WRITTEN QUESTION E-1253/02

by Charles Tannock (PPE-DE) to the Commission

(6 May 2002)

Subject: Rules governing the provision of state aids with particular reference to Mecklenburger Metallguss

A British company Stone Manganese Maríne, a world leader in its field, has made propellers for the Queen Mary, the Queen Elizabeth, the QE2 and many of the Royal Navy's best-known aircraft-carriers and battleships. It is now about to lay-off most of its employees because it has found that its tenders are constantly being undercut by the German company Mecklenburger Metallguss, which has been transformed over the last three years, together with the help of direct subsidies that have been approved by the Commission, from a struggling relic of East-German Communism to the world's largest marine propeller manufacturer in the world.

Under certain circumstances, subsidies are permitted under the rules governing state aid. Commissioner Monti has also gained an impressive reputation for acting without fear or favour regarding the application of state aids. Nevertheless, does the Commission believe that it is appropriate to permit subsidies which will allow an otherwise struggling firm to wipe-out its major competitors

by undercutting their tenders by up to 20 % and, if not, are there provisions for reducing the level of subsidy to ensure that state aids, even when approved by the Commission, enhance rather than reduce competition within the Union? In particular, are the rules sufficiently flexible to allow challenges to be made more than two months after the Commission has made a determination on the legality of a state subsidy where there is a significant change in circumstance on the part of either the recipient of the state subsidy or a competitor?

Finally, is the Commission certain that the levels of subsidy provided to Mecklenburger Metallguss do not exceed those approved by the Commission and what is the limit of discretion on the part of the Commission regarding the precise level of state subsidy which can be permitted at any particular time?

Answer given by Mr Monti on behalf of the Commission

(20 June 2002)

According to current State aid rules Member States can grant state aid for rescuing and restructuring of companies in difficulties, if strict conditions are complied with. The Commission bases its assessment of the compatibility of the aid in these cases on the 1999 Community guidelines on State aid for rescuing and restructuring firms in difficulty. All individual grants of State aid to such companies are thoroughly scrutinised by the Commission on the basis of the guidelines.

The reason for allowing aid to be granted for restructuring of companies in difficulties is to enable them to restore their long term viability, so that they can compete in the market without any further State intervention. This was also the aim of the restructuring of Mecklenburger Metallguss. At the same time the aid should not distort competition in the market and the Commission requires a reduction of the capacities of the aided company as a counterpart for receiving the aid in question. The restructuring of Mecklenburger Metallguss was, at the time, not considered to create undue distortions of competition. In addition, Mecklenburger Metallguss reduced its capacities in the segment for standard cast iron products by 40 %.

As regards your question on possibilities of changing the Commission Decision, the Commission can revoke its decision on its own initiative, where the decision was based on incorrect information that was provided during the procedure and that was a determining factor in the decision. The Commission Decision can also be challenged before the Court of First Instance by an interested party within two months of the publication of the measure.

According to the restructuring guidelines, the aid must be limited to the strict minimum required for the restructuring plan to be carried out; it must be limited in time to the restructuring period; and must be earmarked for measures identified in the restructuring plan. When assessing the aid, the Commission needs to ensure that these criteria are fulfilled. The Commission is not in a possession of any information indicating that Mecklenburger Metallguss might have received any aid other than the DEM 13,75 million approved in the 1999 decision and part of the aid granted to Dieselmotorenwerk Rostock GmbH, also partially approved in 1999(1).

(1) Commission Decision 1999/600/EC of 21 April 1999 on the State aid granted by Germany to Dieselmotorenwerk Rostock GmbH OJ L 232, 4.9.1999.