2005/313/EC: Commission Decision of 16 March 2004 concerning the aid which Italy is planning to implement in order to tackle the peach-growing crisis in Piedmont (notified under document number C(2004) 473)
Date: 2004-03-16
Institutions: European Commission
Subjects: Italy, Piedmont, State aid, application of EU law, bad weather, control of State aid, producer organisation, stone fruit, withdrawal from the market

20.4.2005

EN

Official Journal of the European Union

L 100/19

II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 16 March 2004

concerning the aid which Italy is planning to implement in order to tackle the peach-growing crisis
in Piedmont

(notified under document number C(2004) 473)

(Only the Italian text is authentic)

(2005/313/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

(4)

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

The Commission decision to initiate the procedure was
published in the Official Journal of the European Union (1).
The Commission invited interested parties to submit their
comments on the aid in question.

After having asked the parties concerned to submit
comments in accordance with that Article,

their

(5)

The Commission has received no comments on the aid
concerned from interested parties.

Whereas:

II. DESCRIPTION

(1)

(2)

(3)

I. PROCEDURE

By letter dated 20 September 2002, recorded as received
on 25 September 2002, the Italian Permanent Represen-
tation to the European Union notified the Commission
of aid intended to tackle the peach-growing crisis in
Piedmont.

By letters dated 10 April 2003, recorded as received on
15 April 2003, and 7 August 2003, recorded as received
on 8 August 2003, the Italian Permanent Representation
to the European Union forwarded to the Commission the
additional information it had requested from the Italian
authorities by letters of 13 November 2002 and 5 June
2003.

By letter dated 2 October 2003 the Commission
informed Italy of its decision to initiate the procedure
provided for in Article 88(2) of the Treaty in respect
of the aid concerned.

(6)

(7)

The measure under consideration had been presented as
the adverse weather conditions, and in
a result of
in
particular the hailstorms, which affected Piedmont
2002 and damaged the peach and nectarine crops.
It
consisted initially of the withdrawal from the market of
6 000 tonnes of
to be
made into compost. According to the Italian authorities
the measure should have qualified for the derogation
provided for in Article 87(2)(b) of the Treaty.

(peaches and nectarines)

fruit

The withdrawal operations took place on 25, 26, 27 and
30 September 2002. The quantities withdrawn amounted
to 204,16 tonnes of peaches (value: EUR 18 782) and
977,94 tonnes of nectarines (value: EUR 89 970,48). The
to
total
1 182,10 tonnes of
fruit. As the aid envisaged was
EUR 0,092 per kilo withdrawn, the budget allocation
set aside for the measure was EUR 108 752.

quantity withdrawn

amounted

therefore

(1) OJ C 266, 5.11.2003, p. 3.

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Official Journal of the European Union

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(8)

According to the information contained in the notifi-
the producers to whom the measure would
cation,
the Asprofrut (2) organisation
apply are members of
who,
abovementioned adverse
the
result of
a
weather conditions, incurred losses in excess of 30 % of
their average historical production.

as

(13)

The second factor which led the Commission to doubt
the compatibility of the aid with the common market
was the fact that the Italian authorities, after referring
to a loss in relation to average historical production,
the loss had been calculated in
acknowledged that
relation to the turnover of
the undertakings, while
point 11.3 of the Community guidelines for State aid
to
the
sector
guidelines) (4), which serve as a basis for the assessment
losses caused by
of aid to compensate farmers for
adverse weather conditions, describes a method of calcu-
lating losses which concerns production losses (the ‘price’
factor is taken into consideration only when the loss at
production level has been determined).

agricultural

(hereafter

called

the

(14)

(15)

The third factor which led the Commission to doubt the
compatibility of the aid with the common market was
the fact that, according to the estimates provided by the
Italian authorities, the average production of peaches and
nectarines in 2002 was going to be above that for the
three previous years, while according to point 11.3.1 of
the guidelines aid is permitted only if the damage reaches
20 % of normal production in the less-favoured areas and
30 % in other areas (as indicated in recital 9, the average
regional production for the three years preceding the
event relied on had totalled 144 692 tonnes, 86 059
tonnes for peaches and 58 633 tonnes for nectarines;
for 2002 it had been estimated at 147 300 tonnes,
86 300 tonnes
for peaches and 61 000 tonnes for
nectarines).

average

to the

reference

calculated by

The fourth factor which led the Commission to doubt
the compatibility of the aid with the common market
was
the choice of years used for determining the
production for a normal year for the purpose of calcu-
lating the loss incurred. According to point 11.3.2 of the
guidelines, the gross production in a normal year should
be
gross
production in the previous three years, excluding any
year in which compensation was payable as a result of
adverse weather conditions. The Italian authorities have
calculated the loss incurred by reference to the three
years preceding that of the adverse weather referred to
above, whereas, by their own admission, while no
specific compensation was granted in the peach and
nectarine sectors, holdings producing these two types
of fruit nevertheless obtained, over the three years in
question,
interest rate subsidies on loans granted to
compensate for damage due to adverse weather repre-
senting at
the gross production that
could be marketed. In view of this information it was
difficult to imagine that the peach and nectarine crops
had been spared the adverse weather conditions that had
affected the entire holding and that, as a corollary, a
farmer whose entire holding had been affected could
have received aid for all his crops except peaches and
nectarines.

least 35 % of

(4) Republished in full, following amendment, in OJ C 232, 12.8.2000,

p. 17.

(9)

The average regional production for the previous three
years totalled 144 692 tonnes (86 059 tonnes of peaches
and 58 633 tonnes of nectarines).

(10)

In the light of the information contained in the notifi-
cation it appears that the reason for the use of State aid
is the fact that:

— Council Regulation (EC) No 2200/96 of 28 October
1996 on the common organisation of the market in
fruit and vegetables (3) provides for withdrawals in
each marketing year representing a maximum of
10 % of products marketed by individual producer
organisations, which may be increased by three
the average
percentage points on condition that
remains at 10 % over three years;

— the producer organisations in the region had already
had recourse to the three points increase within the
authorised limits.

III. INITIATION OF THE PROCEDURE PROVIDED FOR
IN ARTICLE 88(2) OF THE TREATY

(11)

The Commission has initiated the procedure provided for
in Article 88(2) of the Treaty because it doubted the
compatibility of the scheme with the common market.

(12)

The first factor which led the Commission to doubt the
compatibility of the aid with the common market was
the fact that, according to the information provided by
the Italian authorities during the exchange of corre-
spondence with the Commission, it became increasingly
clear that the difficult situation was not due to weather
conditions but to the unfavourable development of trade,
in other words a factor falling within the normal risks
associated with farming (for example, in their letter of 7
August 2003 the Italian authorities said that the difficult
situation was due more to market conditions than to a
fall
the loss has been
in addition,
calculated in terms of turnover and not of production
— see recital 13 below).

in production;

(2) According to the information provided by the Italian authorities,
two producer organisations applied for assistance, Asprofrut and
Lagnasco Group. The latter later withdrew its application.

(3) OJ L 297, 21.11.1996, p. 1.

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Official Journal of the European Union

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(16)

The fifth factor which led the Commission to doubt the
compatibility of the aid with the common market was
the appropriateness of the method of calculating the aid.
In order to calculate the amount of aid payable (EUR
0,092 per kilo), the Italian authorities had used only
the average market prices in September 2002 for fresh
packaged products (EUR 0,5 per kilo for nectarines and
EUR 0,45 per kilo for peaches) and not the average
prices for the three years preceding that of the event
excluding any year in which compensation had been
paid as a result of adverse weather conditions, as
prescribed in point 11.3.2 of the guidelines. According
to the Italian authorities this method was to help prevent
overcompensation for losses incurred by farmers, given
that the loss was due to the failure to sell the products
and that the cost price per kilo of product could be
estimated at approximately 50 % of the market price.
In view of this information the Commission could only
find that point 11.3.2 of the guidelines appeared not to
have been observed and conclude that the aid seemed to
be intended to compensate for losses that were due not
to a loss of production but to the unfavourable devel-
opment of the market.

(17) On this point too, the Commission has expressed doubts
about the appropriateness of the basis for calculating the
aid because the Italian authorities had not provided any
details of deductions for costs not incurred by the farmer
owing to the adverse weather or of any amounts received
under an insurance policy and of any direct aid received,
whereas these reductions are prescribed in points 11.3.2
and 11.3.6 of the guidelines.

(18)

(loss of

compliance with point 11.3.8 of

The sixth factor which led the Commission to doubt the
the aid with the common market
compatibility of
concerned
the
guidelines, according to which, where aid is paid to a
producer organisation, the amount must not exceed the
actual loss incurred by the farmer. The concept of actual
the doubts
loss was called into question in view of
referred to above
and not of
production; method of calculating losses not entirely
In addition, since the Italian authorities have
reliable).
indicated that the producer organisation would pay the
aid in full to the farmers, after deducting the costs it had
incurred,
in the
the Commission has been unable,
absence of fuller details, to determine whether the costs
in question, whose nature remained to be specified, were
not excessive, and if the aid paid to the producer orga-
nisation concerned had been transferred to the latter in
proportion to the losses it had incurred.

turnover

exhausted the withdrawal possibilities provided for in
that Regulation (see recital 10), the grant of State aid
for withdrawals that included an overrun of the possibi-
lities
rules
set, would have been contrary to the
governing the common organisation of the market in
fruit and vegetables and would have disturbed the
smooth operation of
the common market. According
to point 3.2 of the guidelines, the Commission cannot,
under any circumstances, approve an aid which is incom-
patible with the rules governing a common organisation
of the market or which would interfere with its proper
functioning.

(20)

Lastly, the Commission has been unable, in the absence
of adequate information, to determine whether the aid
had already been paid and whether it could be aggregated
with other aids with the same objectives.

IV. COMMENTS BY ITALY

(21)

By letter dated 16 January 2004, recorded as received on
19 January 2004, the Italian Permanent Representation
to the European Union forwarded to the Commission a
letter from the Italian authorities in which the latter
submitted their
aid concerned
comments on the
following the initiation of the procedure provided for
in Article 88(2) of the Treaty.

(22) With regard to the deduction of costs not incurred by
the farmer (see recital 17 above), the Italian authorities
have stressed that since the problem was not one of non-
production, all
the stages of cultivation had been
completed and their costs had been incurred.

(23) With regard to the need to avoid overcompensation for
the loss incurred (see recitals 15 and 16), the Italian
authorities said that, leaving aside the inappropriateness
of the method of calculation used, they considered that
they had provided figures which made it highly unlikely
that there would be any over-compensation. They reit-
erated also that, in view of the disproportion between the
amount of the aid and the market price used, and the
fact that the cost price corresponds to around half the
market price, it was difficult to consider that the losses in
the sector were too small for aid to be granted.

(19)

The seventh factor which led the Commission to doubt
the compatibility of the aid with the common market
concerned the existence of a presumption of an infrin-
gement of the rules governing the common organisation
of the market in fruit and vegetables established by Regu-
lation (EC) No 2200/96. Given that the producer orga-
region of Piedmont had already
nisations

in the

(24)

Lastly, with regard to compliance with point 11.3.8 of
the guidelines (see recital 18 ), the Italian authorities said
that the aid would be allocated in relation to the loss
incurred (determined on the basis of
the quantity
delivered) by the members of the producer organisation,
and that they would have seen to it that the share of the
aid retained by the producer organisation was intended
to cover solely the costs it had incurred.

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(25)

the reactions of

The letter sent on 16 January 2004 by the Italian
Permanent Representation to the European Union also
contains
the producer organisation
which could have qualified for the aid (Asprofrut). The
latter states that 2002 was a particularly difficult year,
the weather conditions in the
mainly on account of
region in August and the storms
that affected the
countries of central Europe at the same time which are
among its usual clients. It emphasised that it had applied
to the Region, and had been authorised, to withdraw
from the market a product that was not damaged by
hail, and in compliance with Community marketing
rules, although it had been regraded as an industrial
product on account of
the deterioration that had
occurred between the date of submission of the appli-
cation for withdrawal and the start of the actual with-
drawal operations.

V. ASSESSMENT OF THE AID

(26) According to Article 87(1) of the Treaty, any aid granted
by States or through State resources in any form what-
soever which distorts or threatens to distort competition
by favouring certain undertakings or the production of
certain goods is,
in so far as it affects trade between
Member States, incompatible with the common market.
The measure under consideration corresponds to this
definition in that it concerns certain types of production
and may affect
the position Italy
trade by virtue of
occupies in relation to the products in question (in
2001 Italy was the Union’s second largest producer of
peaches and largest producer of nectarines).

(27) However, in the cases provided for in Article 87(2) and
(3) of the Treaty, certain measures may be considered, as
an exception,
to be compatible with the common
market.

(28)

In the case under consideration, the Italian authorities
in
had explained that
question had been caused by adverse weather conditions.

the damage to the products

(29) As indicated in recital 12, during the exchange of corre-
spondence with the Italian authorities the Commission
had come round to the view that the event responsible
for the difficult situation was not a meteorological event
but
in
other words, a factor that fell within the normal risks
associated with farming.

the unfavourable development of

the market,

(30)

The comments from the Italian authorities following the
initiation of the procedure under the former Article 88(2)
of the Treaty did not provide any information making it

possible to consider this idea less convincing. On the
contrary, with reference to the information from the
Italian authorities which states that, since the difficult
situation was not due to a problem of non-production,
all stages of cultivation had been completed, and above
the explanations from the Asprofrut organisation,
all
which says that
it applied to the Region, and was
authorised,
to withdraw from the market a product
that was not damaged by hail and in compliance with
the Community marketing rules, although it had been
regraded as an industrial product on account of the dete-
rioration that had occurred between the date of
submission of the application for withdrawal and the
start of
the actual withdrawal operations (see recitals
22 and 25), the Commission can only remain doubtful
about the link between the withdrawal operation that
accompanied the aid and a loss of production due to
adverse weather conditions. The measure appears to be
the
linked more to the unfavourable development of
market,
in other words, to an event falling within the
normal risks associated with farming.

compensating

(31) With regard to the doubts set out in recitals 13, 14 and
15, all of which concern the appropriateness of
the
method of calculating the losses, the Commission, even
if it were to adopt the approach taken by the Italian
authorities of
caused by
natural disasters without taking account of the consid-
erations set out
find in the
comments of
those authorities any information that
enables it to glimpse a justification for the use of a
method of calculating losses that is based on turnover
instead of production, or for the choice of reference
years.

in recital 30, could not

losses

for

(32) With regard to the choice of the method of calculation, it
should be stressed that, while point 11.3.2 of
the
guidelines provides for the possibility of adopting a
method of calculating losses other than the one recom-
mended, this alternative method must make it possible to
determine a loss of production (see the rule (5) according
to which ‘the Commission will
(...) accept alternative
methods of calculation of normal production, including
regional reference values, provided it
is satisfied that
these are representative and not based on abnormally
high yields’). The reference to turnover cannot be
the provisions of
justified therefore in the light of
point 11.3.2 of the guidelines.

(33)

in their

letter of
The Commission notes also that
16 January 2004 the Italian authorities gave no justifi-
cation for the choice of reference years used for calcu-
lating the loss and no reply to the question how a loss of
production of 20 or 30 % was possible, while the
estimates of production for
for
2002, a production higher than that for the three years
used as a reference for the calculation of the losses.

the region showed,

(5) Point 11.3.2. of the guidelines. See footnote 4.

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(34)

(35)

it

is difficult

certain holdings producing peaches

In the absence of this information the Commission still
does not know why the Italian authorities used, as a
point of reference, years during which, by their own
admission,
and
subsidies on loans
nectarines had obtained interest
granted to compensate for damage caused by adverse
weather conditions and representing at
least 35 % of
the gross production that could be marketed (as stated
in recital 15,
to imagine that crops of
peaches and nectarines could have been spared the bad
weather that affected the whole of a holding and that, as
a corollary, a farmer whose entire holding was affected
could have received aid for all his crops except peaches
and nectarines). The Commission does not understand
either how the Italian authorities could justify a loss of
20 or 30 % on the grounds of
adverse weather
conditions while, apart from the fact that the production
estimates for 2002 appeared more favourable than the
figures for the three previous years used as a reference, it
is clear
the
from the comments of Asprofrut
products withdrawn had not been damaged by hail but
had been regraded as industrial products on account of
the deterioration that had occurred between the date the
application for withdrawal was submitted and the start of
the actual withdrawal operations (see recital 31).

that

In this situation, even if the Commission had been able
to consider the approach to compensating for losses due
to natural disasters taken by the Italian authorities to be
valid, it would in any case have continued to doubt the
appropriateness of the arrangements for calculating the
loss threshold triggering entitlement to the aid, of the
overrun of that threshold and of the eligibility of the
peach and nectarine producers for aid under point 11.3
of the guidelines. In effect, the use of turnover (in other
involved distinctly downstream of
words,
weather
finding in
the
the withdrawal measure that
recital 30, namely that
accompanied the aid appears to be linked more to the
unfavourable development of the market, i.e. to an event
that falls within the normal risks associated with farming.

conditions) only reinforces

factor

a

(36) With regard to the doubts

set out

could be no overcompensation for

in recital 16,
concerning the appropriateness of the method of calcu-
lation of the aid, the Italian authorities in their letter of
16 January 2004, themselves acknowledged that it was
inappropriate before underlining that the figures provided
should make it possible for the Commission to find that
there
loss
incurred. Again,
the Commission had
been able to consider the approach to compensating
for losses due to natural disasters taken by the Italian
authorities to be valid,
faced with the acknowledged
inappropriateness of the method of calculation it could
only doubt the compatibility of the proposed aid with
the common market.

in this case,

the

if

(37)

In actual fact, the fundamental problem again resides in
the fact that, as the Italian authorities indicated, the loss
incurred by the holdings in question is attributable to the
lack of sales of the product (see recital 16) and not to the
absence of production (see recital 30). Once again,
therefore,
the
the Commission can only suspect
planned aid is being used for purposes other than to
compensate for a lack of earnings due to the unfa-
vourable development of the market, which falls within
the normal risks associated with farming.

that

(38) With regard to the doubts set out in recitals 17 and 18
(concerning the appropriateness of the basis for calcu-
the
lating the
Italian authorities had
aid, because
the deduction of costs not
provided no details of
incurred by the farmer as a result of
the adverse
weather conditions, or of any amounts received under
an insurance policy or any direct aid received),
the
in their letter of 16 January
Commission notes that,
2004, the Italian authorities simply stated that the aid
they intend to grant would not be reduced by the
amount of costs not incurred by the farmer because,
since it was not a question of a lack of production, all
the cultivation stages had been completed and the
relevant costs had been incurred.

(39)

the Commission had been able

In the light of this response, the Commission notes that,
while the question of the deduction of costs not incurred
by the farmers has been dealt with, no details have been
given regarding the deduction of any direct aid received
or of any other amount received under an insurance
policy. While
to
consider the approach taken by the Italian authorities
referred to above on several occasions to be valid, this
absence of detailed information would have been
sufficient in itself for it to continue to harbour doubts
about the compatibility of the measure with the common
market since it could not have been sure that all the
conditions in point 11.3 of the guidelines had been met.

(40) With regard to the doubts set out in recital 18, which are
linked to compliance with point 11.3.8 of the guidelines,
the Commission notes the details provided by the Italian
authorities, according to which the aid would be
allocated in relation to the
incurred by the
members of the producer organisation (determined on
they
the basis of
would see to it that the share of the aid withheld by
the producer organisation was to cover only the costs
it had incurred. That being so, even if it had been able to
consider the approach taken by the Italian authorities,
mentioned above, to be valid, the Commission could

the quantity delivered), and that

loss

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have

doubts

harbour

continued

about
to
only
compliance with point 11.3.8 of the guidelines, given
that
the quantity delivered would not have been an
objective factor in determining the loss incurred, since
the withdrawal operations concerned fruit that had not
been damaged by hail but had been regraded as an
industrial product on account of the deterioration that
occurred between the date of submission of the appli-
cation for withdrawal (see recital 30) and the start of the
actual withdrawal operations, and because without infor-
mation, which
requested,
been
the costs incurred by the
concerning the nature of
Asprofrut producer organisation,
it could not have
been sure that these costs had not been over-estimated,
which would have entailed the grant of operating aid to
that organisation.

nevertheless

had

the

Italian authorities have not made

(41) With regard to the doubts set out in recital 19, which are
based on the existence of a presumption of an infrin-
gement of the rules governing the common organisation
of the market in fruit and vegetables established by Regu-
lation (EC) No 2200/96, the Commission can only state
that
any
submissions that allow this presumption to be over-
turned. In view of the circumstances in which withdrawal
took place, namely at a time when the producer organi-
sations in Piedmont had already exhausted the with-
drawal possibilities provided for in that Regulation (see
recital 10 above), the Commission can only conclude
that the grant of State aid for withdrawals which entail
an overrun of the possibilities set would be contrary to
the rules governing the common organisation of
the
market in fruit and vegetables and would disturb the
smooth operation of the common market.

(44)

(45)

of the market, which falls within the normal risks asso-
ciated with farming. Covering a normal risk associated
with farming with an aid is equivalent to granting a
beneficiary or beneficiaries operating aid which is incom-
patible with the common market.

Even if the approach taken by the Italian authorities of
compensating for a loss caused by adverse weather could
have been considered valid, there are too many grey
areas in the explanations provided by those authorities
for the Commission to be able to consider that the aid
had been granted in compliance with point 11.3 of the
guidelines. From this point of view, therefore, the aid
could not have qualified for the derogation provided
for in Article 87(2)(b) of the Treaty relied on by the
Italian authorities, or for that provided for in Article
87(3)(c), since it would not have contributed to facili-
tating the development of
It would have
been incompatible, therefore, with the common market.

the sector.

of

lastly,

provisions

the presumption of an infrin-
There remains,
of
(EC)
Regulation
gement
the
took place at a time
No 2200/96. Since withdrawal
when the withdrawal possibilities for the producer orga-
nisations in Piedmont had been exhausted, the grant of
aid to finance an operation that goes beyond the limits
set in a regulation designed to govern the market in fruit
and vegetables at European level would risk disturbing
the smooth operation of that market. According to point
3.2 of the guidelines the Commission cannot under any
circumstances approve an aid that is incompatible with
the provisions governing a common organisation of the
market or which would interfere with the proper func-
tioning of the common organisation. The aid must be
regarded therefore as incompatible with the common
market.

(42)

Lastly, with regard to the question of the payment of the
aid and any aggregation of payment, the Commission
notes that in their letter of 16 January 2004 the Italian
authorities said that the aid had not been paid and the
confirmed that no
producer organisation Asprofrut
amount had been received. No response has been
given, however,
the aid
could be aggregated with other aid pursuing the same
ends. Aggregation could lead to overcompensation for a
loss claimed, which would be contrary to point 11.3 of
the guidelines.

to the question of whether

(46)

The Commission need not require recovery of the aid
since it has not been paid,

HAS ADOPTED THIS DECISION:

VI. CONCLUSIONS

(43)

The observations set out above show that the proposed
aid for the Asprofrut producer organisation to cover an
operation for the withdrawal of peaches and nectarines
cannot be regarded as intended to compensate for losses
caused by adverse weather conditions but constitutes a
means of offering certain producers compensation for a
loss of earnings owing to the unfavourable development

Article 1

The State aid amounting to EUR 108 752 which Italy is
planning to implement in order to help cope with the diffi-
culties facing the cultivation of peaches in the region of
Piedmont is incompatible with the common market.

The aid in question cannot therefore be implemented.

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Official Journal of the European Union

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Italy will inform the Commission, within two months of the date of notification of this decision, of the
measures that have been taken to comply with it.

Article 2

This Decision is addressed to the Italian Republic.

Article 3

Done at Brussels, 16 March 2004.

For the Commission

Franz FISCHLER
Member of the Commission