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MEMO/04/172

Brussels, 7 July 2004

Commission adopts new rules governing aid to firms in difficulty

The European Commission approved today new Guidelines on State aid for rescuing and restructuring firms in difficulty. These new Guidelines shall enter into force on 10 October this year and replace the current rules.

“The revision adopted today aims at establishing a clear, objective and readable set of rules. The new Guidelines will also close existing loopholes and tighten up current practice. But the new Guidelines are based on the existing set of rules and do not substantially alter the state of play.” Commissioner MONTI stated today.

The main changes introduced by the revision are:

Common provisions

The rules introduce a clarification regarding eligibility of the firm: a firm is regarded as newly created (and thus ineligible for rescue or restructuring aid) during 3 years from start of operation.

The so-called “one time, last time” has been reinforced to exclude all kinds of repeated interventions in favour of one undertaking.

The new rules also reinforce the Commission’s recovery policy barring new rescue or restructuring aid for firms that did not reimburse aid previously declared as being illegal.

Rescue aid

Unlike the current rules, the new Guidelines allow execution of urgent restructuring measures, even in the rescue period. The rescue period is now clearly limited to six months. At the end of this rescue period, the aid needs to be reimbursed. Rescue aid can still only be granted in the form of reimbursable loans. Irreversible capital injections by public authorities remain prohibited.

In order to speed up procedures Member States have the possibility to opt for a lighter procedure to approve rescue aid if the amount of the aid does not exceed the result of a standard formula and, in any event, € 10 million.

Restructuring aid

The Commission will no longer assess the viability of restructuring plans for SMEs. This allows the Commission to concentrate resources on those cases that pose a genuine threat to competition.

Compensatory measures can take the form of divestiture of assets, a reduction in capacity or market presence or a reduction of entry barriers. Activities that would have been abandoned anyway are not assessed as compensatory measures.

The new Guidelines clarify that the beneficiary should make a real contribution toward the cost of its restructuring. This contribution needs itself to be free of aid.

For SMEs, the contribution should amount to at least 25% of the restructuring costs, for medium-sized enterprises 40%, and for large undertakings the percentage shall be established on a case-by-case basis but it should normally be at least 50%. In exceptional circumstances and in case of extreme hardship the thresholds for small and medium-sized enterprises can be reduced to 20% and 35% respectively.

Agriculture

The rules have been considerably simplified. For processing and marketing of agricultural annex-I products, the normal rules will apply, with the exception of the one time, last time principle, which will only apply for a period of 5 years instead of 10.


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