98/276/EC: Commission Decision of 18 November 1997 concerning counter-guarantees given by the German Federal State of Sachsen-Anhalt to cover guarantees of the Bürgschaftsbank Sachsen-Anhalt GmbH in favour of companies in difficulty (Only the German text is authentic) (Text with EEA relevance)
Date: 1997-11-18
Institutions: European Commission
Subjects: Saxony-Anhalt, aid system, aid to undertakings, commercial bank, credit guarantee, credit institution

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Official Journal of the European Communities

28. 4. 98

COMMISSION

COMMISSION DECISION

of 18 November 1997

concerning counter-guarantees given by the German Federal State of Sachsen-
Anhalt to cover guarantees of the B(cid:129)rgschaftsbank Sachsen-Anhalt GmbH in
favour of companies in difficulty

(Only the German text is authentic)

(Text with EEA relevance)

(98/276/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Community, and in particular Articles 92 and 93 thereof,

Having regard to the Agreement on the European
Economic Area, and in particular Article 61 thereof,

Having given notice to the other Member States and the
parties concerned to submit their comments, in accord-
ance with Article 93(2) of the Treaty,

Whereas:

submitted until

covering up to 90 % of loans, which they would not
receive from private banks otherwise. The programme
started in December 1994 and was running for applica-
tions
the end of 1995. The Land
took over a global counter-guarantee
Sachsen-Anhalt
initially limited to an amount of DEM 100 million. The
amount was reduced to DEM 16 million in April 1996,
that is, after the end of the period allowed for applica-
tions. The Land is
represented in the authorising
committee (Bewilligungsausschuß) of the guarantee bank.
Decisions to grant guarantees covered by the counter-
guarantee of the Land could not be taken without the
assent of the representatives of the Land Government.

The aid programme, which, in breach of Article 93(3) of
the EC Treaty, was not notified, was in force for applica-
tions submitted during the years 1994 and 1995 (the
period for the submission of guarantee applications).

I

On 9 October 1996 the Commission decided to initiate
the procedure pursuant to Article 93(2) of the EC Treaty
with regard to an aid programme of the German Federal
State Sachsen-Anhalt together with the B(cid:129)rgschaftsbank
Sachsen-Anhalt GmbH (hereinafter referred to as ‘the
guarantee bank').

The guarantee bank set up a special guarantee scheme for
firms in difficulty (‘Sonderb(cid:129)rgschaftsprogramm Liquidi-
t(cid:132)tssicherung') under which firms established in Sachsen-
Anhalt that are experiencing liquidity problems owing to
external factors beyond their control which jeopardise
guarantees
their

continued operation may

receive

The Commission had doubts whether the aid programme
might be considered compatible with the common
market, because it aims to help companies in difficulties
to
their businesses without
to continue
Community guidelines on State aid for
rescue and
restructuring (hereinafter:

‘the Guidelines') (1).

adhering

Germany was informed of the decision to initiate the
procedure by letter dated 22 October 1996.
It was
requested to submit its comments. The other Member
States and interested parties were informed and invited to
submit comments through the publication of the letter in
the Official Journal of the European Communities (2).

Germany submitted its comments by letter dated 18
December 1996. No comments were received from any
other party.

(1) OJ C 368, 23. 12. 1994, p. 12.
(2) OJ C 35, 4. 2. 1997, p. 10.

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II

counter-guarantee of the Land cannot be taken without
the assent of the representatives of the Land Government.

The shareholders of the counter-guarantee bank, a private
limited company, are five regional trade associations, five
regional chambers of
industry, commerce and craft
(Industrie, Handels- und Handwerkskammern), II banks
and three insurance companies. Its equity amounts to
DEM 16 146 000.

According to the provisions of the Sonderb(cid:129)rgschafts-
programm Liquidit(cid:132)tssicherung described in Section I,
companies that have encountered liquidity problems due
to external factors that reasonable management would
have foreseen may seek deficiency guarantees from the
guarantee bank, covering up to 90 % of total bank credits,
which they would not otherwise have received owing to
lack of sufficient own securities. Every applicant has to
submit a plan to consolidate its financial situation and
thereby demonstrate that the guarantee would help to
settle the undertaking’s economic circumstances.

The guarantees are limited to a maximum period of three
years and a maximum amount of DEM 2 million per
beneficiary. The guarantees are, according to the wording
of the award provisions, only to be granted for enterprises
established in Saxony-Anhalt and are generally designed
to promote companies with up to 250 employees and a
yearly turnover of up to DEM 40 million. It is, however,
not expressly excluded that guarantees may be granted in
favour of larger companies or companies in sectors to
which special rules on State aid apply. The cover takes the
form of fixed-interest loans at a rate 1 % per annum
below the norm for comparable loans. The guarantee
bank charges a one-off handling fee of 2 %, and a yearly
premium of 1 % of the amount guaranteed.

One of
the preconditions for Land Sachsen-Anhalt’s
assumption of a counter-guarantee as described in Section
I is that the guarantees in question shall only apply to
small and medium-sized companies (a term that does not
refer to the Community definition of SMEs), or to persons
in the liberal professions (who do not hold sufficient
securities, according to banking practice, to obtain the
necessary financing.

The risk was therefore spread as follows:

Lender (credit institution)

Guarantee bank

Land Sachsen-Anhalt

10 %

9 %

81 %

authorising
The Land is
committee (Bewilligungsausschuß) of
the B(cid:129)rgschafts-
bank. Decisions to grant guarantees covered by the

represented within the

The guarantee bank granted deficiency guarantees backed
by the counter-guarantee of the Land Sachsen-Anhalt for
altogether 39 companies, to a value of between DEM
18 000 and DEM 1,8 million. The number of employees
in the recipient companies ranged between 2 and 174.
The last guarantee was approved in April 1996. Only
DEM 15,645 million of the initial total counter-guarantee
provision of DEM 100 million was actually taken up, with
the result that the ceiling was lowered to DEM 16 million
in April 1996.

III

Germany admitted that the aid intensity of the possible
cases of implementation of the guarantee programme to
secure liquidity would be below the ceiling set by the de
minimis rule. It further informed the Commission that,
when applying the scheme, the authorising committee
had used the definition of small and medium-sized enter-
prises as set out by the Commission in its Recommenda-
tion of 3 April 1996. Germany also argued that the bene-
ficiary companies were not ‘in difficulty' in the sense
contemplated by the Guidelines: they were merely experi-
encing liquidity problems due to outstanding claims or
belated payments by customers. The limited equity
capital of the companies concerned, a situation which
Germany regards as typical of East German enterprises,
and attributable to the division of Germany before 1990,
has compounded the financial problems. The programme
was not meant to contribute to the restructuring of bene-
ficiaries so as to restore their viability, for which purpose a
restructuring plan would have been needed, but rather to
assist in the financial consolidation of basically viable
companies.

should

As regards the proviso that only enterprises established in
Sachsen-Anhalt
scheme,
Germany informed the Commission that the authorising
committee had also chosen two companies established in
Lower Saxony and North Rhine-Westphalia which only
had branches in Sachsen-Anhalt.

from the

benefit

As to the need to restrict the amount of aid to the strict
minimum necessary to achieve the aim of the aid, the
German authorities referred to the general budgetary law
of Sachsen-Anhalt, obliging every public administration
to attain best results at lowest costs in any financial trans-
action of the public authorities.

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IV

(cid:190) do not limit the aid to such period as is needed to
devise a necessary and workable restructuring plan,

The guarantees granted by the guarantee bank under its
Sonderb(cid:129)rgerschaftsprogramm Liquidit(cid:132)ssicherung con-
stitute State aid within the meaning of Articles 92(1) of
the EC Treaty and 61(1) of the EEA Agreement. This is so
because the guarantees were 90 % covered by the
counter-guarantee of Sachsen-Anhalt
and had been
approved in collaboration with State officials. No guaran-
tees covered by the counter-guarantee could be granted
without the assent of the Land.

The risk of the guarantee bank is limited to 9 % of the
secured loan. This risk was covered by the 1 % annual
premium calculated on the basis of the full amount of the
guarantee. Consequently, the bank received a premium of
10 % of its own risk. The bank granting the loan charged
the normal annual interest rate for secured loans less 1 %
per annum, to cover its risk of 10 % of the total loan.
Thus the banks involved received a high remuneration,
compared to market interest rates for operating loans, for
the risk they undertook, and this may be considered
sufficient to cover the outstanding risk of insufficiently
secured loans to companies with liquidity problems. The
State contribution through the counter-guarantee was not
recompensed by any premium from the beneficiary, the
company receiving the secured operating loan. Therefore,
the aid element inherent in this aid measure is to be set at
81 % of the loan granted to the company, namely the
amount covered by the public counter-guarantee.

The aid scheme cannot be considered compatible with
the common market under Article 92(3)(c) of the EC
Treaty, read in conjunction with the Guidelines, since the
conditions governing awards:

(cid:190) do not explicitly exclude from the scheme firms oper-
ating in sectors for which specific State aid rules apply
(point 2.2 of the Guidelines) or contain information
allowing the Commission to find that they are con-
sistent with the special rules applicable in sectors
currently subject to special Community rules on State
aid,

(cid:190) do not explicitly exclude large firms from the applica-
tions of the scheme nor require prior notification,

(cid:190) do not provide for rules on combining the aid with

other aid for the same purpose,

(cid:190) do not prohibit or exclude the renewal of the guaran-

tees or their extension,

(cid:190) require only the presentation of a financial consolida-
tion plan rather than a restructuring plan (point 3.2 of
the Guidelines),

(cid:190) do not explicitly restrict the amount of the aid to what
is strictly necessary for the restructuring or rescue of
the firm in question.

It has consequently to be concluded that the provisions of
the aid scheme do not meet the key criteria of rescue and
restructuring aid as outlined by the Guidelines.

The German authorities argued that the companies which
were envisaged when the scheme was drafted were not
really those in difficulty but merely those having liquidity
viable. The
problems while
programme was established to help firms facing the
particular circumstances of eastern Germany, namely the
difficulties of recovering monies from customers and a
low-equity provision, insufficient to bridge the resultant
liquidity shortfall.

remaining

basically

This line of argument is not convincing. Companies that
do not have sufficient equity to cover the typical risks of
their clients’ failing to pay their debts and insufficient
means to cover the risk through credit insurance should
be considered to be in difficulty when liquidity problems
arise that endanger their own existence. Aid schemes
designed to tackle such difficulties are to be appraised in
the light of the Community Guidelines on State aid for
rescue and restructuring.

The fact that such problems arise more frequently in
eastern Germany than in other more developed parts of
the Union is not a result of the division of Germany until
1990 but
from the generally low financial
performance in this area which is to be observed in other
disadvantaged regions of the Union as well. Accordingly,
the scheme cannot be considered compatible with the
common market under Article 92(2)(c) of the EC Treaty.

arises

The aid cannot be considered compatible with the
common market under Article 92(3)(a) of the EC Treaty
either. The principal aim of the scheme in question is to
help firms in financial difficulty located in Sachsen-
Anhalt. The mere fact that the application of such aid
programme is limited to an assisted area has no bearing
on the need to observe the principles laid down in the
Guidelines. The Guidelines expressly state in point 3.2.3:

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‘Thus, the criteria listed in paragraph 3.2.2 are equally
applicable to assited areas, even when the needs of
regional development are considered'.

Furthermore, the scheme formally excluded companies
that are not based in Sachsen-Anhalt, thus creating a
discrimination contrary to Articles 52 et seq. of the EC
Treaty. It does not matter whether the programme was in
spite of this rule used in two particular cases in favour of
west-German companies, because the programme and its
implementation according to own terms is in question,
and not individual cases. The same holds true for the
limitation to small and medium-sized enterprises and
firms in sectors in which specific aid rules apply.

Since the aid programme in question does not serve to
attain any of the other goals set out in Article 92(2) and
(3) of the EC Treaty, it has to be concluded that it cannot
be considered compatible with the common market.

The programme was illegal because it was introduced in
breach of Article 93(3) of the EC Treaty. The explanation
of the German Government that it assumed the cases of
the de
application of
minimis rule is unacceptable, because the planned award
amounting to a maximum of DEM 2 million per benefi-
ciary over a three-year period, exceeds the de minimis
thresholds.

the programme to fall under

Any State aid granted unlawfully is, in principle, to be
recovered from the recipient so as to restore the economic
situation that would have prevailed without the illegal aid.
Repayment is to be made in accordance with the proce-
dures and provisions of German law, with interest calcu-
lated on the rate used as reference rate in the assessment
of regional aid schemes, and running from the date on
which the aid was granted.

Germany should therefore recover
the aid granted
pursuant to the Sonderb(cid:129)rgerschaftsprogramm Liquidi-
t(cid:132)tssicherung. Germany should inform the Commission
of
this Decision within two
months of its being notified. As part of the report of the

the implementation of

implementation of this Decision, Germany should name
the cases in which the de minimis rule is used.

Germany is called on to notify other individual cases in
which it considers any renewal of the aid to be justifiable
under the Treaty. The Commission will state its position
in accordance with the normal procedures,

HAS ADOPTED THIS DECISION:

Article 1

The aid programme Sonderb(cid:129)rgschaftsprogramm Liquidi-
t(cid:132)tssicherung is illegal
for having been introduced in
breach of Article 93(3). The programme is incompatible
with the common market.

Article 2

Germany shall recover all aid granted pursuant to the aid
programme. Repayment shall be made in accordance with
the procedures and provisions of German law, plus
interest payable at the usual reference rate used in the
assessment of regional aid schemes, and running from the
date on which the aid was granted.

Article 3

inform the Commission, within two
Germany shall
months of being notified of this Decision, of the meas-
ures taken to comply therewith.

Article 4

This Decision is addressed to the Federal Republic of
Germany.

Done at Brussels, 18 November 1997.

For the Commission

Karel VAN MIERT

Member of the Commission