2003/739/EC: Commission Decision of 13 May 2003 on the aid scheme which Italy is planning to implement to promote employment in the Region of Sicily (Text with EEA relevance) (notified under document number C(2003) 1484)
Date: 2003-05-13
Institutions: European Commission
Subjects: Italy, State aid, control of State aid, employment aid

17.10.2003

EN

Official Journal of the European Union

L 267/29

COMMISSION

COMMISSION DECISION

of 13 May 2003

on the aid scheme which Italy is planning to implement to promote employment in the Region of
Sicily

(notified under document number C(2003) 1484)

(Only the Italian text is authentic)

(Text with EEA relevance)

(2003/739/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

(2)

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

Since a suspensive clause made the scheme's entry into
force explicitly subject to prior approval pursuant to
Article 87 et seq. of the Treaty, the scheme was entered
in the register of notified aid under number N 428/
2000.

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

(3)

Having regard to Council Regulation (EC) No 659/1999 of 22
March 1999 laying down detailed rules for the application of
Article 88 of the EC Treaty (1),

Having called on interested parties to submit their comments
pursuant to the provisions cited above (2),

Additional
information was requested by Commission
letters dated 31 August 2000 (D/54509), 30 March
2001 (D/51384), 28 May 2001 (D/52158), 16
November 2001 (D/54755) and 7 February 2002 (D/
50529), to which the Italian authorities replied by letters
Nos 1593 of 8 February 2001 (A/31192), 4129 of 27
March 2001 (A/33708), 10255 of 19 September 2001
(A/37368), 11847 of 3 October 2001 (A/37873), 1003
of 22 January 2002 (A/30514), 4873 of 18 April 2002
(A/32946) and 5439 of 29 April 2002 (A/33234).

Whereas:

(4)

A meeting between the Italian authorities and the
Commission was held in Brussels on 16 January 2002.

I. PROCEDURE

(1)

By letter No 7666 of 26 June 2000 (A/35346 of 29 June
2000), the Italian authorities notified the Commission,
pursuant to Article 88(3) of the Treaty, of the refinan-
cing for the period 2000-2006 of employment aid
scheme N 692/97, approved by the Commission on 25
February 1998 (3), and of changes
to the scheme.
Scheme N 692/97 had come to an end because the
appropriation of some EUR 76,5 million approved by
the Commission for the period 1997-1999 had been
fully used up.

(1) OJ L 83, 27.3.1999, p. 1.
(2) OJ C 242, 8.10.2002, p. 2.
(3) OJ C 130, 28.4.1998, p. 15.

(5)

(6)

By letter SG(2002) D/230509 of 4 July 2002,
the
Commission informed Italy that it had decided not to
raise any objections to part A of the scheme, which
provides aid for job creation not linked to investment,
but to initiate the procedure laid down in Article 88(2)
of
the scheme,
concerning aid for job creation linked to investment.

the Treaty in respect of part B of

The Commission decision to initiate the procedure was
published in the Official Journal of the European Commu-
nities (4). The Commission invited interested parties to
submit their comments on the aid.

(4) See footnote 2.

L 267/30

EN

Official Journal of the European Union

17.10.2003

(7)

(8)

The Commission received no comments on the scheme
from interested parties.

Since Commission Regulation (EC) No 2204/2002 of 12
December 2002 on the application of Articles 87 and
88 of the EC Treaty to State aid for employment (5)
entered into force on 3 January 2003, the Commission
informed the Italian authorities by letter of 31 January
2003 (D/50666) that the aid scheme in question would
be assessed in accordance with the provisions of that
Regulation, pursuant to Article 11(2) thereof.

(9)

The Commission accordingly granted the Italian authori-
ties a one-month extension to allow them to submit any
comments.

(10)

The Commission received no such comments.

II. DESCRIPTION OF THE SCHEME

Objective

(11)

The scheme is designed to create jobs in a region, Sicily,
where the standard of living is abnormally low and there
is serious underemployment.

Aim

(15)

The measure is designed to promote job creation. It has
two parts: part A concerning job creation not linked to
investment and part B concerning job creation linked to
investment.

Form and intensity of the aid

(16) Aid is granted in the form of a total exemption from
social security contributions for a maximum period of
six years with a view to promoting the recruitment on
the following categories of
open-ended contracts of
worker:

— apprentices,

— unemployed persons requiring training,

— the long-term unemployed (out of work for more

than 24 months),

Legal basis

— other categories of unemployed person,

(12)

The aid scheme is based on the following statutory
provisions adopted by the Region of Sicily:

— Regional Law No 30/1997,

— Article 9(3) of Regional Law No 24/2000 and Article
6 of Regional Law No 17/2001, which extend the
scope of the scheme,

— Regional Law No 9/2000, which provides for the
refinancing of Regional Law No 30/1997 for the
year 2000,

— Article 18(1) of Regional Law No 32/2000, which
provides refinancing for Regional Law No 30/1997
for the period 2001-2006.

Duration and budget

(13)

The measure is to expire on 31 December 2006. Its total
budget is approximately EUR 554 million.

Recipients

(14) Any company active in any sector, with the exception of
the steel
industry, which operates in Sicily and hires
certain categories of worker on an open-ended basis is
eligible.

(5) OJ L 337, 13.12.2002, p. 3.

— the disabled and rehabilitated drug addicts,

— workers on ‘mobility list’ redeployment schemes,

— workers who have been drawing on the Cassa integra-
zione (wages guarantee fund) for at least 24 months.

(17)

The same type of aid is also available for:

— the conversion of fixed-term employment contracts

into open-ended contracts,

— the conversion of

fixed-term training and work

experience contracts into open-ended contracts.

(18) Aid is granted subject to the following conditions:

— there must not be any job cuts over the 12 months

preceding the recruitment,

— the recruitment must involve the creation of new
jobs in relation to the size of the company's work-
force during the six months preceding the recruit-
ment. Where training and work experience contracts
and other fixed-term contracts are converted into
open-ended contracts, the workers concerned must
not be counted in the company's workforce if the
conversion relates to the same workers.

17.10.2003

EN

Official Journal of the European Union

L 267/31

(19)

The Italian authorities have estimated the average level
of aid at 45 % of the worker's gross wages.

III. DOUBTS RAISED BY THE COMMISSION WHEN IT
DECIDED TO INITIATE THE PROCEDURE LAID
DOWN IN ARTICLE 88(2) OF THE TREATY

(20)

In the decision to initiate the procedure laid down in
Article 88(2), the Commission assessed part B of the
scheme, which provides aid for net job creation linked
to investment, in the light of the guidelines on national
regional aid (6), the criteria laid down by Commission
Regulation (EC) No 70/2001 of 12 January 2001 on the
application of Articles 87 and 88 of the EC Treaty to
State aid to small and medium-sized enterprises (7), the
Community guidelines for State aid in the agriculture
sector (8) and the Community guidelines for the exami-
nation of State aid to fisheries and aquaculture (9).

(21)

The doubts raised by the Commission when it decided
to initiate the procedure laid down in Article 88(2) of
the Treaty focused on:

(23)

are

(a) the initial nature of the investment to which the jobs
created
linked. The Commission doubted
whether the aid for job creation provided for in the
scheme was concerned solely with jobs linked to the
investment project
implementation of an initial
within the meaning of points 4.11 to 4.14 of the
guidelines on national regional aid and Article 2(c)
of Regulation (EC) No 70/2001;

(24)

(b) the intensity of the scheme: the Commission also
doubted whether the aid intensity of the scheme,
which could be calculated in relation to wage costs
as defined in point 4.13 of the guidelines on national
regional aid, complied with the regional ceilings for
Sicily laid down in the Italian regional aid map for
2000-2006 (35 % nge + 15 % gge for SMEs);

(c) compliance with the rules on the cumulation of aid
laid down in points 4.18 to 4.21 of the guidelines
on national regional aid and Article 8 of Regulation
(EC) No 70/2001;

(e) compliance with the principle that, with a view to
ensuring that
the productive investment aided is
viable and sound, the recipient's contribution to its
financing is at least 25 %, as required by point 4.2 of
the guidelines on national regional aid and Article
4(3) of Regulation (EC) No 70/2001;

(f) in the case of agriculture, fisheries and aquaculture,
compliance with points 4.1 and 4.2 of the Commu-
nity guidelines for State aid in the agriculture sector
or the corresponding provisions of the Community
guidelines for the examination of State aid to fish-
eries and aquaculture.

(22) No comments were received either from the Italian
authorities or from interested parties on the doubts
raised by the Commission.

IV. ASSESSMENT

Do the measures constitute aid?

In order to assess whether the measures provided for in
the scheme constitute State aid within the meaning of
Article 87(1) of the Treaty,
it has to be determined
whether they confer an advantage on the recipients,
whether that advantage derives from State resources,
whether they affect competition, and whether they are
liable to affect trade between Member States.

resources, and whether

The first requirement
for the applicability of Article
87(1) of the Treaty is that the measure must confer an
advantage on certain specific undertakings. It has to be
determined whether the recipients receive an economic
advantage they would not have received under normal
market conditions, or whether they avoid costs which
they would normally have had to bear out of their own
financial
this advantage is
conferred on a specific category of undertaking. By
allowing firms located in one region of the country,
namely Sicily, to receive aid for promoting employment
in the form of exemptions from social security contribu-
tions, the Italian authorities thus take over part of the
firms'
labour costs, which are normal expenditure
incurred in their own interest, and confer a financial
advantage that improves their competitive position. In
addition,
firms operating in
specific areas of Italy, because they are not available to
firms outside those areas.

these measures

favour

(d) observance of the principle of necessity for the aid
within the meaning of point 4.2 of the guidelines on
national regional aid and Article 7 of Regulation
(EC) No 70/2001;

(25)

(6) OJ C 74, 10.3.1998, p. 9.
(7) OJ L 10, 13.1.2001, p. 33.
(8) OJ C 28, 1.2.2000, p. 2.
(9) OJ C 19, 20.1.2001, p. 7.

The second requirement for the applicability of Article
87 is that the aid must be granted by the State or out of
State resources.
In the present case the use of State
resources takes the form of revenue forgone by the
public authorities: the exemption of certain firms from
the payment of social security contributions reduces the
tax revenue accruing to the State.

L 267/32

EN

Official Journal of the European Union

17.10.2003

(26)

The third and fourth conditions for the applicability of
Article 87(1) of the Treaty require that the aid distort or
threaten to distort competition, and that it be liable to
affect trade between Member States. The measures at
issue here threaten to distort competition by strength-
ening the financial position and freedom of action of the
recipient firms as compared with competitors who do
not qualify.
in intra-
that effect makes itself
Community trade, then trade between Member States is
affected. In particular, such measures distort competition
and affect trade between Member States if the recipient
firms export part of their output to other Member States,
and if they do not themselves export, domestic output is
nevertheless favoured, because firms in other Member
States have less opportunity to export their products to
the Italian market (10).

felt

If

does it satisfy the tests of Article 87(2)(c). For obvious
reasons the exemptions in Article 87(3)(b) and (d) are
not applicable either.

(31) As the aid is aid for job creation, the Commission has to
consider whether it qualifies for the regional exemptions
in Article 87(3)(a) and (c).

Eligibility of the region

(27)

The measures at issue are therefore in principle banned
by Article 87(1), and can be considered to be compatible
with the common market only if they qualify for one of
the exemptions laid down in the Treaty.

(32) On 1 March 2000 the Commission approved the Italian
regional aid map for the period 2000-2006, delimiting
the regions qualifying for exemption under Article
87(3)(a) of the Treaty (11). In accordance with that map,
Sicily is a region eligible for aid under the exemption.

Lawfulness of the scheme

Assessment of the scheme in the light of the guidelines on
national regional aid and the criteria laid down by Regulation
(EC) No 70/2001

(28)

In the light of the information provided by the Italian
authorities (see points 1 and 2) showing that the scheme
has not yet entered into force, the Commission finds that
the Italian authorities have complied with the obligation
to notify laid down in Article 88(3) of the Treaty.

Compatibility of the measures with the common
market

(29) After determining that the measures under examination
constitute State aid according to Article 87(1) of the
Treaty, the Commission has to consider whether they
can be declared compatible with the common market
under Article 87(2) and (3).

(30)

The Commission takes the view that the aid does not
qualify for the exemptions in Article 87(2): it is not aid
having a social character of
the kind referred to in
Article 87(2)(a), nor is it aid intended to make good the
damage caused by natural disasters or exceptional occur-
rences of the kind referred to in Article 87(2)(b), nor

(10) Judgement of the Court of Justice of the European Communities
dated 13 July 1988 in Case 102/87 [1988] ECR 4067, paragraph
19.

(33)

Since no comments were received from the Italian
authorities in the course of the procedure laid down by
Article 88(2) of the Treaty, the Commission finds that
the formal
investigation has not brought to light any
circumstances capable of dispelling its doubts:

(a) there is no evidence enabling it to conclude with
certainty that the aid for job creation provided for in
the scheme is concerned solely with jobs linked to
the implementation of an initial investment project
within the meaning of points 4.11 to 4.14 of the
guidelines on national regional aid and Article 2(c)
of Regulation (EC) No 70/2001;

(b) there is no evidence enabling it to conclude with
certainty that the aid intensity of the scheme, which
can be calculated in relation to wage costs as defined
in point 4.13 of the guidelines on national regional
aid, complies with the regional ceilings for Sicily laid
down in the Italian regional aid map for 2000-2006
(35 % nge + 15 % gge for SMEs). The scheme's gross
aid intensity, expressed as a percentage of the wage
costs
jobs created over a two-year period,
amounts to 135 % of wage costs (12);

for

(11) OJ C 175, 24.6.2000, p. 12.
(12) The Italian authorities have stated that social security contributions
represent 45 % of a worker's gross wages. Since the scheme
provides for a total exemption from social security contributions
for a maximum period of six years, the gross intensity of the
scheme is 135 %.

17.10.2003

EN

Official Journal of the European Union

L 267/33

(c) there is no evidence enabling it to conclude with
certainty that the rules on the cumulation of aid laid
down in points 4.18 to 4.21 of the guidelines on
national regional aid and Article 8 of Regulation
(EC) No 70/2001 are observed;

(37) According to the information provided by the Italian
authorities when they notified the scheme, the scheme's
gross aid intensity, expressed as a percentage of the wage
costs for jobs created over a two-year period, amounts
to 135 % of wage costs (14).

(d) there is no evidence enabling it to conclude with
certainty that the principle of necessity for the aid
within the meaning of point 4.2 of the guidelines on
national regional aid and Article 7 of Regulation
(EC) No 70/2001 is complied with;

(e) there is no evidence enabling it to conclude with
the
certainty that, with a view to ensuring that
productive investment aided is viable and sound, the
recipient's contribution to its financing is at least
25 %, as required by point 4.2 of the guidelines on
national regional aid and Article 4(3) of Regulation
(EC) No 70/2001;

(f) lastly, there is no evidence enabling it to conclude
with certainty that the investment aid is compatible,
in the case of agriculture, with points 4.1 and 4.2 of
the Community guidelines for State aid in the agri-
culture sector or, in the case of fisheries and aquacul-
ture, the corresponding provisions of the Commu-
nity guidelines for the examination of State aid to
fisheries and aquaculture.

(38)

(39)

(34)

(35)

Assessment of the scheme in the light of Regulation (EC) No
2204/2002

Regulation (EC) No 2204/2002 entered into force on 3
January 2003. Pursuant to Article 11(2) thereof, notifica-
tions pending at the time of entry into force of the
Regulation are to be assessed in accordance with its
provisions.

the
By letter dated 31 January 2003 (D/50666),
Commission informed the Italian authorities that the aid
scheme in question would be assessed in accordance
with the provisions of Regulation (EC) No 2204/2002,
pursuant to Article 11(2) thereof. It accordingly granted
the Italian authorities a one-month extension to allow
them to submit any comments. No such comments were
received from the Italian authorities.

(36)

The scheme in question provides for aid to be granted
for job creation linked to the implementation of an
investment project within the meaning of Article 2(j) of
Regulation (EC) No 2204/2002 (13).

(13) In accordance with Article 2(j), a job is ‘linked to the carrying-out
of a project of investment’ if it concerns the activity to which the
investment relates and if it is created within three years of the
investment's completion. During this period,
the jobs created
following an increase in the utilisation rate of the capacity created
by the investment are also linked to the investment.

The Commission notes that
in cases where jobs are
created for workers who have not been previously
employed or have lost or were about
to lose their
the long-term unemployed,
previous job (apprentices,
unemployed persons requiring training, other categories
of unemployed person, workers on ‘mobility list’ rede-
ployment schemes and workers who have been drawing
on the Cassa integrazione (wages guarantee fund) for at
least 24 months (15)), the scheme's aid intensity does not
comply with the ceiling for regional investment aid in
Sicily laid down in the Italian regional aid map for
2000-2006 (35 % nge + 15 % gge for SMEs), as required
by Article 4(3) of Regulation (EC) No 2204/2002.

it is still

Since that intensity does not comply with the regional
ceiling referred to in Article 4(3) of Regulation (EC) No
2204/2002,
less in line with the maximum
intensity allowed in cases where aid for job creation
under Article 4(3) is cumulated with aid for the recruit-
ment of disadvantaged or disabled workers under Arti-
cles 5 and 6 of
the Regulation. The aid intensity
provided for by the scheme for job creation for the
the disabled and rehabilitated
long-term unemployed,
drug addicts does not comply with Article 8(3) of Regu-
lation (EC) No 2204/2002.

(40) As regards the aid for the conversion of

fixed-term
employment contracts and fixed-term training and work
experience contracts into open-ended contracts, since
the Italian authorities have not provided any information
in the course of the procedure initiated under Article
88(2) of the Treaty, the Commission is unable to find
that the amount of such aid, whether granted for job
creation or for conversion of the contract, does not
exceed the corresponding ceiling for regional aid in
Sicily according to the Italian regional aid map for
2000-2006.

(14) See footnote 12.
(15) As regards workers who have been drawing on the Cassa integra-
zione for at least 24 months, the Commission notes that their situa-
tion is in all respects comparable to that of unemployed workers
proper. Since the Cassa integrazione is involved above all in restruc-
turing processes that require job cuts,
is highly likely that
workers who have been drawing on the fund for 24 months
already will be the first to lose their job. A worker who is in a
situation of quasi-unemployment through having drawn on the
Cassa integrazione for more than 24 months should therefore be
regarded as effectively unemployed.

it

L 267/34

EN

Official Journal of the European Union

17.10.2003

(41)

Since the Italian authorities have not provided any infor-
mation in the course of the procedure initiated under
Article 88(2) of the Treaty, the Commission is unable to
find that the rules on the cumulation of aid laid down in
Article 8 of Regulation No 2204/2002 are complied
with.

(42) Neither can the Commission find that the principle of
necessity for the aid as laid down in Article 7 of Regula-
tion (EC) No 2204/2002 is respected, nor that the reci-
pient contributes at least 25 % to the cost of the invest-
ment project as required by Article 4(3) of Regulation
(EC) No 2204/2002.

(43) Nor can the Commission find that the investments to
which the jobs are linked constitute investments in
tangible assets as defined in Article 2(k) of Regulation
(EC) No 2204/2002.

HAS ADOPTED THIS DECISION:

Article 1

The aid scheme to promote employment, which Italy plans to
implement, is incompatible with the common market.

The scheme may accordingly not be implemented.

Article 2

Italy shall inform the Commission, within two months of noti-
fication of this Decision, of the measures taken to comply with
it.

This Decision is addressed to the Italian Republic.

Article 3

V. CONCLUSIONS

Done at Brussels, 13 May 2003.

(44)

this Decision,

In the light of the assessment set out in recitals 29 to 43
of
the aid
scheme to promote employment in the Region of Sicily
is incompatible with the common market,

the Commission finds that

For the Commission

Mario MONTI

Member of the Commission