Brussels, 12/10/2007 (Agence Europe) - On 11 October, the European Commission launched an in-depth investigation to establish whether a €31 million subsidy that the French authorities are planning to grant to French domestic appliances manufacturer, FagorBrandt, is compatible with the EC Treaty rules on state aid to struggling firms. The Commission is also concerned that the subsidy may be used to finance the repayment of €22.5 million of unlawful aid FagorBrandt received in 2002. The opening of an in-depth investigation allows interested parties to comment on the proposed measures.
From 2004 to 2006 FagorBrandt made increasing losses. These difficulties arose from more intense competition on the market, in particular as a result of the emergence of low cost companies from Asia and Turkey, and from the development of competition from retailers. Internal factors contributed to the difficulties, in particular the obligation to repay €22.5 million of illegal aid (plus interest), received in 2002 under the terms of Article 44 septies of the French General Tax Code and, subsequently declared incompatible with EU state aid rules by a Commission decision of December 2003. On 6 August 2007, the French authorities notified plans to the Commission to grant €31 million restructuring aid to FagorBrandt. According to the French authorities, in the absence of such aid FagorBrandt would be unable to cope with the losses expected for 2007 or to find additional financing on the market
In its preliminary assessment, the Commission doubts that the aid would be compatible with the EU rules on restructuring aid, notably as regards the long term viability of the company and the limitation of aid to the minimum necessary. The Commission is also concerned that the notified aid would be used to finance the repayment of the illegal aid received in 2002. The Commission also has concerns about the likely negative impact of the aid on trade between member states, since FagorBrandt is mainly competing with other European manufacturers. The aid might, therefore, support the company at the expense of its European competitors and their workers. The launch of an in-depth inquiry allows the interested parties to present their comments on the planned measures but does not prejudge the outcome of the proceedings. (ol)