1999/100/EC: Commission Decision of 14 July 1998 on aid for lentil producers in the Prefecture of Levkas (Greece) (notified under document number C(1998) 2367) (Only the Greek text is authentic)
Date: 1998-07-14
Institutions: European Commission
Subjects: Greece, State aid, leguminous vegetable, producer organisation, production aid

5. 2. 1999

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Official Journal of the European Communities

L 32/25

COMMISSION DECISION

of 14 July 1998

on aid for lentil producers in the Prefecture of Levkas (Greece)

(notified under document number C(1998) 2367)

(Only the Greek text is authentic)

(1999/100/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Community, and in particular Article 93(2), first subpara-
graph, thereof,

Having regard to Council Regulation (EEC) No 827/68 of
28 June 1968 on the common organisation of the market
in certain products listed in Annex II of the Treaty (1), as
last amended by Regulation (EC) No 195/96 (2), and in
particular Article 5 thereof,

After giving notice to the parties concerned to submit
their comments to the Commission in accordance with
Article 93(2), first subparagraph, of the Treaty (3),

Whereas:

I

1. In its letter of 19 November 1996, registered on 22
November 1996,
the Permanent Representation of
Greece to the European Union notified the measures
in question to the Commission in accordance with
Article 93(3) of the Treaty.

In its letter of 7 March 1997, registered on 10 March
1997, the Permanent Representation of Greece to the
European Union communicated to the Commission
the additional information requested by the Commis-
sion in its letter of 21 January 1997. In that letter, the
Greek authorities stated that the draft Joint Ministerial
Decision had already been adopted at national level.
the Greek authorities gave assurances
Nevertheless,
that it had not yet been applied.

2. In 1996 drought affected the economic situation of
producers in the Prefecture of Levkas (Ionian islands).
Most of these farmers live in hill communities and
their incomes depend largely on the cultivation of
lentils. The State aid under consideration relates to the
provision of financial assistance for lentil cultivators in

(1) OJ L 151, 30. 6. 1968, p. 16.
(2) OJ L 26, 2. 2. 1996, p. 13.
(3) OJ C 225, 24. 7. 1997, p. 19.

the Prefecture of Levkas, at least 50 % of whose crops
were destroyed by drought in 1996, to compensate
them for their loss of income during that year.

the gross value of

The aid for each farmer who sustained losses amounts
the production
to 30 % of
concerned up to a maximum of GRD 500 000/hectare.
The amount of aid was calculated by the Greek author-
ities as follows:

— the production of lentils taken into account is the
mean yield per hectare over the previous four years,
equal to 680 kg/hectare,

— the prices paid to producers ranged from GRD
1 500 to 2 000 per kg, and for the purposes of
calculating the aid the latter figure (GRD 2 000/kg)
was used,

— the gross production value is 680 kg/hectare x

GRD 2 000/kg = GRD 1 360 000/hectare,

— the maximum aid, representing 30 % of the gross
production value, amounts
to 30 % of GRD
1 360 000 per hectare = GRD 408 000 per hectare.

The Greek authorities estimated the number of benefi-
ciaries at 120 and the total budget made available by
the Greek State for this measure amounted to GRD 40
million.

II

1. In its letter SG(97) D/4136 of 30 May 1997 the
Commission informed the Greek authorities of
its
decision to set in motion the procedure laid down in
Article 93(2) of the Treaty in relation to the measures
notified.

2. In that letter the Commission informed the Greek
authorities that the measure did not appear to qualify
for the derogation provided for under Article 92(2)(b)
of the Treaty, and that it therefore had to be consid-
ered incompatible with the common market.

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The Commission considered that the aid seemed to
satisfy the conditions for application of the Commis-
sion’s established practice concerning compensation
for losses resulting from natural disasters or other
untoward circumstances. The Commission considers
that climatic events such as frost, hail, hoar-frost, rain
or drought can be regarded as natural disasters within
the meaning of Article 92(2)(b) of the Treaty only
when the damage caused attains a certain level as
regards each beneficiary of the aid. For annual crops
this level is defined as 30 % loss of production relative
to a normal period (in principle, the average of the
three years preceding that during which the event took
place), and 20 % in less-favoured areas within the
meaning of Article 21(2) of Council Regulation (EC)
No 950/97 (1). The damage can be compensated up to
a maximum of 100 % of the losses sustained.

In fact, in the case under consideration the compensa-
tion mechanism is activated only if the level of damage
amounts to 50 % of the usual production level. More-
over, the compensation level was set at 30 % of the
gross production value.

the Commission considered that

Nevertheless,
the
maximum gross production level for lentil cultivation
was ECU 881 hectare (5 GRD 270 000/hectare in
April 1997) (2) at Community level. According to the
calculation communicated by the Greek authorities,
the gross production value of
lentils on Levkas
amounted to GRD 1 360 000/hectare, which at the
exchange rate applicable in April 1997, represented
about five times as much as the maximum production
value for
the
Community.

the same crop in other parts of

The market price of GRD 2 000/kg was considered by
the Commission to be abnormally high for products
such as lentils. Indeed, the market value of lentils from
Levkas was nine times higher than the Community
price at the top of the range of ECU 0,7 kg (5 GRD
215/kg) received by producers in other Member States.
The said value was so high that
the Commission
doubted its credibility, even taking into account the
special quality characteristics attributed by the Greek
authorities to the said lentils.

The Commission also considered that
the method
employed by the Greek authorities to calculate the
gross production value led to overcompensation, addi-
to that mentioned in connection with the
tional
product
sale price, by 22,5 %. The Commission
considered that there were indications that the losses
caused by drought were being overcompensated, and
that
the aid in question could not be considered
compatible with the provisions of Article 92(2)(b).

(1) OJ L 142, 2. 6. 1997, p. 1.
(2) When the procedure laid down in Article 93(2) of the Treaty
was instituted, the Commission’s calculations and conclusions
were based on the exchange rate ECU 1 = GRD 305 which
applied in April 1997.

3. Within the scope of this procedure, the Commission
set the Greek Government a time limit for it to submit
its comments on the matter.

The Commission also published in the Official
Journal of the European Communities an invitation to
other Member States and other interested parties to
submit their comments.

III

1. In its letter of 23 June 1997 the Greek Government
submitted its comments on the subject of the measures
described above.

(a) As

regards

the Greek
the procedural aspects,
authorities state that the support measures have not
been implemented before the procedure has led to
a final decision.

Indeed, the Greek authorities state that the adop-
tion of the Joint Ministerial Decision by the rele-
vant Ministers does not necessarily mean that it
will be implemented automatically. According to
the said authorities, implementation of the decision
requires the adoption of two further decisions by
the Ministry for Agriculture defining the details
pertaining to the implementation and payment of
the aid.

Those texts have not been adopted and conse-
quently Greece has not implemented the disputed
Joint Ministerial Decision. The Greek authorities
inform the Commission that the aid will not be
implemented before the adoption of the Commis-
sion’s final decision in the context of the procedure
laid down by Article 93(2) of the Treaty.

(b) As to the substance, the Greek authorities inform
the Commission that the high price per kilogram
stems from the fact that the lentil variety ‘Enklouvi'
is cultivated on terraces of low strength so that
the cultivation
machinery cannot be used. All
work, as well as the threshing after harvesting, has
to be done by hand and this greatly increases the
cost of production.

The Greek authorities also state that in the specific
case, the price paid to the producers is a retail price
since the producers themselves sell
(very
small) production immediately after the harvest.
the production
The said authorities add that
amounts to very little (30 to 35 tonnes in all).

their

Finally, the Greek authorities state that should the
Commission agree to the aid in question, they will
calculate it on the basis of the lower limit of the
price paid to producers, namely GRD 1 500/kg,
within the scope of the decision determining the
implementation details.

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2. The Commission has not received any comments from
other Member States or other interested parties.

IV

Regarding the arguments put
forward by the Greek
authorities, the Commission makes clear the following:

(a) The last sentence of Article 93(3) of

the Treaty
provides that the Member State concerned may not
its proposed measures into effect before the
put
Commission has reached a final decision regarding
those measures.

‘Putting into effect' means not only the actual provi-
sion of aid to the beneficiary, but also the granting of
authorisation enabling the aid to be provided without
further formalities (1). To avoid such an infringement,
when adopting the measures at
legislative level,
Member States are recommended either to notify
them while still at the planning stage or, failing that,
to insert a provision pursuant
to which the body
which is to pay the aid can make the payments only
with the Commission’s approval.

In the case under consideration, the Greek authorities
transmitted to the Commission with the notification a
draft Joint Ministerial Decision. In its reply accom-
panying the additional information requested by the
informed the
the Greek authorities
Commission,
Commission that the Joint Ministerial Decision had
already been adopted but it had not yet been imple-
mented. In the information initially communicated,
no mention was made of the need to adopt orders
concerning the measure’s implementation. In those
circumstances and given that the aid measures had
been put into effect within the meaning of the afore-
said Community definition, the aid was reclassified as
aid that had not been notified.

However, the Commission takes note of the fact that
the two decisions by the Ministry of Agriculture on
provisions concerning implementation and payment
were necessary for the aid to be provided, that they
had not yet been adopted, and that the measures
notified had therefore not actually been implemented.

(b) When setting in motion the procedure provided for in
the Commission had
Article 93(2) of
the Treaty,
considered that the arguments put forward by the
Greek authorities did not seem sufficient to justify the
tenfold increase in the commercial value of the crop.
Even if it were true that the particular characteristics
of production improved the quality of these lentils
and consequently increased their commercial value,
the Commission expressed strong reservations about
whether that value could really be 10 times as much
as the ordinary market price for lentils.

The nature of the additional information provided by
the Greek authorities has done nothing to modify the
Commission’s original position.

Although it has clear consequences for the compet-
itiveness of the enterprises in question, the higher
production cost resulting from the impracticability of
using machinery for the cultivation work, the very
small production, and the fact that the product is sold
directly to consumers, do not provide sufficient
reasons to justify a higher commercial value. The
Greek authorities have not supplied, and the Commis-
sion has not been able to ascertain, any information
demonstrating that consumers are prepared to pay for
these lentils a price 10 times higher than the highest
price paid by the average European consumer for the
same product. Bearing in mind the aid mechanism
(30 % of the gross production value), this commercial
valuation of the lentils would result in the payment of
than the losses
compensation three times greater
calculated at normal market prices.

Besides, the fact that the Greek authorities commit
themselves, when establishing the details of how the
aid is to be implemented, to use a production value
corresponding to a market price of GRD 1 500/kg,
does not mean that those producers will not still
receive excessive compensation for their losses. In
fact, the commercial valuation of the lentils would still
remain six times higher than the maximum value
achieved by other producers
in the Community.
Bearing in mind the aid mechanism, that price would
represent
to
twice as much as the losses calculated at
almost
normal market prices.

compensation amounting

excessive

V

Article 5 of Regulation (EEC) No 827/68 stipulates that
Articles 92, 93 and 94 of the Treaty are applicable to the
production and trade of products listed in the Annex to
that Regulation.

Under Article 92(1) of the Treaty, any aid granted by a
Member State or through State resources in any form
to distort
whatsoever which distorts or
competition by favouring certain undertakings or the
production of certain goods is, in so far as it affects trade
between Member States, incompatible with the common
market.

threatens

The Community’s production of protein-rich crops
amounts to 5,26 million tonnes (2). Greece’s production of
protein-rich crops amounts to 39 300 tonnes. The prod-
ucts concerned are traded between the other Member
States and Greece. In fact, Greece imports 3 600 tonnes of
protein-rich crops from the other Member States every
year and exports 513 tonnes. The monetary value of those
transactions so far as Greece is concerned amounts to
ECU 0,73 million for exports and ECU 1,54 million for
imports.

(1) Letter from the Commission to the Member States SG(89)

D/5521 of 27 April 1989.

(2) Source Eurostat.

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these measures could affect

trade in
Consequently,
protein-rich crops between the Member States, such being
affected when aid schemes favour entrepreneurs active in
one Member State compared with those in others. The
measures in question have a direct and immediate impact
on the production costs of the enterprises in question.
They give them an economic advantage relative to enter-
prises in the same sector which do not have access, in
Greece and in other Member States, to comparable aid.
Consequently, they distort or threaten to distort com-
petition.

In view of the foregoing, the aid in question is to be
regarded as State aid which satisfies the criteria specified
by Article 92(1) of the Treaty.

VI

Article 92(1) of the Treaty provides that aid which meets
the criteria it specifies is in principle incompatible with
the common market.

The derogations from such incompatibility specified in
Article 92(2)(a) (aid having a social character) and (c) (aid
for certain areas of Germany) clearly do not apply in the
case of the aid in question. Indeed, the Greek Govern-
ment did not invoke them.

The derogation provided for by Article 92(2)(b)
(aid to
make good the damage caused by natural disasters or
exceptional occurrences) does not
the
measure affords excessive compensation for the damage
caused by the drought.

apply since

As for the derogations provided for by Article 92(3), it is
stated that the objectives pursued must be in the interest
of the Community and not just of particular sectors of a
national economy. Those derogations (which have to be
interpreted strictly) can be allowed only in cases where
the Commission is able to ascertain that the aid is neces-
sary for the realisation of one of the objectives envisaged
by that provision. If aid not meeting that condition were
granted the benefit of those derogations, this would ef-
fectively allow trade between the Member States to be
affected and competition to be distorted without its being
justified by the common interest, and consequently allow
unjustified advantages to be conferred in relation to
traders in other Member States.

In this case, no such condition is met by the granting of
the said aid. The Greek Government has not provided
and the Commission has not ascertained any justification

to show that the aid satisfies the conditions required for
application of any of the derogations envisaged in Article
92(3) of the Treaty.

The measures do not serve to promote the execution of
an important project of common European interest
within the meaning of Article 92(3)(b) since because of its
possible effect on trade, the said aid conflicts with the
common interest.

Nor do the measures proposed serve to remedy a serious
disturbance of the economy of the Member State in ques-
tion, within the meaning of the same provision.

As for the derogations envisaged by Article 92(3)(a) and
(c), which relate to aid intended to promote or facilitate
the economic development of certain regions or activities,
it must be pointed out that since the aid in question is in
the nature of operational aid, it cannot bring a lasting
improvement to conditions in the sector and the region
concerned (1).

Consequently, the said aid does not qualify for any of the
derogations provided for under Article 92(3) of the Treaty.

It should further be borne in mind that the aid in ques-
tion relates to one of the products covered by a common
organisation of the market and that there are limits to the
authority of any Member State to intervene in the opera-
tion of any such organisation, which is now the exclusive
prerogative of the Commission.

Common organisations of the market must be regarded as
complete and exhaustive systems that exclude any power
on the part of the Member States to enact measures which
can derogate from them or modify them.

The aid in question must therefore be held to contravene
Community rules. Consequently, none of the derogations
provided by Article 92(3) can be invoked.

The said aid measure is therefore incompatible with the
common market,

HAS ADOPTED THIS DECISION:

Article 1

The aid measure which Greece proposes to grant to lentil
producers in the Prefecture of Levkas is incompatible
with the common market. The grant of that aid cannot
therefore be permitted.

Article 2

Greece must inform the Commission within two months
following notification of this Decision of the measures it
has adopted to comply therewith.

(1) Judgment of the Court of First Instance in Case T-459/93,

Siemens v. Commission [1995] ECR II-1675.

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This Decision is addressed to the Hellenic Republic.

Article 3

Done at Brussels, 14 July 1998.

For the Commission

Karel VAN MIERT

Member of the Commission