Brussels, 21/04/2004 (Agence Europe) - According to the latest EU State Aid Scoreboard compiled by the European Commission, the total amount of State aid granted by the fifteen Member States was estimated at €49 billion in 2002, confirming the trend begun in the final half of the last decade. "A national subsidy race remains one of the most serious threats to the unity of the common market…Our vigilance has fostered a tendency to redirect aid towards horizontal objectives of common interest, including cohesion objectives. Based on the latest available figures, the majority of Member States appear to be responding positively to the call for "less and better targeted State aid" which Heads of Government recognised is a key part of effective competition" Commissioner for competition Mario Monti commented during presentation of the document.
The overall level of State aid(1) granted by the fifteen Member States was estimated at €49 billion in 2002, a fall of just under €1 billion on the previous year. In absolute terms, Germany granted the most aid (€13 billion) followed by France (€10 billion) and Italy (€6 billion). Around €28 billion of aid was earmarked for manufacturing and services, €14 billion for agriculture and fisheries, over €5 billion for coal and €1 billion for transport (excluding railways). From the relatively high levels of State aid in the early and mid-nineties, the overall volume of aid fell dramatically from €67 billion in 1997 to €52 billion in 1999. This was due primarily to a fall in aid to the assisted regions in Germany and Italy. Between 1999 and 2002, total aid has continued to decline though less sharply than in previous years, falling at just over €1 billion per year on average.
In relative terms, total State aid amounted to 0.56% of EU GDP in 2002, or 0.39% excluding the agriculture and fisheries sectors. This average (0.39%) masks significant disparities between Member States: the share of aid to GDP ranged from less than 0.20% in the Netherlands, Finland, Sweden and the United Kingdom to 0.55% in Germany, Spain and Portugal, and 0.72% in Denmark. but are diminishing as State aid as a percentage of GDP continues to fall in the vast majority of Member States. Total aid less agriculture, fisheries and transport fell from 0.49% of GDP on average for the period 1998-2000 to 0.41% for the period 2000-2002. The trend is downward in fourteen Member States. Portugal and Ireland experienced the sharpest falls (around 20-25 percentage points) between the two periods under review. In Ireland, this is primarily the result of a cut in the Irish Corporation Tax coupled with a marked increase in GDP while the decrease in Portugal was due largely to a sizeable reduction in a regional aid tax scheme in Madeira that mainly supports financial services. In contrast, aid in relation to GDP increased in Denmark though this rise can be explained by a substantial increase in aid for two horizontal objectives, employment creation and safeguarding the environment.
EU-wide, around 73% of total aid in 2002 was granted for horizontal objectives including research and development, small and medium-sized enterprises, environment and regional economic development. The remaining 27% was aid directed at specific sectors (mainly manufacturing, coal and financial services) including aid for rescue and restructuring. In several Member States, virtually all the aid awarded in 2002 was for horizontal objectives. The share of aid granted for horizontal objectives increased by 7 percentage points over the period 1998-2000 to 2000-2002. This was largely the result of significant increases in aid for the environment (+7 points) and research and development (+4 points). This positive trend was observed, to varying degrees, in the majority of Member States. Indeed, in several Member States - Belgium, Denmark, Greece, Italy, Netherlands, Austria and Finland virtually all the aid awarded in 2002 was earmarked for horizontal objectives.
In the area of employment creation and training, when market failures are being addressed, the Commission recognises the justification for Community or government intervention. The exclusion of less productive workers (perceived or real) at going wage rates and the lack of training provision are examples of widely acknowledged market failures. This is reflected in the Commission's favourable approach to State aid for these objectives: the very limited number of negative decisions in related State aid cases and the recent revision of the State aid rules to facilitate the award of aid for job creation, for the recruitment of disadvantaged and disabled workers and for various training measures. Most public support measures to private companies for employment and training purposes do not constitute state aid because they do not meet the four criteria referred to in Article 87(1) of the Treaty. However, if such interventions do take the form of State aid, State aid control will continue to ensure that the distortive effects on competition by each individual aid proposal is minimised.
For the Union as a whole in 2002, an estimated €8 billion of aid was earmarked exclusively for the least developed regions, the so-called assisted 'a' regions. This represented just under one quarter of total aid (less agriculture, fisheries and transport).
Aid to the "a" assisted regions, which basically corresponds with regions under Objective 1 of the structural funds, saw a sharp reduction, falling to 9 billion EUR in 2000, having attained a record 28 billion EUR in 1993, due largely to a reduction in aid granted in Germany and Italy. Although aid to less-developed regions continues to fall in Germany, the Commission states that the trend seems to have shown a slight reversal in Spain, France and Italy in the 2000-2002 period.
Lastly, the scoreboard reveals that most Member States grant aid to the manufacturing and services sectors in the form of subsidies These latter represent almost 60% of all aid granted to these sectors within the EU. Aside for aid granted under the budget, aid was paid through the taxation and social security regimes. At EU level, tax breaks represent 24% of all of these aids. Although Belgium, Denmark, Spain, Luxembourg, Austria and Sweden provide over 80% of their aid in subsidy form, other countries use tax breaks more, notably Germany (38%), Ireland (67%), and Portugal (74%).