EU-commissaris Kroes over nieuwe ontwikkelingen beleid inzake staatssteun (en)

SPEECH/08/386

Neelie Kroes

European Commissioner for Competition Policy

New developments in EU State Aid Policy

Joint Conference BDI/Berliner Gesprächskreis

Berlin, 11 July 2008

Ladies and Gentlemen,

It a great pleasure to participate in the Berlin Round Table on EU State Aid Law at the German Federation of Industries. There is no better place for this discussion: the centre of state aid thinking, in a city of progress, in a country at the heart of Europe – we have all the ingredients for success here at our disposal.

Today, three-quarters of the way through the current mandate, I hope to share with you my thoughts on how far the Commission has travelled and what the next efforts must be.

We will not always agree with each other – but we are united in believing that state aid is a vital field of Community action, no doubt about it.

THE CONTEXT FOR STATE AID

The present economic circumstances demand a special effort from us all. With more than €50 billion a year spent on state aid – what we do with it matters.

But the nature of our challenges – whether it is oil and food prices, climate change, or competition from emerging economies - is that easy answers do not exist.

That includes protectionism. Protectionism might offer pain relief but it doesn't offer a cure or any guarantee of future economic health.

Imagine you are a doctor and a sick patient comes to you for a professional opinion. Maybe it is minor – you can suggest an exercise programme to make them fitter and send them away. That is often the case with horizontal aid. But if the patient has cancer – do you prescribe them a pain reliever and lie to them? Of course not! You say – 'we can treat this, but you need surgery'. You tell them the truth, because that gives the best chance of survival. That is what we have to do in some state aid cases.

Usually, I think of my role as being like a referee of the market. But when it comes to state aid, sometimes I have to also be the doctor.

It's not because I have no heart. I know the human consequences of some of our decisions. But when others will not tell the truth, sometimes it is up to the Commission to deliver the message.

It reminds me of President John F. Kennedy who once rallied his people in the Cold War by saying: "We do these things not because they are easy, but because they are hard."

There are other times when you don't need a doctor to tell you that state aid is flawed. Nokia moving from Bochum to Romania is a good example. Germany threw money at Nokia but to no lasting effect.

The cumulative effects of state aid show us again the case for control. The internal market can only function if state aid is controlled. Imagine if we did not have that market – we would lose our main asset in global competition!

Without the internal market, we would not have 20% of the increase in our living standards over the past 50 years. But we would have higher taxes, lower productivity and subsidy wars.

So, it is essential that someone keeps an overall perspective on state aid. Each case is only a piece in a big puzzle which enables the European economy to grow.

And the puzzle only fits together if aid makes a positive change to behaviour, and the benefits of the aid outweigh the distortions it creates. This is why we check the objective of state aid – be it social cohesion or market failure - and its incentive effect.

And following approval or an exemption, the Commission still needs the possibility to check whether the conditions of aid are respected or not. There is no point to State Aid Control if there is no possibility to check on projects. I trust you understand the common sense in this.

But our input does not have to be negative! Let me tell you of a broadband aid example which shows how the Commission can add value to your project.

Cumbria in North-West England was a region in difficulty– industry and agriculture were declining, it was isolated and key infrastructure like broadband barely existed. But broadband was exactly what could help overcome that isolation and open up new markets and new businesses. It would not distort markets – instead it would create new ones!

In 2003, regional authorities informally approached DG Competition with plans for an aid scheme to provide affordable broadband to 90% of the citizens and businesses: the so-called ACCESS project. The important point is they pre-notified plans at a stage where advice could easily be given and changes easily made.

Following discussions with my services, the scheme was designed so it would not favour any particular technology solution or operator. There were tender procedures

throughout and the selected service provider had to assure open access to other operators at non-discriminatory conditions. The authorities also requested that aid be limited to the minimum necessary to achieve the set aims

With €30m in state aid, a revolution has been achieved:

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  Cumbria has the best broadband coverage and take-up in the entire UK.
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  99.4% of the county has access to broadband. Only 133 out of 26,500 companies cannot get broadband, and 72% use it.

The Cumbrian broadband market is not only competitive, it is sustainable: private operators are now able to satisfy demand on pure market terms. And citizens have a choice between providers.

This year alone the Commission has so far endorsed another seven schemes like this. Rural Germany is the latest with such an opportunity: 141 million euros ($222.6 million) in German public funding to put cities and rural areas on an equal digital footing. I hope the opportunity is used just as wisely as in Cumbria.

ADOPTION OF NEW STATE AID RULES

We have revised nearly all our rules since 2005.

An evolution, not a revolution – but you could say that the State Aid Action Plan has given us a strong sense of purpose: to be more efficient. Our application of Article 87(3) is now based on a more refined economic approach.

All three new generation frameworks and guidelines – the new RAG, the R/D/I framework, and the environmental guidelines - have been developed with state-of-the-art economics in mind. All three focus on areas where state aid can boost growth and jobs.

I have, of course, heard concerns that we have complicated assessments by increasing the role of economics. For the biggest projects, we do set the bar high; given the large sums involved it would be irresponsible not to. But in most cases we leave smaller projects to simply 'get on with the job.' – it is certainly not our goal to be difficult.

We want to save your time, and ours.

GBER

I am thinking of course of the new General Block Exemption Regulation (GBER). Block exemptions now cover 26 categories of horizontal aid, up from 10 previously.

More important though, it cuts red tape in a big way - condensing five block exemptions (SME, R&D, training, employment, regional) into one.

SMEs are at the forefront of GBER– eligible for bonuses in nearly every instance.

We have aimed GBER at the most obvious market failures:

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  low investment R&D& Innovation
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  low levels of entrepreneurship among groups such as women and the failure to fully use the potential of everyone in the labour force
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  environmental protection
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  access to risk capital

and so on ....

And we have deliberately included in GBER only measures we know would have limited distortions and for which the assessment criteria could be clearly articulated and implemented by the Member States.

With GBER we have completed a new three-stream system for assessing State Aid.

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  Block exemption (no Commission involvement)
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  Standard assessment and
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  Detailed assessment.

Now we have to make that system work.

ENFORCING THE STATE AID RULES

The last State Aid Scoreboard shows we are 'heading in the right direction' – changing the balance of what aid is available and taking determined action when the red line has been crossed.

Of course, we are not interested in writing Member State public policy. We are not here to decide if State Aid is the most appropriate instrument. Our job is merely to verify that it is an appropriate instrument.

But the reality is that sometimes aid is not appropriate. Around €7 billion of illegal and incompatible aid had been effectively recovered by 31 December 2007 together with a further € 2.4 billion of interest. These efforts underpin the credibility of the Commission but also of the Court. There must be a penalty when the rules are broken.

But we are not blind to our surroundings. I believe we have shown that we can tackle emergencies such as the ramifications of the subprime crisis in Europe.

A solid application of the Rescue and Restructuring Guidelines has helped to deal rapidly with the rescue phases of cases such as Northern Rock and WestLB, a good example of flexibility without derogating from the basic principles.

The Sachsen LB case was concluded in record time, I should say. Four months from opening the investigation to the decision. It imposed number of divestitures as compensatory measures but it was hardly unreasonable.

There are strict conditions in such cases because we cannot send the message that moral hazard is OK. This would be a general precedent that risk has no price. Some cases also require restructuring and the in-depth investigations that must precede this – so cases such as Northern Rock and German IKB are not unusual when you consider that angle.

At the other end of the scale – you can see the perception battle we face with the case of training aid at DHL's new site in Leipzig-Halle. A lot of media reported this as the Commission refusing to grant € 6 million in aid. In fact we authorised €1.6 million in aid.

Some people might think I am Santa Claus – but in my book €1.6 million is a good package. Especially when you consider DHL wanted some of the money to meet its basic legal obligations, as if one must receive aid to simply respect the law.

State Aid is not a right for anyone.

STATE AID ADMINISTRATION

Turning to our procedures: we have delivered new systems and together the Commission and Member States must now make them work.

Those procedures should lead to better enforcement, higher predictability and enhanced transparency.

Already, the average length of the preliminary examination procedure for a notified case has fallen by one and a half months since 2002. The average duration is now around 5 months

With the GBER, the majority of State Aid measures can now be introduced without notifying the Commission. Even before GBER, exempted cases were twice the number of cases requiring notification to the Commission (more than 600 compared to 330)

But a good system does not automatically mean it is used effectively. The Environmental Aid Guidelines show us this.

Spending on environmental aid is up, with good reason, but when Sweden spends 77 times more per capita on environmental state aid than France and Italy, well, something is not right.

Overall, this tells me we must do more to share responsibility for making the system work.

NEXT STEPS IN STATE AID POLICY

But further success and change may be controversial – so let me be frank.

The State Aid Action Plan acknowledged we had to increase the speed and predictability of our procedures. And we have.

We would like to go further, and I will do that by bringing a best practice package to the Commission's State Aid Conference on 21 November 2008.

But we are near the limits of what the Commission can do on its own in regards to state aid processes.

We will need Member States help if we want to go further. We will also need the help of the courts and other professionals. The 'ball is in your court,' so to speak. Do you want private enforcement in state aid control, for example?

If speedier handling of cases is desired, what new contribution will Member States offer?

The message I want you to have from today is this: the path forward is going to be one of shared responsibility.

CONCLUSION

So I finish in the hope that you are prepared to work with me to answer these questions, to shoulder these responsibilities.

I say that we have to target and control state aid. But the balance has certainly shifted in recent years - away from aid for favoured industries or companies, and towards so-called horizontal aid. State aid is becoming a way to lift the speed limit of the economy.

Our new systems have now been delivered and from the evidence we have - less red tape and faster decisions – they seem to be working.

But the next steps will only be successful with your input. By working together we will find new ways for the system to deliver for Germany and Europe