98/364/EC: Commission Decision of 15 July 1997 concerning State aid in favour of 'Grupo de Empresas Alvarez' (GEA) [notified under document number C(1997) 2615] (Only the Spanish text is authentic) (Text with EEA relevance)
Date: 1997-07-15
Institutions: European Commission
Subjects: Spain, State aid, aid for restructuring, ceramics, glass industry, industrial restructuring

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II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 15 July 1997

concerning State aid in favour of ‘Grupo de Empresas Alvarez' (GEA)

(notified under document number C(1997) 2615)

(Only the Spanish text is authentic)

(Text with EEA relevance)

(98/364/EC)

THE COMMISSION OF THE EUROPEAN COMMUMTIES,

Having regard to the Treaty establishing the European
Community, and in particular the first subparagraph of
Article 93(2) thereof,

Having regard to the Agreement establishing the Euro-
pean Economic Area, and in particular the first subpara-
graph of Article 62(1)(a) thereof,

Having given notice in accordance with Article 93 to
interested parties to submit their comments to it,

Whereas:

I

On 15 November 1995, the Commission decided to open
the Article 93(2) proceeding against aid which was
awarded to GEA. GEA manufactures and sells tableware
made of porcelain, earthenware and glass; it also produces
bottles. GEA was in the past one of the most important
Spanish tableware manufacturers. During the last
five
years, GEA’s market share amounted to an average of
11,6 % within the Spanish market and of 0,64 % within
the EU market. GEA has a workforce of 1 029. Its annual
turnover amounted to approximately ESP 2 500 million
in 1995 and 1996. The group is located in Vigo, province
of Pontevedra in Galicia, a Spanish region in which the
fishing and car industry are dominant and
shipping,

which suffers, owing to the problems these industries are
facing, a serious economic crisis and high unemployment.
The region is considered an Objective 1 zone and eligible
for regional aid within the meaning of Article 92(3)(a).
After Citroen, GEA is
industrial
employer in this area.

the second-largest

Until June 1991, GEA was wholly owned by the Spanish
public holding INI. INI then decided to privatise the
enterprise. One condition, however, was that INI should
first clean up GEA, which had made sigruficant losses
during the previous years. Thus, INI paid aid which
amounted to ECU 24 million in order to leave GEA free
of debts. That aid, although not notified, was approved by
the Commission in 1992 (State aid NN 15/92, doc.
SEC(92) 1655). The approval was justified on the grounds
of a marked decrease in production capacity, the sever-
ance of GEA’s ties with INI and the fact of its location in
an Article 92(3)(a) area.

After this approval, which was not subject to the fulfil-
ment of any conditions, GEA had received further aid
from INI which was not notified to, nor approved by, the
Commission. This aid comprised a guarantee in 1992
which, at that time, entailed a potential risk of ESP 1 620
million and a direct grant of ESP 983 million in 1994
which was paid in order to discharge the earlier guarantee.
the
In addition,

the Commission was informed that

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regional authorities of Galicia were prepared to award a
new guarantee amounting to ESP 2 500 million.

awarded yet and, if the autonomous regional authorities
were to decide to do so, the Spanish authorities would
notify it.

The Commission seriously doubted whether all the aid
which evidently fell within the scope of Article 92(1)
complied with the derogations as set out in Article 92(3);
it therefore decided to initiate the Article 93(2) procedure
in respect of:

(cid:190) the guarantee amounting to ESP 1 620 million,

awarded in 1992,

(cid:190) the subsidy granted in 1994, amounting to ESP 983

million, and

(cid:190) the probable new guarantee to be awarded by the
regional authorities of Galicia amounting to ESP
2 500 million.

II

By letter dated 26 January 1996, the Spanish authorities
responded to the Commission’s decision to commence
the Article 93(2) proceeding. According to the Spanish
authorities, neither the guarantee awarded in 1992 nor the
payment of the lump sum in 1994 constituted aid within
the meaning of Article 92(1) of the EC Treaty and Article
61 of the EEA Agreement. In both cases, INI acted as any
private investor would have done under market condi-
tions. In 1992, the risk of bankruptcy of GEA would have
been very slight and the guarantee had only served to
support the restructuring process of the enterprise by
the
financing investment. As to the 1994 payment,
Spanish authorities admitted that GEA had been in a
serious economic crisis since its privatisation in 1992
which had deteriorated in particular in 1994 since all
efforts to render GEA viable had failed. Even at this stage,
efforts to restructure the firm such as an early and smooth
reduction of workforce and production capacities had
been undertaken. The payment of ESP 983 million was
designed to support these early efforts. Since those early
efforts had failed, a restructuring plan would be drafted
proposing drastic measures to restore the firm’s viability.
Once this plan was finalised, it would be immediately
submitted to the Commission for a thorough assessment.
The Spanish authorities considered, nevertheless, that the
payment of ESP 983 million in 1994 was an advantageous
deal for INI, since it relieved INI of any obligation to pay
ESP 1 620 million by way of guarantee.

As regards the guarantee of ESP 2 500 million,
the
Spanish authorities stressed that, even though such grant
could not be ruled out, no such guarantee had been

III

By letter dated 30 July 1996, the Commission transmitted
to the Spanish authorities the comments of the third
parties (four different Spanish competitors of GEA and
the Liaison Office of the European Ceramic Industry)
which it had received on the occasion of the publication
of the Commission’s decision to initiate Article 93(2)
proceedings (1).

All the parties were of the opinion that the aid which
GEA had received had led to important distortions of
competition, since it had allowed GEA to offer its prod-
ucts at artificially low prices over a long period. They
themselves as competitors could not compete anymore
with these prices since they did not receive any support
by the State. In support of this thesis, one competitor
enclosed copies of advertisements of supermarket chains
in which GEA’s products were indeed offered at cheap
prices.

One competitor, in addition, alleged that GEA in the
meantime had received further aid in the form of guaran-
tees covering loans totalling ESP 1 000 million. Those
guarantees had not been notified to the Commission and
would have to be added to the aid for which the Commis-
sion had opened the proceeding.

IV

By letters dated 15 October 1996 and 24 October 1996,
the Spanish authorities replied to the comments of the
third parties. They confirmed that the regional authorities
of Galicia, in April, had provided rescue aid in the form
of guarantees covering credits up to a total of approx-
imately ESP 700 million in order to keep GEA in busi-
ness until the Commission had taken its final decision.
Furthermore, another ESP 350 million had been awarded
on guarantees to cover outstanding payments for the
employees’ salaries. The duration of those guarantees was
first fixed at six months and then extended until June
1997, since the Commission had not yet arrived at a final
decision. This aid would, however, have absolutely no
effect on the market since it only served to cover credits
which were necessary to cover the firm’s running costs.
According to the Spanish authorities, this rescue aid was
based on the regional authorities’ decree N 309/1995 of
23 November 1995 on incentives for the economic devel-
opment and the promotion of entrepreneurial activities of
the autonomous region of Galicia. This decree was noti-
fied to and approved by the Commission (State aid N
21/1995, Commission Decision of 31 December 1995). A
precondition of the Commission’s approval, however, was
that rescue aid for firms exceeding the SME criteria
(which is the case with GEA) would have to be notified
individually.

(1) OJ C 144, 16. 5. 1996, p. 3.

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For the rest, the Spanish authorities stressed again that
both INI’s guarantee in 1992 and the payment in 1994
should not be considered as aid within the meaning of
Article 92(1) of the EC Treaty, since INI had acted as any
private investor would have done. The Spanish authorities
also emphasised that the guarantee amounting to ESP
2 500 million which the Commission had included in its
proceeding had not been awarded yet.

As regards the alleged price-undercutting policy on the
part of GEA, the Spanish authorities pointed out that
GEA always sold its products at prices which matched its
costs. In order to support this allegation, the Spanish
authorities enclosed copies of GEA’s bills to its clients,
which demonstrated that the prices were higher than
those charged by the supermarket chain for the product.
According to the Spanish authorities, the cheap offers of
GEA’s products by the supermarkets might therefore have
been part of a campaign to attract clients. For them, at
least, these offers afforded no evidence that GEA was
undercutting prices.

2. significant reduction of debts and generation of funds,

as follows:

(a) reduction of debts actually amounting to ESP
14 000 million, of which ESP 7 000 million are
public debt
through a suspension of payment
proceeding in which the public and private cred-
itors waive their claims by 50 % (the Spanish
authorities had submitted a survey prepared by an
independent lawyer which confirmed that a waiver
of claims to such an extent is quite realistic and
common practice in Spain in similar cases);

(b) two of the remaining factories which are situated in
urban areas will be moved to other areas outside
the centre of Vigo. The company’s installations in
Vigo will be sold at an estimated ESP 5 000 million
(an appraisal of the premises which was submitted
to the Commission and drafted by two different
independent consultants even arrived at at a figure
of ESP 5 900 million). The negotiations for the sale
of the land have already started;

V

(c) sale of
million;

the profit-making plant

for ESP 1 000

In the meantime, several meetings between the Commis-
in
sion and the Spanish authorities had taken place,
which the Spanish authorities had submitted new docu-
mentation concerning GEA’s economic state. The main
objective was to inform the Commission about GEA’s
difficult economic situation and the plans of the regional
government of Galicia to restore the firm’s viability along
the lines of the already announced restructuring plan
which was, after early and unsuccessful attempts to render
the firm viable, worked out in early 1996 and submitted
to the Commission in August and enlarged in November
1996 and February 1997.

According to the documentation which was provided by
the Spanish authorities, GEA had been making heavy
its privatisation in 1991. The company’s
losses after
overall debt was ESP 14 000 million in November 1996,
whilst its equity was exhausted. The Spanish authorities
stressed that, despite the situation, and owing to social
considerations arising from the dramatic labour-market
situation in Vigo, the regional authorities had felt obliged
to keep the company in business, since GEA was, after
Citroen, the second industrial employer in that area.

submitted to the
The restructuring plan which was
Commmission aims at rationalising and restoring the
viability of GEA for the future. In order to achieve this
objective,
the plan proposes, since the other gentler
attempts to render the firm viable and to which the
payment of ESP 983 million in 1994 was related had
failed, drastic measures which can,
in essence, be
summarised as follows:

1. out of the six currently producing plants, two will be
closed. One plant which is producing glass bottles and
which is profit-making will be sold. The remaining
three factories will be independent of each other;

3. drastic cuts, as follows:

(a) reduction of workforce by 43 %, from 1 029, to
587 which will lead to a decrease of the share of
personnel costs from 93 % of sales in 1995 to an
estimated 40 to 45 % in 1997 and 1998;

(b) reduction of production capacity by 32 % from

23,7 million items to 16,1 million items;

(c)

introduction of a central management structure for
the three remaining undertakings
to
in order
decrease management and commercial costs;

(d) further cost reduction due to a switch in the energy
sources (tableware production is highly energy-
intensive) from electricity to natural gas which will
be possible in Vigo from 1997 onwards.

Through the implementation of the above measures, the
plan expects
the restructured group to break even
between 1997 and 1998 and to yield positive results in the
financial years thereafter, amounting to ESP 91 million in
1998 and ESP 200 million in 1999. The plan assumes
sales of which the volume is expected to be the same as in
the bad previous years (12 million units instead of 16
million in the better years) and a constant
turnover
amounting to an average of ESP 2 500 million. The
overall restructuring costs are ESP 3 500 million. They
consist mainly of costs for indemnities, complementary
social costs for dismissed employees and costs for the
transfer of the two factories to sites outside Vigo. The
generation of funds through the sale of GEA’s premises in
Vigo and the waiver of debts will allow the firm to cover
the restructuring costs completely by using the firm’s own
financial resources.

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By letter dated 13 March 1997, the Spanish authorities
informed the Commission that GEA was negotiating
several contracts with altogether eight major customers
(the names of the different firms is confidential) which
would ensure long-term orders for a period of at least
three years at a total of approximately ESP 3 500 million.
In the same letter, the Commission was informed that
GEA was going to be sold to a major porcelain producer,
which was a private company (cid:190) which demonstrated that
there was confidence in GEA’s future on the part of the
private market. All this suggests that GEA’s restructuring
plan and its objectives regarding sales and turnover are
realistic.

By letter dated 25 April 1997,
the Commission was
informed that the firm had renounced its claim on the
regional authorities of Galicia for the guarantee worth
ESP 2 500 million, and this is also the subject of the
Article 93(2) proceeding. This demonstrated that
the
private banks which would have to provide GEA with
new loans would trust in the firm’s ability to implement a
successful restructuring plan and to restore its viability. In
the same letter, the Commission was informed that the
regional authorities of Galicia had agreed to notify indi-
vidually any future aid to GEA even if such aid was based
on already approved general aid schemes.

Finally, by letter of 22 May 1997, the Spanish authorities
informed the Commission that the regional authorities
now had even gone beyond their commitment as
communicated in their letter 25 April 1997, by refraining
from granting any further financial aid to GEA in the
future.

VI

The Article 93(2) proceeding confirmed the Commis-
sion’s view in commencing the procedure, namely that
the guarantee which was awarded to GEA in 1992
amounting to ESP 1 620 million, and the subsidy of ESP
983 million for releasing the guarantee in 1994, constitute
aid which may distort or threaten to distort competition
within the meaning of Article 92(1) of the EC Treaty and
Article 61(1) of the EEA Agreement. No private investor
would have awarded a guarantee to a loss-making enter-
prise like GEA without any security, as INI did in 1992.
Moreover, it is hardly to be expected that a private enter-
prise which had just rid itself of a loss-making company
would again invest in such a company.

Nevertheless, the current proceeding has also revealed
that both the guarantee and the payment of the subsidy
were closely linked since the payment enabled INI to
discharge itself from the 1992 undertaking entered into
on the granting of the guarantee, namely the risk of being
obliged to pay ESP 1 620 million. From an economic
view, this behaviour has to be regarded as a single event,
and it cannot be denied that the payment of ESP 983

million, representing only 60 % of the risk which INI
had undertaken in granting the guarantee, was behaviour
such as any private company would have adopted in such
a situation. Accordingly, the amount of aid to GEA which
to be taken into account when examining the
has
guarantee given in 1992 is reduced to the payment of ESP
983 million, the amount which was actually paid by the
guarantor.

It has also to be borne in mind that the guarantee of ESP
2 500 million, to be provided by the autonomous author-
ities of Galicia which was also covered by the scope of the
procedure commenced by the Commission may be
ignored, since it has been cancelled.

imported 5 813 tons of

trade
The aid could distort competition and affect
between Member States. There is a brisk trading of goods
in the tableware industry between Spain and other
Member States. According to the information provided by
Eurostat, in 1993, Spain exported 7 272 tons of tableware
to other Member States, worth ECU 24,5 million, whereas
it
tableware worth ECU 27,5
million. In 1994, Spain exported 7 917 tons worth ECU
29 million and imported 6 577 tons worth ECU 28,5
million. Between January and October 1995, Spain
exported 8 546 tons of tableware products worth ECU
32,6 million and imported between January
and
September 1995 7 844 tons worth ECU 43,3 million.
Spain’s share in the overall
intra-Community trade in
tableware goods stands at roughly 3 %. GEA, although
not one of the EU’s major producers of tableware, parti-
cipates in this market. Thus, any grant may improve
GEA’s position in the common market to the detriment
of other competitors which do not receive any State aid.

Since the aid was not part of any approved aid scheme, it
was notifiable individually according to Article 93(3) of
the Treaty. Spain did not comply with this requirement.
Consequently, the aid was awarded illegally.

As to whether the aid qualifies for the exemptions under
Article 92(2) or (3) of the EC Treaty, it has to be held that
the exceptions set out in Article 92(2) do not apply in this
case in view of the aid’s specific features, and indeed of
the fact that it does not even seek to satisfy the qualifying
conditions.

As regards the exception under Article 92(3)(a) of the EC
Treaty, GEA’s location certainly is in an area where there
is serious underemployment and where the standard of
living is abnormally low. Aid to promote the economic
development of those areas may, according to Article
92(3)(a), be considered to be compatible with the common
market. In this case, however, the aid was certainly unable
to contribute to the promotion of the economic develop-
ment of the region, since it served to support unsuccessful
attempts to enable the firm to stay in business without

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further restructuring measures rather than to provide
investment or to create jobs.

Nevertheless, the exception under Article 92(3)(c) of the
Treaty indicates that the aid may be considered compat-
ible with the common market, since it complies with the
Community guidelines on State aid for rescuing and
restructuring firms in difficulty (1).

The aid which was awarded to GEA certainly has no
immediate link with the restructuring plan now being
proposed. It has, however, to be borne in mind that the
efforts to make the firm viable started immediately after
the firm’s privatisation and the Commission’s subsequent
approval in 1992, and that the drastic restructuring plan
now being proposed is only a consequence of the earlier
and gentler measures, whose implementation obviously
did not meet with success. The aid, therefore, has to be
regarded in the context of a process in which the present
restructuring plan represents the final, and most ambi-
tious, effort to restore the firm’s viability. Here, it has also
to be remembered that the proposed restructuring will be
carried out without any further commitment from public
bodies.

The present restructuring plan proposes drastic cuts in
costs. In addition, there is a strong reduction in capacity
which, according to point 3.2.2(ii) of the Community
guidelines on State aid for rescuing and restructuring
firms in difficulty,
is necessary in this case since the
tableware market is suffering from overcapacity caused by
a significant decline in consumption in 1992 and 1993
and an increased import penetration (Panorama of EU
Industry 1997, point 9.20). The most significant cost
saving will be achieved through the reduction of
personnel by 43 %, from 1 029 to 587. This will lead to a
reasonable proportion of personnel costs, namely 45 % of
the firm’s overall sales. Furthermore, production capacity
will be reduced by 32 % from 23,7 million items to 16,1
million. The company also pointed to the opportunity for
the reduction of structural costs such as energy costs.
Thus the improvement in viability will, as is required by
point 3.2.2(i) of the Community guidelines on State aid
for rescuing and restructuring firms in difficulty, mainly
result from the firm’s own efforts and internal measures
rather
factors such as price and
demand increases, over which the company has no
control.

than from external

Both the reduction of cost and the reduction of capacities
will enable the firm to become profitable and viable
again. The restructuring plan’s assumption as to future
turnover is based on the average turnover obtained in the
past and should therefore be quite realistic. The fact that
GEA is negotiating major contracts confirms this assump-
tion. The restructuring plan’s assumptions as to price
increases use only normal inflation rates. Similarly, the

(1) OJ C 368, 23. 12. 1994, p. 12.

anticipated reduction of debt and the generation of funds
appear quite realistic although they are based on external
factors over which the company has no control. As
regards the reduction of debts by waiver of claims, the
in
Spanish authorities have provided evidence that
comparable cases creditors waive up to 50 % of their
claims. The value of GEA’s land and of the profit-making
plant were estimated and confirmed by independent
consultants. Nevertheless, it has to be observed that both
the waiver of claims and the sale of the land which are
now being negotiated are indispensable conditions for the
success of the restructuring.

Another convincing sign that the firm may recover its
viability is the fact that the firm has renounced the new
guarantee amounting to ESP 2 500 million and will be in
a position to finance the restructuring out of its own
resources obtained by the generation of funds through the
sale of land and the formal suspension of payments. At
the same time, the waiver of the guarantee demonstrates
that the banks which would have to provide GEA with
further loans during the restructuring process have faith
in the measures which will be carned out by the firm.
This view is also confirmed by the fact that there is a new
private company which was willing to take over the
management and thus the entrepreneurial risk in GEA.

As to the ratio between the aid and the financial contribu-
tion by the investor, one has to conclude that there was,
and will be, a significant financial contribution from the
firm’s own resources. Thus the immediate restructuring
to ESP 3 500 million and will be
costs will amount
covered completely by the firm’s own financial resources
which it will obtain by the implementation of the restruc-
turing plan, which entails
funds
(suspension of payment proceeding which will signi-
ficantly reduce the firm’s debt, sale of the firm’s premises
in Vigo and sale of the profit-making plant). Compared to
this financial contribution and all the financial efforts the
enterprise will have to make, the aid of ESP 983 million is
fairly low.

the generation of

Furthermore, one has to consider the social impact and
the fact that GEA is one of the most important employers
in a depressed area as contemplated in Article 92(3)(a).
After Citroen, GEA is the second industrial employer in
this region and the demise of GEA in this area would also
mean a disappearance of important industrial activities
there and would cause a chain reaction since, certainly,
many of GEA’s suppliers would be forced to shut down as
well. Therefore, the maintenance of approximately 500
staff
directly employed industrial
(from the original
thereby maintain their
number of 1 029), who will
purchasing power without resorting in future to public aid
(the Spanish authorities have confirmed officially that
there will be no further State aid to GEA), will also have

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a knock-on effect on the survival of GEA’s suppliers, who
in turn will maintain their purchasing power; all this has
to be taken into account if the Commission is to assess
the consequences which sustaining a firm like GEA will
have for the economic development of an Article 92(3)(a)
area such as Vigo.

Furthermore, it has to be taken into account that, in the
the Commission would
case of GEA’s bankruptcy,
certainly not object to new aid in favour of any investor
taking over the company’s assets, if this new aid were
based on approved aid schemes and would not exceed the
permitted aid ceilings for the Article 92(3)(a) region of
Vigo. In such an event, any new investor taking over GEA
could obtain up to 60 % of regional investment aid. The
regional authorities consider that such a procedure cannot
be employed in this case, not only for political and/or
social reasons but also because the company would, in the
meantime, lose its customers and consequently lose any
chance to regain viability. Nevertheless,
the aid, ul-
timately amounting to ESP 983 million, is equal to less
than 30 % of the immediate overall restructuring costs of
ESP 3 500 million. The aid intensity is thus far lower than
the aid that would be granted for a new investment, with
far less serious social repercussions.

Moreover, it has to be borne in mind that GEA’s market
share is fairly low. In the Spanish market, it has averaged
11,6 % during the last five years, and in the Community
market it was 0,64 % during the same period. Thus, the
aid measures in favour of GEA are unlikely to have a
major impact on the common market.

On top of that, it has to be taken into account that the
Spanish authorities have confirmed that the autonomous
government had withdrawn its promise to award the guar-
antee worth ESP 2 500 million and that, after a prelim-
inary undertaking to notify individually any future aid to
GEA in April 1997, it officially confirmed by letter dated
22 May 1997 that there will be no more State aid to the
company. Accordingly, it is ensured that GEA will have to
act in the market like any other private company. Future
distortions of competition through injections of public
money should therefore be excluded.

VII

The rescue aid in the form of guarantees covering loans
amounting to ESP 700 million and salary costs of ESP
350 million, awarded in 1995 pending termination of the
Article 93(2) proceeding, also constitutes aid within the
meaning of Article 92(1).

Contrary to the Spanish authorities’ opinion, this aid was
notifiable individually. The Commission’s decision under
which Decree 309/95 (cid:190) the legal basis for the guarantees

(cid:190) was approved, expressly stated that rescue aid to large
enterprises had to be notified individually. This require-
ment was repeated in Article 8.5 of the Decree itself.

Nevertheless, although illegal as to its form, this aid may
be approved as to substance, since it served to keep the
company in business until the Commission had adopted
a final Decision in its Article 93(2) proceeding. There are
precedents in which the Commission has agreed to rescue
aid (for example, in Nino Textile, State aid N 540/95,
letter SG(93) D/16433, of 5 October 1993) because it was
aware that the enterprise involved in the Article 93(2)
proceeding would not survive economically and would
consequently have to file for bankruptcy before the final
decision on the aid if it was not supported by the State. A
prerequisite for such an approval, however, is that the
rescue aid complies with the Community guidelines on
State aid for rescuing and restructuring of firms in dif-
ficulty. This requirement is fulfilled in the present case,
since the aid, in substance, is based on an approved aid
scheme of which the conditions for awarding rescue aid
themselves comply with the guidelines. The duration of
the guarantees was first envisaged to be six months, as is
required in the guidelines. Since the Commission, owing
to the complexity of the restructuring plan submitted by
the Spanish authorities and to the need to enlarge it,
would not arrive at a final decision within that period, the
Spanish authorities extended their duration until June
1997. Moreover,
it has to be borne in mind that the
Spanish authorities expressly promised that the duration
of the guarantees would not exceed the duration of the
Commission’s proceeding.

VIII

Since GEA may restore its viability by the implementa-
tion of drastic restructuring measures and that it is located
in a depressed area for the purposes of Article 92(3)(a),
both the guarantee awarded in 1992 which was discharged
by the payment of ESP 983 million in 1994 and the
rescue aid totalling ESP 1 050 million can be accepted
under the derogation in Article 92(3)(c), read in combina-
tion with the Community guidelines on State aid for
rescuing and restructuring of firms in difficulty. Since
GEA, however, has received aid as part of its privatization
in 1991 the approval will be accompanied by the imposi-
tion of drastic conditions. A rigorous approach will have
to be followed in respect of any new grant of State aid to
the company. The Spanish authorities will be informed
accordingly that any new State aid in favour of
this
company will be considered incompatible with the
common market and at odds with the undertaking given
and it will consequently have repercussions on the aid
being approved by this Decision,

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HAS ADOPTED THIS DECISION:

Article 1
The 1992 guarantee amounting to ESP 1 620 million
which was discharged by the payment in 1994 of ESP 983
million, and the 1996 guarantees totalling ESP 1 050
million which were provided by the Spanish authorities to
the enterprise Grupo de Empresas Alvarez (GEA) con-
stitute illegal aid for the purposes of Article 93(3) of the
EC Treaty because they were not notified to the Commis-
sion prior to their award. They comply, however, with the
Community guidelines on State aid for rescuing and
restructuring firms in difficulty and are therefore compat-
ible with the common market under Article 92(3)(c) of the
Treaty and Article 61(3)(c) of the EEA Agreement, on
condition that the Spanish authorities refrain, as they
undertook in their letter of 22 May 1997, from granting
any new aid to the company in the future and that they
fully implement the agreed restructuring plan.
The Spanish authorities shall submit to the Commission,
until 31 December 2000, half yearly reports on the
progress of the implementation of the restructuring plan
as well as on GEA’s economic data (business plans, profit
and loss accounts) in order to enable it to verify if the

estimates contained in the plan are being adhered to and
if the Spanish authorities’ undertaking to refrain from
granting any further State aid to the firm is being
observed. The reports shall be submitted to the Commis-
sion at half yearly intervals in March or October at the
latest.

Article 2

The Spanish authorities shall inform the Commission,
within two months of notification of this Decision, of the
measures they have taken to comply therewith.

Article 3

This Decision is addressed to the Kingdom of Spain.

Done at Brussels, 15 July 1997.

For the Commission

Emma BONINO

Member of the Commission