Report - State Aid Scoreboard - spring 2004 update
Date: 2004-04-21
Institutions: European Commission
Subjects: EU Member State, EU statistics, State aid, aid to undertakings, control of State aid, regional aid

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 20.4.2004 
COM(2004) 256 final 

REPORT 

State Aid Scoreboard 

- spring 2004 update - 

(presented by the Commission) 

EN 

   EN 

 
 
 
  
 
Contents 

Executive Summary ................................................................................................................... 4 

Introduction ................................................................................................................................ 7 

1. 

1.1. 

1.2. 

1.3. 

1.4. 

1.5. 

2. 

2.1. 

2.2. 

2.3. 

2.4. 

2.5. 

2.6. 

3. 

3.1. 

3.2. 

3.3. 

3.4. 

3.5. 

4. 

5. 

Part One: Overview of State aid in the European Union ............................................. 9 

State aid in absolute and relative terms........................................................................ 9 

Sectoral distribution of aid ......................................................................................... 12 

State aid to the manufacturing sector ......................................................................... 14 

State aid to the transport sector .................................................................................. 15 

State aid to the coal and steel sectors ......................................................................... 17 

Part Two: Redirecting aid to horizontal objectives.................................................... 19 

State aid for horizontal objectives.............................................................................. 19 

Trend in State aid for horizontal objectives ............................................................... 20 

State aid for research and development (R&D) ......................................................... 21 

Special focus on State aid for employment and training............................................ 22 

State aid supporting regional development and cohesion .......................................... 35 

State aid instruments .................................................................................................. 36 

Part Three: State aid control procedures, recovery and modernisation of state aid... 39 

Registered aid cases ................................................................................................... 39 

Commission decisions................................................................................................ 39 

Recovery of aid .......................................................................................................... 40 

Modernising State aid control .................................................................................... 41 

Enlargement ............................................................................................................... 46 

Online State aid scoreboard and register.................................................................... 46 

Methodological notes ................................................................................................. 46 

2 

 
 
  
 
Graphs and Tables 

Table 1: State aid in the Member States, 2002........................................................................... 9 

Graph 1: State aid as a percentage of GDP, 2002 .................................................................... 10 

Table 2: State aid per capita, 1998-2002.................................................................................. 10 

Table 3: Trend in the level of State aid, EU-15, 1992-2002 .................................................... 11 

Graph 2: State aid as a percentage of GDP, 1998 - 2002......................................................... 12 

Table 4: Sectoral distribution of aid, 2002............................................................................... 13 

Table 5: State aid by sector in the Community 1998-2002...................................................... 13 

Table 6: State aid to the manufacturing sector, 2002............................................................... 14 

Graph 3: State aid to the manufacturing sector, 1998 – 2002 .................................................. 14 

Table 7: State aid to the transport sector (excluding railways), 1998-2002............................. 16 

Table 8: Subsidies(1) to the railway sector, 1998-2002 ........................................................... 17 

Table 9: State aid to coal mining 1998-2002 ........................................................................... 18 

Table 10: State aid for horizontal objectives and particular sectors, 2002 .............................. 20 

Graph 4: Share of State aid directed to horizontal objectives, 1998 – 2002 ............................ 21 

Table 11: State aid for R&D .................................................................................................... 22 

Table 12: State aid specifically earmarked for assisted ‘a’ regions, 2002 ............................... 36 

Graph 5: Share of each aid instrument in total aid for manufacturing and services, EU,  

2000 - 2002 ................................................................................................................ 37 

Table 13: State aid for manufacturing and services by type of aid instrument, 2000 – 2002.. 38 

Graph 6: Share of negative decisions by Member State, 2001-2003 ....................................... 40 

Table 14: Recovery cases pending in February 2004 .............................................................. 41 

3 

 
 
  
 
EXECUTIVE SUMMARY 

The Commission continues to ensure a strict control of State aid throughout the Union, a need 
that  has  been  recognised  by  successive  European  Councils.  In  2001,  Member  States 
committed  themselves  to  continuing  their  efforts  to  reduce  the  general  level  of  State  aid 
expressed as a percentage of GDP by 2003, and to the need to redirect aid towards horizontal 
objectives  of  common  interest,  including  cohesion  objectives.  Based  on  the  latest  available 
figures, the majority of Member States appear to be responding positively to the call for “less 
and  better  targeted  State  aid”  which  Heads  of  Government  recognised  is  “a  key  part  of 
effective competition.” In addition to measuring Member States progress towards these goals, 
this update of the Scoreboard includes a special focus on aid for employment and training. 

Main findings 

Overall levels of State aid in the Union continue to fall though less sharply than in the 
late 1990s 

The  overall  level  of  State  aid1  granted  by  the  fifteen  Member  States  was  estimated  at  €49 
billion  in  2002.  In  absolute  terms,  Germany  granted  the  most  aid  (€13  billion)  followed  by 
France  (€10  billion)  and  Italy  (€6  billion).  Around  €28  billion  of  aid  was  earmarked  for 
manufacturing and services, €14 billion for agriculture and fisheries, over €5 billion for coal 
and €1 billion for transport (excluding railways). 

From the relatively high levels of State aid in the early and mid-nineties, the overall volume 
of  aid  fell  dramatically  from  €67  billion  in  1997  to  €52  billion  in  1999.  This  was  due 
primarily  to  a  fall  in  aid  to  the  assisted  regions  in  Germany  and  Italy.  Between  1999  and 
2002, total aid has continued to decline though less sharply than in previous years, falling at 
around €1 billion per year on average.  

Disparities in the levels of aid between Member States still exist …  

In relative terms, total State aid1 amounted to 0.56% of EU GDP in 2002, or 0.39% excluding 
the  agriculture,  fisheries  and  transport  sectors.  This  average  masks  significant  disparities 
between  Member  States:  the  share  of  aid  to  GDP  ranged  from  less  than  0.20%  in  the 
Netherlands, Finland, Sweden and the United Kingdom to around 0.55% in Germany, Spain 
and Portugal, and 0.72% in Denmark. 

… but are diminishing as State aid as a percentage of GDP continues to fall in the vast 
majority of Member States 

Total aid less agriculture, fisheries and transport fell from 0.49% of GDP on average during 
1998-2000  to  0.41%  during  2000-2002.  The  trend  is  downward  in  fourteen  Member  States. 
Portugal and Ireland experienced the sharpest falls (around 20-25 percentage points) between 
the  two  periods  under  review.  In  Ireland,  this  is  primarily  the  result  of  a  cut  in  the  Irish 
Corporation Tax coupled with a marked increase in GDP while the decrease in Portugal was 
due  largely  to  a  sizeable  reduction  in  a  regional  aid  tax  scheme  in  Madeira  that  mainly 
supports financial services. In contrast, aid in relation to GDP increased in Denmark though 

1 

Total excludes aid to the railway sector. 

4 

 
 
  
 
                                                 
this  rise  can  be  explained  by  a  substantial  increase  in  aid  for  two  horizontal  objectives, 
employment creation and safeguarding the environment. 

Throughout the Union, aid is being redirected towards horizontal objectives …  

EU-wide,  around  73%  of  total  aid  (less  agriculture,  fisheries  and  transport)  in  2002  was 
granted  for  horizontal  objectives  including  research  and  development,  small  and  medium-
sized enterprises, environment and regional economic development. The remaining 27% was 
aid directed at specific sectors (mainly manufacturing, coal and financial services) including 
aid for rescue and restructuring.  

In  several  Member  States,  virtually  all  the  aid  awarded  in  2002  was  for  horizontal 
objectives 

The share of aid granted for horizontal objectives increased by 7 percentage points over the 
period 1998-2000 to 2000-2002. This was largely the result of significant increases in aid for 
the  environment  (+7  points)  and  research  and  development  (+4  points).  This  positive  trend 
was  observed,  to  varying  degrees,  in  the  majority  of  Member  States.  Indeed,  in  several 
Member  States  -  Belgium,  Denmark,  Greece,  Italy,  Netherlands,  Austria  and  Finland  – 
virtually all the aid awarded in 2002 was earmarked for horizontal objectives. 

A favourable approach to State aid for employment creation and promotion of training 

When  market  failures  are  being  addressed,  the  Commission  recognises  the  justification  for 
Community or government intervention. The exclusion of less productive workers (perceived 
or real) at going wage rates and the under-provision of training are examples of well accepted 
market failures. Overall, efforts to support training and employment need to be encouraged in 
order to fulfil the Lisbon Strategy. This is reflected in the Commission’s favourable approach 
to State aid for these objectives. While such policies should not distort competition, the award 
of  aid  for  job  creation,  for  the  recruitment  of  disadvantaged  and  disabled  workers  and  for 
various training measures has recently been facilitated by revised State aid rules. Moreover, 
there are only a very limited number of negative decisions in related State aid cases. 

State aid represents a relatively small proportion of all financial support to companies 
for employment and training 

Most public support measures to private companies for employment and training purposes do 
not constitute state aid because they do not meet the four criteria referred to in Article 87(1) of 
the Treaty. However, if such interventions do take the form of State aid, State aid control will 
continue to ensure that the distortive effects on competition by each individual aid proposal is 
minimised. 

Fall in the overall level of aid to the least developed regions but less sharply than before 
as a slight rise observed in a few Member States 

For the Union as a whole in 2002, an estimated €8 billion of aid was earmarked exclusively 
for the least developed regions, the so-called assisted ‘a’ regions. This represented just under 
one  quarter  of  total  aid  (less  agriculture,  fisheries  and  transport).  Aid  to  the  assisted  ‘a’ 
regions, which are almost identical to the Objective 1 regions under the EU Structural Funds, 
fell  dramatically  from  a  peak  of  €28  billion  in  1993  to  €9  billion  in  2000,  due  largely  to  a 
reduction in aid in Germany and Italy. While aid to the least developed regions continues to 

5 

 
 
  
 
decrease  in  Germany  there  has  been  a  slight  upturn  in  Spain,  France  and  Italy  during 
2000-2002. 

Majority of Member States tend to provide aid to the manufacturing and service sectors 
in the form of grants 

As  to  the  instruments  used  when  aid  is  granted  to  the  manufacturing  and  service  sectors, 
grants  are  by  far  the  most  frequently  used  form  making  up  almost  60%  of  the  EU  total.  In 
addition to aid awarded through the budget, other aid is paid through the tax or social security 
system. EU-wide, tax exemptions make up 24% of the total. While Belgium, Denmark, Spain, 
Luxembourg, Austria and Sweden provide more than 80% of their aid in the form of grants, 
other  Member  States  make  greater  use  of  tax  exemptions,  particularly  Germany  (38%), 
Ireland (67%) and Portugal (74%). 

The Commission approves the award of State aid in 95% of cases it examines 

In  2003,  there  were  around  1000  cases  registered  by  the  Commission.  Excluding  the  200 
information  sheets  under  the  block  exemption  regulations,  around  49%  of  registered  cases 
were in the manufacturing and service sectors, 39% in agriculture, 6% in fisheries and 6% in 
transport and energy. According to the Treaty, Member States should notify all State aid to 
the Commission. However, for around 15% of investigated aid cases, it was not the Member 
State but the Commission that had to initiate the control procedure after finding out about the 
aid,  for  example  following  a  complaint.  During  the  period  2001-2003,  5%  of  all  final 
decisions taken by the Commission were negative ones. 

The Commission continues with its State aid reform process to simplify, modernise and 
reform State aid control 

The Commission is continuing to review its State aid guidelines and frameworks to simplify 
and  clarify  them,  and  remove  possible  conflicts  between  the  different  texts.  At  present, 
priority is being given to reviewing the rules on rescue and restructuring aid for companies in 
difficulty, to draft a new framework for the assessment of lesser amounts of aid, to clarify the 
area  of  services  of  general  economic  interest  and  to  introduce  a  “de  minimis”  rule  for  the 
agricultural and fisheries sectors. In parallel with the review of the structural fund regulations 
being undertaken by the Commission, a detailed review of the Regional Aid Guidelines and 
certain  horizontal  frameworks  is  also  being  carried  out,  which  should  improve  coherence 
between  the  various  policies.  Work  on  a  package  of  measures  to  accelerate,  simplify  and 
modernise procedures, in particular with a view to reducing the resources expended on routine 
cases and to enable the Commission to concentrate resources on more important cases, should 
be largely completed in the near future. 

6 

 
 
  
 
INTRODUCTION 

The  control  of  State  aid  focuses  on  the  effects  on  competition  of  aid  granted  by  Member 
States to undertakings. State aid can frustrate free competition, preventing the most efficient 
allocation  of  resources  and  posing  a  threat  to the  smooth  running  of  the  Internal  market.  In 
many cases, the granting of State aid reduces economic welfare and weakens the incentives 
for  firms  to  improve  efficiency.  Aid  may  also  enable  the  less  efficient  to  survive  at  the 
expense of the more  efficient, delaying  structural  change and hindering productivity growth 
and competitiveness. The unique system of control that exists throughout the European Union 
is  aimed  at  reducing  all  of  these  inefficiencies.  The  Commission's  role,  as  set  out  in  the 
Treaty, is to scrutinise proposed and existing state aid measures by Member States to ensure 
that  they  are  compatible  with  EU  state  aid  legislation  and  do  not  distort  intra-community 
competition.  

Over  the  years,  State  aid  control  has  been  instrumental  in  attenuating  many  of  the  worst 
effects  and  impacts  of  State  aid.  However,  the  Treaty  itself  did  not  provide  a  basis  for 
addressing  the  cumulative  distortive  effect  of  the  high  levels  of  State  aid  in  some  sectors. 
Then,  at  the  European  Council  Summits  in  Lisbon  and  later  in  Stockholm,  the  necessary 
political  impetus  was  given  to  address  the  root  cause.  It  was  recognised  that  in  order  for 
Europe to become more competitive, increase productivity and deliver sustainable economic 
growth, with more and better jobs and greater social cohesion, it is necessary to improve its 
competitive  position  not  only  by  ensuring  that  European  society  itself  is  both  dynamic  and 
knowledge-based, but also by reducing levels of State aid.  

In line with this policy objective, Member States are, for the most part, reducing aid levels, in 
GDP  percentage  terms,  while  redirecting  aid  towards  horizontal  objectives  of  Community 
interest, such as the strengthening of economic and social cohesion, environmental protection, 
promotion  of  research  and  development  and  small  and  medium-sized  enterprises. 
Nevertheless, some Member States are continuing to award aid that is particularly distortive 
of competition, such as rescue and restructuring aid. 

The  main  aim  of  this  update  of  the  Scoreboard  is  to  provide  an  overview  of  the  State  aid 
situation in the Union and to examine the underlying trends based on the latest available data 
for  2002.  It  is  divided  into  three  parts.  The  first  part  looks  at  the  extent  to  which  Member 
States  are  reducing  their  State  aid  relative  to  GDP.  The  second  part  focuses  on  Member 
States’  relative  success  in  redirecting  aid  from  specific  sectors  to  horizontal  objectives  and 
includes  a  special  focus  on  public  support  measures  for  employment  and  training.  Finally, 
part  three  looks  at  State  aid  control  procedures,  recovery  and  ongoing  work  to  modernise 
State aid control.  

addition 

Scoreboard 
In 
(http://europa.eu.int/comm/competition/state_aid/scoreboard/)  consisting  of  a  series  of  key 
indicators, statistical information and a Member State Forum was launched in 2002. 

permanent 

edition, 

online 

paper 

this 

to 

a 

7 

 
 
  
 
What is a State Aid ?  

The  Scoreboard  covers  State  aid  as  defined  under  Article  87(1)  EC  Treaty2  that  is  granted  by  the 
fifteen  Member  States  and  has  been  examined  by  the  Commission.  General  measures  and  public 
subsidies that have no affect on trade and do not distort or threaten to distort competition are not dealt 
with in the Scoreboard as they are not subject to the Commission’s investigative powers. 

State  aid  is  a  form  of  state  intervention  used  to  promote  a  certain  economic  activity.  It  implies  that 
certain  economic  sectors  or  activities  are  treated  more  favourably  than  others  and  thus  distorts 
competition because it discriminates between companies that receive assistance and others that do not.  

In  order  to  determine  whether  a  measure  constitutes  State  aid,  a  distinction  has  thus  to  be  drawn 
between the situation where the support is directed at certain undertakings or the production of certain 
goods, as specified in Article 87(1) of the Treaty, and the situation where the measures in question are 
equally applicable throughout the Member State and are intended to favour the whole of the economy. 
In the latter case, there is no State aid within the meaning of Article 87(1).  

This  selective  character  thus  distinguishes  State  aid  measures  from  general  economic  support 
measures.  Most  nation-wide  fiscal  measures  would  be  regarded  as  general  measures  as  they  apply 
across the board to all firms in all sectors of activity in a Member State. The distinction is however not 
always  clear-cut.  For  example,  a  measure  that  is  open  to  all  sectors  may  be  selective  if  there  is  an 
element of discretion by the awarding authorities. On the other hand, the fact that certain companies 
might  benefit  more  than  others  from  a  measure  does  not  necessarily  mean  that  the  measure  is 
selective. The interpretation of the concept of selectivity has evolved over the years following various 
Commission  decisions  and  Court  rulings.  Details  of  the  most  important  cases  can  be  found  on  the 
Commission  website  at  http://europa.eu.int/comm/competition/state_aid/legislation/  or  in  recent 
Annual Competition Reports at http://europa.eu.int/comm/competition/annual_reports/  

The distinction between State aid measures and general economic support measures should be borne in 
mind when interpreting some of the data included in the Scoreboard. Some of the detailed statistical 
tables  in  the  online  Scoreboard  show  that  in  some  Member  States  the  amount  of  State  aid  for  some 
horizontal  objectives  such  as  employment  or  training  has  fallen  or  remained  stable.  This  does  not 
however  mean  that  public  expenditures  on  these  activities  have  fallen.  Instead,  Member  States  may 
have increased spending on general economic support measures. 

Another  important  area  concerns  aid  which  compensates  for  the  provision  of  services  of  general 
economic  interest  (SGEI).  In  its  judgment  in  the  Altmark  case3,  the  Court  of  Justice  ruled  that 
compensation  to  undertakings  that  perform  a  SGEI  is  not  State  aid,  provided  certain  conditions  are 
fulfilled.  As  a  result,  subsidies  compensating  for  SGEI  will  be  regarded  either  as  ‘no  aid’  or 
compatible aid. The distinction is based on legal criteria and has limited economic foundation so that 
similar measures are now classed as aid, or non-aid depending, for example, on whether a tender was 
used. All aid compensating for SGEI is therefore excluded from the Scoreboard. In contrast, in cases 
where  part  of  the  aid  is  found  to  overcompensate  for  the  SGEI  the  appropriate  amount  is  included, 
e.g., in the Deutsche Post case4. 

The above text is without prejudice to the definition of State aid as provided by the Court of Justice. 

2 

3 

4 

The  measure  constitutes  state  aid  if  it  is  granted  by  a  Member  State  or  through  State  resources,  it 
distorts or threatens to distort competition, it favours certain undertakings or the production of certain 
goods, and it affects trade between Member States. 
C-280/00  concerning  the  grant  of  licences  for  scheduled  bus  transport  services  in  the  Landkreis  of 
Stendal (Germany) and public subsidies for operating those services. 
Case C61/1999 in which the Commission reached a negative decision on 19.6.2002. 

8 

 
 
  
 
                                                 
1. 

PART ONE: OVERVIEW OF STATE AID IN THE EUROPEAN UNION 

This chapter provides a snapshot of State aid granted in the European Union in 2002 and an 
overview of the underlying trends. 

1.1. 

State aid in absolute and relative terms 

Total State aid5 granted by the fifteen Member States was estimated at €49 billion in 2002. In 
absolute terms, Germany granted the most aid (€13 billion) in 2002 followed by France (€10 
billion) and Italy (€6 billion).  

Table 1: State aid in the Member States, 2002 

EU

B

DK

D

EL

E

F

IRL

I

L

NL

A

P

FIN S

UK

Total state aid less railways in billion €

48,8

1,3

1,6 13,3

0,7

4,3

9,7

1,0

6,0

0,1

1,9

1,3

1,0

1,7

1,0

3,9

Total state aid less agriculture, fisheries 
and transport in billion €

34,0

0,9

1,3 11,4

0,4

3,5

6,2

0,5

4,5 0,06

0,8

0,5

0,6

0,2

0,4

2,6

Total aid less railways as % of GDP

0,56 0,53 0,92 0,65 0,52 0,68 0,66 0,85 0,50 0,41 0,46 0,63 0,83 1,28 0,39 0,25

Total aid less agriculture, fisheries and 
transport as % of GDP

0,39 0,37 0,72 0,56 0,31 0,55 0,42 0,45 0,38 0,26 0,19 0,21 0,55 0,17 0,16 0,17

State aid as defined under Article 87(1) EC Treaty that is granted by the fifteen Member States for all sectors 
except railways and has been examined by the Commission. In contrast to previous editions of the Scoreboard, 
the total excludes aid to the railway sector (see section 1.4). All data are quoted at constant 2000 prices.  

Source: DG Competition 

Disparities between Member States in the share of State aid as a percentage of GDP 

In relative terms, State aid amounted to 0.56% of EU Gross Domestic Product (GDP) in 2002. 
This  average  masks  significant  disparities  between  Member  States:  the  share  of  total  aid  to 
GDP ranges from 0.25% in the United Kingdom to 1.28% in Finland. The high proportion in 
Finland can be explained by the relatively large amount of aid to agriculture which represents 
around 85% of total aid in this country (Table 1). Indeed, due to the particularities associated 
with  aid  to  agriculture  and  fisheries,  it  is  worth  looking  at  total  aid  less  these  sectors.  This 
new indicator produces a rather different ranking of Member States (Graph 1). For example, 
such aid in Finland represents only 0.17% of GDP, one of the lowest rates in the Union and 
well below the EU average of 0.39%. Germany, Spain and Portugal (each with around 0.55%) 
and Denmark (0.72%) lie well above the average. 

5 

Total  State  aid  covers  manufacturing,  services,  coal,  agriculture,  fisheries  and  part  of  the  transport 
sector.  In  contrast  to  previous  editions  of  the  Scoreboard,  the  total  excludes  aid  to  the  railway  sector 
(see section 1.4). 

9 

 
 
  
 
 
                                                 
Graph 1: State aid as a percentage of GDP, 2002 

Total aid less railw ays

Total aid less agriculture, fisheries and transport

1,4

1,2

1,0

0,8

0,6

0,4

0,2

0,0

EU B DK D EL

E

F

IRL

I

L NL A

P FIN S UK

Source: DG Competition 

State aid may also be expressed in per capita terms, using purchasing power standards which 
take account of differences in price levels between countries. Over the period 2000-2002, the 
annual average volume of aid (less agriculture, fisheries and transport) in the Union was 94 
PPS per capita compared with 107 PPS during 1998-2000 (Table 2). 

Table 2: State aid per capita, 1998-2002 

Total aid less railways in PPS / 
Capita

Total aid less agriculture, fisheries and 
transport in PPS / Capita

EU
B
DK
D
EL
E
F
IRL
I
L
NL
A
P
FIN
S
UK

1998 - 2000
146
115
260
185
101
125
178
313
141
175
134
170
211
313
100
57

2000 - 2002
132
125
294
168
96
130
161
278
115
167
118
166
176
303
102
55

1998 - 2000
107
84
197
168
66
102
130
200
110
101
44
58
161
58
53
35

2000 - 2002
94
83
228
147
60
104
108
160
89
93
43
59
130
46
47
36

Source: DG Competition 

10 

 
 
  
 
 
 
Downward trend in the level of State aid in the vast majority of Member States 

From the relatively high levels of State aid in the early and mid-nineties, the overall volume 
of aid6 fell dramatically from €67 billion in 1997 to €52 billion in 1999 (Table 3). The three 
Member  States  that  contributed  most  to  this  marked  decrease  were  Germany,  Italy  and 
France. In Germany, this can be attributed to the phasing out of  the enormous restructuring 
programme7  carried  out  in  the  new  German  Bundesländer.  In  Italy  too,  aid  to  the  least 
developed regions fell sharply while in France, aid levels were particularly high in the mid to 
late  1990s  due  to  the  large  amounts  of  rescue  and  restructuring  aid  awarded  to  the  banking 
sector. Between 1999 and 2002, total aid has continued to decline though less sharply than in 
previous years, falling at around €1 billion per year on average.  

Table 3: Trend in the level of State aid, EU-15, 1992-2002 

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

Average 
1998-
2000

Average 
2000-
2002

Total state aid less railways in 
billion €

Total state aid less agriculture,
fisheries and transport in billion €

70,4

75,2

72,4

71,0

71,5

67,1

60,5

52,5

50,9

49,5

48,8

54,6

49,7

54,4

60,2

55,4

52,6

54,2

50,2

46,4

37,6

36,6

35,4

34,0

40,2

35,4

Total aid less railways as % of GDP

1,09

1,18

1,11

1,00

0,98

0,88

0,77

0,64

0,59

0,57

0,56

0,67

0,57

Total aid less agriculture, fisheries 
and transport as % of GDP

Source: DG Competition 

0,85

0,95

0,85

0,74

0,75

0,66

0,59

0,46

0,43

0,41

0,39

0,49

0,41

In 2001, Member States pledged to demonstrate a downward trend in State aid in relation to 
GDP  by  2003.  Although  data  for  2003  are  not  yet  available,  the  underlying  trend  for  this 
indicator can be observed by comparing the periods 1998-2000 and 2000-2002. For the Union 
as a whole, total aid less agriculture, fisheries and transport amounted to 0.41% of GDP on 
average  for  the  period  2000-2002  compared  with  0.49%  during  1998-2000.  The  trend  is 
downward  in  fourteen  Member  States.  Portugal  and  Ireland  experienced  the  sharpest  falls 
(around  20-25  percentage  points)  between  the  two  periods  under  review.  In  Ireland,  this  is 
primarily the  result of  a cut in the Irish  Corporation Tax8 coupled with  an increase in GDP 
while  the  decrease  in  Portugal  was  due  largely  to  a  sizeable  reduction  in  a  regional  aid  tax 
scheme in Madeira that mainly supports financial services. In contrast, aid in relation to GDP 
increased  in  Denmark  though  this  rise  can  be  explained  by  a  substantial  increase  in  aid  for 
two horizontal objectives, employment creation and safeguarding the environment. 

In making comparisons between Member States, it is important to bear in mind the effect that 
the trend in GDP has on this indicator. Member States which have experienced relatively high 
economic  growth  over  the  period  under  review  could  theoretically  increase  the  level  of  aid 
and still demonstrate a downward trend. 

6 
7 
8 

Total excludes aid to the railway sector. 
Aid given via the Treuhandanstalt or the Bundesanstalt für vereinigungsbedingte Sonderaufgaben. 
The  rate  of  corporation  tax  in  Ireland  has  been  cut  progressively  in  recent  years  and  is  12.5%  from 
2003. This has reduced the comparative value of the preferential 10% rate to the manufacturing sector, 
therefore contributing to the decline, in monetary terms, of aid to this sector. 

11 

 
 
  
 
 
                                                 
Graph 2: State aid as a percentage of GDP, 1998 - 2002 

1998-2000

2000-2002

1,2

1,0

0,8

0,6

0,4

0,2

0,0

EU B DK D EL

E

F IRL

I

L NL A

P FIN S UK

State aid less agriculture, fisheries and transport 
Source: DG Competition 

1.2. 

Sectoral distribution of aid 

Sectoral distribution of aid varies considerably among Member States and over time 

The data currently available do not provide an accurate picture of the final recipients of the 
aid.  Nevertheless,  they  do  give  some  indication  as  to  which  sectors  are  favoured  by  each 
Member  State.  In  2002,  around  57%  of  State  aid  in  the  Union  was  earmarked  for  the 
manufacturing  and  service  sectors.  A  further  28%  was  directed  towards  agriculture  and 
fisheries,  11%  for  coal  and  the  remainder  split  between  transport  (excluding  railways)  and 
non-manufacturing not elsewhere classified. 

There are significant differences between Member States in the sectors to which they direct 
aid (Table 4). Aid to the agricultural and fisheries sectors accounted for 20% or less of overall 
aid in Denmark, Germany, Spain and Italy while in Austria the share was 66% and in Finland 
as high as 84%. Aid to the coal industry made up around one quarter of total aid in Germany 
and Spain. 

12 

 
 
  
 
 
Table 4: Sectoral distribution of aid, 2002 

Manufacturing

EU
B
DK
D
EL
E
F
IRL
I
L
NL
A
P
FIN
S
UK

51
67
76
57
59
56
37
40
73
57
39
30
26
12
30
48

Services
(including tourism,
financial, media and
culture)
6
3
2
3
1
2
17
12
3
5
3
5
40
1
11
0

% of total

Agriculture 
& Fisheries

Coal

Million euro

Transport 
excluding 
railways

Other non-
manufacturing

Total

28
29
15
14
40
18
35
47
19
38
50
66
33
84
40
28

11
-
-
26
-
23
10
-
-
-
-
-
-
-
-
1

2
0
6
0
-
1
1
0
5
-
9
-
0
2
18
4

2
-
-
0
-
0
0
-
0
-
-
0
-
-
1
20

48.753
1.331
1.623
13.339
686
4.322
9.690
991
5.960
90
1.870
1.324
978
1.726
969
3.855

Due to the rounding of figures, the percentages of some Member states do not sum up to exactly 100. 

Source: DG Competition 

Between  1998-2000  and  2000-2002,  the  volume  of  aid  fell  in  most  of  the  main  sectors: 
manufacturing was down €2.5 billion, services €1.7 billion and coal €1 billion. In agriculture 
and fisheries, the overall amount of aid remained relatively stable (Table 5).  

Table 5: State aid by sector in the Community 1998-2002 

Annual average
1998 - 2000
54,6

€ billion

Annual average
2000 - 2002
49,7

13,4
0,3
27,3
7,4
0,7
5,5
0,1

13,1
0,4
24,8
6,5
1,0
3,8
0,3

Overall national aid
of which:
     Agriculture
     Fisheries
     Manufacturing
     Coal mining
     Transport exl. Railways
     Services
     Not elsewhere classified

Source: DG Competition 

13 

 
 
  
 
 
 
State aid to the manufacturing sector 

1.3. 
The following section focuses on aid to the manufacturing sector9. For some Member States, 
much of the aid earmarked for this sector is of a horizontal nature. However, other Member 
States could potentially look at the manufacturing sector in order to reduce overall State aid 
levels. EU-wide, aid granted to manufacturing in 2002 amounted to around €25 billion or, put 
another way, 1.5% of value added in this sector (Table 6). 

Table 6: State aid to the manufacturing sector, 2002 

State aid to the
manufacturing sector
in million €*

State aid to the
manufacturing sector
as % of value added

EU

B

DK

D

EL

E

F

IRL

I

L

NL

A

P

FIN

S

UK

24.637

887

1.237 7.569

403

2.414 3.611

401

4.355

52

728

392

253

207

289

1.838

1,5

2,0

4,7

1,7

2,7

2,2

1,4

1,1

1,9

2,3

1,2

0,9

1,3

0,7

0,7

0,6

Note:  Data  on  manufacturing  include  aid  for  horizontal  objectives  including  general  regional  development 
schemes for which the specific sector is not known. For some Member States, particularly Greece with almost all 
its  aid  awarded  through  regional  development  schemes,  and Denmark with  almost  all  its  aid  awarded  through 
horizontal  objectives,  data  are  likely  to  overestimate  the  amount  of  aid  actually  going  to  the  manufacturing 
sector. Source: DG Competition 

State aid to manufacturing relative to value added continues to fall: from 1.8% over the period 
1998-2000 to 1.5% in 2000-2002 (Graph 3). The sharpest fall occurred in Ireland, primarily 
the  result  of  a  cut  in  the  Irish  Corporation  Tax.  The  rise  in  Denmark  can  be  attributed  to  a 
marked increase in aid for horizontal objectives. 

Graph 3: State aid to the manufacturing sector, 1998 – 2002 

1998 - 2000

2000 - 2002

d
e
d
d
a
e
u
l
a
v
f
o
e
g
a
t
n
e
c
r
e
p
s
a

6,0

5,0

4,0

3,0

2,0

1,0

0,0

EU

B

DK

D

EL

E

F

IRL

I

L

NL

A

P

FIN

S

UK

Source: DG Competition 

9 

For the purposes of the Scoreboard, the manufacturing sector includes aid for steel, shipbuilding, other 
manufacturing  sectors,  aid  for  general  economic  development  and  aid  for  horizontal  objectives 
including research and development, SMEs, environment, energy saving, employment and training for 
which  the  specific  sector  is  not  always  known.  As  a  result,  data  on  aid  to  manufacturing  may  be 
overestimated.  

14 

 
 
  
 
 
 
 
 
 
 
                                                 
1.4. 

State aid to the transport sector  

The  Commission’s  State  aid  control  in  the  transport  sector  is  more  complex  than  in  some 
other  sectors.  The  complexity  arises  from  the  need  to  take  account  not  only  of  the  general 
provisions  on  State  aid,  but  also  the  special  rules  in  the  Treaty  and  secondary  legislation 
dealing specifically with transport, in particular Article 73 of the Treaty as implemented by 
Regulations  1191/6910  and  1107/7011.  In  addition,  to  reinforce  the  Internal  market  and 
economic and social cohesion, Article 154 EC Treaty provides for Community support, in the 
context of open and competitive markets, of trans-European networks. 

The  transport  sector,  in  particular  the  railways,  continues  to  benefit  from  a  considerable 
amount  of  public  financial  support.  Relatively  large  subsidies  are  paid  as  compensation  for 
the provision of services of general economic interest (SGEI) and, as such, may not be subject 
to prior notification to the Commission12. This may also apply to a substantial part of public 
investment in transport infrastructures that are open to all users on a non-discriminatory basis 
and which do not benefit a particular undertaking carrying out an economic activity.  

Previous Scoreboards reported much larger volumes of State aid to the transport sector as the 
figures included substantial amounts of compensation for SGEI. In the light of recent Court 
decisions and subsequent decisions taken at Commission level, all aid paid as compensating 
for SGEI has been removed from the scope of the Scoreboard (see also box – What is a State 
aid). Indeed, due to its specificities and the lack of comparable data, aid to the railway sector 
is now presented separately in Table 8.  

Road and combined transport 

The  central  aim  of  the  EU  combined  transport  policy  is  a  modal  shift  from  road  to  other 
modes.  Accordingly,  the  Commission  takes  a  favourable  view  of  aid  schemes  that  aim  to 
promote this mode of transport through the acquisition of equipment designed for combined 
transport and the construction of specific infrastructure. In sectors with overcapacity, such as 
road  transport,  no  aid  can  in  principle  be  granted  for  the  purchase  of  transport  vehicles. 
Nevertheless,  it  is  possible  to  grant  aid  in  connection  with  the  purchase  of  new  vehicles,  if 
such  an  incentive  is  aimed  at  environmental  protection  or  safety  objectives  and  actually 
represents compensation for the additional costs for achieving higher technical standards than 
those  laid  down  by  national  or  EU  legislation.  Around  €90  million  of  aid  for  road  and 
combined transport was authorised per year over the period 2000-2002 (Table 7). 

Maritime transport 

In 2002, the Commission approved several tonnage tax schemes allowing companies to pay 
corporate  tax  proportional  to  the  capacity  of  their  fleet  rather  than  on  the  basis  of  profits 
made. These schemes add to a series of tonnage taxes that were previously approved by the 
Commission for the Netherlands, Germany and the United Kingdom. Such measures appear 
to be already proving successful in reversing the decline of EU shipping. In total, around €715 
million of State aid was awarded to the maritime sector every year during 2000-2002. 

10 

11 

12 

Regulation (EEC) No 1191/69 of the Council of 26 June 1969 on action by Member States concerning 
the obligations inherent in the concept of a public service in transport by rail, road and inland waterway. 
Regulation (EEC) No 1107/70 of the Council of 4 June 1970 on the granting of aid for transport by rail, 
road and inland waterway. 
In  particular,  Article  17.2  of  Regulation  1191/69  exempts  from  the  notification  procedure 
compensations paid pursuant to the provisions laid down in the regulation. 

15 

 
 
  
 
                                                 
Air transport 

Before liberalisation of the airline sector, considerable amounts of aid (exceeding €2.5 billion 
in  1994  and  1995)  were  awarded  to  national  airlines  for  restructuring  in  the  mid-nineties. 
Since  1997,  however,  aid  levels  to  the  industry  have  fallen  dramatically  though  some  aid 
continues  to  be  authorised.  In  2002,  the  Commission  authorised  schemes  set  up  by  several 
Member  States  (France,  Germany  Austria  and  the  United  Kingdom)  to  compensate  airlines 
for  the  losses  caused  by  the  closure  of  certain  parts  of  the  airspace  between  11  and  14 
September  2001.  Around  €110  million  of  aid  was  approved  in  2002.  The  Commission  also 
authorised  the  payment  of  the  third  tranche  of  €129  million,  which  was  part  of  the 
restructuring  aid  package  for  the  national  Italian  airline,  Alitalia,  approved  in  2001.  Further 
public funding of this airline of around €1.4 billion was deemed to be no aid.  

In  the  wake  of  the  11  September  2001  terrorist  attacks,  which  prompted  the  insurance 
industry  to  review  its  risk  exposure  and  withdraw  practically  all  war  and  terrorism  cover  at 
short notice, Member States were authorised to offer an additional insurance guarantee or to 
assume  the  risk  directly  themselves.  It  is  not  possible  to  quantify  the  aid  element  for  such 
guarantees, which were authorised for all Member States.  

Over the period 2000-2002, an annual average of €155 million of aid was awarded to the air 
transport sector (Table 7). The increase as compared to the previous period is mainly due to 
the  impact  that  the  11/9/01  attacks  had  on  the  aviation  industry  and  the  subsequent  public 
support measures that become necessary following those attacks. 

Table 7: State aid to the transport sector (excluding railways), 1998-2002 

Annual average 1998-
2000

Annual average 2000-
2002

€ million

86,9
575,2
12,8
28,9
703,7

92,5
715,3
1,7
155,2
964,7

Transport sector

Road and combined transport
Maritime transport
Inland water transport
Air transport
Total

Source: DG Energy and Transport 

Railways 

The Commission has for some years pursued a policy of shifting the balance between modes 
of  transport  and  promoting  modes  that  are  less  damaging  to  the  environment  in  order  to 
achieve  a  sustainable  transport  system.  In  its  2001  White  Paper  on  a  common  transport 
policy13,  the  Commission  recalled  that  rail  transport  was  the  strategic  sector  on  which  the 
success of the efforts to shift the balance will depend. The Commission therefore continues to 
take a favourable approach to aid in the rail sector, both with regard to rail services and, in 
particular, to investments in rail infrastructure which, due to heavy investments costs, are not 
viable  without  public  co-financing.  For  example,  in  2002  the  Commission  took  some 
important  decisions  related  to  the  infrastructure  management  of  the  main  national  railway 

13 

White Paper “European Transport Policy for 2010: Time to Decide”. 

16 

 
 
  
 
 
                                                 
network  in  the  United  Kingdom.  First,  it  approved  a  financial  rescue  package  to  ensure  the 
continued  provision  of  rail  infrastructure  services,  without  which  the  UK  rail  sector  risked 
imminent  collapse.  Subsequently,  the  Commission  approved  a  financial  package  to  allow  a 
newly  established  company,  Network  Rail,  to  take  over  responsibility  for  operating  and 
managing  the  UK  rail  network  on  a  not-for-profit  basis.  The  overall  figure  of  around  €36 
billion was deemed not to constitute State aid.  

Much of the public financial support to the railways is not notified to the Commission, either 
because the financing, due to the lack of liberalisation of the sector, is not deemed by Member 
States to constitute State aid within the meaning of Article 87(1) of the Treaty, or because it 
represents compensation for public services in accordance with Regulation 1191/69. Member 
States  are  however  required  to  report  overall  public  expenditure  to  this  sector.  Disparities 
between  Member  States  may  reflect  different  interpretations  of  the  scope  of  this  annual 
reporting exercise (Table 8). 

Table 8: Subsidies(1) to the railway sector, 1998-2002 

1998

1999

2000

2001

in million €
2002

EU
B
DK
D
EL
E
F
IRL
I
L
NL
A
P
FIN
S
UK

14.299
1.255
169
5.730
497
1.201
2.501
46
4.268
96
1.417
13
n.a.
358
949
62

17.967
1.268
123
5.377
521
1.098
2.501
34
3.901
117
1.760
15
n.a.
369
778
106

18.732
1.298
181
4.803
436
1.112
2.725
196
4.578
134
1.974
13
n.a.
330
817
136

n.a.
1.300
193
4.898
593
1.062
n.a.
198
4.911
159
2.479
13
n.a.
275
797
1.856

n.a.
1.345
199
n.a.
n.a.
n.a.
n.a.
n.a.
5.195
n.a.
2.630
15
n.a.
319
813
841

(1) Includes all public subsidies that have been communicated to the Commission as well as subsidies that have 
been  notified  and  authorised  by  the  Commission  under  relevant  State  aid  rules.  However  the  figures  exclude 
compensation for services of general economic interest. 

Source: DG Energy and Transport. 

1.5. 

State aid to the coal and steel sectors 

Aid  to  the  coal  industry  within  the  European  Union  during  the  period  2001-2002  has  been 
governed by two separate legal frameworks. This is due to the fact that the European Coal and 
Steel Community Treaty expired in July 200214. Thereafter, the sectors previously covered by 
the  ECSC  Treaty  have  been  subject  to  the  rules of  the  EC  Treaty  as  well  as  the  procedural 
rules  and  other  secondary  legislation  derived  from  the  EC  Treaty.  In  July  2002,  a  Council 

14 

With  its  expiry,  all  secondary  legislation  under  the  ECSC  Treaty  also  automatically  expired.  This 
included Commission Decision 3632/93/ECSC of 28 December 1993. 

17 

 
 
  
 
 
                                                 
Regulation was established as the new legal framework for state aid to the Community coal 
industry.15 

In  the  case  of  coal,  some  €5.6  billion  was  granted  to  the  sector  in  2002.  Aid  to  current 
production has continued to decrease steadily in line with the agreements on the reduction of 
volumes of aid to the coal industry until 2005. Table 9 provides an overview of aid to the coal 
industry  over  the  period  1998  -  2002.  Around  40%  of  the  aid  in  2002  was  not  related  to 
current production. Only four Member States still granted aid to this sector in 2002: Germany 
(€3.5 billion), Spain (€1.1 billion though it was €1.9 billion in 2001), France (€1 billion) and a 
relatively insignificant amount (€25 million) in the United Kingdom.  

Due  to  the  increased  efforts  of  the  German  authorities  to  restructure  its  coal  industry,  the 
amount of aid to cover the costs arising from the rationalisation and restructuring of the coal 
industry that are not related to current production has risen. These costs are mainly related to 
exceptional  expenditure  on  workers  who  lose  their  jobs,  to  administrative,  legal  or  tax 
provisions  and  to  the  rehabilitation  of  former  mining  sites.  In  contrast,  production  aid  has 
decreased sharply and will continue to follow a downward trend. As a result, the total amount 
of aid granted by the German authorities has decreased significantly. 

Table 9: State aid to coal mining 1998-2002 

Yearly average of aid not 
destined to current production
(in million €)

EU
D
E
F
UK

1998 - 2000
2.147
663
627
401
456

2000 - 2002

2.532
1.196
640
695
0

Source: DG Energy and Transport 

Yearly average of aid destined to current production

1998 - 2000

2000 - 2002

in million €
5.247
4.064
379
753
51

€ per employee
50.509
63.189
39.475
41.705
4.400

in million €
3.953
2.888
342
630
92

€ per employee
45.720
55.002
49.785
41.939
7.727

State aid to the steel sector fell dramatically from €386 in 1997 to €52 million in 1998 after 
which it has  remained relatively stable.  A total of €78 million  was awarded in  2002 almost 
exclusively for environmental purposes. 

15 

Having  regard  to  the  EC  Treaty,  in  particular  Article  87(3)(e)  thereof,  Council  Regulation  (EC)  No 
1407/2002 of 23 July 2002 lays down rules for the granting of State aid to the coal industry. In addition, 
the provisions of Article 88 EC Treaty and Council Regulation (EC) No 659/1999 also apply. 

18 

 
 
  
 
 
                                                 
2. 

PART TWO: REDIRECTING AID TO HORIZONTAL OBJECTIVES  

In  the  context  of  reducing  overall  levels  of  State  aid,  the  conclusions  of  various  European 
Councils have called for a shift in emphasis from supporting individual companies or sectors 
towards  tackling  horizontal  objectives  of  common  interest,  including  cohesion  objectives. 
Furthermore,  the  Council  invited  Member  States  to  “consider  before  granting  State  aid 
whether it is targeted on clearly identified market failures or directed at horizontal objectives 
… and whether an intervention in the form of State aid is the most appropriate and effective 
way to address these issues.”16 

2.1. 

State aid for horizontal objectives 

State  aid  for  horizontal  objectives,  i.e.  aid  that  is  not  granted  to  specific  sectors,  is  usually 
considered as being targeted to market failures and as being less distortive than sectoral and 
ad hoc aid. Research and development, safeguarding the environment, energy saving, support 
to  small  and  medium-sized  enterprises,  employment  creation,  the  promotion  of  training  and 
aid for regional development are the most prominent horizontal objectives pursued with State 
aid. In contrast, aid to support specific sectors is likely to distort competition more than aid 
for  horizontal  objectives  and  also  tends  to  favour  other  objectives  than  identified  market 
failures. Moreover, a significant part of such aid is granted to rescue or restructure companies 
in difficulty, one of the most potentially distortive types of State aid.  

Due to data constraints, this section looks at horizontal objectives in the context of total aid 
less agriculture, fisheries and transport. 

In  several  Member  States,  virtually  all  the  aid  awarded  in  2002  was  for  horizontal 
objectives, including cohesion 

EU-wide,  aid  earmarked  for  horizontal  objectives,  including  cohesion  objectives,  accounted 
for 73% of total aid less agriculture, fisheries and transport in 2002. The remaining 27% was 
aid directed at specific sectors (mainly manufacturing, coal and financial services) including 
aid to rescue and restructure ailing firms.  

In  several  Member  States  -  Belgium,  Denmark,  Greece,  Italy,  Netherlands,  Austria  and 
Finland  –  virtually  all  the  aid  awarded  in  2002  was  earmarked  for  horizontal  objectives, 
including cohesion. However, in Germany (66%), Spain (67%), France (60%), Ireland (49%) 
and Portugal (39%) and United Kingdom (70%), the share was significantly lower. The high 
share of sectoral aid in Portugal was due to the previously mentioned regional aid tax scheme 
in Madeira. In Ireland, although aid awarded through the Irish Corporation Tax has decreased 
significantly  it  still  accounts  for  a  relatively  high  share  of  total  aid.  In  2002,  the  United 
Kingdom awarded a substantial rescue package for British Energy. Finally, Germany, France 
and Spain have relatively high shares of aid to the coal sector (see also Section 1.5). It should 
be  noted  that  in  Member  States  with  relatively  low  overall  aid  levels,  the  grant  of  a  single, 
relatively large ad hoc aid may cause large variations. 

16 

cf. Council conclusions adopted in November 2002 on “an economic approach towards less and better 
State aid”. See Council document number 13799/02:  
http://register.consilium.eu.int/pdf/en/02/st13/13799en2.pdf. 

19 

 
 
  
 
                                                 
 
Large  disparities  between  Member  States  in  the  share  of  aid  awarded  to  various 
horizontal objectives 

When making comparisons between Member States, it is important to bear in mind that aid 
measures are classified according to their primary objective at the time the aid was approved 
and  not  to  the  final  recipients  of  the  aid.  Notwithstanding  the  measurement  difficulties,  the 
data  do  give  an  indication  as  to  which  horizontal  objectives  are  favoured  by  each  Member 
State  (see  Table  10).  For  example,  26%  of  total  aid  in  Netherlands,  27%  in  the  United 
Kingdom  and  33%  in  Austria  was  directed  exclusively  to  research  and  development  (EU 
average of 15%). Denmark (53% of total aid), Germany (30%), together with the Netherlands, 
Finland  and  Sweden  (each  just  under  40%)  tended  to  favour  environmental  objectives  (EU 
average 16%)17. 

Table 10: State aid for horizontal objectives and particular sectors, 2002  

E

F

Percentage of total aid less agriculture, fisheries and transport
IRL
A

FIN

UK

NL

P

S

L

I

Horizontal Objectives
     Research and Development
     Environment
     SME
     Commerce
     Employment aid
     Training aid
     Regional development n.e.c. (1)

Particular sectors
     Manufacturing
     Coal
     Other Non-manufacturing Sectors
     Financial Services
     Other services

Total aid less agriculture, fisheries 
and railways in million €

EU

B

DK

D

73
15
16
14
1
2
2
23
-
27
3
16
2
5
0

97
15
0
20
0
7
2
52
-
3
-
-
-
-
3

100
5
53
1
-
34
3
3
-
0
0
-
-
-
-

EL
100
10
-
16
-
-
-
74
-
0
0
-
-
-
-

66
14
30
6
0
0
0
16
-
34
4
30
-
-
0

67
12
4
20
0
3
8
19
-
33
5
28
0
-
0

60
18
3
17
2
0
0
18
-
40
2
16
0
22
-

49
8
0
2
-
8
4
26
-
51
35
-
-
14
3

96
13
0
33
2
1
1
46
-
4
3
-
0
-
-

34.005

933 1.274 11.431

410 3.503 6.197

525 4.528

92
9
0
21
1
-
-
61
-
8
-
-
-
-
8

56

98
26
39
4
5
0
-
24
-
2
2
-
-
-
-

96
33
19
17
-
4
10
14
-
4
4
-
0
-
-

39
5
5
15
0
6
5
3
-
61
4
-
-
57
0

98
0
38
12
7
11
0
29
-
2
0
-
-
-
2

84
18
39
5
-
-
1
21
-
16
-
-
-
-
16

70
27
5
15
0
0
2
21
-
30
1
1
28
-
-

780

453

649

231

406 2.629

(1) Aid for general regional development not elsewhere classified. 

Source: DG Competition 

For  the  first  time,  the  Commission  has  also  collated  some  information  on  secondary 
objectives18.  This  improves  in  particular  the  data  coverage  of  aid  earmarked  for  SMEs.  In 
2002, just under €5 billion, 14% of total aid, was made up of measures for which the primary 
objective  was  SMEs.  In  addition,  almost  €1  billion  of  aid,  3%  of  total  aid,  was  directed 
exclusively at SMEs as a ‘secondary’ objective. For the most part, the primary objective of 
these  aid  measures  was  R&D.  Combining  primary  and  secondary  objectives,  35%  of  aid  in 
Italy was earmarked exclusively for small and medium-sized enterprises, 30% in the United 
Kingdom and 28% in Belgium compared with an EU average of 17%.  

2.2. 

Trend in State aid for horizontal objectives 

In  line  with  the  commitments  undertaken  at  the  various  European  Councils,  Member  States 
have  continued  to  redirect  aid  towards  such  horizontal  objectives.  Looking  at  recent  trends, 
the share of total aid granted for horizontal objectives increased by 7 percentage points over 

17 
18 

Including aid for energy saving which was reported separately in previous updates of the Scoreboard. 
For the purposes of the Scoreboard, a secondary objective is one for which, in addition to the primary 
objective, the aid was exclusively earmarked at the time the aid was approved. For example, a scheme 
whose primary objective is R&D may also be limited exclusively to SMEs. 

20 

 
 
  
 
 
                                                 
the  period  1998-2000  to  2000-2002.  This  upward  trend  was  largely  the  result  of  sharp 
increases in aid for the environment (+7 points) and research and development (+4 points) and 
a  smaller  increase  for  SMEs  (+1.5  points)  as  well  as  a  reduction  in  sectoral  aid  for  some 
Member States. 

The  positive  trend  was  observed,  to  varying  degrees,  in  the  majority  of  Member  States, 
particularly in Ireland (+14 points) and Italy (+13 points). In three Member States, the trend 
was  slightly  downward  but  for  all  three,  the  share  of  total  aid  earmarked  for  horizontal 
objectives remains relatively high (85% or more). 

Over  the  periods  under  review,  there  were  appreciable  increases  in  the  share  of  aid  for 
environmental  objectives in total  aid  in  Germany (+14 points), the Netherlands and Finland 
(+10 points) and Denmark (+9) while the share of aid for SMEs rose by +8 points in Italy and 
+5 points in Spain and France.  

Graph 4: Share of State aid directed to horizontal objectives, 1998 – 2002 

1998-2000

2000-2002

100

90

80

70

60

50

40

30

20

10

0

EU

B

DK

D

EL

E

F

IRL

I

L

NL

A

P

FIN

S

UK

Source: DG Competition 

2.3. 

State aid for research and development (R&D) 

In  its  2003  Broad  Economic  Policy  Guidelines19  the  Commission  called  on  governments  to 
contribute to the Lisbon goals, in particular, by “(…) redirecting public expenditure towards 
growth-enhancing investment in physical and human capital and knowledge subject to overall 
budgetary  constraints”.  In  general,  measures  to  increase  the  volume  of,  and  improve  the 
environment  for,  research  investment  have  been  fragmented  and  sluggish.  Latest  available 
figures (2001) show overall R&D investment, of which State aid is a part, in the Union to be 
approaching 2% of GDP, but at an average annual growth rate of 1.5% (1997-2002) which is 
wholly  insufficient  to  meet  the  3%  target  by  2010.  As  two-thirds  of  the  3%  target  should 
come  from  private  sources,  a  major  increase  in  private  investment  in  research  in  Europe  is 
required. While most  Member  States  have adopted targets for increasing  research  spending, 

19 

COM(2003) 170 final/2 of 24.7.2003. 

21 

 
 
  
 
 
                                                 
few of them have been able to translate these into budgetary terms and efforts to improve the 
efficiency of their spending are often needed.  

EU-wide, State aid earmarked for R&D amounted to €5.2 billion in 2002 compared with €3.8 
billion in 1998. The share of total aid granted for R&D increased by 4 percentage points from 
the  period  1998-2000  to  2000-2002.  The  most  notable  rises  were  observed  in  the  United 
Kingdom  and  Italy,  where  the  share  of  R&D  aid  rose  by  9  and  7  points  respectively  (see 
Table 11). 

As  regards  research  and  development  aid  for  small  and  medium-sized  enterprises,  the 
Commission  recently  amended  the  block  exemption  regulation  on  SMEs  in  order  to 
incorporate the new Community definition of an SME and to exempt aid for R&D from prior 
notification to the Commission.20  

Table 11: State aid for R&D 

Aid to Research & Development     
(in million €), 2002

5.179 137

64 1.589

41

412 1.139

44

593

EU

B

DK

D

EL

E

F

IRL

I

L

5

NL

A

P

FIN

S

UK

199

149

31

0

0

72

703

18

23

13

17

6

12

3

10

15

3

15

15

26

35

2

3,6

0,9

-6,6

3,4

3,2

2,5

3,5

2,8

7,2

1,4

1,1

4,7

1,2 -1,7 -0,8

9,3

0,06 0,05 0,04 0,08 0,03 0,06 0,08 0,04 0,05 0,02 0,05 0,07 0,03 0,00 0,03 0,04

Share of R&D aid in total aid, 
annual average 2000-2002

Share of R&D aid in total aid   (% 
point difference 1998-2000 and 
2000-2002)

Share of R&D aid to GDP (in %), 
2002

Source: DG Competition 

2.4. 

Special focus on State aid for employment and training 

2.4.1.  Public money for training and employment – The rationale 

The labour market is not a market as any other: human  resources cannot be exchanged  like 
any other good. Policies must establish fair conditions and ensure full use of society's human 
resources  potential.  One  component  is  public  support  to  employment  and  training.  Without 
public  action,  far  less  education  and  training  would  be  provided  than  is  socially  desirable. 
Enhanced knowledge and skills generate benefits to society beyond those captured as higher 
earnings by better-trained individuals (or by employers); the total social benefit exceeds the 
private  returns.  There  seems  to  be,  for  example,  a  strong  correlation  between  the  level  of 
accumulated human capital in an economy, and its capacity to respond and thrive in the face 
of  technological  change.  Training  contributes  to  social  cohesion  by  reducing  ex-ante 
inequality and the social distance between individuals, with  favourable impact on  economic 
performance21. 

The risk for under-provision of training is compounded by the uncertain accrual of the gains 
from improved productivity. An employer will be hesitant to invest  due  to  the risk  of other 
companies  poaching  workers  with  upgraded  skills.  Workers  face  credit  constraints  due  to 

20 

21 

Commission  Regulation  (EC)  No  364/2004  of  25.2.2004  amending  Regulation  (EC)  No  70/2001,  
OJ L 63, 28.2.2004, p. 22. 
See  A.  de  la  Fuente  and  A.  Ciccone  (2002),  Human  Capital  in  a  Global  and  Knowledge-Based 
Economy, European Commission, DG Employment and Social Affairs for an overview of the academic 
literature.  

22 

 
 
  
 
 
                                                 
imperfect  financial  markets,  and  are  less  motivated  to  invest  in  their  human  capital 
development  because  of  the  slow  response  of  wages  to  productivity  improvement  from 
training. On top of this, there is a conspicuous inequality problem: those in most need of skills 
upgrading  –  low-skilled,  older  workers,  immigrants  –  tend  to  receive  much  less.  SME, 
temporary and part-time workers also typically get relatively little training. 

The  rationale  for  employment  aid  stems  from  imperfectly  functioning  labour  markets  and 
their dependence on institutional arrangements. Some workers are less productive, e.g. due to 
disability  or  other  constraints  on  their  work  capacity.  This  creates  a  barrier  to  their 
employment  at  the  going  wage  rates.  Moreover,  employers  tend  to  perceive  certain 
characteristics  such  as  disability,  ethnic  background,  long-term  unemployment  or  lack  of 
basic education as signals for lower productivity. There is a case, therefore, for public support 
to the hiring of disadvantaged persons.  

2.4.2.  Policy context  

Article 2 of the Treaty enumerates the overall objectives of the Union such as the achievement 
of  a  high  level  of  employment,  sustainable  growth,  and  economic  and  social  cohesion.  In 
pursuit of these objectives, the Treaty provides for the Member States and the Community to 
develop a coordinated European Employment Strategy (EES) and to promote, in particular, “a 
skilled, trained and adaptable workforce”22. The fact that a high level of employment is a key 
criterion  both  for  economic  and  social  progress  is  acknowledged  by  Treaty  Article  127(2) 
which makes it an obligation to take this objective into consideration in the formulation and 
implementation  of  all  Community  policies  and  activities.  The  reformed  EES  has  set  three 
overarching  objectives:  full  employment,  improving  quality  and  productivity  at  work,  and 
strengthening social cohesion and inclusion 23. 

Strengthening  the  adaptability  of  workers  and  enterprises  overall  is  key  to  improving  the 
capacity of the EU to anticipate, trigger and absorb economic change of an ever accelerating 
pace. The prospect of a shrinking working age population adds urgency to such efforts, which 
should  focus  on  the  upgrading  of  skills  and  knowledge,  and  full  mobilisation  of  the  labour 
force  potential.  By  facilitating  transitions  between  different  status,  such  as  work,  training, 
career  breaks  or  self-employment  it  should  be  ensured  that  people  throughout  their  lives 
remain close to the labour market. 

Investing in human capital is, thus, an essential element in implementing the reformed EES. 
Member States have committed, in particular, to ensure the development and implementation 
of lifelong learning strategies to ensure access for all to training throughout life. The Lisbon 
European Council 2000 set the strategic objective for the EU of becoming by 2010 “the most 
competitive  and  dynamic  knowledge-based  economy  of  the  world,  capable  of  sustainable 
economic  growth  with  more  and  better  jobs  and  greater  social  cohesion”.  Human  capital 
development  is  a  crucial  and  integral  part  of  this  strategy.  In  2003  the  Council24  adopted  a 
target for the average level of participation in lifelong learning to reach at least 12.5% of the 
adult  working  age  population  by  2010.  Member  States  have  also  committed  to  offer  every 
unemployed person a new start within 12 months (6 months for young people) in the form of 
training, retraining, work practice or other employment measure.  

22 
23 

24 

EC Treaty Article 125. 
Council  Decision  of  22  July  2003  on  Guidelines  for  the  Employment  Policies  of  the  Member  States 
(2003/578/EC). 
Conclusions from Education, youth and culture Council, 5-6.5.2003, p. 7. 

23 

 
 
  
 
                                                 
It was acknowledged by the Lisbon European Council that "the best safeguard against social 
exclusion  is  a  job".  Member  States  were  invited  to  develop  priority  actions  addressed  to 
persons  with  specific  needs,  thereby  promoting  labour  market  inclusion.  The  new  EES 
includes,  besides  the  general  activation  and  prevention  Guideline,  a  specific  Guideline  to 
promote the integration of and to combat discrimination against people at a disadvantage in 
the  labour  market,  in  particular  early  school  leavers,  low-skilled  workers,  people  with 
disabilities, immigrants and ethnic minorities.  

2.4.3.  Deficit in delivery – When full participation is increasingly urgent  

The  political  aspirations  may  be  unambiguous,  yet  the  results  so  far  are  disappointing.  The 
Report of the Employment Taskforce25 stressed the need to address "the under-utilisation of, 
and  under-investment  in,  people"  and  to  "improve  the  participation  of  women  and  older 
workers  along  with  other  groups  who  are  underrepresented  in  the  labour  market".  Member 
States  were  urged  to  “increase  access  to  training  throughout  the  life-cycle,  with  particular 
attention  to  the  low-skilled  and  other  disadvantaged  people”.  The  Commission  Spring 
Report26 invited the March 2004 European Council “to give a decisive fillip to investment in 
education and training"  and  to target measures on key fields such as "increasing the private 
sector's  contribution  by  providing  specific  incentives,  reinforcing  life-long  learning,  and 
improving  the  effectiveness  of  national  education  and  training  systems".  The  latest  Joint 
Employment  Report27  notes  some,  but  insufficient,  progress  in  moving  towards  more 
inclusive labour markets. The considerable regional disparities in labour market participation 
warrant more attention.  

2.4.4.  Companies role in implementing comprehensive lifelong learning 

Patchwork  solutions  will  not  address  the  issues  of  ensuring  adaptability,  mobilising  the  full 
labour  potential  and  establishing  effective  lifelong  learning  systems.  Comprehensive  policy 
strategies are required. It should be acknowledged that the principal role in making a success 
of any strategy for lifelong learning and labour market inclusion is played by enterprises. 

Firms must recognise,  with  the prospect of a shrinking  working-age population, the need to 
integrate everyone into work. For persons at the margin to win firm labour market access, a 
job in the open market is ultimately needed. However, productivity gaps – whether perceived 
or  real  –  constitute  major  obstacles  for  employment  in  enterprises.  Enabling  financial 
incentives are required for workers concerned to be given a chance.  

Tackling the market failures related to training will require financial support, alongside other 
public  efforts  such  as  recognition  of  qualifications,  etc.  It  should  be  ensured  that  the  right 
incentives  are  there  both  for  employer  and  worker,  taking  account  also  of  social  partners' 
action and that training is provided also for disadvantaged workers. Human capital investment 
tends to be particularly low in SMEs, especially training for lesser-skilled workers. The fact 
that market failures are more pronounced for SMEs means that public financial support to this 
type of company is all the more justified. 

25 

26 
27 

Jobs,  Jobs,  Jobs  –  Creating  more  employment  in  Europe,  Employment  Taskforce  (chair:  Wim  Kok), 
November 2003. 
"Delivering Lisbon – Reforms for the Enlarged Union", COM(2004) 29, 21.1.2004. 
Joint Employment Report 2003/2004, COM(2004) 24 final/2, 27.1.2004. 

24 

 
 
  
 
                                                 
In  parallel  to  public  support,  a  fair  sharing  of  costs  and  benefits  between  employer  and 
workers  needs  to  be  established.28  Avoiding  sub-optimal  investment  by  enterprises  may 
require  a  combination  of  compulsory  and  voluntary  schemes,  such  as  sectoral  and  regional 
training  funds,  and  measures  such  as  tax  credits  and  support  services.  Closer  partnership 
between business, social partners, the public sector and private providers is critical to improve 
the  interface  between  supply  and  demand  for  learning.  Vocational  training  agreements  at 
cross-industry  and/or  sectoral  level  exist  in  most  Member  States  and  usually  collective 
agreements  set  the  framework  for continuing  training  actions.  It  should  be  ensured  that  this 
becomes standard practice.  

The  increasing  pace  of  structural  change  and  population  ageing  heightens  the  need  for 
continuous  upgrading  of  workforce  skills.  An  appropriate  framework  of  incentives  and 
support is likely to depend increasingly on adequate provision of public  funding, especially 
for  SMEs,  to  enable  firms  fully  to  play  their  role  in  making  labour  markets  inclusive  and 
continuously updating workers' skills.  

2.4.5.  Quantitative information on public financial support for employment and training  

Institutional  features  and  traditions  differ  widely  between  the  Member  States  in  this  area. 
Therefore,  it  is  not  a  straightforward  task  to  compare  the  global  efforts  made  to  encourage 
financially human capital development or employment creation for persons at a disadvantage 
on the labour market. It is important to bear in mind that much of the support is provided in 
the form of tax incentives which is not quantified. In the 2004 Employment Guidelines and 
Recommendations,  the  Commission  explicitly  invited  Member  States  to  "ensure  that  they 
demonstrate  adequacy,  transparency  and  cost-effectiveness  in  the  allocation  of  financial 
resources" when implementing the EES. 

Active labour market policies act in supporting unemployed people and other job-seekers to 
increase  their  chances  of  finding  a  job  on  the  open  labour  market.  Public  expenditure  on 
active labour market policies within the EU amounted to almost €59 billion in 200129. Such 
policies  refer  to  various  types  of  actions,  including  training  programmes,  employment 
incentives, start-up initiatives, direct job creation and job sharing. These policies are always 
targeted, e.g., at unemployed people. Public expenditure on labour market policies can either 
take the form of transfers to individuals, employers or service providers, usually depending on 
the type of policy action. 

For  training  programmes,  subsidies  tend  to  be  provided  directly  to  service  providers  or 
individuals  rather  than  to  employers,  with  the  exception  of  targeted  apprenticeship 
programmes.  Transfers  to  employers  mainly  support  various  employment  incentive 
programmes,  but  also  direct  job  creation  actions  or  programmes  targeted  specifically  at 
disadvantaged  people.  Transfers  are  usually  in  the  form  of  periodic  cash  payments  or 
reductions in social contributions. 

28 
29 

Employment Taskforce Report. 
Source:  Eurostat  Labour  Market  Policy  database.  The  figure  for  passive  support,  i.e.  expenditure  on 
unemployment benefits and early retirement schemes, was almost twice as high (€112 billion). 

25 

 
 
  
 
                                                 
2.4.6.  Employment and training measures qualifying as ‘State aid’ 

Public  support  measures  to  private  companies  may  fall  under  the  definition  of  State  aid  in 
Article 87(1) of the Treaty. If a measure meets the four criteria laid down in this Article30, it 
must be examined by the Commission to determine whether or not the aid is compatible with 
the  State  aid  rules.  In  general  terms,  State  aid  is  only  approved  if  it  serves  clearly  defined 
objectives  and  if  undue  distortions  of  competition  are  avoided.  This  requires  a  balancing  of 
the objectives and effects of the aid. Employment creation and the promotion of training are 
two  areas  where  objectives  are  generally  well  defined  and  for  which  the  Commission  has 
traditionally  been  sympathetic.  This  is  reflected  not  just  in  the  recent  introduction  of  block 
exemption  regulations  for  each  objective  but  also  the  very  limited  number  of  negative 
decisions in related State aid cases. 

Furthermore, most employment and training measures do not constitute State aid because they 
do not meet the four criteria referred to above. Often the measures benefit individuals only or 
do  not  give  an  advantage  to  certain  undertakings,  e.g.,  measures  to  provide  guidance  and 
counselling, general assistance and training for the unemployed or training programmes that 
apply without distinction to all employers in a particular Member State or a general reduction 
in the taxation of labour and social costs. These are often known as “general measures” and 
do  not  give  rise  to  State  aid  implications.  In  addition,  under  the  de  minimis  regulation31, 
relatively  small  amounts  of  aid  (less  than  €100  000  over  three  years  for  one  company)  are 
deemed  not  to  affect  trade  between  Member  States  and/or  distort  competition  and  are 
therefore disregarded.  

In contrast, where all four criteria set out in Article 87(1) are met, employment and training 
measures do constitute State aid. Measures which are designed for a specific region, type of 
company (e.g., SME) or sector are deemed to be selective in that they affect some firms but 
not others. Even if a measure is open to all sectors, it may be selective if there is an element of 
discretion  by  the  awarding  authorities.  By  granting  employment  or  training  aid  to  certain 
firms,  national  authorities  are  taking  over  part  of  those  firms'  labour  or  training  costs  and 
conferring  a  financial  advantage  that  improves  their  competitive  position.  Insofar  as  the 
products  or  services  concerned  are  in  competition  with  those  of  firms  from  other  Member 
States,  such  aid  is  likely  to  distort  competition  and  affect  trade  between  Member  States. 
Consequently, it is, in principle, incompatible with the common market. See box below for a 
selection of case studies. 

The Court of Justice has repeatedly stated that the criteria laid down in Article (87)1 of the 
Treaty  should  be  applied  objectively  without  any  discretion  on  the  part  of  the  Commission. 
This has given rise to questions on the application of the State aid rules where, for example, 
employment  and  training  measures  are  administered  at  regional  level  or  in  the  case  of 
measures  which  are  primarily  financed  by  the  social  partners  themselves  through  collective 
agreements which impose a levy on all companies in a particular sector. While such measures 
are often in line with national and Community policy in these areas, the past case law of the 
Court indicates that they may nevertheless constitute State aid according to the criteria set out 
in  Article  87(1)  of  the  Treaty.  On  the  other  hand,  a  very  recent  opinion  of  the  Advocate 

30 

31 

The  measure  constitutes  state  aid  if  it  is  granted  by  a  Member  State  or  through  State  resources,  it 
distorts or threatens to distort competition, it favours certain undertakings or the production of certain 
goods, and it affects trade between Member States. 
Commission Regulation (EC) No 69/2001 of 12 January 2001 on the application of Articles 87 and 88 
of the EC Treaty to de minimis aid, OJ L 10, 13.1.2001, p. 24. 

26 

 
 
  
 
                                                 
General32 suggests that under certain circumstances such measures should not be considered 
as aid, but rather as the allocation of the costs of financing certain types of measures within 
the  sector  concerned.  The  Commission  will  therefore  follow  the  future  development  of  the 
case law in this field very carefully, and draw the appropriate conclusions in the light of any 
future evolution of the case law of the Court. 

The  next  sections  deal  in  turn  with  aid  for  employment  and  aid  for  training,  including  a 
summary of the block exemption regulation for each objective. 

Application of State aid rules to employment and training measures: Case studies 

General measures that therefore do not qualify as State aid 

The New Deal scheme33 in the United Kingdom is aimed at helping the unemployed, in particular young people 
who have been unemployed for six months or more to find work and improve their prospects of remaining in 
sustained  employment.  The  aim  is  to  get  those  young  people  who  are  ready  to  enter  employment  into 
unsubsidised work and to prepare those who are not for submission to, say, a subsidised job with an employer. 
The job subsidy is aimed specifically at young people whom it has not been possible to place in unsubsidised 
employment and is there to provide an incentive to employers to consider employing those young people which 
they might otherwise overlook. The subsidy is available for employers in all sectors and lasts for a maximum of 
26  weeks  but  ceases  if  the  employee  leaves  employment.  The  Commission  assessed  whether  or  not  the  New 
Deal  falls  within  Article  87(1)  of  the  EC  Treaty.  As  it  applies  to  all  economic  sectors,  all  regions  and  all 
enterprises taking on young or long-term unemployed, the Commission concluded that the scheme contains no 
specificity.  Furthermore,  the  United  Kingdom  authorities  have  no  discretionary  power  concerning  the  level  of 
the subsidy as this varies only according to the number of weekly working hours or training costs. As a result, 
the Commission concluded that Article 87(1) did not apply and thus New Deal measures do not constitute State 
aid. 

Other  Member  States  have  similar  general  measures  favouring  employment.  For  example,  the  French  “Youth 
Employment  Contract” scheme targets young, low qualified people by providing a fixed level of assistance to 
cover  employers’  social  security  contributions.  In  Sweden,  an  employment  subsidy  programme  provides  for 
general subsidies targeted at the long-term unemployed. Subsidies take the form of tax concessions to employers.  

Employment measures qualifying as compatible State aid  

A Danish scheme34 assists with integration into the labour market of people suffering from severe physical or 
mental problems, providing for subsidies to companies corresponding to a maximum of 50% or 66% of workers’ 
wages,  depending  on  the  degree  of  disability.  Although  the  measures  in  question  apply  to  companies  in  all 
sectors  of  activity,  the  Danish  authorities  have  a  certain  discretionary  power  with  regard  to  selection  of  the 
companies, persons  concerned  and  amount of  aid.  The  Commission  therefore  concluded  that  the  measures  are 
selective and therefore constitute State aid within the meaning of Article 87(1) of the EC Treaty. However, the 
Commission considered that this scheme is compatible with the EC treaty, in accordance with Article 87(3)c. 

In its assessment of the French Training Development Commitments “EDDF” scheme, which awards grants to 
cover  a  range  of  costs  related  to  the  provision  of  training  programmes,  the  Commission  decided  that  it  was 
selective  as  it  does  not  favour  all  companies  identically  and  aid  intensities,  ranging  from  25%  to  80%,  differ 
according to the size of the firm and the region in which it is located. As a result, the Commission concluded that 
the  scheme  constitutes  State  aid.  However,  it  considered  the  aid  to  be  compatible  with  the  common  market 
because the eligible costs and aid intensities conform to the rules set out in the block exemption regulation on 
training aid. 

32 
33 
34 

Case C-345/02, Pearle BV of 11 March 2004. 
Case N 374/98. 
Case NN 10/02 Social measures in the employment sector (Sociale beskæftigelsesforanstaltninger). 

27 

 
 
  
 
                                                 
Employment measures which included some incompatible State aid 
Training  and  work  experience  contracts35  were  introduced  in  Italy  in  1984.  They  consisted  of  a  fixed–term 
contract, including a training period, for young unemployed persons. Employers were exempt from paying social 
security contributions for two years in respect of persons employed under this type of contract. The reduction 
was applied automatically in a non-discretionary manner throughout the country and therefore was considered to 
be a ‘general measure’. In 1990, regional authorities were given discretionary power to raise the age limit of the 
recipients, above that set at national level, thus rendering the measures selective. The Commission assessed the 
measures in order to determine whether they were compatible with the common market under Article 87(2) and 
87(3).  It  concluded  that  the  aid  was  compatible  with  the  common  market  where  it  either  related  to  the 
recruitment  of  certain  groups  of  workers  experiencing  particular  difficulties  entering  or  re-entering  the  labour 
market,  or  involved  net  job  creation  as  defined  in  the  State  aid  rules.  It  therefore  authorised  the  aid  in  these 
specific cases. However, some of the aid was deemed to be incompatible with the common market and was thus 
prohibited. In particular, the Commission found that the aid was not aimed solely at the recruitment of persons 
seeking  their  first  job  or  still  unemployed  after  losing  their  previous  job  and  that  it  was  not  aimed  at  the  net 
creation of new jobs within the meaning of the guidelines on aid to employment.  

2.4.7.  The need to control State aid for employment 

Within the single market, aid granted to reduce labour costs can lead to distortions of intra-
Community competition and deflections in the allocation of resources and mobile investment, 
to  the  shifting  of  unemployment  from  one  country  to  another,  and  to  relocation.  Without 
rigorous controls and appropriate aid limits, employment aid can have harmful effects which 
cancel out its immediate effects on job creation. If the aid is used to protect firms exposed to 
intra-Community  competition,  it  could  have  the  effect  of  delaying  adjustments  needed  to 
ensure the competitiveness of European industry. In the absence of rigorous controls, the fact 
that such aid will probably be concentrated in the most prosperous regions runs counter to the 
objective of economic and social cohesion. Care must also be taken to ensure that the granting 
of State aid does not lead to escalating subsidization, making the aid ineffective and wasting 
public money on all sides. The danger is that, if granted in an uncontrolled fashion, this type 
of aid will simply shift unemployment elsewhere without helping to resolve the employment 
problem in the European Union and will therefore distort competition to an extent contrary to 
the common interest.  

2.4.8.  A range of possibilities enable Member States to grant aid for employment 

Notwithstanding  the  need  for  control,  in  the  light  of  the  market  failures  set  out  in  section 
2.4.1., the Commission has traditionally adopted a rather favourable approach to employment 
aid, particularly where it is intended to encourage firms to create jobs or to hire individuals 
who  face  particular  difficulties  in  finding  work,  such  as  the  long-term  unemployed, 
unqualified  workers,  older  workers,  young  people  looking  for  their  first  job,  as  well  as 
minorities and disabled people.  

For  certain  types  of  employment  measures,  which  are  less  distortive  of  competition,  the 
Commission  has  introduced  a  block  exemption  regulation  designed  to  facilitate  Member 
States’  job-creation  initiatives.  The  new  regulation  offers  Member  States  the  possibility  to 
grant  aid  for  the  creation  of  new  jobs  and  the  recruitment  of  disadvantaged  and  disabled 
workers without having to seek the Commission’s prior clearance (see box for details). The 
rules in the regulation are aligned to a great extent on those for SME/regional aid, except for 
the period during which safeguarding of the jobs is required. The rules limit that requirement 
to three years and two years in the case of SMEs. The regulation differs in that respect from 

35 

Case C 49/1998. 

28 

 
 
  
 
                                                 
the  one  on  SME/regional  aid,  since  it  became  evident  that  the  requirement  that  jobs  be 
safeguarded for five years was too strict, especially for SMEs, where greater flexibility of the 
labour  market  is  needed.  As  the  regulation  came  into  force  only  in  2003,  it  is  too  early  to 
assess its impact. 

In  addition,  Member  States  may  through  the  Guidelines  on  National  Regional  Aid36  grant 
state aid for job creation if jobs are linked to the carrying-out of an initial investment project. 
As  with  investment  aid,  the  aid  for  job  creation  provided  for  in  these  guidelines  must  be 
tailored to the nature and intensity of the regional problems it addresses. The amount of aid 
must not exceed a certain percentage of the wage cost of the person hired, calculated over a 
period of two years. Aid intensities can be increased for SMEs and for companies located in 
assisted areas.37 

In limited circumstances, Member States may also grant aid to maintain jobs. This type of aid 
is  similar  to  operating  aid  which  from  an  economic  point  of  view  has  the  most  distortive 
effect on competition. As a result, this type of measure must be notified to the Commission 
and  is  assessed  on  a  case  by  case  basis.  Aid  to  maintain  jobs  can  be  authorised  in  limited 
circumstances:  

– 

– 

– 

in accordance with the guidelines on national regional aid, in regions eligible for the 
derogation  under  Article  87(3)(a)  of 
the  economic 
development of areas where the standard of living is abnormally low or where there 
is serious underemployment, including ultra-peripheral regions; 

the  Treaty  concerning 

the Guidelines on rescue and restructuring aid38 also provide for the award of aid to 
maintain jobs for a company in difficulty; 

finally,  Article  87(2)(b)  of  the  Treaty  provides  for  aid  to  maintain  jobs  if  it  is 
intended  to  make  good  the  damage  caused  by  natural  disasters  or  exceptional 
occurrence.  

Aid may also be awarded for job-sharing but due to the Commission’s limited experience in 
this area, such measures must be notified and are examined on a case-by-case basis.  

2.4.9.  State aid expenditure on employment 

A wide range of aid measures (or parts of measures) may have as their objective the creation 
or maintenance of jobs. This makes it difficult to quantify the total amount of aid that could 
be classified under ‘aid for employment’. For example, we are not able to identify the precise 
amount of aid for ‘job creation’ that may be linked to regional investment or the amount of 
aid that will maintain jobs through rescue and restructuring packages. It is however possible 
to estimate the total amount of State aid awarded through measures for which the objective is 
exclusively  ‘employment’:  for  the  Union  as  a  whole,  this  totalled  around  €840  million  in 
200239. This figure has fluctuated around the €1 billion mark in recent years though the share 
of such aid in total aid has increased as the level of sectoral aid has fallen. The level of aid 
varies substantially from one Member State to another. For example, three large measures in 

36 
37 
38 
39 

Guidelines on national regional aid, OJ C 74, 10.3.1998, pages 9-31. 
In non-assisted regions, only SMEs are eligible for aid for job creation. 
Guidelines on rescue and restructuring aid, OJ C 288, 09.10.1999, pages 2-18. 
Due  to  the  design  of  a  number  of  employment  and  training  schemes,  some  employment  aid  may  be 
classified under training aid and vice-versa. 

29 

 
 
  
 
                                                 
Denmark  account  for  more  than  50%  of  total  EU  aid  for  employment  while  other  Member 
States have no such ‘employment’ measures. Clearly, such disparities do not reflect the extent 
of  public  support  for  employment  in  each  Member  State  but  rather  the  means  by  which 
national  governments  have  chosen  to  provide  funding  as  well  as  the  precise  design  of  their 
measures. 

Brief summary of the block exemption regulation for employment aid40 

The compatibility of State aid for employment is governed by Commission Regulation (EC) No 2204/2002 of 5 
December 2002 (OJ L 337, 13.12.2002, pages 3-14). 

Under the regulation Member States may grant aid for the creation of new jobs, the recruitment of disadvantaged 
and  disabled  workers,  and  to  cover  the  additional  cost  of  employing  disabled  people  without  sending  prior 
notification  to  the  Commission.  Other  types  of  employment  aid  are  not  prohibited  but  must  be  notified  to  the 
Commission and are assessed in light of the criteria set out in the block exemption for employment aid and/or in 
accordance with the regional aid guidelines. Employment measures falling outside the block exemption are aid 
to a single company exceeding €15 million over three years, individual aid awards that are not granted under an 
aid  scheme,  schemes  that  are  targeted  at  specific  sectors,  and  other  types  of  employment  such  as  aid  for  job 
sharing, aid for other types of disadvantaged workers etc.  

Job creation aid  

In  order  to  stimulate  the  creation  of  new  jobs,  the  regulation  allows  companies  to  save  part  of  the  new 
employees'  wage  costs  over  a  two-year  period.  The  amount  of  permissible  aid  depends  on  whether  the  job  is 
created  in  an  assisted  area  and  the regional aid  ceiling  applicable  to  each of  these  areas.  For  example,  the  aid 
ceiling  is  increased  by  15  percentage  points  in  the  assisted  areas  covered  by  Article  87(3)a  of  the  Treaty. 
Increases to the aid ceiling are also permitted for SMEs outside of the assisted areas, e.g., +15 percentage points 
for small enterprises. No aid for job creation is allowed for large companies located outside the assisted areas 
(see table below).  

Disadvantaged workers  

In  order  to  encourage  the  hiring  of  long-term  unemployed  persons  and  other  disadvantaged  workers  Member 
States may compensate companies for up to 50% of one year's wage costs and compulsory social contributions. 

The  definition  of  disadvantaged  persons  include:  young  persons  below  25  years  or  within  2  years  from 
completing full-time education; migrant workers moving within the EU; members of ethnic minorities requiring 
development  of  linguistic,  vocational  training  or  working  experience;  persons  absent  from  working  life  and 
education for 2  years due  to  family  reasons;  single  adults  looking  after  children;  unemployed  persons without 
secondary qualification; unemployed persons above 50 years; long-term unemployed persons. Other categories 
can be added after notification. 

Disabled persons  

In order  to  foster  an  increased  hiring of disabled persons,  the  State  may  also  assume  up  to  60% of one  year's 
wage cost and social security payments, should a company decide to do so. Furthermore, the block exemption 
regulation allows to grant state aid up to 100% of additional costs of employing disabled people such as costs of 
adapting premises, cost of adapting or acquiring equipment for their use, cost of employing staff for time spent 
solely on the assistance of the disabled worker(s) or to compensate for any reduced productivity resulting from 
disabilities of the worker(s).  

40 

http://europa.eu.int/eur-lex/pri/en/oj/dat/2002/l_337/l_33720021213en00030014.pdf. 

30 

 
 
  
 
                                                 
Maximum aid ceilings 

Aid for net job creation:

Outside 
assisted areas

Art. 87(3)(c) regions

Art. 87(3)(a) regions

          Small enterprises

15.0% GGE

Regional aid ceiling

Regional aid ceiling

          Medium-sized enterprises

7.5% GGE

+ 10% GGE

+ 15% GGE

          Large enterprises

-

(max. 30% NGE)

(max. 75% NGE)

Aid for recruitment of disadvantaged 
lAid for recruitment of disabled people
Aid for additional costs of employing 
disabled people

50%

60%

100%

2.4.10.  State  aid  rules  apply  to  training  but  are  generously  applied  in  response  to 

identified market failures  

Where Member States introduce financial and tax incentives to encourage firms to invest in 
training their workforce, steps must be taken to ensure that those incentives do not run counter 
to the objectives of competition policy. A training aid measure which is intended to reduce, 
for  certain  firms,  the  costs  they  normally  have  to  bear,  in  their  own  interest,  in  order  to 
improve  their  employees’  skills,  confers  on  them  an  advantage  over  their  competitors  and 
therefore it may distort competition.  

Usually, however, training has positive external effects for society as a whole. Expenditure on 
training  increases  the  competitiveness  of  EU  industry  and  the  attractiveness  of  the 
Community  as  a  place  in  which  to  set  up  in  business  (see  also  Section  2.4.4).  Thus,  the 
Commission has generally in its State aid policy given sympathetic consideration to training 
aid.  

Moreover, as with employment, most public support measures for training do not fall within 
the  scope  of  the  competition  rules,  but  constitute  general  measures  as  they  are  open  to  all 
enterprises in all sectors and are without discretionary power for the authorities applying the 
measure, e.g., a general tax incentive scheme, such as automatic tax credits, open to all firms 
investing  in  employee  training.  France,  Austria,  the  Netherlands  and  Sweden  have  recently 
introduced  new  fiscal  reforms  to  encourage  investment  in  training  while  Ireland  has 
established a National Training Fund financed through a levy on companies. Some Member 
States have provisions that require employers either to spend beyond a certain threshold level 
on  training,  or  pay  a  training  levy.  Other  measures  do  not  constitute  state  aid  because  they 
directly benefit people everywhere and do not grant an advantage to certain undertakings or 
sectors.  Most  Member  States  provide  funding  for  training  for  vulnerable  groups  through 
initiatives  such  as  the  training  or  re-training  of  unemployed  people,  apprenticeships  in 
undertakings. 

Where a training measure meets the four criteria laid down in Article 87(1) of the Treaty, it is 
assessed on the basis of the block exemption regulation for training aid which came into force 
in 2001. The regulation covers all public support for training which favours one or more firms 
or  sectors  of  industry  by  reducing  costs  they  should  normally  have  to  bear  when  they  want 
their employees to acquire new skills (see box for details). 

31 

 
 
  
 
 
The regulation facilitates the granting of training aid for Member States by removing the need 
for pre-notification of the measure to the Commission. However, on implementation of an aid 
scheme, or grant of individual aid, exempted by this regulation, Member States must, within 
20 working  days,  forward to the  Commission a summary of the information regarding such 
aid  scheme  or  individual  aid.  The  Commission  received  78  summary  information  forms  in 
2001, 102 in 2002 and 53 in 2003. 

Over  this  three-year  period,  four  Member  States,  Germany  (41%),  Italy  (24%),  the  United 
Kingdom  (20%)  and  Spain  (9%)  accounted  for  94%  of  the  total  number  of  schemes  or 
individual  aid  awards  exempted  by  the  regulation.  Although  this  indicates  that  most  other 
Member States have not made use of the possibilities offered, the regulation has resulted in a 
decrease in the overall number of notifications in this area. It is important to bear in mind that 
awards of individual aid exceeding €1 million must still be notified.  

Brief summary of the block exemption regulation for training aid 

The  compatibility  of  State  aid  for  training  is  governed  by  Commission  Regulation  (EC)  No  68/2001  of  12 
January 2001, (OJ L 10, 13.1.2001, pages 20-24) amended by Commission Regulation (EC) No 363/2004 of 25 
February 2004 (OJ L63, 28.02.2004, pages 20-21). 

The regulation covers all public support for training which favours one or more firms or sectors of industry by 
reducing  costs  they  should  normally  have  to  bear  when  they  want  their  employees  to  acquire  new  skills.  The 
regulation  applies  to  training  aid  whether  the  training  is  provided  by  companies  themselves  or  by  public  or 
private training centres. The regulation applies to all sectors.  

The regulation distinguishes between specific training and general training because the latter has less distortive 
effects on competition than former. Therefore, higher maximum aid intensities are permitted for general training, 
SMEs, disadvantaged workers and companies located in assisted areas (see table below). 

Specific  training:  Training  involving  tuition  directly  and  principally  applicable  to  the  employee’s  present  or 
future  position  in  the  assisted  firm  and  providing  qualifications  which  are  not  or  only  to  a  limited  extent 
transferable to other firms or fields of work.  

General  training:  Training  involving  tuition  which  is  not  applicable  only  or  principally  to  the  employee’s 
present or future position in the assisted firm, but which provides qualifications which are largely transferable to 
other firms or fields of work and thereby substantially improve the employability of the employee. Training is 
considered  ‘general’  if,  e.g.,  it  is  jointly  organised  by  different  independent  enterprises,  or  if  employees  of 
different  enterprises  may  avail  themselves  of  the  training.  It  is  also  considered  ‘general’  if  it  is  recognised, 
certified or validated by public authorities or bodies on which the Member State or the Community conferred the 
necessary powers. 

Eligible costs for training aid may include trainers’ personnel costs; trainers’ and trainees’ travel expenses; other 
current expenses (materials, supplies, etc.); depreciation of tools and equipment, to the extent that they are used 
exclusively  for  the  training  scheme  in  question;  cost  of  guidance  and  counselling  services  with  regard  to  the 
training project; trainees’ personnel costs up to the amount of the total of the above eligible costs. 

Maximum aid ceilings 

Gross percentages

Standard rate (large firms outside assisted areas)

Increases of standard rate:

          SME

          Art. 87(3)(a) region

          Art. 87(3)(c) region

          Beneficiaries: categories of disadvantaged workers

Specific 
training

25%

General 
training

50%

10%

10%

5%

10%

20%

10%

5%

10%

Large training projects (aid granted to a single company exceeding €1 million) are not exempted from individual 
notification. 

32 

 
 
  
 
 
2.4.11.  State aid expenditure on training 

For the Union as a whole, just under €600 million of State aid was awarded specifically for 
training  objectives  in  200241.  Spain  accounts  for  more  than  half  the  total  amount  due  to  a 
large aid measure for continuing vocational training in enterprises. This measure has all the 
hallmarks of a general measure but as the authorities have a certain discretionary power with 
regard to selection of the companies, it was deemed to be State aid, albeit compatible with the 
Treaty.  Total  aid  to  training  has  fallen  gradually  in  recent  years  in  line  with  a  reduction  in 
expenditure under this Spanish aid measure. It is important to note that a sizeable proportion 
of  training  aid  awarded  to  SMEs  may  qualify  as  ‘de  minimis’  and  is  therefore  disregarded 
(see section 2.4.6). 

In  2001,  under  the  block  exemption  for  training,  relatively  small  amounts  of  aid  have  been 
reported  by  Member  States.  EU-wide,  just  over  €40  million  was  awarded  of  which  Spain, 
Italy and the United Kingdom each granted around €10 million. In 2002, the total increased to 
€120 million of which Austria granted €45 million, the United Kingdom €37 million and Italy 
€22 million. 

2.4.12.  Measuring the effectiveness of aid for employment and training 

In  its  conclusions  on  State  aid  in  November  2002,  the  Council  invited  Member  States  to 
continue  to  “develop  the  use  of  “ex-ante”  and  “ex-post”  evaluations  of  individual  State  aid 
and State aid schemes in order to monitor impact on competition and effectiveness of the aid”. 
It has been clearly demonstrated above that only a fraction of the active labour market policy 
(ALMP)  measures  carried  out  by  Member  States  constitutes  State  aid.  As  regards  ALMP 
overall, the Employment Guideline on "active and preventative measures for the unemployed 
and  inactive"  commits  Member  States  to  ensuring  "regular  evaluation  of  the  efficiency  of 
labour market programmes and review them accordingly"42. Thus, the yearly implementation 
cycle  of  the  European  Employment  Strategy  puts  emphasis  on  the  evaluation  of  the  ALMP 
measures, while this exercise is squarely outside the competence of competition policy.  

As confirmed by a study of State Aid Schemes Designed to Promote Employment in 200143 
the effectiveness of employment aid measures depends on several factors mainly related to the 
design characteristics of a scheme. For example, schemes targeted towards certain categories 
of  workers  appear  to  be  more  effective  (they  tend  to  have  lower  deadweight)  than  overly 
general  schemes  for  promoting  employment  in  circumstances  where  the  targeting  of  the 
programme has encouraged employers to take on people with characteristics they would not 
normally  consider  for  employment.  Other  factors  that  may  have  a  significant  impact  on  the 
performance of employment measures are the amount of aid, the duration of the measure, the 
form  of  the  aid,  whether  or  not  any  obligation  is  placed  on  the  employer  as  a  condition  of 
receiving  the  benefit,  etc.  With  regard  to  the  amount  of  aid,  findings  from  the  above-
mentioned study indicate that relatively small amounts of aid tend to be effective only with 
small  companies  (less  than  30  employees)  and  that  higher  levels  of  aid  do  not  necessarily 
deliver higher levels of net additionality. 

41 

42 

43 

Due  to  the  design  of  a  number  of  employment  and  training  schemes,  some  training  aid  may  be 
classified under employment aid and vice-versa. 
Council  Decision  of  22.7.2003  on  guidelines  for  the  employment  policies  of  the  Member  States 
(2003/578/EC). 
Cambridge  Policy  Consultants,  ‘The Study of State  Aid  Schemes  Designed  to Promote  Employment’ 
Final Report, October 2001. 

33 

 
 
  
 
                                                 
Clearly,  care  should  be  taken  in  the  design  of  measures  so  that  the  risk  for  unintended 
substitution  effects44  (the  inclusion  of  disadvantaged  workers  at  the  expense  of  more  easily 
placed  workers  can  be  the  explicit  objective)  and  dead-weight  losses45  is  minimised. 
Nonetheless, it is necessary to keep in mind when evaluating for example the effectiveness of 
subsidising a job opportunity for a disabled worker or a long-term  unemployed  person,  that 
the benchmark against which to assess the effectiveness of the measure is not a perfect market 
outcome, but a sub-optimal one; the alternative to subsidised jobs for disadvantaged workers 
is likely to be unemployment with receipt of passive benefits. 

2.4.13.  Conclusions 

The market failures associated with employment creation and the promotion of training, such 
as  the  exclusion  of  less  productive  workers  (perceived  or  real)  at  going  wage  rates  and  the 
under-provision  of  training  are  generally  well  accepted  (see  section  2.4.1).  When  market 
failures  are  being  addressed,  the  Commission  recognises  the  justification  for  Community  or 
government intervention. This is reflected in the Commission’s favourable approach to State 
aid  for  these  objectives:  the  very  limited  number  of  negative  decisions  in  related  State  aid 
cases  and  the  recent  revision  of  the  State  aid  rules  to  facilitate  the  award  of  aid  for  job 
creation, for the recruitment of disadvantaged and disabled workers and for various training 
measures. 

Further efforts to support training and employment need to be encouraged in order to realise 
the  Lisbon  Agenda  for  economic  and  social  renewal.  Competition  policy  complements  and 
reinforces other Community policies contributing to the Lisbon Strategy46, which recognises 
that  more  jobs  are  needed  to  make  the  EU  both  more  competitive  and  more  inclusive. 
Achieving a considerably higher employment rate requires massive human capital investment, 
not least in the form of continuous training. 

Most public support measures to private companies for employment and training purposes do 
not constitute state aid because they do not meet the four criteria referred to in Article 87(1) of 
the Treaty. However, if such interventions do take the form of State aid, State aid control will 
continue to ensure that the distortive effects on competition by each individual aid proposal is 
minimised. On the other hand, it will not present obstacles to policies in pursuit of community 
objectives for which no such distortion can be demonstrated or where the distortion is limited 
and outweighed by the positive effects of the aid measure. 

By  removing  the  need  to  notify  the  Commission,  the  block  exemption  regulations  for 
employment  and  training  aid  should  allow  Member  States  greater  flexibility  to  design 
measures  supporting  these  objectives  as  well  as  speeding  up  their  implementation.  This 
initiative is in line with the conclusions of various European Councils, which call for a shift in 
emphasis  from  supporting  individual  companies  or  sectors  towards  tackling  horizontal 
objectives of common interest. 

44 

45 

46 

Substitution  effect:  the  assisted  person  fills  a  job  that  would  otherwise  have  been  taken  by  another 
person. 
Deadweight  loss:  the  employer  would  have  recruited  the  same  type  of  person  without  any  outside 
financial support. 
Communication  from  the  Commission:  "A  Pro-Active  Competition  Policy  for  a  competitive  Europe" 
(forthcoming). 

34 

 
 
  
 
                                                 
To date, only a limited number of Member States have made use of the possibilities offered 
by the new exemption regulations. Therefore, in the process of reviewing these regulations, 
which  expire  at  the  end  of  2006,  the  Commission  will  consult  Member  States  in  order  to 
receive a detailed assessment of any difficulties which may have arisen in their application. In 
the  light  of  feedback  from  Member  States,  the  Commission  will  also  reflect  on  the 
appropriateness of aid ceilings as well as certain definitions in the text. 

The  Commission  is  aware  of  the  need  to  monitor  ongoing  developments  in  Member  States 
employment  and  training  policy  initiatives  so  as  to  ensure  as  far  as  possible  that  measures 
which have a limited effect on competition can be implemented without the need for approval 
by  the  Commission.  Some  existing  employment  and  training  measures  such  as  those  which 
are primarily financed by the social partners themselves through collective agreements which 
impose  a  levy  on  all  companies  in  a  particular  sector  have  given  rise  to  questions  on  the 
application  of  the  State  aid  rules.  While  such  measures  are  often  fully  in  line  with  national 
and Community policy in these areas, the past case law of the Court indicates that they may 
nevertheless constitute State aid according to the criteria set out in Article 87(1) of the Treaty. 
On the other hand, a very recent opinion of the Advocate General47 suggests that under certain 
circumstances such measures should not be considered as aid, but rather as the allocation of 
the costs of financing certain types of measures within the sector concerned. In this context, 
the  Commission  will  follow  the  future  development  of  the  case  law  in  this  field  very 
carefully, including the Court judgment in the Pearle BV case. 

2.5. 

State aid supporting regional development and cohesion 

The  redirection  of  aid  toward  horizontal  objectives  explicitly  includes  cohesion  objectives 
which  implies  an  increase  in  aid  in  support  of  economic  and  social  cohesion.  However,  the 
decision to grant aid for regional development can only be taken if the balance between the 
resulting distortions of competition and the advantages of the aid in terms of the development 
of  a  less  favoured  region  can  be  guaranteed.  Furthermore,  to  achieve  greater  cohesion  it  is 
essential that aid is concentrated on the least developed regions. Its effectiveness must not be 
compromised by the granting of disproportionate State aid in non-assisted regions. 

State aid specifically earmarked for assisted ‘a’ regions 

Each Member State targets part of  its State aid towards the least developed regions, the so-
called  ‘assisted  regions’.  For  the  Union  as  a  whole,  an  estimated  €8  billion  of  aid  was 
earmarked  exclusively  for  assisted  ‘a’  regions48  in  2002.  This  represented  just  under  one 
quarter of total aid (less agriculture, fisheries and transport) for which a regional breakdown is 
not available).49  

47 
48 

49 

Case C-345/02, Pearle BV of 11 March 2004. 
Article 87(3)(a) provides that aid “to promote the economic development of areas where the standard of 
living  is  abnormally  low  or  where  there  is  serious  underemployment”  may  be  considered  compatible 
with the common market. The ‘a’ regions are largely identical to the Objective 1 regions under the EU 
Structural Funds. 
This  figure  includes  all  aid  specifically  earmarked  for  assisted  ‘a’  regions  regardless  of  the  overall 
objective of the aid. However, due to an absence of data on the final beneficiaries of the aid, it is not 
possible  to  quantify  the  amount  of  aid  granted  through  nation-wide  schemes  from  which  assisted 
regions will also clearly benefit. See spring 2003 update of the Scoreboard for further information on 
methodological issues. 

35 

 
 
  
 
                                                 
Table 12: State aid specifically earmarked for assisted ‘a’ regions, 2002 

EU

B DK

D

EL

E

F

IRL

I

L NL A P* FIN S UK

Total aid less agriculture, fisheries 
and transport, mio €

34.005 933 1.274 11.431 410 3.503 6.197 525 4.528 56 780 453 649 231 406 2.629

Aid for assisted 'a' regions, mio €

Aid for assisted 'a' regions as a 
percentage of total aid**

7.966

23

-

-

-

-

1.791 410 938

549

449 2.891

16

100

27

9

86

64

-

-

-

-

29 649

6

100

-

-

-

-

260

10  

Note: There are no assisted ‘a’ regions in B, DK, L, NL and S. For the purposes of this table, Northern Ireland (UK) is deemed to be an ‘a’ 
region’. * In 2000, Lisboa and Vale do Tejo changed from ‘a’ to ‘c’ status. Data are not yet available on specific aid schemes to this region 
so all aid is still classified under assisted ‘a’ regions. ** Data exclude agriculture, fisheries and transport for which a regional breakdown is 
not available. It is therefore not possible to measure aid to assisted ‘a’ regions as a proportion of total State aid. 

Source: DG Competition 

Disparities  between  the  Member  States  in  the  levels  of  aid  reserved  for  assisted  ‘a’  regions 
(Table 12) reflect not only differences in regional policy but also the size of each country’s 
eligible  population  as  well  as  the  extent  to  which  each  Member  State  grants  aid  at  a  sub-
central level.  

Aid  to  the  assisted  ‘a’  regions  fell  dramatically  from  a  peak  of  €28  billion  in  1993  to  €9 
billion  in  2000,  due  largely  to  the  phasing  out  of  the  restructuring  programme  in  the  new 
German Bundesländer. Aid to the assisted ‘a’ regions in Germany stood at less than €2 billion 
in 2002. The level of aid to the poorer, southern regions in Italy also fell rapidly from a peak 
of €9 billion in 1995 to €2 billion in 2000. However, since then, there has been a slight upturn 
with just under €3 billion awarded  in 2002. The level of  aid  to  the assisted  ‘a’ regions also 
increased in Spain and France over this period. 

2.6. 

State aid instruments 

Majority  of  Member  States  tend  to  provide  aid  to  manufacturing  and  services  in  the 
form of grants …  

All State aid represents a cost or a loss of revenue to the public authorities and a benefit to 
recipients. However, the actual aid element may differ from the nominal amount transferred in 
the case of a subsidised loan or guarantee.  

36 

 
 
  
 
Graph 5: Share of each aid instrument in total aid for manufacturing and services, 
EU, 2000 - 2002 

Tax deferrals
2,6%

Guarantees
3,2%

Soft loans
6,0%

Equity participations
5,6%

Tax exemptions
24,0%

Grants
58,6%

Source: DG Competition 

… though significant differences still exist in the use of instruments 

During 2000-2002, grants accounted for almost 60% of all State aid in the manufacturing and 
service sectors. In addition to aid awarded through the budget, other aid is paid through the 
tax  or  social  security  system.  EU-wide,  tax  exemptions  make  up  24%  of  the  total.  While 
Belgium, Denmark, Spain, Luxembourg, Austria and Sweden provide more than 80% of their 
aid  in  the  form  of  grants,  other  Member  States  make  greater  use  of  tax  exemptions, 
particularly Germany (38%), Ireland (67%) and Portugal (74%). A similar instrument is a tax 
deferral which is used by only six Member States. Tax deferrals account for 14% of all aid in 
Italy compared with an EU-wide average of 3%. 

There are other forms of aid instrument which vary from one Member State to another (Table 
13). One such category covers transfers in which the aid element is the interest saved by the 
recipient  during  the  period  for  which  the  capital transferred  is  at  his  disposal.  The  financial 
transfer  takes  the  form  of  a  soft  loan  or  tax  deferral.  The  aid  elements  in  this  category  are 
much lower than the capital values of the transfers. EU-wide, soft loans represent around 6% 
of  all  manufacturing  aid.  In  France,  Austria,  and  the  United  Kingdom  the  proportion  is 
significantly higher (more than 9%).  

Aid may also be in the form of state equity participation which represents almost 6% of all aid 
to  the  manufacturing  and  service  sectors.  Finally,  aid  may  be  provided  in  the  form  of 
guarantees.  The  aid  elements  are  much  lower  than  the  nominal  amounts  guaranteed,  since 
they  correspond  to  the  benefit  which  the  recipient  receives  free  of  charge  or  at  lower  than 
market rate if a premium is paid to cover the risk. Guarantees were awarded in 2002 by most 
Member States although the aid made up only 3% of total aid in the Union. 

37 

 
 
  
 
 
Table 13: State aid for manufacturing and services by type of aid instrument,  
2000 – 2002 

Grants

58,6
81,5
94,7
49,8
74,4
90,1
35,5
28,7
70,0
94,8
68,4
85,9
20,3
73,3
82,6
72,5

Tax 
exemptions
24,0
10,0
5,1
37,7
24,9
-
24,5
67,3
12,4
-
13,3
-
73,7
19,4
8,4
8,7

TYPE OF AID
Equity 
participations
5,6
0,0
-
0,4
-
0,3
28,0
2,6
0,9
-
0,0
-
-
-
1,0
0,5

EU
B
DK
D
EL
E
F
IRL
I
L
NL
A
P
FIN
S
UK

Soft loans

6,0
6,9
0,0
3,8
0,7
7,9
9,4
0,1
2,9
5,2
5,4
9,8
4,7
7,1
7,9
18,3

Tax 
deferrals
2,6
0,1
-
0,4
-
-
0,1
-
13,7
-
9,8
-
1,0
-
-
-

per cent

Guarantees

3,2
1,6
0,2
7,9
0,1
1,7
2,5
1,3
0,1
-
3,0
4,3
0,2
0,2
0,2
-

Source: DG Competition 

38 

 
 
  
 
 
3. 

PART THREE: STATE AID CONTROL PROCEDURES, RECOVERY AND MODERNISATION 
OF STATE AID 

3.1. 

Registered aid cases 

The Commission controls the Member States’ granting of State aid by means of a formal and 
transparent  procedure  (Council  regulation  No.  659/1999).  According  to  the  regulation,  “any 
plans to grant new aid shall be notified to the Commission in sufficient time by the Member 
State concerned.” Although the vast amount of aid is notified, for around 15% of investigated 
aid  cases,  it  was  not  the  Member  State  but  the  Commission  that  had  to  initiate  the  control 
procedure after finding out about the aid, for example following a complaint50. 

In  2003,  there  were  just  under  1000  cases51  registered  by  the  Commission:  642  cases  were 
notified  by  Member  States,  104  non-notified  cases  initiated  by  the  Commission,  18  cases 
examining  existing  aid  and  203  information  forms  submitted  under  the  block  exemption 
regulations (see below). Excluding the information forms, around 49% of all registered cases 
were in the manufacturing and service sectors, 39% in agriculture, 6% in fisheries and 6% in 
transport and energy.  

Of the 642 notifications, more than 80% were received from six Member States: Italy 24%, 
Germany 19%, France 12%, the United Kingdom 11%, the Netherlands and Spain each 9%. 
Of the 104 non-notified cases, 39 cases concerned Italy, 14 Germany and 10 France.  

With a view to reducing the administrative burden for specific types of aid, block exemptions 
for  small  and  medium-sized  enterprises,  for  training  aid,  for  employment  and  another  for 
small and medium-sized enterprises in the agricultural sector have recently come into force52. 
As one would expect, the number of notifications for these types of aid fell in 2002 and 2003 
as some Member States made use of the block exemptions: in 2003 the Commission received 
142 information forms on exempted aid for SMEs, 53 forms on exempted training aid and 8 
forms on exempted employment aid. Four Member States, Italy (35%), the United Kingdom 
(33%), Germany (12%), and Spain (9%) accounted for 90% of the information sheets while 
most other Member States have not made use of the possibilities offered. 

3.2. 

Commission decisions 

In 2003, the Commission took around 617 final decisions.53 In the vast majority of cases, the 
Commission concludes that the examined aid is compatible with the State aid rules and allows 

50 
51 
52 

53 

In 2003 there were 175 registered complaints, some of which may lead to new registered cases.  
This figure includes the 47 cases which were withdrawn during the course of the year. 
Commission  Regulation  (EC)  No  70/2001  of  12  January  2001  on  State  aid  to  SMEs  (OJ  L  10, 
13.1.2001, pages 33-42); Commission Regulation (EC) No 68/2001 of 12 January 2001 on training aid 
(OJ L 10, 13.1.2001, pages 20-29); Commission Regulation (EC) No 2204/2002 of 5 December 2002 
on State aid for employment (OJ L 337, 13.12.2002, pages 3-14). Commission Regulation (EC) 1/2003 
of 23 December 2003 on State aid to SMEs in the agricultural sector (OJ L 1, 3.1.2004, pages 1-16). 
Excluded  under  ‘final’  decisions  are  all  decisions  taken  in  2003  to  open  a  formal  investigation 
procedure  (71)  as  well  as  corrigenda,  information  injunctions,  court  cases,  proposal  appropriate 
measures, etc. The total also excludes those decisions in which the Commission decides that the notified 
aid does not in fact constitute aid as defined under Article 87(1). There were 16 such decisions in 2003. 
Included  under  ‘positive’  decisions  are  the  8  conditional  decisions  taken  during  the  period  under 
review. Luxembourg has not been included in the graph due to the relatively small number of decisions 
(8 final decisions, of which 6 were positive decisions) over this period. 

39 

 
 
  
 
                                                 
Member States to award such aid without carrying out a formal investigation procedure. This 
was the case for 91% of decisions taken in 2003. Where the Commission has doubts whether 
certain aid measures comply with the rules, it carries out a formal investigation during which 
third  parties  and  all  Member  States  are  invited  to  provide  observations.  At  the  end  of  the 
formal investigation procedure, the Commission either takes a positive or conditional decision 
(5% of the decisions in 2003) or that it does not comply with State aid rules and hence is not 
compatible  with  the  Common  Market  and  takes  a  negative  decision  (4%  of  all  decisions  in 
2003).  Graph  6  shows  the  share  of  incompatible  and  compatible  aid  cases  that  have  been 
examined  by  the  Commission  between  2001  and  2003.  Over  this  three-year  period,  5%  of 
final decisions were negative. 

Graph 6: Share of negative decisions by Member State, 2001-2003 

Negative decisions

Positive decisions

e
g
a
t
n
e
c
r
e
p
n

i

100

90

80

70

60

50

40

30

20

10

0

90

95

92

96

94

100

96

98

95

96

99

100

97

100

98

10

5

EU
(2047)

B
(76)

0

DK
(56)

8

4

6

4

D
(416)

EL
(54)

E
(308)

F
(255)

4

5

1

I
(332)

NL
(125)

A
(78)

2

IRL
(50)

3

FIN
(38)

0

P
(54)

0

S
(32)

2

UK
(165)

Figures in brackets show total number of decisions 2001 - 2003

Source: European Commission (DG Agriculture, Fisheries, Competition, Transport and Energy). 

3.3. 

Recovery of aid 

The  Commission  has  the  power  to  require  that  aid  granted  by  Member  States  which  is 
incompatible with the common market be repaid by recipients to the public authorities which 
granted it. The Member State must recover the aid immediately in accordance with national 
procedures. 

The  fact  that  Commission  decisions  are  enforced  through  the  Member  States  under  their 
national  procedures  constitutes  a  weak  spot  in  the  enforcement  system.  Due  to  the  inherent 
conflict  of  interest  (the  State  being  the  donor  of  aid  as  well  as  the  recovering  institution) 
recovery orders do not often enjoy a high priority in Member States. This is particularly true 
when the aid beneficiary has declared bankruptcy. In around one third of all recovery cases, 
the  beneficiary  is  a  bankrupt  company.  In  such  cases,  recovery  takes  place  under  national 

40 

 
 
  
 
 
insolvency  procedures  since  there  is  no  harmonised  European  insolvency  law.  Moreover,  a 
number of Member States, including the Acceding States, have recently adopted insolvency 
laws, modelled to a greater or lesser extent on the U.S. Chapter 11 insolvency statute. In line 
with the US model, these new laws shield the economic activities of the insolvent company 
against its creditors, including the State aid recovery claims. 

As a response to this and as part of the recent reorganisation of DG Competition, a new unit 
has  been  set  up,  specifically  charged  with  ensuring  the  enforcement  of  State  Aid  decisions. 
Besides  the  treatment  of  individual  cases,  it  analyses  the  barriers  to  recovery  and  tries  to 
identify possible solutions. A dialogue with practitioners and academics of insolvency law has 
begun  in  order  to  avoid  a  one-sided  approach  but  to  pursue  the  goal  of  effective  recovery 
within the overall internal market objectives. 

Table  14  provides  an  overview  of  the  pending  recovery  orders.  As  of  February  2004,  there 
were 88 such orders, of which 40 involved Germany and 20 Spain. 

Table 14: Recovery cases pending in February 2004 

Member 
State

Aid 
Schemes

Individual 
Aid

Total

B
D
EL
E
F
I
NL
A
P
Total

7

10
4
7
2
1
1
32

5
33
1
10
4
2
1

56

5
40
1
20
8
9
3
1
1
88

Note: State aid recovery procedures in sectors other than agriculture, fisheries and transport. 

Source: DG Competition 

In 2003, the Commission  took  11 (partly) negative decisions in which it requested Member 
States to recover aid of well over €1.3 billion. This figure, however, is underestimated, as it is 
not possible to identify the exact amount of incompatible aid in cases when aid is awarded to 
a large number of beneficiaries through a scheme or when a certain type of instrument is used 
for which it is difficult to quantify the effect of the aid, e.g. a guarantee. 

3.4.  Modernising State aid control 

3.4.1. 

Improving current procedures and working methods 

Work has continued on procedural change which has become increasingly important in view 
of  enlargement.  The  objective  is  to  accelerate,  simplify  and  modernise  procedures,  in 
particular with a view to reducing the resources expended on routine cases and to enable the 
Commission to concentrate resources on more important cases which present real competition 
concerns  at  the  Community  level  and  hamper  the  growth  and  competitiveness  of  European 
business.  In  this  regard,  the  Commission  services  have  prepared  draft  implementing 
provisions under Article 27 of Regulation (EC) n° 659/1999 concerning the form, content and 
other details of notifications, the form, content and other details of annual reports, details of 

41 

 
 
  
 
 
time-limits  and  the  calculation  of  time-limits,  and  the  interest  rate  for  the  recovery  of 
unlawful  aid,  as  well  as  other  suggestions  to  improve  current  procedures  and  working 
methods. A meeting with State aid experts from the Member States was held in January 2004 
with a view to adopting an implementing regulation which will be published shortly. 

3.4.2.  Review of State aid guidelines and frameworks 

The Commission is continuing to review its State aid guidelines and frameworks to simplify 
and  clarify  them,  and  remove  possible  conflicts  between  the  different  texts.  At  present, 
priority is being given to reviewing the rules on rescue and restructuring aid for companies in 
difficulty,  to  look  at  the  reform  of  the  Community's  regional  aid  rules  after  enlargement,  to 
draft  a  new  framework  for  the  assessment  of  lesser  amounts  of  aid,  to  clarify  the  area  of 
services of general economic interest and to introduce a “de minimis” rule for the agricultural 
and fisheries sectors. 

In March 2004, the Commission met with State aid experts from the Member States to discuss 
a  draft54  set  of  guidelines  on  rescue  and  restructuring  aid  for  companies  in  difficulty  which 
should replace the existing guidelines due to expire in October 2004. 

In  spring  2003,  the  Commission  carried  out  a  review  of  the  guidelines  on  national  regional 
aid55  and  concluded  that  a  revision  of  the  guidelines  was  not  necessary  at  this  stage.  The 
Commission  nevertheless  decided  to  conduct  an  overall  review  in  good  time  to  enable 
Member States and the Commission to draw up, notify and approve the regional maps for the 
period after 1 January 2007. 

In October 2003, following intensive consultations with the Member States, the Commission 
modified  the  “Multisectoral  Framework  on  regional  aid  for  large  investment  projects”56, 
which was adopted in 2002 to establish a faster, simpler and more accountable control system 
of  Government  support  to  large  investments.  In  order  to  prevent  serious  distortions  of 
competition, the Framework provides for strict rules in sectors with structural difficulties. A 
list  of  such  sectors  should  have  been  established  by  the  end  of  2003.  However,  due  to  the 
methodological  and  technical  difficulties  in  establishing  such  a  list,  and  in  agreement  with 
Member States, the Commission has decided to extend the adoption to the end of 2006. 

The  current  Commission  Regulations  and  Frameworks  governing  State  aid  already  allow 
Member  States  a  large  number  of  possibilities  to  grant  aid  in  pursuit  of  the  realisation  of 
Community  objectives,  cf.  de  minimis  regulation,  block  exemption  regulations  and  other 
frameworks  for  horizontal  objectives.  Nevertheless,  the  Commission  recognises  that  there 
may  be  scope  for  further  flexibility  for  the  approval  of  lesser  amounts  of  State  aid  without 
undermining the principle of a strict overall control of State aid. The future development of 
the  State  aid  rules  to  take  account  of  these  factors  is  addressed  in  the  Commission's 
Communication on a pro-active competition policy for a competitive Europe.  

In  December  2003,  the  Commission  adopted  a  framework  on  State  aid  to  shipbuilding57  to 
replace  the  1998  Shipbuilding  Regulation  which  expired  at  the  end  of  2003.  The  guiding 
principle of this exercise was to simplify and normalise the treatment of shipbuilding, both as 

54 
55 

56 
57 

http://europa.eu.int/comm/competition/state_aid/others/. 
The 1998 Guidelines on national regional aid stipulated that the Commission should review them within 
five years of their becoming applicable. 
OJ C 263, 1.11.2003. 
OJ C 317, 30.12.2003, pages 11-14. 

42 

 
 
  
 
                                                 
to  the  form  and  the  substance  of  State  aid  rules.  It  was  nevertheless  proposed  to  maintain 
certain  sector-specific  provisions  on  the  basis  of  certain  particularities  that  distinguish 
shipbuilding from other industries. The important work carried out by the LeaderSHIP 2015 
initiative  has  revealed  the  crucial  importance  of  increasing  the  competitiveness  of  the  EU 
shipbuilding  industry.  Therefore,  the  new  Commission  Framework  on  support  measures  for 
shipbuilding  improves  and  strengthens  support  for  innovation.  Compared  to  the  1998 
Shipbuilding  Regulation,  the  new  framework  contains  a  definition  of  the  concept  of 
“innovation”  tailored  to  the  special  needs  of  the  shipbuilding  industry.  The  percentage  of 
State  support  for  expenditure  on  investments  needed  to  fund  the  innovative  aspects  of  the 
project has doubled from 10% to 20%.  

3.4.3.  Services of General Economic Interest (SGEI) 

On 18 February 2004, the Commission adopted draft instruments designed to increase legal 
certainty as regards the financing of services of general economic interest. 

The first is a draft Commission Decision on the application of Article 86 of the Treaty to state 
aid in the form of public service compensation. The purpose of the Decision is to set out the 
conditions under which state aid granted to small-scale services of general economic interest 
is compatible with the Treaty and to exempt such aid from the prior notification requirement. 
The  Commission  takes  the  view  that,  where  the  conditions  under  which  such  aid  may  be 
granted  are  clearly  set  out  and  complied  with  by  Member States,  administrative  procedures 
for  Member States  and  the  Commission  can  be  streamlined  by  waiving  the  notification 
requirement. 

The  draft  Decision  does  not  at  present  specify  thresholds  for  determining  what  constitutes 
small-scale  services  of  general  economic  interest.  Since  situations  differ  widely  from  one 
Member  State  to  another,  the  Commission  thought  it  preferable  to  await  the  results  of 
consultations on the draft before finalising the figures. 

Hospitals and social housing undertakings are also to be included in the scope of application 
of  the  Decision.  They  perform  services  of  general  economic  interest  for  which  the  level  of 
compensation  may  be  very  high  without  there  being  any  particularly  large  risks  of 
competition being distorted. 

The  second  instrument  is  a  draft  Directive  amending  Directive 80/723/EEC  on  the 
transparency  of  financial  relations  between  Member States  and  public  undertakings. 
Directive 80/723/EEC  is  currently  applicable  to  undertakings  which  carry  on  public  service 
activities and activities outside the scope of public service and receive "state aid" in the form 
of  public  service  compensation.  It  is  proposed  that  the  drafting  of  the  Directive  be  brought 
into  line  with  the  Altmark  judgment,  stipulating  that  the  Directive  is  applicable  where  the 
undertakings  receive  public  service  compensation,  irrespective  of  the  legal  classification  of 
such compensation in the light of Article 87 of the EC Treaty. 

The Commission has also drawn up a draft "Community framework for state aid in the form 
of public  service  compensation". The purpose  of the draft is to  set out the conditions under 
which  compensation  granted  to  large-scale  services  of  general  economic  interest  (i.e.  those 
not covered by the above-mentioned Decision) constitutes compatible aid. However, because 
of  the  potential  risks  of  distortion  of  competition,  such  aid  must  be  notified  to  the 
Commission. 

43 

 
 
  
 
These  draft  instruments  reflect  the  Commission's  long-established  approach  to  services  of 
general economic interest and allow Member States to grant the relevant undertakings all the 
funding  that  is  necessary  for  the  operation  of  the  public  service.  However,  any 
overcompensation may constitute state aid that is incompatible with the Treaty. Similarly, aid 
granted for the performance of a public service activity should not be used to cover activities 
on  markets  outside  the  public  service  sphere.  Such  practices  are  not  necessary  for  the 
operation of services of general economic interest and are harmful to other undertakings. 

The draft instruments will be presented to the Member States, the European Parliament, the 
Economic  and  Social  Committee  and  the  Committee  of  the  Regions  for  their  opinions.  The 
drafts are available on the Competition DG's website, and all interested third parties can make 
known their views on them. The drafts will be finalised by the Commission in the light of the 
comments received. 

3.4.4.  State aid to the fisheries sector 

At  present,  the  Commission  assesses  the  compatibility  of  State  aid  schemes  in  the  fisheries 
sector  according  to  the  Guidelines  for  the  examination  of  State  aid  to  fisheries  and 
aquaculture  adopted  in  200158.  However,  the  Commission  intends  to  overhaul  the  rules 
governing the granting of State aid to this sector. To this end, the Commission adopted on 9 
July 2003 a “Draft Commission Regulation on the application of Articles 87 and 88 of the EC 
Treaty to State aid to small and medium-sized enterprises active in the production, processing 
and marketing of fisheries products”. This draft Regulation sets out the principle according to 
which a large number of State aids to the fisheries sector would no longer have to be notified 
to the Commission before being granted, provided that these aids comply with the rules laid 
down  in  the  Regulation.  It  was  discussed  with  State  aid  experts  from  the  Member  States  in 
October  2003  and  published  in  the  Official  Journal  for  consultation59.  The  Commission 
services  intend  to  hold  a  second  meeting  with  Member  States  before  it  is  adopted  by  the 
Commission and enters into force by the summer of 2004. 

State  aid  to  the  fisheries  sector  which  does  not  fall  within  the  block  exemption  Regulation 
would still have to be notified to the Commission. Such aid will be subject to new Guidelines, 
which are currently being elaborated, and which should enter into force at the same time as 
the block exemption Regulation. 

The fisheries sector will also be covered by a Commission Regulation on the application of 
Articles  87  and  88  of  the  EC  Treaty  for  “de  minimis”  aid  in  the  agriculture  and  fisheries 
sector.  A  draft  of  this  Regulation  was  adopted  by  the  Commission  in  December  2003.  It 
foresees that aid up to €3000 per fisherman or farmer could be granted over a period of three 
years without being notified to the Commission, provided that the global amount of such aid 
does not exceed 0.3% of production in the fisheries or agricultural sector by the Member State 
concerned.  

Member  States  will  be  able  to  grant  aid  that  is  in  line  with  the  Regulation  without  the 
Commission  having  to  approve  the  aid  in  advance,  but  they  will  also  have  to  provide 
information certifying that the two ceilings have been complied with. The draft will now be 
discussed by Member States and interested third parties. The Commission would like to see 
the Regulation implemented towards the end of 2004.  

58 
59 

OJ C 19, 20.1.2001, p. 7. 
OJ C 265, 4.11.2003, p. 17. 

44 

 
 
  
 
                                                 
3.4.5.  State aid to the agricultural sector 

On 23 December 2003, the Commission adopted a new Regulation60 introducing exemption 
arrangements  for  certain  types  of  state  aid,  up  to  certain  ceilings,  granted  to  farmers  or 
undertakings processing or marketing agricultural products. 

The Regulation covers a broad range of types of state aid granted to small and medium-sized 
enterprises (SMEs) in the agricultural sector (investment aid, aid for early retirement, aid for 
the setting-up of young farmers, aid for producer groups, aid to encourage the production and 
marketing  of  quality  agricultural  products,  etc.).  Given  the  definition  of  SMEs  (fewer  than 
250 employees, annual turnover not exceeding EUR 40 million or annual balance-sheet total 
not exceeding EUR 27 million), almost all farms and undertakings in the agricultural sector 
are covered by these provisions. 

With  this  Regulation,  the  Commission  is  also  establishing  a  new  transparency  arrangement: 
summary information on  all exempted state aid, by Member State, will be published on the 
Internet61  five  days  before  the  start  of  payment  of  the  aid.  All  farmers  and  other  interested 
parties will thus have access to all the information regarding all state aid measures covered by 
the block exemption. This measure will ensure transparency and benchmarking, while at the 
same  time  avoiding  the  need  for  the  formal  notification  procedure  and  subsequent 
Commission approval. The new Regulation will be applicable until the end of 2006. 

On 23 December 2003, the Commission also adopted a draft Regulation on de minimis aid in 
the agriculture and fisheries sectors (see above). 

3.4.6.  State aid to the maritime sector 

In  January  2004,  the  Commission  adopted  new  Community  guidelines  on  State  aid  to 
maritime  transport62.  This  communication  -  replacing  the  1997  Guidelines  –  aims  at  setting 
the  parameters  within  which  State  aid  to  maritime  transport  will  be  approved  by  the 
Commission.  These  Guidelines  are  intended  to  clarify  what  State  aid  schemes  may  be 
introduced in order to support the Community maritime interest, with the aim of improving a 
safe, efficient, secure and environment friendly maritime transport; encouraging the flagging 
or re-flagging to Member States' registers; contributing to the consolidation of the maritime 
cluster  established  in  the  Member  States  while  maintaining  an  overall  competitive  fleet  on 
world markets; maintaining and improving maritime know-how and protecting and promoting 
employment for European seafarers; contributing to the promotion of new services in the field 
of short sea shipping following the White Paper on Community transport policy. 

3.4.7.  De minimis aid to the transport sector 

In  March  2004,  the  Commission  adopted  a  draft  regulation  which  would  extend  to  the 
transport sector the application of the de minimis regulation of January 2001 under which aid 
not  exceeding  a  ceiling  of  €100  000  per  enterprise  over  any  period  of  three  years  does  not 
constitute State aid within the meaning of the Treaty.  

60 

61 
62 

Commission Regulation (EC) No 1/2004 of 23 December 2003 on the application of Articles 87 and 88 
of the EC Treaty to state aid to small and medium-sized enterprises active in the production, processing 
and marketing of agricultural products (OJ L L 1, 3.1.2004). 
http://europa.eu.int/comm/agriculture/stateaid/exemption/info_en.htm. 
Commission communication C(2004) 43 - Community guidelines on State aid to maritime transport (OJ 
C13/3 17.1.2004). 

45 

 
 
  
 
                                                 
3.5. 

Enlargement 

In  order  to  prevent  incompatible  aid  from  being  “imported”  into  the  EU  on  the  date  of 
accession,  a  system  was  set  up  to  examine  measures  which  were  put  into  effect  in  the 
Acceding States before 1 May 2004 and will still be applicable after that date (the existing aid 
mechanism).  The  purpose  of  this  mechanism  is  to  provide  Acceding  States  and  economic 
operators with legal certainty as regards State aid measures that are applicable after the date of 
accession.  A  total  of  222  State  aid  measures  were  accepted  for  inclusion  in  the  Accession 
Treaty63. Between January 2003 and February 2004, Acceding States submitted a further 288 
measures of which 110 have been approved or cleared for approval by the Commission. The 
relatively high number of cases still under assessment can be explained by the fact that most 
cases have been submitted only recently. The Commission has three months, upon receipt of a 
complete set of information, to assess each measure.  

The autumn 2004 update of the Scoreboard will include detailed information on the State aid 
situation in each of the ten Acceding States. 

4. 

ONLINE STATE AID SCOREBOARD AND REGISTER 

The online Scoreboard contains electronic versions of this and previous Scoreboards as well 
as a set of key indicators, a wide array of statistical tables and internet-links to information on 
State aid policy issues of the Member States and the European Parliament. 

http://europa.eu.int/comm/competition/state_aid/scoreboard/ 

Any  queries  or  requests  for  data  should  be  sent 
Stateaid-Scoreboard@cec.eu.int 

to 

the  scoreboard  mailbox  at 

State aid Register – a second transparency tool 

The  Commission’s  State  aid  Register  has  been  online  since  2001.  The  Register  provides 
detailed  information  on  all  State  aid  cases  which  have  been  been  the  object  of  a  final 
Commission decision since 1st January 2000 as well as block exemption cases published in 
the Official Journal. It is updated daily and thus ensures that the public has timely access to 
the  most  recent  State  aid  decisions.  It  is  available  on  the  homepage  of  the  Competition 
Directorate General’s Internet site: 

http://europa.eu.int/comm/competition/state_aid/register/ 

5. 

METHODOLOGICAL NOTES 

The Scoreboard covers State aid as defined under Article 87(1) EC Treaty that is granted by 
the fifteen Member States and has been examined by the Commission. Accordingly, general 
measures  and  public  subsidies  that  have  no  affect  on  trade  and  do  not  distort  or  threaten  to 
distort  competition  are  not  dealt  with  in  the  Scoreboard  as  they  are  not  subject  to  the 
Commission’s  investigative  powers.  For  example,  a  general  tax  break  for  expenditure  on 

63 

Treaty of Accession was signed on 16 April 2003: 
http://europa.eu.int/comm/enlargement/negotiations/treaty_of_accession_2003/index.htm. 

46 

 
 
  
 
                                                 
 
research  and  development  is  not  considered  as  State  aid  although  it  may  well  appear  in 
Member  States  national  budgets  as  public  support  for  research  and  development. 
Furthermore, Community funds and instruments are also excluded. All State aid data refer to 
the implementation of Commission decisions and not cases that are still under examination, 
which  once  decided  upon,  may  have  an  effect  on  historical  data.  State  aid  expenditure  is 
attributed to the year it was made. In cases that result in expenditure over a number of years, 
the total amount is attributed to each of the years in which expenditure took place. All data are 
provided  in  million  (or  billion  where  appropriate)  euro  at  constant  2000  prices.  UK  figures 
cover the financial year 2002-2003. 

This  edition  of  the  Scoreboard  focuses  largely  on  2002,  the  year  following  the  Stockholm 
European  Council  where Member States committed themselves  to demonstrate  a  downward 
trend in State aid in relation to GDP by 2003. A full set of State aid data for the year 2003 will 
only be available in early 2005 as Member States, together with the Commission, require up 
to one year to collect and analyse the data. In future, however, the Commission and Member 
States have pledged to reduce this time-lag with the result that 2004 data should be available 
by the end of 2005. 

As  in  previous  years,  State  aid  data  collected  for  the  Scoreboard  are  grouped  according  to 
primary  objectives  which  may  be  either  horizontal  or  sector-specific.  Information  on  the 
objective of the aid, or, the sector to which the aid is directed, refers to the time the aid was 
approved  and  not  to  the  final  recipients  of  the  aid.  For  example,  the  primary  objective  of  a 
scheme  which,  at  the  time  the  aid  was  approved,  was  exclusively  earmarked  for  small  and 
medium-sized  enterprises  is  classified  as  aid  for  ‘small  and  medium-sized  enterprises’.  In 
contrast, aid granted under, say, a regional development scheme may ultimately be awarded to 
small  and  medium-sized  enterprises,  but  is  not  regarded  as  such  if,  at  the  time  the  aid  was 
approved, the scheme was open to all enterprises.  

For the first time, the Commission has collated some information on secondary objectives. A 
secondary  objective  is  one  for  which,  in  addition  to  the  primary  objective,  the  aid  was 
exclusively earmarked at the time the aid was approved. For example, a scheme for which the 
primary  objective  is  R&D  may  have  as  a  secondary  objective  ‘SME’  if  it  was  directed 
exclusively  at  SMEs.  As  a  result,  the  data  now  present  a  more  accurate  picture  of  the  total 
amount of aid exclusively earmarked for SMEs though it is not possible to determine the total 
amount of aid that actually went to SMEs. 

The following symbols have been used in the Scoreboard: 

n.a. 
- 
0 

not available 
real zero 
less than half the unit used 

Further information on methodological issues may be found on the online Scoreboard: 

http://europa.eu.int/comm/competition/state_aid/scoreboard/conceptual_remarks.html 

47