COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS EU State Aid Modernisation (SAM)
Date: 2012-05-08
Institutions: European Commission
Subjects: EU control, State aid, control of State aid, economic growth, single market

EUROPEAN COMMISSION 

Brussels, 8.5.2012  
COM(2012) 209 final 

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMITTEE OF THE REGIONS 

EU State Aid Modernisation (SAM) 

(Text with EEA relevance) 

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COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, 
THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND 
THE COMMITTEE OF THE REGIONS 

EU State Aid Modernisation (SAM) 

(Text with EEA relevance) 

1. 

1. 

2. 

3. 

INTRODUCTION: STATE AID CONTROL IN THE PRESENT ENVIRONMENT 

Europe  2020  is  Europe's  growth  strategy  for  this  decade.  In  a  changing  world,  the 
European Commission is targeting its policies at making Europe a smart, sustainable and 
inclusive economy. Those three mutually reinforcing objectives should help the EU and 
the Member States deliver high levels of employment, productivity and social cohesion.  

In that light, the single market is Europe's best asset for generating sustainable growth. 
An  effective  internal  market  requires  the  deployment  of  two  instruments:  first, 
regulation  to  create  one  integrated  market  without  national  borders  and,  second, 
competition  policy  including  State  aid  control  to  ensure  that  the  functioning  of  that 
internal  market  is  not  distorted  by  anticompetitive  behaviour  of  companies  or  by 
Member States favouring some actors to the detriment of others. Competition is a major 
driver  of  growth;  it  incentivises  enterprises,  including  new  ones,  to  enter  markets  and 
innovate, improving productivity and competitiveness in a global context. Competition 
is  also  a  cost-effective  policy  as  it  can  be  deployed  without  any  public  or  private 
spending. Thus, as one of the instruments of competition policy, State aid control plays a 
fundamental role in defending and strengthening the single market.  

The economic and financial crisis has threatened the integrity of the single market and 
increased  the  potential  for  anticompetitive  reactions.  At  the  same  time,  the  crisis  has 
increased  the  demand  for  a  greater  role  of  the  State  to  protect  the  most  vulnerable 
members  of  society  and  promote  economic  recovery.  But  it  has  also  put  strains  on 
Member  States'  budgets,  requiring  fiscal  consolidation  and  better  use  of  scarce 
resources. Last but not least, it has increased the disparity in Member States’ leeway to 
finance their policies. 

4. 

Europe's  growth  potential  can  be  increased  by  better  focussing  public  expenditure  and 
by creating appropriate conditions for recovery to take off and last. In particular, public 

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spending  should  become  more  efficient1,  effective  and  targeted  at  growth-promoting 
policies that fulfil common European objectives.  

Some of that public spending will take the form of State aid2, be it in the form of direct 
expenditure, tax incentives, State guarantees or other. Stronger and better targeted State 
aid control can encourage the design of more effective growth-enhancing policies and it 
can  ensure  that  competition  distortions  remain  limited  so  that  the  internal  market 
remains open and contestable. It can also contribute to improving the quality of public 
finances. A more focused framework will allow Member States to better contribute 
both to the implementation of the Europe 2020 strategy for sustainable growth as 
well as to budgetary consolidation. 

The  modernisation  of  State  aid  control  is  needed  to  strengthen  the  quality  of  the 
Commission’s scrutiny and to shape that instrument into a tool promoting a sound use of 
public  resources  for  growth-oriented  policies  and  limiting  competition  distortions  that 
would undermine a level playing field in the internal market. The current complexity of 
the substantive rules as well as of the procedural framework, applying equally to smaller 
and bigger cases, are challenges to State aid control. 

Other  elements  also  buttress  the  need  for a  broad  modernisation  package  for  EU  State 
aid policy as a whole: the expiry of a number of key State aid instruments before the end 
of  2013;  the  preparation  of  the  EU  Multiannual  Financial  Framework  and  of  the  EU 
Structural  Funds  rules  for  2014-2020;  and,  last  but  not  least,  the  strengthening  of  the 
economic and budgetary surveillance system under the EU semester.  

The objectives of modernisation of State aid control are therefore threefold: (i) to foster 
sustainable,  smart  and  inclusive  growth  in  a  competitive  internal  market;  (ii)  to  focus 
Commission ex ante scrutiny on cases with the biggest impact on internal market whilst 
strengthening the Member States cooperation in State aid enforcement; (iii) to streamline 
the rules and provide for faster decisions.  

This  Communication  outlines  an  integrated  strategy  for  reform  to  achieve  those 
objectives, which are closely interlinked and which should be seen as integrated building 
blocks of a single reform package.  

This would also imply the phasing out of subsidies leading to inefficient use of resources or environmental 
damage,  in  line  with  the  Commission  Communication  "Roadmap  to  a  Resource  Efficient  Europe", 
COM(2011)571 final, p. 10. 
An overview of the public expenditure from State aid can be found in the “State Aid Scoreboard - Report on 
state aid granted by the EU Member States”, COM(2011) 848 final. 

5. 

6. 

7. 

8. 

9. 

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2. 

OBJECTIVES  OF  STATE  AID  MODERNISATION  AND  THE  INSTRUMENTS  TO  ACHIEVE 
THEM  

2.1. 

Foster growth in a strengthened, dynamic and competitive internal market 

10. 

11. 

12. 

13. 

The  Europe  2020  growth  Strategy  recognises  the  role  of  State  aid  for  growth  and  its 
capacity  "to  actively  and  positively  contribute  to  the  Europe  2020  objectives  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"3.  

Policies  to  achieve  the  Europe  2020  objectives  can  make  an  important  contribution  to 
ending the crisis and re-igniting sustainable growth. Member States and the Union will 
prioritise budgetary outlays to that effect, some of which will contain State aid.  

Modernised  State  aid  control  should  facilitate  the  treatment  of  aid  which  is  well-
designed, targeted at identified market failures and objectives of common interest, and 
least distortive ("good aid"). This shall ensure that public support stimulates innovation, 
green  technologies,  human  capital  development,  avoids  environmental  harm  and 
ultimately  promotes  growth,  employment  and  EU  competitiveness.  Such  aid  will  best 
contribute  to  growth  when  it  targets  a  market  failure  and  thereby  complements,  not 
replaces,  private  spending.  State  aid  will  be  effective  in  achieving  the  desired  public 
policy objective only when it has an incentive effect, i.e. it induces the aid beneficiary to 
undertake activities it would not have done without the aid. And State aid will have the 
greatest impact on growth only when it is designed in a way which limits competition 
distortions  and  keeps  the  internal  market  competitive  and  open.  Therefore  State  aid 
control is crucial in order to improve the efficiency and effectiveness of public spending 
taking the form of State aid, with the overarching objective of spurring more growth in 
internal  market,  for  which  a  necessary  condition  is  developing  competition.  State  aid 
which does not target market failures and has no incentive effect is not only a waste of 
public resources but it acts as a brake to growth by worsening competitive conditions in 
the internal market. 

State  aid  control  already  underpins  the  Europe  2020  flagships.  For  example,  the 
broadband guidelines provide conditions for efficient State support to broadband rollout, 
supporting  the  achievement  of  the  objectives  of  "Digital  agenda  for  Europe".  Public 
support  to  develop  infrastructure  is  also  instrumental  to  the  achievement  of  smart, 
upgraded  and  fully  interconnected  transport  and  energy  networks  as  foreseen  by 
"Resource efficient Europe". The framework for State aid to research, development and 
innovation  facilitates  the  achievement  of  "Innovation  Union"  as  well  as  "An  industrial 
policy for the globalisation era" objectives. The enforcement of "polluter pays" principle 
as  well  as  a  possibility  to  provide  aid  in  order  to  encourage  companies  to  go  beyond 

3 

Commission Communication "Europe 2020 – a strategy for smart, sustainable and inclusive growth", COM 
(2010) 2020 final, 3.3.2010, p 20.  

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mandatory EU environmental standards or to promote energy efficiency provided for in 
the Environmental aid guidelines are one of the tools to implement "Resource efficient 
Europe" flagship. The possibility to support training with State funds contributes to the 
goals  of  "An  agenda  for  new  skills  and  jobs".  Rescue  and  restructuring  aid  guidelines 
allow State aid to ailing companies only under strict conditions and if it results in their 
return  to  long-term  viability,  encouraging  thereby  exit  of  inefficient  firms  and  bracing 
the  companies  for  global  competition,  contributing  to  "An  industrial  policy  for  a 
globalised era". The link between the Europe 2020 objectives and flagship initiatives on 
the one hand, and State aid rules on the other, should be further developed to streamline 
the  Commission’s instruments and to  encourage  Member States to direct scarce public 
resources to common priorities.  

By  putting  an  emphasis  on  the  quality  and  the  efficiency  of  public  support,  State  aid 
control can also help Member States to strengthen budgetary discipline and improve the 
quality  of  public  finances  –  resulting  in  a  better  use  of  taxpayers'  money.  It  is 
particularly important in order to achieve smart fiscal consolidation, reconciling the role 
of targeted public spending in generating growth with the need to bring budgets under 
control.  There  is  therefore  also  a  need  to  embed  State  aid  control  and  more  general 
competition concerns in the EU Semester procedure. 

Robust State aid control is also essential to ensure a well functioning single market. 
Such robust control goes hand in hand with the effective implementation of EU internal 
market  rules  and  is  of  particular  relevance  in  markets  that  have  only  recently  been 
opened  and  where  large  incumbents  aided  by  the  State  still  play  a  major  role,  such  as 
transport, postal services or, in more limited cases, energy. State aid modernisation can 
improve the functioning of the internal market through a more effective policy aimed at 
limiting  distortions  of  competition,  preserving  a  level  playing  field  and  combating 
protectionism.  This  role  of  State  aid  becomes  more  important  now  as  we  need  to 
mobilise the full potential of the internal market for growth.  

The  global  environment  creates  challenges  and  opportunities  for  European  companies. 
Different  systems  of  competition  rules  exist  worldwide.  By  comparison,  EU  State  aid 
rules offer a more transparent, coherent and growth-oriented framework, while allowing 
comparable  levels  of  aid4.  The  increasing  focus  of  the  modernised  EU  State  aid 
framework  on  growth-enhancing  goals,  while  ensuring  a  proper  functioning  of  the 
internal market should improve the competitiveness of EU companies, including outside 
the EU.  

14. 

15. 

16. 

4 

A  comparative  study  carried  out  by  WTO  in  2006  suggests  that  the  level  of  aid  granted  by  EU  Member 
States is comparable to the levels granted by the EU's main trading partners (subsidies as a percentage of 
GDP).  See  World  Trade  Organization  Report  2006  "Exploring  the  links  between  subsidies,  trade  and  the 
WTO."  http://www.wto.org/english/res_e/booksp_e/anrep_e/world_trade_report06_e.pdf.  See  Section  II 
"Subsidies, Trade and the WTO", Chapter E "The incidence of Subsidies". 

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17. 

In the specific circumstances when subsidies granted by a third country would lead to a 
distortion  of  competition,  WTO  rules  provide  a  basic  framework  to  remedy  specific 
consequences of unlawful foreign subsidies for EU operators. In addition, bilateral Free 
Trade Agreements concluded by the EU with third countries may include also rules on 
subsidies  to  deal  with  specific  issues  not  covered  by  the  WTO  framework  (e.g.  Free 
Trade Agreement with Korea). Trade policy instruments can be used to implement those 
disciplines. 

18. 

The proposals of the State aid modernisations contributing to the growth objective are: 

(a) 

Identification  and  definition  of  common  principles  applicable  to  the  assessment 
of  compatibility  of  all  the  aid  measures  carried  out  by  the  Commission;  such 
horizontal  principles  would  clarify  how  the  Commission  would  assess  common 
features  that  are  presently  not  treated  in  the  same  manner  across  the  different 
guidelines  and  frameworks;  those  principles  would  have  to  be  as  operational  as 
possible  and  could  deal  with  the  definition  and  assessment  of  genuine  market 
failures,  the  incentive  effect  and  the  negative  effects  of  public  interventions, 
including, potentially, considerations on the overall impact of the aid.  

(b)  Revision and streamlining of State aid guidelines, to make them consistent with 
those  common  principles.  The  revision  will  follow  a  general  approach  based  on 
strengthening  the  internal  market,  promoting  more  effectiveness  in  public 
spending (use of State aid only where it represents a real added–value); a clearer 
definition of the market failures that need to be addressed and greater scrutiny of 
the incentive effect will play an important role in that context to ensure value for 
money  and  avoid  distortions.  A  more  systematic  assessment  of  the  potential 
negative  effects  of  State  aid  -  notably  in  terms  of  distortions  of  allocative  and 
dynamic  efficiency,  subsidy  races  and  market  power  -  will  also  need  to  be 
pursued. Thus, for example, revised Rescue and Restructuring Guidelines for non-
financial firms will become a very important instrument for controlling that very 
distortive  type  of  aid  in  order  to  ensure  that  the  market  process  of  exit  is 
interrupted by State intervention only when truly justified. Similarly, when market 
conditions  permit,  a  new  set  of  rules  for  rescuing  and  restructuring  financial 
institutions will be put in place for the post-crisis environment, consistent with the 
future  proposals  for  EU  crisis  management  and  resolution.  Finally, 
the 
identification  of  best  practices  with  regard  to  Europe  2020  spending  priorities 
should  allow  for  rapid  clearance  of  cost-effective  and  growth  enhancing  aid.  As 
for  the  streamlining,  in  a  first  stage,  several  guidelines,  including  guidelines  for 
Regional  Aid,  Research  &  Development  &  Innovation,  Environmental  aid,  Risk 
Capital and Broadband (types of aid which account for more than two-thirds of aid 
granted in the EU), could be aligned and possibly consolidated with the common 
principles  by  the  end  of  2013.  This  could  also  allow  seeking  synergies  between 
different aid regimes and satisfying multiple objectives. The individual adoption of 
each of the guidelines will take place progressively and without delay during this 
period. Other guidelines will then be progressively aligned and consolidated. 

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2.2. 

Focusing enforcement on cases with the biggest impact on internal market  

19. 

The drive towards more efficient spending should not translate into micro control of all 
public expenditure but rather into prioritisation and stronger scrutiny of the aid with 
a significant impact on the single market, such as those measures covering large and 
potentially distortive aid, including fiscal aid. In parallel, the analysis of cases of a more 
local nature and with little effect on trade should be simplified. That outcome could be 
achieved  by  defining  more  proportionate  and  differentiated  rules  and  by  modernising 
State  aid  control  procedures,  with  increased  responsibility  of  Member  States  in 
designing and implementing support measures. It will require a clearer definition of the 
rules  and  an  enhanced  ex  post  monitoring  by  the  Commission  to  ensure  adequate 
compliance.  It  will  also  lower  administrative  burden  for  public  authorities  and  for 
beneficiaries when smaller amounts of aid are involved.  

20. 

The proposals of the State aid modernisation contributing to the prioritisation objective 
are:  

(a) 

a possible review of the de minimis Regulation, on the basis of a detailed impact 
assessment,  taking  into  account  the  situation  in  all  Member  States  and  in  the 
internal market taken as a whole, as well as the budgetary implications of such a 
review,  in  order  to  examine  whether  the  current  threshold  still  corresponds  to 
market conditions;  

(b)  possible changes to the Council Enabling Regulation to allow the Commission to 
declare that certain categories of aid are compatible with the internal market and 
are  therefore  exempted  from  ex  ante  notification.  It  would  in  turn  permit  an 
increase  of  types  of  aid  that,  based  on  Commission's  experience,  could  benefit 
from  such  simplified  control,  without  weakening  efficient  supervision  by  the 
Commission  and  ex  post  monitoring.  Those  new  types  of  aid  which  could  be 
covered  by  the  Enabling  Regulation  could  include  for  instance:  aid  granted  to 
culture; aid to make good the damage caused  by natural disasters: aid to (partly) 
EU-funded projects such as JESSICA; and others. 

(c) 

a  revision  and  possible  extension  of  the  General  Block  Exemption  Regulation, 
for  the  categories  of  aid  covered  by  the revised  Enabling  Regulation,  in  order  to 
contribute  to  better  channel  public  resources  towards  certain  well-established 
objectives  while  simplifying  the  administrative  treatment  of  well  designed 
measures with relatively low amounts of aid.  

21. 

Should  the  Commission  decide  to  increase  the  size  and  scope  of  aid  measures  exempt 
from  notification  obligation,  responsibilities  of  Member  States  for  ensuring  the 
correct enforcement of State aid rules would increase. With more measures exempt 
from  the  notification  requirement,  Member  States  will  have  to  ensure  the  ex  ante 
compliance  with  State  aid  rules  of  de  minimis  measures  and  block-exempted  schemes 
and cases, in strict coordination with the Commission which will continue to exercise ex 
post  control  of  such  measures.  The  Commission  will  expect  better  cooperation  from 
Member  States  in  terms  of  quality  and  timeliness  of  submission  of  information  and 

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notifications'  preparation,  as  well  as  effective  national  systems  (including  private 
enforcement)  to  ensure  that  State  aid  measures  exempt  from  ex  ante  notification 
obligation  comply  with  Union  law.  A  lower  administrative  burden  through  less 
notification  obligations  can  only  be  envisaged  if  it  is  accompanied  by  increased 
commitment and delivery on the part of the national authorities in terms of compliance. 
Consequently, ex post control by the Commission will have to be increased, also because 
the current results of the monitoring of the implementation of block exempted measures 
by Member States reveal frequent lack of compliance with State aid rules. In such a way, 
effectiveness of enforcement can be ensured.  

2.3. 

Streamlined rules and faster decisions 

22. 

23. 

Over  time,  State  aid  rules  have  developed  into  a  complex  legal  framework.  There  is 
scope  to  clarify  and  simplify  the  rules,  enhance  consistency  and  streamline  the 
assessment  process.  There  is  a  need  to  better  explain  State  aid  concepts  and  to 
consolidate our horizontal and substantive rules.  

The Commission is obliged to examine all allegations concerning potential aid without 
in  practice  being  able  to  set  priorities  for  complains  handling.  In  addition  the 
Commission is not always in a position to obtain complete and correct information from 
parties,  which  may  prolong  procedures.  There  is  a  need  to  streamline  and  reform 
procedures  in  order  to  deliver  decisions  within  business-relevant  timelines,  in  close 
cooperation with Member States. Elements of the package contributing to that objective 
are: 

(a) 

clarification and better explanation of the notion of State aid: the notion of aid is 
an objective concept defined directly by the Treaty in Article 107 as any measure 
that  results  from  an  intervention  by  the  State  or  through  State  resources,  that  is 
liable  to  affect  trade  between  Member  States,  that  confers  an  advantage  on  the 
recipient and distorts or threatens to distort competition. The Commission's role in 
that  respect  is  limited  to  providing  clarification  as  to  how  it  understands  and 
applies the provisions of the Treaty, as interpreted by the Court of Justice. Within 
those limits, the Commission will provide further clarification on the key concepts 
relating  to  the  notion  of  aid  with  a  view  to  contributing  to  an  easier 
implementation; 

(b)  A  modernisation  of  the  State  aid  Procedural  Regulation  with  regards  to 
complaint-handling  and  market  information  tools,  in  order  to  enable  the 
Commission to better focus its action on cases which are most relevant for internal 
market.  It  requires  enabling  the  Commission  to  set  priorities  for  complaints 
handling, in order to prioritise allegations of potential aid with a large impact on 
competition and trade in internal market. In parallel, in order for the Commission 
to be able to effectively investigate cases of aid with significant impact, it should 
be endowed with more efficient tools to obtain all the necessary information from 
market  participants  and  in  good  time  so  as  to  deliver  decisions  within  business-
relevant  timelines.  Such  modernisation  of  procedures  would  also  allow  the 
Commission to undertake more ex officio investigations into significant distortions 

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of  competition  hampering  internal  market.  It  should  also  permit  a  quick 
verification  of  market  effects  of  aid  measures  which  would  enable  quicker 
decision-taking.  

3. 

24. 

25. 

26. 

27. 

THE WAY FORWARD  

State aid modernisation as outlined above should result in a clearer and more coherent 
architecture  of  State  aid  control.  The  various  potential  measures  outlined  above 
constitute integrated building blocks of a single reform package. 

The  potential  measures  outlined  above,  therefore,  work  together  to  achieve  the  high 
level  objectives  –  they  are  mutually  supportive  and  interdependent.  For  instance,  the 
possible procedural measures suggested above would allow faster decision-making and 
would allow the Commission to focus its enforcement on what matters most at the EU 
level.  A  similar  logic  applies  to  the  extension  of  the  scope  of  the  General  Block 
Exemption Regulation through a modification of the Enabling Regulation.  

In view of that interdependence between objectives and elements of the package, and in 
order to maximise the results of the State aid modernisation, it is also desirable that the 
main elements of the reform enter into force at the same time. The different processes 
will  therefore  start  as  from  the  adoption  of  the  present  Communication,  and  the  main 
instruments of the package, including the Council acts, should be adopted by the end of 
2013. 

To meet this target, Commission proposals for the Procedural and Enabling Regulations 
should be adopted in autumn 2012. The Commission will aim at developing the rest of 
the  package  over  the  next  months  with  a  view  to  progressively  achieving  the  revision 
and streamlining of the main Commission acts and guidelines by the end of 2013. The 
Commission intends to consult Member States and engage in an open dialogue with the 
European Parliament and other stakeholders, with a view to gathering input for a debate 
on the State aid modernisation proposals.  

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