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State aid: crisis-related aid aside, Scoreboard shows continued trend towards less and better targeted aid

European Commission - IP/11/1487   01/12/2011

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European Commission - Press release

State aid: crisis-related aid aside, Scoreboard shows continued trend towards less and better targeted aid

Brussels, 01 December 2011 - The volume of national support to the financial sector actually taken by banks between October 2008 and 31 December 2010 amounted to around €1.6 trillion (13 % of GDP), the European Commission's autumn state aid scoreboard shows. The bulk (74%) came in the form of State guarantees on banks' wholesale funding (see more figures below). The Commission today prolonged the crisis state aid regime for banks, but clarified its rules on remuneration of recapitalisations and revised its rules on fees for interbank financing guarantees to ensure the State is adequately remunerated (see IP/11/1488).

Support to the real economy on the basis of temporary crisis rules dropped to €11.7 billion in 2010, a fall of nearly 50% compared with 2009, reflecting both a low uptake and the budgetary constraints of most EU Member States. The Commission, therefore, is not proposing to extend the Temporary Framework as the normal aid rules, e.g. to promote risk capital investment, to improve energy efficiency or to help small and medium-sized enterprises (SMEs), are equally adequate at this juncture. The short-term export credit insurance, to help palliate market failure, is still in force and the one-off subsidy of €500,000 per company was replaced in 2010 already by the normal de minimis rule.

Total non-crisis aid remained stable at €73.8 billion in 2010 or 0.6% of GDP and continued to re-focus on less distortive horizontal objectives such as aid for research and innovation, protection of the environment and providing risk capital to SMEs. The Scoreboard also shows Member States recovering illegal aid much faster, with 82% (around €12 billion) clawed back at the end of June 2011 thanks to the Commission's action and also, probably, the pressure to correct public finances.

"The key condition to disconnect the life-support machine between the State and the financial sector is to solve the sovereign debt crisis. Our analysis shows that, thanks to our state aid control, the support fulfilled its purpose of protecting economic and financial stability without so far any irreparable damage to competition and to the single market," Commission Vice-President in charge of competition policy Joaquín Almunia said, adding: "I'm determined to revert to normal rules as soon as market conditions permit and to ensure the aid received by banks and by the real economy is geared towards increasing growth and jobs".

Support to banks

Between 2008 and 31.12.2010 €1,608 billion, was actually used to support financial institutions

This was composed of bank liquidity support measures:

  • 1,199 billion (10% of GDP) average outstanding State guarantees on banks' funding and other (short-term) liquidity support measures.

and measures to support bank solvency:

  • 409 billion (3% of GDP) recapitalisation measures and treatment of impaired assets.

Three Member States accounted for nearly 60% of the total aid used. These are Ireland (25%), the United Kingdom (18%) and Germany (15%).

Aid granted to the real economy – Temporary Framework

To minimise the impact of the tightening in credit conditions, Member States also granted aid to the real economy under a temporary framework adopted by the Commission at the end of 2008. The main support measure used was the one-off subsidy of up to €500,000 per company, which was discontinued in 2010. This was followed by subsidised loan interests or guarantees, reduced interests for environmentally-friendly investments and risk capital aid.

Between December 2008 and 1 October 2011, Member States made available €82.9 billion under the temporary framework. The total amount taken up in 2009 was €21 billion while in 2010 it amounted only to €11.7 billion. This indicates that market funding was available to a certain extent.

Long-term trends in non-crisis aid

Non-crisis aid remained stable at €73.7 billion or 0.6% of GDP. Aid to industry and services amounted to €61 billion or 0.5% of GDP of which 85% was earmarked for horizontal objectives of common interest. Most notably, the Commission observed a greater focus on aid for regional development, research, and environmental protection. Such measures are not only less distortive of competition but also contribute towards reaching the EU 2020 strategic objectives of smart, sustainable and inclusive growth.

The reforms under the State Aid Action Plan 2005 – 2008 (see IP/05/680) have also continued to bear fruit. Almost 90% of total aid is granted through block exemptions or schemes (see IP/06/1765 and IP/08/1110). Once approved by the Commission, such general measures allow Member States to grant aid to individual companies without further Commission scrutiny, giving Member States a high degree of flexibility and low administrative burden, while compatibility criteria safeguard a level playing field in the internal market. Only 11.5% of the total aid is assessed individually.

The Scoreboard further shows that at the end of June 2011 roughly 82% or around €12 billion of the total amount of illegal and incompatible aid had been repaid by beneficiaries to the State that had granted it. This marks a significant improvement as compared to the end of 2004, when only 25% had been recovered.

The Scoreboard including annexes, statistics and indicators for all Member States is available at:

http://ec.europa.eu/comm/competition/state_aid/studies_reports/studies_reports.html

Contacts:

Amelia Torres (+32 2 295 46 29)

Maria Madrid Pina (+32 2 295 45 30)


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