WRITTEN QUESTION E-0411/02

by André Brie (GUE/NGL) to the Commission

(20 February 2002)

Subject: Preventive measures against payment of unauthorised state aid

In view of reports that the management of the long-established Berlin company Babcock Borsig intends to transfer its plant to the Spanish city of Bilbao, apparently because Spain is prepared to make substantial aid available (allegedly up to EUR 500 million over a period of five years):

- will the Commission state whether such aid is actually permissible for the relocation of businesses from one EU Member State to another?

- does the Commission have any early warning system enabling it to examine such (possibly unauthorised) state aid arrangements prior to the actual payment and to take appropriate action so as to ensure that any objection it may raise as a result is not simply faced with a fait accompli?

- would the Commission not agree that such an early warning system should be set up if it does not already exist?

Answer given by Mr Monti on behalf of the Commission

(23 April 2002)

The Commission is regularly questioned about the consistency of competition policy when there are certain relocations within the Union. Although it does not have any precise information on the possible aid to which the Honourable Member refers, the Commission would reiterate the key elements of this policy.

The basic principle underlying the rules on State aid is that it is incompatible with the common market. However, exceptions may be made provided that the impact on trade and the distortion of competition which result from the granting of State aid are offset by an adequate contribution to the development of a disadvantaged region.

This is why one of the objectives of the cohesion policy, and the sole aim of regional aid, is to compensate for the structural handicaps of certain regions so that they are considered by a sufficient number of undertakings to be a viable location, in the same way and in the same conditions as those that are relatively more advantaged. As far as the monitoring of State aid is concerned, this policy is translated into practice by a system of ceilings on the level of aid depending on the degree and the urgency of the various regional problems.

Relocations are first and foremost the result of choices made by the enterprise in order to improve its competitiveness, either by reducing its overheads (wage costs, transport, raw materials, tax), or by rationalising its production tools. Decisions concerning the location of an undertaking may thus be influenced by a number of factors, not only or principally the possibility of obtaining financial support from the public purse in order to make new investments. In any event, any public support of this kind, whether of national or Community origin, must respect the Community rules on State aid.

It is true that the difficulty in reaching an operational definition of relocation limits the possibilities for intervention to put in place a genuine control mechanism. However, the Commission already takes account of this phenomenon in the application of the Community rules on State aid so as to ensure that the harmful effects of aid on competition are offset by beneficial effects, notably in terms of cohesion. Thus, when it adopted the guidelines on national regional aid, the Commission reduced the level of aid authorised across the board in order to reduce the risks of regions attempting to outbid one another and to limit aid to what is strictly necessary. At the same time, the granting of regional aid was tied more strictly to conditions of duration in terms of the continuation of investment and jobs creation in the region concerned. Finally, large investment projects must be notified individually to the Commission so that it can examine the related aid, even before it is granted and in the light of the provisions drawn up to this end by the multisectoral framework.

This being the case, the Commission intends to make contact with the Spanish authorities in order to check that any aid granted to Babcock Borsig conforms to the Community rules applicable.