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Neelie Kroes

European Commissioner for Competition Policy

Two years into the SAAP - State of Play and prospects

European State Aid Law Institute Conference
Brussels, 21st May 2007

Ladies and Gentlemen, dear friends,

It is my pleasure to be with you again. Here, at the 2005 ESTALI Conference, I presented the State Aid Action Plan. It's my flagship project as Competition Commissioner. And it's the first ever comprehensive reform of State Aid policy in fifty years of Community law.

It's easy to present ambitious and bold policy plans. But what I care about is results. So today, halfway through implementing the Action Plan, I'm here to report on progress. We have delivered a great deal – probably more than I thought possible in such a short time! My team know how grateful I am for their excellent work over these last two years. I'm also pleased by the strong support we've had from stakeholders. Today, I'd like to share some of our achievements with you.

But of course there is still some way to go, to 'bed down' the reform and ensure everyone 'buys-in'. I'll turn to that in the later part of my presentation.

Introduction: the philosophy behind State aid reform

The State Aid Action Plan was about two things. First, better regulation: cutting red tape, making the rules more effective, better focussed and more predictable. In short, more user-friendly rules for granting authorities and companies alike. Secondly, and most importantly, 'Lisbonising State Aid' – transforming this policy tool to deliver growth and jobs.

Four guiding principles have underpinned our reform:

  • less and better targeted State Aid
  • a refined economic approach
  • more effective procedures, better enforcement, higher predictability and enhanced transparency and
  • a shared responsibility between the Commission and Member States.

Instruments delivered

So how have we put these principles into practice?

In September 2005, and after an economic analysis of the market failures involved, we launched our ideas on State Aid for Innovation. The reaction we got was very positive; and these proposals have since become part of the 'law of the land'.

In October 2005, the Commission adopted new Regional Aid Guidelines. Tailored to address the new diversity in our enlarged Union, the rules better target those regions most in need. We had to stand our ground: some 'old' regions were fast to resist modernisation. But the proof of the pudding is in the eating: the 25 regional aid maps notified to us last year have all been approved. We have also adopted a Regional Block Exemption Regulation to spare Member States the trouble of notifying small, straightforward regional aid schemes.

November 2005 saw the adoption of the Decision and Framework on Services of General Economic Interest and the related Transparency Directive. Our package gives clarity and certainty to compensation to pay for a wide range of vital public services across Europe. It is now for Member States to use it to best effect!

2006 was clearly the 'Lisbon year' of our reform. Last July, we adopted the new Risk Capital Guidelines for SMEs - the first concrete implementation of our refined economic approach in a 'legislative' text. We increased the safe-harbour threshold to €1.5 million and set clear conditions for entering that harbour. For other cases, we laid down the requirements for detailed economic assessment. This is the 'economic approach' in practice – laying down 'hard and fast rules' for simple cases, while being flexible enough to accommodate the more sophisticated and complex issues that are a equally part of life.

Our new R&D and Innovation Framework followed last November. Grounded in the Lisbon agenda, it improves the old rules by setting higher thresholds, incorporating innovation for the first time ever, and developing a refined economic approach to properly assess 'big' cases. This is the text I'm most proud of, because it so clearly goes to the heart of fostering European competitiveness and excellence. The first large projects we've seen, for example from the Agency for Innovation, give encouraging signs that this is going in very much the right direction.

Finally in December, we adopted the new de minimis Regulation doubling the threshold to €200,000 over 3 years, and setting a guarantee ceiling of €1.5 million. This should cover more than 90% of the financing needs of SMEs, without any bureaucratic burden and they have warmly welcomed it.

Of course, we have not just produced new legislative texts. We have also started to apply our new economic approach in practice. As a result, our decisions are becoming more transparent, more robust and better argued – our economic doctrine is gaining in sophistication. And we have started to improve State Aid discipline, which includes referring Member States who fail to comply with State aid law to court. We are actively enforcing the Deggendorf principle, under which no company can receive new aid if it has not reimbursed old incompatible aid. Now that really bites! The statistics show the results: more illegal aid is being recovered by Member States.

Obviously, all our efforts would be in vain were it not for stakeholder support, and partnership with Member States. We have therefore created a network of State Aid contact points to spread knowledge and good practice. And we have recently launched the State Aid weekly e-news, providing all the latest developments in the State Aid world. We now have over 3,000 subscribers. If you have not done so already, make sure you register!

I think it is fair to say that these last two and a half years have been ripe in delivery, both on policy and procedure. But tomorrow marks just the mid-point of the mandate. And there is a lot more still to deliver. I can assure you, I mean to keep my promises!

This year's priorities

This year is a crucial one. Better procedures are a priority. We have now finalised our internal proposals on best practice guidelines, and had a first discussion with Member States. It's still too early to say how we will proceed. But one thing is clear: the top speed of a car depends on both the engine and the fuel you put into it. And so our 'top speed' in assessing aids will depend on Member States delivering timely and complete information. If we could counter-check this information by asking questions directly to competitors or contacting potential beneficiaries, we could squeeze out another few kilometres per hour. I hope Member States will carefully consider the benefits of such an approach.

But my very top ongoing priority is the General Block Exemption, due to be adopted mid-next year at the latest. I know you'll have a dedicated session on this, so I won't say too much about it now. But for me, this is the most important contribution State Aid policy can make to better regulation and simplification. We want to cut red tape where it can be cut, and make sure that small and straightforward aid for SMEs, employment aid, training aid, regional aid, some risk capital aid, some R&D aid – including for large companies – and even some environmental aid measures no longer need the 'Brussels' stamp of approval'. This will free our resources for those cases that really matter – big cases with real risks for competition – while easing the burden for those SMEs who really deserve support without thereby affecting competition to a significant degree.

2007 is also the year of the new guidelines on environmental protection. Our work coincides with the very important work on Energy and Climate Change currently going on in the Commission and the other institutions. As you'd expect, these guidelines will follow the same structure and economic approach as the R&D&I Framework. Our aim is to find a proper balance, so that genuine environmental measures can be supported, while minimising distortions of competition and undesirable spill-overs. A first draft will be out very soon – please do send us your comments!

In parallel, time has come to update our approach to setting the reference rates used to determine the aid element in loans, recovery interest, and actualisation. I'm also thinking about revisiting the notice on guarantees, especially as concerns risk assessment. The revised reference rates methodology will be ready by the end of the year. As a consequence, we will also need to adopt a new implementing regulation, to update our notification forms, include the new methodology – and thereby, again, improve procedures. And we will publish a new notice on recovery, to help Member States comply better with their obligations, should they have granted incompatible aid – which of course we hope they no longer will!


Ladies and Gentlemen,

So far, State aids reform has progressed successfully. New rules have been put in place, based on new approaches. And building upon this, we are developing their application in practice. At the same time, we are trying to improve the quality and speed of our decision-making.

But I have no time for complacency. The State Aid Action Plan is a small revolution. But history tells us that after every revolution comes a backlash. The French Revolution first triggered the Restoration before the principles of Enlightenment finally spread across Europe.

Sometimes I have the feeling that, as we progress along our reform path, the risk of backlash is never very far away! Looking to my own backyard for a minute, the challenge for the Commission now is to really get on and apply our new principles in concrete cases which stand up in the European courts. But durable change will also vitally depend on our capacity to engage all stakeholders. When some complain about 'globalisation', when some consider 'matching aid' a worthwhile alternative to healthy competition, then I know that more hard work is needed to complete our reform and explain its benefits to policy-makers and citizens.

And that is why I am so pleased to be able to rely on the support of the enlightened minds of all of the State Aid experts gathered in this room.

Thank you for your attention and your ongoing contribution!

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