0.27% || 3.65 || 0.14%

Estonia || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Ireland || 0 || 0% || 11.00 || 6.73% || 35.28 || 22.91% || 16.51 || 10.55%

Greece || 0 || 0% || 3.77 || 1.59% || 0 || 0% || 2.53 || 1.17%

Spain || 0 || 0% || 1.30 || 0.12% || 9.50 || 0.89% || 8.51 || 0.79%

France || 13.21 || 0.68% || 9.25 || 0.49% || 0 || 0% || 0 || 0%

Italy || 0 || 0% || 4.05 || 0.27% || 0 || 0% || 0 || 0%

Cyprus || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Latvia || 0 || 0% || 0.41 || 2.20% || 0.10 || 0.55% || 0 || 0%

Lithuania || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Luxembourg || 2.50 || 6.82% || 0.10 || 0.26% || 0 || 0% || 0 || 0%

Hungary || 0 || 0% || 0.11 || 0.11% || 0 || 0% || 0 || 0%

Malta || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Netherlands || 14.03 || 2.36% || 0 || 0% || 4.83 || 0.82% || 0 || 0%

Austria || 0.90 || 0.32% || 5.89 || 2.13% || 0.58 || 0.21% || 0 || 0%

Poland || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Portugal || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Romania || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Slovenia || 0 || 0% || 0 || 0% || 0 || 0% || 0.25 || 0.70%

Slovakia || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Finland || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Sweden || 0.25 || 0.08% || 0.53 || 0.18% || 0 || 0% || 0 || 0%

United Kingdom || 44.41 || 2.39% || 6.62 || 0.42% || 31.36 || 1.85% || 0 || 0%

Total EU-27 || 112.71 || 0.87% || 87.52 || 0.74% || 90.23 || 0.74% || 31.73 || 0.25%

In 2011, an overall amount of € 31.7 billion (0.25 % of GDP) was injected into the European banking system. However, as in the previous year, only a few countries were involved. Ireland, Spain and Germany injected € 16.5 billion, € 8.5 billion and € 3.6 billion into their respective banking systems. In terms of GDP, the aid provided by Ireland accounted for 10.5 % of GDP followed by Greece with € 2.5 billion of recapitalisation representing 1.2 % of GDP. In the case of beneficiaries, the largest recapitalisation aid in 2011 was granted to Irish AIB/EBS for a total amount of € 12.6 billion.

Box 2: Repayments

Exiting from recapitalisation aid can also take the form of repayments from banks to governments in order to return the capital received. The total repayments which were made during the whole period being considered (2008-2011) amounted to € 34 billion. Most of them were made by French banks; they amounted to € 16 billion[89]. That figure represents 70 % of the total capital injected into the French banking system (€ 22 billion). In Belgium, repayments made by Fortis accounted for roughly 30 % of its overall recapitalisation. In Hungary, the only bank that received capital injections (FHB) has fully repaid the aid to the government.

Other banks that have started to repay capital injections include ING, which initially received € 10 billion of capital. ING has already repaid € 7 billion (€ 5 billion in December 2011 and € 2 billion in May 2011). Aegon repaid the full capital amount in June 2011. KBC has started repaying capital as well; € 500 million was repaid in 2011 and a binding repayment schedule for the balance of the capital has been in place since the Commission amended that bank's restructuring decision in 27 July 2011. In December 2008 and early 2009, Germany provided capital to Commerzbank in the form of a silent participation of € 16.4 billion (perpetual hybrid tier-1 capital instrument under German law). Commerzbank has been able to reduce the size of the silent participation to € 1.6 billion, by means of repayments and conversions into common equity.

The main strategy used particularly by French and UK banks, to repay the capital received was to replace it by capital raised in the market. That strategy has been complemented by retaining earnings, selling business units and deleveraging.

3.1.3.3. Impaired asset relief

In 2011, no impaired asset relief was provided for the European financial system.

In comparison with the previous year, the number of write-downs recorded in Europe has decreased. In many cases, new injections of capital raised directly on the market have offset losses arising from the difference between the revised market value of assets and their book value. It should be recalled that impaired asset relief is appropriate when there is considerable uncertainty about the real value of certain assets, and where there is the chance of the market overestimating the real long-term risk as was the case at the beginning of the crisis for certain types of assets. In 2010 and 2011, there was less uncertainty about the real value of the some categories of assets, so the impairment amounts raised less concern. Recapitalisation is more appropriate than impaired asset relief in addressing such situations. Nevertheless, impaired asset relief continues to be provided.

State aid in the form of impaired asset relief was provided in Europe in the second phase of the crisis when the problem of toxic assets became significant. Lessons from past crises highlight the importance of cleaning banks' balance sheets, and the difficulties in pricing the toxic assets correctly. The overall amount of impaired asset relief approved in the period from 1 October 2008 to 1 October 2012 was € 445.7 billion or 3.5 % of EU GDP.

Impaired asset relief measures are concentrated in a few Member States. Such State aid has been approved in only 11 out of 27 countries. The vast majority of the amount approved in absolute terms (€ 248 billion) was for interventions in the United Kingdom. Ireland, Germany, Belgium and the Netherlands are the other countries with substantial impaired asset relief measures. In GDP terms, the largest volume of aid was approved in Ireland (34.5 % of GDP), followed by the United Kingdom (14.3 % of GDP). In 2012, the Commission approved impaired asset relief measures, totalling € 18.2 billion for a few Member States.

Figure 32: Impaired assets per country by year

2008 - 2011

Member States || Impaired assets

2008 || 2009 || 2010 || 2011

In € billion || As a % of GDP || In € billion || As a % of GDP || In € billion || As a % of GDP || In € billion || As a % of GDP

Belgium || 0 || 0% || 7.73 || 2.29% || 0 || 0% || 0 || 0%

Bulgaria || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Czech Republic || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Denmark || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Germany || 9.80 || 0.39% || 23.07 || 0.96% || 23.30 || 0.93% || 0 || 0%

Estonia || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Ireland || 0 || 0% || 0 || 0% || 2.60 || 1.69% || 0 || 0%

Greece || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Spain || 0 || 0% || 0 || 0% || 2.86 || 0.27% || 0 || 0%

France || 0 || 0% || 1.20 || 0.06% || 0 || 0% || 0 || 0%

Italy || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Cyprus || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Latvia || 0 || 0% || 0 || 0% || 0.41 || 2.27% || 0 || 0%

Lithuania || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Luxembourg || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Hungary || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Malta || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Netherlands || 0 || 0% || 5.00 || 0.88% || 0 || 0% || 0 || 0%

Austria || 0 || 0% || 0.40 || 0.14% || 0 || 0% || 0 || 0%

Poland || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Portugal || 0 || 0% || 0 || 0% || 3.10 || 1.80% || 0 || 0%

Romania || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Slovenia || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Slovakia || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Finland || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Sweden || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

United Kingdom || 0 || 0% || 40.41 || 2.58% || 0 || 0% || 0 || 0%

Total EU-27 || 9.80 || 0.08% || 77.82 || 0.66% || 32.27 || 0.26% || 0 || 0%

The overall amount of aid actually used for impaired assets stood at € 119.9 billion in the period 1 October 2008 to 31 December 2011. That intervention was concentrated mainly in two countries (Germany and the United Kingdom), which used € 56.2 billion and € 40.4billion respectively. In the United Kingdom, however, the aid went mainly to a single beneficiary while in Germany a number of banks received asset relief. Aid for impaired assets in those two countries accounted for roughly 80 % per cent of overall impaired assets relief in Europe. In GDP terms, the United Kingdom (2.3 %), Latvia (2.2 %) and Germany (2 %) are the countries that made most use of that type of instrument[90].

The main banks to have benefited from impaired assets relief are the Royal Bank of Scotland (RBS), which received € 40.4 billion in 2009 and the German banks Hypo Real Estate (€ 20 billion), West LB (€ 11.6 billion), Nordbank (€ 10 billion) and LLBW (€ 9.7 billion).

More than 90 % of asset relief measures have been approved under ad hoc measures. The only country that used a scheme for asset relief was Ireland, where a general plan for asset relief called NAMA was approved in 2010.

3.1.3.4. Liquidity measures other than guarantees

The total volume of aid approved in the form of liquidity intervention other than guarantees amounts to € 216 billion (1.7 % of GDP). Four countries, the Netherland (€ 52.9 billion), the United Kingdom (€ 51.9 billion), Spain (€ 50.8 billion) and Ireland (€ 40 billion), account for roughly 85 % of the total aid approved, whereas in terms of GDP the largest budget has been set aside by Ireland (26 % of GDP) and Latvia (13.5 % of GDP). In 2012, Portugal has been authorised to grant the largest volume of liquidity, amounting to € 6 billion.

With respect to the aid used, the overall volume of liquidity provided in the period 2008-2011 amounted to € 89 billion (0.7 % of GDP). In absolute terms, the Netherlands (€ 30.4 billion), Spain (€ 19.3 billion) and the United Kingdom (€ 18.5 billion) have been the countries making the most use of that instrument. In relative terms the largest amount of support is granted by the Dutch government (5 % of GDP), followed by Latvia (4.9 % of GDP) and Greece (3.2 % of GDP).

In 2011, the average volume of outstanding liquidity decreased from € 63.7 billion to € 43.7 billion. A significant drop in the volume of outstanding liquidity was observed in Spain (‑€ 5.4 billion), Germany (‑€ 4.8 billion), the Netherland (‑€ 4.1 billion) and United Kingdom (-€ 2.5 billion). In terms of GDP, the country showing the largest drop was Latvia (-2.8 % of GDP). The United Kingdom (€ 16 billion) and Spain (€ 13.5 billion) had the largest amounts of average outstanding liquidity in 2010, while in GDP terms Greece (3.1 %), Latvia (2.2 %) and Portugal (1.5 %) topped the table.

Despite Spain experiencing a drop in the outstanding amount of liquidity in 2011 due to the maturity of the loan provided under its scheme for the acquisition of financial assets, new liquidity has been granted on an ad hoc basis to CAM (€ 3 billion) and Banco de Valencia (€ 2 billion). The other country reporting significant new amounts of liquidity in 2011 was Portugal which provided a loan amounting to € 1 billion to the Banco Portugues de Negocios (BPN)[91]. Small amounts of liquidity were also provided in 2011 by Latvia, Austria and Greece. Overall, the amount of new liquidity provided in 2011 was € 6.5 billion in the EU (0.05 % of GDP).

Figure 33: Liquidity per countries by year, new liquidity provided in 2011

2008 - 2011

Member States || Liquidity interventions || New liquidity

2008 || 2009 || 2010 || 2011 || 2011

In € billion || As a % of GDP || In € billion || As a % of GDP || In € billion || As a % of GDP || In € billion || As a % of GDP || In € billion || As a % of GDP

Belgium || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Bulgaria || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Czech Republic || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Denmark || 0.59 || 0.25% || 1.97 || 0.88% || 0.73 || 0.31% || 0 || 0% || 0 || 0%

Germany || 3.57 || 0.14% || 0 || 0% || 4.75 || 0.19% || 0 || 0% || 0 || 0%

Estonia || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Ireland || 0 || 0% || 0 || 0% || 0 || 0% || 0.08 || 0.05% || 0.32 || 0.20%

Greece || 0.47 || 0.19% || 4.26 || 1.79% || 6.90 || 3.00% || 6.64 || 3.09% || 0.01 || 0.00%

Spain || 2.33 || 0.21% || 19.31 || 1.84% || 18.96 || 1.78% || 13.49 || 1.26% || 5.00 || 0.47%

France || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Italy || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Cyprus || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Latvia || 0.96 || 4.15% || 0.97 || 5.26% || 0.89 || 4.98% || 0.44 || 2.20% || 0.14 || 0.71%

Lithuania || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Luxembourg || 0 || 0% || 0.14 || 0.36% || 0.19 || 0.45% || 0.08 || 0.18% || 0 || 0%

Hungary || 0 || 0% || 2.13 || 2.29% || 1.05 || 1.07% || 0.71 || 0.71% || 0 || 0%

Malta || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Netherlands || 13.23 || 2.22% || 30.40 || 5.33% || 7.90 || 1.34% || 3.75 || 0.62% || 0 || 0%

Austria || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Poland || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Portugal || 1.05 || 0.63% || 3.73 || 2.23% || 3.81 || 2.21% || 2.48 || 1.45% || 1.00 || 0.59%

Romania || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Slovenia || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Slovakia || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Finland || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

Sweden || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0% || 0 || 0%

United Kingdom || 0 || 0% || 6.90 || 0.44% || 18.55 || 1.09% || 16.03 || 0.92% || 0 || 0%

Total EU-27 || 22.19 || 0.18% || 69.82 || 0.59% || 63.72 || 0.52% || 43.70 || 0.35% || 6.47 || 0.05%

3.1.4. Restructuring

From the onset of the crisis the Commission has applied temporary State aid rules to the financial sector in order to use competition policy also as an instrument to contain the negative effects of the turmoil in the financial sector and its disruptive impact on the economy as a whole. In the context of the Commission’s State aid rules, many restructuring plans have been submitted to the Commission. The broad features of such plans are set out in the Commission’s ‘Restructuring Communication’[92].

By 1 October 2012, the Commission had adopted more than 30 decisions approving a restructuring plan for financial institutions, 17 approving liquidation plans and one negative decision requiring the recovery of the aid granted (Banco Privado Portugues).

The key aim of restructuring plans is to restore normal market conditions in the banking sector by ensuring that banks reform their business model to ensure long-term viability without the need to depend on additional State aid. For that reason, when restoring viability is considered unfeasible and a bank is unable to remain on the market without state support, aid for resolution purposes is usually provided. Resolution can take different forms (liquidation, sale, downsizing) depending on factors such as the specific context in which the bank operates, its reference market and its activities. The restructuring plan also has to comply with other requirements aimed at minimising distortions of competition, limiting moral hazard and ensuring that the aid is limited to the minimum.

The Commission approved the State aid instruments in order to meet a three-fold objective: safeguarding financial stability, preserving the internal market while maintaining a level playing field, and restructuring aid beneficiaries for long‑term viability. State aid for banks that are considered unviable following evaluation of the restructuring plan has to be assessed from each of these standpoints.

In the context of the financial crisis, all the Irish banks have received aid and are therefore subject to restructuring. For instance, Anglo Irish Bank received a considerable amount of capital from the government in 2011, in addition to other aid received in previous years. A plan submitted by the Irish authorities, which was approved by the Commission in 2011, provides for a joint winding-down of the bank together with the Irish Nationwide Building Society over a period of ten years. The amended restructuring plan of Bank of Ireland was approved by the Commission during 2011. Permanent TSB and Allied Irish Bank (which merged with Educational Building Society) have provided restructuring plans on 30 June and 30 September of this year. They are currently being assessed by the Commission.

A number, e.g. ING and ABN Amro, are also subject to restructuring obligations.

In Greece, recapitalisation measures for a number of banks have been temporarily approved, which will trigger the need for restructuring. The bank ATE has been split into a good bank/bad bank structure. The Portuguese banks that have recently been recapitalised within that Member State's recapitalisation scheme (BCP and BPI), as well as outside that scheme (Caixa Geral Depositos, for which the Commission has temporarily approved the rescue aid), have to submit restructuring plans before 31 December 20