Some comforting elements, and serious matter for concern. Does the Council's unanimous decision that aid granted by three Member States to their road carriers is lawful effectively strike a hard blow to the notion of the EU as a "community based on law", as some Community circles fear? In my opinion, there are several reasons for not over-dramatising this unpleasant affair, although it is a worrying element that requires vigilance. Let us try to keep cool heads, while highlighting the general significance of the issue, at a time when the sharing of powers between the institutions is under discussion within the Convention on the Future of Europe, and when there is strong polemic about whether priority should be given to what is supranational over what is intergovernmental, or vice versa. The facts of the matter are as follows.
a) Aim of divergence. Early 2001, the Economic/Finance Council had unanimously authorised a number of temporary tax reductions on fuel for haulage firms, decided in France, Italy and the Netherlands after the sharp rise in oil prices a few months earlier. This positive decision was taken subject to the "State aid" aspect, which comes under the Commission's competence. The latter had opened a formal inquiry in April 2001, finally reaching the conclusion that such State aid was illegal. It prepared to take a formal negative decision. It would not have called for aid already paid to be reimbursed (considering above all that, after the decision taken by the Ecofin Council, the beneficiaries could have "legitimate confidence" that the measure would be approved), but it would have imposed immediate suspension of the aid.
b) The Council's attitude. On the eve of the Commission's decision, on 5 February this year, the three countries concerned triggered the procedure under Art. 88, par.2, third and fourth paragraph of the Treaty, thus blocking the Commission's decision. According to this provision, the Council is able to decide, when decreeing unanimously, that national aid is compatible with the common market if it is justified by "exceptional circumstances". The Council had three months in which to decide. If no unanimous decision were reached, the Commission would have resumed its freedom of action. The deadline fell on 5 May. Two days earlier, after difficult discussions between the Fifteen, the Council announced that, having noted the existence of "exceptional circumstances", it had authorised the tax reductions in question for the period strictly necessary for remedying the economic and social difficulties of the road transport sector.
Normal application of a Treaty provision? From the point of view of institutional function, there is nothing scandalous or astonishing about the Council's decision. The provision of the Treaty exists and is clear: the Council is able to decide that State aid is lawful even against the opinion of the Commission. I have already had the opportunity to stress that the "Community method" does not exist, as some Euro-sceptics claim and as public opinion sometimes believes, in systematic predominance of the supranational institution, but in a balance between the three main political institutions (Parliament, Council and Commission) and in the dialectic whereby Parliament and Council may improve or reject a Commission project, and the Council may in some cases also intervene in management decisions. That is the Community method (see this same heading on 28 March 2002).
In the case of State aid, the Council's intervention must fulfil two conditions: be exceptional and unanimous. In general, unanimity does not exist, as aid by one country upsets the others for competition reasons. Very often, it is one government that attacks the subsidies granted in neighbouring countries, or companies in one Member State that challenge the artificial advantages enjoyed by their rivals. This divergence of interest is generally an effective safeguard against the indispensable unanimity of the Fifteen. And yet there are precedents. These almost exclusively concern the agricultural sector, where exceptional circumstances are more frequent (for social reasons, or natural causes) and the economic consequences are often negligible from the European point of view (aid being in general limited to a specific area or product). But experts also recall a case in 1994 concerning aid to the steel industry.
Why then, has the present case caused so much concern and polemic?
Risks of bargaining. The reasons why this affair has caused such a sensation lie partly in the fact that the area concerned is a highly sensitive one (taxation), and above all the way unanimity was reached within the Council. "They reached agreement as if they were haggling at an Istanbul market", one senior European official told "Le Monde". The "yes" accorded to France, Italy and the Netherlands could have been negotiated in exchange for future clearance of other national aid schemes that would not necessarily obtain the Commission's agreement. Measures such as the extension of aid to the coal industry in Germany, the maintenance of the ecopoint mechanism for road transport taxation in Austria, and a tax regime in favour of certain foreign firms in Belgium were mentioned behind the scenes. Such perspectives, if confirmed, not only bring into question the power of the Commission with regard to State aid, but the very principle of the EU as a "community based on law". It would no longer be legal considerations and economic analyses that determine the lawfulness of aid, but haggling between Member States. It would no longer be the supranational, independent institution of the governments that would decide on the basis of European common interest (the correct working of the single market, fair competition conditions, equality of "small" and "large" countries under common law), but the governments themselves that would bend equality by basing their arguments on national interests.
So you can see, there is cause for concern.
The wrong choice. The Commission, however, is also accountable if the matter goes wrong. This is why, I believe, the case for engaging a battle of principle is badly chosen, and the time is not right for triggering such a battle:
- The Ecofin Council had already taken an unanimous decision in favour of the tax measures in question. Although the Commission's right to deliberate on the "aid" aspect is undeniable, and although the Directorate General on Transport no doubt had valid reasons for considering such subsidies were illegal, caution would have been appropriate.
- These measures were nonetheless close to expiry. In October, those of the Netherlands, in December those of France and Italy. Given that the Commission did not plan to ask for aid already paid to be reimbursed, it is difficult to imagine that a few more months of reduced excise duties (already in force for over one year) would have substantially upset the way the common market works.
- The Council's decision is difficult to attack before the Court of Justice (the Commission did think of this, apparently), as the existence of exceptional circumstances did not seem disputable when the Ecofin Council made its decision, given the sharp rises in oil prices.
- For electoral and other reasons, the Commission is currently under fire of criticism and accusation (sometimes clumsy, as when an Irish minister declares the Commission is partly responsible for the rise of the extreme right, because it plans to strengthen compulsory coordination of national economic policies). It does not need to provide an opportunity to be even more criticised. It must, of course, stand firm on principles and not fear taking unpopular decisions when duty calls, but for reasons described in the above lines, it was perhaps not wise to take this specific opportunity to raise questions of principle.
- Sharing and balancing powers between the different European institutions is, and will increasingly be at the heart of the work of the Convention on the Future of Europe. The debate must take place in serenity, without being upset by polemic fuelled by topical events or specific interests.
Call for consistency. To conclude, I consider that the Commission should abstain from taking the matter before the Court of Justice (at any rate, the ruling would take two years, once the Convention has completed its work and the draft new Treaty is ready), and concern itself more with clarifying the intentions of Member States regarding the use of the instrument under Art. 88, par. 2. The bargaining method and the rule "do ut des" are deplorable. Furthermore, the governments said they all politically agreed to work towards reducing the number and the volume of State aid schemes. Their coherence and their political responsibility must be called upon to avoid any dangerous aberrations, but without dramatising matters and by showing confidence in their good faith at the outset. (F.R.)
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P.S. - It is often question in Community circles of divergent opinions within the Commission on how appropriate it is to prohibit the temporary tax measures under discussion. This is an aspect that has no importance. If there were a majority against the ban, then it should show itself. It would have been known and the Council's intervention would have become of no purpose. In the contrary case, however, the College as a whole would take on the responsibility of the decision. The Commission's collegial nature must be a srious thing.