WRITTEN QUESTION E-2414/01 by Christoph Konrad (PPE-DE) to the Commission. Restrictions on subsidies for SMEs.
Date: 2001-09-03
Institutions: European Parliament, Provisional data
Subjects: State aid, application of EU law, competition law, control of State aid, financial aid, small and medium-sized enterprises

C 147 E/18

Official Journal of the European Communities

EN

20.6.2002

The Commission would also stress that all the obligations and rights arising from Directive 95/46/EC apply
to such data processing, in particular the obligations to process personal data fairly and lawfully, to limit
the data processed to those which are adequate, relevant and not excessive, to inform the data subject, to
grant the data subject the right to access, object to and rectify the data concerning him/her, to ensure the
security of the data, not to take individual decisions affecting a data subject based solely on the automated
processing of data, in addition to the provisions on cross-borders flows of data.

The Commission would draw attention in this respect to the statement made by the European Data
Protection Commissioners at their meeting in Santiago de Compostela on 18-20 September 1998,
in
which they had voiced their grave concern about what was, at the time, only a draft and had asked the
Icelandic Government to reconsider their plans with respect to the protection of personal data.

The Commission would also like to mention the rule of medical secrecy which exists in Europe and places
strict limits on the communication of medical data for reasons unrelated to a therapeutic relationship.

In addition, the Commission would stress that Article 3 of the Charter of Fundamental Rights of the
European Union guarantees everyone the right to his/her physical and mental integrity, that Articles 7 and
8 recognise everyone’s right to respect for his/her private and family life and the right to the protection of
personal data concerning him/her, and that Article 21 prohibits any discrimination based on genetic
features.

Finally, the Commission does not have any specific information regarding the possible use of the Icelandic
data by companies established in the Member States. Nor can it comment on either the risk or the
probability of a Member State agreeing to the wish of a private company to have data identical to those
possessed by Decode. In any case, if a Member State were to adopt similar regulations to the Icelandic law
of 1998, the Commission would assess how they conformed with Community rules, particularly those
relating to the protection of personal data. In this context, the Commission would consult the independent
working party on data protection set up by Article 29 of Directive 95/46/EC, this working party being
composed of European data protection commissioners.

(2002/C 147 E/018)

WRITTEN QUESTION E-2414/01

by Christoph Konrad (PPE-DE) to the Commission

(3 September 2001)

Subject: Restrictions on subsidies for SMEs

1. What grounds does the Commission have for limiting the business activities of equity investment
companies for SMEs and of guarantee associations by means of its communication on ‘State aid and risk
capital’, particularly bearing in mind that, in Europe, additional jobs and training places are mainly created
in SMEs?

2. Why does the Commission recognise ‘market failure’ only in the case of SMEs in areas receiving
assistance from the Structural Funds?

3. What view does the Commission take of the fact that equity investment companies for SMEs display
a commitment to assisting the development of the economy even though the return on their investment is
likely to be small? Why does it assume that equity investment companies which receive public funding
distort competition and displace potential investors from the market, when the economic reality is that,
particularly in the case of SMEs and when new businesses are being set up, other potential investors are
often not interested because they anticipate little return on the investment?

4. Why does the Commission intend to limit existing refinancing and liability indemnity programmes
for equity investment companies for SMEs?

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Official Journal of the European Communities

C 147 E/19

5. Why does the Commission prohibit guarantees for food-retailing SMEs which do not process
agricultural products into new products and yet not assistance to restaurants? What grounds does it have
for the far-reaching prohibition on assistance to SMEs in the transport industry?

6.

Does the Commission intend to limit guarantees for SMEs in the export trade?

Answer given by Mr Monti on behalf of the Commission

(5 November 2001)

1.
The Commission is given the task, under the EC Treaty, of controlling State aid to enterprises in
order to ensure that competition in the common market is not unduly distorted. The reasons for
controlling State aid apply as much to aid in the form of equity injections as to other forms of aid such as
grants or subsidised loans. However, the Commission also recognises the role played by small and
medium-sized enterprises (SMEs) in the economy, as well as the difficulties they may face, particularly in
terms of access to finance. For this reason, the Commission has always allowed higher aid intensities for
SMEs than for large enterprises. The Commission also recognises the importance of risk capital in the
financing of new and growing businesses. It has observed that public authorities have developed ways of
promoting such financing which fall within the definition of State aid but do not fall within existing rules
on the type of State aid which can be found compatible with the common market.

The new communication1 (1) on ‘State aid and risk capital’ represents the Commission’s response to these
various factors. The communication represents a widening of the type of State aid measures which can be
found compatible with the common market, rather than a limitation.

In order to be found compatible with the common market under the new communication, the
2.
Commission requires that a measure should address a market
the
Commission recognises such market failure only in the case of SMEs in areas receiving assistance from the
Structural Funds. The Commission has made clear that it will automatically accept the existence of market
failure for smaller transaction sizes, namely transactions below € 500 000, rising to € 750 000 or
€ 1 000 000 in areas eligible for regional aid in recognition of those areas’ particular difficulties. Above
those levels the Commission would require evidence of the existence of such a market failure, but does not
exclude such a possibility.

the case that

failure.

is not

It

3.
The fact that the expected return on an equity investment is below the level acceptable to a private
investor indicates that the investment may represent State aid. All aid is likely to be motivated by a
concern on the part of public authorities for the development of the economy. However, this cannot alter
the advantage which the company’s competitors may not have and which it would not otherwise have
obtained. Competition is thus distorted. The Commission does not assume that such an investment
normally will displace potential investors from the market, although the risk of such displacement exists
and the Commission has received anecdotal evidence of this occurring.

Where the lower levels of interest shown by private investors in a particular type of investment can be
attributed to market failure then this may provide a justification for State aid. However, a low return on
investment may also indicate a lack of viability, in which case the case for public intervention is reduced.

4.
The Commission and Member States are bound, under Article 88(1) of the EC Treaty, to keep under
review all systems of aid existing in those States. This review necessarily involves the reassessment of such
measures against State aid rules as these rules and the economic environment evolve.

5.
The Commission is not aware of such a differentiated treatment between restaurants and food-
retailing SMEs which do not process agricultural products into new products. As long as the general rules
for State aid in the form of guarantees are respected, such food-retailing companies may benefit from
them.

C 147 E/20

Official Journal of the European Communities

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20.6.2002

As regards the transport industry, in view of the over-capacity of tonnage in most of the main freight
transport sectors and economic problems which arise as a result, the Commission is very cautious when
assessing aid for the purchase of transport means. It therefore decided that such aid has to pass the
Commission’s close scrutiny by way of State aid procedures and may not be subject to an exemption from
notification.

6.
The field of export credit is regulated by the (OECD) Consensus for officially supported export
credits, Council Decision 93/112/EEC of 14 December 1992 extending the Decision of 4 April 1978 on
the application of certain guidelines in the field of officially supported export credits2 (2), which has been
implemented into Community law. In addition, general rules relating to State aid (namely, Articles 87 and
88 of the EC Treaty) are applicable. Export guarantees have to be analysed and evaluated according to
these instruments, in order to verify their compliance with Community law, irrespectively of whether they
relate to SMEs or to other undertakings.

(1) OJ C 235, 21.8.2001.
(2) OJ L 44, 22.2.1993.

(2002/C 147 E/019)

WRITTEN QUESTION P-2482/01

by Joan Colom i Naval (PSE) to the Commission

(5 September 2001)

Subject: Drought and famine in Central America

According to reports received by the questioner, the drought which has been affecting Central America for
three months has destroyed between 40 and 100 % of the harvest of maize, beans, rice and sorghum in
some areas and famine is affecting 1,6 million people in Guatemala, El Salvador, Honduras and Nicaragua,
according to figures supplied by the United Nations World Food Programme (WFP).

Can the Commission say whether it has taken any steps to provide aid and what the result has been?

Answer given by Mr Patten on behalf of the Commission

(4 October 2001)

According to the Food and Agricultural Organisation’s (FAO) Special Alert Report No 317 of 3 September
2001 (1) current estimates for Central America’s aggregate cereal output are of 2,3 million tonnes, some 8
percent lower than the last five-year average. This drop is largely due to the drought or unevenly
distributed rains during the period June-August 2001 that followed abundant rains in May 2001.

The cumulative effects of the successive natural disasters C Hurricane Mitch, earthquakes and drought C,
the dramatic fall in the prices of critical export crops (coffee, banana) and the structural inadequacies of
agricultural policies, contributed to the worsening of the overall poverty situation and food insecurity
amongst large groups of the rural populations.

All indications are that current food aid needs are being met by the governments of the region, through
the use of strategic reserves and imports, complemented with food aid contributions made by World Food
Programme (WFP), United States Agency for International Development (USAID) and Inter-American
Development Bank (IDB).

Until this moment the governments have not requested additional emergency relief and no appeals have
been received from international relief organisations or non-governmental organisations (NGOs). However
the continuation of the adverse agricultural conditions might will exhaust the governments’ capacity in the
short run and may require additional donor support.