Proposal for a Regulation (EU) No xxxx/2010 of the European Parliament and of the Council of amending Council Regulation (EC) No 1234/2007 (Single CMO Regulation) as regards the aid granted in the framework of the German Alcohol Monopoly
Date: 2010-06-24
Institutions: European Commission
Subjects: Germany, State aid, State monopoly, beverage industry, common organisation of markets, control of restrictive practices, ethanol, suspension of aid

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EUROPEAN COMMISSION 

Brussels, 24.6.2010 
COM(2010)336 final 

2010/0183 (COD) 

Proposal for a 

REGULATION (EU) No xxxx/2010 OF THE EUROPEAN PARLIAMENT AND OF 
THE COUNCIL 

of 

amending Council Regulation (EC) No 1234/2007 
(Single CMO Regulation) as regards the aid granted in the framework of the German 
Alcohol Monopoly 

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EXPLANATORY MEMORANDUM 

Currently as an exception to State aid rules, the German authorities may grant State aid under 
the  German  Alcohol  Monopoly  for  products  marketed,  after  further  transformation,  by  the 
monopoly,  as  ethyl  alcohol  of  agricultural  origin.  The  total  allowed  State  aid  is  limited  to 
EUR 110 million per year. 

According to Article 182(4) of Council Regulation (EC) No 1234/2007 of 22 October 2007 
establishing  a  common  organisation  of  agricultural  markets  and  on  specific  provisions  for 
certain agricultural products (Single CMO Regulation), the derogation ends on 31 December 
2010.  This  draft  regulation  extends  the  application  of  the  derogation  and  proposes  that  the 
production/sales by the monopoly shall gradually decrease so that the monopoly will finally 
cease to exist as from 1 January 2018. Two categories of distilleries are dealt with differently: 

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the agricultural bonded distilleries (landwirtschaftliche Verschlussbrennereien - there 
are  currently  about  670  distilleries  of  this  type)  processing  mainly  cereals  and 
potatoes, may remain in the monopoly until the end of 2013. Their production will 
however  be  gradually  reduced  from  540.000  hl  in  2011,  to  360.000  hl  in  2012  and 
180.000 hl in 2013. When leaving the Monopoly the agricultural bonded distilleries 
may receive  a compensatory aid  of EUR 257,50 per hl of nominal distilling rights. 
This compensatory aid is granted at the latest on 31 December 2013, but may be paid 
in several instalments until 31 December 2017. 

the  small-scale  flat-rate  distilleries  (Abfindungsbrennereien),  distillery  users 
(Stoffbesitzer)  and  fruit  cooperative  distilleries  (Obstgemeinschaftsbrennereien) 
which  are  locally-oriented  and  produce  very  small  quantities  of  alcohol  from  fruits 
(up to 300 litres per year) may produce in total up to 60.000 hl annually until the end 
of 2017. 

The  total  amount  of  aid  paid  from  1  January  2011  to  31  December  2013  shall  not  exceed 
EUR 269,9  million  and  the  total  amount  of  aid  paid  from  1  January  2014  to  31  December 
2017 shall not exceed EUR 268 million. 

Germany will continue to present an annual report to the Commission on the functioning of 
the system. Moreover, from 2013 to 2016 Germany will on a yearly basis include an annual 
phasing-out plan for the small-scale flat-rate distilleries, distillery users and fruit cooperative 
distilleries. 

The proposal has no financial implications for the Community budget. 

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2010/0183 (COD) 

Proposal for a 

REGULATION (EU) No xxxx/2010 OF THE EUROPEAN PARLIAMENT AND OF 
THE COUNCIL 

of 

amending Council Regulation (EC) No 1234/2007 
(Single CMO Regulation) as regards the aid granted in the framework of the German 
Alcohol Monopoly 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty on the Functioning of the European Union, and in particular the 
first paragraph of Article 42 and Article 43(2) thereof, 

Having regard to the proposal from the European Commission, 

Having regard to the opinion of the European Economic and Social Committee (1), 

After transmission of the proposal to the national Parliaments, 

Acting in accordance with the ordinary legislative procedure, 

Whereas: 

(1) 

(2) 

The specific rules on the aid that Germany may grant in the framework of the German 
Alcohol  Monopoly  ("the  Monopoly")  as  provided  for  in  Article  182(4)  of  Council 
Regulation  (EC)  No  1234/2007  of  22  October  2007  establishing  a  common 
organisation of agricultural markets and on specific provisions for certain agricultural 
products (Single CMO Regulation)2 will expire on 31 December 2010. 

According  to  the  report  submitted  by  the  Commission  pursuant  to  Article  184(3)  of 
Regulation  (EC)  No  1234/2007,  the  importance  of  the  Monopoly  has  decreased  in 
recent  years.  Between  2001  and  2008,  about  70  agricultural  bonded  distilleries 
(landwirtschaftliche Verschlussbrennereien) left the Monopoly. The volumes sold by 
the Monopoly have fallen since 2003 and the budget decreased from EUR 110 million 
in 2003 to EUR 80 million in 2008. Some distilleries have thus already made efforts to 
prepare for their entry into the free market by creating cooperatives, investing in less 
energy consuming equipments to reduce production costs and increasingly marketing 
their  alcohol  directly.  However,  more  time  is  needed  to  facilitate  this  adaptation 
process,  and  to  allow  distillers  to  survive  on  the  free  market.  An  extension  of  a  few 
more years is deemed necessary to complete the process of abolishing the Monopoly 
as well as the aid and allow for its definitive phasing-out. 

1 
2 

OJ C …, p. ... 
OJ L 299, 16.11.2007, p. 1. 

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(3) 

(4) 

(5) 

In  some  parts  of  Germany,  alcohol  distilleries  are  traditionally  linked  to  small  and 
medium size farms and play an important role for the farms to continue their activities 
by providing an additional income to farmers and securing employment in rural areas. 
Agricultural  bonded  distilleries  processing  mainly  cereals  and  potatoes  should 
therefore continue to be able to receive aid through the Monopoly until 31 December 
2013.  By  that  date,  all  bonded  distilleries  should  have  entered  the  free  market.  This 
deadline also coincides with the new programming period for rural development 2014-
2020,  meaning  for  Germany  a  possibility  to  transfer  parts  of  the  funds  used  for  the 
Monopoly into their rural development programme. 

flat-rate  distilleries 

The  small-scale 
(Abfindungsbrennereien),  distillery  users 
(Stoffbesitzer)  and  fruit  cooperative  distilleries  (Obstgemeinschaftsbrennereien) 
contribute  in  particular  to  the  preservation  of  traditional  landscapes  and  biodiversity 
by helping to preserve orchards, which supply distillers with raw material. Taking this 
into account as well as the fact that the production of those distilleries is local and very 
limited,  they  should  continue  to  be  able  to  benefit  from  the  aid  granted  under  the 
Monopoly for a final period until 31 December 2017. By this date, the Monopoly is to 
be abolished. In order to guarantee the closure character of this aid, Germany should 
on a yearly basis present an annual phasing-out plan from 2013. 

The  production  of  ethyl  alcohol  in  the  framework  of  the  Monopoly  is  limited  and 
corresponds  at  present  to  less  than  10%  of  the  total  production  of  ethyl  alcohol  of 
agricultural origin in Germany. Considering, in particular, that all  bonded distilleries 
shall have entered the free market by 31 December 2013 at the latest that percentage 
will decrease considerably after that date. 

(6) 

In order to ensure continuity in the granting of the aid, this Regulation should apply 
from 1 January 2011. 

(7) 

Regulation (EC) No 1234/2007 should therefore be amended accordingly. 

HAVE ADOPTED THIS REGULATION: 

In Article 182 of Regulation (EC) No 1234/2007, paragraph 4 is replaced by the following: 

Article 1 

"4.  By way of derogation from Article 180 of this Regulation, only Article 108(1) 
and the first sentence of Article 108(3) of the TFEU shall apply, until 31 December 
2017,  to  the  aid  granted  by  Germany  in  the  existing  national  framework  of  the 
German  Alcohol  Monopoly  ("the  Monopoly")  for  products  marketed,  after  further 
transformation,  by  the  Monopoly,  as  ethyl  alcohol  of  agricultural  origin  listed  in 
Annex I to the TFEU, provided that the following conditions are complied with: 

(a) 

the  total  production  of  ethyl  alcohol  under  the  Monopoly  benefiting  from  the 
aid  shall  gradually  decrease  from  the  maximum  of  600.000  hl  in  2011,  to 
420.000 hl in 2012 and to 240.000 hl in 2013 and may amount to a maximum 
of 60.000 hl per year from 1 January 2014 until 31 December 2017, on which 
date the Monopoly shall cease to exist; 

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(b) 

(c) 

(d) 

(e) 

the production of agricultural bonded distilleries benefiting from the aid shall 
gradually decrease from 540.000 hl in 2011, to 360 000 hl in 2012 and 180.000 
hl in 2013. By 31 December 2013 all agricultural bonded distilleries shall leave 
the Monopoly. When leaving the Monopoly the agricultural bonded distilleries 
shall  be  allowed  to  receive  a  compensatory  aid  of  EUR  257,50  per  hl  of 
nominal distilling rights. This compensatory aid may be granted at the latest on 
31  December  2013.  It  may,  however,  be  paid  in  several  instalments  until 
31 December 2017 at the latest; 

the  small-scale  flat-rate  distilleries,  distillery  users  and  fruit  cooperative 
distilleries  may  benefit  from  the  aid  granted  by  the  Monopoly  until 
31 December 2017, under the condition that the production benefiting from the 
aid does not exceed 60.000 hl per year; 

the total amount of aid paid from 1 January 2011 to 31 December 2013 shall 
not exceed EUR 269,9 million and the total amount of aid paid from 1 January 
2014 to 31 December 2017 shall not exceed EUR 268 million; and 

before 30 June each year Germany shall submit a report to the Commission on 
the functioning of the Monopoly and the aid granted in the framework thereof 
in the previous year. Moreover, the annual reports to be submitted in 2013 to 
2016  shall  include  an  annual  phasing-out  plan  for  the  following  year 
concerning  the  small-scale  flat-rate  distilleries,  distillery  users  and  fruit 
cooperative distilleries." 

Article 2 
Entry into force 

This  Regulation  shall  enter  into  force  on  the  day  following  that  of  its  publication  in  the 
Official Journal of the European Union. 

It shall apply from 1 January 2011. 

This Regulation shall be binding in its entirety and directly applicable in all Member States. 

Done at Brussels,  

For the European Parliament 
The President 

For the Council 
The President 

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