By adopting temporary frameworks for State aid in crisis situations, the European Commission has reacted swiftly to the need for Member States to mitigate the economic disruption caused by the Covid-19 pandemic and Russia’s war against Ukraine. However, the Commission is finding it difficult to monitor the public aid granted and to assess its impact on competition within the Internal market.
These are the main findings of the special report published by the European Court of Auditors on Wednesday 23 October on the implementation of the temporary framework for State aid to combat Covid-19 (see EUROPE 12450/7), to respond to Russian military aggression (EUROPE 13053/10) and to support the transition to a ‘net zero’ economy (see EUROPE 13138/1).
The European auditors note that public spending on this type of aid in the EU has almost tripled, rising from around €120 billion a year before the pandemic to more than €320 billion in 2020 and 2021 and almost €230 billion in 2022.
However, according to George-Marius Hyzler, the member of the Court responsible for the special report, even though we know that they have granted lower sums than those initially approved, we still do not know the total sum of aid that the Member States have actually granted.
One of the reasons for this situation is that reporting by Member States is inadequate, particularly in terms of transparency of beneficiaries. In many countries, there are no central registers to monitor compliance with the rules on the cumulation of financial support. The auditors cite the example of Germany, where reporting errors involving more than €30 billion of aid were found to have occurred as a result of the manual procedures in place and incorrect interpretation of the Commission’s guidelines.
Furthermore, according to the Court, the Commission has not established a structured approach for detecting non-notified public aid.
Mr Hyzler also pointed out that the Commission had not yet assessed the impact on the single market of the temporary state aid frameworks in question. “In plain language, we do not know whether or not the EU’s internal market suffered as a result of state aid going to certain undertakings during these particular crisis conditions; keeping in mind that the fundamental objective of state aid rules in the EU is to prevent distortion of competition”, he said.
The Court notes that, if the need for a temporary State aid framework is not sufficiently proven and if its parameters are insufficiently delimited, the richest EU Member States could “simply spend more than the others and thereby distort the conditions of competition”.
Lastly, the Court noted “inconsistencies” between the temporary regulatory frameworks and the relevant guidelines, particularly concerning the “definition of market failure, the maximum amount of State aid that can be granted (...) [and] cumulation rules”.
Reacting to the report, the European Commission said that in times of crisis, the rules had to be clear, simple, but robust. In its view, the framework conditions enabled Member States to notify aid schemes implemented in the areas where they were most needed. This flexibility has made it possible to examine a number of cases that has almost quadrupled and to adopt most of the decisions in less than a month, without compromising legal standards, it emphasised.
See the report by the European Court of Auditors: https://aeur.eu/f/e0e (Original version in French by Mathieu Bion)