Member States moving towards less and better targeted aid

The European Commission’s latest state aid Scoreboard shows that Member States have been moving over the past six years towards the European Council objective of less and better targeted aid. In particular, the EU-10 Member States have progressively reoriented their state aid towards horizontal objectives of common interest such as regional development, R&D, SMEs and protecting the environment. With the exception of Malta and Hungary, they have all directed more than 85% of their aid to horizontal objectives which places them at or above the EU average. R&D aid has increased only moderately in the EU, but with the new R&D framework a further increase is expected in the future.

Competition Commissioner Neelie Kroes commented: “The current state aid reform is starting to bear fruit: overall aid levels go down, and aid is increasingly allocated to the Lisbon objectives of sustainable growth and job creation in a knowledge-based economy. Still more could be done for research, development and innovation, but approved budgets of around €12 billion for R&D&I aid in 2007 show that Member States are beginning to take advantage of the additional possibilities under the new Commission framework for R&D&I.”

Less and better targeted aid

In a rather favourable economic context of economic growth, Member States have responded positively to the European Council’s call for less aid and better targeted aid. The overall level of state aid for industry and services has decreased from €53bn or 0.50% of GDP in the period 2001-2003 to €48bn or 0.43% of GDP in the period 2004-2006. This downward development is largely due to the EU10 Member States, as they continue to adjust their state aid policies and practices to the requirements of EU state aid rules. Their state aid decreased from €7bn or 1.41% of GDP to €3.3bn or 0.59% of GDP over the same period

In addition, two further factors contributed to this evolution:

• In a period of steady economic growth, Member States granted considerably less rescue and restructuring aid, accounting for half of the decrease. In fact, the level of rescue and restructuring aid in the period 2004 – 2006 was, at €1.8bn, less than one third of the €6.2bn awarded in 2001 – 2003.  

• State aid to the coal sector shows a continuous downward trend.

The clear move towards “better targeted aid” continues with almost two thirds of the Member States now awarding more than 90% of their aid to horizontal objectives, compared to just half of the Member States in 2005. However, it needs to be kept in mind that part of this increase is to be attributed to an increase of tax exemptions for the environment and energy saving, in particular in energy intensive industries.

The three main horizontal objectives remain environment and energy savings, regional economic development and research, development and innovation (R&D&I). Environment and energy saving was extensively supported by the Nordic countries, Germany, The Netherlands and the United Kingdom. Regional development was favoured mainly by EU-10 and Mediterranean Member States. Research and development was favoured most by Finland, France, the Netherlands, Belgium, Italy the Czech Republic and Estonia.

State aid for Research, development and innovation (R&D&I)

State aid to R&D has moderately increased in the most recent years (+ 1.7%) and stood at 0.06% of GDP or €6.7bn in 2006, with a potential to increase further in the coming years. Under the new EU Framework for R&D&I (see IP/06/1600 and MEMO/06/441), the Commission approved in 2007 R&D&I budgets totalling more than €12bn. Even though the new framework requires a more detailed analysis, the timeframe for analysing the measures has remained unchanged.

Aid granted under the block exemption regulations

In 2007, the Commission observed a significant increase of measures falling under the scope of the newly introduced block exemption rules, including the new block exemption Regulation for regional aid. This, combined with sizeable budgets of many of the new measures, seems to indicate a steep increase in expenditure falling under block exemptions in the years to come.

Starting in 2001, block exemptions have come into force for aid to SMEs, aid to training, aid to employment and to regional investment aid, as well as for certain types of aid in the fisheries sector and aid to SMEs in the agricultural sector. As regards expenditure, an estimated €3 billion was awarded in 2006 under the three block exemption regulations for SMEs in the industry and services sector, training and employment.

The Scoreboard is available on the Europa website:

http://ec.europa.eu/comm/competition/state_aid/studies_reports/studies_reports.html
The Spring 2008 Scoreboard will include a feature chapter on state aid in Romania and Bulgaria.

State aid awarded in the EU-25 Member States, 2006

        Total state aid less railways in billion €      Total state aid less agriculture, fisheries and transport in billion €  Total aid less railways as % of GDP     Total aid less agriculture, fisheries and transport as % of GDP
EU-25   66.7    47.9    0.58    0.42   
EU-15   61.1    44.7    0.56    0.41   
EU-10   5.6     3.2     0.91    0.52   
Belgium 1.2     0.9     0.39    0.28   
Czech Republic  0.8     0.6     0.66    0.51   
Denmark 1.3     1.0     0.59    0.46   
Germany 20.2    16.0    0.87    0.69   
Estonia 0.1     0.0     0.41    0.08   
Ireland 1.0     0.5     0.57    0.28   
Greece  0.6     0.3     0.26    0.15   
Spain   4.9     3.9     0.50    0.39   
France  10.4    7.4     0.58    0.41   
Italy   5.5     3.8     0.37    0.26   
Cyprus  0.1     0.1     0.76    0.48   
Latvia  0.3     0.0     1.80    0.15   
Lithuania       0.1     0.1     0.54    0.23   
Luxembourg      0.1     0.0     0.32    0.13   
Hungary 1.4     0.8     1.57    0.93   
Malta   0.1     0.1     2.29    1.77   
Netherlands     1.9     1.3     0.35    0.24   
Austria 2.3     1.6     0.90    0.60   
Poland  2.3     1.2     0.85    0.45   
Portugal        1.5     1.4     0.93    0.91   
Slovenia        0.3     0.1     0.83    0.48   
Slovakia        0.2     0.2     0.51    0.45   
Finland 2.6     0.6     1.53    0.35   
Sweden  3.5     2.9     1.15    0.94   
United Kingdom  4.2     3.1     0.22    0.16   
State aid as defined under Article 87(1) EC Treaty that has been granted by the 25 EU Member States for all sectors except railways and has been examined by the Commission. All data are quoted at constant prices. Source: DG Competition, DG Energy and Transport, DG Agriculture and DG Fisheries

Trend in the level of State aid in the EU member States, 1996-2006

        EU-25   EU-15  
        Total state aid less railways in billion €      as % of GDP     Total state aid less agriculture, fisheries and transport in billion €  as % of GDP     Total state aid less railways in billion €      as % of GDP     Total state aid less agriculture, fisheries and transport in billion €  as % of GDP    
1996                                    77.9    0.93    58.3    0.70   
1997                                    98.9    1.12    78.9    0.90   
1998                                    66.1    0.73    50.2    0.55   
1999                                    57.1    0.61    40.3    0.43   
2000                    48.0    0.46    59.1    0.60    42.6    0.43   
2001                    50.5    0.48    62.3    0.62    45.9    0.46   
2002                    56.8    0.53    65.6    0.65    50.6    0.50   
2003                    52.0    0.49    57.0    0.56    41.6    0.41   
2004    67.5    0.62    47.5    0.44    61.7    0.59    43.7    0.42   
2005    66.6    0.60    47.3    0.43    60.9    0.58    44.2    0.42   
2006    66.7    0.58    47.9    0.42    61.1    0.56    44.7    0.41   
Annual average 2001-03                  53.1    0.50    61.6    0.61    46.0    0.46   
Annual average 2004-06                  47.6    0.43    61.2    0.58    44.2    0.42   
Source: DG Competition, DG Energy and Transport, DG Agriculture and DG Fisheries