Report from the Commission - State aid scoreboard - Spring 2009 update - Special edition on state aid interventions in the current financial and economic crisis
Date: 2009-04-08
Institutions: European Commission
Subjects: State aid, control of State aid, economic recession, financial market, international finance, monetary crisis

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 8.4.2009 
COM(2009) 164 final 

REPORT FROM THE COMMISSION 

STATE AID SCOREBOARD 
- SPRING 2009 UPDATE – 

SPECIAL EDITION ON STATE AID INTERVENTIONS IN THE CURRENT  
FINANCIAL AND ECONOMIC CRISIS  

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TABLE OF CONTENTS 

Introduction ................................................................................................................................ 3 

1. 

2. 

3. 

4. 

4.1. 

4.2. 

4.3. 

5. 

6. 

7. 

Early cases: Application of the standard rules on rescue and restructuring aid........... 5 

Worsening of the crisis: Difficulties in the application of the standard rules on rescue 
and restructuring aid..................................................................................................... 8 

The need to coordinate support to financial institutions: The Commission's 
Communications .......................................................................................................... 9 

Measures adopted by Member States in support of financial institutions: schemes and 
ad hoc cases................................................................................................................ 14 

Guarantee schemes covering the liabilities of financial institutions.......................... 16 

Recapitalisation schemes ........................................................................................... 18 

Recent ad hoc cases (outside schemes)...................................................................... 19 

Real economy and financial crisis: The 'Temporary Framework'.............................. 21 

Procedures .................................................................................................................. 26 

Conclusions ................................................................................................................ 27 

Annex 1: Where to find information on State aids................................................................... 29 

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INTRODUCTION 
This special edition of the State aid Scoreboard provides an overview of State aid measures1 
undertaken by EU Member States in the context of the current financial and economic crisis 
and  reviewed  by  the  Commission  until  31  March  2009  as  well  as  an  overview  of  the 
Commission's  coordinating  action  in  setting  out  general  principles  governing  these  aid 
measures.  

The  world  economy  is  currently  experiencing  its  severest  financial  and  economic  crisis  in 
almost a century, with the European economy not being spared. For the first time since 1945, 
the world economy as a whole is shrinking. The EU’ latest interim forecasts for 2009 – 20102 
estimate  real  EU  GDP  to  fall  by  almost  2  %  in  2009  in  both  the  EU  and  the  Euro  area, 
although  growth  is  projected  to  remain  positive  in  nine  Member  States.  GDP  growth  is 
expected to turn moderately positive in 2010, to around 0.5 % in both the EU and the Euro 
area,  as  macroeconomic  policies  take  effect  in  gradually  stabilising  economies  around  the 
world. 

In  the  EU,  the  crisis  has  prompted  action  on  many  levels  –  national  governments,  the 
European Central Bank (ECB) and the Commission. All have been working closely together 
to protect savings, ensure financial stability, maintain a flow of affordable credit for business 
and households and put in place a better system of governance for the future. 

In  this  process,  State  aid  control  as  an  integral  part  of  the  EU’s  competition  policy  plays  a 
central  role.  Since  the  beginning  of  the  current  crisis,  the  Commission’s  interventions  have 
contributed  positively  to  maintaining  financial  stability  while  preserving  incentives  for 
appropriate risk taking and competition in the future. In the absence of a comprehensive pan-
European supervisory, regulatory and legal framework for the financial sector, EU State aid 
policy  provided  the  framework  to  allow  swift  implementation  of  national  measures  in  a 
coordinated manner while ensuring the integrity of the Single Market. 

The Commission approached the resolution of the financial crisis in three steps: the 'Banking 
Communication'3 adopted on 13 October 2008 provided an appropriate European framework 
to  allow  rescue  operations  in  order  to  stop  or  prevent  runs  on  financial  institutions.  In  a 
second  step,  the  'Recapitalisation  Communication'  of  5  December  20084  identified  a  set  of 
standards  and  safeguards  allowing  Member  States  to  recapitalise  banks  in  order  to  ensure 
adequate  levels  of  lending  to  the  economy.  This  need  arose  in  view  of  the  widespread 
reluctance  even  of  fundamentally  sound  banks  to  continue  lending  at  usual  volumes  and 
conditions in the context of the current uncertainties. The third step is the clean-up phase of 
financial institutions' balance sheets by removing toxic assets and underperforming loans. The 

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4 

The notion of aid is defined in Article 87 (1) of the EC Treaty and has been developed in the case law of 
the European Court of Justice. Further guidance is provided, in particular by references to case law, in 
the  Commission  notice  on  the  enforcement  of  State  aid  law  by  national  courts  adopted  on 
25 February 2009. 
European  Commission,  Directorate  General  for  Economic  and  Financial  Affairs,  Interim  Forecast, 
January 2009. 
Communication  from  the  Commission  –  The  application  of  the  State  aid  rules  to  measures  taken  in 
relation to financial institutions in the context of the current global financial crisis, OJ C 270, 5.10.2008, 
p. 8–14. 
Communication  from  the  Commission–  The  recapitalisation  of  financial  institutions  in  the  current 
financial crisis: limitation of the aid to the minimum necessary and safeguards against undue distortions 
of competition, OJ C 10, 15.1.2009, p. 2-10. 

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'Impaired Assets Communication' of 25 February 20095 provides the framework for this phase 
which may in many cases require restructuring and is an essential step with regard to restoring 
confidence in the financial sector and the economy as a whole. 

The State aid rules in place before the recession already provided a good framework to tackle 
the impact of the financial crisis on the real economy, by targeting ‘smart’ investments – in 
particular in favour of SME, training, R&D, risk capital, environment protection and energy 
saving – and restricting the use and negative effects of rescue aid. The autumn 2008 update of 
the State aid Scoreboard shows that Member States positively respond to these possibilities. 
On average, 80 % of Member States’ public support subjected to State aid control was in 2007 
targeted  to  horizontal  objectives,  compared  with  around  50  %  in  the  mid-1990s,  with 
increasing spending on R&D and environmental aid including energy saving.6 The additional 
facilities under the “Temporary Community framework for State aid matters to support access 
to finance in the current financial and economic crisis” issued on 17 December 20087 provide 
a flexible complementary framework, allowing Member States to take additional measures in 
response to the recession within a time-limited window, should general measures or State aid 
under normal rules not be sufficient. 

The  pivotal  role  of  State  aid  control  has  in  particular  been  recognised  by  the  Presidency’s 
Conclusions of the Brussels European Council of 19/20 March 2009. As regards the financial 
sector, the European Council calls on the Member States “to act in a coordinated manner, in 
line with the guidelines provided by the Commission communication of 25 February 2009 and 
in full respect of competition rules”8 as further measures may be necessary for restoring the 
functioning  of  credit  markets  and  facilitating  the  flow  of  lending  to  the  real  economy, 
including  by  dealing  with  impaired  banking  assets  on  the  basis  of  full  disclosure  to 
supervisory authorities.9 

The European Council further concluded that “measures taken by Member States to support 
the real economy and employment should be implemented in a timely, targeted and temporary 
manner,  while  respecting  the  following  guiding  principles:  promoting  openness  within  the 
Internal  Market  and  vis-à-vis  third  countries;  ensuring  non-discrimination  of  products  and 
services from other Member States; ensuring consistency with long-term reform objectives.”10 

The crisis was initially triggered in mid 2007 by problems with sub-prime mortgage lending 
in  the  US  that  impacted  heavily  on  other  financial  markets,  leading  to  a  loss  of  confidence 
between  financial  institutions  and  in  particular  to  a  freeze  of  interbank  lending.  These  first 
events and the subsequent deterioration into a systemic crisis of the entire banking sector in 
the  autumn  2008  were  already  subject  of  a  first  analysis  in  the  autumn  2008  edition  of  the 
State Aid Scoreboard.11 It reviewed the Member States’ and the Commission’s first responses 
to the crisis, including the unprecedented recourse to Article 87 (3) (b) of the EC Treaty by 
the Commission in the ‘Banking Communication’ issued on 13 October 2008 in response to 
the  widening  of  the  financial  crisis.  This  provision  allows  for  a  flexible  but  controlled 
framework for aid to remedy the serious disturbance in the economy of a Member State and 

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Communication from the Commission on the Treatment of Impaired Assets in the Community banking 
sector, of 25 February 2009, OJ C 72, 26.3.2009, p. 1. 
Report from the Commission- State aid Scoreboard- Autumn 2008 Update. COM (2008) 751 final of 
17 November 2008, p.30. 
OJ C 16, 22.1.2009 p. 1-9. 
Point 2 of the Presidency’s Conclusions of the Brussels European Council 19/20 March 2009. 
See  section  3.  on  The  need  to  coordinate  support  to  financial  institutions:  The  Commission's 
Communications. 
Point 10 of the Presidency’s Conclusions of the Brussels European Council 19/20 March 2009. 
Part Five of the Autumn 2008 Scoreboard, State aid related to the financial crisis, p. 51 – 54. 

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has been part of the State aid rules since the entry into force of the EEC Treaty in 1958. With 
one  exception,12  this  provision  has  so  far  not  been  applied,  not  even  during  the  recession 
phases in the 1970s and early 1980s.  

The autumn 2008 Scoreboard also reported on the first signs of spill-over of the turmoil in the 
financial  markets  to  the  real  economy  and  the  consensus  that  Member  States  have  to 
coordinate  their  response  to  the  crisis,  also  in  order  to  avoid  any  short-term  fix  involving  a 
subsidy race between Member States. It summarised the events triggering the crisis as well as 
the  first  responses  of  the  Member  States  and  the  Commission  to  build  confidence,  promote 
financial stability and bring the real economy back on track.  
As  additional  background,  the  Jacques  de  Larosière-Report  to  the  European  Council13  not 
only outlines ways to repair the crisis – regarded by the recent Presidency Conclusions as a 
basis for action14 – but also looks into the causes of the crisis, in particular macro-economic 
causes,  issues  of  risk  management,  the  role  of  credit  rating  agencies  and  possible  corporate 
governance and regulatory, supervisory and crisis management failures. 

The present document is divided into seven main sections. Section 1 deals with early rescue 
cases and describes the standard procedure of rescuing and restructuring enterprises. Section 2 
is focused on the worsening of the crisis. Section 3 relates to the need to coordinate support 
and  the  recent  Commission's  Communications  related  to  the  financial  sector:  the  'Banking 
'Impaired  Assets 
'Recapitalisation  Communication',  and 
Communication', 
Communication'. Section 4 provides an overview on the measures adopted by Member States 
in support of financial institutions. Section 5 turns to the real economy and briefly sets out the 
Commission's  'Temporary  Framework'  related  to  State  aid  in  the  real  economy  sectors. 
Section  6  discusses  the  procedures  that  were  established  in  order  to  ensure  rapid  decision 
making. Finally, Section 7 provides conclusions. 

the 

the 

This  report  only  deals  with  preliminary  figures  and  can  only  give  a  broad  overview  of  the 
maximum  volumes  of  guarantees  and  other  measures  that  governments  have  announced  to 
provide. In particular, the report does not discuss the State aid component of the measures in 
place. Furthermore, the report cannot include information which is subject to confidentiality 
obligations. 

Finally,  regular  readers  of  the  Scoreboard  will  notice  the  changed  format  of  this  spring 
edition, which includes the usual special focus, but does not include updates on other State aid 
areas. These are now published online only.15 However, the autumn editions of the report will 
continue to give a full account of State aid policy in the European Union. This Scoreboard and 
previous  editions  can  be  consulted  on  the  European  Commission  Competition  Directorate 
General’s website. 

1. 

EARLY  CASES:  APPLICATION  OF  THE  STANDARD  RULES  ON  RESCUE  AND 
RESTRUCTURING AID 

When  European  financial  markets  were  first  affected  by  the  problems  with  sub-prime 
mortgage lending in the US, some European banks encountered severe difficulties due to their 

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See  Fifth  Report  on  Competition  policy  (1975),  April  1976,  par.  133  for  general  comments  and 
Seventeenth Report on Competition Policy (1987), 1988, par.186 and 187, referring to Greece. 
The High  Level  Group on Financial  Supervision  in  the  EU,  chaired  by Jacques  de  Larosière, Report, 
Brussels 25 February 2009; see also the 2008 OECD Financial Market Trends publication "The Current 
Financial Crisis: Causes and Policy Issues". 
Point 5 of the Presidency’s Conclusions of the Brussels European Council 19/20 march 2009. 
http://ec.europa.eu/competition/state_aid/studies_reports/studies_reports.html. 

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exposure  to  collateralised  debt  obligations  (CDOs)  or  because  of  their  inherently 
unsustainable business model. In order to prevent insolvency of several banks, and potential 
contamination or negative spill over, Member States intervened with the adoption of the first 
rescue measures in favour of individual banks.  

The  Commission  tackled  the  individual  cases  during  the  first  phase  according  to 
Article 87 (3) (c) of the EC Treaty and the Community Guidelines on State aid for  rescuing 
and restructuring firms in difficulty (‘R&R Guidelines’).16  

Basic principles under the R&R Guidelines 

Rescue aid is a temporary assistance to keep a firm in financial difficulties afloat for the time needed to work out 
a restructuring and/or a liquidation plan. It must in principle be given in the form of loans or guarantees lasting 
no more than six months and it should be restricted to the minimum necessary to keep the firm in business for 
the rescue period.  

Restructuring  aid,  on  the  other  hand,  is  based  on  a  feasible,  coherent  and  far-reaching  plan  to  restore  a  firm's 
long-term  viability.  It  usually  involves  different  elements  such  as  the  reorganisation  and  rationalisation  of  the 
firm's  activities  on  a  more  efficient  basis,  the  restructuring  of  those  existing  activities  that  can  be  made 
competitive  again,  diversification  towards  new  and  viable  activities,  financial  restructuring  (capital  injections, 
debt reduction) and the adoption of measures to limit distortion of competition. Restructuring aid is not aimed at 
making good past losses without tackling the reasons for those losses. Repeated rescue or restructuring aids for 
the sole purpose of keeping firms artificially alive are not allowed. 

In very exceptional cases, firms in difficulty may be allowed to take certain urgent structural measures to halt or 
reduce a worsening of the financial situation in the rescue phase, such as the closing of business activities. The 
beneficiary may undertake urgent measures, even of a structural nature, such as an immediate closure of a branch 
or other forms of abandoning loss-making activities. 

Initially, the financial institutions affected by the crisis were directly exposed to a significant 
amount  of  CDOs  and/or  had  funded  this  through  short  term  wholesale  financing  which  had 
dried up after the summer of 2007. That was the case of the German IKB17 and Sachsen LB.18 
Germany essentially granted a liquidity facility to Sachsen LB and a risk shield to IKB without 
which both banks would not have been able to continue their business. These measures were 
notified in January 2008 and the Commission, after formal investigation, concluded that the 
aid  had  been  limited  to  the  minimum  necessary  and  was  accompanied  by  a  significant  own 
contribution  by  the  beneficiary.  Additionally,  compensatory  measures  were  put  in  place  to 
minimise potential distortions of competition created by the aid. 

Depending  heavily  on  wholesale  funding,  including  issuing  mortgage-backed  securities, 
covered bonds and medium and short term unsecured funding, UK mortgage lender Northern 
Rock19 became a victim of the crisis in September 2007. The Commission considered that the 
guarantees  granted  by  the  UK  authorities  could  be  authorised  as  rescue  aid  until  a 
restructuring  plan  was  drawn  up.  In  April  2008  the  Commission  decided  to  open  a  formal 
investigation on the restructuring aid, which is currently under assessment.20 

In  2008,  the  situation  deteriorated  further  with  the  fall  of  Bear  Stearns.  European  central 
banks  addressed  the  liquidity  crisis  by  injecting  high  amounts  of  liquidity  into  the  financial 
markets. However, also the market value of portfolio investments decreased significantly and 
banks required more capital in order to back up the assets in their balance sheets. Banks thus 
needed to strengthen their capital base and issued new capital instruments. WestLB21 was also 

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OJ C 244, 1.10.2004, p. 2. 
Case C10/2008, Restructuring aid to IKB (decision 21.10.2008). 
Case C9/2008, Restructuring aid to Sachsen LB (decision 4.6.2008). 
Case NN70/2007, Northern Rock (decision 5.12.2007). 
Case C14/2008, Restructuring aid to Northern Rock (under assessment). 
Case NN25/2008, WestLB (decision 17.7.2008). 

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faced with the downgrades of the structured portfolio in its balance sheet and established with 
the help of its owners a risk shield of € 5 billion for its most  impaired assets, thereby freeing it 
from  the  obligation  to  provide  the  required  capital.  Upon  notification,  the  Commission 
authorised  the  risk  shield  for  six  months  or  until  approval  of  a  restructuring  plan.  WestLB 
notified  such  plan  after  six  months  and  the  Commission  decided  to  open  formal  a 
investigation. The plan is currently under assessment.22 
In  July  2008,  Denmark  communicated  the  measures  taken  to  rescue  Roskilde  Bank.23 
However,  the  rescue  aid  approved  by  the  Commission  did  not  take  effect  and  Denmark 
adopted  a  package  of  measures  to  liquidate  the  entity  in  an  orderly  manner  whereby  full 
creditor  protection  was  granted.  It  was  approved  in  November  2008,  under  the  Guidance 
Communication on state aid to overcome the financial crisis. 

State aid implemented by Germany for Sachsen LB, C9/2008 (ex NN 8/2008) 

The  case  originated  with  the  US  subprime  crisis  in  which  Sachsen  LB  and  in  particular  one  of  its  off-balance 
conduits, Ormond Quay, was caught. In August 2007, the refinancing market completely dried up and Ormond 
Quay  was  unable  to  refinance  itself  any  longer.  As  Sachsen  LB  could  not  provide  the  credit  facilities  it  had 
pledged, a pool of Landesbanken and the savings banks association committed to provide liquidity assistance of 
around € 17 billion. 

Sachsen LB was sold to Landesbank Baden-Württemberg (LBBW) on 26 August 2007 with effect from 1 January 
2008. A structured investment portfolio of € 17.5 billion, including  Ormond Quay, was excluded from the sale 
and  transferred  into  a newly created  special  investment  vehicle,  the  "Super  SIV". In order  to  enable  the  Super 
SIV's financing, the Free State of Saxony granted a guarantee over an amount of € 2.75 billion. 

Germany  considered  that  the  measures  complied  with  the  market  economy  investor  principle  and  notified  the 
measure as "no aid" for reasons of legal certainty. It also indicated as a precaution that the measures should in 
any event qualify as rescue and restructuring aid compatible with the common market.  

The Commission carried out an in-depth investigation in order to ensure that the German measures should they 
constitute  State  aid,  are  limited  to  the  minimum  necessary  and  meet  all  other  requirements  under  the  R&R 
Guidelines in order to exclude any undue distortion of competition. 

In  its  final  decision,  the  Commission  concluded  that  a  market  economy  investor  would  not  have  granted  the 
liquidity measure at stake. It could however be regarded as rescue aid compatible with the common market as it 
was  limited  to  6  months  and  did  not  exceeded  the  minimum  necessary  to  keep  the  bank  afloat  until  the 
restructuring plan could be implemented.  

The state guarantee in the context of the sale of Sachsen LB to LBBW was regarded as structural in nature and 
hence  assessed  in  the  context  of  a  restructuring  plan.  The  Commission  concluded  that  the  restructuring  plan 
would allow restoring the long-term viability of Sachsen LB. Moreover, the aid was also limited to the minimum 
and accompanied by a significant own contribution in line with the targets indicated in the R&R Guidelines, i.e. 
above 50 % of the restructuring costs. 

Finally,  compensatory  measures  were  included  to  mitigate  as  far  as possible  any  adverse  effects  of  the  aid on 
competitors and to avoid repeating the mistakes of the past. In particular, LBBW committed to sell or liquidate 
Sachsen  LB  Europe  plc  (a  subsidiary  which  had  been  in  charge  of  Sachsen  LB's  international  structural 
investments) and its participation in East Merchant GmbH (a subsidiary which was a key player in Sachsen LB's 
structured  finance  activities).  Moreover,  Germany  and  LBBW  gave  the  commitment  that  Sachsen  Bank  would 
abandon proprietary trading and international real estate activities by the end of 2011. The aim of the plan was to 
reduce  the  dependence  of  Sachsen  LB  on  profits  from  capital  markets  and  in  particular  from  the  "asset 
management and structured products" business segment. 

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Case C43/2008, WestLB risk shield (under assessment). 
Case NN36/2008, Roskilde Bank (decision 31.7.2008). 

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2. 

WORSENING OF THE CRISIS: DIFFICULTIES IN THE APPLICATION OF THE STANDARD 
RULES ON RESCUE AND RESTRUCTURING AID 

As the crisis of confidence among banks dramatically worsened in mid-September 2008 with 
the  bankruptcy  of  Lehman  Brothers,  the  financial  crisis  entered  in  a  phase  marked  by  very 
serious problems of prominent American and European banks and the efforts of governments 
to  rescue  distressed  financial  institutions.  Essentially,  the  insolvency  of  Lehmann  Brothers 
had  ended  a  phase  of  an  implicit  rescue  guarantee  to  banks  which  are  'too  big  to  fail'.  This 
meant that banks stopped lending to each other. 
By September 2008, Bradford and Bingley,24 the UK mortgage bank, fell into difficulties and 
the UK authorities designed a package of measures to ensure financial stability, protect retail 
depositors and support the orderly winding down of the company while its retail deposit book 
was sold to Abbey National after a competitive process. The Commission was in contact with 
the  UK  authorities  to  provide  support  in  the  design  of  measures  that  could  comply  with 
competition rules. The Commission decision demonstrated that State aid control contributes 
to  financial  stability  while  keeping  distortions  of  competition  to  a  minimum.  At  the  same 
time, deposits of individual customers remained fully protected. In this case, the Commission 
went  to  the  limit  of  what  can  be  approved  as  rescue  aid  under  the  R&R  Guidelines  as  the 
winding down of the company and the sale of the deposit book to a competitor constituted a 
structural  measure.  This  could  exceptionally  be  justified  in  view  of  the  tensions  in  the 
financial  market  and  the  need  to  protect  Bradford  and  Bingley's  creditors.  Also  Hypo  Real 
Estate25  faced  a  liquidity  crisis  due  to  its  short-term  refinancing  strategy.  A  number  of 
German banks together with the German Federal government provided loan guarantees. The 
Commission authorised the rescue measure under the commitment to present a restructuring 
plan.  

The general erosion  of confidence within the banking  sector in October 2008 led to serious 
difficulties to access liquidity. The crisis had become systemic and equally affected financial 
institutions whose difficulties stemmed exclusively from the general market conditions which 
had  severely  restricted  access  to  liquidity.  It  thus  became  doubtful  whether  the  R&R 
Guidelines were still providing an appropriate framework to tackle the crisis, as the crisis hit 
also banks that could normally not be considered as 'companies in difficulties'. Furthermore, 
urgent structural action became necessary in many cases. 

The table below provides information on the state of play of pending restructuring plans from 
the first two phases. 

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25 

Case NN41/2008, Rescue aid to Bradford & Bingley (decision 1.10.2008).  
Case NN44/2008, Rescue aid to Hypo Real Estate (decision 2.10.2008). 

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Table 1: Early cases: pending restructuring plans 

Member 
State 

Case 
number 

Financial Institution 

Commission 
decision date 

Submission of 
restructuring plans 
due 

Germany 

C43/2008  WestLB 

 30/04/2008 

Germany 

NN44/2008  Hypo 

Real 

Estate 

 02/10/2008 

Holding  

The  United 
Kingdom 

C14/2008 

Northern Rock 

 05/12/2007 

The  United 
Kingdom 

NN41/2008  Bradford and Bingley 

 01/10/2008 

to  open 

08/08/2008 
Decision 
formal 
investigation: 
Restructuring  plan 
currently 
under 
assessment 

Restructuring  plan 
submitted 
on 
01/04/2009  

to  open 

17/03/2008 
Decision 
formal 
investigation: 
Restructuring  plan 
under 
currently 
assessment 

Restructuring  plan 
on 
submitted 
27/03/2009  

3. 

THE  NEED  TO  COORDINATE  SUPPORT  TO  FINANCIAL  INSTITUTIONS:  THE 
COMMISSION'S COMMUNICATIONS 

In  autumn  2008,  the  deepening  financial  crisis  increasingly  affected  the  European  financial 
sector.  Several  Member  States  began  to  set  up  general  schemes  in  order  to  support  the 
financial  sector  and  to  ensure  financial  stability.  In  October  2008,  the  Heads  of  State  and 
Government agreed to implement national rescue packages for the European banking sector, 
with  a  view  to  safeguarding  the  stability  of  the  sector,  restoring  the  normal  functioning  of 
wholesale credit markets and underpinning the supply of credit to the real economy. In this 
context, the Commission offered to issue guidance on how Member States can take measures 
to support banks whilst avoiding excessive distortions of competition, in line with EU State 
aid  rules.  The  Commission  has  played  an  important  role  in  containing  the  crisis  and  in 
supporting coordination between Member States. 

On 13 October 2008 the Commission issued the Communication on the 'application of State 
aid rules to measures taken in  relation to  financial institutions in the context of the current 
global  financial  crisis'  (the  'Banking  Communication').26  In  this  Communication,  the 
Commission sets out how Member States can best support financial institutions in the current 
financial  crisis  whilst  respecting  EU  State  aid  rules  and  thus  avoiding  undue  distortions  of 

26 

OJ C 270, 25.10.2008, p. 8–14. 

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competition. In particular, the Commission guidance focused on State guarantees which had 
been  widely  announced  by  Member  States  at  the  time  and  which  implied  the  danger  of 
negative spill-overs in particular by attracting funds to 'first mover' states. 

In this context, Art 87 (3) (b) of the EC Treaty was considered to be an appropriate legal basis 
for  State  intervention.  It  stipulates  that  the  Commission  may  allow  State  aid  ‘to  remedy  a 
serious  disturbance  in  the  economy  of  a  Member  State’.  Critically  and  to  an  unprecedented 
extent,27 by referring to Art 87 (3) (b) of the EC Treaty, the Commission acknowledged the 
exceptional  circumstances  and  the  systemic  risks  inherent  to  the  financial  crisis.28  This  was 
particularly evident in cases of schemes that concerned rescue measures for the entire banking 
sector of a Member State.  

It  seemed  arbitrary  to  allow  the  application  of  Article  87  (3)  (b)  of  the  EC  Treaty  in  case 
Member  States  were  taking  action  as  regards  the  entire  sector  or  big  systemic  banks,  while 
smaller banks would still need to revert to Article 87 (3) (c) of the EC Treaty. Therefore, the 
Banking Communication introduces a common approach to apply Article 87 (3) (b) of the EC 
Treaty  to  schemes  and  individual  cases.  Moreover,  it  introduced  the  principle  that  under 
Article 87 (3) (b) of the EC Treaty banks should in principle not be treated better than under 
rescue aid, implying that also banking rescue aid should normally be limited to six month and 
followed  up  by  a  restructuring  plan.  The  most  important  differences  were  that  beneficiaries 
did not need to be in difficulty and structural measures were in principle allowed.  

However,  the  Banking  Communication  emphasizes  that  Art  87  (3)  (b)  of  the  EC  Treaty 
requires  a  restrictive  interpretation  of  what  can  be  considered  a  serious  disturbance  of  a 
Member State's economy.29 The use of Art 87 (3) (b) of the EC Treaty cannot be envisaged as 
a  matter  of  principle  in  crisis  situations  in  other  individual  sectors  in  the  absence  of  a 
comparable risk that they have an immediate impact on the economy of a Member State as a 
whole. 

27 
28 

29 

Indeed, the provision has been applied only once previously in the 1980s in the case of Greece. 
In its Presidency Conclusions of the Brussels European Council 15/16 October 2008, the Council stated 
that  'in  the  current  exceptional  circumstances,  European  rules  must  continue  to  be  implemented  in  a 
way  that  meets  the  need  for  speedy  and  flexible  action.  The  European  Council  supports  the 
Commission's implementation, in this spirit, of the rules on competition policy, particularly State aids, 
while continuing to apply the principles of the single market and the system of State aids.' 
The Court of First Instance has repeatedly stressed that Article 87 (3) (b) of the EC Treaty needs to be 
applied  restrictively  and  must  tackle  a  disturbance  in  the  entire  economy  of  a  Member  State  ;  of  Cf. 
Joined  Cases  T-132/96  and  T-143/96  Freistaat  Sachsen  and  Volkswagen  AG  Commission  [1999] 
ECR II-3663, para.  167.  Confirmed  in  Commission  Decision  in  case  C  47/1996, Crédit  Lyonnais, OJ 
1998 L 221/28, point 10.1, Commission Decision in Case C28/2002 Bankgesellschaft Berlin, OJ 2005 L 
116, page 1, points 153 et seq and Commission Decision in Case C50/2006 BAWAG, not yet published, 
points 166. See Commission Decision of 5 December 2007 in case NN 70/2007, Northern Rock, ABl. 
C 43  of  16.2.2008,  p.  1,  Commission  Decision  of  30  April  2008  in  case  NN  25/2008,  Rescue  aid  to 
WestLB,  ABl.  C  189  of  26.7.2008,  p.  3,  Commission  Decision  of  4  June  2008  in  Case  C9/2008 
SachsenLB, not yet published. 

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10 

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The "Banking Communication" of 13 October 200830 

The  Banking  Communication  focuses  mainly  on  guarantees  covering  liabilities  of  financial  institutions. 
Moreover,  it  also  concerns  recapitalisation  measures,  controlled  winding-up  of  financial  institutions  and  other 
forms of liquidity assistance. For all these types of aid, the general conditions for aid to be in compliance with 
the EU State aid rules as set out in the Communication are: 

•  Non-discriminatory  access  in  order  to  protect  the  functioning  of  the  Single  Market  by  making  sure  that 

eligibility for a support scheme is not based on nationality;  

•  State commitments to be limited in time in such a way as to ensure that support can be provided as long as it 
is  necessary  to  cope  with  the  current  turmoil  in  financial  markets  but  will  be  reviewed  and  adjusted  or 
terminated as soon as improved market conditions so permit;  

•  State  support  to  be  clearly  defined  and  limited  in  scope  to  what  is  necessary  to  address  the  acute  crisis  in 
financial  markets  while  excluding  unjustified  benefits  for  shareholders  of  financial  institutions  at  the 
taxpayer's expense;  

•  An appropriate contribution of the private sector by means of adequate remuneration and the coverage by the 

private sector of at least a significant part of the cost of assistance granted;  

•  Sufficient  behavioural  rules  for  beneficiaries  which  prevent  an  abuse  of  State  support,  like  for  example 

expansion and aggressive market strategies on the back of a state guarantee;  

•  An  appropriate  follow-up  by  structural  adjustment  measures  for  the  financial  sector  as  a  whole  and/or  by 
restructuring individual financial institutions that had to rely on State intervention other than guarantees. 

The Commission action resulted in the prevention or correction of measures that could be either discriminatory 
or harmful to other Member States and banks; it was then complemented by the guidance on pricing issued by 
the European Central Bank for guarantees in favour of Eurosystem banks. 

Pursuant  to  the  Banking  Communication,  the  Commission  approved  a  number  of 
recapitalisation schemes and individual recapitalisation measures based on the principles laid 
down in the Communication. These measures, besides attracting funds to 'first mover' states 
could imply the danger of other negative spill over e.g. distortions of competition due to non-
market remunerations in case of bank recapitalisation. An increasing number of banks faced 
problems of capital adequacy. In order to free the necessary capital, i.e. to deleverage, even 
fundamentally sound banks were constrained in further lending which would bind additional 
capital.  In  order  to  prevent  a  passing  on  of  the  credit  crunch  to  the  real  economy,  banks 
therefore had to be incited not to deleverage but to seek capital from the state.  

Hence,  an  increasing  number  of  Member  States  saw  the  necessity  of  'precautionary' 
recapitalisation of banks in view of the market pressure for higher capital buffers and in order 
to ensure lending to the real economy. Since the schemes varied considerably from Member 
State  to  Member  State,  both  Member  States  –  in  particular  around  the  ECOFIN  Council  of 
2 December 2008 – and potential beneficiary institutions called for more detailed guidance on 
the compatibility of specific forms of recapitalisation. 

The Commission responded on 5 December 2008 with the publication of a Communication on 
the 'Recapitalisation of financial institutions in the current financial crisis: limitation of aid to 
the  minimum  necessary  and  safeguards  against  undue  distortions  of  competition'  (the 
'Recapitalisation  Communication').31  While  the  Banking  Communication  already  recognizes 
that  recapitalisation  is  one  of  the  key  measures  for  restoring  financial  stability,  the 
Recapitalisation  Communication  gives  detailed  guidance  on  the  conditions  under  which 
specific forms of recapitalisation would be acceptable under State aid rules. Several national 
schemes and individual measures were assessed on this basis. 

30 
31 

OJ C 270, 25.10.2008, p. 8–14. 
OJ C 10, 15.1.2009, p. 2-10. 

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11 

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The "Recapitalisation Communication" of 5 December 200832 

The guiding principles of the Communication are in line with the ones set out in the Banking Communication. 
Particular emphasis is put on the avoidance of undue distortions of competition which have to be balanced with 
the overall objective of restoring financial stability. Two specific principles are particularly emphasised: 

(1) 

(2) 

Remuneration close to market prices as a way to limit competition distortions;  

Temporary character of recapitalization, with incentives for State capital redemption favouring an early 
return to normal functioning of the market.  

Concerns  about  undue  distortions  of  competition  are  also  reflected  in  the  distinction  drawn  between  the 
treatment of fundamentally sound, well-performing banks on the one hand and distressed, less-performing banks 
on the other.  

When  determining  the  adequate  entry  level  price  of  recapitalisations,  the  Communication  refers  to  the 
recommendations of the ECB of 20 November 2008 based on a corridor for rates of return for beneficiary banks 
which,  notwithstanding  variations  in  their  risk  profile,  are  fundamentally  sound  financial  institutions.  The 
Communication complemented this guidance to include conditions other than remuneration rates and deals with 
the  terms  under  which  distressed,  less-performing  banks  may  have  access  to  public  capital.  In  particular,  the 
Communication deals with:  

•  Remuneration (based on ECB recommendations): The price for the capital should reflect the type of capital 

chosen, an appropriate benchmark risk-free interest rate, and the individual risk profile of the bank. 

• 

Incentives for State capital redemption: The pricing mechanism needs to carry a sufficient incentive to keep 
the duration of State involvement to a minimum, for example through a remuneration rate that increases over 
time. 

•  Competition  distortion:  The  Communication  stresses  the  need  for  safeguards  against  possible  abuses  and 
distortions of competition in recapitalisation schemes. In particular, its irreversible nature can trigger a later 
expansion of the beneficiary bank at the expense of the non-beneficiary banks in the same or other Member 
States. The guidelines therefore stipulate that any capital injection must be kept to the minimum. In addition, 
claw back mechanisms or better fortunes clauses were also recommended to consider.  

•  Review: Six months after their introduction, Member States should submit a report to the Commission on the 

implementation of the measures taken. 

Towards the end of 2008, the market value of portfolio investments had decreased further and 
several  Member  States  announced  their  intention  to  complement  their  existing  support 
measures  by  providing  some  form  of  relief  for  impaired  bank  assets.  Indeed,  beyond 
guarantees  and  capital  injections,  asset  relief  measures  may  be  needed  in  order  to  remove 
uncertainty as to the location and size of losses from impaired assets, which is one of the main 
root causes of the continuing lack of confidence in the financial sector.  

In  this  context  the  Commission  responded  on  the  25  February  2009  with  the  adoption  of  a 
Communication on the Treatment of Impaired Assets in the Community Banking sector (the 
"Impaired  assets  Communication").33  The  Communication 
the 
recommendations  of  the  ECB  and  has  been  discussed  with  Member  States.  It  complements 
and  refines  the  Banking  Communication  in  relation  to  principles  that  must  be  followed  by 
asset  relief  measures,  in  a  similar  vein  as  the  recapitalisation  communication  detailed  the 
application of the general principles to recapitalisation of banks. 

took  account  of 

The design of the asset relief schemes, be it asset purchase, swap, guarantee or hybrid models, 
is the responsibility of Member State. A coordinated approach is however necessary in order 
to:  

(i) accelerate bank recovery and promote a return to normal market conditions;  

32 
33 

OJ C 10, 15.1.2009, p. 2-10. 
Communication from the Commission on the Treatment of Impaired Assets in the Community banking 
sector, of 25 February 2009, OJ C 72, 26.3.2009, p. 1. 

EN 

12 

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(ii) reduce the risk of fragmenting the Internal Market;  

(iii) minimise the economic and budgetary cost of State intervention and avoid a subsidy race 
between Member States; and  

(iv)  minimise  the  inherent  competition  distortions  between  aided  and  non-aided  banks, 
between  Member  States,  and  between  aided  institutions  with  different  degrees  of  problems, 
and to tackle moral hazard. 

The "Impaired Assets Communication" of 25 February 200834 

The  Impaired  Assets  Communication  sets  up  the  following  principles  which  asset  relief  measures  should 
generally apply:  

• 

full transparency and disclosure of impairments, which has to be done prior to government intervention; 

•  coordinated approach to the identification of assets eligible for asset relief measures through development of 

eligible categories of assets ("baskets"); 

•  coordinated approach to valuation of assets ex-ante, based on common principles such as valuation based on 
real  economic  value  (rather  than  market  value),  certified  by  independent  experts  and  validated  by  banking 
supervisory authorities; 

•  parallel  viability  review  of  the  bank's  activities  and  balance  sheet  with  a  view  to  assessing  its  present  and 

prospective capital adequacy and viability; 

•  validation by the Commission of the valuation of the assets, in the framework of the State aid procedures on 

the basis of uniform assessment criteria; 

•  adequate burden-sharing of the costs related to impaired asset between the shareholders, the creditors and the 

State;  

•  adequate remuneration for the State, at least equivalent to the remuneration of State capital; 

•  coverage of the losses incurred from the valuation of the assets at real-economic-value by the bank benefiting 

from the scheme; 

•  aligning incentives for banks to participate in asset relief with public policy objectives, through an enrolment 
window limited to six months during which the banks would be able to come forward with impaired assets; 

•  management of assets subject to relief so as to avoid conflicts of interests; 

•  appropriate  restructuring  including  measures  to  remedy  competition  distortion,  following  a  case  by  case 
assessment and taking into account the total aid received through recapitalisation, guarantees or asset relief, 
with a view to the long-term viability and normal functioning of the European banking industry. 

The Commission approval for asset relief measures will be granted for a period of six months, 
and  is  conditional  on  the  commitment  to  present  details  of  the  valuation  of  the  impaired 
assets,  as  well  as  viability  assessment  and  restructuring  plan  for  each  beneficiary  institution 
within 3 months from its accession to the asset relief programme. Depending on the individual 
situation  of  each  beneficiary,  appropriate  restructuring  may  include  measures  to  remedy 
competition distortions, taking into account i.a. the total aid received through recapitalisation, 
guarantees  or  asset  relief  measures,  with  a  view  to  ensuring  that  the  bank  in  question  can 
return to long-term viability and perform their normal lending functions without State support. 

The first cases are currently under examination. 

34 

Communication from the Commission on the Treatment of Impaired Assets in the Community banking 
sector, of 25 February 2009, OJ C 72, 26.3.2009, p. 1. 

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13 

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4. 

MEASURES  ADOPTED  BY  MEMBER  STATES 
INSTITUTIONS: SCHEMES AND AD HOC CASES 

IN  SUPPORT  OF  FINANCIAL 

Since  the  Commission  adopted  the  Banking  and  Recapitalisation  Communications,  23 
schemes  have  been  approved:  12  guarantee  schemes,  5  recapitalisation  schemes,  5  schemes 
combining several measures and one fund for the acquisition of financial assets. 

Finland,  Ireland,  Latvia,  the  Netherlands  and  Portugal  have  notified  to  the  Commission 
guarantee  schemes  only  while  France,  Denmark,  Italy,  Slovenia  and  Sweden  notified 
guarantee  schemes  in  the  first  place  and  shortly  thereafter  also  recapitalisation  measures. 
Another group of Member States which includes Austria, Germany, Hungary, Greece and the 
United  Kingdom  opted  for  designing  schemes  combining  several  measures  (guarantee, 
recapitalization, other forms of equity interventions, etc). In addition, the United Kingdom has 
recently  approved  an  additional  guarantee  scheme  to  support  lending  to  business.  Finally, 
Spain  notified  first  a  fund  for  the  acquisition  of  financial  assets  and  later  on  a  guarantee 
scheme.  

Denmark,  France,  Italy,  Germany,  Sweden,  Finland  and  the  United  Kingdom  have  further 
notified  amendments  to  the  original  schemes  in  place  which  have  been  approved  by  the 
Commission. 

Schemes approved under the current exceptional circumstances require special follow up by 
Member  States  and  the  Commission  in  order  to  terminate  them  as  soon  as  the  economic 
situation so permits. As a general rule, Member States must carry out a review at least every 
six months and report back to the Commission on the results of such review. This means that 
the first wave of reviews will reach the Commission as from April 2009. 

This review will also concern restructuring plans which Member States committed to present 
for  individual  financial  institutions  in  certain  cases.  During  the  upcoming  months,  the 
Commission will examine them in detail on their merits. In its assessment, attention will be 
focused  on  three  central  pillars:  restoring  of  long-term  viability  of  beneficiaries,  the  private 
contribution to the coverage of restructuring costs (aid limited to the minimum) and measures 
to minimize competition distortions. 

In  addition  to  the  general  schemes,  10  Member  States  have  adopted  ad  hoc  individual 
interventions in favour of certain financial institutions.  

EN 

14 

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Interventions of Member States in support of financial institutions: schemes and 
ad hoc measures 

The  total  maximum  volume  of  crisis  measures  so  far  approved  by  the  Commission, 
schemes  and  ad  hoc  measures  taken  together,  entails  amounts  of  around  €  3,000 
billion.35 This corresponds to around 24% of the EU GDP.36 This figure represents the 
overall  maximum  amount  of  guarantee  umbrellas,  rescue  and  restructuring  packages 
and other measures set up by Member States. It should not be mistaken as the State aid 
element  of  the  measures.  The  aid  impact  of  these  measures  can  only  be  assessed  ex 
post  in  future  scoreboard  editions  depending  on  the  actual  implementation  of  the 
measures 

The  following  overview  shows  which  type  of  measures  have  so  far  been  taken  by 
individual Member States that decided to intervene in support of financial institutions. 

Member State 

Guarantee 
schemes 

Recapitalisation 
schemes 

Schemes combining 
several measures 

Other 
measures 

Recent ad hoc 
Interventions 

Belgium 

Bulgaria 

Czech Republic 

Denmark 

Germany 

Estonia 

Ireland 

Greece 

Spain 

France 

Italy 

Cyprus 

Latvia 

Lithuania 

Luxembourg 

Hungary 

Malta 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

Netherlands 

x 

x 

x 

x 

x 

x 

x 

x 

35 
36 

See footnotes 38 and 50. 
It represents around 26 % of the aggregated GDP of the 18 concerned Member States. 

EN 

15 

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Austria 

Poland 

Portugal 

Romania 

Slovenia 

Slovakia 

Finland 

Sweden 

United Kingdom 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

4.1. 

Guarantee schemes covering the liabilities of financial institutions 

Guarantee schemes might constitute an effective tool in contributing to financial stability and 
to maintaining credit supply to businesses. However, as for other types of support measures, 
they must be designed so as to avoid undue distortive effects on neighbouring markets and the 
internal market as a whole. In its analysis of the measures the Commission has focussed on 
three  elements.  First,  on  eligibility  criteria,  to  avoid  discrimination;  second,  on  pricing,  to 
make  sure  that  prices  come  as  close  as  possible  to  the  market  price  and  reflect  the 
beneficiaries' risk profiles and third, on safeguards to minimize distortions of competition. 
So far, the Commission has approved guarantee measures in 16 Member States37 (see table 2). 
The volumes indicated in the table represent the maximum level of guarantees foreseen in the 
scheme  and  authorised  by  the  Commission  and  it  should  therefore  not  be  mistaken  as  the 
volume  of  aids  actually  granted  by  Member  States  in  reality.  The  table  also  provides 
information  on  this  maximum  guarantee  volume  expressed  as  a  percentage  of  GDP  and  the 
share  of  the  financial  intermediation  in  the  GDP.  The  approximate  maximum  volume  of 
guarantees authorised by the Commission amounts to € 2,300 billion. 38 

37 
38 

Guarantee schemes and schemes combining guarantee with other measures. 
This amount does not take into account guarantee schemes for Italy and Ireland for which there are no 
an ex-ante estimations of the volume (see footnotes 40 and 42). 

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16 

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Table 2: Guarantees schemes reviewed by the Commission until 31 March 2009: 
maximum volume of guarantee by country  

Member 
State 

Denmark 

Germany 

Ireland 

Greece 

Spain 

France 

Italy 

Latvia 

Hungary 

Netherlands 

Austria 

Portugal 

Volume of 
guarantees 
(billion Euro) 

Volume of 
guarantees as % 
of GDP (2008)* 

Size of financial 
sector in % GDP 
(2006)* 

580.0039

400.00

See footnote40

15.00

200.0041

265.00

See footnote42

4.2443

4.9544

200.00

90.0045

20.00

259.27

16.30

-

6.56

19.39 

14.22

-

20.00

5.09

35.00

33.29

12.92

5.3 

4.8 

10.2 

4.5 

4.7 

5.0 

4.8 

6.8 

4.5 

6.7 

5.4 

7.5 

39 

40 

41 
42 

43 
44 
45 

The total volume of guarantees under the scheme was originally estimated at € 500 billion. Later, the 
scheme was modified to include additional guarantees of € 80 billion. 
Although the total amount of the guarantee could not be identified ex ante, the Irish scheme is limited in 
its  material  and  temporal  scope.  The  scheme  covers,  for  the  period  from  30  September  2008  to 
29 September  2010,  liabilities  existing  at  close  of  business  on  29  September  2008  or  at  any  time 
thereafter,  up  to  29  September  2010,  in  respect  of  retail  and  corporate  deposits,  interbank  deposits, 
senior  unsecured  debt,  asset  covered  securities,  dated  subordinated  debt  excluding  any  intra-group 
borrowing  and  any  debt  due  to  the  European  Central  Bank  arising  from  Eurosystem  monetary 
operations institution. No call may be made under the guarantee after 29 September 2010. 
Initial volume of € 100 billion that can be increased to € 200 billion. 
Under the Italian scheme, a State guarantee can be provided until 31 December 2009 on liabilities of 
Italian banks issued after 13 October 2008 and until 31 December 2009. Subordinated debt, guaranteed 
bank bonds, structured instruments or complex products, or products with a derivative component are 
explicitly  excluded  from  the  eligibility  for  the  guarantee,  and  so  is  regulatory  capital.  Only  liabilities 
with residual maturity of no less than three months and no more than five years are eligible and those 
with a maturity longer than 3 years cannot exceed 25 % of the total value of the liabilities covered by 
the State guarantee. In addition, the scheme includes a ceiling for each beneficiary bank. 
Limit established : 20 % GDP (exchange rate of 20 February 2009). 
1500 HUF (exchange rate of 18 February 2009). 
Part of the € 90 billion (€ 15 billi on) can be used for other measures than guarantees (recapitalisation, 
loans). 

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17 

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Slovenia 

Finland 

Sweden 

United 
Kingdom 
Total 

12.00

50.00

150.00

294.2646
2285.4548

20.67

28.06

46.20

15.75
-

4.9 

2.6 

3.7 

8.447 
- 

* Source and definition: Eurostat 

As  guarantee  schemes  are  only  temporary  emergency  measures  to  address  the  symptoms  of 
the crisis, they must be followed, as appropriate, by adjustment measures. In particular, when 
a guarantee is activated in favour of an individual financial institution, the measure must be 
followed by an appropriate restructuring or liquidation of the beneficiary.  

Guarantee scheme for banks in Ireland (NN48/2008) 

On 30 September 2008, the Irish Minister for Finance announced a government decision to guarantee all deposits 
and debts of six Irish banks and their subsidiaries located abroad. The Commission immediately contacted the 
Irish  authorities  requesting  modification  of  any  discriminatory  aspects  of  the  measure.  On  3  October  the  Irish 
authorities  formally  notified  the  scheme.  After  close  cooperation  between  the  Commission  and  the  Irish 
authorities, the Irish government modified certain aspects of the scheme in order to make it non-discriminatory, 
maintain the integrity of the Internal Market in financial services and to bring it fully in accordance with State 
aid rules.  

The  principal feature of  the scheme  is  the  provision of  a  State  guarantee  on  all  existing  and new  liabilities  of 
eligible banks issued between 29 September 2008 and 28 September 2010.  

The initial announcement that only 6 Irish banks were eligible for the guarantee presented a serious risk of large 
outflow of capital from non-eligible competitors operating in Ireland. On 9 October 2008 the Irish Government 
confirmed,  at  the  Commission's  insistence,  that  the  guarantee  scheme  would  be  available  to  all  banks  with 
subsidiaries or branches in Ireland with a significant and broad based footprint in the domestic economy. Further 
changes  to  the  scheme  included  specific  safeguards  on  commercial  conduct  and  competitive  behaviour  of 
covered banks in order to prevent the use of the guarantee by the beneficiaries to unduly expand their activities 
to the detriment of competitors, and close monitoring and reporting on the use of the scheme. Again, it was due 
to  the  Commission's  rapid  interventions  that  securing  financial  stability  was  achieved  and  the  integrity  of  the 
Internal Market maintained at the same time. The Commission authorised the measure on 13 October 2008 under 
Article 87 (3) (b) of the EC Treaty. 

4.2. 

Recapitalisation schemes 

Capital injections can be used by Member States with the view to preserving the stability and 
proper functioning of financial markets. The nature, scope and conditions of recapitalisation 
schemes vary considerably. When assessing these measures, the Commission pays particular 
attention to the entry criteria and the treatment of banks with different risk profiles and levels 
of  solvency.  Other  elements  such  as  the  objective  of  recapitalisation,  soundness  of  the 
beneficiary  bank,  and  exit  incentives,  in  particular  with  a  view  to  the  replacement  of  State 
capital by private investors, are also analysed by the Commission. 

46 

47 
48 

This  amount  corresponds  to  two  different  schemes:  Case  N507/2008  approved  on  13.10.2008  (£  250 
billion  exchange  rate  of  18  February  2009)  and  Case  N111/2009  approved  on  24.3.2009  ((£  10, 
exchange rate of 25 February 2009) 
2005 data. 
See footnote 38. 

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18 

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So  far,  the  Commission  has  approved  recapitalisation  measures49  in  11  Member  States 
amounting  to  a  total  volume  of  around  €  275  billion. 50  In  addition,  ad  hoc  recapitalisation 
measures have also been approved by the Commission which are analysed in Section 4.3. 

Table 3: Recapitalisation schemes reviewed by the Commission until 31 March 2009: 
maximum volume by country  

Member State 

Volume of 
recapitalisation 
(billion Euro) 

Volume of 
recapitalization 
schemes as % of GDP 
(2008)* 

Denmark 
Germany 
Greece  
Spain51  
France 
Italy 
Hungary 
Austria 
Slovenia 
Sweden 
United Kingdom 

Total 

* Source: Eurostat 

13.50
80.00
5.00
30-50
21.50
15-20
1.04
15.00
12.0052
4.8053
63.0054

6.03 
3.26 
2.19 
2.91 - 4.85 
1.15 
1.00 – 1.33 
1.07 
5.55 
20.67 
1.48 
3.37 

273.8455

-

Six months after the introduction of the measure taken, Member States should submit a report 
to the Commission on the implementation of the approved schemes, providing details on the 
banks that have been capitalised, the amounts received, the use of the capital and other related 
information.  Individual  recapitalisation  measures  taken  in  conformity  with  a  recapitalisation 
scheme approved by the Commission do not require an individual notification. Nevertheless, 
on top of the six-month review, some Member States committed to submit to the Commission 
information on each recapitalisation at the moment when it takes place. In the context of the 
six-months review, Member States should propose a path towards exit from reliance on State 
capital and an assessment of the bank's business model with a view to appreciating the banks' 
risk  profile  and  viability  or,  for  banks  which  are  not  fundamentally  sound,  a  restructuring 
plan. 

4.3. 

Recent ad hoc cases (outside schemes) 

the  Banking  and  Recapitalisation 
In  addition 
Communications,  some  Member  States  have  adopted  ad  hoc  interventions  in  favour  of 

the  schemes  approved  under 

to 

49 
50 

51 

52 
53 
54 
55 

Recapitalisation schemes and schemes combining recapitalisation with other measures. 
The amount has been calculated taking into account the upper levels in the Spanish and Italian schemes. 
To  avoid  double  count,  it  does  not  take  into  account  the  volume  of  the  Slovenian  recapitalisation 
schemes (see footnote 52). Volumes indicated in table 3 represent the maximum level foreseen in the 
scheme and authorised by the Commission and it should therefore not be mistaken as the volume of aids 
actually granted by Member States in reality. 
Fund  for  the  Acquisition  of  Financial  Assets;  the  Spanish  scheme  does  not  represent  a  classical 
recapitalisation scheme, although it might produce effects similar to recapitalisation. 
The overall budget of the guarantee and the liquidity schemes is capped at € 12 billion. 
50 billion SEK. 
£50 billion. 
See footnote 50. 

EN 

19 

   EN 

 
                                                 
individual financial institutions amounting to a total volume of around € 400 billion. 56 State 
aid  to  individual  undertakings  in  difficulties  is  normally  assessed  according  to  the  R&R 
Guidelines.  However,  ad  hoc  interventions  by  Member  States  in  the  present  systemic  crisis 
have  been  assessed  under  Article  87  (3)  (b)  of  the  EC  Treaty.  The  table  below  provides 
information on these recent individual rescue measures. 

Table 4: Recent individual rescue measures reviewed by the Commission until 31 March 
2009 

Beneficiary 

Case 
number 

Member 
State 

Type of 
measure 

Volume 
(billion 
Euro) 

Dexia 

NN49/2008 
NN50/2008 
NN45/2008 

Belgium 
France 
Luxembourg 

Guarantee 

150 

Commission 
decision 
date 
19/11/2008 

C 9/2009 

Fortis 

N574/2008 

Belgium/ 
France/ 
Luxembourg 
Belgium 

NN42/2008 
NN46/2008- 
NN53a/2008 
N602/2008 
NN57/2008 
N615/2008 

Belgium 
Luxembourg
Netherlands 
Belgium 
Belgium 
Germany 

KBC 
Ethias group 
Bayern LB 

Germany 
Germany 
Germany 

N655/2008 
N639/200859 
N17/2009 

Nord/LB 
IKB 
Sicherungsein-
richtungsgesell-
schaft 
deutscher 
Banken 
Anglo 
Bank 
Bank of Ireland  N149/2009 
NN68/2008 
Parex  Banka 
NN3/2009 
Latvia 

N9/2009 

Irish 

Guarantee57 

16.9 

13/03/2009 

Guarantee 

150 

19/11/ 2008 

Recapitalisation

7 

03/12/2008 

Recapitalisation
Recapitalisation
Guarantee 
Recapitalisation
Guarantee 
Guarantee 
Guarantee 

3.5 
1.5 
4.8 
10 
2058 
5 
6.7 

18/12/2008 
12/02/2009 
18/12/2008 

22/12/2008 
22/12/2008 
21/01/2009 

Ireland 

Recapitalisation

1.5 

14/01/2009 

Ireland 
Latvia 

Recapitalisation
Guarantee 
Recapitalisation
Liquidity 

26/03/2009 
24/11/2008 
11/02/2009 

3.5 
0.775 
0.2 bn 
LVL 
1.5 bn 
LVL 

56 

57 

58 
59 

This amount does not take into account the measure in favour of Kaupthing Bank for which the budget 
is not available at this stage. Nor does it take into account the measure in favour of IKB (see footnote 
59). 
On the same data, the Commission has opened formal investigation to analyse whether the restructuring 
plan for the Dexia group will restore the long term viability. 
10 per year in 2009 and 2010. 
Application of the German support scheme for financial institutions. 

EN 

20 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
ING 
Aegon 
SNS 
Reaal/New 
Banco  Privado 
Português S.A. 
Kaupthing 
Bank 
Carnegie 
Investment 
Bank 
Total 

N528/2008  Netherlands  Recapitalisation
N569/2008  Netherlands  Recapitalisation
N611/2008  Netherlands  Recapitalisation

10 
3 
0.750 

13/11/2008 
27/11/2008 
10/12/2008 

NN 71/2008 

Portugal 

Guarantee 

0.450 

13/03/2009 

NN2/2009 

Finland 

Guarantee 

NN64/2008 

Sweden 

Liquidity 

See 
footnote60 
5 bn SEK 

21/01/2009 

15/12/2008 

393.2961 

Member States' recourse to ad hoc interventions in favour of individual banks is either due to 
the  absence  of  a  general  scheme  available  to  the  bank  at  the  moment  it  entered  into 
difficulties, or to the fact that, for various reasons, the bank was not eligible for aid under the 
general  scheme.  For  example,  individual  measures  were  taken  in  favour  of  Dexia,  Fortis, 
KBC,  Ethias,  and  Parex  Banka  Latvia  due  to  the  lack  of  general  schemes  available  at  the 
moment when the banks entered into difficulties. Similarly, the recapitalisation interventions 
in favour of Anglo Irish Bank, ING, Aegon, SNS Reaal/New, Carnegie Investment Bank and 
Bank  of  Ireland  were  needed  in  the  absence  of  recapitalisation  schemes  in  the  relevant 
Member  States  (only  guarantee  schemes  were  available).  Conversely,  Kaupthing  Bank, 
Bayern  LB  and  Nord/LB  did  not  fall  under  the  scope  of  the  respective  guarantee  schemes 
while the guarantee granted to IKB, although it was in line with the German support scheme 
for  financial  institutions,  required  individual  notification  because  the  bank  was  under 
the  Sicherungseinrichtungsgesellschaft 
restructuring.  The 
Deutscher Banken was also justified because the eligibility conditions of the scheme in place 
in Germany were not fulfilled by this financial institution.  

intervention  for 

individual 

Where relevant, a subsequent restructuring plan or a liquidation plan has to be submitted for 
the  Commission's  assessment  and  approval  within  6  months  after  the  rescue  measure  was 
adopted.  This  means  that  the  restructuring  plans  will  reach  the  Commission  as  from 
March 2009.  

On 31 March 2009, the Commission approved a temporary back-up facility for illiquid assets 
for  a  period  of  six  months  that  the  Netherlands  intend  to  grant  in  favour  of  ING.  This 
clearance,  based  on  the  Impaired  Assets  Communication,  ensures  financial  stability  of  the 
bank  while  the  Commission  continues  to  investigate  the  aid  package  and  expects  ING  to 
submit a restructuring plan shortly (C10/2009, ex N138/2009). 

5. 

REAL ECONOMY AND FINANCIAL CRISIS: THE 'TEMPORARY FRAMEWORK' 

Towards the end of 2008, the financial crisis has severely affected the real economy. Banks 
de-leveraged  and  became  much  more  risk-averse  than  in  previous  years.  As  a  result,  even 
healthy  companies  started  to  experience  difficulties  with  access  to  credit.  Some  Member 
States reacted with State capital injection to financial institutions, not primarily to rescue them 
but rather to prevent credit supply restrictions and limit the pass-on of the financial markets' 

60 
61 

Guarantee against legal risks. Budget not available at this stage. 
See footnote 56. 

EN 

21 

   EN 

 
 
 
 
 
                                                 
difficulties to the real economy. A serious downturn started to affect the wider economy and 
Member States announced national recovery plans to get their economies through the credit 
squeeze.  

Indeed, most European economies are now 'officially' in recession (two consecutive quarters 
of negative growth). Europe is facing a period where consumer confidence, consumption and 
investment are shrinking sharply, households are under pressure and businesses' order books 
are down. The forecasts for the EU economy for 2009 are negative with rising unemployment 
across Europe. 

In early November 2008, the European Union's Heads of State and Government agreed on the 
need for a coordinated response to the crisis. The Commission responded with the European 
Economic Recovery Plan,62 a plan intended to contain the scale of the downturn, to stimulate 
demand  and  confidence,  and  to  boost  long-term  competitiveness.  It  proposes  a  counter-
cyclical macro-economic response to the crisis in the form of an ambitious set of actions to 
support  the  real  economy.  Some  of  the  proposed  measures  include  State  aid.  The  challenge 
for the Community is to avoid public interventions which would undermine the objective of a 
level  playing  field  for  European  companies  and  avoid  protectionism  disrupting  the  Internal 
Market. 

Some  Member  States  may  be  tempted  to  adopt  protectionist  measures  to  safeguard  their 
domestic  industries  at  the  potential  expense  of  others.  This  entails  the  risk  of  escalation, 
Member  States  outbidding  each  other  to  attract  economic  activities,  ultimately  leading  to  a 
subsidy  race.  Past  experience  shows  that  individual  action  of  this  kind  is  not  effective  and 
could seriously damage the Internal Market. 
As  a  result  of  the  substantial  modernisation  of  the  State  aid  rules  over  the  last  years,63 
Member States currently dispose of an appropriate framework to better target public support 
towards sustainable goals such as stimulating research, development and innovation, making 
training,  regional  development  and 
risk  capital  available 
environmental protection. In addition, Member States are now in a position to grant no less 
than  26  different  types  of  State  aid  without  having  to  notify  individual  measures  to  the 
Commission  and  with  minimum  administrative  burden.  In  the  current  economic  situation 
Member States should use these possibilities to the full. 

to  SMEs  and  start-ups, 

However, in view of the dimension of the crisis and the difficulties to find credit faced by all 
type  of  companies  (SMEs  and  large  companies),  the  Commission  adopted  the  Temporary 
Community  framework  for  State  aid  measures  to  support  access  to  finance  in  the  current 
financial  and  economic  crisis64  (the  'Temporary  Framework')  granting  Member  States 
additional ways to deliver finance to enterprises affected by the credit squeeze.  

These additional possibilities are justified to remedy a serious disturbance in the economy and 
may be declared compatible with the common market on the basis of Article 87 (3) (b) of the 
EC Treaty. 

The Temporary Framework of 17 December 200865 

The temporary measures are applicable until the end of 2010 and pursue two objectives: 

62 

63 
64 

65 

Communication from the Commission to the European Council, A European Economic Recovery Plan; 
COM(2008) 800 of 26 November 2008. 
DG Competition ´s State aid reform web page. 
OJ  C  16,  22.1.2009  p.  1-9.  The  consolidated  version,  integrating  the  amendments  adopted  by  the 
Commission on 25 February 2009, is published in OJ C 83, 7.4.2009, p. 1-15. 
OJ  C  16,  22.1.2009  p.  1-9.  The  consolidated  version,  integrating  the  amendments  adopted  by  the 
Commission on 25 February 2009, is published in OJ C 83, 7.4.2009, p. 1-15. 

EN 

22 

   EN 

                                                 
• 

• 

to unblock bank lending to companies and thereby guarantee continuity in their access to finance; and  

to  encourage  companies  to  continue  investing  in  the  future,  in  particular  in  a  sustainable  growth  economy 
including the development of green products. 

The specific aid instruments that will assist Member States to meet those objectives include: 

•  a lump sum of aid up to € 500,000 per company;  

•  State guarantees for loans at a reduced premium;  

•  aid in the form of subsidised interest rate applicable to all type of loans;  

•  subsidised loans for the production of green products involving the early adaptation to or going beyond future 

Community product standards.  

In addition to the new measures, the Framework provides for: 

•  a temporary derogation from the risk capital guidelines in order to increase the tranche of finance per target 
SME  (from  €  1.5  million  to  €  2.5  million)  and  a  reductio n  of  the  minimum  level  of  private  participation 
(from 50 % to 30 %); and  

•  a simplification of the requirements of the Export Credit Communication66 to use the exemption that allows 

temporarily non-marketable risks to be covered by the state.  

The  Commission  is  in  favour  of  a  horizontal  approach  which  benefits  the  whole  economy. 
Consequently,  the  Commission  holds  that  the  proposed  aid  instruments  are  the  most 
appropriate  ones  to  achieve  the  general  objectives  and  that  there  is  no  need  to  single  out  a 
sector. Accordingly, apart from the exclusion of fisheries and primary agricultural production 
from the limited amount of aid the Framework makes no such distinction.  
On  25  February  2009,67  after  having  gained  some  experience  with  the  application  of  the 
Temporary Framework, the Commission has introduced some further technical adjustments.  

In particular, with respect to the conditions of compatibility for guarantees, the Commission 
has adopted a new grid which adjusts the guarantee safe-harbours according to different levels 
of collateralisation. Moreover, in addition to the reduction of the annual guarantee premium of 
2 years, the revised safe-harbour premiums contained in the grid could be applied for another 
8 years without reduction.  

The Commission has ensured swift decisions in cases where the notifications were complete 
and  the  conditions  of  the  Temporary  Framework  respected.  So  far,  the  Commission  has 
authorized 24 measures under the Temporary Framework: 

•  8  schemes  for  aid  up  to  €  500,000  per  company  proposed  by  Germany,  France,  Latvia, 

Luxembourg, Hungary, Portugal, the United Kingdom and Austria;  

•  4 schemes for subsidized loan interests in Germany, Hungary and France;  

•  3 risk-capital schemes in Germany, France and Austria; 

•  3  schemes  offering  reduced  interest  loans  to  businesses  investing  in  the  production  of 

green products in France, the United Kingdom and Spain; 

•  6 guarantee measures in Belgium, Germany, France, Luxembourg, Hungary and the United 

Kingdom.  

66 
67 

OJ C 281, 17.9.1997, p. 4. 
Communication  from  the  Commission  -  Amendment  of  the  Temporary  framework  for  State  aid 
measures to support access to finance in the current financial and economic crisis of 25 February 2009. 
The  consolidated  version,  integrating  the  amendments  adopted  by  the  Commission  on  25  February 
2009, is published in OJ C 83, 7.4.2009, p. 1-15. 

EN 

23 

   EN 

                                                 
Table 5: Overview of measures reviewed by the Commission under the Temporary 
Framework until 31 March 2009 

Member State 

EUR 
500.000 per 
under-
taking 

Belgium 

Guarantee 

N117/2009 

20/03/2009 

Reduced-
interest rate 
loans 

Reduced-
interest rate 
loans for green 
products 

Risk capital 
aid 

Simplification of 
requirements of 
the Export Credit 
Communication 

Germany 

N668/2008 

N27/2009 

30/12/2008 

30/12/2008 

27/02/2009 

N38/2009 

N39/2009 

3/02/2009 

N661/2008 

19/02/2009 

N140/2009 

30/03/2009 

N7/2009 

N23/2009 

N15/2009 

N11/2009 

N119/2009 

19/01/2009 

27/02/2009 

04/02/2009 

03/02/2009 

16/03/2009 

N124/2009 

19/03/2009 

Spain 

France 

Latvia 

Luxembourg 

N99/2009 

N128/2009 

27/02/2009 

11/03/2009 

Hungary 

Austria 

Portugal 

United 
Kingdom 

N77/2009 

N114/2009 

N78/2009 

24/02/2009 

10/03/2009 

24/02/2009 

N47a/2009 

20/03/2009 

N13/2009 

19/01/2009 

N43/2009 

N71/2009 

04/02/2009 

27/02/2009 

N72/2009 

27/02/2009 

N47d/2009 

26/03/2009 

Regarding  the  aid  instruments  chosen  in  the  aid  measures,  all  intervening  Member  States 
except  Belgium,  Spain  and  Portugal  selected  multiple  instruments,  e.g.  grants,  interest 
subsidies, loans and guarantees.  

Special reference to the car sector 

The  automotive  sector  has  been  hit  particularly  hard  by  the  current  economic  crisis.  The 
Commission  responded  by  a  Communication  on  EU  support  to  fight  the  crisis  in  the 
automotive  sector  on  25  February  2009.68  It  defends  a  proactive  stance  to  support  the 
industry,  soften  negative  effects  and,  in  particular  ensure  long-term  competitiveness.  It  sets 
various measures to improve access to credit, to clarify the rules for granting state aid in the 
particular circumstances, to boost the demand for new vehicles through coordinated national 
action,  to  minimise  social  costs  and  retain  the  skilled  workforce  and  to  defend  fair 
competition  in  open  markets.  The  Commission  suggests  a  new  partnership  with  industry, 

68 

Communication from the Commission- Responding to the crisis in the European automotive industry, 
COM(2009) 104 final of 25 February 2009. 

EN 

24 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
trade  unions  and  Member  States  in  the  context  of  the  CARS  21  process  to  accompany  the 
common crisis response. 

For  any  measures  boosting  demand,  the  Commission  has  organised  the  exchange  of  best 
practises and proposed common principles on which car scrapping schemes should be based.69  

On  the  supply  side,  much  of  the  public  support  should  be  covered  by  horizontal  policy 
instruments  applicable  to  industry  as  a  whole  and  should  be  met  through  a  combination  of 
European  and  Member  State  level  action.  The  European  Investment  Bank  is  expected  to 
approve € 3.8 billion worth of automotive sector  projects in March while additional projects 
in the pipeline add up to a total of € 6.8 billion. 

Moreover,  several  of  the  schemes  approved  by  the  Commission  under  the  Banking  and 
Recapitalisation  Communications  may  also  benefit  the  financial  branches  of  the  car 
manufacturers.  

In  the  State  aid  area,  the  Temporary  Framework  for  the  real  economy  as  described  above 
remains an important State aid instrument also in the car sector. Under the Framework, the car 
sector  (together  with  other  sectors)  can  benefit  from  various  forms  of  aid,  such  as:  State 
guarantees, subsidized loans, subsidized loans for green products which targets in particular 
the  production  of  "green"  cars  going  beyond  the  Community  standards,  "small  amounts  of 
aid"70 and risk capital aid for SMEs. 

As  regards  State  aid  to  the  car  industry,  so  far,  Member  States  have  mostly  notified  these 
support  measures  under  general  schemes,  including  schemes  under  the  Temporary 
Framework.  By  way  of  example,  the  Commission  approved  a  French  scheme  (N23/2009) 
under  which  France  can  provide  state  guarantees  to  loans  to  various  industrial  sectors.  The 
Commission  has,  likewise,  approved  a  UK  scheme  (N71/2009)  and  a  German  scheme 
(N27/2009) under which the car industry (as well as other industries) can benefit from support 
in  the  form  of  State  guarantees.  As  regards  the  subsidized  loans  to  "green  products",  the 
Commission approved a UK scheme (N72/2009), a French scheme (N11/2009) and a Spanish 
scheme (N140/2009)providing for subsidized interest rates on loans for green products going 
beyond the Community standards. In addition, the Commission has approved several schemes 
under  which  Member  States  can  grant  small  amounts  of  aid  to,  among  other,  the  car  sector 
(see above table 5).  

The  position  of  the  Commission  has  been  clear  and  strong  as  regards  certain  attempts  to 
implement protectionist measures in the car industry. Since France announced its planned aid 
to  the  automotive  sector  which  originally  raised  concerns  concerning  State  aid  and  Internal 
Market rules, the Commission has stated without ambiguity that any aid granted under such 
requirements  could  not  be  regarded  as  compatible.  Intensive  contacts  between  the 
Commission and the French authorities have been fruitful and France committed to avoid any 
condition contrary to Internal Market rules.71  

69 

70 

71 

Already  in  July  2008,  the  Commission  issued  a  communication  inviting  Member  States  to  promote 
green  public  procurement  in  order  to  boost  demand  for  cleaner  and  more  fuel  efficient  vehicles. 
Communication from the Commission "Public procurement for a better environment", COM(2008) 400 
final of 16 July 2008. 
Aid up to €  500 000 per company for the next two years to relieve them from current difficulties with 
the access to credit. If a company has already received de minimis aid prior to the entry into force of the 
Temporary Framework or will so during the validity of the Temporary Framework, the sum of the aid 
received  under  the  Temporary  Framework  and  de  minimis  aid  received  under  the  De  Minimis 
Regulation must not exceed €  500 000 between 1 January 2008 and 31 December 2010. 
See MEMO 09/90 of 28 February 2009. 

EN 

25 

   EN 

                                                 
Special reference to the air transport sector 

The  current  crisis  also  affected  the  air  transport  sector  which  was  already  struggling  with 
consistently high crude prices during the first half of the year. 

In January 2009, the Commission approved rescue aid in the form of State loan guarantee in 
favour  of  Austrian  Airlines  (NN72/2008),  which  allowed  the  company  to  raise  financing  in 
the  market  despite  the  credit  squeeze  and  to  keep  operating  until  the  Commission  takes  a 
position on its privatisation plan. The decision was taken on the basis of the R&R Guidelines. 

The  public  tender  procedure  carried  out  by  the  Greek  authorities  to  sell  certain  assets  of 
Olympic  Airlines  and  Olympic  Airways  Services  prior  to  the  liquidation  of  the  two 
undertakings  was  not  successful,  given  the  financial  and  economic  situation.  Few  bidders 
were forthcoming and most lacked financial credibility. In March, the Commission considered 
that the intention of the Greek authorities to carry out the sale by means of direct negotiations 
with  interested  parties  did  not  raise  State  aid  concerns  as  this  was  likely  to  be  the  value-
maximising solution (N83/2009). The decision was taken on the basis of Article 87 (1) of the 
EC Treaty. 

6. 

PROCEDURES 

Financial crisis 

In its response to the financial crisis, the Commission is aware of the importance of delivering 
quick  decisions  in  close  cooperation  with  Member  States  in  order  to  contribute  to  restoring 
financial stability and to providing legal certainty. This is why the Commission has adopted 
decisions  on  emergency  rescue  measures  in  short  time  periods.  In  contrast,  when  assessing 
restructuring plans, the Commission must ensure that the envisaged restructuring is capable of 
restoring the long-term viability, that state support is limited to the minimum necessary and 
decide  whether  compensatory  measures  should  be  put  in  place  to  minimise  potential 
distortions  of  competition  created  by  the  aid.  The  analysis  of  State  interventions  of  such 
magnitude might require longer time than certain emergency rescue measures.  

The early experiences in 2007 and the first half of 2008 showed that the Commission can deal 
with cases in a rapid, efficient and flexible way. A swift assessment of support measures to 
financial  institutions  was  particularly  necessary  in  view  of  the  considerable  impact  of  the 
crisis  on  individual  financial  institutions  and  the  interdependence  between  them,  requiring 
immediate  measures  to  avoid  a  melt-down  of  the  entire  financial  sector.  However,  the 
deepening financial crisis required a further streamlining of the processes.  

The 'Banking Communication' sets out the steps the Commission took in order to ensure the 
swift adoption of decisions upon complete notification, if necessary within 24 hours and over 
a weekend. In particular, the following arrangements were put in place: 

•  Simplified  consultation  procedure  within  DG  Competition  and  quicker  consultation  of 

other services; 

•  Use  of  an  urgent  written  procedure  or  a  temporary  empowerment  of  a  Member  of  the 

Commission; 

•  Simplified linguistic requirements. 

The Member States' agreement to be notified of decisions in one of the working languages of 
the  Commission  has  also  helped  to  speed  up  the  procedures.  In  addition,  Member  States' 
cooperation is necessary for the Commission to guarantee swift decision making. Experience 

EN 

26 

   EN 

has  shown  that  early  informal  contacts  and  the  involvement  of  the  Commission  at  an  early 
stage contribute significantly to the adoption of decisions within short timeframes. 

During  the  last  quarter  of  2008,  18  decisions  on  banking  schemes  and  16  decisions  on 
individual  banking  cases  were  adopted.  In  particular,  looking  at  the  22  banking  schemes 
decided72 until March 2009, the Commission took in 9 cases its decision in less than a week.73 

Real Economy 

Accelerated  procedures  apply  also  to  measures  under  the  recently  adopted  Temporary 
Framework. Accordingly, the Commission has set up the necessary arrangements, similar to 
those adopted for the banking sector, so that notifications based on the Temporary Framework 
can be dealt with rapidly provided that Member States supply all relevant information. Any 
measures proposed must be notified to the Commission in the regular way. 

Furthermore, in order to provide guidance on the application of the Temporary Framework in 
practice,  the  Commission  has  set  up  an  Economic  Crisis  Team  (comp-economic-crisis-
team@ec.europa.eu)  to  serve  as  a  first  point  of  reference  for  all  stakeholders.  More 
information may be found on the DG Competition website.  

For other urgent measures falling outside the scope of the Temporary Framework but linked 
to the financial and real economy crisis, the Commission has also applied, insofar as possible, 
accelerated procedure. 

7. 

CONCLUSIONS 

It  should  be  noted  that  figures  that  appear  in  this  report  and  particularly  those  referring  to 
guarantees and recapitalisation measures should not be taken as the State aid element of the 
measure. The aid impact of these measures can only be assessed in later editions, depending 
on the actual use of the measures. 

The  Commission  has  been  playing  and  will  continue  to  play  a  key  role  in  coordinating 
Member States' action in view of maintaining a level playing field, preserving the integrity of 
the  common  market  and  fighting  harmful  protectionism.  It  will  ensure  that  new  support 
schemes  comply  with  the  EC  Treaty  State  aid  rules  and  it  will  monitor  measures  already 
reviewed  by  the  Commission  to  ensure  they  are  implemented  in  compliance  with 
Commission's decisions and the EC Treaty. The Commission will continue to closely monitor 
the situation in the market and review Member States support measures in order to ensure that 
they are designed in a way to limit as much as possible competition distortions and to keep the 
single market functioning. 

In  addition,  the  Commission  has  particularly  emphasized  that  support  measures  must  be 
designed  considering  the  medium-to-long  term  perspective,  in  particular  that  of  swiftly 
returning  to  a  competitive  environment.  Support  measures  should  target  the  new  market 
failures  (such  as  the  credit  squeeze),  with  the  objective  and  effect  of  boosting  economic 
growth  and  not  perpetuating  economic  inefficiency  and  failed  business  models.  State  aid 
should  be  focused  on  long-term  competitiveness  through  support  for  research,  development 
and  innovation,  for  green  products  and  measures  to  tackle  climate  change  and  for  skills-
enhancing measures reinforcing labour flexibility in the Common Market.  

Finally,  the  Commission  will  support  restructuring  processes  in  the  context  of  State  aid 
monitoring.  Restructuring  and  possibly  managed  liquidation  will  be  necessary  to  enable 

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Modifications to the original schemes are not taken into account. 
Average duration from notification to decision: 17 days. 

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viable  companies  to  emerge  from  the  crisis.  In  particular,  State  aid  to  banks  has  to  be 
accompanied by restructuring to address previous defects in their business models, to ensure 
ongoing  utility  as  a  means  of  channelling  credit  to  the  economy  and  to  reach  long  term 
viability.  Similarly,  companies  operating  in  the  "real"  economy  facing  structural  problems 
will need to undertake necessary restructuring to restore long-term viability.  

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ANNEX 1: WHERE TO FIND INFORMATION ON STATE AIDS 

For weekly updates on the latest developments in State aid, see DG Competition's e-News on 
http://ec.europa.eu/comm/competition/state_aid/newsletter/index.html. 
features 
information  on  new  legislative  texts  and  proposals,  decisions  of  the  European  Commission 
and the Courts of the European Union and other state aid-related documents and events. 

E-News 

For  more  detailed  information  on  State  aid  policy  developments,  facts  and  figures,  see  DG 
Competition's State aid Scoreboard, published twice a year in spring and autumn on 

http://ec.europa.eu/comm/competition/state_aid/studies_reports/studies_reports.cfm 

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