European Commission Aims To Modernise State Aid Control

On 8 May 2012, the European Commission announced the objectives of a reform of EU state aid control, which it aims to have in place by the end of 2013. The reform is part of the EU's wider agenda of fostering growth and creating appropriate conditions for economic recovery to take off and endure. The European Commission notes that the complexity of the current rules as well as of the current procedural framework for state aid are challenges to state aid control. The reform has three main objectives:

to foster sustainable, smart and inclusive growth; to focus European Commission scrutiny on cases with the biggest impact on the internal market; and to streamline the rules and provide for faster decisions. The European Commission wants to ensure that the main elements of this reform enter into force at the same time. This will involve proposals for new legislation being adopted in autumn 2012 and the main instruments of the package being adopted by the end of 2013. Fostering growth The European Commission states that 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 the least distortive. It notes that such aid will best contribute to growth when it targets a market failure and thereby complements, not replaces, private spending. The European Commission continues that 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. As part of the growth aim, the European Commission will develop common principles for the compatibility assessment of national support projects and revise and streamline some existing texts, such as the environmental, regional, R&D&Innovation and risk capital guidelines, which could be aligned and possibly consolidated. Also rescue and restructuring guidelines for non-financial firms will be revised. Financial institutions will be interested to note that the Commission commits to a new set of rules for rescuing and restructuring financial institutions for the post-crisis environment "when market conditions permit". Focusing on cases with the biggest impact The European Commission specifically envisages: (i) a possible review of the state aid de minimis Regulation, to determine whether the threshold is still appropriate;

(ii) possibly allowing the...