SME Chamber

Almunia plans to modernize EU state-aid rules

 State-aid rules should become more ‘efficient' under plan – Joaquín Almunia, the European commissioner for competition, announced proposals to modernise the European Union's state-aid rules, aimed at making them more efficient and effective.

Speaking at the European Commission's first Competition Forum inBrussels, Almunia outlined ways in which he wants the system overhauled better to meet the requirements of the EU's single market.

State aid has figured prominently in EU member states' responses to the financial crisis. The Commission has introduced emergency measures that allow governments to prop up their financial sectors. However, there is an acknowledgement within the Commission that there must be a more radical overhaul of the system if is to be used more effectively. One EU official said that the changes likely to be proposed would be the "most far-reaching reform of state-aid control in 50 years".

The Commission has extensive powers to police member states' use of state aid. At the moment, a country must notify the Commission every time it decides to provide state aid, and then must wait for the Commission's approval. Under the current regime, there is no distinction between state aid that will have a great impact on competition and aid that will have relatively little.

Quicker decisions

As part of the reforms, cases could be prioritised so that officials can focus more on those that have a bigger impact on the internal market. Commission officials believe that this will free up resources and allow them to devote more time to the most important cases, help them to reach decisions more quickly, and also let them start a greater number of own-initiative investigations into suspected breaches of the rules. Currently, the Commission waits for complaints before starting an investigation.

Among other changes, Almunia is expected to raise the possibility of making it easier for member states to provide what the Commission classifies as ‘good aid': the financial support that member states and the Commission agree is necessary for growth and economic recovery. This could include measures to boost the internal market as well as research and development and innovation spending. Likewise, rules could be modified so that so-called bad aid that does not boost the internal market could be banned.

The Commission's role in state aid is enshrined in the EU treaties. Financial support from governments is controlled to ensure that it does not distort competition and free trade. Mostly, state aid is prohibited – but there are some circumstances when it is allowed, notably to ensure a well-functioning economy.

State-aid rules have come into focus since the start of the financial crisis, which forced governments to make unprecedented interventions, particularly in the financial sector. Nicolas Véron of Bruegel, a Brussels-based think-tank, said that the Commission's role in state-aid decisions during the crisis had been substantial. "It has not been a yes-man, it has not been a rubber-stamping exercise," he said. "They have shown flexibility but have certainly not been toothless."

Today's Competition Forum is also due to discuss how competition can be used as part of the EU's overall policies to boost the EU's competitiveness and innovation and whether more can be done to ensure the competitive use of intellectual property rights.

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