1999/99/EC: Commission Decision of 3 June 1998 concerning Sicilian Regional Law No 25/93 on measures to promote employment (Articles 51, 114, 117 and 119) (notified under document number C(1998) 1713) (Only the Italian text is authentic) (Text with EEA relevance)
Date: 1998-06-03
Institutions: European Commission
Subjects: Sicily, State aid, aid system, employment aid, job creation

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II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 3 June 1998

concerning Sicilian Regional Law No 25/93 on measures to promote employ-
ment (Articles 51, 114, 117 and 119)

(notified under document number C(1998) 1713)

(Only the Italian text is authentic)

(Text with EEA relevance)

(1999/99/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

II

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

After giving notice to the parties concerned, in accord-
ance with the aforementioned Article, to submit their
comments,

Whereas:

I

(1)

By letter No 3416 of 2 May 1997 (1), the Commis-
sion informed the Italian Government of
its
decision to initiate proceedings pursuant to Article
93(2) of the Treaty in respect of aid referred to in
Articles 51, 114, 117 and 119 of Sicilian Regional
Law No 25/93. In the same letter it asked the
Italian Government to submit its comments within
30 days of being notified of the letter and asked
interested parties to submit their comments within
30 days of the date of publication of the letter.

(1) OJ C 204, 4. 7. 1997, p. 10.

(2)

(3)

(4)

The Italian Government submitted its comments
by letters from the Permanent Representative’s
Office No 4319 of 30 June 1997, No 6799 of 10
October 1997, No 7072 of 22 October 1997 and of
6 May 1998.

No other Member State or
submitted comments to the Commission.

interested party

III

The aid referred to in the letter of 2 May 1997 is set
out below.

Article 51 of Sicilian Regional Law No 25/93
provides for the refinancing of an aid scheme for
cooperatives introduced by Regional Law No 36/91
up to an amount of ITL 24 billion (ECU 12,7
million). After refinancing, the following forms of
aid will be available:

(a) under Article 8(1), grants to cooperatives of up
to 50 % of eligible expenditure, subject to a
ceiling of ITL 150 million (some ECU 78 000);

(b) under Article 8(2), loans at an interest rate of
4 % to cooperatives to finance that part of the
investment not covered by grants under Article
8(1);

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Those grants and loans are available for investment
in the construction, modernisation, expansion and
development of production facilities,
for invest-
ment in safeguarding and creating jobs, and for
and machinery. The
expenditure
maximum intensity of the aid must not exceed the
laid down for Sicily (1)
maximum intensities
according to the size and location of the firm.

on plant

(9)

(c) under Article 14(1), loans at an interest rate of
4 % for a period of not more than 24 months
to finance working capital;

(d) under Article 14(2), loans at an interest rate of
4 % (for a period of 15 years, including a two-
year grace period) and leasing agreements at an
interest rate of 7.5 %. The same type of invest-
ments and expenditure as those covered by
Article 8(1) and (2) are eligible for such aid.

(5)

(6)

(7)

(8)

Article 114 of Regional Law No 25/93 authorises
IRCAC (Instituto Regionale per
il credito alle
cooperative — regional agency providing credit to
cooperatives) to grant to cooperatives in the hotel
and tourist trade and in agri-tourism the subsidised
loans referred to in Article 14(2) of abovemen-
tioned Regional Law No 36/91 so as to enable
them duly to settle their debts to public bodies at
national and regional
levels and to banks. This
assistance is limited to debts contracted before 30
June 1993.

The scheme is also open to firms in the leisure and
sports sector which have contracted loans under the
regional laws and are experiencing financial diffi-
culties as a result of the decline in the number of
visitors.

Article 117, which modifies an aid scheme estab-
lished under Regional Law No 46/67, provides for
grants covering 20 % of costs which are aimed at
promoting tourist transport by charter flights and
are available to tour operators who hire aircraft for
carrying tourists to Sicily.

Grants are also available, again to cover 20 % of
transport costs, to Italian and foreign travel agen-
cies for providing tourist travel as part of inclusive
tours and for carrying tourists by rail or sea.

(1) That

is

to say,

in the
the maximum intensities
Commission Decision of 1 March 1995 on regional aid in
Italy (Aid No 40/95): OJ C 184, 18. 7. 1995, p. 4.

set out

The eligibility conditions are set out in Sicilian
Regional Circular No 15353 of 14 October 1993
and on the grant application form. The grants are
provided only where the tourists carried spend at
least six nights in Sicily. Tour operators and travel
agencies are required to supply the administration
with the name of
the establishment where the
tourist is staying. The competent administrations
are to enter into agreements with these tourism
businesses to ensure that the amounts of aid they
receive are reflected in equivalent reductions in the
rates they charge to tourists.

Tour operators and travel agencies are required to
present the necessary documentation to enable the
administration to check the unit cost of transport
per passenger (invoice showing the cost of trans-
port, number of passengers carried, etc.). They must
also produce the necessary documentation to allow
the administration to check that they have passed
on the grants they have received in the form of
equivalent reductions in the rates they charge to
tourists. They are also required to publicise the
Sicilian scheme in their brochures, informing tour-
ists of the benefits to them.

(10)

The annual budget allocated to the scheme is ITL
15 billion (ECU 7,7 million).

(11) Article 119 provides for loans to be granted at a
rate of 4 % to travel agencies and other operators
providing unscheduled road transport services. The
loans are intended to finance working capital and
are granted up to a ceiling of ITL 150 million. A
subsidiary guarantee can also be provided by the
Region of Sicily.

The budget allocated for 1993, 1994 and 1995 is
ITL 3 billion.

The competent authorities informed the Commis-
sion by letter No 4319 of 30 June 1997 that the
scheme provided for under the measure in question
had been repealed by Sicilian Regional Law No
33/96 and that no aid had previously been granted.
The proceedings initiated in respect of the scheme
therefore no longer served any useful purpose.

IV

(12)

for cooperatives

refinanced under
The grants
Article 51 of Regional Law No 25/93 and modified
by Article 114 of the same Law fall within the
scope of Article 92(1) of the EC Treaty.

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(13)

This aid is granted to firms operating in certain
areas of Italy which are thus given an advantage
over firms located elsewhere.

(14)

The aid distorts competition in so far as
it
strengthens the financial position and opportuni-
ties of the recipient firms with respect to competi-
tors who do not receive the aid. It also affects
intra-Community trade whenever this effect occurs
in that context.

possible to ascertain from the supplementary infor-
mation provided by the competent authorities that
the scheme introduced by Law No 36/91 had been
notified and approved by the Commission in April
1991 (2). Furthermore, the information currently at
the Commission’s disposal justifies the following
conclusions.

some of

In particular,
it distorts competition and affects
trade between Member States where the recipient
to other
firms export
Member States; equally, even where such firms do
their goods, national production is
not export
favoured because
established in other
Member States have less chance of exporting their
products to the Italian market (1).

their products

firms

The aid influences decisions on the location of
recipient firms, and this also affects trade. Since the
aid encourages firms to relocate to subsidised areas
or to move from one Member State to another,
production at the new site and the supply of goods
from it alter the patterns of trade between the
Member States.

It

From the above it can be seen that the aid granted
under the scheme provided for in Regional Law No
36/91 which was refinanced on the basis of Article
51 of Law No 25/93 and modified by Article 114 of
Law No 25/93 falls within the scope of Article
92(1).
incompatible with the
common market, unless it qualifies for one of the
derogations provided for in the Treaty. It is also
illegal since it was put into effect by the Italian
Government before the Commission had given its
opinion, notwithstanding the suspensory effect of
Article 93(3).

therefore

is

(15)

(16)

suffers

serious

particularly

(18) With regard to the refinancing of aid for productive
investment provided for under Article 8(1) and (2)
and Article 14(2) of Law No 36/91, the Commis-
sion confirms the approval it gave in 1991. Sicily,
which
problems
compared with the rest of the Community, quali-
fies for the derogation under Article 92(3)(a) (3). The
arrangements for granting the aid are in line with
the Community rules on eligible investment
expenditure and with the maximum intensities
applicable. The aid in question therefore qualifies
for the derogation under Article 92(3)(a) in so far as
it is intended to promote the economic develop-
ment of a region where the standard of living is
abnormally low and where there is serious under-
employment.

(19) With regard to the refinancing of the aid intended
to finance working capital under Article 14(1) of
Law No 36/91, the Italian Government did not
dispute the objections raised by the Commission
when it initiated the proceedings. At the time, one
of the Commission’s observations was that the aid
constituted operating aid and did not fulfil the
conditions laid down in the Commission’s 1988
communication on the method for the application
of Article 92(3)(a) and (c) to regional aid (4) as it was
limited in time, nor degressive, nor
neither
designed to overcome structural handicaps. These
facts were not denied.

(17) With regard to the refinancing — provided for in
Article 51 of Law No 25/93 — of the scheme set
up by Regional Law No 36/91 and the modifica-
tion of one of the measures under Article 114 of
Law No 25/93, the initiation of proceedings was
justified principally on the grounds of lack of infor-
It was
mation concerning the basic scheme.

(1) Judgment in Case 102/87 [1988] ECR 4067 (SEB).

(20)

The same considerations are valid for the granting
under Article 114 of Law No 25/93 of
loans
provided for in Article 14(2) of Law No 36/91 to
firms in the hotel and tourist trade and in agri-
tourism to enable them to settle their debts to

(2) Aid N 582/90, OJ C 192, 23. 7. 1991, p. 2.
(3) Commission Decision of I March 1995 (Aid N 40/95).
(4) OJ C 212, 12. 8. 1988, p. 2.

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national and regional bodies and to banks. The
competent authorities did not dispute that
this
measure concerned operating aid. Moreover, it was
non-degressive operating aid. Furthermore, given
that the aid was granted in respect of expenditure
already incurred, it did not in any way act as an
incentive to stimulate additional investment.

V

(23) With regard to the aid provided for in Article 117
of Law No 25/93, the Italian authorities sent the
Commission the following observations:

(21)

It its notice on the de minimis rule for State aid (1)
the Commission stipulated that the ceiling of ECU
100 000 over a three-year period was a threshold
figure below which Article 92(1) can be said not to
apply, with the result
that a measure need no
longer be notified in advance under Article 93(3).

The Commission nevertheless laid down the condi-
tions for applying the rule, in particular to ensure
that, where aid is given to the same recipient under
separate measures covered by the de minimis rule,
the total amount of the aid does not exceed the
threshold set and that, where aid is provided other
than in the form of a grant, it has to be converted
into its grant equivalent. The de minimis rule is of
interest primarily to SMEs, but it applies to all
recipients irrespective of size.

(22) Accordingly, aid under Article 14(1) of Law No
36/91 and aid under Article 14(2), as amended by
Article 114 of Law No 25/93, is not in conformity
with Community rules governing operating aid. It
does not qualify for any derogation and is therefore
incompatible with the Treaty for the part not
covered by the de minimis rule.

(24)

(25)

(26)

they point out

the measure is not
that
First,
discriminatory on grounds of nationality or with
regard to the means of transport used. Both Italian
and foreign travel agencies and tour operators
benefit and all means of transport are covered. The
Italian authorities consider,
there
can be no effect on competition in these respects.

therefore,

that

Second, in their view, the direct beneficiaries of the
grants are the consumers, i.e. the tourists them-
selves, since the tour operators and travel agents are
obliged by law to reduce the rates they charge for
transport by an amount equivalent to the grant
paid by the Region and thus to pass on in the rates
charged all the grants they receive. The tour oper-
ators and travel agents thus act simply as interme-
diaries since they cannot themselves keep any of
the aid they receive from the Region.

therefore consider

The Italian authorities
that,
although the measure is undoubtedly aimed at
attracting tourists to Sicily, the grants have only
indirect effects which are spread over the island’s
entire tourist industry and economy in general. In
their opinion, such advantages, which are in them-
selves indirect and widespread and cannot be quan-
tified, do not fall within the scope of Article 92(1)
of the Treaty.

(27)

The Italian authorities have also provided the
following information on the tourist industry in
Sicily, which, in their view, requires such aid if it is
to develop:

Table 1

Data from the Region of Sicily

Year

1991

1992

1995

1996

1997

Nights

10 820 000

7 033 000

9 548 000

10 228 000

10 329 000

Average number of days spent
in Sicily

4,2

3,80

3,01

2,99

3,10

(1) OJ C 68, 6. 3. 1996, p. 9.

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Table 2

Data for 1996 from the Region of Sicily

Region

Tourists/residents

Tourists/km2

Average stay (days) (1)

Sicily

Veneto

Friuli-V G

Valle d’Aosta

Emilia-Romagna

1,74

12,04

7,97

22,62

7,17

(1) The average stay of tourists in Italy is 4,3 days.

344

2 899

1 210

821

1 271

2,99

5,10

5,80

4,02

4,31

(28)

The Commission also has the following additional information concerning the Region of
Sicily:

Table 3

Added value at factor cost of the tourist industry as a percentage of the added value of
overall economic activity

(1991 data, source: Istituto Tagliacarne)

(%)

Italy

Trentino

Valle d’Aosta

Friuli-V G

Veneto

Emilia-Romagna

Sicily

2,8

9,7

7,1

3,5

3,1

2,8

1,9

(29)

In 1996 productivity in the Mezzogiorno (which
includes Sicily) was 76,6 % of that of centre-north
Italy. Infrastructure endowment in Sicily in 1995
was 69,3 % of the national index (Italy = 100).
The unemployment rate in 1996 was 24 % and
youth unemployment was 60,1 %. Training courses
provided in the Mezzogiorno represent only 22 %
of the national total.

(30) As regards the nature of the aid, the Commission

notes first of all that:

(a)

the measure may be considered non-discrim-
inatory, in the sense intended by the Italian

authorities, since there will be no effect on
competition with regard to either travel agen-
cies or the means of transport used;

(b) given the scheme’s arrangements,

the direct
effects of the aid in terms of financial advan-
tages are effectively passed on from the travel
agencies and tour operators to the consumer,
which means that these traders do not gain any
direct financial advantage from the aid.

Notwithstanding the observations under (a) and (b),
however, the object and the effect of the measure is
to encourage tourists to visit Sicily. Tour operators
therefore gain an indirect advantage in terms of the
increase in demand made possible by the grants.

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that

the effect of

(31) While the Commission can agree with the Italian
Government
the advantage
obtained is indirect, widespread and not quantifi-
able, it nevertheless considers that it falls within
the scope of Article 92(1). This is because the aid
benefits only firms operating in certain areas,
which therefore enjoy an advantage since the aid is
not granted for the transport of tourists outside
those areas.

(32)

(33)

the patterns of

Since the aid influences the choices made by tour-
ists, trade is also affected. In so far as the grants
encourage tourists to choose to stay in the areas
that benefit,
tourism in the
Community are altered. The aid therefore distorts
competition and strengthens the financial position
and opportunities of
firms with
respect to competitors who do not receive the aid.
Whenever this occurs in the context of
intra-
Community trade, competitors feel the effects.

the recipient

In the light of the above observations, the Commis-
sion therefore considers that the aid in question
falls within the scope of Article 92(1). Accordingly,
the aid is not compatible with the common market
unless
the derogations
provided for in the Treaty. It is also illegal since it
was put into effect by Italy before the Commission
had given its opinion, notwithstanding the suspen-
sory effect of Article 93(3).

for one of

it qualifies

(34) With a view to assessing the compatibility of the
aid, the Commission must first of all point out, as it
did when initiating the proceedings, that it consti-
tutes operating aid. At the time, the Commission
noted that the measures did not comply with the
Community rules on operating aid, specifically
those stipulating that the aid must be limited in
time, degressive and designed to overcome struc-
tural handicaps.

(35)

take into account
the
The Commission must
following additional
factors. Given the natural
beauty and architectural heritage of the island, the
tourist industry could play an important role in
developing the economy of Sicily, which is one of
the less-favoured areas of the Union within the
meaning of Article 92(3)(a) of the Treaty. Because
of a number of structural factors, such as the under-
development of infrastructure and the low level of
training, the tourist industry in Sicily has not yet
been developed as it deserves to be. As the figures
provided by the Italian authorities show (see Table
2), compared with five other Italian regions visited
by tourists, Sicily is the least developed in terms of
the number of visitors, both in relation to the
number of residents (1,75 for Sicily and between

7,17 and 22,62 for the other regions) and per km2
of land (344 for Sicily and between 821 and 2 899
for the other regions). The figures also show that
the number of visitors has not increased since at
least 1991 and that the added value of the tourist
industry as a proportion of the added value of the
economy as a whole is much lower in Sicily than in
Italy generally and in the country’s other tourist
regions. Finally, the average stay of tourists in Sicily
(2,99 days) is much shorter than the average for the
country as a whole (4,3 days).

(36) As a general rule, the Commission takes the view
that development must be based on long-term pol-
icies capable of
influencing the infrastructure
required for that purpose. However, the measures
in question can provide a useful addition to struc-
tural measures. Firstly, since they apply only if the
tourist stays at least six nights in Sicily, the meas-
ures should have the effect of prolonging stays by
tourists. Secondly, in view of both the economic
situation of the island and the structural short-
comings of the sector, the efforts at developing
temporarily the Region’s tourist potential by means
of the measures in question should continue to be
supported. Since underpinning demand is likely to
be a key factor in improving tourist facilities, the
measures can make a useful contribution to
improving infrastructure and promoting the devel-
opment of the sector.

(37) On the basis of

the above considerations,

the
Commission believes
that, provided they are
limited in time, the aid measures in question are
compatible with the common market by virtue of
the derogation laid down in Article 92(3)(a). With
regard to the limitation in time, an appropriate
period is five years from the date on which the
proceedings were initiated. The date by which the
scheme should be brought to an end is therefore
set at 31 December 2002. Since it has been oper-
ating since 1967,
there can be no question of
extending or refinancing it,

HAS ADOPTED THIS DECISION:

Article 1

The refinancing and modification of the aid scheme for
cooperatives under Articles 51 and 144 of Sicilian
Regional Law No 25/93 is illegal as regards the part not
covered by the de minimis rule since it was put into effect
before the Commission had given its opinion pursuant to
Article 93(3) of the EC Treaty.

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Article 2

Article 5

The refinancing of the aid measures under Article 8(1)
and (2) and Article 14(2) of Sicilian Regional Law No
36/91 provided for by Article 51 of Law No 25/93 is
compatible with the common market by virtue of the
derogation laid down in Article 92(3)(a) of the EC Treaty.

Article 3

The refinancing of the aid measures under Article 14(1) of
Sicilian Regional Law No 36/91 provided for by Article
51 of Law No 25/93 and the modification pursuant to
Article 114 of Law No 25/93 of the aid measure under
Article 14(2) are incompatible with the common market
for the part exceeding the ceiling of ECU 100 000 over a
three-year period fixed by the de minimis rule, since the
aid measures do not qualify for any of the derogations
provided for by Article 92(2) and (3) of the EC Treaty or
by Article 61(2) and (3) of the EEA Agreement.

Article 4

Italy shall take the appropriate measures to discontinue
forthwith the aid measures referred to in Article 3 of this
Decision if the total amount of aid exceeds the ceiling
fixed by the de minimis rule referred to in that Article.

Italy shall also take measures to recover the aid paid
illegally within the meaning of Article 3. The aid shall be
paid back in accordance with the procedures and provi-
sions of domestic law, together with interest at the refer-
ence rate used to calculate the net grant equivalent of
regional aid in Italy, until such time as the aid is ef-
fectively recovered.

The aid measures provided for under Article 117 of
Sicilian Regional Law No 25/93 are illegal since they
were put into effect before the Commission had given its
opinion in accordance with Article 93(3) of the EC Treaty.

The aid measures referred to in the preceding paragraph
are compatible with the common market by virtue of the
derogation provided for in Article 92(3)(a) of
the EC
Treaty for a limited period of five years from the date on
which the proceedings were initiated. That period shall
end on 31 December 2002. The scheme shall not be
extended or refinanced.

Article 6

Italy shall take the appropriate measures to terminate on
31 December 2002 the aid measures referred to in Article
5.

Article 7

The Italian Government
required to inform the
is
Commission, within two months of notification of this
Decision, of the measures it has taken to comply with it.

Article 8

This Decision is addressed to the Italian Republic.

Done at Brussels, 3 June 1998.

For the Commission

Karel VAN MIERT

Member of the Commission