State aid modernization and the wish to achieve more with less

State aid modernization and the wish to achieve more with less

State aid reform hopes to achieve more results with less aid. The Commission also hopes to monitor state aid more effectively with less (or at least not more) man-power. Will that work?

As we speak, the European state aid rules are being reformed and modernized. This modernization project is to turn Europe into a ‘smart, sustainable and inclusive economy’. According to the Commission’s 2012 Communication, its purpose is:

  1. to foster sustainable, smart and inclusive growth in a competitive internal market;
  2. 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; and
  3. to streamline the rules and provide for faster decisions.

The reform process is a comprehensive one and many different measures are proposed to achieve these goals. Particularly interesting is the plan to allow more types of state aid measures to be exempted from the obligation of prior notification to the European Commission.

Generally, EU Member States may not grant state aid before the Commission has authorized it, except if it is covered by a Block Exemption Regulation. So far, no prior Commission authorization is needed for regional aid, SMEs, R&D, employment aid, training aid and environmental aid – given that certain conditions are met. Now, the Commission wants to extend the possibility for exemptions to areas such as culture and heritage conservation, innovation and amateur sports. This means that more and more state aid can be granted without burdening the Commission with the – complex – analysis of whether a notified measure constitutes state aid and whether it is compatible with the internal market. This frees up some much-needed time to focus on some of the more pressing threats to the internal market. It also means that Member States – the ones who have an interest in granting the aid – are increasingly becoming responsible for ensuring that the aid granted fulfills the conditions of the relevant Block Exemption Regulation.

The question is: will it work? Is it not dangerous to abandon the possibility of ex ante control of state aid in broad fields such as ‘innovation’ and leave matters in the hands of the Member States? It is already known that the monitoring of the existing block exemptions has some significant shortcomings. Should the amount of exemptions not be limited rather than expanded?

The Commission’s answer appears quite trouble –free: “If and when the Commission adopts more block exemptions, it would also expect Member States to take their share of responsibility for ensuring strict compliance.” This is important, no doubt, but does it really address the shortcomings at all? Member States have always been expected to take their share of responsibility. Of course, the Commission adds that it has already increased its monitoring and that it will not hesitate to investigate problematic aid measures and to order the recovery of this aid if necessary. The European Parliament, in any case, does not seem to be convinced. “Deeply concerned” by the discovered shortcomings, it “urges the Commission” to ensure “that the possible weakening of the ex ante monitoring of notifications will be offset by effective and strict ex post control on behalf of the Commission to ensure adequate compliance”. So much for freeing up time, then.


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