WRITTEN QUESTION E-1005/97 by Werner Langen (PPE) to the Commission (19 March 1997)

Subject: Distortions of competition in forestry undertakings in Germany

According to information from the Federal Ministry for Food, Agriculture and Forestry the operating results for forestry undertakings for 1995 are as follows:

- state forest DM 386 net earnings per hectare of forest land

- publicly-owned forest DM 215

- privately-owned forest DM 38.

Losses in state and publicly-owned forests are covered by appropriations from the public budgets and are thus a state aid within the meaning of the EU Treaty and the competition legislation. This aid, which accounts for a difference of almost DM 350 per hectare of forested land between the privately-owned and state forest, is a striking distortion of competition for private forestry undertakings.

1. In the Commission's view is such a massive subsidy compatible with the principle of equal conditions of competition in the EU?

2. Will the Commission take up this case pursuant to Article 92 of the EU Treaty and take action against the Federal Government?

Answer given by Mr Fischler on behalf of the Commission (7 May 1997)

According to the Commission's information, the operating results for forestry undertakings in Germany for 1995 are as follows:

- state forest- old Länder * DM 132 per hectare- new Länder * DM 386 per hectare- publicly owned forest * DM 52 per hectare- privately owned forest + DM 67 per hectare

There are two main reasons for the rather large losses incurred by state forests: first, they are largely situated in areas where productivity is low (such as mountainsides), but where it is essential to operate them; secondly, under the legislation in force, the management of state forests must be exemplary (vorbildlich), and must take account of the whole range of forestry functions and of the public interest (Gemeinwohl). In addition, state forestry undertakings have a number of administrative and public service tasks. Clearly, the accounts of state forests will be much more difficult to balance than those of private forests.

To the extent that the exploitation of forests by the state would favour 'certain undertakings or the production of certain goods' deficit compensation granted to public forestry undertakings might constitute state aid under Article 92(1) of the EC Treaty.

The Commission has asked the German authorities to clarify the matter and further emphasized the Member State's obligation under Article 93(3) of the EC Treaty to notify any plans to grant or alter aid. The German authorities replied that no state aids in the form of deficit compensation have been granted for the above period or are planned for the future. In the absence of more concrete information on the alleged state aid the Commission is unable to further investigate this matter.

It should be noted that the Commission often takes a favourable view towards state aid in relation to forestry, but assesses each individual case on its merits. Its policy is partly based on Council Regulation (EEC) No 2080/92, which provides for Community part-financing of afforestation schemes (investment, maintenance and income loss compensation) on agricultural holdings. Article 8(2) of this Regulation allows Member States to provide additional aid for measures for which the conditions of granting of aid differ from those laid down in the Regulation, or the amounts exceed the limits stipulated in the Regulation, provided that the measures comply with Articles 92, 93 and 94 of the EC Treaty. Regarding forestry exploitation the Commission's state aid policy is based on Council Regulation (EEC) No 867/90, which provides for Community part-financing of measures for the development and rationalization of the processing and marketing of wood. It is often Commission practice under Article 92(3)(c) to regard relatively high aid rates in the forestry sector as compatible with the common market.