2002/458/EC: Commission decision of 1 March 2002 on the aid schemes implemented by Greece in favour of the settlement of debts by the agricultural cooperatives in 1992 and 1994 including the aids for reorganisation of the dairy cooperative AGNO (notified under document number C(2000) 686)
Date: 2000-03-01
Institutions: European Commission
Subjects: Greece, State aid, agricultural cooperative, aid for restructuring, aid system, debt, economic support, fraud, milk

17.6.2002

EN

Official Journal of the European Communities

L 159/1

II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 1 March 2002

on the aid schemes implemented by Greece in favour of the settlement of debts by the agricultural
cooperatives in 1992 and 1994 including the aids for reorganisation of the dairy cooperative
AGNO

(notified under document number C(2000) 686)

(Only the Greek text is authentic)

(2002/458/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

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

first

the

Having called on interested parties to submit their comments
pursuant to the provision cited above (1) and having regard to
their comments,

Whereas:

I. PROCEDURE

INITIAL OPENING OF THE ARTICLE 88(2) PROCEDURE

(1) On 7 June 1993, the Commission was informed by
letter from the Greek Minister of Agriculture of the
intention of the Greek Government to apply the pro-
visions of Article 32(2) of Greek law No 2008/92 to
write off the debts of several types of cooperatives to the
Agricultural Bank of Greece (ABG), concerning the
period 1982 to 1989.

(2)

At an early stage, the Commission considered this letter
as a notification within the meaning of Article 88(3) of
the Treaty. Subsequently, the Commission was informed

(1) OJ C 100, 2.4.1998, p. 7 and OJ C 107, 7.4.1998, p. 19.

(3)

(4)

of the fact that aid provided for in Article 32(2) of Greek
law No 2008/92 had already been granted, at least to the
dairy cooperative AGNO, without previous Commission
approval. Taking this into account, the Commission
decided to include these legal provisions in the register
of non-notified aids (NN 168/97).

By letter SG (97) D/10773 dated 19 December 1997,
the Commission informed Greece of its decision to
initiate the procedure laid down in Article 88(2) of the
EC Treaty in respect of the aid measures to reimburse
debts of cooperatives pursuant to Article 32(2) of Greek
law No 2008/92. The file was registered under Aid C 82/
97.

SECOND OPENING OF THE ARTICLE 88(2) PROCEDURE

By letter of 20 November 1995,
the Commission
received a complaint regarding aid to the dairy cooperat-
ive AGNO in northern Greece. According to the com-
plainant, the Greek authorities decided, through the
ABG, to assist AGNO in paying some or all of its debts,
possibly amounting to GRD 13 billion. AGNO had
supposedly also benefited from fiscal concessions avail-
able to cooperative companies in the agricultural sector
in Greece.

L 159/2

EN

Official Journal of the European Communities

17.6.2002

(5)

(6)

(7)

(8)

Following requests for additional information, two bilat-
eral meetings were held, at the request of the Greek
authorities, on 16 May 1997 and 23 July 1997 between
the Greek authorities and the Commission. As a result of
these meetings, the Greek authorities supplied additional
information by letters dated 9 June and 29 August 1997.

As a result of this exchange of information with the
Greek authorities, it was possible to ascertain that AGNO
benefited from the following measures, all provided by
the ABG:

— GRD 851 million in the framework of Article 32(2)
of Greek law No 2008/92 (Aid NN 168/97)
and GRD 529,89 million in the framework of
Article 19(1) of Greek law No 2198/94 (non-
notified) for compensation for losses due to the
Chernobyl nuclear disaster,

— GRD 10,145 billion in the framework of Article 5
in a
of Greek law No 2237/94 (non notified)
consolidation loan linked to a debt due to the
considerable delays in the implementation of an
investment project,

— GRD 1,899 billion in the framework of Act of the
Governor of the Bank of Greece No 1620 of
5 October 1989 allowing banks to consolidate
loans to clients (non-notified).

By letter SG (97) D/10775 dated 19 December 1997,
the Commission informed Greece of its decision to
initiate the procedure laid down in Article 88(2) of the
EC Treaty in respect of the general provisions for debt
consolidation of agricultural cooperatives, as well as in
respect of
the dairy
the aids for reorganisation of
cooperative AGNO. The file was registered under Aid
C 78/97.

200 cooperatives and the unions, companies and far-
mers via the ABG (C 32/98) (2). The overall amount of
at
to
debt
GRD 163 billion.

be written-off was

established

(9)

Subsequently, Greece made a request to the Council to
agree to such measures pursuant to the provisions of
Article 88(2)(3). By Decision of 15 December 1998, the
Council agreed to this request (3).

(10) Consequently, the provisions of Articles 14 to 17c of
Greek law No 2538/97 are not covered by the present
Decision.

Comments

(11) Both Commission Decisions to initiate the procedure
were published in the Official Journal of the European
Communities (4). The Commission invited interested par-
ties to submit their comments on the measures.

(12) By letters of 18 March 1998, and of 31 March 1998,
registered on 8 April 1998, the Greek authorities have
submitted their observations to the Commission on,
respectively, aid files C 78/97 and C 82/97.

(13) By letter dated 30 April 1998, registered on 4 May
1998, and of 7 May 1998, registered on the same
date, the Commission received comments from the
Association of Greek Dairy Product Industries (Sevgap)
on, respectively, aid files C 78/97 and C 82/97. These
comments were forwarded to Greece which was given
the opportunity to react by letter dated 25 May 1998.
The Commission also received, on 12 March 1999, the
observations of the Agricultural Bank of Greece in
respect of the debt consolidation of AGNO and other
agricultural cooperatives.

THIRD OPENING OF THE ARTICLE 88(2) PROCEDURE

(14) By letter dated 18 August 1998, registered on 20 August
1998, Greece transmitted its remarks concerning the
submission of Segvap.

The Commission has already investigated debt write-offs
from the Greek State via the ABG in favour of agricul-
tural cooperatives. By letter SG (98) D/4020 of 20 May
1998, the Commission communicated to the Greek
Government its decision to open the procedure provided
for in Article 88(2) of the Treaty in relation to Articles 14
to 17c of Greek law No 2538/97 of 1 December 1997
allowing the Greek State to write off debts of over

(15) By letter dated 12 March 1999, the ABG forwarded its
comments in relation to both Article 88(2) procedures.

(2) OJ C 376, 4.12.1998, p. 2.
(3) OJ C 120, 1.5.1999, p. 16.
(4) See footnote 1.

17.6.2002

EN

Official Journal of the European Communities

L 159/3

II. DESCRIPTION

(21)

ARTICLE 32(2) OF GREEK LAW No 2008/92

(16) Article 32(2) of Greek law No 2008/92 establishes that
the Greek State may assume and settle debts to the
ABG incurred by primary, secondary and other tertiary
cooperative associations, cooperatives and companies
between the years 1982 and 1989, provided and to the
extent that they were incurred due to the implementation
of social or some other intervention policy on the
instructions and on behalf of the State.

(17) Article 32(3) of Greek law No 2008/92 establishes that
the assumption and settlement of the said liabilities shall
take place subject to the essential prerequisite that the
cooperative association, cooperative or company shall
be deemed viable.

(18) According to the letter from the Greek authorities dated
7 June 1993, the Greek Government undertook to apply
these legal provisions to write off debts of several types
of cooperatives towards the ABG, for the period 1982 to
1989. The beneficiaries had to be considered viable on
the basis of restructuring plans approved by a special
committee created for this purpose. According to this
letter, the Greek Government had committed to reim-
burse to the ABG part of the outstanding debt from
totalling
61 agricultural
GRD 91,769 billion,
from an overall amount of
GRD 266,126 billion.

associations,

cooperative

(19) The letter from the Greek authorities of 7 June 1993
refers to the fact that these debts arise from reductions
in the retail price of goods, benefiting consumers. Due
to this fact, the Greek authorities considered it was
impossible to recover the sums involved. Nevertheless,
an early assessment of the scheme showed that it can
also cover debts arising from other reasons such as
marketing policies,
lack of own capital,
investments,
extraordinary events and other things.

In the letter opening the procedure provided for in
Article 88(2) of the Treaty, the Commission requested
the
Greece to provide extensive information about
interventionist and social policy of the Greek Govern-
ment
in the agricultural sector as well as Greece’s
position about compatibility of this policy with the
common agricultural policy. The Commission also
required information as to the criteria used to assess the
viability of agricultural cooperatives and conformity
with the Community policy for restructuring companies
in difficulty.

(22)

In the particular case of the aid granted to AGNO in the
framework of Article 32(2) of Greek law No 2008/92,
the Commission considered that the Chernobyl nuclear
accident was an ‘extraordinary event’ within the meaning
of Article 87(2)(b) of the Treaty. However, the Com-
mission expressed doubts about the applicability of
this Treaty provision to compensate for damage that
occurred more than five years after the actual losses
incurred. Equally, the Commission took the view that
the amount granted (GRD 1,38 billion,
including
GRD 529,89 million in the framework of Article 19(1)
of Greek law No 2198/94) may have led to overcompen-
sation for the damage incurred.

(23) After clarification, the Greek authorities indicated that
the Greek State wrote off an overall amount of
GRD 37,835 billion for 116 cooperatives that were
judged viable on the basis of specific restructuring
and rationalisation programmes. Greece supplied the
individual sheets that formed the basis for the ABG
write-offs, indicating for each cooperative the amount
and the reason(s) for the write-off.

(24) The analysis of the individual files indicates that the
measures concerned cooperatives in all subsectors of
agricultural production. The 116 files indicate that the
reasons for the write-offs are extremely varied. The most
important ones are:

— production aids,

— collection and marketing of agricultural products,

(20)

In their letter of 9 June 1997 relating to aid file No C 78/
97, the Greek authorities confirmed that they applied
legal provisions to compensate for damage caused to the
dairy cooperative AGNO by the Chernobyl nuclear
disaster. This cooperative was on the list of 61 organis-
ations mentioned in the Annex to the Greek letter of
7 June 1993.

— storage of agricultural products,

— export of agricultural products,

L 159/4

EN

Official Journal of the European Communities

17.6.2002

— acquisition of the materials needed for the pro-

duction process,

— operating expenses,

— management of pesticides on behalf of SYNEL and

animal feed on behalf of KYDEP,

Furthermore, assistance may be conditional on the
execution of certain conditions (such as administrative/
organisation modernisation, reduction of personnel,
reinforcement of own capital, etc.).

— unspecified debt to the ABG,

— damage caused by a price-fixing policy,

(28) The Greek authorities have supplied copies of the AGB
Circulars No 150/94 and No 22/95 containing detailed
implementation provisions for Article 5 of Greek law
No 2237/94.

— compensation due

actions
(reduction of Community aids, ban on exports,
inspections),

to administrative

— damage caused by social policy,

— damage caused by the Chernobyl nuclear accident,

(29) Greece indicated that a large number of cooperative
associations (116) have benefited from these debt
rescheduling arrangements. One of these cooperatives
was the dairy business AGNO.

— investments.

Article 5 of Greek law No 2237/94

(25) Greek law No 2237/94 is a law implementing Council
Regulation (EEC) No 2079/92 concerning aid to encour-
age early retirement of farmers (5). However, added to
the text of Greek law No 2237/94 is a series of
provisions concerning the debts of agricultural cooperat-
ives. According to Article 5 of this law,
the ABG
may, within specified parameters, assist agricultural
cooperatives with the payment of outstanding debts.
These arrangements apply to any debt outstanding at
31 December 1993 which is attributable to objective
and external circumstances (e.g. not to mismanagement).

(26) According to this law, no interest is payable on the loan
for the first half of the term, whereafter interest is
chargeable at a rate of 50 % of the normal market rate
for such loans. The duration of the loan is established at
10 years. The ABG has however the faculty, in excep-
tional cases where the deficits are particularly important,
to extent the reimbursement period to 15 years, with a
grace period of three years, or to reduce the applicable
rate to less than 50 % of the market rate.

(27) According to this law, assistance to cooperatives is
subject to the previous submission of a development/
modernisation feasibility study, demonstrating that the
cooperatives are able to reimburse the rescheduled debts.

(5) OJ L 215, 30.7.1992, p. 91.

(30) AGNO is a union of 74 cooperatives and 35 producer
groups active in the dairy sector in Northern Greece
(Macedonia). AGNO is active in all activities linked to
the milk sector, from the production of animal feed to
marketing of dairy products. In 1994 AGNO was the
third largest operator in Greece in terms of sales of fresh
milk (14 % market share). AGNO is also active in the
production of other types of milk, cheese, yoghurt and
other drinks. At the date of the debt settlements, AGNO
had a turnover of GRD 19,8 billion and 912 employees.

(31) The ABG signed with AGNO a loan for regularisation of
debts outstanding at 31 December 1993 at the latest.
The overall amount of this loan is GRD 10,145 billion.
This amount is due to financial charges incurred on
investment projects linked to the removal and modernis-
ation of the dairy industry. An extremely long tendering
process affected the investment financial plan unfavour-
ably.
of
GRD 8,5 billion, the project finished with a total cost of
GRD 13,5 billion, i.e., a 58 % increase.

expected

instead

Thus,

cost

an

of

(32) According to the Greek authorities, AGNO, and other
cooperatives, benefited from the debt rescheduling after
submission of a feasibility study, evaluated and approved
by the ABG according to purely banking criteria, and
subject to the realisation of a concrete programme for
restructuring of the milk industry, the execution of
which is monitored by a special expert committee.

17.6.2002

EN

Official Journal of the European Communities

L 159/5

(33)

In the case of AGNO, the initial measures for financial
recovery consisted of reductions of operational costs,
such as personnel (150 persons in three years), extra
hours by 80 %, wages over legal thresholds by 20 %,
publicity expenses by 2 % and general costs by
GRD 50 million. These measures include also ensuring
new resources, such as recovery of cooperative capital,
increase of cooperative fees by GRD 50 000, imposition
of a special levy on delivered milk GRD 1,5/kg on the
first three years and GRD 3/kg after 1998) and sale of
real estate. A secondary set of measures was equally
foreseen.

ACT OF THE GOVERNOR OF THE BANK OF GREECE No 1620 OF
5 OCTOBER 1989

(37) The Act of the Governor of the Bank of Greece No 1620
of 5 October 1989 authorises credits institutions in
Greece to regularise their debts pursuant to any type of
loans in GRD or foreign currencies. The same act allows
the banks to convert loans into equity. This provision
applies to all banks, both public and private.

(34)

In its Decision concerning the opening of the procedure
provided for in Article 88(2) of the Treaty, the Com-
mission considered that the assistance given to cooperat-
ives to pay its debt pursuant to Article 5 of Greek law
No 2237/94 is a State aid within the meaning of
Article 87(1) of the Treaty.

(35)

(36)

Firstly, the ABG would be regarded as a public enterprise
in the meaning of Commission Directive 80/723/EEC
between Member States and public entreprises (6). Sec-
ondly, the Commission considered that the principle of
the private investor in a market economy was not
followed by the ABG, since the consolidation loans were
given on conditions extremely favourable to companies
in difficulty. Thirdly, the Commission considered that
these operations would not take place in normal market
conditions.

In the framework of the appraisal of the aids, the
Commission considered that the provisions of Article 5
of Greek law No 2237/94 did not respect either the
general conditions of the Community guidelines for
State aids for rescue and restructuring of companies in
difficulty (7) (hereinafter ‘guidelines’) in force at the date
of
the Article 88(2) procedure or
the special rules applicable to aids in the agricultural
sector (8), that may be applicable in place of the general
rules. The same conclusion applied to the specific aid
granted to AGNO pursuant to these provisions.

the opening of

(38)

In 1992, the Act of the Governor of the Bank of Greece
No 2091 of 11 June 1992 introduced minimal rates for
these consolidations: 18 % for short-term loans and
17 % to medium- and long-term loans. These limits were
subsequently abolished by the Act of the Governor of
the Bank of Greece No 2326 of 4 August 1994.

(39) The Greek authorities have indicated that AGNO also
benefited from a debt rescheduling of GRD 1,899 billion
in the framework of the Act of the Governor of the Bank
of Greece No 1620 of 5 October 1989. The loan was
granted for 10 years (including a two-year period where
only simple interest is calculated), at the rate in force for
medium-term loans.

(40)

In parallel with the position taken regarding Article 5 of
Greek law No 2237/94, Greece considered that this
provision does not involve State aid within the meaning
of Article 87(1) of the Treaty.

(41)

In the light of the parallelism of this mechanism with
the one described previously and on the basis of the
scanty information available at the time, the Commission
decided also to open the procedure provided for in
Article 88(3) of the Treaty also in respect of these
provisions.

TAX EXEMPTIONS

(6) OJ L 195, 29.07.1980, p. 35, Directive as last amended by

Directive 93/84/EEC (OJ L 254, 12.10.1993, p. 16).

(7) OJ C 368, 23.12.1994, p. 12.
(8) SEC (89) 343/2, 7 March 1989.

(42)

In their letter of 20 November 1995, the plaintiff also
mention the granting of State aid to AGNO via Greek
laws No 2238/94 and No 2169/93. As these laws
concerned the general financing of agricultural organis-
ations and the general tax law, the Commission con-
sidered that these do not involve State aid to agricultural
cooperatives within the meaning of Article 87(1).

L 159/6

EN

Official Journal of the European Communities

17.6.2002

III. COMMENTS FROM THIRD PARTIES

amount of GRD 500 billion, Article 5 of Greek law
No 2237/94 and the provisions of Greek law No 2538/
97.

(43) The only third party submitting comments in procedures
C 78/97 and C 82/97 was Segvap, the plaintiff in the
case.

(44)

In general, the plaintiff considers that there is a regular
long-term policy of the Greek authorities, using govern-
ment resources, to treat assisting companies not on the
basis of objective criteria but because of their status. The
plaintiff consider this policy harmful and discriminatory
in relation to non-cooperative undertakings, that cannot
have access to such aids. The result of this practice is the
survival of companies with structural weaknesses, low
productivity, and an incapacity to adapt to a competitive
environment. In conclusion, the plaintiffs consider that
this policy is harmful to the agricultural economy in
Greece and the European Union.

ARTICLE 32(2) OF GREEK LAW No 2008/92

(45)

In particular regarding Article 32(2) of Greek law
No 2008/92, the plaintiff maintains that the measure
constitutes State aid within the meaning of Article 87(1)
of the Treaty. Indeed, it involves consumption of State
resources and selectively benefits certain undertakings.

(46) Article 87(2) and (3) provides for certain types of aid
that can be reconciled with the common market. The
plaintiffs consider that only Article 87(3)(c) could be
applicable. In that, they consider that the measure does
not fulfil the conditions to be considered compatible
with the common market in the light of the guidelines.

(47)

In particular, the plaintiffs note that Greece did not
supply any evidence of the existence of restructuring
programmes relating to the restoration of viability of the
beneficiary enterprises,
the requisite reduction pro-
duction capacity, the enhancement of their competi-
tiveness in the relevant market, and the proportional
ratio between the aids granted and the contribution of
the beneficiary to the restructuring effort. There is no
real programme to ensure financial soundness of the co-
operatives, only a succession of debt settlements.

(48) The plaintiffs alert the Commission to the recurrent
nature of such debt write-offs. In particular, Greek law
No 2198/94 approving a debt settlement for an overall

(49) Regarding the aid granted to AGNO in particular, in the
framework of Article 32(2) of Greek law No 2008/
92, the plaintiffs consider that the debt amount of
GRD 851 million cannot be attributed to the Chernobyl
nuclear accident. On the one hand, the plaintiffs sustain
that all milk companies (including AGNO) continued to
deliver fresh milk products to the market during the
whole of 1986. Also, it is very unlikely that AGNO
would destroy 19 000 t of milk. Most of
it was
dehydrated into milk powder, subsequently used for the
production of other dairy products.

(50) The plaintiff calls upon the Commission to declare that
the provisions of Article 32(2) of Greek law No 2008/
92 are incompatible with the common market.

ARTICLE 5 OF GREEK LAW No 2237/94

(51) The plaintiffs consider that the distinction made by the
Greek authorities between the ABG and the Greek
State is new and manifestly contrary to the spirit of
Article 87(1) of the Treaty.

(52) According to the plaintiffs, the conditions of Article 5
of Greek law No 2237/94 are evidently more favourable
than the general rules for regularisation of debts foreseen
in the Act of the Governor of the Bank of Greece
No 1620 of 5 October 1989, namely in terms of interest
rates (where they are actually set at 50 % of the market
rates) and in terms of duration of the loans (in relation
to normal banking practice).

(53) The plaintiffs disagree with the assertions of the Greek
authorities that the terms of adjustment of AGNO’s debt
were made solely on the basis of banking practices and
criteria. Not only are the terms of the consolidation
loans considered extremely favourable, but also the
criteria should be made explicit by the Greek authorities.
Furthermore, a report on the execution of the restructur-
ing programme should be made public.

17.6.2002

EN

Official Journal of the European Communities

L 159/7

TAX EXEMPTIONS

(54) The plaintiffs do not support the initial conclusion of
the Commission relating to the absence of State aids in
favour of agricultural cooperatives in the framework of
Greek law No 2238/94, relating to the general tax
legislation in Greece. The plaintiff argues that
the
cooperatives benefiting from tax exemptions are favou-
red in relation to other undertakings in the same
objective circumstances.

IV. COMMENTS FROM GREECE

(55) The Greek authorities transmitted their remarks in
several stages. Firstly, they supplied their initial reactions
to the opening of
the procedure provided for in
Article 88(2) of the Treaty. At a later stage, Greece sent
comments in relation to the submissions made by the
plaintiffs. Finally, the ABG sent its comments. Due to
the nature and status of the ABG (see point 108), these
remarks are considered as an additional submission by
the Greek authorities and not as comments from third
parties.

ARTICLE 32(2) OF GREEK LAW No 2008/92

(56)

In their initial remarks to the opening of the procedure
provided, the Greek authorities pointed out that the
cooperatives have a special status in the agricultural
economy, that their members have joint liability, that
they have a statutory obligation to take over the
production of their members and dispose of it at the
best possible market prices (regardless of whether or not
they manage to do so in the end). Furthermore, Greece
added that they represent the interests of large groups of
producers farming in mountain, hill and lessfavoured
areas.

(57) During the period in question (1982 to 1989),

in
addition to the Chernobyl nuclear disaster, Greece
suffered from many natural disasters that had a negative
impact on the financial situation of the cooperatives.
The Greek authorities attach a list of 24 natural disasters
that affected Greece during that period. According to
the Greek authorities,
these disasters
were flooding, high winds, snowstorms, heavy rainfall,
disease, bad weather,
low temperatures, scab,
drought and heatwave. These natural disasters and
adverse weather conditions affected several types of
agricultural products and regions.

the causes of

frost,

(58) According to Greece, this was compounded by State
interventions concerning the formation of prices at
which cooperatives dispose of their products. The debts
were written off only after certification and recognition
by a committee.

the

(59) Greece supplied copies of the reports made by the
committees for each cooperative. These reports showed
that
adjusted
amount
(GRD 37,835 billion) is substantially lower than the
initial forecasts (GRD 91,676 billion). 116 cooperatives
were concerned, all of which were deemed viable on the
basis of specific rationalisation programmes.

overall

debt

of

(60) Regarding the aid granted to AGNO in particular, in
application of the provisions of Article 32(2) of Greek
law No 2008/92, Greece added that the time lag was
needed to check the details of every applicant (there
were first and second level verification committees).

(61) Greece considers that the amount of GRD 91 million,
equivalent to the difference between GRD 851 million
effectively considered and the amount of 760 million
that could theoretically be considered as the actual
losses, is not unjustified. The difference of actual sales
figures for AGNO between 1985 and 1986 is 8,5 million
kg. This surplus milk was pasteurised in bulk for various
cheese producers at a loss of GRD 10,7 kg. The total
loss was therefore GRD 91 million.

(62)

the

that

Furthermore, Greece
interest of
adds
GRD 529,89 million settled under Article 19 of Greek
law No 2198/94 is not overcompensation for the overall
loss of GRD 851 million. Indeed, Greece considers that,
in order to provide full compensation for late payment,
the overall amount of interest to be written off would be
GRD 959,79 million.

(63) Greece concludes that the aid granted to AGNO in the
framework of Article 32(2) of Greek law No 2008/92
constitutes aid to compensate for the loss incurred as a
result of an extraordinary event, namely the Chernobyl
disaster, and consequently meets the requirements of
Article 87(2)(b) of the Treaty.

L 159/8

EN

Official Journal of the European Communities

17.6.2002

(64)

In reply to the complainant’s allegations, Greece indi-
cates that compensation for damage caused by the
Chernobyl nuclear disaster was also available for some of
the private dairy companies, cleared by the Commission
under the Article 87 and 88 procedure (9).

(65)

In reply to the plaintiffs’ comments on the opening of
the procedure provided for in Article 88(2) of the Treaty,
Greece maintains that the substantive beneficiary of any
debt restructuring schemes are the producers/members
of cooperatives that suffered the economic impact of
disasters or extraordinary events. Greece states that
cooperatives are statutorily bound to take up the entire
production of their members, contrary to other under-
takings, which can operate freely and selectively as
regards quantities and quality of supplies. Consequently,
they operate in the market under different arrangements
and ipso facto cannot be treated in the same way.

(66) Debt write-offs under Article 32(2) of Greek law
No 2008/92 are intended to secure the agricultural
cooperatives financial equilibrium and make possible
long-term cooperation between them and the ABG
with consequent benefits for both sides. In that, the
intervention of the ABG respects the private investor
principle.

(69) Greece disagrees with the Commission’s claim that the
ABG, in settling the debts of AGNO under Article 5 of
Greek law No 2237/94, did not act according to the
private investor principle. Greece points out that the
application of the provisions of Article 5 of Greek law
No 2237/94, which was at the discretion of the ABG,
was decided by the Board of Directors and the General
Assembly of the ABG shareholders on the basis of the
private investor principle. This was likewise applied by
the ABG to all other cooperative entities whose debts
were settled by Article 5 of Greek law No 2237/94.

of Greek

(70) Greece indicated that the total amount of the debt
for the dairy cooperative AGNO under
settlement
2237/94 was
5
Article
GRD 10,145 billion, consisting of GRD 3,12 billion
from mature
short-term debt,
GRD 4,725 billion from medium-term loans (mainly
linked to the project of relocation of the dairy plant)
and 2,3 billion GRD for contractual interest between
1 January 1994 and 31 March 1995.

uncovered

law No

and

(67) The Greek authorities attach to their submission viability
study forms that had to be submitted by each cooperative
to benefit from the write-offs.

(71) The Greek authorities indicate that the Circular of the
ABG No 150/94 contains a set of criteria for the
application of Article 5 of Greek law No 2237/94, not
only regarding servicing the debt to the ABG but also
restoration of long-term viability of debtors.

ARTICLE 5 OF GREEK LAW No 2237/94

(68)

In the view of the Greek authorities, Article 5 of law
No 2237/94 concerning consolidation of debts by
agricultural cooperatives does not constitute State aid
within the meaning of Article 87(1) of the Treaty. Greece
sustains that regularisation of debts is a normal banking
practice applied in all Member States and does not lead
to an additional use of State resources.

(9) Aid N 54/87 — Commission letter SG (87) D/5035 of 15 April

1987.

(72) According to Greece,

the measures undertaken are
realistic and contribute to the cooperative’s financial
equilibrium, as indicated in the viability study sent.
Greece also sent a progress report on the implementation
of the reorganisation measures for AGNO. This report is
dated 31 October 1996.

(73) AGNO imposed a special charge on milk deliveries. The
charge was
this
overall
GRD 240,44 million in 1996 and 1997. This helped
substantially to increase the cooperative’s assets.

product

special

of

17.6.2002

EN

Official Journal of the European Communities

L 159/9

(74) The Greek authorities claim that, contrary to what has
been asserted by the Commission, Article 5 of Greek law
No 2237/94 contains provisions imposing reduction or
cessation of productive capacity. To illustrate this,
Greece indicates that the restructuring plan for AGNO
involves cessation of
lossmaking activities, such as
production of animal feed for members.

debts, the Bank anticipated the receipt of the sum of
GRD 16,75 billion, plus interest and considerable rev-
enue from various banking transactions. On the other
hand,
in the case of enforcement proceedings being
initiated (i.e. seizure, public auction, etc.), the Greek
authorities anticipated the receipt of an overall amount
of GRD 2,64 billion.

(75) According to the Greek authorities, Greece as an Objec-
tive 1 area would be exempted from the application of
the sector limits relating to the processing and marketing
of dairy products under the Annex to Commission
Decision. No 94/173/EC (10).

ACT OF THE GOVERNOR OF THE BANK OF GREECE No 1620 OF
5 OCTOBER 1989

(76) Greece adds that the annual statements of AGNO show
positive operating results and that
the cooperative
serviced all the short-term loan debt interest and part of
that on the medium-term loans. Application of the
reform measures and the reduction of costs permitted a
positive financial result guaranteeing AGNO’s viability.

(80) Regarding the Act of the Governor of the Bank of Greece
No 1620 of 5 October 1989, Greece adds that it
determines the general framework for the restructuring
of business debts by the banking system, while allowing
the banks freedom to determine the specific terms
applying to the servicing of their customers’ debts.
Specifically, the banks are free to determine the period
given to their business clients to pay off debts, as well as
the interest rates where their debts are restructured.

(77)

In its reply to the comments of the plaintiff, Greece
further adds that, in the case of AGNO, restructuring of
its debts was based both on the findings of the feasibility
study, and on the anticipated benefits for the Bank from
the application of any alternative solutions (i.e. initiation
of enforcement proceedings).

(81)

Initially, these provisions were subject to a minimum
interest rate level of 18 % per annum for working capital
and 17 % per annum for medium-term loans. Since
4 August 1994, these minimum interest rates were
abolished, thus enabling the banks to fix interest rates
according to their own discretion and according to the
circumstances of each individual case, even at the level
of each individual customer.

(78)

In this respect, Greece indicates that, according to the
financial position on 31 December 1994, AGNO had an
overall debt of GRD 21,58 billion, against a total
security-cover of GRD 44,14 billion. The major part of
the overall debt consists of
to the ABG
(GRD 16,75 billion), while the main part of the financial
envelope concerning securities relates to the joint liab-
ility of AGNO’s members (GRD 30,55 billion).

the debt

(82) Greece considers then that the adoption of Article 5 of
Greek law No 2237/94 only aims to make the general
framework of the Act of the Governor of the Bank of
Greece No 1620 of 5 October 1989 more specific and
render its application possible for the ABG. According
to Greece, this specification was needed to define a
stricter framework for this debt restructuring, namely by
the introduction of strict eligibility conditions and
provisions for non-respect of the terms of the adjustment
loans.

(79) According to Greece, the feasibility study made provision
for the regular servicing of
the Association’s debts
through implementation of a financial reform plan.
Therefore, on the basis of the adjustment of AGNO’s

COMMENTS SUPPLIED BY THE ABG

(10) OJ L 79, 23.3.1994, p. 29, repealed by Regulation (EC) No 1750/

1999 as from 1.1.2000.

(83)

In its submission of 12 March 1999, the ABG supports
the comments and information submitted by the Greek
authorities.
to amplify the
Its submission sets out
comments and information transmitted by Greece.

L 159/10

EN

Official Journal of the European Communities

17.6.2002

(84) Regarding the debt rescheduling of several cooperatives,
the ABG states that,
it was faced with a
in 1994,
situation where several agricultural cooperatives, includ-
ing AGNO, were not in a position to service their debts
due to a combination of factors. The high costs of
servicing these debts (mostly consisting of compound
interest) seriously jeopardised the ability of the cooperat-
ives to continue operating. As these cooperatives were a
significant proportion of ABG’s clients, ABG had a
significant financial interest in their survival. The ABG
pointed out that not only would it lose the capital
invested in these cooperatives but it would also mean an
important loss of future revenue, via the provision of
banking services to these cooperatives.

(85) The ABG considers that its decision to reshedule debts
of cooperatives was entirely consistent with the behav-
iour of a private bank in equivalent circumstances. All
requests for rescheduling of debts were examined and
granted by ABG on the basis of commercial criteria and
the fulfilment of the ABG’s general requirements for
debt rescheduling.

(86) The ABG argues that the assertions of the Commission
concerning the link between the decision of the Greek
Government and the behaviour of the ABG are not
correct. The ABG states that Article 5 of Greek law
No 2237/94 was not necessary fot the ABG to reschedule
the debts owed to it. The Act of the Governor of the
Bank of Greece No 1620 of 5 October 1989 had granted
to all banks in Greece (both private and public) the
freedom to enter into debt rescheduling arrangements
with their clients. Furthermore, according to the ABG,
Article 5 of Greek law No 2237/94 did not impose any
obligation on the ABG to settle the debts of cooperatives
and did not confer any legal rights upon cooperatives to
request from the ABG the rescheduling of their debts.

(87) According to the ABG, its only objective in agreeing to
the rescheduling was to protect its commercial interests.
For this purpose, the ABG laid down requirements for
these settlements in circulars No 150/94 and No 22/95,
containing:

— a viability plan providing for measures to ensure
financial restructuring and repayment of debt,
including
expenses
reduction of operational
(through personnel cuts and other appropriate cost
savings), the cessation of loss-making activities,
obligation to dispose of idle assets, and the increase

of equity capital
(via imposition of a levy on
products and an increase in members’ equity share),

— a timetable for completion of financial restruc-

turing,

— provision for cancellation of the debt restructuring
arrangement if instalments were delayed for more
than six months and reversion to previous situ-
ation,

— a reduction of the financial charges to the cooperat-

ives,

— the provision of further credit to depend on the
fulfilment of the terms and conditions of the debt-
restructuring arrangements,

— a contractual obligation on each beneficiary coop-
erative to cover all its needs for banking services
through ABG,

— the ratio of security given to ABG and debt to ABG

should be 110:100,

— regular close monitoring of the implementation of

the business plan by the ABG.

(88) The ABG adds that several cooperatives did not comply
with the eligibility criteria and their applications were
rejected. Furthermore,
in accordance with circulars
No 150/94 and No 22/95, the ABG cut the credit lines
to some cooperatives and took the necessary steps to
recover the outstanding amounts.

In

accident.

addition to

(89) Regarding the debt write-off provided in the framework
of Article 32(2) of Greek law No 2008/92, the ABG
states that there was no overcompensation for the
damage suffered by AGNO resulting from the Chernobyl
nuclear
of
GRD 760 million (AGNO’s loss from the destruction of
19 000 tonnes of contaminated milk at an average price
of GRD 40/kg). The amount of GRD 1,38 billion actually
granted includes GRD 91 million for AGNO’s loss from
the sale of pasteurised milk to cheese processors and an
amount of GRD 529,89 million representing interest on
these losses. To this end, the ABG avers that AGNO was
paying a market price of GRD 40/kg, instead of the
target price of GRD 34/kg which was then applicable.

loss

the

17.6.2002

EN

Official Journal of the European Communities

L 159/11

(90) According to the AGB, AGNO’s sales of fresh milk and
yoghurt were reduced by 8 500 t between 1985 and
1986. This cooperative was then obliged to dispose of
this additional milk by processing it into cheese. AGNO
was then paying to its members up to GRD 44,5/kg of
milk to be processed into cheese, GRD 10,5 higher that
the indicative price of GRD 34/kg applicable during this
period. On the basis of such price difference, the ABG
justifies that AGNO’s loss was 91 million GRD (8 500 t
× GRD 10,5/kig). The ABG adds that, in 1987 alone,
AGNO processed into cheese 5,23 t of milk. AGNO
should have paid its raw milk suppliers GRD 30,03/kg.
However, the ABG added that, pursuant to the Greek
Government’s price-intervention policy, AGNO was
paying its producers GRD 44,5/kg of milk.

(91) The ABG argues that, in order to cover the abovemen-
tioned losses, AGNO was obliged to raise significant
loans from the ABG. The actual payment of compen-
sation did not occur until 31 August 1993. Taking
account of the reference rates applicable in Greece
between 1988 and 1993, the amount of interest due
on the losses calculated at GRD 851 million was
GRD 959,79 million. Thus, the ABG argues that the
writing-off of GRD 529,89 million in interest does not
overcompensate the actual losses incurred.

(92) The ABG argues that AGNO’s financial situation deterio-
rated sharply before 1994 as a result of delays in the
write-off of the Chernobyl-related debts and the delay in
the implementation of the investment project. AGNO’s
output was below normal levels, a problem that was
compounded by strong competition in the market and
a downturn in market sales.

(94) According to the ABG, AGNO’s restructuring measures
were agreed with this bank on 7 July 1995, when
two debt rescheduling arrangements were concluded
concerning respectively GRD 10,145 billion and
GRD 1,899 billion. The restructuring measures were:

— increase in equity capital by 290 million GRD in

the period 1995-1997,

— imposition of a levy of GRD 1,5/kg of milk
delivered until 31 December 1995 and 3 GRD/kg
from 1 January 1996,

— annual savings of GRD 200 million through
reduction of overtime and supplementary pay-
ments to staff,

— reduction in returns on products with total savings
of GRD 210 million in the first year and
GRD 250 million thereafter,

— reduction of marketing/advertising expenditure
down to 2 % of turnover, i.e. GRD 540 million,

— savings of GRD 500 million in 1995 and 1996

related to the lay-off of 150 employees,

— annual savings of GRD 50 million by general

reduction of production costs,

— cancellation of planned investment and any other
investment not linked to the milk processing plant,

— extension of the product range and increase in

product quality,

— introduction of modern marketing methods,
including incentives for sales personnel, exclusive
representatives, change of the distribution methods
and change of billing system.

(93)

Faced with AGNO’s inability to pay its debt, the ABG
could either force AGNO into bankruptcy or reschedule
its debts. According to the ABG, the cost-benefit analysis
of both options was favourable to restructuring the
cooperatives’ debts. The overall amount of credits
returning to the ABG from liquidation (after payment of
privileged creditors) would be GRD 2,64 billion. This
would only cover a minor part of the overall debt of
AGNO the ABG of GRD 16,75 billion. Equally, the ABG
argues that the debt rescheduling arrangements were
accompanied by an overall value of securities of
GRD 44,23 billion (of which GRD 30,55 billion mem-
ber’s liability, GRD 7,11 billion liabilities on fixed assets
and GRD 4,84 billion claims).

(95) On the basis of these restructuring measures, the ABG
concluded that AGNO had material prospects of
returning to viability and repaying its debts. ABG agreed
to reschedule AGNO’s debts. The amount of AGNO’s
debt concerned was GRD 10,145 billion. According to
the ABG, this debt comes not only from the execution
of the investment project, but from loans related to the
entire operation of the factory and interest on such
loans. The rescheduling agreement provided for repay-
ment over a period of 15 years, with a three-year grace
period during which AGNO would not pay any amount
to the ABG. Payment of interest would only be made for
the second half of the 15-year term at an interest rate
50 % lower than market rates.

L 159/12

EN

Official Journal of the European Communities

17.6.2002

(96) As a result of the high level of AGNO’s indebtedness,
there was also a significant amount of debt that could
not be covered by the provisions of Article 5 of Greek
law No 2237/94 because it matured after 31 December
1993. Thus, the ABG decided to reschedule a further
GRD 1,899 billion on the basis of the Act of the
Governor of the Bank of Greece No 1620 of 5 October
1989. In was agreed that this amount would be paid
over a period of 10 years, with a two-year grace period
in which only payments of interest would be paid at the
rate of 21,5 %.

(97) As regards the implementation of the viability plan, the
ABG adds that the first report, issued on 14 February
1996, showed that the initial measures were not suf-
ficient to achieve the financial targets set. On the basis
of this report, additional measures were implemented:

— increase of the levy on delivered milk from GRD 3
to 4/kg. The annual proceeds of this measure were
expected to be GRD 230 million,

— GRD 80 million cost-savings by changing the

payment system for the milk suppliers,

— reduction of

to
the marketing
GRD 550 million in 1996 and 1997. This would
result in annual savings of GRD 950 million in
these years,

expenditure

— lay-off of 81 employees by 31 January 1996,
resulting in GRD 283 million savings in 1995 and
1996,

— annual savings of GRD 20 million on recruitment

of seasonal personnel,

— the levy charged to milk suppliers for animal
feedstock would be increased by GRD 0,5/kg of
delivered milk, for an annual income of 35 million
GRD,

— cooperation with a producer of animal feedstock
would result in annual savings of financial charges
of GRD 91 million,

— cooperation with a distributor in the Athens mar-
resulting in additional benefits of about

ket,
GRD 100 million,

— agreement with producers and personnel would
allow the freezing at 1995 prices of their outstand-
ing claims against AGNO and deferment of pay-
ment of GRD 2,5 billion until 1999.

(98) A second report identified in 1996 a short delay in
implementing certain measures and a cash-flow diffi-
culty in AGNO’s operation that did not allow the
achievement of the financial objectives. Measures were
recommended for the period June-September 1996,
including the following:

— calculation of interest on amounts owed by pro-
ducers over seven days for the sale of animal
feedstock,

— reductions in daily allowances and expenses for

missions of AGNO’s staff,

— a levy of 1 % for monthly salaries up to
salaries over

GRD 200 000 and 2 % for
GRD 200 000,

— compulsory delivery to AGNO of all milk pro-

duction by its members,

— application of interest on bounced cheques from
customers and negotiations for the payment of
frozen debts by customers,

— detailed financial plan for coverage of AGNO’s
for working capital and repayment of

needs
medium-term debts.

(99) According to the ABG, its close monitoring of AGNO’s
operation following the 1995 debt rescheduling agree-
ments allowed it to try and exercise influence on AGNO’s
management decisions with a view to minimising its
financial exposure in this cooperative. However, a series
of situations after 1996 in which ABG’s interest diverged
from the decisions of AGNO’s management indicated
that
the ABG should be more actively engaged in
AGNO’s management to ensure that the implementation
of the agreed restructuring measures and the prospects
of repayment of its debts were not undermined, if not
abandoned.

— payment by milk producers of outstanding debts

of GRD 75 million in 1996 and 1997,

— annual

savings of GRD 196 million and
GRD 60 million from payments of producers’
debts to feedstock suppliers and advance payments
respectively,

(100) The ABG indicated that it realised then that its financial
exposure in AGNO entailed a more active commitment
in the cooperative’s management. Consequently, the
ABG nominated four technical advisers in August 1997,
with the consent of AGNO’s Board of Directors. The
ABG assumed direct responsibility for AGNO’s manage-
ment on 1 May 1998, with the consent of AGNO’s
General Assembly.

17.6.2002

EN

Official Journal of the European Communities

L 159/13

V. ASSESSMENT

EFFECT ON TRADE

APPLICABILITY OF ARTICLE 87(1) OF THE TREATY

(101) In accordance with Article 87(1) of the Treaty, any aid
granted by a Member State or through State resources in
any form whatsoever which distorts or theatens to
distort competition by favouring certain undertakings
or the production of certain goods shall, in so far as it
affects trade between Member States, be incimpatible
with the common market.

(102) The measures being assessed concern cooperatives active
in all sectors in the production, processing and market-
ing of agricultural products in Greece. In the framework
of the common agricultural policy, the large majority of
these products is covered by a common organisation of
the market. In all regulations establishing a common
market organisation for a given sector, there is a specific
provision stating that, save as otherwise provided by the
Regulation, Articles 87, 88 and 89 of the Treaty shall
apply to the production and trade of the products
covered by the said Regulation.

USE OF STATE RESOURCES

(103) With the exception of the alleged tax exemptions, all the
measures undertaken in favour of agricultural cooperat-
ives in general, and AGNO as an example, were done
through the ABG.

(104) Even if the ABG is formally a private company, the sole
shareholder of the ABG is the Greek State, its Board of
Directors is appointed by governmental decision and the
Greek State can establish a dominant influence in the
rules governing this bank. The ABG would be regarded
as a public undertaking within the meaning of Article 2
of Commission Directive 80/723/EEC on transparency
of financial relations between Member States and public
enterprises, as amended (11).

(105) Consequently, debt write-offs and debt reschedules by
the ABG involve necessarily a use of State resources. In
the context of the Commission examination of certain
measures pursuant to Articles 87 and 88 of the Treaty,
the use of ABG’s resources is assimilated to measures
undertaken by a Member State or
through State
resources within the meaning of Article 87(1) of the
Treaty. However,
the conditions
required by Article 87(1) of the Treaty, it has to be
demonstrated for all measures that the behaviour of the
ABG is not compatible with the principle of the private
investor in a market economy.

in order to fulfil

(106) Most of the measures under examination cover benefici-
aries active throughout the agricultural sector in Greece.
The production value of agricultural products in the
Community was EUR 213,467 million in 1998 (12),
while the value of the Greek agricultural production was
EUR 8,834 million in the same year, representing 4,1 %
of overall European production. There is significant
trade in agricultural products between Greece and the
Community. Indeed, between 1988 and 1998, Greece
between
imported
EUR 1,476 million and EUR 2,911 million and exported
to the remaining European countries a minimum worth
of EUR 842 million and a maximum worth of
EUR 1,796 million,

ranging

global

value

a

DISTORTIONS OF COMPETITION

(107) In the agricultural sector, the Commission has consist-
ently held that certain measures are susceptible to
affecting trade between Member States when there is a
trade flow of the products concerned. Pursuant to the
data shown above, the measures in question affect trade
flows between Greece and other Member States.

(108) Apart from the use of State resources and the effect on
trade flows, the Commission notes that the measure is
selective, i.e. the write-offs of the debts towards the ABG
are made selectively to a group of economic operators
(116 cooperatives). These write-offs have an immediate
financial impact on the situation of these undertakings
in relation to the undertakings that, in Greece and in
other Member States, do not have access to such
measures.

ADVANTAGES ACCORDING TO THE MARKET CREDITOR
PRINCIPLE (13)

Article 32(2) of Greek law No 2008/92

(109) The Commission notes that the position of the Greek
authorities on the aid character of this measure is
contradictory. In their initial reply to the opening of the
procedure provided for in Article 88(2) of the Treaty,
the Greek authorities linked the debt write-offs to
natural disasters and extraordinary events fulfilling the
requirements of Article 87(2)(b) of the Treaty. Conse-
quently, they considered at an initial stage that the
measure involved State aids within the meaning of
Article 87(1) of the Treaty.

(11) OJ L 195, 29.07.1980, p. 35, Directive as last amended by

(12) Source Eurostat.
(13) Judgment of the Court of 29 June 1999 in Case C 256/97 —

Directive 93/84/EEC (OJ L 254, 12.10.1993, p. 16).

DMT. Not yet published in the Official Journal.

L 159/14

EN

Official Journal of the European Communities

17.6.2002

(110) At a later stage, Greece argued that the debt write-offs
were intended to secure long-term financial equilibrium
of the cooperatives and make possible cooperation with
the ABG, with mutual benefits. Thus, Greece concluded
that the interventions of the ABG respected the private
investor principle.

(111) On this point, the Commission cannot agree with the
views of
the Greek Government. The Commission
considers that in no circumstances would a private bank
renounce all or part of its claims in relation to a given
undertaking simply on the grounds of
its potential
economic viability.

(112) In particular, the Commission does not agree that a
private investor in a market economy would renounce
its credits to 116 agricultural cooperatives, up to an
amount of GRD 37,835 billion, without any reciprocity
from these beneficiaries.

(113) Therefore, the Commission considers that all the con-
ditions for the application of Article 87(1) of the Treaty
are fulfilled for this measure. The aid intensity consists
of the overall amount of debt write-off.

Article 5 of Greek law No 2237/94

(114) According to the Greek authorities, Article 5 of law
No 2237/94 concerning consolidation of debts by
agricultural cooperatives does not constitute State aid
within the meaning of Article 87(1) of the Treaty. Greece
sustains that regularisation of debts is a normal banking
practice applied in all Member States and does not lead
to an additional use of State resources.

(115) The Commission does not share the views of the Greek

authorities on this point.

(116) The Commission noted that there are legal provisions
authorising all banks in Greece to execute debt resched-
uling arrangements. The terms and conditions according
to which these debt reschedules are done is left the
discretion of every bank according to its commercial
banking practices. The adoption of Article 5 of Greek
law No 2237/94 allows the ABG to perform the same
type of operations, but in more specific conditions. The
Commission can then presume that these operations
would not have taken place in normal market conditions,

i.e. if the ABG operated according to the private creditor
principle using purely commercial banking criteria.

(117) Firstly, the range of eligible undertakings is considerably
reduced, introducing an element of selectivity. Indeed,
Article 5 of Greek law No 2237/94 specifically concerns
agricultural cooperatives and is not available to other
types of undertakings. Secondly, while in the general
case it is up to the banks to set the interest rates
applicable for
rescheduling arrangements,
Article 5 of Greek law No 2237/94 established very
favourable terms for these arrangements, that can go up
to 15 years, with a grace period of three years, and at
50 % of the normal market rate for such loans.

the debt

(118) Consequently,

the Commission considers

this
measure is selective and distorts competition conditions
in the internal market. It gives benefiting cooperatives
competitive advantages not compatible with the private
creditor principle.

that

(119) The Commission considers that the aid intensity is at
least equivalent to the granting of a new loan for the
overall amount of
the cooperative’s debt, having a
duration of 10 or 15 years, at 50 % of the normal
market rate for consolidation loans. As the scheme was
applicable to 116 cases and the Commission cannot
exclude that at least some of these cooperatives would
not obtain any debt rescheduling under normal market
conditions, the aid intensity could be in some cases up
to 100 %,
if one of such cooperatives had been
unable to obtain such settlement arrangements in any
circumstances (point 41 of the Commission communi-
cation on the application of Articles 92 and 93 of the
Treaty and of Article 5 of Commission Directive 80/
723/EC to public undertakings in the manufacturing
sector (14).

(120) Furthermore, the Greek argument according to which it
would be financially more advantageous to the ABG
to reschedule the cooperatives’ debts than to force
cooperatives, for example AGNO, into bankruptcy, does
not withstand closer examination. The Commission
considers this should be assessed on a case by case basis.

(14) OJ C 307, 13.11.1993, p. 3.

17.6.2002

EN

Official Journal of the European Communities

L 159/15

(121) As to the case of the dairy cooperative AGNO, it received
support from the Greek Government in the form of debt
write-offs or settlements through the ABG at least in
four instances (Greek law No 2008/92, Greek law
No 2198/94, Greek law No 2237/94 and Greek law
No 2538/97). Any private investor would at a certain
point call into question its participation in a cooperative
in order to limit further losses.

(122) Secondly, the Greek authorities failed to demonstrate
that the private banks were executing the same oper-
ations on the same conditions to relieve the debt of the
agricultural cooperatives.

(123) Thirdly, the debt of AGNO to the ABG amounted to
GRD 16,754 billion, while the net assets of AGNO had
a market value of about GRD 7 billion. The debt of
AGNO to other banks was minor (GRD 698 million)
compared with the debt to the ABG, indicating that even
if the banking system, as a whole, agreed to granting
favourable lending terms to AGNO (15),
the ABG’s
servicing could not be comparable with that of the other
banks. Equally, even if nominally the overall value of the
securities provided (GDR 44,23 billion) exceeds the
amount of debt to be restructured, the Commission
noted that most of these securities come from the
member’s joint liability (GRD 30,55 billion) or claims
(GRD 4,84 billion). By definition, these types of securities
may prove extremely difficult to mobilise (16) or uncer-
tain, depending on the exact nature of these claims.

(124) Therefore, the Commission considers that all the con-
ditions for the application of Article 87(1) of the Treaty
are fulfilled.

Act of the Governor of the Bank of Greece No 1620 of
5 October 1989

(125) Act of the Governor of the Bank of Greece No 1620 of
5 October 1989 provides a legislative framework to
allow credit institutions in Greece to regularise their
debts pursuant to any type of loans in GRD or foreign
currencies.

(126) For a certain period, this provision was subject to a
given level of interest rates. At the time the consolidated
loans under Article 5 of Greek law No 2237/94 were
granted to AGNO and other cooperatives, these minimal
rates were not applicable anymore.

(127) As the provisions of Act of the Governor of the Bank of
Greece No 1620 of 5 October 1989 apply equally and
according to the same rules to public and private banks
active in the Greek market and debt rescheduling is a
normal banking practice in all European States, the
Commission concludes that this provision is not selec-
tive. Consequently, it does not in itself constitute State
aid within the meaning of Article 87(1) of the Treaty. In
so far as the public banks have used these provisions to
reschedule debts, a case-by-case analysis is needed in this
case to determine the aid character of each measure.

Loan to AGNO pursuant to Act of the Governor of the
Bank of Greece No 1620 of 5 October 1989

(128) Regarding recital 127, the Commission concluded that
the provisions of Act of the Governor of the Bank of
Greece No 1620 of 5 October 1989 do not in themselves
constitute State aid within the meaning of Article 87(1)
of the Treaty.

(129) Being the general Greek provisions allowing restructur-
ing of debts by banks, the above position is without
prejudice to the actual behaviour of the ABG in resched-
uling debts of cooperatives pursuant to these adminis-
trative provisions. These may indeed constitute State aid,
if it can be demonstrated that the behaviour of ABG
cannot be justified by the principle of the private creditor
in the market economy.

(15) Bulletin EC 9-1984 and see fn. 14, point 3.2, third indent, mutatis

mutandis (as to the private contribution).

(16) See aid C 47/95 where Italy obtained from the Council under the
procedure of Article 88(2) third subparagraph of the Treaty an
authorisation to grant aid in order to prevent banks from
claiming personal assets of cooperative members,
in case of
bankruptcy of these cooperatives.

(130) In the case of AGNO,

concerned

an overall

the total debt rescheduling
arrangements
amount of
GRD 12,044 billion: GRD, 10,145 billion in the frame-
work of Greek law No 2237/94 and GRD 1,899 billion
on the basis of Act of the Governor of the Bank of
Greece No 1620 of 5 October 1989. The Greek
authorities indicate that this amount was not eligible
under the provisions of Greek law No 2237/94. More-
over, the ABG cannot be assimilated to a private creditor
since it has repeatedly granted aid to AGNO.

L 159/16

EN

Official Journal of the European Communities

17.6.2002

(131) The Commission noted that this operation is concomi-
tant with a major debt rescheduling fulfilling the con-
the
ditions of Article 87(1) of the Treaty. Even if
rescheduling conditions are less favourable to AGNO
than the ones pursuant
to Article 5 of Greek law
No 2237/94, the interest rate applicable (21,5 %) is still
lower than the reference rate applicable at the time in
Greece (26,47 %). The Commission considers that this
additional settlement
is part of an overall plan to
assist AGNO in paying off its debt and, consequently,
constitues State aid pursuant to Article 87(1) of the
Treaty.

(132) The Commission considers that the aid equivalent of
this procedure corresponds to a new loan of the overall
amount of debt at an interest rate equivalent to the
difference between a market rate (at least the reference
rate applicable in Greece at the time) and the applicable
rate, for the total duration of the loan (see recital 119).

Tax exemptions

(133) The plaintiffs argue that differential treatment of cooper-
atives in the framework of Greek general tax law or
cooperative law constitutes State aid within the meaning
of Article 87(1) of the Treaty.

(134) According to point 23 of the Commission notice on the
application of the State aid rules to measures relating to
direct business taxation (17), the differential nature of
some measures does not necessarily mean that they
must be considered State aids. They may constitute
general measures justified by the nature or general
scheme of
In particular, according to
point 25 of the said Commission notice, it may also be
justified by the nature of the tax system that cooperatives
which distribute all their profits to their members are
not taxed at the level of the cooperative when tax is
levied at the level of their members.

the system.

(135) As this situation corresponds to the one described by
the Greek authorities, the Commission has no grounds
to consider that differential treatment of cooperatives in
the framework of the Greek tax system constitutes State
aid within the meaning of Article 87(1) of the Treaty.

(17) OJ C 384, 10.12.1998, p. 3.

POSSIBLE DEROGATIONS IN THE FRAMEWORK OF ARTICLE 87
OF THE TREATY

(136) However the prohibition on State aid contained in
Article 87(1)
for
is not unconditional.
Article 87(2)(b) of the Treaty, that Greece invokes as the
legal basis for the granting of the aids in Article 32(2)
of Greek law No 2008/92, the remaining exceptions
contained in Article 87(2) of the Treaty are manifestly
inapplicable.

Except

ARTICLE 87(2)(b) OF THE TREATY

(137) In their reply to the opening of the procedure provided
for in Article 88(2) of the Treaty, the Greek authorities
invoke the provisions of Article 87(2)(b) of the Treaty,
which deems that aid to make good the damage caused
by natural disasters or exceptional circumstances is
compatible with the common market.

(138) However, even if aid to compensate for the economic
effects of natural and assimilated disasters is deemed
compatible by the EC Treaty itself, all instances of such
aid should be notified under Article 88(3) of the EC
Treaty and the Member State must justify the aid. Only
in this way can the Commission satisfy itself that an aid
of this type is in fact caught by Article 87(2)(b).

(139) Firstly, the Commission took note of the fact that
Article 32(2) of Greek law No 2008/92 is primarily
intended to writeoff debt of agricultural cooperatives
incurred by the execution of the social and intervention
policy on behalf of the Greek State. Although Greece
argues that
the interventions from the Greek State
resulted from the damage caused by a list of 24 natural
disasters that affected Greece between 1982 and 1989,
Greece fails to demonstrate a causal link between these
natural disasters and State intervention concerning the
formation of sales prices for products. For example, the
link between compensation for damage caused by the
exporting of oranges, marketing of apricots, construc-
tion of a fridge unit, storage of table olives and any type
of natural disasters falling under Article 87(2)(b) is, at
least, unclear.

17.6.2002

EN

Official Journal of the European Communities

L 159/17

(140) Secondly, an analysis of the 116 evaluation sheets
indicating the reasons for debt write-offs for individual
cooperatives sent by the Greek authorities shows that in
none of the cases is the damage caused by natural
disasters or adverse climatic conditions. Only six cooper-
atives (including the dairy cooperative AGNO) benefited
from write-offs linked to the nuclear disaster at Cher-
nobyl.

(141) Thirdly, the Commission notes that the Greek State
compensated the cooperatives, after 1992, for damage
supposedly caused to agricultural production by natural
disasters and exceptional events which occurred between
1982 and 1989. Consequently,
in some situations,
compensation may have occurred up to ten years after
the event.

(142) According to its existent practice (18), the Commission
considers that, where aid is paid only several years after
the occurrence of the event in question, there is a real
danger that the payment of such aid will produce the
same economic effects as operating aid. Therefore, in
the absence of a specific justification, resulting for
example from the nature and extent of the event, or
the delayed or continuing nature of the damage, the
Commission does not approve national aids which are
submitted more than three years after the occurrence of
the event. The existing practice has recently been codified
in point 11.12 of the Community guidelines for State
aid in the agriculture sector (19). The administrative
difficulties invoked by the Greek authorities cannot be
considered an acceptable justification, since the law,
adopted in 1992, foresees already the settlement of
damage predating to 1982.

(143) Subsidiarily, in relation to the aid granted to the dairy
cooperative AGNO in the framework of Greek law
No 2008/92 as a result of the Chemobyl nuclear disaster,
the Commission notes at least part of the losses consist
of a comparison between the average prices paid by
AGNO to their producers and the target prices for the
same raw materials. Consequently, these losses result
from higher producer prices for milk and not from the
exceptional event itself.

(144) For the reasons detailed above, the Commission cannot
consider that the provisions of Article 32(2) of Greek
law No 2008/92 fulfil the conditions of Article 87(2)(b)
of the Treaty.

(18) See precedent C 51/96.
(19) OJ C 28, 1.2.2000, p. 2.

ARTICLE 87(3) OF THE TREATY

(145) The Commission considers that the aid measures are not
intended to promote the execution of an important
project of common European interest, nor to remedy a
serious disturbance of the economy of a Member State
within the meaning of Article 87(3)(b). Equally, they are
not intended to promote cultural or heritage protection
within the meaning of Article 87(3)(d). It is therefore
necessary to consider whether the application of the
measures provided for may benefit from a derogation
under
the Treaty, or
Article 87(3)(c).

either Article 87(3)(a) of

Article 32(2) of Greek law No 2008/92

(146) The debt write-offs undertaken in the framework of
Article 32(2) of Greek law No 2008/92 are made to
the extent that the debts were incurred due to the
implementation of social or intervention policy on
instructions of the Greek State. Although the Com-
mission,
in opening the procedure provided for in
Article 88(2) of the Treaty, called upon the Greek
authorities to transmit all details in relation to these
social and intervention policies, including an assessment
of these national policies in the light of the common
agricultural policy, the Greek authorities have failed to
transmit the requested information.

(147) From an analysis of the text of the draft law and the
116 cases where a debt write-off has actually been
agreed, it can be concluded that all the causes related to
the write-off of debt resulting from expenditure incurred
by the cooperatives for the execution of certain func-
tions. All the causes for debt write-offs (production
aids, collection and marketing of agricultural products,
storage of agricultural products, acquisition of material
needed for the production process, current operating
costs, management of pesticides and animal feed, debts
to ABG, damage caused by price fixing, compensation
for administrative actions, compensation for damage
caused by the Chernobyl accident and investments) are
considered by the Commission as operating aids which
therefore cannot be approved by the Commission under
Article 87(3)(c) of the Treaty.

L 159/18

EN

Official Journal of the European Communities

17.6.2002

(148) In particular, the aids for compensating the damages
caused by the Chernobyl accident must be considered as
operating aids because they do not fulfil the conditions of
Article 87(2)(b) of the Treaty. Equally, aids compensating
cooperatives for the realisation of investments must be
considered operating aids since, as compensation is paid
retroactively, these aids simply improve the financial
situation of cooperatives after the execution of the
investment without having any incentive for the realis-
ation of investments and, thus, the development of the
sector (20).

(149) The remarks of the Greek authorities confirm that the
objective of the measure is to relieve the beneficiaries of
their debt burden, and that there is no reciprocity on the
part of the beneficiaries which might be considered to
benefit the development of certain economic activities
or certain regions. To this extent, a mere statement of
the ‘viability’ of the cooperative cannot be considered as
reciprocity. The fact that cooperatives are statutorily
bound to takeup the entire production of their members
is not liable to modify this conclusion, as acceptance of
a cooperative statute is not mandatory. Having regard
to the principles laid down in the case law (21), the
Commission is therefore bound to conclude that the
measure cannot benefit
from the derogation under
Article 87(3)(c) of the Treaty.

(150) Although Article 87(3)(a) of the Treaty has not been
explicitly invoked by the Greek authorities, the latter
argued that the measures had a regional scope, due to
the fact that cooperatives represent the interest of large
groups of farmers active in mountain, hill and less-
favoured areas.

(151) The Commission communication of 1988 (22) on the
method for the application of Article 87(3)(a) and (c) to
regional aid provides in point I.6 that in recognition of
their special difficulties the Commission may, by way of
derogation, authorise certain operating aid in these
regions under specific conditions which are enumerated
in sub-points (i) to (v). Sub-point (ii) of these conditions
specifies that ‘the aid should be designed to promote a
durable and balanced development of economic activity
and not give rise to sectoral overcapacity at the Com-

munity level such that the resulting Community sectoral
problem produced is more serious that the original
regional problem; in this context, a sectoral approach is
required and in particular the Community rules, direc-
tives and guidelines applicable to certain industrial (steel,
shipbuilding, synthetic fibres, textiles and clothing) and
agricultural sectors, and those concerning the industrial
enterprises involving the transformation of agricultural
products are to be observed.’ (23).

(152) In the agriculture sector, which covers the production,
processing and marketing of Annex I products, it has
been constant Commission policy for many years to
prohibit the payment of operating aid in all regions,
including regions which fall under Article 87(3)(a) of the
Treaty.

(153) It can directly be seen from the examination of the long
list of individual grants that the measure is susceptible
of undermining the operation of the common market
organisations established under the common agricultural
policy. Indeed, the cooperatives are compensated for
costs incurred by actions that are normally carried out in
the framework of these common market organisations.

(154) It is constant jurisprudence of the European Court of
Justice that Member States are barred from adopting
national measures which are liable to undermine the
machinery of price formation established by a common
market organisation (24). Given the precedence of the
common agricultural policy over State aid rules and over
the competition rules laid down in the Treaty (Article 36
of the EU Treaty) (25), national measures hampering a
common organisation of an agricultural market can in
no case be approved under a State aid scheme on the
grounds that an exemption provision applies.

(155) In view of the above, it must be concluded that the
provisions of Article 32(2) of Greek law No 2008/92
constitute State aid within the meaning of Article 87(1)
which cannot qualify for any of the exceptions provided
for in Article 87(2) or (3).

(20) Judgment of 17 September 1989 in Case C 730/79, Philip Morris

[1980] ECR p. 2671-2693.

(21) In particular, Judgment of the Court of First Instance of 8 June
1995 in Case T-459/93, Siemens v Commission [1995] ECR II-
1675, and the case law cited therein.

(22) OJ C 212, 12.8.1988, p. 2. Guidelines for national regional aid

— point 2. (OJ C 74, 10.3.1998, p. 10).

(23) Judgment of the Court of 14 January 1997 on case C-165/97 —
Spain v. Commission (Piezas y Rodajes SA) ECR [1997] p. I-
0135.

(24) Judgment of the Court of 12 June 1990 in case 35/88, KYDEP,

[1990] ECR page I-3125.

(25) Judgment of the European Court of Justice in Case 177/78 Pigs

and Bacon, Commission v. McCarren [1979] ECR 2161.

17.6.2002

EN

Official Journal of the European Communities

L 159/19

(156) As an individual case of application of the aid scheme
indicated above, the same conclusion applies to the aid
granted to dairy cooperative AGNO (GRD 851 million).

(157) As to the particular case of the aid granted to AGNO
pursuant
to Article 19 of Greek law No 2198/94
(GRD 529,89 million), the Commission noted that it
consisted of interest for late payment of damage relating
to the Chernobyl nuclear accident. Since the object of
the aid is the same as the one granted pursuant to
Article 32(2) of Greek law No 2008/92, the previous
conclusion is also applicable.

ARTICLE 5 OF GREEK LAW NO 2237/94

(158) Article 87(3)(c) of the Treaty establishes that aids to
facilitate the development of certain activities or of
certain economic areas may be considered compatible
with the common market, where such aids do not
adversely affect trading conditions to an extent contrary
to common interest.

(159) Although this was not specifically invoked by the Greek
authorities, the provisions of Article 5 of Greek law
No 2237/94 should be examined in the light of these
provisions.

(160) At an early stage,

the Commission assessed these
provisions in the light of the guidelines in force at the
time the aids were granted and at the time of the opening
of the procedure provided for in Article 88(2) of the
Treaty (26). These guidelines have subsequently been
modified by a new set of rules for State aids in favour of
companies in difficulty, including specific conditions for
the granting of these aids in the agricultural sector (27),
that started to apply on 1 January 1998. These guidelines
were subsequently codified in mid-1999 (28). For reasons
of legal certainty, the appraisal of the measure is done
according to the criteria in force at the date of the
opening of the procedure provided for in Article 88(2)
of the Treaty.

(161) Point 2.2 of the 1994 Community guidelines established
that Member States could, at their discretion, continue
to apply special Commission rules for the agricultural
sector for this type of aids in the agricultural sector. As
the measures have not previously been notified to the
Commission and Greece did not recognise the aid
character of the measure, it has not indicated which set
of rules it wishes the Commission to apply to examine
conformity of the measures with the Treaty’s rules.

(162) In these conditions, the Commission is obliged to cover
all the aspects of the relevant Community guidelines, i.e.
rescue aids, restructuring aids according to the special
rules applicable to the agricultural sector and restructur-
ing aids according to the general criteria.

Special rules for rescue and restructuring of enterprises
in the agricultural sector

(163) Concerning the special rules in the agricultural sector
wich could apply as an alternative to the general rules,
aid was in essence limited in volume by specific elements
of the capital stock of the farm or company in question.
Where the farm or company in question would be at
risk through inability to pay debt, it was Commission
policy that Member States would be able to safeguard
these investments by granting restructuring aid within
specific parameters.

(164) The Commission’s previous practice on the agricultural

sector (29) can be summarised as follows:

(a)

(b)

aid (for example, meeting the cost of interest due)
must be intended to reduce the financial burden of
existing debts contracted to finance investments;

the cumulated grant equivalent of any existing aids
granted when the debts were contracted and the
new aid may not exceed the rates generally accepted
by the Commission:

— for investments in primary production, 35 %
or 75 % in less-favoured areas within the
meaning of Article 21(2) of Regulation (EC)
No 950/97 (30),

— for investments in processing or marketing,
55 % (75 % in Objective 1 areas) if they
comply with the exclusions laid down in
the Community guidelines for State aid in
connection with investments in the processing
and marketing of agricultural products (31);

(26) See footnote 7.
(27) OJ C 283, 19.9.1997, p. 2.
(28) OJ C 288, 9.10.1999, p. 2.

(29) See footnote 8 and precedent cases N 864/97, C 65/97.
(30) OJ L 142, 2.6.1997, p. 1.
(31) OJ C 29, 2.2.1996, p. 4.

L 159/20

EN

Official Journal of the European Communities

17.6.2002

(c)

the new aid must be in response to readjustments
of the rates for new loans made to take account of
changes in the cost of borrowing — the amount of
aid must not exceed the change in the rates for new
loans — or must be for agricultural holdings whose
viability can be guaranteed, particularly in cases
where the financial burden of existing loans is such
that the holdings are likely to be put at risk or even
to be declared bankrupt.

(165) The Commission concludes that these aids do not respect
the special criteria for restructuring of agricultural
enterprises, by the simple fact that debts to be resched-
uled are not necessarily linked to the execution of
investments. Indeed, Article 5 of Greek law No 2237/94
may cover other reasons for indebtedness, provided
that these are attributable to objective and external
circumstances.

Rescue aid

(166) As a general comment, the Commission considers that
the spirit and the letter of Article 5 of Greek law
No 2237/94 do not conform with the general objective
of rescuing companies in difficulties, which merely aims
at offering a brief respite to companies in difficulties
while a long-term solution can be worked out. Indeed,
these provisions aim themselves to constitute a long-
term solution to the agricultural cooperatives’ financial
problems.

(167) According to the Commission’s criteria, rescue aid must:

— consist of

liquidity help in the form of

loan
guarantees or loans bearing normal commercial
interest rates,

— be restricted to the amount needed to keep a firm
in business (for example, covering wage and salary
costs and routine supplies),

— be paid only for the time needed (as a general rule
not exceeding six months) to devise the necessary
and feasible recovery plan,

— be warranted on the grounds of serious social
difficulties and have no undue adverse effects on
the industrial situation in other Member States,

(168) The Commission does not have the necessary infor-
mation to assess respect of the second, fourth and fifth
conditions. However, the Commission noted that the
first and third conditions are clearly not respected.
Indeed, the consolidation loans are granted for a duration
of 15 years at rates 50 % lower than market rates.

(169) Consequently, Article 5 of Greek law No 2237/94
does not respect the Community criteria for rescuing
companies in difficulty.

General Community guidelines for restructuring of
firms in difficulties

(170) Concerning the Community guidelines on aid for the
rescue and restructuring of companies in difficulty, the
general principle applied by the Commission is to allow
restructuring aid only in circumstances where it can be
demonstrated that the approval of restructuring aid is in
the Community interest.

in difficulty. Pursuant

(171) From the formal point of view, Article 5 of Greek law
No 2237/94 constitutes a scheme for restructuring
to
agricultural cooperatives
points 4.1. and 4.2. of the applicable guidelines, the
Commission considers that approval of aid schemes
relating to restructuring of companies in difficulty is
only possible if these companies fall within the definition
of small and medium enterprises (SMEs) within the
meaning of the relevant Community guidelines for State
aid in the agriculture sector applicable at that time (32).
For large enterprises, individual notification of all awards
is required by the guidelines.

(172) Article 5 of Greek law No 2237/94 does not contain
any explicit provision limiting the aid to SMEs according
to the Community definition. Even though these pro-
visions have not been duly notified pursuant
to
Article 88(3) of the Treaty, the Commission notes that,
according to the Greek authorities, 116 agricultural
cooperatives made use of this scheme.

(173) One of the beneficiaries was the dairy cooperative
AGNO, that could not be considered an SME within
the meaning of the applicable Community guidelines.
Indeed, at the end of 1993, AGNO had a 912 strong
workforce
and
EUR 60 million turnover (maximum at the time the aid
was granted: EUR 20 million).

(maximum for

SMEs:

250)

— be, in principle, one-off operations.

p. 4.

(32) OJ C 213, 19.8.1992, p. 10, presently OJ C 213, 23.7.1996,

17.6.2002

EN

Official Journal of the European Communities

L 159/21

(174) Consequently,

the Commission concluded that

the
restructuring scheme for cooperatives was not limited to
SMEs according to the applicable Community guidelines.
Therefore, the Commission cannot authorise such a
scheme.

(175) Furthermore, the Greek authorities failed to supply to
the Commission, as requested in the decision opening
the Article 88(2) procedure concerning the measures,
detailed information about the implementation of the
scheme for all 116 beneficiaries, and not only in the
particular case of AGNO.

(176) As regards substance, the approval of a restructuring
aid can only be possible when the following general
conditions are fulfilled:

(a) Restoration of viability

All restructuring plans must restore the long-term
viability and health of the firm within a reasonable
timescale and on the basis of realistic assumptions
as to its future operating conditions. Improvement
of viability must mainly result
from internal
measures and from external factors only to the
extent that assumptions on the evolution of these
factors are widely accepted. To fulfil the viability
criterion, the restructuring plan must enable the
company
including
all
depreciation and financial charges and generate a
minimum return on capital such that the firm will
be able to compete in the market on its own merits.

to cover

costs

its

(b) Avoidance of undue distortions of competition

through the aid

Measures should be taken to avoid, as far as
possible, adverse effects on competitors. When an
objective assessment of the demand and supply
situation demonstrates that there exists an excess
of production capacity, the restructuring plan must
make a contribution, proportionate to the amount
of aid received, to the restructuring of the relevant
market in the European Community by irreversibly
reducing or closing capacity.

restructuring to be undertaken and must be related
to the benefits anticipated from the Community’s
point of view. Aid beneficiaries will be expected to
make a significant contribution to the restructuring
plan from their own resources or from external
commercial financing. In order to limit the distor-
tive effect, the aid shall not provide the company
with surplus cash which could be used for aggress-
ive, market distortive activities.

(d)

Full implementation of restructuring plan and
observance of conditions

The company must fully implement the restructur-
ing plan agreed by the Commission and must
discharge all obligations laid down by the Com-
mission.

(e) Monitoring and annual reports

Granting of restructuring aid must be monitored at
regular intervals through adequate reports.

(177) As regards the restoration of viability, the provisions of
Article 5 of Greek law No 2237/94, in conjunction with
ABG circulars No 150/94 and No 22/95, make access
to the measure conditional on the execution of a
feasibility study linked to the modernisation and devel-
opment of the cooperative. This feasibility plan should
show that the agricultural cooperative would be able to
satisfy its financial obligations towards the ABG.

(178) Within these arrangements, the ABG could include
conditions to assure modernisation (at administrative
levels), by reduction of operational
or organisational
expenditure (personnel reducing measures and/or other
relevant cost saving measures), sale of unproductive
assets and reinforcement of own capital (via imposition
of levies on delivered products and increase in members’
equity share).

(c) Aid in proportion to the restructuring costs

and benefits

The amount and intensity of the aid must be
limited to the strict minimum needed to enable

(179) The feasibility plans included also complete timetables
for the completion of financial restructuring (depending
on each cooperative), provisions for reversion to pre-
vious debt arrangements, as well as provisions for
regular close monitoring of the plan.

L 159/22

EN

Official Journal of the European Communities

17.6.2002

(180) While the provisions of Article 5 of Greek law No 2237/
94 are linked to the reduction of financial exposure of
the agricultural cooperatives towards the ABG and allow
a regular reimbursement, the Commission accepts that
the feasibility study for each cooperative can be con-
sidered as a restructuring plan within the meaning of the
guidelines. Indeed, these feasibility studies are designed
to assure financial support in a restructuring process
guided mainly by internal measures.

(181) As regards the respect of the second condition, Article 5
of Greek law No 2237/94 does not contain any pro-
vision concerning measures taken by the Greek State to
offset as far as possible adverse effects on competitors.
Furthermore, the aid scheme applies to cooperatives
covering all the agricultural sector, including sub-sectors
for which there is a structural excess of production
capacity, as mentioned in point 2.3 of the Annex
to Commission Decision 94/173/EC (33), setting out
sectoral
limits for the Community guidelines for aid
for processing and marketing of agricultural products
applicable at the time of the opening of the Article 88(3)
procedure. Neither the aforementioned article nor its
implementing rules foresee any provision imposing on
the benefiting cooperatives an irreversible reduction or
closure of capacity as a contribution to the restructuring
of the relevant market at a European level.

(182) To that extent, it should be noted that, contrary to the
assertions of the Greek authorities, Decision 94/173/EC
was applicable to all Community regions, with certain
derogation criteria for Objective 1 regions like Greece.
Decision 94/173/EC is mentioned as a yardstick to judge
overcapacity in some sectors both for cofinanced and
national aids, and not as an absolute reference. Other
indications of overcapacity could also have been used
(i.e. market surveys), if appropriate.

(183) The Greek authorities argue that the present law contains
provisions imposing a reduction or cessation of the
productive capacity, namely the cessation of loss-making
activities. The Commission considers that Greek law
No 2237/94 and its implementing rules do not impose
any reduction of production capacity on cooperatives,
but only the obligation to dispose of idle assets. Aban-
doning unused or unprofitable capacities and disposal
of idle assets is fully justified in order to rebalance assets
and liabilities and it is necessary to achieve viability at
the level of the cooperative. However, the Commission
cannot consider this provision as an obligation to reduce

(33) See footnote 10.

capacity that should be seen as a real contribution from
the beneficiary of the measure to the restructuring of the
specific sector in the Community context.

(184) Point 3.2.3 of

the Community guidelines refers to
particular conditions for restructuring aid in assisted
areas. According to these provisions, if regional develop-
ment needs justify it, the Commission can make use of
certain flexibility in assisted areas (Article 87(3)(a) and
Article 87(3) (c)) with regard to the requirement of
reduction in capacity in the case of markets with
structural overcapacity. However, the Commission could
not accept a general waiver of this requirement. Indeed,
the Greek authorities have not supplied any justification
for such flexibility in the case of a measure affecting all
sectors of agricultural production in the whole of Greece.

(185) The third condition relates to the proportion between
the costs of the restructuring aid and its benefits from
the Community point of view.

(186) Firstly, neither Article 5 of Greek law No 2237/94 nor
its implementing provisions limit the overall amount of
benefit
to each cooperative to the strict minimum
needed to enable restructuring. Therefore, the Com-
mission cannot be sure that in all instances the approved
aid was limited to the minimum necessary.

(187) As a consequence, the Commission cannot be sure that,
the agreed debt reschedules did
for all 116 cases,
not produce surplus cash (or newly-created borrowing
capacity) for the cooperatives, allowing them to engage
in aggressive and market distortive activities.

(188) Furthermore, the Commission considers that measures
such as increase in equity capital, imposition of a levy
per unit of delivered product and sale of idle assets can
be considered as contributions from the beneficiaries to
the restructuring effort, if the product of these levies and
sales is assigned to the restructuring process. The level
at which these are required would allow the Commission
to judge whether it could be considered as ‘significant’,
in the light of the Community guidelines. However, it
should be noted that Article 5 of Greek law No 2237/
94 and its implementating provisions do not establish a
minimum level at which beneficiary contributions can
be considered important.

17.6.2002

EN

Official Journal of the European Communities

L 159/23

(189) As regards the fourth condition (full implementation of
restructuring programmes), the Commission notes that
monitoring of the implementation of the business plan
was performed by the ABG. At least in one case, the
Greek authorities indicated that the initial restructuring
measures were not sufficient to ensure the viability of
the cooperative. As a result, two sets of additional
restructuring measures were imposed on it. In this case,
the ABG assumed directly the management of
the
cooperative. While the exact details on the conditions of
this assumption of control by the ABG are unclear, these
actions indicate that not in all cases was there full
implementation of restructuring programmes. On the
other hand, this direct assumption of control by ABG is
in contradiction with the implementing provisions of
the law, referring to cancellation of the debt rescheduling
arrangements and reversion to the previous situation if
instalments are delayed more than six months. More-
over, failure to assure full compliance of the restructuring
programmes and assumption of control by the ABG
may imply further aids to these cooperatives (34). There-
fore, the Commission cannot be sure that there has been
full implementation of the viability measures in all the
approved settlements agreed under Article 5 of Greek
law No 2237/94.

(190) As regards the fifth condition the Commission notes
that the adopted implementing rules foresaw monitoring
of the rescheduling arrangements at close intervals.
However, Greece has failed to supply a detailed report
on overall implementation of these measures, as request-
ed by the Commission in opening the procedure pro-
vided for in Article 88(2) of the Treaty.

(191) Taking account of the above, the Commission concludes
that the provisions of Article 5 of Greek law No 2237/94
do not comply with the general Community guidelines.
Consequently, even if the scheme concerned only SMEs
within the meaning of the relevant Community guide-
lines, it could not be approved by the Commission.

(34) Judgment of the Court of 17 June 1999 in Case C-295/97

Piaggio. Not yet published.

The particular case of the aids granted to the dairy
cooperative AGNO in the framework of Article 5 of
Greek law No 2237/94 and Act of the Governor of the
Bank of Greece No 1620 of 5 October 1989

(192) Article 5 of Greek law No 2237/94 constitutes a scheme
to restructure agricultural cooperatives in difficulty. The
dairy company AGNO is merely one of the beneficiaries
of the scheme. As a general principle, the Commission
considers that assessment of individual cases of appli-
cation of a scheme under Articles 87 and 88 of the
Treaty does not affect the compatibility of the scheme
with the common market. However, taking account of
the fact that both the complaint and the comments from
the Greek authorities and from the ABG are focussed on
the dairy cooperative AGNO, the Commission con-
sidered it would be pertinent to consider, as a explana-
tory argument, the aid granted to AGNO according to
the general criteria for rescue and restructuring firms in
difficulty.

(193) Also, taking account of the concomitance of the aid to
AGNO pursuant to Article 5 of Greek law No 2237/94
and the aid granted in the framework of the Act of the
Governor of the Bank of Greece No 1620 of 5 October
1989, and their similar objectives and instruments, this
assessment is done in conjunction for both aids.

(194) This assessment

is without prejudice to the Com-
mission’s position in relation to the compatibility with
State aid rules of Article 5 of Greek law No 2237/94.

(195) As regards the respect of the first condition of the
Community guidelines (restoration of viability),
the
Commission noted that
the Greek authorities have
supplied a set of measures to be implemented. These
measures envisage reestablishing the cooperative’s finan-
cial balance. They involve cost-cutting measures like
staff reductions (150 jobs in three years), reduction
of overtime and supplementary payments to staff,
marketing/advertising expenditure by 2 % and general
costs by GRD 50 million. These measures include also
ensuring new resources, such as recovery of cooperative
capital, increase of cooperative fees by GRD 50 000,
imposition of a special levy on delivered milk (GRD 1,5/
kg for the first three years and GRD 3/kg after 1996),
increase in equity capital and sale of real estate. In
addition, AGNO should introduce modern marketing
methods, extend its product range and improve product
quality and cancel any planned investment not linked to
the milk processing plant. These measures can be
considered a restructuring plan within the meaning of
the above guidelines.

L 159/24

EN

Official Journal of the European Communities

17.6.2002

(196) In order to approve that restructuring plan, the ABG
limits the financial assessment of the net cash-flow of
the cooperative plus net effects with application of the
restructuring plan minus loan instalments during the
entire loan period. According to the Commission’s view,
this assessment method allows measurement of the
capacity of the cooperative to reimburse the loans at the
new rates, but cannot be considered as equivalent to a
viability assessment of the cooperative within the mean-
ing of
the
profitability of the cooperative in private terms.

the guidelines, requiring an analysis of

(201) As regards the fourth condition (full implementation of
the restructuring plan), it results clearly from the Greek
authorities’ comments that the initial measures imposed
on the cooperative were not sufficient to ensure a
return to viability. As a result, two sets of additional
restructuring measures were imposed on it. On the other
hand, AGNO received further State assistance, by the
writing-off of GRD 570 million of its debt to the ABG
pursuant to Greek law No 2538/97. Finally, the ABG
took over AGNO’s management on May 1998.

(197) This is particularly important, since according to the
restructuring plan the net cash-flows are lower than
GRD 100 million between 1998 and 2004, i.e. 0,5 % of
the cooperative’s turnover.

(198) As regards respect of the second condition (reduction of
capacity), the cooperative is active in the dairy sector,
which suffers from structural overcapacity in the Com-
munity market. Sector limitations on investments are
applicable, either at the level of primary production
(Article 6 of Regulation (EC) No 950/97), or at the level
of processing and marketing of dairy products (point 2.2
of the Annex to Decision 94/173/EC). On the other
hand, and in spite of its size, the restructuring measures
imposed on AGNO did not include any type of capacity
reduction.

(199) As regards the third criterion (proportionality),

the
Commission considers that the favourable provisions of
Article 5 of Greek law No 2237/94 were not sufficient,
by themselves, to allow AGNO to restore its viability.
This is demonstrated by the fact that, in conjunction
with these legal provisions, the ABG also rescheduled a
further GRD 1,899 billion in the framework of this
operation.

(202) Taking account of the above, two situations might have
occurred. If the first set of measures was realistic and
liable to bring AGNO to viability, the restructuring
If the initial
measures were not fully implemented.
restructuring measures were fully implemented,
the
development of further measures and further aid given
to AGNO call into question the reasonableness of the
calculation of the initial prospects of viability.

(203) The assessment of the individual aids granted to the
dairy cooperative AGNO confirms at the individual level
the conclusion that the overall scheme implemented by
Article 5 of Greek law No 2237/94 and the aid granted
through Act of the Governor of the Bank of Greece
No 1620 of 5 October 1989 do not respect
the
Community guidelines.

(204) Furthermore, the takeover of AGNO’s management by
the ABG should be assessed by the Commission pursuant
to Articles 87 and 88 of the Treaty. For procedural
reasons, this additional element cannot be assessed in
the framework of this Decision.

(200) As regards the contribution from the beneficiary cooper-
ative to the restructuring operation, the Commission
should be assured that the contribution from the ben-
eficiary to the restructuring process is significant.
According to the calculation method normally followed
by the Commission, the consolidation loan has a cash
grant equivalent of at least 64,7 % (see recital 119).
Taking into account the fact that the overall loan is
GRD 12,044 billion
+
GRD 1,899 billion), the total aid is GRD 7,79 billion.
On the other hand, the total combined effect of the
special levy per kilo of milk delivered, the increase in
equity and the sale of assets would generate a beneficiary
contribution of GRD 3,025 billion over the whole
restructuring period, equivalent to 38 % of the total
restructuring aid. The Commission can consider this
own resources contribution as significant.

(GRD 10,145

billion

VI. CONCLUSIONS

(205) The Commission considers that the tax provisions for
cooperatives pursuant to Greek laws No 2238/94 and
No 2169/93 and the debt rescheduling provisions of
Act of the Governor of the Bank of Greece No 1620 of
5 October 1989 do not in themselves constitute State
aid within the meaning of Article 87(1) of the Treaty.
However, in the individual case of the debt rescheduling
arrangements for AGNO pursuant to Act of the Gover-
nor of the Bank of Greece No 1620 of 5 October 1989,
the Commission considers they constitute State aid
within the meaning of Article 87(1) of the Treaty.

17.6.2002

EN

Official Journal of the European Communities

L 159/25

(206) On the other hand, the Commission considers that the
provisions of Article 32(2) of Greek law No 2008/92
(including the aid to the dairy cooperative AGNO
pursuant to Article 19 of Greek law No 2198/94) and
the provisions of Article 5 of Greek law No 2237/94 do
constitute State aid.

(212) The aids should be repaid in accordance with the
procedures of Greek law. The amounts of these aids
shall bear interest from the date on which the aid was
granted to the moment of its effective recovery. It shall
be calculated on the basis of the market rate, with
reference to the rate used for calculating the grant-
equivalent in the framework of regional aid (40).

(207) The Commission regrets that Greece has illegally put the
abovementioned aids into application in violation of
Article 88(3) of the Treaty.

(208) For the reasons set out above the aids satisfying the
requirements of Article 87(1) of the Treaty cannot
qualify for any of the exemptions provided for in
Article 87(2) and (3). They are therefore incompatible
with the common market.

(209) In cases such as the present one where non-notified aid
is introduced without awaiting the Commission’s final
decision, the imperative character of the procedural rules
set out in Article 88(3) of the Treaty, of which the
Court of Justice has recognised the direct effect in its
judgements of 19 June 1973 (Case 77/72 Carmine
Capolongo v. Azienda Agricola Maya) (35), 11 December
1973 (Case 120/73 Gebr. Lorenz GmbH v. Federal
Republic of Germany) (36) and 22 March 1977 (Case
78/76 Steinicke und Weinlig v. Federal Republic of
Germany) (37), prevent any retrospective legalisation of
the aids (Judgment of 21 November 1991 in Case
C-354/90 Fédération nationale du commerce extérieur
des produits alimentaires and others v. France (38)).

(210) Article 14(1) of Council Regulation (EC) No 659/1999
of 22 March 1999 laying down detailed rules for
application of Article 88 of the EC Treaty (39) provides
that when a negative decision is taken in a case of
unlawful aid the Commission shall decide that
the
Member State concerned is to take all necessary action
to recover the aid from the recipient. Reimbursement is
necessary in order to restore the previous situation by
removing all financial advantages unduly gained by the
recipients since the date of granting of the aid.

(211) Article 14(2) of Regulation (EC) No 659/1999 states
that the aid to be recovered is to include interest at an
appropriate rate set by the Commission. Interest runs
from the date on which the illegal aid was made available
to the recipients until that of its recovery.

(35) [1973] ECR 611.
(36) [1973] ECR 1471.
(37) [1977] ECR 595.
(38) [1991] ECR I-5505.
(39) OJ L 83, 27.3.1999, p. 1.

(213) The present Decision is without prejudice to an eventual
Commission investigation on the competitive impact of
the behaviour of the ABG in the Greek agricultural
sector.

(214) The present Decision is without prejudice to any con-
clusions that the Commission may draw as regards
financing of the common agricultural policy by the
European Agricultural Guidance and Guarantee Fund
(EAGGF),

HAS ADOPTED THIS DECISION:

Article 1

1.
The tax provisions in favour of cooperatives pursuant to
Greek laws No 2238/94 and No 2169/93 and the debt
rescheduling arrangements in Act of the Governor of the Bank
of Greece No 1620 of 5 October 1989 do not in themselves
constitute State aid within the meaning of Article 87(1) of the
Treaty.

The following State aids are incompatible with the

2.
common market:

(a) Article 32(2) of Greek law No 2008/92;

(b) Article 5 of Greek law No 2237/94;

(c) The grant to the dairy cooperative AGNO pursuant to
Article 19 of Greek law No 2198/94, of an amount of
GRD 529,89 million;

(d) The rescheduling of the debt of the cooperative AGNO
to the Agricultural Bank of Greece amounting to
GRD 1,899 billion,
in the framework of Act of the
Governor of the Bank of Greece No 1620 of 5 October
1989.

(40) OJ C 74, 10.3.1998, p. 9.

L 159/26

EN

Official Journal of the European Communities

17.6.2002

Article 2

The Greek authorities shall take all the measures necess-
1.
ary to recover from the recipients the aids referred to in
Article 1(2) and unlawfully made available to them, within
two months of the notification of this Decision.

(c)

2.
Recovery shall be effected in accordance with the
procedures of Greek law. The sums to be recovered shall bear
interest from the date on which they were made available to
the recipients until their actual recovery. Interest shall be
calculated on the basis of the reference rate used for calculating
the grant-equivalent of regional aids.

Article 3

1.
Greece shall inform the Commission, within two months
following notification of this Decision, of the measures taken
to comply with it.

stration that this operation does not include further State
aids in favour of AGNO;

all information allowing the Commission to initiate an
investigation pursuant to Articles 87 and 88 of the
Treaty of the relations between the Greek State and the
Agricultural Bank of Greece and its competitive impact
in the agricultural sector. For that purpose, Greece should
transmit
legislation,
to the Commission all relevant
balance sheets of the Bank for the last 10 years and its
eventual comments on the subject;

(d) A report covering all debt settlement arrangements made
by the ABG to agricultural cooperatives pursuant to Act
of the Governor of the Bank of Greece No 1620 of
5 October 1989, as well as an appraisal as to their
conformity with the rules of Articles 87 and 88 of the
Treaty.

Article 4

This Decision is addressed to the Hellenic Republic.

2. Within the same time period, the Greek authorities are
requested to supply to the Commission:

Done at Brussels, 1 March 2000.

(a)

(b)

a full list of beneficiaries for all shcemes, the amounts to
be recovered and the interest due;

all information available about the taking over of AGNO
by the Agricultural Bank of Greece, as well as a demon-

For the Commission

Franz FISCHLER

Member of the Commission