2000/369/EC: Commission Decision of 20 July 1999 on aid granted by Italy to Sangalli Manfredonia Vetro (notified under document number C (1999) 2895) (Text with EEA relevance) (Only the Italian text is authentic)
Date: 1999-07-20
Institutions: European Commission
Subjects: Italy, State aid, control of State aid, glass industry, infringement procedure (EU)

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II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 20 July 1999

on aid granted by Italy to Sangalli Manfredonia Vetro

(notified under document number C (1999) 2895)

(Only the Italian text is authentic)

(Text with EEA relevance)

(2000/369/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Com-
munity, and in particular the first subparagraph of Article 88(2)
thereof,

Having regard to the Agreement on the European Economic
Area, and in particular Article 62(1)(a) thereof,

Having in accordance with the abovementioned Articles given
interested parties notice to submit their comments (1), and
having regard to those comments,

Whereas:

I. PROCEDURE

(1) By letter of 10 February 1998, registered as incoming
mail on 11 February 1998 under A/31060, the Com-
mission received a complaint from a competitor concern-
ing aid which the Italian authorities allegedly intended to
grant to Sangalli Vetro SpA to build a flat-glass factory
in Manfredonia in southern Italy. According to the
complainant, the aid was in the form of a land sale at
below the market price, provision of infrastructure free
of charge, the grant of investment aid at an intensity
higher than that allowed under the regional aid scheme
applicable, the grant of employment subsidies, and tax

concessions and reductions in social security contri-
butions. A further complaint about the same aid measures
was received by letter of 25 September 1998 from
another flat-glass producer.

(2) By letters of 18 February, 27 April, 17 July and 27 Octob-
er 1998 the Commission asked the Italian authorities for
detailed information on the measures in question. The
Italian authorities replied by letter of 6 May 1998.

(3)

In view of the lack of sufficiently detailed information
from the Italian authorities, and its doubts about the
compatibility of the aid measures with the common
market, the Commission decided on 22 December 1998
to initiate the procedure laid down in Article 88(2) of the
Treaty and to require the Italian Government to answer
its questions. The Italian Government was informed of
this by letter of 27 January 1999 (SG(99) D/686), which
was published in the Official
the European
Communities with an invitation to interested third parties
to submit their comments on the aid in question (2).

Journal of

(1) OJ C 92, 1.4.1999, p. 5.

(2) See footnote 1.

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(4) The Commission received comments from Sangalli Vetro
SpA, from the recipient Sangalli Manfredonia Vetro Srl,
from Enisud, and from a company intending to move to
the same industrial site as Sangalli Vetro in Manfredonia;
it forwarded them to the Italian Government for its
observations, and the Italian Government replied by letter
of 4 June 1999.

II. DESCRIPTION OF THE AID

II.1. The recipient

(5)

(6)

Italy.

Sangalli Manfredonia Vetro Srl (Sangalli) was set up on
30 January 1998 and has its registred office in Foggia,
It is controlled by Sangalli Vetro SpA
Apulia,
(Sangalli SpA). The Sangalli group operates in the flat-
glass processing industry, obtaining its raw materials
from major flat-glass producers established in various
countries of the European Economic Area.

Sangalli is a medium-sized firm according to the criteria
set out in the Commission recommendation concerning
the definition of small and medium-sized enterprises (3).
When it starts operating in 2001,
it will have 197
employees and assets of ITL 217 million.

(7) The Sangalli Vetro group is also a medium-sized firm
according to the criteria referred to in recital 6. It employs
213 persons and had a consolidated turnover of ITL
65,460 billion at 31 December 1997.

II.2. The measures at issue

(8) The Article 88(2) procedure was initiated in respect of

the following measures:

— the sale of land by Agricoltura SpA to Sangalli at a price
which is apparently not consistent with the market price;
the Commission did not have specific detailed information
concerning the identity of the selling company, the prices
charged and current market prices,

— the subsidies which the regional and/or national authorities
may have granted to Sangalli and other companies for the
construction of infrastructure in the investment area; the

Commission did not have sufficient data to identify the
nature of the infrastructure and to check that it was not
built solely for the Sangalli project,

— investment aid for the building of a new flat-glass factory
allegedly granted by the Italian Government to Sangalli; as
the area concerned is an assisted region, the Commission
noted that the Italian authorities had failed to state the
exact legal basis for the measures in question and that the
forecast market growth, as indicated by the complainants,
would not be enough to absorb a capacity increase,

— a grant of ITL 50 million for employees which Enisud may
have granted to Sangalli, as the Commission was unable to
satisfy itself that it was not State aid,

— aid in the form of tax concessions and reductions in social
security contributions, as the Commission was unable to
establish whether they were covered by an approved
scheme.

III.1. Reply of the Italian authorities to the initiation of
the Article 88(2) procedure

(9) On 18 December 1998, Agricoltura SpA, a company
under private law (Agricoltura) sold a total of 206 563 m2
of land at the industrial site of Mattinata e Mote Sant’Ang-
elo (hereinafter Manfredonia). The Italian authorities state
that the price paid by Sangalli was higher than the
price determined in an expert report carried out by an
independent company on 31 May 1996 for plots adjacent
to the plots in question. In accordance with point II.3 of
the Commission communication on State aid elements in
land and buildings by public authorities (4),
sales of
therefore, it was not necessary to notify the sale, as it did
not comprise any State aid within the meaning of the
Treaty. Furthermore, the price paid was also higher than
that paid at the same time by other investors for adjacent
plots.

(10) The infrastructure that will be provided at the place of
the investment will be used by all the firms located at the
Manfredonia industrial site. It will consist in the supply
of drinking water and the installation of a centralised
water purifying and treatment plant, and a network
of roads and shared parking areas. The cost of the
infrastructure for the exclusive use of Sangalli, for ex-
ample site development and connection to the electricity

(3) OJ C 107, 30.4.1996, p. 4.

(4) OJ C 209, 10.7.1997, p. 3.

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grid, would be borne solely by Sangalli. The Italian
authorities also state that Consorzio per lo Sviluppo
Industriale ASI (Consorzio), which manages the industrial
plots and the infrastructure work, has not, as yet,
determined the charges which firms on the site will have
to pay the use of the common infrastructure. The Italian
authorities state, however, that, as a public business
enterprise, Consorzio is obliged to apply tariffs which at
least cover costs. The tariffs will be set out in a list of
prices adopted by internal procedures which will apply
to all the firms in Manfredonia.

(11) With regard to the situation in the flat-glass market, the
Italian authorities have provided data indicating that the
Italian and Community markets for flat glass are not
suffering from excess capacity. On the contrary, they are
growing by some 2 % a year owing to more varied uses
for flat and other types of glass. This is demonstrated by
the fact that other producers of flat glass are setting up
joint subsidiaries in other European countries. According
the main reason why the
to the Italian authorities,
complainants applied to the Commission is that, once
the new factory at Manfredonia has been built, the
Sangalli group will no longer have to acquire raw
materials from the complainants. The Italian authorities
have forwarded a list with the terms and conditions
applied by the competitors of the Sangalli group.

(12) The investment aid granted totals ITL 135,6 billion, in
respect of eligible, non-discounted costs of
ITL 191
billion. The Italian authorities argue that this corresponds
to an intensity of 40 % net grant equivalent, plus 15 %
gross grant equivalent, which is permitted in an Objective
1b investment region and is calculated in accordance
with the relevant Ministerial order (5).

(13) The Italian authorities state that on 2 May 1998 Manfre-
donia Sviluppo, an incorporated partnership established
in Foggia, Apulia, submitted to the responsible Ministry
an application from Sangalli for admission to the ‘Manfre-

(5) Circolare Ministero dell’Industria No 234363 of 20 November 1997,

as amended by Circolare No 9000043 of 5 February 1998.

donia Area Contract’ (6), an instrument used within the
framework of the regional scheme provided for in Law
No 488 of 19 December 1992 (7). The Sangalli project
was approved on 15 July 1998. The scheme in Law No
488 of 1992 and the ‘area contract’ system were approved
by the Commission in decisions of 30 June 1997 (letter
SG(97)D/4949)
(letter
SG(99)D/1119).

22 December

1998

and

(14) On 7 May 1998 Enisud SpA (Enisud) and Sangalli signed
an agreement which provided for the recruitment of a
maximum of 45 workers formerly employed by ENI
companies that had been hived off. For each ENI worker
actually taken on, Enisud undertook to pay ITL 50 million
(EUR 25 826). The agreement was not notified to the
Commission in the annual report on Enisud’s activities,
as Sangalli had not yet employed any former ENI workers
and would be taking on only those who satisfied the job
requirements. Furthermore, the Italian authorities pointed
out that the Commission had acknowledged in a letter of
10 May 1994 that Enisud’s activities were similar to those
forming the subject of its Decision 92/266/EEC (8) on
French public industrial groups, and that they were not
caught by Article 87(1).

(15) The Italian authorities state that the general reductions in
social security contributions have not yet been granted to
Sangalli and that, when they are, the authorities will
comply with the Pagliarini-Van Miert Agreement of
1 March 1995, extended by decision of 31 March 1998
(letter SG(98)D/2708 of 1 April 1998).

III.2. Comments by interested parties and comments by
Italy

(16) The Commission has comments from Associazione degli
Industriali di Capitanata (the Association) Foggia, Apulia;
from Sangalli SpA; from Sangalli; and from Enisud.

(6) The Manfredonia contract was signed on 4 March 1998. The
examination of the various projects for admissibility was com-
pleted on 15 July 1998. The projects accepted included Sangalli
Vetro.

(7) On the basis of its decision of 21 May 1997 on State aid 27A/97,
notified to Italy by letter No SG (97)D/4949 of 30 June 1997, the
Commission authorised the scheme provided for in Law No 488
of 1992. By decision of 21 December 1998 concerning State aid
810/97, notified to Italy by letter of 9 February 1999,
the
Commission also approved the instruments implementing the
Law, including the area contract instrument.

(8) OJ L 138, 21.5.1992, p. 24.

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(17) The Association emphasises that the Sangalli project, as
part of the Manfredonia area contract, is of considerable
importance to Apulia. With the opening of the new plant,
there will be 500 new jobs, both direct and indirect, and
other small and medium-sized firms will be encouraged
to move to the region. Furthermore, the fact that Sangalli
will be producing glass, the raw material which until now
it has only processed, will strengthen competition in the
common market in an oligopolistic sector.

(18) Sangalli itself also describes the situation in the flat-glass
market in Europe and in Italy. According to its estimates,
production in 2001 (excluding its own output) will be
950 000 tonnes, against demand of 1 058 000 tonnes.
Sangalli justifies its investment by the need to produce its
own flat glass, for which it has until now been dependent
on the major European producers, and provides details
concerning its future sales strategies. It also provides the
same responses to the various points raised in the
procedure as the Italian authorities.

(19) Enisud confirms the statement by the Italian authorities
concerning the non-mandatory nature of the agreement
between Sangalli and Enisud and the fact that the former
has not as yet taken on any former ENI workers. Enisud
also points out that, according to the abovementioned
letter of 10 May 1994 from DG IV,
the industrial
restructuring of the ENI group does not contain any State
aid. Enisud argues that this has been confirmed in the
assessments of Enisud’s annual reports carried out by the
Commission; Enisud also specifies that, despite its efforts
to promote the Manfredonia area contract (assistance for
80 firms totalling ITL 1 400 billion and 4 000 new jobs
planned), no former ENI workers have been employed by
any of the companies in Manfredonia.

(20) In its reply to the comments by third parties, as part of the
procedure Italy states that it agrees with the observations
submitted.

IV. ASSESSMENT OF THE AID

(21) Article 87(1) of the Treaty and Article 61(1) of the
EEA Agreement provide that any aid which distorts or
threatens to distort competition by favouring certain

undertakings or the production of certain goods is, in so
far as it affects trade between Member States, incompat-
ible with the common market.

(22) The procedure under Article 88(2) of the Treaty has
enabled the Commission to determine that some of the
measures in question do not comprise any State aid
within the meaning of Article 87(1) of the Treaty and
Article 61(1) of the EEA Agreement, and that the initial
investment aid complies with an approved scheme. On
the other hand, tax concessions and reductions in social
security contributions granted to the recipient are not
compatible with the common market, as they are not
covered by an approved scheme.

IV.1. The sale of land

(23) Agricoltura is a public enterprise governed by private
law. On 18 December 1998 it sold Sangalli 206 563 m2
of land located within its own operating area at a price of
ITL 15 000 per m2. Agricoltura will bear the costs of
clearing the site and making good the damage caused by
its polluting activities. Its responsibility for such work
will be limited in time (12 months after the sale) and to a
specific proportion of the costs.

(24) The Commission takes the view that the price paid by
Sangalli corresponds to the market price. The Italian
authorities have provided a report, dated 31 May 1996,
carried out by an independent consultancy firm. Accord-
ing to that report, the price per square metre at the
time was ITL 12 000. The Italian authorities have also
submitted other contracts for the sale of parcels of land
in the same area but smaller than that acquired by
Sangalli. The contracts had recently been concluded by
Agricoltura with other firms at ITL 12 000 per square
metre and on the same conditions as those given to
Sangalli: Agricoltura is to bear the costs of clearance and
clean-up within the same time limits. The selling price is
therefore higher in Sangalli’s case than in that of the firms
purchasing adjacent parcels, as its plot is larger, and the
cost of clearing it is in turn higher.

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(25) The Commission therefore concludes that, in accordance
with point II.3(b) of the Commission communication on
State aid elements in sales of land and buildings by public
authorities (9), the sale does not comprise any State aid,
because it took place at a price corresponding to that
established by an independent valuer and to the market
value at the time of the sale.

IV.2. Development of the infrastructure in the invest-
ment area

(26) The infrastructure provided by Consorzio is for the
benefit of all the firms located in the area. According to
the information provided by the Italian authorities it
comprises the supply, purification and treatment of water
and the construction of road links and common parking
areas within the industrial site.

(27) As regards the utilisation of the infrastructure, the Italian
authorities stated in a letter of 6 June 1999 that the
charges cover the costs of the infrastructure provided.
Furthermore, as stipulated in the agreement between
Consorzio and Sangalli, the charges for the use of the
infrastructure will be fixed by internal Consorzio rules,
which will apply equally to all the firms concerned.

(28) The cost of infrastructure specifically benefiting Sangalli,
such as the electricity supply connection and the develop-
ment of the site, is to be borne solely by the firm itself.

(29) The Commission concludes from the foregoing that the
infrastructure is shared by all the firms located within the
Manfredonia industrial area, that it will not be made
available free of charge, and that the charges will be
calculated so as to cover all the costs incurred. Further-
more, the charges will be applied objectively to all the
firms concerned. As the cost of infrastructure for the
exclusive use of each firm, including Sangalli, will be
borne solely by each firm, the Commission concludes
that there is no selective assistance for the recipient
company. The construction of
the infrastructure in
question is not, therefore, caught by Article 87(1) of the
Treaty.

(9) OJ C 209, 10.7.1997, p. 3.

IV.3. The flat-glass industry and the Sangalli feasibility
study

(30) In connection with the initial investment aid, the Italian
authorities have forwarded a feasibility study concerning
the Sangalli project. In 2002, Sangalli will be producing
185 000 gross tonnes, or 160 000 tonnes net, of flat
glass (10) varying in thickness from 2 mm to 20 mm and
of various sizes. Most of
(approximately
100 000 tonnes) will be used by the Sangalli group itself,
and 60 000 tonnes will be used by industry, of which
60 % on the domestic market and 40 % exported to
Greece and eastern Europe.

its output

(31) As already stated in the notice initiating the procedure,
the relevant market is the market for flat glass produced
using the float process developed in the 1960s. The
process makes it possible to produce glass which requires
no further polishing or smoothing and may therefore be
cut and sold directly. This is the process most often used
by the industry’s major producers. Flat glass produced in
this way is then used in the manufacture of panes for
construction, insulation and reinforcement.

(32) The Community flat-glass market is shared by a small
number of large manufactures (11) for whom, despite their
strong expansion into eastern Europe, the Community
market remains the largest outlet (12). According to the
major Community flat-glass manufacturers, after two
years of crisis, 1997 saw an upturn in demand. The new
investment took place mainly in eastern Europe and in
In addition, according to the same
South America.
sources, 1997 witnessed one of
the most extensive
internal restructuring exercises in the industry, involving
losses in jobs and in orders; the prospects for recovery,
they say, are very poor, in a market still suffering from
excess capacity (13).

(10) Flat glass produced by the float process.
(11) According to the magazine Industrial minerals, December 1997,
the flat-glass market in Europe is shared by the following firms:
Pilkington 25 %, Glaverbel 18 %, Saint-Gobain 29 %, Guardian
12 %, PPG 8 %, Sisecam 6 % and Euroglas 2 %.

(12) This is the case for Pilkington plc, Saint-Gobain and Glaverbel.
Websites (28.11.1998): http://www.pilkington.com, www.saint-
gobain.com and www.glaverbel.com.

(13) Pilkington annual

report 1996/97 and 1998, websites
(28.11.1998): http://www.pilkington.com/finance; 1997 annual
report, group performance www.glaverbel.com.

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(33) The Commission notes that the trend towards internal
restructuring and relocation in the countries of eastern
Europe is due, according to the Panorama of EU industry,
to the fact that, ‘The glass industry is going through a
period of reorganisation... . Firms are also responding to
the huge variations in the worldwide labour market, and
are making investments in lower-cost countries to benefit
from cheaper factors of production’ (14). But this does not
prove that capacity in the Community flat-glass market is
greater than requirements.

new entrant Sangalli)’ (19). This was recently confirmed in
a report forwarded to the Commission by the European
flat-glass producers group, which stated that Saint-Gobain
would be opening a new factory at the end of 1999 in
the United Kingdom, that Glaverbel and Pilkington would
be opening another in Spain in mid-2000 and Interpane
in France and Sangalli in Italy would also be doing the
same at the end of 2000, all having the same production
capacity of 500 tonnes a day (185 000 gross tonnes a
year).

(34) According to a study carried out by an independent
organisation, the historical trend in the glass market has
in fact been one of worldwide growth in demand of some
2 to 3 % a year. Over the last 20 years, the figure for
Europe has been 4,4 %. In the European Union, and
specifically in the flat-glass sector, the demand forecasts
are: + 3,2 % in 1998, + 4,6 % in 1999, + 2,9 % in 2000,
+ 4,3 % in 2001, + 2,7 % in 2002, and + 4,0 % in 2003,
representing an average growth in demand of + 3,6 %
over the whole period (15).

(35) The firms themselves predict a growth in demand in the
period 1998 to 2000 of some 2 to 3 % a year. In their
annual reports all the large companies refer to ‘current
insufficient capacity’ (Glaverbel 1998) (16) or state that,
against the corresponding period in 1998, ‘1999 showed
a change based on actual structure of + 4,3 %’ (Saint-
Gobain 1999) (17) or again that ‘total consumption of flat
glass in the 15 EU countries is growing at a rate of
‘glass
4 %, higher than their average GDP’ and that
consumption in 1999 should experience
similar
growth’ (18). This optimistic view of market trends is also
confirmed by the fact that, as stated in the Commission
decision of 7 August 1998 on the acquisition of PPT
Industries Inc. by Glaverbel, ‘In the last five years Guardian
has built a new float-glass plant in Germany. There exist
announced projects for new float-glass plants in Italy,
Spain, Greece and the United Kingdom (mainly by the
existing float-glass producers, but also by the potential

(36) In conclusion, the European flat-glass industry is not in
crisis, which explains the investments planned by the
major companies in the sector. Furthermore, as regards
the Italian flat-glass market, it is likely that there will be a
strong increase in demand owing to the opening of a new
Fiat plan at Melfi, Apulia, and the centralisation of Alfa
Romeo production in Naples.

(37) As regards the processed glass sector in which Sangalli
SpA operates, the Commission concludes that in view of
the market share held by Sangalli, a medium-sized firm,
the aid could not seriously distort competition in that
market.

(38) On the basis of the foregoing, the Commission concludes
that the Sangalli project is viable. First, over 60 % of the
Manfredonia plant output is for the Sangalli group’s own
consumption. The flat-glass supply contracts concluded
by the Sangalli group which the Italian authorities
forwarded to the Commission show that the conditions
and prices applied by the group’s suppliers (Saint-Gobain,
Pilkington and Glaverbel) are not competitive, and that
Sangalli is unable to renegotiate them. With the new
factory at Manfredonia, the group should no longer have
to depend on its suppliers and should achieve higher
profits in the future. Second, the output intended for the
market is equal to only 1 % of demand at European
level (20). Not only is the market
in southern Italy
experiencing strong growth, but Manfredonia is close to
Greece and the Balkans, regions where demand is expect-
ed to surge, so that it can be assumed that production for
the domestic and European markets effectively corre-
sponds to a real demand.

(14) DG III, Panorama of EU industry 97, Vol. I, pp. 9-8 to 9-14.
(15) Study published by Frost & Sullivan Market Research in 1997.
(16) Statement by Luc Willame, CEO of Glaverbel, to the General
Shareholders’ Meeting on 27 May 1998. Source: http://www.glav-
erbel.com (28.11.1998).

(17) http://www.saint-gobain.com (15.6.1999).
(18) Glaverbel 1998 annual report,

‘Management report’, section
headed ‘European glass consumption up’. Source: http://www.gla-
verbel.com (14.6.1999).

(19) Point 22 of the decision of 7 August 1998 declaring a concen-
tration to be compatible with the common market
(Case
IV/M.1230 — Glaverbel/PPG), OJ C 282, 11.9.1998, p. 2.
(20) According to estimates by the Assiciation of flat-glass producers,
forecast demand in the EU will be 6 390 million tonnes in 1999,
6 737 million tonnes in 2000 and 7 180 million tonnes in 2001.

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IV.4. Regional aid

(39) On the basis of the information supplied by the Italian
authorities in the course of this procedure, the Com-
mission concludes that Italy, in granting non-repayable
aid amounting to 70 % gross of the initial investment
costs to Sangalli
in Manfredonia, complied with Law
No 488/92. The grand of ITL 135,630 billion, to be paid
in three equal annual instalments in respect of eligible
costs of ITL 191 billion (21), corresponds to the maximum
intensity allowed by Law No 488/92 (40 % nge + 15 %
gge) for a medium-sized firm such as the recipient (see
section II.1) in the investment area, which is in a region
qualifying for aid under Article 87(3)(a) (22).

(40) The aid also complies with the instrument implementing
Law No 488/92, the area contract (23). The area contract
is intended to stimulate new employment initiatives and
create jobs in industry, agriculture, the services sector and
tourism. In accordance with the regional aid schemes the
public authorities grant aid for investments that are viable
from a technical, economic and financial standpoint and
which benefit on their own account from favourable
terms from credit institutions (24).

the investment, appear to be adequate. Lastly, as regards
job creation, the Commission notes that the project
creates 197 direct jobs (management and workers) and
306 indirect jobs. Sangalli will obtain its supplies of raw
materials (chiefly the glass-making sands) and its service
requirements (land and sea transport) in situ.

(43) Accordingly,

the Commission concludes that,

in the
present case, the regional aid granted by the Italian
authorities to Sangalli complies with the terms and
intensities of the scheme in Law No 488/92, which has
already been approved by the Commission.

IV.5. Employment subsidy granted by Enisud

(44) By letter of 10 May 1994 the Commission stated that,
applying by analogy Decision 92/266/EEC (26), the con-
version activities of Enisud did not constitute State aid
within the meaning of Article 87(1) of the Treaty. As
requested in the letter, the Italian authorities had under-
taken to send a report on the conversion activities of
Enisud every year in order to verify that State aid was not
being used (27). The Italian authorities have, to date,
regularly presented such a report, and the Commission
the conversion
has not expressed any concern that
measures taken by Enisud might contain State aid after
all.

(41) Although the regional aid in question reaches the thresh-
old provided for in the multisectoral
framework on
regional aid for large investment projects (25), it is not
subject
to the obligation to notify the Commission
provided for in the framework. Italy formally granted
Sangalli the aid in question on 15 July 1998, i.e. prior to
the entry into force of the framework.

(45) Enisud belongs to the ENI group, which has been in the
process of privatisation since December 1995 (28). The
Treasury currently holds only a minority shareholding
(36,3 %) (29). None of ENI’s Board members are appointed
by the State nor, as regards the conversion activities, are
the supervisory bodies linked to the public authorities.

(42) On the basis of the information in recitals 30 to 38
and the abovementioned feasibility study presented by
Sangalli to the Italian authorities, the Commission con-
cludes that the Sangalli project is viable. Furthermore, the
financing prospects and conditions applicable to Sangalli
for its contribution to the project, amounting to 25 % of

(46) The conversion activities essentially consist in finding
employment for group employees currently without a
job (covered by wage guarantee fund and mobility
schemes) and in promoting industrial initiatives in areas
where ENI has closed plants. The cost of such measures
has been borne by the group (30) and has accounted for
0,28 % of its own funds (in-house financing).

(21) The eligible costs break down as follows: 5 % for studies
(ITL 9,5 billion); 3 % for land (ITL 5,5 billion); 20 % for plant
(ITL 43,3 billion); and 72 % for equipment (ITL 132,6 billion).
(22) See decision of 21 May 1997 on State aid 27A/97 which lists
the intensities allowable in Article 88(3)(a) regions, (OJ C 242,
8.8.1997).
(23) See footnote 7.
(24) See footnote 6.
(25) OJ C 107, 7.4.1998, p. 7.

(26) See footnote 8.
(27) See, inter alia, the 1997/98 annual report sent to the Commission
in connection with the supervision of the conversion activities
(document registered as incoming mail on 18 November 1998
under A/38296).

(28) ENI shares have also been quoted on the stock exchange since

1995.

(29) See http://www.eni.it (28.6.1999).
(30) According to ENI estimates contained in the report, the total
conversion costs will be ITL 100 billion, and the activity is to
continue until the end of 2000.

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(47) The Commission therefore concludes that the grant of
ITL 50 million per worker to firms which employ former
ENI workers is not caught by Article 87(1) of the Treaty.
As the resources used are not State resources, and the
ENI group conducts its worker re-employment policy
independently, the measure in question cannot be regard-
ed as State aid.

(52) The most recent decision of 31 March 1998, however,
relates only to the part concerning the reductions in
social security contributions. The Commission there
decides that aid to employment, which is aid not connect-
ed with investment and exempting for one year from
social security contributions firms that create new jobs in
specific regions of Italy, is compatible with the common
market on the basis of the guidelines on aid to employ-
ment (34).

(48) When it

initiated the procedure,

the Commission
expressed doubts about the fact that the abovementioned
annual report for the period from 1997 to October 1998
did not refer to the grant
to Sangalli. The Italian
authorities, like ENI and the recipient, have confirmed
that the measure was not included in the annual report
because the recruitment by Sangalli had not taken place;
accordingly, the doubts expressed by the Commission
have been resolved.

IV.6. General reductions in statutory contributions

(49) In their reply to the initiation of proceedings, the Italian
authorities stated that any general reductions in statutory
contributions (sgravi contributivi di tipo generale) granted to
Sangalli, will comply with the Pagliarini-Van Miert.
Agreement of 1 March 1995, extended by letter of 1 April
1998 (SG(98)D/2708).

(50) The Commission notes that the decision of 31 March
1998 (31), communicated to Italy by the letter of 1 April
1998 referred to in recital 15, renews only some of the
measures contained in Decision 95/455/EC of 1 March
1995 on the arrangements for reducing the social security
contributions paid by firms in the Mezzogiorno and for
assigning to the State some of those contributions (32).

(51) The earlier decision provided for the dismantling of the
system of reductions in social security contributions in
the Mezzogiorno (0 % by 1 December 1997) (33).
In
in relation to centre-north
addition,
regions in the proportion of contributions taken over by
the State under the fiscalizzazione measures was to be
phased out as follows: 2 % at 1 January 1998, 1 % at
1 January 1999 and 0 % at 1 January 2000.

the differential

(31) OJ C 188, 17.6.1998, p. 8.
(32) OJ L 265, 8.11.1995, p. 23.
(33) The decision provides for a different system for Abruzzi.

(53) Sangalli is a new company that is due to start operating
in 2001, when the abovementioned decision will no
longer be applicable. Furthermore, the jobs created are
in this instance,
linked to investment. Accordingly,
reductions in tax and social security contributions are not
covered by a scheme approved by the Commission.

(54) As they are not provided for in a scheme approved by
the Commission, the reductions constitute new individual
aid measures, the compatibility of which with the com-
mon market must be specifically assessed in the light of
their characteristics.

(55) The aid in question is not compatible with the common
market and does not qualify for exemption under
Article 87(2), as it is not aid of a social character granted
to individual consumers and is not intended to make
good the damage caused by natural disasters or other
exceptional occurrences. Neither does it qualify for
exemption under Article 87(2)(c). Nor is exemption under
Article 87(3)(b), (c) and (d) possible, as the aid is not
intended to promote the execution of an important
project of common European interest or to remedy a
serious disturbance in the economy of a Member State,
or to facilitate the development of certain economic
activities or to promote culture and heritage conservation.
However, the recipient is located in a region qualifying
for assistance under Article 87(3)(a), and the Commission
must determine the compatibility of the aid under that
exemption.

(34) OJ C 334, 12.12.1995, p. 4. The granting of such aid is subject

to the following conditions:
— the workers recruited must be unemployed,
— the recruiting firms must not have dismissed staff in the last

12 months,

— recruitment must involve the creation of new jobs, measured
against the number of staff employed by the firm in the
12 months preceding the recruitment,

— contracts must be open-ended or of sufficient length to
guarantee some job stability (employment must be guaran-
teed for at least 12 months following payment of the aid). In
the event of combination with other aid, the total amount of
the aid may not exceed the higher ceiling in the schemes
concerned.

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Official Journal of the European Communities

L 137/9

(56) Point 10 of the guidelines on aid to employment referred
to in recital 52 specifies that the guidelines cover only aid
that is not linked to investment: ‘Even where investment
aid is calculated per job created or includes premiums for
job creation, it does not constitute employment aid as
such since it is not directly intended to create or maintain
jobs. In view of its purpose and its permanent effects on
the industrial structure, such aid should be treated just
like any other investment aid and should be subject to
the normal assessment criteria’.

(57) The Commission concludes that the jobs created in
connection with the investment have already been taken
the regional aid scheme (Law
into account under
No 488/92). As a result,
if Sangalli were to receive
additional aid for the new jobs created, that aid would
come on top of the investment aid forming the subject of
this procedure: the total would exceed the maximum
levels for the assisted region in question. The intensity of
the investment aid provided for in Law No 488/92
already corresponds to the maximum intensity for the
assisted region in question, so that combination with aid
in the form of reductions in tax and social security
contributions would result in the maximum levels being
exceeded, which would be incompatible with the com-
mon market.

(60) The investment aid of ITL 135,630 billion complies with
the conditions and intensities provided for in Law
No 488/92, already approved by the Commission. That
aid is therefore compatible with the common market.

(61) The contribution of ITL 50 million per worker which
Enisud may grant to Sangalli does not comprise State aid
within the meaning of Article 87(1) of the Treaty, as it
does not involve the use of public resources and the
public authorities are not involved in the choice of
recipient.

(62) On the other hand, tax relief and the social security
reductions to which the Italian authorities refer in their
letter of 6 May 1999 constitute aid which is not covered
by Decision 95/455/EC. The benefit of that aid combines
with the aid under Law No 488/92, as it is aid linked to
initial investment benefiting firms in the regions provided
for in Article 87(3)(a). As the intensity of the aid corre-
sponds to the maximum for the assisted region in
question, combination with aid in the form of
tax
concessions and social security reductions would result
in the regional ceilings approved by the Commission
being exceeded and thus render the aid in question
incompatible. The Italian authorities are therefore not
authorised to grant such aid to Sangalli.

(58) For those reasons, the Commission concludes that aid
in the form of reductions in tax and social security
contributions granted to Sangalli constitutes incompat-
ible aid since it does not qualify for any of the relevant
exemptions.

(63) On the basis of the information supplied by the Italian
authorities, the Commission concludes that no State aid
has been granted to the firm in question in advance of
the Commission’s final decision,

V. CONCLUSIONS

HAS ADOPTED THIS DECISION:

(59) On the basis of the foregoing, the Commission considers
that the sale of land by Agricoltura to Sangalli does not
comprise State aid as the sales price is consistent with the
value calculated by an independent expert and with the
price recently paid by other firms in similar transactions.
Furthermore, the construction of infrastructure in the
investment area cannot be regarded as State aid, as the
infrastructure is used by all the firms located in the same
industrial site and the charges, based on costs incurred,
are applied objectively to all the firms. The costs of any
infrastructure for the sole use of any one firm will be
borne solely by that firm.

Article 1

The sale of land by Agricoltura SpA to Sangalli Manfredonia
Vetro Srl, the construction of common infrastructures in the
investment area and the contribution that will be granted by
Enisud SpA to Sangalli Manfredonia Vetro Srl
for each
employee of the ENI group who is recruited by Sangalli
Manfredonia Vetro fall outside the scope of Article 87(1) of
the Treaty.

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Official Journal of the European Communities

8.6.2000

Article 2

Article 4

The aid granted by Italy to Sangalli Manfredonia Vetro Srl
totalling ITL 135,630 billion complies with Law No 488 of
19 December 1992 establishing a regional aid scheme
approved by the Commission.

Article 3

Italy shall not grant tax concessions or reductions in social
security contributions to Sangalli Manfredonia Vetro Srl
inasmuch as such measures are not part of a scheme approved
by the Commission and constitute aid that is incompatible
with the common market.

Italy shall inform the Commission within two months of the
date of notification of this Decision of the steps it has taken to
comply herewith.

Article 5

This Decision is addressed to the Italian Republic.

Done at Brussels, 20 July 1999.

For the Commission

Karel VAN MIERT

Member of the Commission