Opinion of the European Economic and Social Committee on the  State aid action plan — Less and better targeted state aid: a roadmap for state aid reform 2005-2009 (COM(2005) 107 final — SEC(2005) 795)
Date: 2005-12-14
Institutions: European Economic and Social Committee
Subjects: ESC opinion, State aid, control of State aid, economic and social cohesion, governance, simplification of formalities, sustainable development

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II

(Preparatory Acts)

EUROPEAN ECONOMIC AND SOCIAL COMMITTEE

422ND PLENARY SESSION HELD ON 14-15 DECEMBER 2005

Opinion of the European Economic and Social Committee on the ‘State aid action plan — Less and
better targeted state aid: a roadmap for state aid reform 2005-2009’

(COM(2005) 107 final — SEC(2005) 795)

(2006/C 65/01)

On 8 June 2005 the Commission decided to consult the European Economic and Social Committee, under
Article 262 of the Treaty establishing the European Community, on the abovementioned proposal.

The Section for the Single Market, Production and Consumption, which was responsible for preparing the
Committee's work on the subject, adopted its opinion on 11 November 2005. The rapporteur was Mr
Pezzini.

At its 422nd plenary session, held on 14-15 December 2005 (meeting of 14 December), the European
Economic and Social Committee adopted the following opinion by 117 votes to two with five abstentions.

1. Introduction

1.1
The European Economic and Social Committee has
consistently stressed the importance of state-aid control as a
key factor in:

— sound competition policy, not least as a way of increasing

convergence between Member States' economies;

— boosting innovation and the EU's competitiveness;

— cohesion and sustainable growth throughout the Communi-

ty's regions.

1.2
The rules governing state aid are based on the Commu-
nity's founding texts – the ECSC Treaty and the EEC Treaty.
Unlike the ECSC Treaty, which has now expired, the EC Treaty
does not lay down an absolute ban on state aid: derogations (1)
and some exceptions (2) to the ban are provided for, giving the
Commission – and, exceptionally,
too – wide
discretionary power to authorise aid as an exception to the
general rule.

the Council,

(1) Article 87(2).
(2) Article 87(3).

1.3 Moreover, Articles 87, 88 and 89, which govern this
complex matter, are included in Section II of Title VI laying
down common rules on competition, taxation and approxima-
tion of laws, precisely in order to underscore the fact that the
issue of state aid should be viewed in terms of the impact that
it can have on the competitive market place.

In this connection, the EESC has already stressed that
1.3.1
any new state aid action plan should be compatible with the
objectives laid down in Article 2 of the EC Treaty in order to
inter alia, proper functioning of the internal market,
ensure,
rules, harmonious,
implementation of non-discriminatory
balanced,
sustainable development of economic activities,
sustainable and non-inflationary growth, a high degree of
competitiveness and convergence, a better quality of
life,
economic and social cohesion and solidarity among Member
States.

Indeed, state aid, as the Commission itself states, is:

‘a
1.4
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 competi-
tion because it discriminates between companies that receive
assistance and others that do not’ (3).

(3) COM(2005) 147 final of 20.4.2005.

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1.4.1
According to Article 87(1) of the Treaty, state aid
includes not just aid granted by public authorities and financed
by public funds but also interventions to reduce costs which
are normally part of an undertaking's outgoings.

1.6.3
As part of the plan to reform state aid arrangements,
the EP proposed that a clear-cut approach be laid down with a
view to fostering innovation across all sectors, under the
heading of the Lisbon objectives.

The March 2005 European Council reiterated the goal
1.5
of continuing to work towards a reduction in the general level
of state aid, while granting derogations for any market failures.
This is in line with the recommendations of the 2000 Lisbon
Summit and the 2001 Stockholm Summit and meets the need
to direct aid towards horizontal objectives of common interest,
including cohesion objectives.

1.7
For its part, over the years, the Court of Justice has also
expressed its views on state aid on many occasions, creating
genuine case law laying down consistent, extremely detailed
guidelines, most recently with the judgment on services of
general interest and the Altmark judgment of 24 July 2003 (8).

Furthermore, in its recent Communication on the mid-
1.5.1
term review of the Lisbon Strategy, the Commission took up
this objective of reducing state aid, redirecting it to address
market
failures, particularly in sectors with a high growth
potential, and stimulating innovation (4).

1.6
The European Parliament, too, has recently expressed its
views on state aid (5), stressing that it must be used responsibly,
providing value for money, since it:

— equals more than 50 % of the EU's annual budget;

— has consequences for public finances, for competition and
for the ability of private undertakings to invest in a globa-
lised economic environment;

— is raised from European taxpayers.

1.6.1 Moreover, on 12 May 2005, the EP adopted a resolu-
tion on Strengthening European competitiveness – the effects
of industrial change on policy and the role of SMEs (6),
in
which it supported the aim of reducing the global volume of
aid to enterprises, but pointed to the usefulness of certain types
of aid in offsetting shortcomings in the market, such as aid for
research and development,
training and for advisory
for
services.

1.6.2
The EP noted the importance of state aid for SMEs in
the Member States and called on the Commission to maintain
the
within the Structural Funds all aid instruments
economic and socio-economic reconversion of regions affected
by industrial relocation; it urged better consideration for small
and micro-enterprises (7) in these regions and, more generally,
in all cohesion policies.

for

(4) The information society is not always easy to understand. Informa-
tion society products contain a significant input of intelligence. The
capacity to produce increasingly innovative and intelligent goods
and services must be stimulated and supported, not least with state
aid.

(5) EP Resolution No. P6_TA(2005)0033 of 22.2.2005.
(6) EP Resolution No. A6-0148/2005 of 12.5.2005.
(7) See Recommendation 2003/361/EC (OJ L 124 of 20.5.2003).

In its April 2005 Report on the State Aid Scoreboard (9),
1.8
the Commission paints an encouraging picture of Member
States' reactions to the Lisbon Strategy, recording a slight
decline in the level of aid in relation to GDP and even more
positive responses as regards the redirection of aid in line with
the suggestions of the European Councils; nevertheless, there is
still a long way to go.

1.8.1
In 2001, the Commission created the state aid register
and the state aid scoreboard as a basis for discussion on a
strategy for reducing the general level of state aid and redir-
ecting it towards horizontal objectives, and these tools were
developed further in 2002. The EESC has already expressed
appreciation of the Commission's efforts to achieve greater
transparency in the area of state aid, which would seem to be
especially important with regard to the Member States which
have recently joined the EU.

it also notes

1.9
The EESC is pleased to note that, in 2003, annual total
state aid had fallen by 3,6 % since 1999 and by almost 30 %
figure of
since 1996; however,
EUR 53 billion (10), over 60 % of which is earmarked for the
manufacturing and service industries, continues to be high. It
also stresses its concern at the potential competition distortions
which could be caused by the state-aid disparities between
Member States and between the different
regions within
Member States.

that

the

In an earlier opinion (11),
1.9.1
the EESC welcomed the
ongoing clarification and fine-tuning of
the rules by the
Commission, with particular regard to the block exemption
regulation for employment aid designed to facilitate Member
States' job creation initiatives.

(8) Case C-280/00, Altmark Trans and Magdeburg – Nahverkehrsge-

sellschaft Altmark (2003) ECR I-7747.

(9) See footnote 3.
(10) At EU level.
(11) OJ C 108 of 30.4.2004.

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1.9.2
The EESC fully agrees with the Commission that state
aid rules need to be adjusted with the passage of time to take
into account political, economic and legal developments. That
is why instruments for assessing state aid are reviewed periodi-
cally and therefore often have limited duration (12).

— the compatibility of the new framework with Community
environment policy (new Emission Trading Scheme rules);

— innovation policy (November 2004 Vademecum and new
2005 Communication) and research and technological
development policy (new 2006 framework for R&D aid);

The EESC welcomes the Commission's proposals for
1.10
general reform in the field (13), based on an integrated approach
which takes proper account of ‘market failures’.

— sectoral industrial policy;

1.10.1
It feels that the adoption of a new framework which
gears state aid policy to development needs should be subject
to a review comprising streamlining and an exhaustive impact
assessment.

1.10.2
The review should be based on clear goals, wide-
ranging consultation and comprehensive information. In addi-
tion to a clear control system, the new framework should
provide coherence between policies, concentrated measures
and,
transparency and legal
certainty.

lastly, greater

streamlining,

1.10.3

The proposed framework should be in line with:

— the integrated approach to competitiveness decided on by
the November 2004 European Council with a view to rein-
vigorating the Lisbon agenda in terms of economic develop-
ment, employment growth and consolidating enterprise;

— the need to streamline Community state aid policy, which
has been rendered increasingly complex by successive addi-
tions, which have also increased the administrative burdens
for both Member States and beneficiaries;

— the need to ensure legal certainty and administrative trans-
parency, with clear, simple, pre-established rules which are
easy for businesses and their advisers to understand and
use;

— the principle that aid should be economically worthwhile; it
should be aimed at rectifying market
failures, reducing
uncertainty and ensuring a sufficient degree of predictability
for operators;

— the mechanisms and procedures for identification and noti-
fication of measures incompatible with the EU-25 single
market; these must ensure practical ways of actively invol-
ving stakeholders, the judiciary, the academic and business
worlds and civil society.

1.10.4
following:

Particular consideration must also be given to the

— the size and location of beneficiaries and the volume of aid

granted (cf. ‘De minimis’ regulation);

(12) SEC(2005) 795 of 7.6.2005.
(13) COM(2004) 293 final of 20.4.2004.

— cohesion policy (revision of the Guidelines on Regional Aid

(RAG 2006);

— enterprise policy (‘De minimis’ regulation and revision of

the rules on risk capital);

— consumers' views and the benefits for the European public.

1.11
In the EESC's view, however, the most important thing
in defining a common state aid framework is to launch a
modern policy which will win the unanimous support of all
the Member States, since all the EU economies are subject to
transition and restructuring processes as a result of globalisa-
tion.

1.12
As competitors and end recipients of state aid, under-
takings, along with the public sector, are in a good position to
assess the effectiveness of the instruments created. They have a
practical contribution to make in monitoring solutions suitable
for modern European state aid policy, and can make sugges-
tions for drawing up new guidelines.

1.12.1 Moreover, undertakings are directly exposed both to
the legal uncertainties and lengthy approval
times of aid
systems and to the serious consequences of recovery of aid
declared to be unlawful. They are therefore among those who
would benefit most from the dissemination of a uniform under-
standing of Community legislation and the elimination of diffi-
culties and disparities in interpretation and implementation.

2. Towards a balanced framework for reforming state aid

The EESC firmly believes that the Commission's reform
for achieving

2.1
proposals could be a valuable melting pot
balanced reconciliation of:

— all Member States' development needs – a sustainable,
knowledge-based economy with more and better jobs and a
high standard of living;

— the constraints of globalisation, not least in terms of full

respect for WTO rules;

— equal conditions, in the great single market of the enlarged
Europe, for undertakings, consumers, taxpayers and civil
society as a whole.

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2.2
The EESC fully supports the principle underlying the
‘Less and better-targeted’ state aid reform, which seeks to make
undertakings more competitive on domestic and international
markets and to create the right conditions to enable the most
efficient undertakings to be rewarded.

2.3
The EESC fully endorses the approach outlined by the
Commission aimed at simplifying rules in order to give opera-
tors greater certainty and alleviate Member States' administra-
tive burdens. Indeed, the EESC firmly believes that uncertainty
regarding what constitutes legitimate state aid and what does
not is likely to call into question the legitimacy of the Commis-
sion's state aid control process.

2.6
Competitiveness is a measure of a market's capacity to
create valuable goods and services effectively in a globalised
world, raising the standard of
living and ensuring a high
employment rate. However, it must be admitted that the EU
has failed in its attempt to promote the growth of its business
and human resources and achieve higher levels of technological
research, innovation, training and internationalisation, as called
for by the Lisbon Strategy.

3. The reform and the Lisbon Strategy (Less and better-

targeted state aid policy)

The EESC believes that the proposed reform of Com-

2.4
munity state aid rules should essentially entail:

The EESC supports a new general Community state aid

3.1
framework based on an aid policy which:

— greater involvement by the institutions of the various stake-
in policy-making and

holders, particularly undertakings,
policy implementation;

— bringing existing rules into line with new challenges in
order to support the Lisbon objectives and increase the
benefits for the public;

— is more targeted and selective;

— is consistent and fully integrated with the Lisbon Strategy,
with the completion of the single market and with other
Community policies;

— is based on simplification, transparency and legal certainty

of procedures and rules;

— the creation of specific instruments to encourage undertak-

ings to expand, providing suitable incentives;

— gives undertakings and workers a more institutional role in
the decision-making and implementation processes, and in
assessing and monitoring the effectiveness of aid;

— the adoption of new rules for state aid for innovation and

R&D;

— clearer conditions for the granting of fiscal aid, reviewing
the frameworks for aid measures in order to introduce tax
advantages, to provide an attractive, simple instrument with
limited impact on competition which will ensure a level
playing field for disadvantaged areas;

— the introduction of ex-post assessment mechanisms and
the cost-effectiveness of measures, which
monitoring of
examine their viability in terms of the functioning of the
internal market;

— greater international cooperation to coordinate Community
policy with the policies of third countries, particularly those
whose legislation does not provide for any state aid restric-
tions.

— is based on responsibility-sharing, by means of national

coordination bodies;

— is linked to the aid policies of international bodies and prin-

cipal European partners on the global markets;

— complies with the rules of the single market;

— ensures that all European Union state aid is compatible.

3.2
The EESC believes that Community state aid policy has
an active role to play in making Europe more attractive to
investors and employers, boosting business competitiveness
and social cohesion, encouraging research and innovation
endeavours, and, lastly, promoting the introduction and disse-
mination of new skills and the training of human resources.

State aid policy is an integral part of competition policy
2.5
and, as such,
is among the Community policies, with the
greatest bearing on economic trends. The EESC therefore
believes that state aid policy should be used more specifically
to achieve high-quality development and consistency with the
Lisbon objectives so that it can play a driving role in ensuring
sound economic and employment development trends.

3.3
The EESC feels that a general block exemption regu-
lation should be introduced to extend and simplify the Com-
munity exemption framework for training and employment
aids, favouring the aid measures which are most transparent
and best target specific objectives, to be identified in close
consultation with undertakings and the social partners, which,
as beneficiaries of the aid systems, are in the best position to
assess the effectiveness of the proposed instruments.

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3.4
As regards the regional aid system, the EESC supports
the intention in the new 2007-13 programming framework of
boosting development in disadvantaged regions (NUTS II ‘statis-
tical effect’ regions, NUTS II ‘economic development’ regions
and NUTS III
‘low population density’ regions) and remote
islands and mountain areas, overcoming the aid dependency
mindset, reducing maximum aid intensities, preventing the aid
differential between less developed regions exceeding 10 %, and
combating potential waves of relocation due to dispropor-
tionate aid differentials (no higher then 20 % for NUTS level III
regions) between border regions.

exemptions. The Lisbon Strategy laid down specific objectives
for the culture, audiovisual, film and sport sectors, where there
is great potential for innovation, growth and job creation.

3.10
The Community framework for state aid to environ-
mental protection will remain in force until 2007. Here, too, it
is important to pursue the Lisbon objectives, facilitating the
introduction of
trading scheme (ETS
National Allocation Plans) as part of the Kyoto Protocol objec-
tives.

the CO2 emissions

3.4.1
The EESC supports the Commission's approach of
varying regional aid intensities for different types of undertak-
ings, but considers that the danger of slowing down smaller
undertakings' expansion should be avoided and a single differ-
ential of 20 % set for both small and medium-sized undertak-
ings. The proposed limits for aid for large undertakings' invest-
ments in regions covered by the new derogations should take
into account the new classification of undertakings laid down
in the 2003 Commission Recommendation (14).

Aid to innovation (pursuant to the Green Paper (15)):
3.11
the existing framework should be
The EESC believes that
extended to types of aid for innovative activities which are not
covered by the current guidelines, and that clear, general
compatibility criteria should be defined which leave Member
States greater scope for intervention without a notification obli-
gation.

As regards small-scale aid, the EESC endorses increasing
least with a view to

3.5
the ceiling for ‘de minimis’ aid, not
ensuring more targeted, streamlined Community action.

To bring about improvement in this field, the EESC
3.11.1
calls upon the Commission to specify more precisely, with the
help of Eurostat, which production and service activities can
currently be defined as innovative. Some guidance in this sensi-
tive area would be extremely useful.

3.6
The EESC believes that the Commission should focus on
state aid which has a significant effect on trade rather than
wasting its resources analysing large numbers of cases of predo-
minantly local concern, and that it should clarify the meaning
and interpretation of the concept of ‘local concern’.

3.11.2
In this connection, the EESC welcomes the issue on
21 September 2005 of the Communication on state aid and
innovation, which provides a Community framework for this
key sector and identifies both the most obvious market failures
and suitable measures for those cases which could be remedied.

3.7
The EESC believes that state aid control should be
proportionate and effective, and that complex notification
procedures should be avoided in cases which are of minor
importance for Community competition.

3.8
The EESC firmly supports the proposal on small-scale
state aid submitted by the Commission in February 2004, with
a view to giving Member States greater flexibility, simpler
aid
procedures
measures facilitating the achievement of the Lisbon objectives
while preserving adequate scope for Commission control.

and sufficient opportunity

to introduce

3.12
Clear pre-established criteria need to be devised for
gauging which market failures are likely to impede innovation
measures and instruments in the implementation of the Lisbon
Strategy. At the same time, however, the Member States and
their
room for
manoeuvre to vary interventions so that they are proportionate
and effective and can transform pre-competitive research into
commercial and market innovation.

regions will have to be given sufficient

State aid facilitating SME investment

in innovative
3.13
projects needs to encourage businesses to grow in size as well
and to encompass, in particular:

3.9 Where sectoral aid is concerned, coherence between EU
sectoral policies and aid regimes in the transport, energy, infor-
mation and communication sectors needs to be ensured, along
recommended by the Commission for block
the

lines

(14) OJ L 124 of 20.5.2003.

— support for regional and transregional innovation networks;

— promotion of the industrial technology parks and districts

policy;

(15) COM(1995) 688

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— introduction of business angels and service intermediaries
such as venture technologists, brokers and patent consul-
tants;

— establishment of technology transfer centres and venture

capital;

element of social and regional cohesion. In accordance with the
criteria established by the Altmark judgment (16) and the rele-
vant Commission Decision of 13 July 2005, the concept of a
‘typical undertaking, well run’ therefore needs to be clarified.
Legal certainty also needs to be ensured as regards compensa-
tion for public service provision, which is a form of state aid
compatible with the Treaty.

— training and hiring of skilled technical staff.

3.14
The EESC believes that the new framework should also
take into account all the external factors which affect the inno-
vation process, namely:

The EESC believes that the future legislation should
3.16
take into account
that responsibility for defining
services of general economic interest lies with national, regional
and local
institutions with democratic legitimacy in the
field (17).

the fact

— the culture of innovation-based enterprise;

— the network of relations and interrelations with other
undertakings, organisations and public bodies, which are
essential for the creation and dissemination of knowledge
and innovation;

— the reference framework of laws and regulations, particu-

larly in the field of intellectual property;

4. Simplification and transparency of procedures

4.1
The EESC believes that major steps forward can be
taken towards a simpler, more transparent Community aid
policy, building on the Commission's work to target elements
likely to cause substantial distortions of competition.

— access to the capital market, particularly in respect of risk
(revision of the Communication on

and start-up capital
investment capital);

Delays in the processing of cases also need to be elimi-
4.2
nated, with administrative practices improved and streamlined;
Member States need to shoulder their responsibilities too in
order to ensure transparency and effectiveness.

— education and training services and relations between the

academic and scientific worlds and enterprise;

4.3
The EESC also calls strongly for codes of practice to be
developed with the full involvement of all stakeholders, particu-
larly undertakings, as beneficiaries of aid measures.

— innovation support structures (such as incubators, district
technology parks) and intermediary

industrial

networks,
services.

3.14.1 More generally, it believes that, when reviewing the
guidelines on horizontal aid such as aid to research, innovation,
the environment and human capital:

— the intensities currently laid down for horizontal aid should

be increased;

— the regional bonuses for interventions in less-developed

areas should be maintained;

— a ‘cohesion bonus’ for interventions part-financed by the
Structural Funds should be introduced for non-eligible areas
or area which are no longer eligible under Article 83(c).

3.15
As regards aid to services of general economic interest,
it should be stressed that these services are a fundamental

5. The reform and EU-25

The situation in the wake of enlargement calls for
5.1
changes to state aid policy to make all regions of the EU
equally attractive as new locations and to investors, and to
ensure fair competition between neighbouring regions.

5.2
The 10 new Member States currently grant undertakings
much higher amounts of state aid – as a percentage of GDP –
than the EU-15 Member States, although the situation looks set
to even out gradually. During the period 2000-2003, state aid
in the new Member States represented on average 1,42 % of
GDP compared to an average of 0,4 % in EU-15.

(16) Case C-280/00, Altmark Trans and Magdeburg – Nahverkehrsge-

sellschaft Altmark 2003 ECR I-7747.

(17) The exemption of public-service compensation (Article 86(2))
should be substantial enough to ensure sufficient flexibility and
dynamism and minimum administrative burden.

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The Lisbon Strategy provided for aid to be used to
5.3
achieve horizontal objectives.
In 2002,73 % of aid was
earmarked for this purpose in EU-15 as opposed to 22 % in
the new Member States (18).

5.4
On the other hand, it should be acknowledged that the
new Member States have adapted very well to the market
economy, although the enlarged EU still needs to take major
steps to reduce the overall level of aid and encourage competi-
tiveness, sustainable and cohesive development and the new
European knowledge-based economy.

6. Involvement of stakeholders: undertakings and civil

society

6.1
The EESC believes that better governance of state-aid
practices and procedures is necessary. Direct stakeholders need
to be more involved, particularly enterprise and civil society, as
they are directly exposed both to the legal uncertainties and
lengthy turnaround times for Community approval of aid
systems and to the serious effects of the recovery of inadmis-
sible or unlawful aid.

As both beneficiaries of state aid and, at the same time,

6.2
competitors, businesses are in a prime position to:

— assess the effectiveness of the instruments implemented,
monitor the solutions adopted and define possible best
practices, thanks to the skills and first-hand experience they
have acquired;

— facilitate better dissemination of Community legislation, in
forms which are clear, transparent and directly accessible to
users, whether providers or beneficiaries of aid;

— help surmount the difficulties and uncertainties encountered
in interpreting and implementing rules, which are in danger
of calling into question the legitimacy of state aid control;

— introduce forms of private enforcement, facilitating compli-
ance with and full implementation of European legislation.

(18) 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 restruc-
turing. 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
(+4
points). This positive trend was observed, to varying degrees, in the
in several Member States -
Indeed,
majority of Member States.
Belgium, Denmark, Greece, Italy, Netherlands, Austria and Finland
– virtually all the aid awarded in 2002 was earmarked for hori-
zontal objectives (COM(2004) 256 final).

(+7 points) and research and development

6.3

The EESC therefore believes that:

— the institutions should involve enterprise more in decision-

making and policy implementation;

— mechanisms for ex-post assessment and monitoring the

cost-effectiveness of measures need to be introduced;

— Commission decisions should be made fully accessible on
the Internet in one of the Commission's working languages
as well as in the language of the Member State concerned;

— businesses need to be kept informed about ongoing notifi-
cation processes so that they can ascertain whether conces-
sions granted at national or local
level comply with EU
substantive rules and procedures relating to aid, and so that
they can work with authorities at different levels to bring
about more effective implementation of EU state aid policy;

— proactive monitoring of the implementation of legislation
should be performed, involving enterprise and civil society
representatives in economic analysis of market failures and
performance shortfalls in particular sectors or industries;

— systematic,

joint ‘market-failure watch’ mechanisms based
on clearly-defined, transparent criteria need to be intro-
duced, as well as aid measures which have no significant
impact on competition in the internal market and comply
with the Lisbon Strategy.

7. Towards a state aid policy which is an instrument for
growth and part of a shared vision for integrated, cohe-
sive economic development in EU 25-27, fostering new
jobs and businesses

The EESC believes that a clear picture needs to be
7.1
painted of
the added value of state aid for the European
Union's future, in terms of the objectives of the competitive,
sustainable and cohesive development of the Member States
decided on at Lisbon and reiterated a number of times at
various European summits since 2000.

7.1.1
The key sectors identified by the Lisbon Strategy
require substantial, targeted financial input which must be fully
reflected in Member States' budgetary and structural policies: a
pre-established, coherent, compatible framework is needed to
which all policies,
including Community competition policy,
must refer and conform.

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7.2
Before a single European market which can compete on
equal terms with the other players on the global market can be
fully achieved, the EESC believes that substantial modernisation
is needed in both the framing and implementation of European
economic and, in particular, state aid policy. This is also a pre-
requisite for the major infrastructure and major intangible
investment necessary for an effective, technologically advanced,
competitive market to function properly.

The Committee believes

7.3
compatibility
criteria need to be defined in order to encourage the Member
States and regions to implement support policies with the aim
of achieving a competitive economy which complies with free
trade rules.

that general

7.4 Where the market fails to make European businesses
competitive and proves incapable of building up their technolo-
gical
innovation, training and internationalisation capacities,
European state aid policy must facilitate rather than hinder
policies and schemes to stimulate businesses' growth and
increase their ability to attract new investment, expertise and
capital to Europe.

8. Concluding recommendations

8.1
The EESC is in favour of modernisation of European
state aid policy based on a new, proactive approach and on a
In this connection it
new, general Community framework.
recommends, in particular:

— a policy which can provide adequate responses and remedy

or eliminate market failures;

— a policy which contributes substantially to the completion
of the internal market, without leading to distortion of
competition;

— a more coherent,

integrated policy which facilitates the
achievement of the various strands of the Lisbon Strategy,
to make businesses more competitive and innovative on the
world stage while also improving the public's quality of life
and work;

Brussels, 14 December 2005

— strengthening the industrial and service fabric by boosting
enterprise and bringing industry and the labour market into
line with the new industrial policy objectives and the new
demands of globalisation;

— strong support for all forms of product and process innova-

tion (19);

— a proactive approach to make Europe more attractive to
investors and better able to create jobs, to make businesses
more competitive, to encourage research and innovation
projects and, lastly, to promote the development and disse-
mination of new skills and the training of human resources;

— greater focus on factors which genuinely distort competi-
tion in the internal and international markets, without
creating unnecessary, costly red tape in efforts to deal with
local incidents which cause no significant distor-
limited,
tion;

— an approach based on simpler, transparent, unambiguous
procedures and rules together with measures based on
fixed, non-discretionary criteria which are compatible with
the Lisbon agenda as regards harmonious, cohesive and
competitive development at global level;

— greater institutional involvement of enterprises in the deci-
in assessing

sion-making and implementation processes,
and monitoring effectiveness, and in enforcement;

— a closer relationship between European regulations and
legislation and those of the WTO international bodies and
of the main European players on the global markets;

— a participatory forward-looking exercise open to all political
decision-makers and socio-economic players, with the
objective of creating a shared vision and establishing in
advance how and to what extent intervention is actually
compatible with development.

The President

of the European Economic and Social Committee

Anne-Marie SIGMUND

(19) As called for in the Green Paper on Innovation (1995).