REPORT FROM THE COMMISSION State aid ScoreboardReport on State aid contribution to Europe 2020 Strategy - Spring 2011 Update -
Date: 2011-06-22
Institutions: European Commission
Subjects: State aid, aid to industry, control of State aid, employment aid, environmental protection, regional development, research and development, small and medium-sized enterprises, transmission network

EUROPEAN COMMISSION 

Brussels, 22.6.2011 
COM(2011) 356 final 

REPORT FROM THE COMMISSION 

State aid Scoreboard 

Report on State aid contribution to Europe 2020 Strategy  

- Spring 2011 Update - 

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TABLE OF CONTENTS 

Executive summary...................................................................................................... 3 

Research & Development & Innovation ...................................................................... 3 

Environmental protection and energy saving............................................................... 4 

Regional development.................................................................................................. 4 

Small and medium-sized enterprises (SMEs) .............................................................. 5 

Broadband .................................................................................................................... 6 

Employment and Training ........................................................................................... 6 

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

State aid for research, development and innovation .................................................... 9 

Policy context............................................................................................................... 9 

State aid rules for R&D&I ......................................................................................... 11 

State aid decisions on R&D&I and case studies ........................................................ 13 

Expenditure on R&D&I ............................................................................................. 15 

State aid and innovation performance........................................................................ 17 

Conclusion on State aid for R&D&I.......................................................................... 18 

State aid for environmental protection....................................................................... 19 

Policy context............................................................................................................. 19 

State aid rules for environmental protection .............................................................. 20 

State aid decisions on environmental protection and case studies............................. 21 

State aid expenditure on environmental protection.................................................... 23 

Conclusion on State aid for environmental protection and energy saving................. 25 

State aid for Regional development ........................................................................... 26 

Policy context............................................................................................................. 26 

Rules on State aid for regional development ............................................................. 27 

State aid decisions on regional aid and case studies .................................................. 29 

State aid expenditure on Regional aid........................................................................ 32 

Conclusion on State aid for regional development .................................................... 33 

State aid for SMEs ..................................................................................................... 33 

1. 

1.1. 

1.2. 

1.3. 

1.4. 

1.5. 

1.6. 

2. 

3. 

3.1. 

3.2. 

3.3. 

3.4. 

3.5. 

3.6. 

4. 

4.1. 

4.2. 

4.3. 

4.4. 

4.5. 

5. 

5.1. 

5.2. 

5.3. 

5.4. 

5.5. 

6. 

6.1. 

Policy context............................................................................................................. 33 

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6.2. 

6.3. 

6.4. 

6.5. 

7. 

7.1. 

7.2. 

7.3. 

7.4. 

7.5. 

8. 

8.1. 

8.2. 

8.3. 

8.4. 

8.5. 

9. 

State aid rules for SMEs............................................................................................. 34 

State aid decisions on SMEs and case studies ........................................................... 36 

State aid expenditure for SMEs ................................................................................. 38 

Conclusion on State aid for SME's ............................................................................ 39 

State aid to the broadband sector ............................................................................... 40 

Policy context............................................................................................................. 40 

State aid rules for broadband...................................................................................... 40 

State aid decisions on broadband and case study....................................................... 41 

State aid expenditure on broadband sector................................................................. 43 

Conclusion on State aid to broadband sector ............................................................. 46 

State aid for employment and training ....................................................................... 46 

Policy context............................................................................................................. 46 

Rules of State aid for employment and training......................................................... 48 

State aid decisions on employment and training and case studies ............................. 49 

State aid expenditure for training and employment ................................................... 51 

Conclusion on State aid for employment and training............................................... 52 

Conclusion ................................................................................................................. 52 

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1. 

EXECUTIVE SUMMARY 

This Spring edition of the State aid Scoreboard provides an overview of State aid in the areas 
which  are  particularly  relevant  for  the  Europe  2020  Strategy1.  These  areas  are  research  and 
development  and  innovation  (R&D&I),  environmental  protection,  regional  development, 
broadband, SME’s, employment and training. For each of these areas, the Scoreboard sets out 
the  policy  context,  describes  the  legal  framework  under  which  aid  can  be  granted,  provides 
data  on  the  number  and  type  of  measures  decided  in  the  period  2004-2010  and  on  actual 
expenditure (up to and including 2009). This Scoreboard is the first on State aid in the context 
of the Europe 2020 Strategy. It is intended to serve as a starting point for further analysis in 
the  coming  years,  to  be  complemented,  where  possible,  with  a  more  qualitative  analysis  on 
the effectiveness of the aid measures. 

1.1. 

Research & Development & Innovation  

Research  and  development  and  innovation  (R&D&I)  are  key  elements  in  the  effort  to 
strengthen  the  competitiveness  of  the  European  economy  and  to  ensure  sustainable  growth. 
Therefore, R&D&I have been placed at the heart of the Europe 2020 Strategy.. 

The main role of State aid for R&D&I is to provide funding, when markets themselves fail to 
deliver  an  optimal  outcome  due  to  imperfections  in  their  functioning  (as  a  result  of  e.g. 
externalities,  public  goods,  imperfect  and  asymmetric  information  and  coordination  or 
network  failures).  State  aid  can  contribute  to  generating  more  R&D&I  only  if  it  addresses 
well-identified market failures which prevent markets from reaching optimal R&D&I levels, 
and if it is well designed so that distortions of competition and trade are minimised and public 
spending  efficiency  maximised.  However,  it  is  important  to  bear  in  mind  that  State  Aid  is 
only one complementary element in the much larger tool-box needed to boost R&D&I, and 
that it cannot replace the reforms needed to tackle structural weaknesses in this specific area. 

The  EU  still  has  to  make  significant  improvements  to  achieve  the  Europe  2020  target  of 
spending 3 % of EU GDP on R&D&I by 2020. In 2009, this figure stood at 2.01 % of GDP 
(around EUR 236.5 billion), the highest level ever, but still well below the 3 % target. There 
are also huge differences between Member States. The public sector was the source of funds 
for  around  one  third  of  total  R&D&I  expenditure  in  the  EU  (0.65  %  of  GDP).  State  aid 
represented a relatively small share of this total (EUR 10.6 billion, equal to 0.09 % of GDP in 
2009). 

Between 2004 and 2010, the Commission took 426 final decisions on R&D&I measures, of 
which 413 measures were approved as compatible, an additional 12 measures were declared 
not  to  contain  State  aid  and  one  measure  was  subject  to  a  negative  decision  with  recovery. 
Between the entry into force of the R&D&I Framework2 on 1 January 2007 and the end of 
2010, the Commission approved 195 aid schemes. During the same period, the Commission 
approved  an  additional  44  individual  or  ad  hoc  R&D&I  aid  measures,  of  which  39  were 
approved after a detailed assessment.  

According to the annual reports submitted by Member States, more than half of the total EUR 
46.5  billion  granted  in  the  period  2004-2009  for  R&D&I  was  provided  by  two  Member 

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"Europe 2020: a strategy for smart, sustainable and inclusive growth", COM (2010) 2020, p.21. 
Framework for State aid for Research and Development and Innovation,OJ C 323 of 30.12.2006, p. 1. 

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States: Germany (29 %) and France (22 %). Five other Member States were responsible for a 
further third of the total: Italy (11 %), Spain (9 %), the United Kingdom (7 %), Belgium (5 %) 
and the Netherlands (4 %). 

Member States which are considered to be innovation leaders are not necessarily those where 
most R&D&I State aid is granted. Indeed, evidence shows that a high level of performance in 
this  area  is  not  directly  linked  to  the  level  of  State  aid  granted  but  rather  to  the  appropriate 
environment and general conditions for investment. 

1.2. 

Environmental protection  

The  Europe  2020  Strategy  has  put  forward  sustainable  growth,  promoting  a  more  resource 
efficient,  greener  and  competitive  economy,  as  one  of  the  main  priorities  for  the  coming 
years. In particular, it defined the following targets: reduction by 20 % of CO2 emissions, a 20 
%  share  for  renewable  energy  in  EU  energy  consumption  and  a  20  %  increase  in  energy 
efficiency.  

The  objective  of  State  aid  control  in  the  field  of  environmental  protection  is  to  ensure  that 
State  aid  measures  result  in  a  higher  level  of  environmental  protection  than  would  occur 
without the aid and to ensure that the positive effects of the aid outweigh its negative effects, 
notably distortions of competition and effect on trade between Member States. State aid may 
be  necessary  to  achieve  the  EU  environmental  objectives  that  cannot  be  achieved  through 
market-based incentives or through regulation. 

Aid  granted  by  Member  States  falls  under  two  categories:  (i)  direct  aid  for  environmental 
measures  and  (ii)  reductions  or  exemptions  from  environmental  taxes.  In  the  period  2004-
2010,  the  Commission  took  347  final  decisions  on  the  matter  (approving  320  State  aid 
measures) and the number of block exempted measures amounted to 219. The highest number 
of  measures  was  related  to  the  promotion  of  energy  from  renewable  energy  sources  (120 
block exempted measures).  

In the period 2004-2009, State aid in the field of environmental protection amounted to EUR 
79  billion  in  the  EU.  Germany  and  Sweden  (through  tax  exemptions)  accounted  for 
respectively 51 % and 16 % of this total. In 2009, such state aid, granted in the EU, amounted 
to EUR 13.2 billion  

1.3. 

Regional development  

The Europe 2020 Strategy places economic, social and territorial cohesion at the heart of the 
Strategy.  Currently,  regional  State  aid  is  the  horizontal  objective  representing  the  highest 
share of total aid to industry and services. 

Effective control of regional State aid is a precondition for Member States to deliver efficient 
regional aid policies and to contribute to smart, sustainable and inclusive growth.  

The objective of State aid control for regional aid is to allow national support to promote the 
development  of  disadvantaged  areas  within  the  EU  in  a  way  which  is  compatible  with  the 
internal market rules. Special attention is paid to the outermost regions, in recognition of the 
specific  additional  costs  that  result  from  the  structural  handicaps  which  may  result  from 
geographic remoteness and difficulties to integrate into the internal market. 

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Regional State aid control must be distinguished from EU Cohesion policy. National regional 
aid in fact focuses more on disadvantaged areas than EU regional policy, which has at present 
broader  policy  objectives  and  a  wider  spatial  coverage.  Only  a  fraction  of  Cohesion  policy 
funding  is  covered  by  State  aid  rules  as  the  majority  of  structural  funds  spending  relates  to 
activities  which  do  not  fall  within  the  definition  of  State  aid,  for  example  general 
infrastructure. 

In the period 2004-2010, the Commission adopted 570 final decisions on State aid measures 
for  regional  development.  In  the  same  period,  Member  States  implemented  778  block 
exempted measures for regional development. 

In  the  period  2004-2009,  regional  development  State  aid  amounted  to  EUR  67  billion,  of 
which EUR 13 billion was granted in 2009. Almost half (45 %) of the regional aid in 2009 
was granted through only five measures in Germany and France.  

1.4. 

Small and medium-sized enterprises (SMEs)  

The Europe 2020 Strategy highlights the role of SME’s in the European economy as engines 
of  job  creation  and  growth.  The  support  to  SME’s  constitutes  an  important  element  of  the 
Europe  2020  Strategy.  In  particular,  in  addition  to  other  weaknesses  related  to  the  business 
environment,  Member  States  will  have  to  tackle  the  special  financing  difficulties  of  such 
companies.  Where  market  forces  alone  are  insufficient,  State  aid  measures  may  play  a 
supplementary role by providing public funding. 

However,  State  aid  control  is  essential  to  maintain  a  level  playing  field  for  all  companies 
active in the internal market, irrespective of the Member State in which they are established. 
The Commission has to be vigilant that the measures are well targeted; ensuring that the aid 
does  not  discourage  investors,  is  not  invested  to  keep  inefficient  firms  afloat  and  does  not 
create distortions of competition. 

Between  2004  and  2010,  the  Commission  took  139  final  decisions  on  measures  addressed 
exclusively  to  SMEs,of  which  108  concerned  risk  capital.  Three  Member  States  were 
responsible  for  more  than  half  of  the  approved  risk  capital  measures:  Germany,  the  United 
Kingdom and Italy. The other SME aid measures predominantly concerned Germany, Austria 
and  Slovakia.  Measures  taken  under  the  general  block  exemption  regulation3  (GBER) 
amounted to around 1 500 for the period 2004-2010. Of this total, risk capital aid (which can 
be  granted  as  block  exempted  measures  since  the  entry  into  force  of  the  GBER),  is  the 
objective of only 28 measures.  

The  total  State  aid  earmarked  for  SMEs  amounted  to  approximately  EUR  33  billion  in  the 
period 2004-2009 (EUR 4.6 billion in 2009), of which risk capital represents around EUR 2.3 
billion. Four Member States were responsible for three quarters of the total SME aid in 2009: 
Italy (24 %), Germany (20 %), France (18 %) and the United Kingdom (14 %). 

However,  figures  on  State  aid  to  SMEs  do  not  fully  reflect  the  total  aid  amount  actually 
disbursed  to  these  companies  as  they  only  take  into  account  those  measures  for  which  the 

3 

Commission  Regulation  (EC)  No  800/2008  of  6  August  2008  declaring  certain  categories  of  aid 
compatible with the common market in application of Article 87 and 88 of the Treaty (General block 
exemption Regulation). OJ L 214, 9.8.2008, p. 3 (entry into force 29 August 2008). 

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primary  objective  is  "SMEs"  or  "risk  capital".  Thus,  any  conclusions  to  be  drawn  from  the 
downward trend observed as regards total SME aid must take into account that caveat.  

As regards risk capital, it seems that most of the aid is concentrated in the United Kingdom; 
use of this option by the other Member States was almost negligeable. 

1.5. 

The broadband sector 

The  Europe  2020  Strategy  has  underlined  the  importance  of  broadband  deployment  to 
promote social inclusion and competitiveness in the EU. It has also set ambitious targets for 
broadband development, as set up in the Digital Agenda, e.g. to bring basic broadband to all 
Europeans by 2013 and to ensure that, by 2020, all Europeans have access to a much faster 
internet service. The estimated costs of each of those objectives are up to EUR 60 billion for 
the first stage and EUR 270 billion for the second. 

The  objective  of  State  aid  control  for  broadband  is  to  promote  competition  among  service 
providers  by  enhancing  infrastructure  developments.  This  is  intended  to  help  to  maximise 
consumer welfare in the form of lower prices and better services. Such investments will come 
primarily  from  commercial  operators.  However,  the  importance  of  public  funding  and  State 
aid  has  increased  significantly  since  2008,  when  national  State  aid  measures  for  broadband 
roll-out  were  designed  as  an  integral  part  of  comprehensive  national  broadband  strategies. 
Therefore  the  amount  of  State  aid  dedicated  to  the  broadband  sector  has  risen  sharply 
compared to the average in the period 2004-2008.  

Between  2004  and  2010  the  Commission  approved  64  State  aid  measures  relating  to  the 
broadband  sector,  most  of  which  concerned  the  United  Kingdom.  According  to  the  annual 
reports for the period 2004-2009, Member States have already implemented EUR 368 million 
of State aid for broadband networks.  

The use of public funding can help to bring high-speed internet access to as many Europeans 
as possible to help them benefit from the advantages of a knowledge-based society. However, 
public funding has to be used carefully in the liberalised telecoms markets to avoid crowding 
out private investments.  

1.6. 

Employment and training  

The  Europe  2020  Strategy  aims  to  foster  a  high-employment  economy  with  a  75  % 
employment rate.  

The objective of State aid control in this field is to allow national support for training and job 
creation, in particular for disadvantaged and disabled workers. The role of State aid measures 
to promote job creation and training is quite limited because direct aid for employment targets 
only  disabled  and  disadvantaged  workers,  whereas  aid  with  other  objectives  also  has 
employment  effects,  in  particular  regional  aid.  However,  the  Commission  has  traditionally 
adopted a positive approach towards employment aid, particularly where it is intended to be 
used to employ individuals who face particular difficulties in finding work. The Commission 
is also generally positively as regards training aid. Member States are therefore encouraged, 
where necessary, to complement their national plans for employment and training with well-
targeted State aid measures. 

The  Commission  approved  a  total  of  51  State aid  measures  for  employment  and  training  in 
the  period  2004-2010.  The  figure  was  low  due  to  the  fact  that  the  majority  of  measures  for 

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training  and  employment  were  introduced  by  Member  States  under  block  exemption 
regulations. During the same period 1 005 measures were block-exempted. Nearly 70 % of all 
employment  measures  introduced  under  a  block  exemption  regulation  were  set  up  by  five 
Member  States:  Poland,  Italy,  Spain,  Hungary  and  Germany.  Around  74  %  of  training 
measures under block exemption regulations were implemented by Italy, Belgium, the United 
Kingdom, Germany and Spain. 

training  and  employment  amounted 

to  around 
State  aid  expenditure  for 
the  period  2004-2009,  of  which  employment  aid  stood  at 
EUR 22.3 billion 
EUR 17.5 billion. Training and employment State aid amounted together to around EUR 3.4 
billion  in  2009.  Denmark,  Poland  and  Italy  were  responsible  for  84  %  of  employment  aid 
granted in 2009, while Italy, Germany and Spain granted half of total training aid. 

together 

in 

2. 

INTRODUCTION 

This Spring edition of the State aid Scoreboard aims to provide an overview of the situation as 
regards  State  aid  in  the  Member  States  in  the  areas  which  are  particularly  relevant  for  the 
Europe  2020  Strategy4,  i.e.  R&D&I,  environmental  protection,  regional  development, 
broadband, SMEs and employment and training5. For each of these areas the Scoreboard sets 
out  the  policy  context,  describes  the  legal  framework  under  which  aid  can  be  granted  and 
provides data on  the number and  type of  measures decided  in  the period 2004-2010 and on 
actual expenditure(up to and including 2009).  

Given that the Europe 2020 Strategy was only launched in 2010 and the latest available data 
on  State  aid  expenditure  relate  to  2009,  it  is  of  course  too  early  at  this  stage  to  draw 
conclusions  as  to  how  State  aid  control  policy  concretely  contributed  to  the  Europe  2020 
objectives.  However,  this  Scoreboard  is  envisaged  as  a  first  edition  putting  State  aid  in  the 
context of the Europe 2020 Strategy, and could serve as a starting point for further analysis in 
the coming years, to be complemented where possible with a more qualitative analysis on the 
effectiveness of the aid measures. 

When the European Council at the end of March 2010 endorsed the Commission's proposal, it 
concluded that innovation and competitiveness are fundamental to the Europe 2020 Strategy, 
alongside protection of the environment and social inclusion. Indeed, EU competition policy, 
and  State  aid  control  policy  in  particular,  are  key  elements  in  the  Europe  2020  Strategy. 
Competition  is  not  an  end  in  itself,  but  rather  a  means  of  increasing  the  competitiveness  of 
European markets to the benefit of companies and consumers, resulting in more choice, better 
products at better prices. Competition boosts productivity, growth and job creation.  

The objectives of State aid control are: i) to limit overall levels of State aid ("less aid"); ii) to 
ensure that where aid is granted it does not restrict competition but addresses market failures 
to  the  benefit  of  society  as  a  whole  ("better  aid");  iii)  to  effectively  prevent  or  recover 
incompatible  aid;  and  iv)  ensure  a  level  playing  field  in  the  internal  market  (no  trade 
distortions  between  Member  States).  State  aid  control  has  a  particular  significance  in  the 
context  of  the  crisis  and  budgetary  restrictions  in  the  Member  States.  During  the  crisis,  the 

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"Europe 2020: a strategy for smart, sustainable and inclusive growth", COM (2010) 2020, p.21. 
This  Spring  edition  of  the  Scoreboard  does  not  aim  to  be  exhaustive.  It  does  not  consider  all  areas 
which  may  be  relevant  to  the  Europe  2020  Strategy,  such  as  culture  and  media,  and  which  might  be 
assessed in future editions of the Scoreboard. 

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Commission  has  demonstrated  the  adaptability  of  its  State  aid  tools,  notably  by  adopting 
various communications  aimed  at  preserving financial stability and ensuring a level playing 
field,  while  providing  legal  certainty,  as  regards  both  financial  institutions  and  the  real 
economy6.  

Europe 2020 has identified three main themes: 

– 

– 

– 

Smart growth: developing an economy based on knowledge and innovation.  

Sustainable  growth:  promoting  a  more  resource  efficient,  greener  and  more 
competitive economy.  

Inclusive growth: fostering a high-employment economy delivering economic, social 
and territorial cohesion. 

State aid control policy can contribute to the achievements of these three themes.The Europe 
2020 Strategy lays down various priorities for which State aid instruments can be used in a 
policy mix to contribute to the following "flagship initiatives": 

(1) 

Innovation Union;  

(2) 

a digital agenda for Europe;  

(3) 

a resource efficient Europe;  

(4) 

an industrial policy to tackle globalisation7; and  

(5) 

new skills and jobs.  

State  aid  control  aims  at  helping  Member  States  to  better  target  aid  by  directing  it  more 
closely to improving competitiveness and/or reducing regional and social disparities. In other 
words,  it  aims  to  ensure  that  aid  addresses  market  failures  and  does  not  distort  competition 
without  an  appropriate  compensating  benefit.  Typically,  such  aid  relates  to  horizontal 
objectives that are taken into account through specific regulatory frameworks and guidelines, 
including for R&D, innovation and risk capital, SMEs, environmental protection and training. 
Specific frameworks and guidelines in this regard helps to ensure that when Member States 
intervene in the market, the public funds are more likely to effectively address the identified 
market failures.  

The  current  architecture  of  State  aid  control  is  based  on  a  ‘three-stream’  system:  block 
exemption,  standard  assessment  and  detailed  assessment.  Block  exempted  measures  include 
those that are exempted from prior notification to the Commission and which can therefore be 
implemented  without  prior  Commission  authorisation.  Notified  measures  are,  in  principle, 
subject  to  a  standard  assessment.  Only  in  instances  where  doubts  cannot  be  removed  is  a 
detailed assessment carried out. This two-tiered approach enables the Commission to focus its 
analysis on the most distortive aid measures. 

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Information on State aid granted in response to the crisis can be found in chapter 3 of the Commission's 
State  aid  Scoreboard  Report  on  State  aid  granted  by  the  EU  Member  States  -  Autumn  2010  Update 
(COM(2010)701). The next Autumn State aid Scoreboard will update this information.  
In  line  with  the  G20  commitments,  the  EU  has  continued  resisting  protectionism  in  all  its  forms  and 
minimising any negative impact on trade and investment of the EU's domestic policy actions. 

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This Spring edition of the Scoreboard provides an overview of aid reported by Member States 
for each of the relevant categories of State aid, putting them in their legal and policy context. 
This includes aid for R&D&I (Section 3), environmental and energy saving aid (Section 4), 
regional and development aid (Section 5), SMEs (Section 6), broadband networks (Section 7) 
and employment and training aid (Section 8). 

The figures in this report are based on the annual reports on existing schemes submitted by 
the  Member  States  pursuant  to  Article  5  of  Commission  Regulation  (EC)  794/20048  and 
Annex III A of that Regulation, which defines the scope and content of the data that Member 
States have to provide to the Commission9. The data are based on the information submitted 
by  Member  States  in  their  notifications  pursuant  to  Article  2  of  Council  Regulation  (EC) 
659/199910. 

Figures  on  expenditure  related  to  State  aid  do  not  include  contributions  from  the  Structural 
Funds and the Cohesion Fund. In the period 2007-2013, these funds will account for about 36 
%  of  the  EU  budget.  This  represents  spending  of  nearly  EUR  347  billion  over  the  period 
concerned,  targeted  at  three  objectives:  Convergence;  Regional  Competitiveness  and 
Employment, and Territorial Cooperation.  

Only  a  fraction  of  Cohesion  policy  funding  is  covered  by  State  aid  rules  as  the  majority  of 
spending  relates  to  general  infrastructure  or  non-economic  activities11.  In  any  event,  the 
respect of State aid rules is an explicit requirement for benefiting from the Structural Funds. 

3. 

STATE AID FOR RESEARCH, DEVELOPMENT AND INNOVATION 

3.1. 

Policy context 

Research and development and innovation (R&D&I) is one of the key elements in the effort 
to  strengthen  the  competitiveness  of  the  EU  economy  and  to  ensure  sustainable  growth. 
Therefore, R&D&I has been placed at the heart of the Europe 2020 Strategy12, as one of its 
flagship initiatives. 

The Europe 2020 Strategy has set the target of spending 3 % of EU GDP on R&D by 2020. 
However, it also recognises that "it is not only the absolute amounts spent on R&D that count 
– Europe needs to focus on the impact and composition of research spending and to improve 

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OJ L 140, 30.4.2004, p. 1.  
Data on State aid expenditure presented in this Scoreboard cover all State aid measures as defined under 
Article 107 TFEU (former Article 87(1) of the EC Treaty) that Member States have awarded to industry 
and services. Agriculture, Fisheries and the transport sector are excluded as well as State aid granted in 
response  to  the  crisis  (aid  to  the  financial  sector  and  to  the  real  economy).  To  show  the  underlying 
trends,  and  in  line  with  the  Autumn  2010  Scoreboard,  data  covers  the  period  2004-2010  (number  of 
decisions and approved amounts). For expenditure the latest available data relate to 2009. 
OJ L 83, 27.3.1999, p. 1. 
The  bulk  of  regional  spending  is  reserved  for  Convergence  regions  (essentially  those  regions  with  a 
GDP per capita below 75 % of the Union average) to help improve their infrastructures and to develop 
their economic and human potential. In addition, all Member States are eligible for funding to support 
innovation  and  research,  sustainable  development,  and  job  training  in  their  less  advanced  regions.  A 
smaller amount goes to cross-border and inter-regional cooperation projects. 
"Europe 2020: a strategy for smart, sustainable and inclusive growth", COM (2010) 2020, p. 12. 

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the conditions for private sector R&D in the EU"13. It makes an explicit reference to the role 
of State aid control policy by considering that it can "actively and positively contribute […] 
by  prompting  and  supporting  initiatives  for  more  innovative,  efficient  and  greener 
technologies,  while  facilitating  access  to  public  support  for  investment,  risk  capital  and 
funding for research and development"14. However, it is important to stress that State aid rules 
are only one element of R&D&I policies and that State aid concerns only a subset of overall 
R&D expenditure. For instance, while as pointed out by recent economic analysis "an R&D 
tax treatment more oriented towards fiscal incentives rather than direct subsidies appears to 
have a positive effect on the efficiency level of R&D spending across EU Member States"15, 
fiscal incentives for R&D largely fall outside the scope of State aid rules since they constitute 
measures of general scope16.  

In  its  Communication  on  "Europe  2020  Flagship  initiative  Innovation  Union"17,  the 
Commission describes what in its view needs to be done in order to boost innovation and to 
re-focus R&D&I policy on the challenges facing our society, such as climate change, energy 
and resource efficiency, health and demographic change. The European Council meeting of 4 
February 2011 focused on energy and innovation and agreed on a number of priority actions 
whose implementation will contribute much to enhancing growth and job creation as well as 
promoting Europe's competitiveness18. 

The "Innovation Union" will be developed alongside the flagship initiative on "An Industrial 
Policy  for  the  Globalisation  Era",  which  sets  out  a  strategic  framework  for  supporting  a 
strong,  diversified  and  competitive  industrial  base  in  Europe.  This  initiative  stresses  the 
importance  of  competitive  markets  as  drivers  of  innovation  and  efficiency  gains  and  as 
incentive for firms to increase their productivity and underlines that the essential role of State 
aid control is "to avoid distortion in the Single Market; moreover, the design of State aid rules 
contributes  to  promote  the  competitiveness  of  industry  in  Europe.  State  aid  rules  provide  a 
framework that directs Member States' investments to address identified market failures."  19 
The key issue is thus how Member States should intervene to reach this objective, and what 
should be the role of State aid rules in this respect. 

Furthermore, under the pressure of budgetary restrictions, Member States have to maintain a 
difficult  balance  between  adjusting  government  spending  and  protecting  growth-friendly 
expenditure20.  Although  the  most  effective  way  of  stimulating  innovation  is  by  fostering 

13 

14 
15 

16 

17 
18 
19 
20 

See  page  10  of  the  Europe  2020  Flagship  Initiative  Innovation  Union,  COM(2010)  546  final  .  The 
Innovation  Union  Scoreboard  2010  identifies  the  largest  gap  with  main  competitors  in  the  "firm 
activities" category which includes business R&D expenditure.  
"Europe 2020: a strategy for smart, sustainable and inclusive growth", COM (2010) 2020, p. 21. 
Conte, Dierx, Ilzkovitz and Schweizer, 'An analysis of the efficiency of public spending and national 
policies in the area of R&D', Occasional papers, DG ECFIN, September 2009. 
See  as  examples  of  general  fiscal  measures  the  Spanish  scheme  "Reduction  of  tax  from  intangible 
assets" (case N 480/2007) and the Italian measure "R&D tax credit" (case N 507/2007). As examples of 
other general measures see the Danish case "Technology transfer institutes" (case N 617/2008) and the 
Irish measure "National development plan 2007-2013" (case N 374/2009).  
Communication on "Europe 2020 Flagship Initiative Innovation Union", COM(2010) 546 final. 
See Council conclusions of the meeting of 4 February 2011. 
Communication on "An Integrated Industrial Policy for the Globalisation Era" COM(2010) 614, p. 10. 
Expenditure on innovation is explicitly cited as one of the categories of growth-friendly expenditure in 
the Annual growth survey, Annex 2: Macro-Economic Report. At the European Council of 4 February 
2011,  it  was  agreed  that  "in  conducting  fiscal  consolidation,  Member  States  should  give  priority  to 
sustainable  growth-friendly  expenditure  in  areas  such  as  research  and  innovation,  education  and 
energy". 

EN 

10 

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competition  and  general  measures  creating  the  right  conditions,  State  aid  may  in  certain 
circumstances be the appropriate option to provide incentives for additional private R&D&I 
investment and to address identified market failures. 

The most relevant market failures for R&D&I are positive externalities (where the benefits for 
society far exceed the private benefits for a particular enterprise investing in R&D&I), public 
goods (when the result of a particular activity cannot be protected such that it can be used by 
competitors  of  the  enterprise  which  originally  invested  in  the  R&D&I),  imperfect  and 
asymmetric information and coordination and network failures. State aid can help change the 
incentives of private firms and make them invest in R&D&I.  

However,  if  State  aid  were  to  be  used  to  protect  national  enterprises,  keep  inefficient  firms 
afloat,  distort  competition  and  artificially  maintain  fragmented  markets  this  could  lead  to  a 
reduction in the overall level of R&D&I and economic growth. Indeed, when an undertaking 
receives aid, its position in the market is generally strengthened and the returns on investment 
for competitors might be reduced. Furthermore, a reduction in the incentive for innovation at 
beneficiary  level  can  take  place  when  the  aid  results  in  a  soft  budget  constraint  for  the 
beneficiary.  The  aid  could  also  lead  to  supporting  inefficient  undertakings  or  enabling  the 
beneficiary to enhance exclusionary practices or market power. 

Therefore,  State  aid  can  contribute  to  generate  more  R&D&I  only  if  it  addresses  well 
identified market failures which prevent markets from reaching optimal R&D&I levels, and if 
it  is  well  designed,  ensuring  that  distortions  of  competition  and  trade  are  minimised  and 
public spending efficiency maximised (this is illustrated by the example of the Gaya Project, 
as described in the box in paragraph 3.3.). 

Nevertheless, as mentioned above, it should be born in mind that State aid is only one element 
in  the  much  larger  tool-box  needed  to  boost  R&D&I.  State  aid  can  not  replace  the  reforms 
needed to tackle the structural weaknesses in this specific area.  

3.2. 

State aid rules for R&D&I 

The  rules  governing  State  aid  for  R&D&I  were  reviewed  in  the  context  of  the  Lisbon 
Strategy,  it  having  been  acknowledged  that  the  level  of  R&D&I  was  not  optimal  for  the 
economy.  The  aim  of  State  aid  for  R&D&I  is  to  contribute  towards  increasing  the  level  of 
private investments in this field that would lead, ultimately, to higher growth in the Union.  

The Framework on R&D&I21 of 2006 and the General Block Exemption Regulation22 of 2008 
form  the  legal  basis  for  the  assessment  of  R&D&I  State  aid  measures.  This  year  the 
Commission  will  conduct  a  mid-term  review  of  the  Framework,  taking  stock  of  recent  case 
experience  and  provisionally  identifying  practical  adjustments  to  be  considered  for  the 
revision of the Framework in 2013. 

21 

22 

Framework for State aid for Research and Development and Innovation, OJ C 323 of 30.12.2006, p. 1. 
(entry into force 1 January 2007). 
Commission  Regulation  (EC)  No  800/2008  of  6  August  2008  declaring  certain  categories  of  aid 
compatible with the common market in application of Article 87 and 88 of the Treaty (General block 
exemption Regulation). OJ L 214, 9.8.2008, p. 3 (entry into force 29 August 2008). 

EN 

11 

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General Block Exemption Regulation 

The  General  Block  Exemption  Regulation  (GBER),  in  line  with  the  Framework,  includes  R&D  and 
innovation measures.  

The following measures are included in the GBER: aid for R&D projects, aid for technical feasibility 
studies,  aid  to  cover  industrial  property  rights  costs  for  SMEs,  aid  for  young  innovative  small 
enterprises, aid for innovation advisory services and for innovation support services, aid for the loan of 
highly qualified personnel and aid for R&D in the agriculture and fisheries sectors. 

Framework for State aid for R&D&I 

The Framework for State aid for R&D&I set out the conditions Member States should respect when 
granting  aid  to  promote  R&D&I,  allowing  nevertheless  the  Member  States  to  tailor  their  support  to 
R&D&I according to their national specificities. The aim of the 2006 Framework is to make it easier 
for Member States to better target the aid to the relevant market failures. It pays great attention to the 
needs of SMEs, which are most affected by market failures, but also offers many possibilities for large 
enterprises to receive support, when duly justified. State aid must lead the aid recipient to change its 
behaviour so that it increases its level of R&D&I activities. 

The Framework icovers State aid measures for a variety of R&D&I activities: aid for R&D projects, 
aid  for  technical  feasibility  studies,  aid  for  industrial  property  rights  costs  for  SMEs,
  aid  for  young 
innovative  enterprises,
  aid  for  innovation 
advisory services and for innovation support services, aid for the loan of highly qualified personnel, 
and aid for innovation clusters. It also contains specific rules for agriculture and fisheries.  

  aid  for  process  and  organisational  innovation  in  services,

The  application  of  the  rules  is  based  on  a  refined  economic  analysis.  Measures  including  high  aid 
amounts, which have the greatest potential to distort competition and trade, are subject to a detailed 
assessment  while  measures  involving  lower  aid  amounts  are  subject  to  a  lighter  assessment  on  the 
basis of per se rules and may even be exempted from prior notification obligation under the GBER. 

For R&D projects, the Framework distinguishes three categories of aid, depending on whether the type 
of  research  is  more  or  less  remote  from  the  market:  fundamental  research,  industrial  research  and 
experimental development, along the same line provided in the Frascati Manual on the Measurement 
of  Scientific  and  Technological  Activities23.  This  allows  different  aid  intensities  according  to  the 
importance of the market failures research projects face. 

Furthermore, guidance is provided as regards whether State aid is involved in R&D&I projects carried 
out  by  both  undertakings  and  publicly-funded  research  organisations.  This  has  increased  legal 
certainty  for  research  organisations  and  their  contractual  or  collaborative  research  activities  which 
should enhance the role of public research entities, and facilitate public-private collaboration. 

Compatibility of aid subject to a detailed assessment 

Due to the higher risk of distortion of competition, when aid granted to a single beneficiary exceeds 
specific thresholds set by the Framework, an individual notification is required. The assessment of the 
aid  is  conducted  under  the  Framework  and  aims  at  analysing  the  effects  on  competition  and  the 
contribution of the R&D project to objectives of common interest. 

23 

Organisation for Economic Co-operation and Development, 2002. 

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12 

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3.3. 

State aid decisions on R&D&I and case studies 

Between  2004  and  2010,  the  European  Commission  took  426  final  decisions  on  R&D&I 
measures,  including  12  no  aid  decisions  and  413  compatibility  decisions.  The  Commission 
took  one  partly  negative  decision  with  recovery  (case  C31/2004  Schiefergruben  Magog 
(Germany)). In 2004, the number of approved State aid measures stood at 38. It increased to 
around  70  per  year  in  the  next  two  years  mainly  due  to  the  fact  of  including  new  Member 
States in the total and the increase in the number of German cases.  

Since the entry into force of the R&D&I Framework on 1 January 2007 and until the end of 
2010,  the  Commission  has  approved  195  State  aid  schemes,  of  which  143  pure  R&D 
schemes,  14  innovation-oriented  schemes  and  38  mixed  measures,  pursuing  both  R&D  and 
innovation  objectives.  At  the  same  time,  the  Commission  has  approved  an  additional  44 
individual applications of a scheme or ad hoc R&D aid measures, of which 39 after detailed 
assessment  (including  two  measures  for  which  formal  investigation  procedures  were 
conducted)24.  Moreover,  it  has  monitored  a  total  of  192  individual  measures  granted  on  the 
basis of approved aid schemes whichexceed EUR 3 million but are not individually notifiable.  

The number of measures approved under the R&D&I Framework initially amounted to 64 in 
2007, a level similar to the one observed in previous years, but it increased to around 110 in 
2008, largely due to the significant number of German (26) and Spanish (24) measures. In the 
last  two  years,  a  significant  decrease  was  observed.  Around  40  measures  were  approved  in 
2009 and about 30 in 2010. This phenomenon can also be explained by the introduction of the 
GBER in the second half of 2008, which allowed R&D&I aid to be granted without ex ante 
Commission scrutiny25.  

The  number  of  R&D&I  block  exempted  measures  introduced  by  Member  States  during  the 
same  period  (2004-2010)  amounted  to  55926.  Almost  60  %  of  all  such  measures  were 
introduced by four Member States: Italy (109), Poland (79), Spain (73) and Germany (67).  

The trend of R&D&I measures in the period 2004-2010 is shown in the figure below: 

24 

25 

26 

Two  further  measures  were withdrawn,  one  during  the  preliminary  examination  and another  after  the 
opening of the formal investigation procedure. The 39 cases subject to detailed assessment (of which 24 
were notified by France) involve a total of more than EUR 2 billion of State aid and refer to domains as 
diverse  as  advanced  nanosubstrates,  engine  components  and  new  composite  materials  for  aeroplane 
structures,  intelligent  energy  management,  automatic  processing  of  multimedia  data,  high  fields 
magnetic  resonance  imaging,  CMOS  derivative  processes  for  system-on-chip  technologies,  fuel  cell 
power modules, new methods for the production of biofuels, and artificial hearts. 
Prior to this, R&D aid was exempted from the obligation of prior notification only if it was directed at 
SMEs. 
Of which 256 were introduced in 2009 and 142 in 2010. 

EN 

13 

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New R&D and Innovation state aid measures, EU-27, 2004-2010

300

250

200

150

100

50

0

2004

2005

2006

2007

2008

2009

2010

Notifiable measures approved by the Commission

Block exempted measures introduced by Member States

As regards the type of supported activities, out of the R&D&I block-exempted measures put 
into  force  under  the  GBER,  100  provided  aid  for  fundamental  research,  299  for  industrial 
research  and  290  for  experimental  development.  As  regards  the  GBER  objectives,  109 
measures referred to industrial property rights for SMEs, 54 to young innovative enterprises, 
115 to technical feasibility studies, 79 to innovation advisory and support services, 54 to R&D 
in the agricultural and fisheries sectors and 39 to the loan of highly qualified personnel.  

The box below provides examples of measures implemented in two Member States to boost 
R&D&I  investments.  The  first  one  is  a  block  exempted  measure  implemented  by  Spain 
addressed to the automotive sector and the second one is a French individual aid concerning 
technologies  for  motor  biofuels  which  includes  certain  compensatory  measures  to  outweigh 
the distortion of competition.  

Competiveness plan of the automotive sector (X 59/2009, Spain) 

In  2009,  Spain  communicated  to  the  Commission  a  block  exempted  measure  aiming  to  improve  the 
competiveness  of  the  automotive  sector.  It  covered  aid  for  environmental  purposes,  for  R&D  and 
innovation  activities  and  for  training.  The  overall  budget  was  EUR  800  million  for  the  financing  of 
investments realised in 2009.  

As regards R&D&I, aid could be granted for experimental development and for technical feasibility 
studies. Beneficiaries could be SMEs and large enterprises. In line with the provisions of the GBER, 
SMEs benefited from an aid intensity bonus. Aid was granted in the form of grants and soft loans. 

In 2009, aid under this scheme (EUR 194 million) represented more than two-thirds of State aid for 
R&D&I  granted  in  Spain  under  block  exempted  measures  and  around  20  %  of  total  R&D&I  aid 
granted in the EU under block exempted measures.  

Gaya Project (N 493/2009, France) 

In 2009, France notified to the Commission its intention to implement the Gaya research programme 
which  aimed  to  develop  technologies  for  the  production  of  second-generation  motor  biofuels.  The 
GDF  SUEZ  group,  the  project  leader,  and  its  partners  planned  to  develop  a  pre-industrial  R&D 

EN 

14 

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demonstration plant to test biomass gasification processes throughout the production chain. This plant 
is intended to be used as part of a collaborative R&D programme for use in a subsesquent industrial 
stage. The expected total budget was EUR 46.5 million for the seven-year duration of the project. 

Following an in-depth examination, in 2010 the Commission authorised aid of EUR 18.9 million for 
the  programme.  It  found  that  the  R&D  project  would  generate  substantial  benefits  in  terms  of 
dissemination of scientific knowledge and environmental protection, land use planning, and reduction 
of  Europe's  energy  dependency.  However,  because  the  potential  commercial  benefits  of  the  GAYA 
project  were  not  expected  before  2020-2030,  the  project  required  public  funding.  The  Commission 
was particularly concerned that the allocation of future intellectual property rights among GDF Suez 
and its partner research bodies would not distort competitive conditions in the biomethane market in 
the future. GDF Suez undertook to forego the exclusive rights that could be granted to it by its partners 
over  their  technologies.  The  distortions  of  competition  caused  by  the  aid  would  therefore  remain 
limited, in particular because the future demonstration plant will be open to other stakeholders in the 
sector. Finally, the presence of major European competitors and the fact that the project was different 
from other expected technologies made it possible to maintain competitive pressure in energy markets. 
The  aid  was  granted  under  an  aid  scheme  of  the  French  Environment  and  Energy  Management 
Agency which was authorised by the Commission in March 2010. 

3.4. 

Expenditure on R&D&I 

As mentioned above, the Innovation Union flagship initiative foresees a EU-wide target of 3 
% of the EU’s GDP (public and private expenditure, combined) being invested in R&D&I.  

In 2009, R&D expenditure in the EU stood at a record 2.01 % of GDP (around EUR 236.5 
billion)27, slightly higher than in 2008 (1.92 %) but still far from the target set by theEurope 
2020 Strategy28.  

There  were  also  vast  differences  between  Member  States.  While  three  Member  States 
exceeded  the  3  %  target29,  only  three  other  Member  States  exceeded  the  EU-average30  and 
nine Member States31 did not even reach 1 % of GDP with their combined public and private 
R&D expenditure.  

The government sector was the source of funds for around one third of total R&D expenditure 
in the EU (0.65 % of GDP). State aid represented a relatively small share of this total (13 %), 
equal  to  EUR  10.6  billion  or  0.09  %  of  GDP  in  2009  (EU  average).  Nine  Member  States 
awarded R&D&I State aid above the EU average: Belgium (0.22 %), Slovenia (0.19 %), the 
Czech Republic (0.18 %), Luxembourg (0.16 %), Finland (0.14 %), Spain (0.13 %), France 
(0.11  %),  Austria  (0.11  %)  and  Hungary  (0.10  %).  On  the  other  hand,  six  Member  States 
(Cyprus, Slovakia, Greece, Latvia, Poland and Estonia) granted only 0.01 % or less of their 
GDP as State aid to R&D&I.  

27 
28 

29 

30 
31 

Source: Eurostat. 
The US spend 2.6 % and Japan 3.4 %. In comparison to some emerging economies, the EU has a strong 
lead  but  countries  like  China  and  Brazil  are  closing  the  gap  with  the  EU.  See  chapter  4  of  the 
Innovation Union Scoreboard 2010.  
Finland, Sweden and Denmark exceeded the EU goal of channelling 3 % of GDP into R&D, with 3.96 
%, 3.6 % and 3.02 % respectively. Data for 2009; source: Eurostat. 
Germany (2.82 %), Austria (2.75 %) and France (2.21 %). 
Lithuania  (0.84  %),  Poland  (0.68  %),  Greece  (0.58  %),  Malta  (0.54  %),  Bulgaria  (0.53  %),  Slovakia 
(0.48 %), Romania (0.47 %), Latvia (0.46 %) and Cyprus (0.46 %). 

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Almost  60  %  of  total  R&D&I  State  aid  in  2009  was  granted  by  three  Member  States: 
Germany (EUR 2.5 billion, 24 % of the EU total), France (EUR 2.2 billion, 20 %) and Spain 
(EUR 1.4 billion, 13 %). 

Expenditure on R&D as % of GDP, 2009

Finland

Sweden

Denmark

Germany

Austria

France

EU 27

Belgium

United Kingdom

Slovenia

Netherlands

Ireland

Luxembourg

Portugal

Czech Republic

Estonia

Spain

Italy

Hungary

Lithuania

Poland

Greece

Malta

Bulgaria

Slovakia

Romania

Latvia

Cyprus

0

0.5

1

1.5

2

2.5

3

3.5

4

R&D aid

government sector's expenditure on R&D

Gross domestic expenditure on R&D

% of GDP

Block exempted aid reported as R&D&I aid amounted to around EUR 1 billion in 2009. This 
represented  9  %  of  total  aid  granted  to  the  same  objective.  Spain  (EUR  282  million),  Italy 
(EUR  267  million)  and  Belgium  (almost  EUR  130  million)  made  the  most  use  of  this 
instrument.  Member  States  generally  used  four  (out  of  nine)  GBER  objectives  in  this  area: 
experimental  development  (Art.  31.2.c  GBER,  EUR  428  million),  industrial  research  (Art. 
31.2.b  GBER,  EUR  312  million),  technical  feasibility  studies  (Art.  32  GBER,  EUR  65 
million)  and  aid  for  industrial  property  rights  costs  for  SMEs  (Art.  33  GBER,  EUR  53 
million).  

In 2009, State aid for R&D&I was granted under approximately 420 measures (of which 137 
were  block  exempted)  but  the  six  largest  schemes  (all  approved  by  the  Commission) 
accounted for a quarter of total expenditure. These measures together with 13 other schemes 
(two of them block exempted) accounted for almost half of total R&D&I State aid granted in 
the EU. Among these top 19 measures, there were 5 French, 3 German, 3 Spanish, 3 Italian, 2 
British, 1 Belgian, 1 Finnish and 1 Austrian scheme. 

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Over the long-term, the trend shows a steady increase of R&D&I aid both in relative and in 
nominal  terms.  It  increased  between  2004  and  2009  from  0.05  %  (EUR  5.7  billion)  of  EU 
GDP  to  0.09  %  in  2009.  In  this  period,  more  than  half  of  the  total  EUR  46.5  billion  of 
R&D&I aid granted was spent by two Member States: Germany (29 %) and France (22 %) 
while five Member States accounted for another third of the total: Italy (11 %), Spain (9 %), 
the United Kingdom (7 %), Belgium (5 %) and the Netherlands (4 %). 

Member  States  predominantly  granted  State  aid  for  R&D&I  under  schemes  rather  than 
through ad hoc individual measures. In 2009, State aid granted under schemes accounted for 
98  %  of  the  total  while  ad  hoc  measures  were  responsible  for  the  remaining  2  %.  These 
proportions have remained stable over the last six years.  

As regards aid instruments, the most frequently used in 2009 was direct grants (roughly 80 % 
of the total) followed by soft loans32 (11 %) and tax exemptions (9 %). Other instruments, like 
equity  participations,  tax  deferrals  or  guarantees  do  not  play  any  important  role.  Spain  and 
France were responsible for more than 70 % of aid in the form of soft loans while Belgium 
and the United Kingdom accounted together for almost 85 % of tax exemptions for R&D&I. 

3.5. 

State aid and innovation performance  

Comparing  the  levels  of  State  aid  granted  by  Member  States33  with  their  performance  in 
innovation34,  it  is  observed  that  there  is  no  direct  link  between  the  two  variables.  The 
innovation  performance  indicator  comprises  many  dimensions  which  include,  in  addition  to 
the level of expenditure on R&D (public and private), for example youth education attainment 
level,  broadband  access  by  firms,  community  trademarks  per  million  population.  All  these 
dimensions  contribute  to  the  innovation  performance  of  a  country.  This  shows  the  different 
options  that  Member  States  have  to  trigger  R&D&I;  State  aid  is  only  one  of  the  available 
tools.  

Member  States  like  Sweden,  Germany  or  Denmark,  which  are  in  the  group  of  innovation 
leaders, granted State aid (in relative terms, as percentage of GDP) equal to or below the EU 
average.  However,  Finland  –  also  an  innovation  leader  –  granted  State  aid  above  the  EU 
average.  In  all  these  cases,  government  expenditure  in  R&D&I  was  higher  than  the  EU 
average35.  

32 
33 
34 

35 

For the purposes of annual reporting for State aid, soft loans also includesrepayable advances.  
The comparison is static and takes into account only the levels of State aid granted in 2009. 
The  Innovation  Union's  performance  scoreboard  for  Research  and  Innovation  (1  February  2011) 
classifies Member States in four categories: Innovation leaders (Denmark, Finland, Germany, Sweden), 
innovation  followers  (Austria,  Belgium,  Cyprus,  Estonia,  France,  Ireland,  Luxembourg, 
the 
Netherlands,  Slovenia  and  the  United  Kingdom),  moderate  innovators  (the  Czech  Republic,  Greece, 
Hungary, Italy, Malta, Poland, Portugal, Slovakia and Spain), and modest innovators (Bulgaria, Latvia, 
Lithuania and Romania). 
As a percentage of GDP 

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EU Member States' innovation performance and level of State aid to 
R&D (as %  of GDP)

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0

LV BG LT RO SK PL HU MT EL ES CZ IT PT EE SI CY EU
27

FR LU IE NL AT BE UK DE FI DK SE

Innovation performance (scale: 0 - 1) R&D aid as % of GDP

Of  the  group  of  innovation  follower  countries,  in  most  of  the  Member  States,  the  level  of 
State  aid  is  above  or  close  to  the  EU  average  (0.09  %  of  GDP  in  2009).  Only  the  United 
Kingdom, Estonia and Cyprus show a low share of State aid to R&D&I (below half of the EU 
average).  Apart  from  Hungary,  Spain  and  the  Czech  Republic  which  granted  aid  above  the 
EU average, the rest of the countries in the moderate or modest innovator groups granted low 
levels of State aid to R&D&I (below the EU average).  

3.6. 

Conclusion on State aid for R&D&I 

Europe still has to make important progress to achieve the European target of spending 3 % of 
EU  GDP  on  R&D&I  by  2020.  The  quantitative  target  has  also  to  be  accompanied  by 
structural  reforms  to  improve  the  environment  and  general  conditions  for  private  sector 
research  and  development.  In  the  "Europe  2020  Flagship  initiative  Innovation  Union",  the 
Commission describes what in its view Europe has to do to improve conditions and access to 
finance for R&D&I, to face new challenges of our society and to ensure that innovative ideas 
are turned into products and services that create growth and jobs. State aid rules provide a set 
of additional tools to address these challenges. 

The main role of State aid for R&D&I is to provide funding when markets themselves do not 
reach optimal R&D&I levels due to imperfections in their functioning. Member States which 
are  considered  to  be  innovation  leaders  are  not  necessarily  those  where  most  R&D&I  State 
aid is granted.  

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4. 

STATE AID FOR ENVIRONMENTAL PROTECTION  

4.1. 

Policy context 

Natural  resources  underpin  the  functioning  of  the  European  and  global  economy  and  our 
quality of life. Intensive use of the world's resources puts pressure on our planet and threatens 
the security of supply of those resources. Therefore, there is a need to change the current use 
of  resources  in  favour  of  a  resource-efficient,  low-carbon  economy  to  achieve  sustainable 
growth.  

Against this background, the Europe 2020 Strategy has highlighted "sustainable growth"36 as 
one of the main priorities for the coming years: concrete targets37 have been set and a long-
term  framework  for  actions  is  provided  in  the  flagship  initiative  for  "A  resource-efficient 
Europe".  

The  long-term  framework  foresees  a  mix  of  coordinated  actions  in  a  number  of  areas38, 
supporting  policy  agendas  for  climate  change,  energy39,  transport,  industry,  raw  materials, 
agriculture, fisheries, biodiversity and regional development which will contribute to: 

– 

– 

– 

– 

Boosting economic performance while reducing resource use; 

identifying  and  creating  new  opportunities  for  economic  growth  and  greater 
innovation and boosting the EU's competitiveness; 

ensuring security of supply of essential resources; 

fighting  against  climate  change  and  limiting the  environmental  impacts  of  resource 
use.  

Many  of  these  objectives  are  targeted  through  regulatory  or  general  measures  which  do  not 
entail  State  aid.  Furthermore,  according  to  the  provisions  of  Article  191  TFEU  40,  the 
environmental  actions  of  the  EU  shall  be  based  on  the  precautionary  principle  that 
environmental damages should as a priority be rectified at source and that the polluter should 
pay,  whichimplies  the  full  internalisation  of  environmental  costs  by  the  polluters  and  hence 
does not entail State aid.  

Indeed,  as  the  "A  resource-efficient  Europe"  initiative  states,  "resources  are  often  used 
inefficiently because the information about the true costs to society of consuming them is not 
available  with  the  result  that  businesses  and  individuals  cannot  adapt  their  behaviour 
accordingly".  In  certain  cases,  in  the  absence  of  government  intervention,  undertakings  can 
avoid  bearing  the  full  cost  of  the  environmental  harm  arising  from  their  activities  and  as  a 
result, the market fails to allocate resources in an efficient manner, which results in companies 

36 

37 

38 

39 
40 

Communication on "A resource-efficient Europe – Flagship initiative under the Europe 2020 Strategy", 
COM(2011) 21 final. 
Reduce  greenhouse  gas  emissions  by  at  least  20  %  compared  to  1990  levels  or  by  30  %  if  certain 
conditions are met (notably an international agreement on binding emission reduction targets); increase 
the share of renewable energy sources in our final energy consumption to 20 %; and a 20 % increase in 
energy efficiency. 
The  development  of  coordinated  roadmaps  is  foreseen  in  the  flagship  initiative  "A  resource-efficient 
Europe".  
See conclusions on energy of the European Council meeting on 4/2/2011.  
Art. 191 of the Treaty on the functioning of the European Union, OJ C 83 of 30.03.2010.  

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not changing their behaviour towards more environmental protection. In such situations, State 
aid can serve to respond to the market failure linked to negative environmental externalities. 

Incentives for companies to increase environmental protection and internalise their costs can 
be introduced for instance through market-based instruments41 (hereinafter, MBI e.g. taxation) 
and/or regulation (e.g. mandatory EU standards). Public support, including State aid, may also 
play  a  role  when  market  failures  prevent  companies  from  achieving  more  environmental 
protection and when other market based instruments cannot be used42.  

The  primary  objective  of  State  aid  control  in  the  field  of  environmental  protection43  is  to 
ensure that State aid measures will result in a higher level of environmental protection than 
would  occur  without  the  aid  and  to  ensure  that  the  positive  effects  of  the  aid  outweigh  its 
negative effects, notably distortions of competition and affectation of trade between Member 
States.  

4.2. 

State aid rules for environmental protection  

The  current  Guidelines44  governing  State  aid  for  environmental  protection  were  part  of  the 
2008  Climate  Change  Package.  They  were  drafted  to  ensure  the  implemention  of  State  aid 
control in the context of the environmental and energy policies of the EU. These have been 
complemented  by  the  GBER  which  included  for  the  first  time  in  a  block  exemption 
regulation, specific provisions for environmental protection.  

Guidelines on State aid for environmental protection 

Under  the  current  Environmental  Aid  Guidelines  ,  which  entered  into  force  in  April  2008,  the 
Commission  elaborates  on  compatibility  rules  by  considering  some  usual  aid  measures  for 
environmental  protection.  Other  types  of  aid  measures  may  also  be  declared  compatible  but  will  be 
assessed  directly  on  the  basis  ofArticle  107  TFEU  (balancing  test  between  positive  and  negative 
effects).  

For instance, the guidelines encourage Member States to support the production of renewable energy 
and energy efficient cogeneration by allowing them to grant operating aid to renewable energy or CHP 
(cogeneration  of  heat  and  electricity)  producing  companies,  covering  the  full  difference  between 
production costs and market price. In addition, there are provisions for aid for early adaptation to EU 
standards,  aid  for  environmental  studies,  aid  for  district  heating,  aid  for  waste  management  and  aid 
involved in tradable permit schemes.  

As  regards  tax  reductions,  the  guidelines  declare  energy  tax  reductions  compatible  as  long  as  after 
reduction, the companies concerned pay at least the EU minimum tax level (and such tax reductions 
are  block  exempted,  see  below).  Where  the  companies  do  not  pay  at  least  the  EU  minimum,  tax 
exemptions  may  still  be  declared  compatible  with  the  internal  market  but  the  Member  State  must 
demonstrate that it does not undermine the general environmental protection objective of the tax and 
that these derogations are necessary and proportionate.  

41 

42 
43 

44 

Such  as  tradable  permit  schemes  etc.  The  Commission  announced  in  the  Europe  2020  Strategy  its 
commitment to enhance the use of MBI.  
Such as certain exemptions to the Energy Tax Directive. 
It  is  important  to  note  that  the  Europe 2020  Strategy  includes, within  its  "Resource  efficient  Europe" 
flagship initiative, a call on Member States "to phase out environmentally harmful subsidies, limiting 
exceptions to people with social needs". Environmentally harmful subsidies also concern measures that 
do  not  constitute  State  aid,  and  the  ongoing  discussion  on  the  phasing  out  of  such  subsidies  is  not 
limited to State aid issues.  
Guidelines on state aid for environmental protection OJ C 82 of 01.04.2008, p. 1.  

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The  guidelines  foresee  a  standard  assessment  and  a  detailed  assessment.  Measures  including 
investment aid amounts in excess of EUR 7.5 million per beneficiary, and operating aid measures with 
a specific threshold, which have the greatest potential to distort competition and trade, are subject to a 
detailed assessment.  

General Block Exemption Regulation (GBER) 

The GBER includes for the first time in a block exemption regulation provisions concerning aid for 
environmental  protection  and  energy  saving.  Rules  are  aligned  with  the  guidelines  on  State  aid  for 
environmental protection. A notable difference between the guidelines and the GBER is however that 
the GBER generally foresees a simplified cost calculation methodology. 

The  Regulation  allows  authorities  to  grant  a  number  of  aid  measures  favouring  environmental 
protection  or  tackling  climate  change  under  certain  conditions.  Such  measures  include,  amongst 
others, investments in energy savings, investments in renewable energy sources and aid in the form of 
environmental  tax  reductions  from  the  harmonised  energy  taxation  without  the  obligation  of  prior 
notification to the Commission.  

When  certain  individual  notification  thresholds  are  exceeded  or  the  conditions  of  the  GBER  are  not 
fulfilled, aid still needs to be notified to the Commission individually in order for the Commission to 
analyse the effects on competition and contribution to the common interest.  

4.3. 

State aid decisions on environmental protection and case studies 

In  the  period  2004-2010,  the  Commission  took  347  final  decisions  on  State  aid  for 
environmental protection i.e. energy saving or other environmental protection objectives. This 
included 320 compatible aid decisions, 21 no aid decisions and 6 negative decisions.  

The  large  majority  of  the  decisions  taken  (slightly  above  82%)  concerned  schemes,  6% 
concerned the individual application of a scheme and 11% related to ad hoc measures. Five 
Member  States  accounted  for  a  half  of  the  decisions  taken:  Italy  (44),  Germany  (38),  the 
Netherlands (36), the United Kingdom (33) and the Czech Republic (26).  

Almost  140  decisions  were  taken  in  years  2006-2007,  prior  to  the  entry  into  force  of  the 
environmental  aid  guidelines  and  the  GBER.  The  detailed  economic  assessment  was 
introduced  in  April  2008  in  the  environmental  aid  guidelines,  and  10  positive  detailed 
assessment decisions have been taken by the Commission in the period until the end of 2010.  

Member  States  introduced  219  block  exempted  measures  of  which  194  were  schemes.  The 
highest numbers of schemes were introduced by Germany (40), Italy (39), Spain (38) and the 
United Kingdom (21). As to the detailed objectives pursued by these aids, the most popular 
one  was  the  promotion  of  energy  from  renewable  energy  sources  (Art.  21  of  the  General 
Block Exemption Regulation), that existed (as a single objective or one of the objectives) in 
120  block  exempted  measures.  It  was  followed  by  investments  in  energy  saving  measures 
(Art.  21  GBER,  101  measures),  investment  aid  enabling  undertakings  to  go  beyond  EU 
standards for environmental protection (Art. 18 GBER, 71 measures), aid for environmental 
studies  (Art.  24,  61  measures)  and  investment  aid  for  high  efficiency  cogeneration  (Art.  22 
GBER, 58 measures). The other GBER objectives played less important roles45. 

45 

Art. 19 – 42 measures, Art. 20 – 25 measures, Art. 25 – 7 measures. 

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New environmetal protection and energy saving state aid 
measures, EU-27, 2005-2010

140

120

100

80

60

40

20

0

2004

2005

2006

2007

2008

2009

2010

Notifiable measures approved by the Commission

Block exempted measures introduced by Member States

The  box  below  shows  examples  of  particular  measures  implemented  in  two  Member  States 
with the objective to improve environmental protection. The first one is a German measure to 
support  a  project  for  the  separation  and  recycling  of  CO2  emissions  in  the  steel  production 
process. The second example relates to a tax measure for the cement industry implemented in 
Denmark.  

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Top Gas Recycling (TGR) Project - Aid to ArcelorMittal Eisenhüttenstadt GmbH (Germany, N 
450/2009) 

In  2009,  Germany  notified  to  the  Commission  its  intention  to  grant  aid  to  ArcelorMittal 
Eisenhuettenstadt  GmbH  (hereafter  AMEH),  to  support  the  deployment  of  the  Top  Gas  Recycling 
(TGR) demonstration project. TGR is an innovative and environmentally-friendly process that enables 
the separation of CO2 from other emission gases as they come out of the furnace and recycles the CO2-
free emissions for the production of steel, resulting in energy savings. TGR is a technology which had 
not yet been implemented in practice on an industrial scale. As the aid amount of EUR 30.18 million 
exceeds the threshold of EUR 7.5 million for one undertaking foreseen for investment aid, a detailed 
assessment was conducted on the basis of the positive and negative elements of the aid in questions.  

The Commission considered that the aided project had environmental benefits, hence contributing to 
achieving  Climate  Change  targets.  The  project  was  not  expected  to  lead  to  significant  distortion  of 
competition and the aid had an incentive effect. Furthermore, the measure met the formal criteria of 
proportionality. The aid intensity of 55 % was below the maximum allowable aid intensityof 60 % of 
eligible costs (with CO2 costs savings not being accounted for in line with the EAG). The Commission 
noted  that  given  the  risks  related  to  the  TGR  project,  and  the  impact  of  the  aid  on  the  markets  the 
Commission  could  in  this  case  accept  the  proposed  aid  amount.  The  Commission  approved  the 
measure on 9 March 2010. 

Tax exemptions for cement producers (Denmark, N 327/2008 and C 30/2009)  

In June 2008, Denmark notified to the Commission two environmental tax reliefs from environmental 
taxes for the cement industry: one from the newly introduced tax on nitrogen oxide (NOx) and a full 
exemption from the existing waste tax on certain waste from cement production. 

According  to  the  environmental  guidelines,  aid  in  the  form  of  reductions  of  or  exemptions  from 
environmental  taxes  will  be  considered  compatible  with  the  internal  market  provided  that  it 
contributes at least indirectly to an improvement in the level of environmental protection and that the 
tax reductions and exemptions do not undermine the general objective pursued. As regards the NOX 
tax reduction, there is an indirect environmental benefit stemming from the fact that the general tax 
level  can  be  higher  than  it  would  be  without  the  reduction.  As  regards  the  risk  of  undermining  the 
general objective pursued, Denmark tried to keep the reduction to a minimum by limiting the number 
of  beneficiaries  and  requiring  that  the  beneficiary  still  pays  53  %  of  the  full  tax.  The  Commission 
considered  that  the  measure  was  necessary  and  proportionate  and  approved  the  proposed  NOx  tax 
reduction on 28 October 2009. 

However, with respect to the full exemption from the waste tax, the Commission had doubts about the 
necessity and proportionality of the tax exemption, in particular since the full exemption would leave 
the  company  with  no  incentive  to  contribute  to  the  environmental  objective  of  the  waste  tax.  The 
Commission opened a formal investigation procedure on 28 October 2009 (now case C 30/2009) and 
invited third parties to provide comments. A final decision has not yet been adopted.  

4.4. 

State aid expenditure on environmental protection  

The Europe 2020 Strategy includes the so called '20/20/20' environmental protection targets 
concerning: reduction by 20 % of CO2 emissions, a 20 % share for renewable energy in EU 
energy  consumption  and  a  20  %  increase  in  energy  efficiency.  State  aid  can  directly  or 
indirectly  contribute  to  these  objectives,  in  particular  when  it  tackles  market  failures  or 
complements  insufficient  incentives  towards  more  environmental  protection  (e.g.  general 
regulatory measures). 

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As  explained  above,  not  all  public  support  measures  constitute  State  aid,  for  instance  the 
general  taxation  measures  do  not  as  they  are  not  selective.  The  figures  below  only  concern 
support measures that do constitute State aid.  

In  2009,  state  aid  relating  to  environmental  protection  amounted  to  EUR 13.2 billion  (of 
which, 93 % or EUR 12.2 billion corresponds to environmental protection other than energy 
saving and only 7 % or EUR 0.97 billion to energy saving). In relative terms, environmental 
aid represented 22.6 % of total aid for industry and services or 0.11 % of EU-27 GDP.  

Only six Member States granted more than the EU average: Sweden (0.66 % GDP), Germany 
(0.23 %), Denmark (0.19 %), Finland (0.19 %), the Netherlands (0.19 %) and Austria (0.13 
%). In nominal terms, the largest grantors were Germany (EUR 5.7 billion, 43 % of the EU 
total), Sweden (EUR 1.9 billion, 14 %), the United Kingdom (EUR 1.2 billion, 9 %) and the 
Netherlands (EUR 1.1 billion, 8 %). 

Environmental  aid  covers  a  wide  range  of  objectives,  including  support  measures  for 
renewable  energy,  energy-saving,  waste  management  and  remediation  of  contaminated  sites 
and  improvement  of  production  processes.  For  these  types  of  measures,  aid  granted  by 
Member  States  pursues  a  direct  benefit  to  the  environment.  State  aid  expenditure  can 
therefore be taken as a proxy to indicate the intended environmental benefit. This represented 
35.5  %  of  environmental  aid  in  2009,  equal  to  around  EUR 4.7 billion.  The  largest 
contributors to this amount were: Spain (EUR 828 million), the United Kingdom (EUR 746 
million),  Austria  (EUR  358  million)  and  two  Scandinavian  Member  States:  Denmark  (EUR 
362 million) and Sweden (EUR 343 million). 

A second category of State aid measures covered under the environmental aid guidelines are 
reductions  or  exemptions  from  environmental  taxes.  Expenditure  under  this  category  of  aid 
scheme indicates the amount of tax revenue foregone and can therefore not serve as a proxy 
measure of the environmental benefit which the taxes themselves have brought. In 2009, 56.1 
% of environmental aid, equal to around EUR 7.4 billion, fell under this category. Within this 
total,  Germany  granted  the  most  (around  EUR  5  billion),  followed  by  Sweden  (EUR  1.6 
billion), the  United  Kingdom  (EUR  0.4 billion), Finland  (EUR 0.2 billion), Denmark (EUR 
58 million) and Slovakia (EUR 31 million). 

Since  the  environmental  guidelines  introduced  new  elements  to  the  necessity  and 
proportionality test for tax exemptions below EU minimum tax levels (harmonised taxes), the 
Commission  has  approved  only  one  such  tax  exemption  case  concerning  Denmark  (N 
327/2008,  see  description  above)46.  Member  States  have  however  to  adopt  appropriate 
measures to bring existing tax reductions in line with the environmental guidelines before 31 
December  2012,  including  when  taxes  are  below  EU  minimum  levels.  Therefore  the 
Commission may receive notifications of further cases by the end of 2012. 

Block exempted aid for environmental protection that can collectively be classified as having 
a direct benefit to the environment amounted to EUR 732 million in 2009, corresponding to 
around 6 % of total aid for environmental objectives (which is relatively low, in comparison 
to the share for the other horizontal objectives). Member States generally used three (out of 
eight) GBER objectives in this area: the promotion of energy from renewable energy sources 
(Art.  23  GBER,  EUR  341  million),  investments  enabling  an  undertaking  to  go  beyond  EU 

46 

In  addition,  there  was  one  negative  decision  without  recovery  concerning  a  Dutch  case:  Exemption 
from environmental taxes for ceramic producers (C 5/2009). 

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standards for environmental protection (Art 18 GBER, EUR 188 million) and investments in 
energy saving measures (Art. 21 GBER, EUR 116 million). 

The share of block exempted aid in the field of environment is particularly low mainly as a 
result of a small number of tax exeption schemes approved in the past which are so significant 
in terms of monetary value that they continue to account for most of the State aid granted in 
this field. Almost half (47 %) of the block exempted aid granted in this field was granted by 
Germany, with Spain and Belgium together accounting for a further 44 %.  

Looking into the trend for State aid expenditure for environmental protection comparing two 
consecutive periods 2004-2006 and 2007-2009 we can notice that it decreased both in relative 
terms (as a percentage of GDP - from 0.12 % GDP to 0.11 % GDP) and in nominal terms by 
EUR  0.6  billion  per  year,  on  average.  Also  its  share  in  the  total  State  aid  to  industry  and 
services decreased from 25.5 % to 23.3 %.  

Several  reasons  can  justify  the  decrease.  The  first  one  is  the  effect  of  the  market  based 
incentives already implemented through which operators internalise their environmental costs 
and no State aid is needed. Another element which contributes to the reduction of State aid is 
the  higher  EU  environmental  standards:  adaptation  to  EU  standards  is  compulsory  for 
operators  and  they  have  the  obligation  to  respect  them  without  any  public  support.  Finally, 
budgetary constrains due to the crisis might also have had an impact on the public expenditure 
earmarked for environmental protection, at least in the second period identified above. 

Over  the  period  2004-2009,  when  EUR  79  billion  was  granted  as  environmental  aid  in  the 
EU, Germany and Sweden (and their tax exemptions) accounted for respectively 51 % and 16 
% of the total. A tax exemption from the energy tax on electricity for the manufacturing sector 
has been the most significant aid expenditure for Sweden from 2005 onwards and represents 
more than half of the environmental aid in Sweden47. In Germany, expenditure rose steadily 
up to 2006 following the approval in 2002 of measures that prolonged several tax exemptions 
from the German energy taxation on electricity and mineral oils. Following modifications to 
these  tax  exemptions  in  Germany,  aid  granted  under  environmental  tax  exemption  schemes 
fell  significantly,  by  EUR 3.2 billion  between  2006  and  2009.  In  2009,  one  third  of  all 
environmental aid in Germany was granted under a tax measure addressed to energy intensive 
users in the manufacturing sector.  

Almost  all  aid  for  environmental  protection  is  granted  under  schemes.  Between  2004  and 
2009, individual ad hoc aid for thatobjective accounted for less than 0.5 % of the total. As to 
the preferred aid instruments, tax exemptions were chosen first, accounting for 77 % of total 
State  aid  granted  for  environmental  protection  between  2004  and  2009,  followed  by  direct 
grants (23 %). 

4.5. 

Conclusion on State aid for environmental protection and energy saving 

In  light  of  the  Europe  2020  Strategy,  State  aid  may  be  necessary  to  achieve  the  EU 
environmental objectives that cannot be achieved through market-based incentives or through 
regulation. The role of State aid control is to ensure that aid for an environmental objective 
does not unduly distort competition. 

47 

"Energy tax for the manufacturing sector" (cases, N 156/2004 and N 596/2005).  

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State  aid  control  can  also  accompany  further  the  harmonisation  of  support  schemes  across 
Member States towards a European internal market for energy. State aid control may play a 
role  in  particular  to  increase  harmonisation  of  support  to  renewables  to  limit  competition 
distortions  between 
in  different  Member  States  and  avoid 
overcompensation in the coming years. 

renewables  produced 

5. 

STATE AID FOR REGIONAL DEVELOPMENT  

5.1. 

Policy context  

By  addressing  the  handicaps  of  the  disadvantaged  regions,  regional  State  aid  promotes  the 
economic,  social  and  territorial  cohesion  of  Member  States  and  the  Union  as  a  whole, 
contributing in this way towards the Europe 2020 goals. In this sense, regional aid is different 
to other types of aid, as it is mainly intended to address a cohesion disequilibrium rather than 
market failures only. 

Regional  State  aid  control  must  be  differentiated  from  EU  Cohesion  policy.  Regional  State 
aid in fact focuses more on disadvantaged areas than EU regional policy, which has at present 
broader policy objectives and a wider spatial coverage. The main objective of regional State 
aid  is  to  address  territorial  imbalances  in  terms  of  wealth  and  employment  (concentration 
effect)  by  acting  as  an  incentive  to  locate  economic  activities  in  assisted  areas  (mitigated 
against other factors such as labour costs, access to markets, tax, productivity, etc.). Regional 
aid allows a Member State to support new investments which contribute to local job creation 
and spinoffs through the indirect stimulation of economic activity (leverage effect). 

EU  Cohesion  policy  aims  at  reducing  disparities  between  the  levels  of  development  of  the 
various regions and the backwardness of the least favoured regions. . It finances a wide range 
of  actions,  from  infrastructure  (transport,  telecom,  energy,  social)  to  human  capital.  The 
expenditure  category  "Support  to  enterprise  and  innovation",  which  is  the  most  directly 
related  to  direct  business  support  and  therefore  includes  State  aid,  represents  20 %  of  total 
Cohesion policy spending. Only a fraction of Cohesion policy funding is covered by State aid 
rules as the majority of structural funds spending relates to activities which do not fall within 
the  definition  of  State  aid,  for  example  general  infrastructure.  Furthermore,  direct  financial 
support to enterprises can cover various forms (e.g. grants, risk capital, loans) and purposes 
(e.g. innovation, environment, training, etc.). A significant share of the State aid granted in the 
context of Cohesion policy is therefore not directly related to regional investment aid within 
the meaning of the RAG, but falls under other State aid rules (e.g. R&D&I, environment, risk 
capital, etc.). 

Regional State aid has a wide spectrum of application which ranges from measures benefitting 
the  whole  of  the  regional  economy  such  as  general  support  measures  for  undertakings  in 
assisted  areas  (e.g.  start-up  aid,  investment  aid)  to  individualised  State  aid  for  large 
investment  projects  (LIP),  which  is  potentially  more  distortive  and  for  which  aid  intensities 
are automatically scaled down. 

However, regional aid can only play an effective role if it leads to sustainable activities and is 
concentrated on the most disadvantaged regions of the Union. Furthermore, the advantages of 
the aid in terms of regional development of a less favoured region must outweigh the resulting 
distortions of competition, i.e. the level of risk of a crowding out effect of competitors from 
the  market  caused  by  the  aid  granted  to  a  particular  beneficiary  or  a  limited  group  of 
beneficiaries.  

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As part of the EU State aid rules, the Commission has the sole authority to decide on regional 
development  aid,  based  on  its  assessment  of  the  compatibility  with  the  internal  market.  In 
contrast to this, the structural funds must be used in line with Operational Programmes which 
are  proposed  by  each  Member  State  in  cooperation  with  the  Commission.  Their 
implementation is ensured by the national managing authorities which, in accordance with the 
General Structural Funds Regulation48 are responsible for ensuring compliance with all Union 
policies including State aid rules. Non-respect of the State aid rules constitutes an irregularity 
under that Regulation which can lead to a recovery of the EU co-financing. Major projects, 
which concern projects with eligible costs exceeding EUR 50 million, have to be submitted 
formally to the Commission49. Subsequently, the Commission decides on co-financing taking 
into account all Union policies.  

5.2. 

Rules on State aid for regional development 

The Regional Aid Guidelines (RAG) lay down the criteria applied by the Commission when 
examining the compatibility of regional State aid with the internal market. The RAG take into 
account  the  relative  seriousness  of  the  problems  affecting  the  development  of  the  regions 
concerned  by  introducing  specific  regional  aid  ceilings  which  reflect,  in  essence,  the 
balancing  exercise  which  the  Commission  must  perform  between  the  positive  and  negative 
effects of the aid.  

As  announced  in  the  RAG,  the  Commission  adopted  in  2009  a  communication  setting  out 
criteria  for  the  in-depth  assessment  of  regional  aid  to  large  investment  projects  (LIP)50,  i.e. 
projects with eligible investment costs of at least EUR 50 million in present value. Regional 
aid to LIPs in excess of certain thresholds needs to be individually notified to the Commission 
because  it  may  carry  a  greater  risk  of  distorting  competition.  In  certain  circumstances,  the 
Commission opens a formal investigation procedure and carries out an in-depth assessment51.  

Guidelines on regional aid for 2007-2013 

The  RAG  specify  the  rules  for  granting  State  aid  which  promotes  the  development  of  the  EU's 
disadvantaged regions, e.g. by supporting investment and job creation. 

To take into account the relative seriousness of the problems affecting the development of the regions 
concerned, two categories of regions are distinguished:  

– 

– 

48 

49 
50 

51 

Regions  with  less  than  75  %  of  the  EU  average  GDP  per  capita  and  outermost  regions 
(Article 107(3)(a) of the TFEU) qualify for the highest rates of aid, as well as for operating 
aid (regional aid aimed at reducing a firm’s current expenses). Aid rates vary from 30 to 50 
% of the eligible costs. 

Regions  which  Member  States  define  themselves  in  line  with  a  national  regional 
development  policy  on  the  basis  of  certain  parameters  linked  mainly  to  low  population 
density and/or particularly low GDP per capita or high unemployment (Article 107(3)(c) of 

Council  Regulation  (EC)  No  1083/2006  of  11  July  2006  laying  down  general  provisions  on  the 
European  Regional  Development  Fund,  the  European  Social  Fund  and  the  Cohesion  Fund  and 
repealing Regulation (EC) No 1260/1999 (OJ L 210, 31.7.2006, p. 1). See Arts 9 and 60. 
Art. 41 ibid.  
Communication  from  the  Commission  concerning  the  criteria  for  an  in-depth  assessment  of  Regional 
aid to large investment projects OJ C 223, 16.9.2009, p.3. 
The  Dell  Poland  case  (C  46/2008)  was  the  first  case  where  the  Commission  conducted  the  type  of 
assessment detailed in the guidance paper. 

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the  TFEU).  For  these  regions,  Member  States  can  allocate  regional  aid  at  lower  rates  (in 
principle, between 10 and 15 % of eligible costs). 

Rates can be increased in all assisted regions by 20 percentage points where the aid is given to small 
enterprises and by 10 percentage points where it is given to medium-sized enterprises. 

Although operating aid is normally prohibited, it may be granted under certain conditions. In order to 
encourage  start-up  and  early  development,  aid  can  be  granted  to  the  establishment  and  expansion 
phases  of  small  enterprises  during  the  first  five  years.  Operating  aid  is  allowed  to  counter  de-
population in the least populated areas and in the outermost regions, in order to offset the additional 
costs arising in the pursuit of economic activity due to the handicaps faced  in those regions such as 
remoteness,  insularity,  small  size,  difficult  topography  and  climate,  and  economic  dependence  on  a 
few products.  

Finally, the RAG define the rules on "large investment projects", including a 'transparency mechanism' 
for certain types of aids. 

Guidance on in-depth assessment of regional aid to LIP 

The  RAG  foresee  that  in  certain  cases  LIPs  need  to  be  individually  notified  to  the  Commission 
because  they  may  carry  a  greater  risk  of  distorting  competition.  An-depth  assessment  of  these 
measures  is  necessary  where  the  aid  beneficiary  has  a  market  share  of  more  than  25  %  or  the 
production  capacity  created  by  the  project  exceeds  5  %  of  the  market  (while  the  growth  rate  of  the 
product market concerned is below the EEA GDP growth rate). 

The guidance paper sets out the methodology for the detailed compatibility assessment of regional aid 
to  LIPs.  It  is  based  on  the  balancing  test  that  weighs  the  positive  effects  brought  about  by  the  aid 
against the negative impact of a potential distortion of competition which the aid might entail. Member 
States  have  therefore  to  provide  information  on  the  positive  effect  of  the  aid  as  well  as  its 
appropriateness, proportionality and incentive effect. 

General Block Exemption Regulation 

The  GBER  exempts  from  notification  to  the  Commission  transparent  regional  investment  and 
employment aid schemes which respect the rules on eligible expenses and the maximum aid intensities 
defined in the regional aid map for the Member State concerned. The material rules for investment aid 
are equivalent in the GBER and in the RAG, so that there is no advantage to be gained in notifying an 
aid  measure  which  is  exempted.  The  GBER  also  exempts  regional  aid  to  newly  created  small 
enterprises, which represents a new form of regional aid introduced by the RAG. 

In line with the provisions of the RAG, the GBER foresees increased aid rates for small and medium-
sized enterprises. 

Ad hoc aid granted to large enterprises is not covered by the GBER with the exception of transparent 
aid provided it is used to top-up aid granted under schemes and the ad hoc component does not exceed 
50 % of the total amount of aid. 

Individual notification of LIPs is required if certain conditions are met.  

If the conditions of the GBER are not fulfilled, aid needs to be notified and will be assessed on the 
basis of the RAG. 

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5.3. 

State aid decisions on regional aid and case studies 

In  the  period  2004-2010,  the  Commission  adopted  570  final  decisions  on  measures  for 
regional development. This included 523 compatible aid decisions, 14 no aid decisions and 33 
negative decisions. Only slightly more than a half of the decisions taken concerned schemes 
(52 %); the rest concerned ad hoc individual measures (almost 29 %) and individual aid under 
schemes  (19  %).  Six  out  of  ten  decisions  concerned  five  Member  States:  Poland  (96 
decisions), Germany (91), Italy (60), the Czech Republic (46) and France (18). 

In the same period, the Commission completed 59 detailed assessments of LIPs and one in-
depth assessment based on the guidance paper52. The relatively high share of ad hoc measures 
is explained by the number of Polish ad-hoc cases.  

The number of regional State aid measures approved per year fluctuated between 60 and 100 
in the period 2004-2009, with three peaks: in 2004 (92 measures), 2006 (96) and 2009 (86). In 
2010, there was a sharp decrease to around 50 approved measures.  

The  total  number  of  block  exempted  measures  for  regional  development  set  up  by  Member 
States amounted to 778, 97 % of which were schemes. The highest numbers of schemes were 
introduced by two Member States with decentralised competences for State aid at the level of 
the  regional  administrations:  Italy  (120)  and  Spain  (112),  followed  by  the  Czech  Republic 
(76),  Poland  (68)  and  Austria  (57).  After  a  peak  level  in  2009  when  a  total  of  266  block 
exempted measures were introduced, the figure dropped to 145 in 2010. This can be explained 
by the introduction of the new GBER in 2008 and by the fact that a significant part of regional 
aid  relates  to  Structural  Funds  operations  for  which  the  Operational  Programmes  for  the 
period 2007-2013 had been approved in the preceding years.  

Around  60  %  of  all  block  exempted  measures  for  regional  development  were  established 
under the GBER (which entered into force in 2008). In this group, schemes accounted for 96 
%.  As  regards  the  detailed  objectives  of  the  GBER,  87  %  of  the  approved  measures  were 
defined as regional aid schemes. (Art 13 of the GBER). The remaining part was shared by aid 
measures for newly created small enterprises (10 %, Art 14 of the GBER) and regional ad hoc 
aid measures (less than 4 %, Art 13.1 of the GBER). 

52 

LIP Poland - Aid to Dell Poland (C 46/2008). 

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New regional development State aid measures, 
EU-27, 2004 - 2010

300

250

200

150

100

50

0

2004

2005

2006

2007

2008

2009

2010

Notifiable measures approved by the Commission

Block exempted measures introduced by Member States

The box below shows examples of regional aid measures implemented in four Member States. 
The  first  one  is  a  German  measure  to  support  investments  in  certain  assisted  regions.  The 
second example shows a Maltese measure aimed to promote the creation of new enterprises, a 
possibility which was first introduced with the 2007-2013 RAG. The third example describes 
French measures to offset the specific handicaps facing the outermost regions. The last one is 
a large investment project implemented in Hungary. 

‘Investitionszulagengesetz 2007’ (Germany, N 357a/2006 and XR 6/2007) 

In June 2006, Germany notified to the Commission a successor scheme to the aid measures foreseen 
under  the  investment  premium  law,  which  provided  for  fiscal  support  to  investment  projects  in  the 
new German Länder and in Berlin. The initial notification concerned the application of the scheme for 
projects started both before and after 31 December 2006. 

In agreement with the German authorities, the measure was split into two parts:  

(a) aid N 357a/2006 related to initial investment projects started before 1 January 2007; 

(b)  Block  exempted  scheme  XR  6/2006  concerning  projects  started  after  31  December  2006.  This 
measure was exempted from notification and did not need to be approved by the Commission. 

The total budget foreseen for both measures is around EUR 1.74 billion.  

In  2009,  20  %  of  total  State  aid  earmarked  for  regional  aid  in  the  EU  was  granted  under  these  two 
measures:  around  11  %  under  the  scheme  N  357a/2006  and  the  rest  under  the  block  exempted 
measure. It represents around three-quarters of total regional aid in Germany.  

Aid scheme for newly created small enterprises (Malta, N 622/2007)  

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30 

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In October 2007, Malta notified to the Commission its intention to apply a scheme aimed at supporting 
the  creation  of  new,  high  value-adding  enterprises  that  demonstrate  a  potential  to  contribute  to 
regional  economic  development,  in  line  with  the  provision  for  “Aid  for  newly  created  small 
enterprises” objective of the RAG. This is a new form of aid included for the first time in the regional 
aid guidelines for the period 2007-2013. 

The scheme applies to the entire territory of Malta, which is designated under the Maltese regional aid 
map for 2007-2013 as an assisted area eligible for national regional State aid under the derogation of 
Article 107(3)(a) TFEU.  

Aid  can  be  granted  to  small  enterprises  created  less  than  three  years  before  the  date  of  application 
under the scheme and with at least three full-time equivalent employees. The Member State introduced 
a mechanism to avoid a possible misuse of aid. 

The  measure  is  only  applicable  to  certain  economic  sectors.  Aid  is  awarded  in  the  form  of  a  direct 
grant. The total grant value per beneficiary is limited to EUR 2 million and the annual amount of the 
aid can not exceed 33 % of EUR 2 million per enterprise. 

After  assessment,  the  Commission  concluded  that  the  scheme  fulfilled  the  requirements  of  the 
Guidelines on regional aid and considered it compatible with the internal market. 

Aid schemes for the French overseas departments (France, N 542/2006 and others)  

In 2007, the Commission approved ten aid schemes for the French overseas departments. The ten aid 
schemes concern exemptions from tax and social security contributions to offset the specific handicaps 
facing  the  outermost  regions  These  outermost  regions  are  eligible  under  the  derogation  of  Article 
107(3)(a) TFEU for the period 2007-2013. The ten aid schemes had previously been approved by the 
Commission under the regional aid guidelines for 2000-2006. 

Under  certain  conditions,  companies  can  also  benefit  from  investments  aid  of  up  to  60  %  for  large 
enterprises in French Guyana, and up to 50 % for large enterprises in Martinique, Guadeloupe and La 
Réunion(plus SME bonus as applicable). 

According to the RAG, operating aid can be also granted but it needs to be justified by its contribution 
to regional development and its level has to be proportionate to the additional costs resulting from the 
factors set out in Article 349 TFEU . After assessment, the Commission concluded that the total aid 
notified  is  equivalent  to  around  6.5  %  of  the  GDP  of  the  regions  concerned,  and  that  this  level  is 
proportionate to the overall additional costs borne by companies in those regions.  

In  2009,  22.7  %  of  total  regional  aid  granted  in  Europe  was  granted  under  these  10  schemes  which 
represented around 77 % of total regional aid in France. 

N 671/2008 – HU – LIP – Regional investment aid to Mercedes-Benz Manufacturing Hungary  

In December 2008, the Hungarian authorities notified under the RAG their intention to grant regional 
aid  for  a  large  investment  project  in  favour  of  Mercedes-Benz  Manufacturing  Hungary  .  Hungary 
intended to promote regional development by providing regional aid to Mercedes-Benz for setting up a 
new plant for production of 180 000 passenger cars. The region is a disadvantaged area eligible for aid 
under Article 107(3)(a) of the TFEU as a region with an abnormally low standard of living and high 
unemployment.  

The investment project involved eligible costs of EUR 548.4 million. Some EUR 400 million of the 
total project costs would be financed through a loan by the EIB without any State guarantee, State aid 
accounts for EUR 111.5 million. The investment will create 2 500 direct jobs as well as 10 000 to 14 
000  indirect  jobs.  According  to  the  Hungarian  authorities,  the  project  would  help  to  decrease  the 
regional unemployment rate by 0.5 %.  

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31 

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The Commission’s assessment of regional aid to LIPs aims to verify whether the market share of the 
beneficiary and the production capacity created by the investment remain below the thresholds set in 
the RAG. In case the thresholds are not exceeded, the effect of the aid on competition is deemed to be 
outweighed by its positive contribution to regional development.  

The  Commission  found  that  market  shares  of  the  Daimler  group  ,  to  which  the  plant  belong  would 
remain  significantly  below  the  25  %  threshold  on  the  relevant  markets,  both  before  and  after  the 
planned investment, andconcluded that the additional production capacity created through the project 
would  remain  below  5  %  of  the  apparent  consumption  of  the  product  concerned  in  the  EEA.  In 
November 2009 the Commission approved the State aid measure. 

5.4. 

State aid expenditure on regional aid 

In  2009,  regional  State  aid  amounted  to  EUR  13.9  billion.  This  amount  represented 
approximately 24 % of total State aid for industry and services or 0.12 % of the EU-27 GDP. 
Around EUR 4.9 billion (35 %) was granted using block exempted measures.  

In  relative  terms,  as  a  percentage  of  GDP,  12  Member  States  granted  more  than  the  EU 
average: Greece (0.57 %), Hungary (0.28 %), Slovenia (0.27 %), Malta (0.25 %), the Czech 
Republic (0.23 %), France (0.22 %), Ireland (0.18 %), Slovakia (0.17 %), Poland (0.17 %), 
Germany (0.15 %), Lithuania (0.14 %), and Spain (0.12 %).  

In  relation  to  total  aid  to  industry  and  services,  regional  development  aid  was  particularly 
important in the EU-12 countries where it represented around 30 % of the total, a higher level 
than that observed for EU-15 (23 %). This is explained by the fact that these Member States 
have  a  higher  number  of  eligible  regions  and  therefore  the  possibility  to  grant  higher  aid 
intensities. 

The  highest  share  of  regional  development  aid  in  proportion  to  total  aid  to  industry  and 
services was found in Greece (76 %), Bulgaria (59 %), Lithuania (51 %), Slovakia (47 %) and 
the Czech Republic (46 %) while in four Member States (Denmark, the Netherlands, Cyprus 
and Finland) it stood below 2 %.  

In nominal terms, the largest grantors were France (EUR 4.1 billion, 30 % of the EU total), 
Germany (EUR 3.7 billion, 27 %), Greece (EUR 1.4 billion, 10 %), Spain (EUR 1.2 billion, 9 
%) and Italy (EUR 1 billion, 7 %). 

In 2009, almost half (45 %) of total aid for regional development in the EU was granted under 
only  five  measures.  These  are  three  German  schemes  (two  of  which  are  block-exempted) 
which  focus  on  supporting  investments  in  the  poorest  regions  (mainly  in  Eastern  Germany) 
and two French schemes which provide operating aid in the French overseas departments.  

By comparing the two consecutive periods 2004-2006 and 2007-2009, it appears that regional 
development aid increased both in nominal terms (by EUR 2.7 billion) and in relative terms as 
a percentage of GDP from 0.08 % to 0.1 % of GDP. Also, its share in total aid to industry and 
services increased from 19 % to 23 %. 

Regional  aid  was  included  in  a  block  exemption  regulation  for  the  first  time  in  2007.  The 
regulation  was  adopted  in  2006  and  entered  into  force  in  2007.  Since  then,  a  total  of  EUR 
11.4 billion of State aid has been granted without prior notification to the Commission. The 
share of regional aid granted under block exempted measures has progressively increased to 

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32 

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reach 35 % of total regional aid awarded in 2009. The GBER measures accounted for only 15 
% of total block exempted expenditure for regional development.  

In the period 2004-2010, EUR 67 billion was granted as aid in the EU. Almost all this aid was 
granted under schemes (96 %) while ad hoc individual aid accounted for only 4 % of the total. 
As regards aid instruments, tax exemptions were used for 55 % of total aid granted (with an 
increasing trend over the period), followed by direct grants (42 %). 

5.5. 

Conclusion on State aid for regional development 

Regional State aid will continue to contribute to economic, social and territorial cohesion in 
the  European  Union.  The  importance  of  this  objective  has  increased  in  recent  years,  in 
particular since the 2004 and 2007 accessions. Currently, regional State aid is the horizontal 
objective with the highest share of total aid to industry and services.  

Special  attention  is  paid  to  the  outermost  regions,  due  to  the  specific  additional  costs  that 
result  from  the  structural  handicaps  imposed  by  geographic  remoteness  and  specific 
constraints in integrating into the internal market.  

6. 

STATE AID FOR SMES 

6.1. 

Policy context 

The  flagship  initiative  "An  industrial  policy  for  the  globalisation  era"53of  the  Europe  2020 
Strategy  highlights  the  important  role  of  small  and  medium-sized  enterprises  (SMEs)  in  the 
EU economy as engines of job creation and growth: "SMEs make up some 2/3 of industry’s 
employment and a large share of EU industry’s growth and jobs potential is to be found in its 
lively and dynamic SMEs. Promoting the creation, growth and internationalisation of SMEs 
thus has to be at the core of the new EU integrated industrial policy". 

It  also  stresses  that  despite  substantial  progress  in  recent  years54,  there  are  still  serious  and 
identifiable  challenges  regarding  smart  regulation  and  the  business  environment,  especially 
for SMEs. In particular, "access to finance has been identified by most Member States as an 
important  bottleneck  especially  for  SME  and  innovation  financing"55
.  Indeed,  in  the  current 
context of economic slowdown and financial crisis, SMEs often have difficulties in obtaining 
capital, risk capital or loans, given the risk-averse nature of certain financial markets and the 
limited collateral that they may be able to offer. Additionally, their limited resources may also 
restrict their access to information, notably regarding new technology and potential markets. 
To alleviate these difficulties, Member States must increase their efforts to apply the "think 
small first" principle and to simplify support schemes.  

53 

54 

55 

Communication  from  the  Commission  "An  Integrated  Industrial  Policy  for  the  Globalisation  Era 
Putting Competitiveness and Sustainability at Centre Stage", COM(2010)614. 
The Commission has already taken action aimed at mitigating the specific difficulties faced by SMEs. 
See  Communication  from  the  Commission:  "Think  Small  First"  A  "Small  Business  Act"  for  Europe, 
COM(2008) 394 final,. The European Economy Recovery Plan, together with the European Investment 
Bank and the European Investment Fund, aims to enhance access to financing for SMEs. It also recalls 
that  the  Member  States  should,  where  appropriate,  make  full  use  of  the  recently  reformed  rules  for 
granting state aid to SMEs.  
See section 3.2 of the flagship initiative "An industrial policy for the globalisation era". 

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To support SMEs, governments can intervene in a number of ways which are not considered 
to  constitute  State  aid,  such  as  general  support  measures,  which  may  include  a  general 
reduction in the taxation of labour and social costs, reducing payment delays to improve SME 
cash-flow, simplifying rules to reduce administrative burden, etc. Where market forces alone 
are  insufficient,  State  aid  measures  may  play  a  complementary  role  by  providing  public 
funding.  Indeed,  the  flagship  initiative  "An  industrial  policy  for  the  globalisation  era" 
recognises  this  by  stating  that  "the  design  of  State  aid  rules  contributes  to  promote  the 
competitiveness  of  industry  in  Europe.  State  aid  rules  provide  a  framework  that  directs 
Member States' investments to address identified market failures". 

However,  State  aid  control  is  essential  to  maintain  a  level  playing  field  for  all  companies 
active in the internal market, irrespective of the Member State in which they are established. 
The Commission has to be vigilant that the measures are well targeted; ensuring that the aid 
does  not  discourage  investors,  is  not  invested  to  keep  inefficient  firms  afloat  and  does  not 
create distortions of competition. 

6.2. 

State aid rules for SMEs 

In the context of the Lisbon Strategy for growth, jobs and competitiveness, the Commission 
modernised  the  State  aid  rules  and  reinforced  measures  specifically  addressed  to  SMEs. 
Currently, SMEs are eligible for all aid categories allowed under EU State aid rules and SMEs 
can benefit from higher aid intensities for certain measures56. 

In  addition,  the  State  aid  rules  have  been  significantly  simplified  and  streamlined  in  the 
GBER  and  now  offer  Member  States  the  possibility  to  introduce  a  wide  panoply  of  aid 
measures  for  SMEs  with  minimal  administrative  burden.  The  Commission  encourages 
Member States to make use of these possibilities to shift existing aid budgets towards "better 
targeted" aid. 

However, due to the higher risk of distortion of competition, large amounts of aid are assessed 
by  the  Commission  on  an  individual  basis  to  analyse  their  effects  on  competition  and 
contribution to the common interest. The GBER therefore sets different notification ceilings 
based on the category of aid and its likely effects on competition.  

In 2006, the Commission adopted the Risk Capital Guidelines (RCG)57 which constitutes an 
important  instrument  for  the  financing  of  SMEs.  A  Risk  Capital  Action  Plan  was  already 
approved in 1998, and risk capital has featured as an important element in the Lisbon Strategy 
and  remains  a  key  aspect  of  the  Europe  2020  Strategy.  The  RCG  are  applicable  until  31 
December  2013,  but  they  foresaw  a  mid-term  review.  In  this  respect,  the  Commission 
announced in the Innovation Union communication that it would "assess the effectiveness of 
the  temporary  State  aid  measures  […],  including  the  increased  'safe  harbour'  for  venture 
capital investments, and on this basis make the necessary proposals". That mid-term review 
was conducted in 201058 and led to the transformationof the provisional increase of the safe 
harbour threshold introduced by the Temporary Framework into a permanent provision for the 
remaining duration of the RCG (i.e. until the end of 2013). 

56 
57 

58 

See Sections 3, 4, 5 and 8. 
Guidelines on State aid to promote risk capital investments in small and medium-sized enterprises, OJ 
C 194, 18.8.2006, pages 2-22. 
Communication  from  the  Commission  amending  the  Guidelines  on  State  aid  to  promote  risk  capital 
investments in small and medium-sized enterprises OJ C 329, 7.12.2010, p.4. 

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The box below summarises the main features of the rules in the GBER for SMEs and the Risk 
Capital Guidelines. 

General Block Exemption Regulation (GBER) 

The  GBER  sets  out  a  framework  to  allow  Member  States  to  grant  aid  targeted  at  creating  jobs, 
boosting  competitiveness  and  improving  the  environment  without  the  Commission  having  to  get 
involved at all. Measures which are listed in the GBER and comply with the conditions and criteria set 
forth therein benefit from an exemption to the notification requirement. 

The GBER is particularly relevant for SMEs since all 26 measures covered by it can be granted for 
SMEs (with special top-ups to the permissible aid intensities), and some are designed to overcome the 
specific  market  failures  they  face.  SMEs  can  receive  aid  throughout  their  different  development 
stages.  The  following  categories  of  aid  are  specially  and  exclusively  designed  for  SMEs:  SME 
investment  and  employment  aid;  consultancy  aid  in  favour  of  SMEs;  aid  for  SME  participation  in 
fairs;  aid  in  the  form  of  risk  capital;  aid  contributing  to  intellectual  property  rights  costs;  aid  for 
adapting to new EU environmental standards or aid for environmental studies; innovation aid; aid for 
newly created small enterprises in assisted regions and aid for promoting female entrepreneurship.  

Aid  measures  exceeding  the  ceilings  for  individual  notification  still  have  to  be  notified  to  the 
Commission  individually  in  order  for  the  Commission  to  analyse  their  effects  on  competition  and 
contribution to the common interest.  

Risk Capital Guidelines  

The RCG pursue a double objective: setting the conditions for Member States to bring additional risk 
capital to SMEs in early development stages where an equity gap can be identified, and promoting the 
development of a venture capital industry in a way that preserves fair competition.  

Aid in risk capital measures can be present at various levels: at the level of private co-investors, if they 
benefit from more favourable conditions than the State; at the level of the investment fund and/or its 
manager if for instance management fees are above market levels; and at the level of the enterprises 
invested in, whenever aid is present at the other levels or when the beneficiary SMEs receive capital 
injections that the market would not provide otherwise. 

The RCG cover various types of measures (constitution of investment funds and/or alternative stock 
markets, guarantees and other financial instruments to risk capital investors or funds, scouting costs) 
as well as fiscal incentives to funds and/or to their managers, or to investors to undertake risk capital 
investment.  However,  individual  capital  injections  by  the  State  fall  outside  the  scope  of  the  RCG, 
which applies only to schemes. 

Contrary to other State aid rules, the Risk Capital Guidelines do not include any list of eligible costs or 
calculation  of  aid  intensities  but  rather  consider  that  the  entire  amount  of  an  equity  contribution, 
including participation from private investors, is to be assessed for compatibility. 

The  RCG  set  out  compatibility  conditions  regarding  the  level  of  investment  tranches,  restriction  to 
seed,  start-up  and  expansion  phases,  prevalence  of  equity  and  quasi-equity,  participation  by  private 
investors,  profit-driven  character  of  investment  decisions  and  commercial  management.  When  the 
measure  takes  the  form  of  participation  in  a  private  equity  investment  fund  and  all  the  above-
mentioned conditions are met, Member States can use the GBER to grant aid. 

The RCG foresee a two-level analysis where the focus of control is put on the most distortive schemes. 
If  risk  capital  schemes  respect  the  basic  compatibility  conditions  (safe-harbour),  the  assessment  is 
lighter and may even be block exempted.  

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6.3. 

State aid decisions on SMEs and case studies 

Between 2004 and 2010, the  Commission took 139  final  decisions  on  measures  exclusively 
addressed to SMEs (of which, 108 concerned risk capital). These decisions declared 99 risk 
capital  measures  (all  schemes)  and  30  other  SME  aid  measures  (23  schemes,  4  ad  hoc 
individual aids and 3 individual applications of schemes) compatible with the internal market. 
The Commission also took 7 no aid decisions relating to risk capital measures and 3 negative 
decisions (2 on risk capital measures and 1 concerning SME aid). 

More  than  half  of  the  approved  risk  capital  measures  concerned  three  Member  States: 
Germany  (28),  the  United  Kingdom  (16)  and  Italy  (12),  while  SME  aid  measures 
predominantly concerned: Germany (7), Austria (5) and Slovakia (6 – all in 2004). 

The number of approved risk capital measures fluctuated between 10 and 19 per year in the 
period 2004 to 2009 but dropped to 7 in 2010. 10 SME aid measures were approved in 2004 
and then the figure dropped to between 2 and 5 approvals per year. 

Block  exempted  measures  for  risk  capital  and  SME  aid  amounted  to  around  1  500  for  the 
period  2004-2010.  From  this  total,  risk  capital  aid  (which  can  be  granted  under  block 
exempted measures since the entry into force of the GBER) concerned only 28 measures. 

Six  Member  States  accounted  together  for  over three  quarters  of  block  exempted  measures: 
Italy  (322),  Spain  (220),  Germany  (186),  the  United  Kingdom  (184),  Poland  (121)  and 
Austria (113). 

Between 130 to160 block exempted measures were introduced in the period 2004-2006. With 
the  entry  into  force  of  the  GBER,  this  figure  rose  to  269  in  2007,  303  in  2008  and  346  in 
2009.  In  2010,  a  significant  decrease  to  only  144  measures  was  observed,  which  can  be 
explained  by  the  fact  that  the  measures  introduced  in  the  previous  years  are  generally  still 
used by Member States. As regards the categories of aid, the highest number ofnew measures 
(360) focused on SME investment and employment aid (Art. 15 GBER) followed by aid for 
consultancy in  favour of  SMEs  (Art.  26;  308 measures),  aid  for  SME  participations  in  fairs 
(Art. 27; 99 measures), aid in the form of risk capital (Art. 28 – 29; 28 measures) and aid for 
small enterprises newly created by female entrepreneurs (Art. 18; 18 measures). 

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36 

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New SME and risk capital State aid measures, 
EU-27, 2004-2010

400

350

300

250

200

150

100

50

0

2004

2005

2006

2007

2008

2009

2010

Notifiable measures approved by the Commission

Block exempted measures introduced by Member States

The  box  below  shows  examples  of  particular  measures  implemented  in  two  Member  States 
addressed to SMEs. The first one is a measure implemented in the United Kingdom based on 
the Risk Capital Guidelines which tackled certain identified market gaps for investments. The 
second  is  a  block  exempted  measure  based  on  specific  rules  for  SMEs  contained  in  the 
GBER.  

Enterprise  Investment  Scheme  and  Corporate  Venturing  Scheme 
NN42a/2007) 

(United  Kingdom, 

In  2007  the  United  Kingdom  notified  to  the  Commission  a  measure  designed  to  encourage  private 
individuals and companies to invest in smaller, unquoted, high growth-potential companies in the UK 
in order to grow their businesses into sustainable, profitable enterprises. The measure comprised three 
different  schemes:  the  Enterprise  Investment  Scheme  (EIS),  Venture  Capital  Trusts  (VCTs)  and  the 
Corporate Venturing Scheme (CVS).  

Under the Enterprise Investment Scheme (EIS), private individuals receive tax incentives for making 
direct investments in qualifying SMEs. The Venture Capital Trust (VCT) scheme offers tax incentives 
to  private  individuals  for  collective  investments  through  VCTs  managed  by  professional  fund 
management  companies.  The  Corporate  Venturing  Scheme  (CVS)  provides  tax  relief  to  companies 
making direct investments in qualifying SMEs. The maximum annual investment limit per qualifying 
company raising money under the three schemes is GBP 2 million. 

As  the  measure  exceeded  the  maximum  levels  of  investment  tranches  foreseen  in  the  RCG,  it  was 
subjected to a detailed assessment where the Commission required additional evidence of the market 
failure being tackled at each level where the aid may be present. As the result of a detailed assessment, 
the Commission concluded that the measure fulfilled the conditions set out in the RCG and that the 
overall balance of the measure was positive. 

More  than  50  %  of  risk  capital  aid  in  the  United  Kingdom  during  the  last  three  years  was  granted 
under these schemes, which represents around 30 % of totalrisk capital aid in the EU. 

EN 

37 

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SME investment and employment aid (France, X 65/2008)  

In  2008,  France  implemented  a  block  exempted  measure  specially  designed  to  overcome  the 
difficulties in access to finance faced by SMEs. According to Article 15 of the GBER, aid could be 
granted for "SME investment and employment". The measure was addressed to all sectors and the aid 
could  take  the  form  of  loan,  interest  rate  subsidy,  guarantee,  grant  or  repayable  advances.  The  total 
annual budget was around EUR 160 million. 

6.4. 

State aid expenditure for SMEs 

As  noted  above,  Europe  2020,  via  its  flagship  initiative  ‘An  industrial  policy  for  the 
globalisation  era’,  highlights  the  potential  of  SMEs  as  engines  of  job  creation  and  growth. 
State aid is seen in this context as an important tool to provide funding for SMEs when this 
can not be made available by the market alone. The extent to which Member States use this 
possibility  varies  and  depends  on  the  combination  of  different  policies  chosen  by  the 
goverments.  

Total State aid earmarked for SMEs (which is different from total State aid actually disbursed 
to SMEs) amounted to approximately EUR 4.6 billion59 in 2009 (0.04 % of EU-27 GDP), of 
which risk capital represents around EUR 0.6 billion. In relative terms, roughly 7 % of aid to 
industry  and  services  was  exclusively  earmarked  for  SMEs.  Risk  capital  accounted  for  an 
additional  1  %  of  total  aid.  70  %  of  risk  capital  aid  was  granted  by  the  United  Kingdom 
(around EUR 0.4 billion). 

The  highest  share  of  SME  aid  (including  risk  capital)  relative  to  total  aid  to  industry  and 
services was observed in: Estonia (30 %), Italy (24 %) and the United Kingdom (20 %). Five 
Member States (Sweden, Poland, Malta, Denmark and Bulgaria) granted less than 1 % of total 
aid as SME aid.  

Only four Member States accounted for three quarters of all SME aid: Italy (24 %), Germany 
(20 %), France (18 %) and the United Kingdom (14 %). 

In 2009, for the first time over half of SME aid (53 %; EUR 2.4 billion) was granted under 
block  exempted  measures.  From  this  total,  GBER  measures  accounted  for  approximately 
EUR 1.5 billion, including aid for consultancy in favour of SMEs (EUR 714 million; Art. 26 
GBER), SME investment and employment aid (EUR 710 million; Art. 15 GBER), risk capital 
aid  (EUR  39  million;  Art.  23-24  GBER)  and  aid  for  SME  participation  in  fairs  (EUR  25 
million; Art. 27 GBER). 

59 

In  this  regard  it  is  important  to  note  that  the  current  reporting  provisions,  as  laid  down  in  the 
Commission  Regulation  (EC)  No  794/2004  of  21  April  2004  implementing  Council  Regulation  (EC) 
No  659/1999  laying  down  detailed  rules  for  the  application  of  Article  93  of  the  EC  Treaty,  do  not 
enable  the  Commission  services  to  obtain  information  on  the  type  of  beneficiary  (SME  or  large 
enterprises) of aid across all objectives. The Commission services can only produce information on how 
much  aid  is  exclusively  earmarked  for  SMEs  under  dedicated  SME  schemes.  State  aid  measures  are 
classified according to their primary objective at the time the aid was approved and not according to the 
final  recipients  of  the  aid.  This  means  that  a  measure  which  is,  for  example,  aimed  at  innovation 
projects for all size of enterprises, will be classified as a research, development and innovation measure 
and expenditure will be counted in relation to that objective, even if the majority of aid was given to 
SMEs.  Therefore,  SME  aid  presented  here  is  underestimated  and  represents  only  aid  granted  under 
measures directed exclusively at SMEs (with SME aid as the primary objective). In addition, the figures 
include risk capital aid, which under State aid rules can only be granted to SMEs.  

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38 

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Half  of  total  State  aid  for  SMEs  in  2009  was  granted  under  only  11  schemes  (four  French, 
three British, two German, one Italian and one Belgian). Among them, three measures, (one in 
Italy  and  two  in  France)  were  to  support  SME  investment  in  assisted  areas,  two  British 
schemes provided tax incentives for risk capital investments, one German scheme supported 
SMEs in the food processing sector while a second one helped SMEs in Bavaria, two French 
and  one  Belgian  schemes  offered  general  support  to  SMEs  while  the  third  British  measure 
enabled tax-advantaged share options for the recruitment and retaining of qualified employees 
by smaller, higher-risk growth companies. 

By comparing the consecutive periods 2004-2006 and 2007-2009, a downward trend in SME 
aid is observed, both in relative terms (as a percentage of GDP - from 0.05 % of the GDP to 
0.04 % ) and in nominal terms by EUR 0.6 billion per year. Also its share in total State aid to 
industry and services decreased from 11.4 % to 7.8 %.  

Almost all aid for SMEs granted in the EU is done through schemes. Between 2004 and 2009 
(when  a  total  of  EUR  33.1  billion  was  granted  as  risk  capital  aid  and  SME  aid),  ad  hoc 
individual aid accounted for less than 0.5 % of the total. As regards aid instruments, Member 
States mainly used: direct grants (64 % of total aid), tax exemptions (24 %) and soft loans (8 
%). If risk capital aid is taken separately, tax exemptions and equity participations were the 
preferred instruments.  

6.5. 

Conclusion on State aid for SME's 

As part of the Europe 2020 Strategy, support to SMEs constitutes an important challenge. In 
particular,  Member  State  will  have  to  tackle,  in  addition  to  other  weaknesses  related  to  the 
business environment, the specific financing difficulties of these companies.  

State aid rules currently offer Member States a wide range of options designed to support the 
development  of  SMEs.  In  particular,  the  GBER  constitutes  an  appropriated  framework  for 
granting  aid  with  a  minimum  of  administrative  cost  and  without  prior  notification  to  the 
Commission while at the same time guaranteeing that measures are well targeted and do not 
create  major  distortions  of  competition.  In  the  context  of  market  failures  affecting  SMEs, 
Member States are encouraged to make full use of this instrument. 

As  explained  above,  figures  on  State  aid  to  SMEs  do  not  fully  reflect  the  total  aid  amount 
actually disbursed to these companies as they only take into account those measures for which 
the primary objective is "SMEs" or "risk capital". Thus, any conclusions to be drawn from the 
downward trend observed as regards total SME aid must take into account that caveat.. In any 
event, the importance of the block exempted measures for SMEs is evident, as more than half 
of total aid for SMEs granted in 2009 was done so under such measures.  

As regards risk capital, it seems that most of the aid is concentrated in the United Kingdom; 
use of this option by the other Member States was almost negligeable. The recent reform of 
the RCG, to adapt them to current market conditions, allows a lower participation by private 
investors  and  higher  investment  tranches.  These  changes  should  promote  risk  capital 
investments in SMEs.  

EN 

39 

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7. 

STATE AID TO THE BROADBAND SECTOR  

7.1. 

Policy context 

The  European  Commission  has  set  highly  ambitious  objectives  for  broadband  development, 
because smart investments into high and very high speed broadband infrastructures are crucial 
to create jobs, increase economic performance and to unlock the competitive potential of the 
EU in the long term.  

The  Europe  2020  Strategy  underlined  the  importance  of  broadband  deployment  to  promote 
social  inclusion  and  competitiveness  in  the  EU  and  has  also  set  ambitious  targets  for 
broadband  development.  In  2010,  the  European  Commission  launched  one  of  the  flagship 
initiatives of the Europe 2020 Strategy, the "Digital Agenda"60, which restated the objective 
of bringing basic broadband to all Europeans by 2013 and sought to ensure that, by 2020, all 
Europeans have access to internet speeds of above 30 Mbps and 50 % or more of European 
households subscribe to internet connections above 100 Mbps. 

It is estimated that investments of up to EUR 60 billion will be necessary to achieve the first 
objective  while  the  second  will  require  a  further  EUR  270  billion61.  Such  investments  will 
primarily  come  from  commercial  operators.  However,  these  ambitious  objectives  cannot  be 
reached without the smart use of public funds. Member States are called upon "to use public 
financing  in  line  with  EU  competition  and  State  aid  rules"62  in  order  to  meet  the  coverage, 
speed and take-up targets defined in the Europe 2020 Strategy.  

The  European  Commission  plans  to  focus  several  of  its  financial  instruments,  such  as  the 
European  Regional  Develoment  Fund, 
the  European  Agricultural  Fund  for  Rural 
Development,  the  Trans-European  Networks  and  the  Competitiveness  and  Innovation 
Programme,  to  help  achieve  the  goals  of  the  Digital  Agendapossibly  including  credit 
enhancement (backed by the EIB and EU funds). 

Public  funding  and  State  aid  will  play  an  important  role  in  complementing  private 
investments and in extending broadband and very high speed, next generation access (NGA) 
network coverage to areas where market operators are unlikely to invest on commercial terms 
in the near future. However, public funding has to be used carefully in the liberalised telecoms 
markets to avoid a crowding out of private investments. 

7.2. 

State aid rules for broadband  

The Broadband Guidelines63 of 2009 lay down the conditions under which public funding can 
be granted to broadband development in line with the EU State aid rules: they codify the well 
established  case  practice  of  the  Commission  (developed  since  2003)  concerning  basic 
broadband  networks,  extrapolate  the  fundamental  tenets  and  apply  them  to  the  new  area  of 
very high speed, fibre based NGAnetworks.  

60 
61 

62 
63 

A Digital Agenda for Europe. COM/2010/0245.  
See Broadband Communication, available at: 
http://ec.europa.eu/information_society/activities/broadband/docs/bb_communication.pdf. 
See Key action 8. 
Guidelines for the application of State aid rules in relation to rapid deployment of broadband networks 
OJ C 235, 30.9.2009, p.7. 

EN 

40 

   EN 

                                                 
 
The Guidelines help public authorities to design aid measures to target public investment in 
geographical  areas  where  commercial  investments  are  unlikely  to  take  place.  Furthermore, 
private  operators  gain  additional  certainty  and  clarity  about  the  role  and  scope  of  public 
intervention  in  this  sector  and  are  better  able  to  plan  their  own  investments  in  new  and 
upgraded networks.  

The box below summarises the main features of the Broadband Guidelines.  

Guidelines on broadband networks 

The  Guidelines  offer  a  comprehensive  and  transparent  tool  to  ensure  that  any  public  funding  of 
broadband complies with the EU's State aid rules, in order to facilitate the widespread deployment of 
high-speed and very high speed broadband networks to enhance European competitiveness and help 
foster a knowledge-based society in Europe. 

In particular, the Guidelines explain how public funds can be channelled for the deployment of basic 
broadband networks as well as NGA networks to areas where private operators would not invest. 

To  identify  the  areas  eligible  for  public  intervention,  the  Guidelines  distinguish  between  "white", 
"grey" and "black" areas, depending on whether there are already adequate broadband infrastructures 
in  place.  Public  funding  to  roll-out  broadband  networks  in  (mostly  rural)  white  areas,  where  no 
adequate infrastructure exists is generally regarded as unproblematic. Conversely, State aid in (densely 
populated) areas where competing broadband infrastructures already exist (black areas) is prohibited, 
while a State aid project for grey areas requires a more in-depth analysis. A similar approch is applied 
for aid to NGA networks, distinguishing between "white NGA", "grey NGA", and "black NGA" areas. 

A number of crucial safeguards (such as detailed mapping, open tenders, wholesale access obligations 
or  technological  neutrality  and  claw-back  mechanisms)  are  laid  down  in  the  Guidelines  in  order  to 
promote competition and avoid the crowding out of private investment. 

In the case of aid to NGA networks, since the risk of distorting competition could be higher (because, 
for instance, basic broadband infrastructures may already be in place in the targeted areas), there are 
additional compatibility conditions to be met. 

In some instances, Member States may consider that the provision of a broadband network should be 
regarded as a service of a general economic interest (SGEI). According to the case-law of the Court, 
provided that the Altmark criteria are met, State funding for the provision of broadband services as an 
SGEI  may  fall  outside  the  scope  of  the  State  aid  rules.  The  Guidelines  also  provide  detailed 
description on the conditions if public authorities decide to invest in a broadband network on the same 
conditions  as  a  market  economy  private  investor  (in  line  with  the  Market  Economy  Investment 
Principle). 

7.3. 

State aid decisions on broadband and case study 

Between 2004 and 2010 the Commission adopted 72 final decisions on measures concerning 
broadband  networks  including  65  compatible  aid  decisions,  six  no  aid  decisions  and  one 
negative decision. As shown in the graph below, since the entry into force of the Broadband 
Guidelines in September 2009, there has been a sharp increase in the number of compatible 
aiddecisions.64  The  adoption  of  the  Broadband  Guidelines  has  led  to  better-designed  aid 
measures and to an accelerated treatment of broadband cases. 

64 

See communications of the Commission in MEMO/10/31 and IP/11/54. 

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41 

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New State aid measures concernig broadband networks, 
EU-27, 2004-2010

20

18

16

14

12

10

8

6

4

2

0

2004

2005

2006

2007

2008

2009

2010

Notifiable measures approved by the Commission

Decisions  under  the  Broadband  Guidelines  primarily  concerned  "white"  or  "NGA  white 
areas"  where  no  adequate  broadband  or  NGA  infrastructures  were  available  (56  of  the 
approved  measures  and  6  no  aid  decisions),  but  also  concerned  "grey  areas"  where  the 
existing  operator  did  not  have  sufficient  market  incentives  to  upgrade  its  network  and  no 
effective  competition  took  place  (8  of  the  approved  measures).  Concerning  "black  areas" 
where  at  least  two  or  more  broadband  network  providers  are  present,  the  Commission  has 
never approved any aid measure.  

In the period 2004-2010, most of the approved aid measures concerned the United Kingdom, 
but several (regional) initiatives were approved for Germany and Italy. These are the largest 
Member States that had to face the risk of a "digital divide" in their countries.  

Number of approved State aid measures concerning 
broadband networks
2004 - 2010

17

14

10

7

1

1

1

1

1

1

2

2

2

2

3

18
16
14
12
10
8
6
4
2
0

Cyprus

Greece

Hungary

Latvia

Slovenia

Sweden

Austria

Finland

France

Lithuania

Ireland

Spain

Italy
Germany
United Kingdom

Around 80 % of decisions were decisions not to raise objections. However, it should be noted 
that in several cases this result was achieved following exchanges with the Commission, with 

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42 

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Member  States  making  alterations  to  the  notifications  in  order  to  ensure  that  their  schemes 
were in line with the State aid rules.  

The box below shows an example of a Finnish measure addressed to support the broadband 
development in sparsely populated areas: 

High-speed  Broadband  Construction  Aid  in  Sparsely  Populated  Areas  of  Finland  (Finland,  N 
62/2010) 

In  2010  Finland  notified  to  the  Commission  a  measure  aimed  at  supporting  the  development  of 
electronic  communication  networks  offering  very  high  speed  broadband  services  (NGA)  in  sparsely 
populated areas of Finland which were not served and where there were no plans for such coverage in 
the near future. 

According to the Finnish national action plan for improving information society infrastructure, by the 
end  of  2015,  nearly  all  Finnish  citizens,  businesses  and  public  administrations  shall  have  access  to 
NGA  services  with  a  minimum  downstream  rate  of  100  Mbps.  Due  to  the  economics  of  broadband 
networks,  commercial  operators  are  not  willing  to  invest  in  sparsely  populated  areas,  though 
broadband  network  coverage  could  bring  proportionally  higher  benefits  for  citizens  and  businesses 
than in urban areas. 

Finland  therefore  designed  a  State  aid  scheme  to  extend  NGA  coverage  to  such  sparsely  populated 
rural areas as well. The project is financed by private and public funds, European funds included. The 
aid takes the form of direct grants and aid intensities (capped at 66 %) will depend of the outcome of a 
tender procedure. 

As a result ofthis project Finland will be one of the first Member States to reach almost 100 % NGA 
coverage in Europe by 2015 – out of which 95 % will be commercial deployment, 5 % with the help 
of State aid – thus fulfilling the EU objective for broadband deployment. 

After the analysis of the measure in the light of the BroadbandGuidelines, the Commission concluded 
that the aid was compatible with the internal market. 

7.4. 

State aid expenditure on broadband sector 

In the past, State aid measures to support the broadband sector were typically small, localised 
projects from only a few Member States (e.g. the United Kingdom or Italy).  

Since  2008,  there  has  been  a  constant  increase  in  the  importance  of  public  funding  ,  and 
national State aid measures for broadband roll-out are now designed to form an integral part 
of  the  comprehensive  national  broadband  strategies.  In  line  with  these  developments,  the 
amount of State aid channelled to broadband development has risen sharply compared to the 
average  in  the  period  2004-2008.  The  amount  of  public  funding  earmarked  for  broadband 
development is expected to increase further65. 

There are two main reasons for the continuously growing importance of State aid and public 
funds  in  the  broadband  sector.  Firstly,  more  and  more  Member  States  recognise  the 
importance  of  widespread  broadband  availability  for  their  socio-economic  development. 
Secondly, a technological shift is under way due to the deployment of NGA networks. Such 

65 

For  instance,  according  to  the  announcements  of  the  Member  States,  at  the  end  of  2010,  France  will 
spend EUR 2 billion, Germany at least EUR 1 billion, Italy EUR 1,5 billion and the UK around EUR 1 
billion, etc of public funds to foster broadband development in their countries. 

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43 

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networks  require  heavy  investments  from  operators,  hence  the  number  of  areas  where  such 
investments  will  not  take  place  on  commercial  terms  is  higher  than  was  the  case  for  basic 
broadband. Therefore, the areas where public intervention would be needed will be larger and 
the amount of financing necessary to cover an area with an NGA network is expected to be 
significantly higher compared to basic broadband. 

In the period 2004-2010, Germany and Spain had the largest volume of authorised State aid 
for broadband development66.  

State aid to broadband networks, approved volume per Member State
2004 - 2010 (in EUR million)

1200

1000

800

600

400

200

0

1078.4

839.23

6.9

7.5

8.15

28

33

67.5

70

92.5

141.4

160

261.6

268

321.02

France

Cyprus

Latvia

Sweden

Austria

Lithuania

Hungary

Slovenia

Finland

Greece

Italy

Ireland
United Kingdom

Spain

Germany

The  Commission  has  approved  more  than  EUR  4  billion  of  aid  under  the  State  aid  rules, 
primarily to extend broadband coverage in white or NGA white areas (around 69 %), where 
no  operator  had  sufficient  market  incentive  to  undertake  such  investments.  Given  that  aid 
intensities  are  typically  around  50  %,  it  is  reasonable  to  assume  that  the  approved  aid  has 
generated total investments of around EUR 8 billion in broadband networks. 

66 

France supports broadband development as SGEI measures, which do not qualify as State aid and are 
therefore not counted in the above statistics. In the EU12 Member States, State aid is typically granted 
under the Regional aid Guidelines, those amounts are also not reflected in the chart.  

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44 

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State aid to broadband netw orks
approved volum e per year  2004 - 2010 (in EUR m illion)

1806

579

389

406

41

55

115

2004

2005

2006

2007

2008

2009

2010

2000

1800

1600

1400

1200
1000

800

600

400

200

0

More than half of the approved schemes involved aid of less then EUR 20 million. However, 
with the implementation of national framework schemes and the shift to NGA development, 
more and more State aid schemes have a budget over EUR 100 million67. The Commission 
encourages Member States to design and notify national framework schemes in order to speed 
up the implementation of broadband projects. 

According  to  the  annual  reports  for  the  period  2004-2009,  Member  States  have  already 
implemented EUR 368 million out of the approved State aid volume for broadband networks. 
Around  60  %  of  this  amount  (EUR  226  million)  was  granted  in  2008  and  2009.  Three 
quarters of total aid was granted by the United Kingdom (EUR 159 million) and Ireland (EUR 
125  million).  The  large  difference  between  the  approved  volume  (EUR  4  billion)  and  aid 
reported by Member States is due to the fact that the majority of State aid was foreseen for 
2010 and the following years.  

Besides  State  aid  and  private  investments,  the  development  of  broadband  networks  is  also 
supported through other instruments. For example, for the 2007-2013 financing period of the 
Structural  Funds,  a  total  of  EUR  2.3  billion  was  allocated  to  broadband  infrastructure 
investments and EUR 12.9 billion to information society services. A further EUR 360 million 
was  used  for  broadband  funding  through  the  European  Agricultural  Fund  for  Rural 
Development while the EIB invested EUR 2.4 billon in broadband infrastructures in 2009 and 
a total of EUR 12 billion since 2000.  

67 

See  for  instance  N  284/2005  -  Metropolitan  Area  Network  Broadband  Program,  Ireland:  EUR  170 
million;  N  201/2006  -  Broadband  access  development  in  underserved  territories,  Greece:  EUR  160 
million; N 157/2006 - South Yorkshire Digital Region Broadband Project, United Kingdom: EUR 120 
million; N 73/2008 - Public support to broadband, digital TV, mobile and infrastructures in rural areas, 
Spain:  EUR  180  million;  N  115/2008  -  Broadband  in  rural  areas  of  Germany,  Germany:  EUR 141 
million;  N  646/2009  -  National  broadband  plan  for  rural  areas  in  Italy,  Italy:  EUR  155  million;  N 
62/2010 - High speed broadband in Finland, Finland: EUR 131 million; N 53/2010 - Federal framework 
programme on duct support, Germany: EUR 600 million; N 407/2009 - Optical fibre Catalonia (Xarxa 
Oberta),  Spain:  EUR  354  million;  and  N 304/2010  -  Programa  Avanza  Nuevas  Infraestructuras  de 
Telecomunicaciones, Spain: EUR 150 million. 

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7.5. 

Conclusion on State aid to broadband sector  

The  Europe  2020  Strategy  has  underlined  the  importance  of  broadband  deployment  to 
promote social inclusion and competitiveness in the EU. Member States are currently in the 
process of defining  their  plans  to achieve the goals set in the Digital Agenda. The effective 
use of public funding seems to be necessary to bring high-speed and very high-speed internet 
access to as many citizens of the EU as possible to help them benefit from the advantages of a 
knowledge-based  society.  On  the  other  hand,  public  funding  has  to  be  used  carefully  in  the 
liberalised telecoms markets to avoid a 'crowding out' of private investments. 

The Broadband Guidelines have provided a clear and predictable framework for State aid in 
this sector. Since the adoption of these guidelines the Commission has approved a significant 
number of decisions that allow Member States to support investments in areas where market 
operators are unlikely to invest on commercial terms (e.g. rural or remote areas).  

In  addition  to  setting  up  the  legal  framework  for  granting  State  aid,  the  Guidelines  aim  not 
only  to  promote  investments  in  broadband  infrastructure  but  also  to  ensure  that  effective 
competition takes place, thereby helping to maximise consumer welfare, in the form of lower 
prices and better and more services. 

8. 

STATE AID FOR EMPLOYMENT AND TRAINING 

8.1. 

Policy context 

A high level of employment is identified as key to the sustainability of Europe’s social model 
andwelfare systems and to preserve public finances while maintaining economic growth. That 
is  the  reason  why  the  European  Union  put  forward  as  one  of  the  Europe  2020  priorities 
fostering  a  high-employment  economy  and  set  an  ambitious  target  of  75  %  employment  for 
the  20-64  years  age  group  by  2020.  The  flagship  initiative  "An  agenda  for  new  skills  and 
jobs"68  identifies  four  main  priorities  to  meet  this  challenge:  better  functioning  labour 
markets;  a  more  skilled  workforce,  capable  of  contributing  and  adjusting  to  technological 
change  with  new  patterns  of  work  organisation;  better  job  quality  and  working  conditions; 
and  stronger  policies  to  promote  job  creation  and  demand  for  labour.  Although  Member 
States  are  the  main  actors,  pooling  all  efforts  and  instruments  is  essential  to  achieve  this 
objective.  The  initiative  proposes  13  concrete  actions,  with  accompanying  and  preparatory 
measures, to coordinate policies focused on those four priorities. 

As  a  skilled  workforce  is  an  essential  asset  to  develop  a  competitive,  sustainable  and 
innovative economy in line with Europe 2020 goals69, the Europe 2020 Strategy pays special 
attention  to  the  integration  of  young  people  into  the  labour  market70.  The  flagship  initiative 
"Youth on the Move" seeks to improve young people’s education, mobility and employment 
prospects.  The  initiative  includes  actions  to  support  Member  States  in  modernising  their 
education and training systems to provide young people with the skills they need to succeed 

68 
69 
70 

Communication from the Commission "An Agenda for new skills and jobs", COM(2010)682 final. 
See page 2 of the "An Agenda for new skills and jobs" initiative. 
The Europe 2020 Strategy has set a target on educational attainment which aims to tackle the problem 
of early school leavers by reducing the drop out rate to 10 % from the current 15 %, whilst increasing 
the share of the population aged 30-34 having completed tertiary education from 31 % to at least 40 % 
by 2020.  

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in  today's  labour  markets  and  makes  provision  for  a  European  policy  framework  for  youth 
employment. 

The  design  and  implementation  of  policies  for  achieving  the  targets  of  the  Europe  2020 
Strategy  is  the  responsibility  of  Member  States,  on  the  basis  of  the  employment  guidelines 
adopted by the Council71. One component in their strategies is public support in its different 
formats. Total public expenditure on labour market policy measures amounted to around EUR 
57 billion in 200872. Of this total, around EUR 22 billion served to support training measures. 
Another  EUR  24  billion  were  spent  on  labour  market  services73,  to  finance  systems  and 
structures which offer services to the unemployed.  

Most  of  those  public  measures  are  addressed  to  individuals  or  apply  to  all  workers,  e.g., 
general  reduction  in  the  taxation  of  labour  and  social  costs74,  measures  to  provide  guidance 
and counselling, general assistance and training for the unemployed or training programmes 
that apply without distinction to all employers in a particular Member State. Those types of 
measures  do  not  give  an  advantage  to  certain  undertakings  and  thus  do  not  constitute  State 
aid.  

However, due to the imperfect functioning of labour markets, State aid can, in certain cases, 
constitute an appropriate instrument, for example, to support the recruitment of workers with 
disabilities  or  other  categories  of  workers  which  face  barriers  to  their  employment  at  the 
going wage rates. Employers tend to perceive certain characteristics such as disability, long-
term unemployment or lack of basic education as signals for lower productivity. State aid in 
form  of  wage  subsidies  might  help  such  workers to enter the  labour  market or  to remain in 
their post by covering extra costs induced by their perceived or real lower productivity. 

Despite  its  positive  effects,  employment  aid  bears  a  risk  of  distorting  competition.  Without 
rigorous controls and appropriate aid limits, employment aid can have harmful effects which 
cancel out its immediate effects on job creation. If the aid is used to protect firms exposed to 
cross-border  competition,  it  could  have  the  effect  of  delaying  the  adjustments  needed  to 
ensure the competitiveness of European industry. 

As regards training, without public action, far less education and training would be provided 
than is socially desirable. Underinvestment in training may occur for a number of reasons: a 
risk averse approch by firms, financial constraints, fear that employees will leave before the 
firm  has  recouped  its  investment,  etc.  Enhanced  knowledge  and  skills  generate  benefits  to 
society  beyond  those  captured  as  higher  earnings  by  better-trained  individuals  (or  by 
employers);  the  total  social  benefit  exceeds  the  private  returns.  Training  also  contributes  to 
social  cohesion  by  reducing  ex-ante  inequality  and  the  social  distance  between  individuals, 

71 

72 

73 

74 

Council Decision of 21 October 2010 on guidelines for the employment policies of the Member States, 
OJ L 308, 24.11.2010, p. 46–51.  
Source:  Eurostat.  Labour  market  policy  measures  cover  activation  measures  for  the  unemployed  and 
other  target  groups  including  the  categories  of  training,  job  rotation  and  job  sharing,  employment 
incentives,  supported  employment  and  rehabilitation,  direct  job  creation,  and  start-up  incentives.  The 
amount remained stable during recent years. 
Labour  market  policies  services  cover  all  services  and  activities  of  the  public  employment  service 
together with any other publicly funded services for jobseekers. 
See as examples the French "Aid to support the employment of youth in the enterprises" (N 454/2002) 
on  grants  to  partially  cover  the  cost  of  employment  or  the  Spanish  measure  "Incentives  for  engaging 
redundant workers from the toy sector" (N 53/2009) on reductions to the social security costs. 

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with  a  favourable  impact  on  economic  performance.  Tackling  the  market  failures  related  to 
training will require financial support, alongside other public efforts. 

By granting training aid to certain firms, public authorities are taking over part of those firms' 
training costs and conferring a financial advantage that improves their competitive position. 
State  aid  training  measures  must,  therefore,  be  well  designed  in  order  to  address  market 
failures  that  arise  from  an  underinvestment  in  training  and  to  guarantee  that,  within  those 
limits, distortions of competitions are minimised. 

8.2. 

Rules of State aid for employment and training 

Most  of  the  State  aid  rules  on  employment  and  training  are  contained  in  the  GBER.  For 
individual aid measures involving large aid amounts, prior notification remains necessary. In 
2009,  the  Commission  issued  two  guidance  papers75  which  set  out  the  criteria  that  it  will 
follow  to  assess  the  compatibility  of  notified  aid  measures  for  disadvantaged  and  disabled 
workers and for training aid. 

The  box  below  summarises  the  main  possibilities  of  granting  employment  and  training  aid 
under the current State aid provisions. 

EU State aid rules for Employment  

The EU State aid rules for employment provide a package of measures which can be used to support 
job creation and recruitment of disadvantaged or disabled employees.  

The  GBER  covers  aid  granted  for  the  recruitment  of  disadvantaged  workers  in  the  form  of  wage 
subsidies; aid for the employment of disabled people in the form of wage subsidies; and aid to cover 
the  additional  cost  of  employing  disabled  people.  However,  individual  aid  measures  above  the 
notification  threshold  require  individual  notification.  This  threshold  is  set  at  EUR  5  million  per 
undertaking  per  year  for  the  employment  of  disadvantaged  workers  and  at  EUR  10  million  per 
undertaking per year for the employment of disabled workers. 

Other  types  of  employment  aid  are  not  prohibited,  but  they  must  be  notified  to  the  Commission  in 
advance. 

EU rules for State aid for training 

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

Training considered by the GBER may be one of two kinds: specific training isapplicable principally 
to the employee's present or future position and general training provides qualifications that are largely 
transferable to other firms or fields of work. The risks of distortive effects on competition are higher in 
the first case than in the second. 

In  view  of  the  particular  handicaps  and  the  higher  relative  costs  that  SMEs  have  to  bear  when  they 
invest in training, the aid intensities allowed under the GBER are higher for that type of enterprise. 

75 

Communication  from  the  Commission  -  Criteria  for  the  compatibility  analysis  of  state  aid  to 
disadvantaged  and  disabled  workers  subject  to  individual  notification,  OJ  C  188,  11.8.2009,  p.6  and 
Communication from the Commission - Criteria for the compatibility analysis of training state aid cases 
subject to individual notification, OJ C 188, 11.8.2009, p.1. 

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However,  individual  aid  measures  involving  large  aid  amounts  can  entail  a  higher  risk  of  distorting 
competition.  Such  measures  are  subject  to  prior  notification  in  order  to  assess  whether  the  positive 
effects outweigh the negative effects. The GBER sets the notification threshold at EUR 2 million for 
training aid projects. 

8.3. 

State aid decisions on employment and training and case studies 

In  the  period  2004-2010,  the  Commission  took  32  final  decisions  on  employment  measures 
declaring  that  25  measures  were  compatible  with  State  aid  rules  and  five  measures  did  not 
contain State aid76. A large majority of the decisions (94 %) related to schemes. Almost two 
thirds of all State aid measures were implemented by France (5), Germany (4), Denmark (3), 
Italy (3), Spain (3) and Sweden (2). 

During  the  same  period  the  number  of  decisions  on  training  measures  amounted  to  34  (26 
State  aid  measures  approved,  four  no  aid  decisions  and  four  negative  decisions).  Of  the 
approved State aid measures, six relate to schemes, 12 to ad hoc cases and eight to individual 
applications of schemes. 

The number of measures approved by the Commission for training and employmentwas very 
low  due  to  the  fact  that  the  large  majority  of  measures  introduced  by  Member  States  were 
done so under block exemption regulations77.  

The  number  of  block  exempted  measures  introduced  by  Member  States  during  the  period 
2004-2010 was 1 00578. Of this total, 147 correspond to measures put in place under the block 
exemption  regulation  on  employment79,  420  to  measures  established  under  the  block 
exemption regulation on training80 and 438 to measures set up under the GBER. 

Almost  70  %  of  all  measures  introduced  under  the  block  exemption  regulation  on 
employment  were  set  up  by  five  Member  States:  Poland (31),  Italy  and  Spain  (20  measures 
each),  Hungary  (19)  and  Germany  (13).  Concerning  training  measures,  Italy  (96),  Belgium 
(69), the United Kingdom (62), Germany (56) and Spain (29) implemented around 74 % of 
the measures adopted under the block exemption regulation on training. Finally, almost a half 
of the measures adopted under the GBER were introduced by Italy (120) and Germany (105). 

Among  the  GBER  objectives,  the  highest  number  of  measures  focused  on  specific  training 
(art. 38(1) GBER; 342 measures) and/or on general training (Art. 38(2); 229). With regard to 
employment  aid,  the  distribution  of  measures  was  as  follows:  aid  for  the  recruitment  of 
disadvantaged  workers  in  the  form  of  wage  subsidies  (Art.  40  GBER;  75)  aid  for  the 
employment of disabled workers in the form of wage subsidies (Art. 41 GBER; 66) and aid 
for compensating the additional costs of employing disabled workers (Art. 42 GBER; 50).  

76 
77 
78 
79 

80 

In addition, there were two negative decisions. 
GBER and the previous block exemption regulations for employment and training. 
Of which, 288 were introduced in 2009 and 124 in 2010. 
Commission Regulation No 2204/2002 of 12 December 2002 on the application of Articles 87 and 88 
of the EC Treaty to State aid for employment, OJ L 337, 13.12.2002, pages 3-14 (in force before the 
introduction of the GBER). 
Commission Regulation No 68/2001 of 12 January 2001 on the application of Articles 87 and 88 of the 
EC  Treaty  to  training  aid,  OJ  L  10,  13.01.2001,  pages  20-29  (in  force  before  the  introduction  of  the 
GBER). 

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New State aid measures for employment and training, 
EU-27, 2004-2010

350

300

250

200

150

100

50

0

2004

2005

2006

2007

2008

2009

2010

Notifiable measures approved by the Commission

Block exempted measures introduced by Member States

The  below  box  shows  two  examples  of  State  aid  measures  implemented  in  Belgium  and 
France which aim to support employment and training. In both cases, measures were designed 
according to the provisions of the GBER and therefore did not require prior notification to the 
Commission before implementation. 

Block exempted aid for professional integration of persons with disabilities (Belgium, X 29/2008) 

In  2008,  the  Flemish  regional  government  implemented  a  measure  aimed  at  promoting  the 
employment of disabled workers according to Articles 41 and 42 of the GBER. Under the scheme, aid 
is granted to employers who recruit disabled persons as well as to the disabled who are self-employed.  

The  aid  takes  the  form  of  direct  subsidies  aimed  at  compensating  the  salary  cost  of  the  disabled 
employees  (including  social  contributions).  The  aid  starts  from  40  %  of  the  total  salary  cost  and  is 
reduced  over  the  time  to  reach  20  %  from  the  fifth  year  from  recruitment.  In  addition,  the  scheme 
allows the Member State to compensate for the extra costs generated by the employment of disabled 
persons  such  as  additional  transport  costs,  adaptation  of  the  workplace,  purchase  of  tools  and  work 
clothes,  special  training  needs.  Specific  provisions  are  foreseen  for  the  employment  of  persons  with 
visual and/or hearing impairments. 

According to the Flemish authorities, the annual budget of the scheme is set at EUR 59.3 million.  

Aid scheme on training aid (France, X 64/2008)  

In 2008, France implemented a training scheme that follows the provisions of the GBER. The measure 
aims  to  provide  general  and  specific  training  to  employees  of  all  sectors.  According  to  the  rules 
established in the GBER, the maximum aid intensity for general training is 60 % of eligible costs and 
25  %  for  specific  training.  To  compensate  for  the  greater  financial  difficulties  faced  by  SMEs,  the 
GBER foresees higher aid intensities for these enterprises (20 % increase for both types of training).  

The aid can be granted through grants, loans, guarantees, subsidy interests or reimbursable advances. 
The annual budget is around EUR 60 million and EUR 3 million for guarantees. Additional funding 
(around EUR 25 million) is provided by the Structural Funds for the period 2007-2013.  

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In 2009, more than 40 % of total training aid in France was granted under this scheme. 

8.4. 

State aid expenditure for training and employment 

As  noted  above,  the  Europe  2020  Strategy  aims  at  fostering  a  high-employment  economy 
with a 75 % employment rate. State aid is one of the tools available to achieve this objective. 
Generally, it is used where other measures can not fully correct imperfect functioning of the 
labour market. In practice, it plays a particularly important role in facilitationg the integration 
into the labour market of supposedly less-productive workers (the young and the un-skilled, 
people with a disability etc.). 

Training  and  employment  State  aid  amounted  together  to  around  EUR  3.4  billion  in  2009 
(0.03 % of EU-27 GDP) of which employment aid stood at EUR 2.4 billion (0.02 % of GDP). 
In relative terms, roughly 6 % of aid to industry and services was granted for employment and 
training.  

The  highest  share  of  training  and  employment  aid  in  relative  to  total  aid  to  industry  and 
services  was  observed  in  Denmark  and  Poland.  Six  Member  States  (Bulgaria,  Germany, 
Greece,  the  Netherlands,  Romania  and  Sweden)  granted  less  than  1  %  to  these  objectives 
while Luxembourg did not use State aid at all for training and employment.  

Three  Member  States  accounted  for  84  %  of  employment  aid  granted  in  2009:  Denmark 
(EUR 1.2 billion, 51 %), Poland (EUR 0.6 billion, 26 %) and Italy (EUR 0.2 billion, 8.7 %). 
Italy was one of three Member States who together granted half of all training aid (Italy: 21 
%, Germany: 16 % and Spain: 13 %). 

More than half of all aid for training and employment (55 %, EUR 1.8 billion) was granted 
under  block-exempted  measures.  The  share  of  block  exempted  measures  was  significantly 
higher for training aid (88 %) than for employment aid (41 %). GBER measures amounted to 
around EUR 1.2 billion, of which aid for the employment of disabled workers in the form of 
wage  subsidies  amounted  to  EUR  625  million  (Art.  41  GBER),  aid  for  compensating  the 
additional costs of employing disabled workers to EUR 28 million (Art. 42 GBER), and aid 
for the recruitment of disadvantaged workers in the form of wage subsidies to EUR 52 million 
(Art. 40 GBER). As regards training aid, the amounts were as follows: EUR 438 million for 
aid for general training (Art. 38(2) GBER) and EUR 99 million for aid for specific training 
(Art. 38(1) GBER).  

When analysing figures for employment aid, it must be observed that around 80 % of the total 
was granted under only three schemes: aDanish scheme supporting integration into the labour 
market of people suffering from severe physical and mental problems81 and Polish and Italian 
schemes  providing  employment  aid  for  people  with  a  disability82.  Training  aid  was  less 
concentrated. The three largest schemes (one Polish, one Italian and a French one) accounted 
for  around  20  %  of  total  training  aid83.  Comparing  the  two  consecutive  periods  2004-2006 
and 2007-2009, it can be observed that training aid generally stood at the same levels both in 

81 
82 

83 

Mesures sociales dans le secteur du travail (NN 10/2002). 
"Miesięczne  dofinansowanie  do  wynagrodzeń  pracowników  niepełnosprawnych"  (X  306/2009)  and 
"Credito d’imposta per le nuove assunzioni nelle aree svantaggiate" (XE 12/2008). 
"Refundacja  wynagrodzeń  młodocianych  pracowników"  (X  134/2010),  "Aide  aux  entreprises  pour  la 
réalisation  d'un  programme  de  formation"  (XT  1/2002)  and  "Engagements  de  développement  de  la 
Formation (EDDF)" (N 753/1999). 

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nominal  terms  (around  EUR  0.8  billion  per  year)  and  relative  terms  (1.5  %  of  total  aid  to 
industry and services). On the other hand, State aid for employment decreased from EUR 3.1 
billion  per  year  in  the  first  period  to  EUR  2.7  billion  in  the  second  one.  The  share  of 
employment aid in total aid to industry and services also decreased by 0.9 % (from 5.9 % to 
5.0 %). 

Almost all aid for employment and training is granted in Europe under aid schemes. Between 
2004  and  2009  (when  EUR  17.5  billion was granted  as  training aid  and  EUR  4.8  billion  as 
employment aid), ad hoc individual aid accounted for around 1 % of the total. As regards aid 
instruments, Member States used direct grants (83 % of total aid) and tax exemptions (17 %). 

8.5. 

Conclusion on State aid for employment and training 

The role of State aid measures to promote job creation and skilled workers is quite limited. 
Most public support measures do not fall within the scope of the State aid rules, but constitute 
general measures as they are open to all enterprises in all sectors and are without discretionary 
power  for  the  authorities  applying  the  measure.  However,  when  market  failures  are  being 
addressed, the Commission recognises the justification for State aid interventions. 

Most  rules  governing  State  aid  to  employment  and  training  are  contained  in  the  GBER, 
facilitating  a  speedy  and  low  administrative  cost  implementation  of  the  measures.  Indeed, 
more  than  half  of  all  aid  to  these  objectives  was  granted  under  block  exempted  measures. 
However, there are important differences: while a large majority of training aid was granted 
under block-exempted measures (88 %), for employment it represented less that half of total 
aid (41 %). 

Most  employment  aid  is  concentrated  in  three Member  States  and  it  is  mainly  addressed  to 
disabled workers. Training aid is more dispersed and mainlyconcerns general training.  

Despite  its  limited  scope  under  current  State  aid  rules,  the  Commission  has  traditionally 
adopted  a  rather  favourable  approach  towards  employment  aid,  particularly  where  it  is 
intended to help disadvantaged and disabled workers to enter or stay in the labour market by 
covering  the  extra  costs  resulting  from  their  perceived  or  real  lower  productivity.  The 
Commission has also generally given sympathetic consideration to training aid. When market 
failures lead to a less than optimal level of training, Member States are therefore encouraged 
to complement their national plans for employment and training with well-targeted State aid 
measures. State aid control will continue to ensure that the distortive effects on competition of 
such intervention are minimised.  

9. 

CONCLUSION 

State  aid  control  policy  is  an  important  tool  which  can  contribute  to  achieving  the  Europe 
2020 objectives by supporting smart, sustainable and inclusive initiatives of general common 
interest. State aid measures can correct market failures, thereby improving the functioning of 
markets and enhancing European competitiveness. State aid control has become an essential 
pillar of the internal market which ensures that companies are able to compete on equal terms 
and provides safeguards against Member States engaging in subsidy races.  

Member States are called upon to use a wide range of measures to achieve the Europe 2020 
targets, including regulatory frameworks and general measures, for instance those relating to 
tax. State aid is only  a  complementary tool and, curcially, must be well targeted to specific 
needs  or  priorities.,  Consequently,  the  Commission  aims  at  ensuring  that  State  aid  fulfils 

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52 

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clearly defined objectives of common interest and does not distort competition or affect trade 
between Member States to an extent contrary to the common interest.  

Furthermore,  it  is  important  to  emphasise  that  the  amount  of  aid  is  not  a  measure  of  its 
efficiency.  In  the  context  of  the  crisis  and  taking  into  account  budgetary  constraints  in  the 
Member  States,  the  objective  of  having  less  but  better  targeted  aid  remains  of  primary 
importance.  Also,  in  order  to  promote  competiveness,  the  aim  is  to  address  market  failures 
and not to substitute public expenditure for market forces.  

In particular, State aid targeted at R&D&I can be effective to provide incentives for additional 
private R&D&I investments with the aim of achieving the EU target of spending 3 % of EU 
GDP on R&D&I by 2020.  

State aid rules for the protection of the environment can also give Member States extensive 
possibilities  for  encouraging  clean  industries  and  environmentally-friendly  economies 
contributing to "a resource-efficient Europe".  

Moreover,  well  targeted  State  aid  measures  can  help  to  mitigate  the  special  financing 
difficulties faced by SMEs, by contributing to their creation, growth and development. In this 
sense,  Member  States  can  make  full  use  of  the  possibilities  offered  under  the  GBER  for 
SMEs, which allows them to speed up the implementation of State aid measures and to reduce 
administrative costs.  

Equally, a range of options to increase the employability of certain categories of workers by 
granting training aid, encouraging job creations and/or promoting the access of disadvantaged 
and disabled workers to the labour market. Although State aid is relatively limited in this area, 
its use , where market failures are identified, can help to contribute to the objectives of "An 
agenda for new skills and jobs". 

State aid also plays a key role in the development of the broadband sector. The efficient use of 
public funding can help to bring high speed internet access to as many citizens of the EU as 
possible  allowing  them  to  benefit  from  the  advantages  of  a  knowledge-based  society. 
However, aid has to be used carefully in the liberalised telecoms markets to avoid a 'crowding 
out' of private investment. 

Finally,  by  promoting  economic,  social  and  territorial  cohesion  within  the  Union,  regional 
State aid contributes to the Europe 2020 goals. In this sense, regional State aid differs from 
other types of aid, as it is mainly intended to address the cohesion disequilibrium rather than 
market failures only. The importance of this objective is evident, as reflected by the volumes 
of  aid  spent  on  regional  development,  which  accounts  for  the  highest  share  of  total  aid  to 
industry and services.  

As most of the State aid rules were reviewed in the context of the Lisbon Strategy for growth 
and  jobs,  they  are  generally  adapted  and  oriented  to  serve  the  new  challenges  under  the 
Europe  2020  Strategy.  In  the  forthcoming  revisions  of  certain  guidelines  and  frameworks, 
further  adjustments  might  be  necessary.  In  the  case  of  the  risk  capital  guidelines,  some 
changes have already been implemented. 

Large  disparities  between  Member  States  demonstrate  different  policy  approaches,  however 
the objective of "less and better targeted aid" is still valid for all countries. In the context of 
the current crisis and budgetary restrictions there is a need to keep public expenditure under 

EN 

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control,  while  ensuring  the  effectiveness  of  the  measures  and  a  level  playing  field  for 
enterprises. 

EN 

54 

   EN