0 ECOSV051 105TH PLENARY SESSION 3031 JANUARY

EU guidelines on state aid for rescuing and restructuring firms in difficulty

- 0 -

ECOS-V-051

105th plenary session, 30-31 January 2014

Rue Belliard/Belliardstraat 101 — 1040 Bruxelles/Brussel — BELGIQUE/BELGIË —

Tel. +32 22822211 — Fax +32 22822325 — Internet: http://www.cor.europa.eu

REVISED OPINION

EU guidelines on state aid for rescuing and restructuring firms in difficulty

THE COMMITTEE OF THE REGIONS

welcomes the fact that the European Commission launched a consultation on the review of the guidelines on state aid for rescuing and restructuring firms in difficulty, which was open to all stakeholders and sets out a number of options;
welcomes that the European Commission rejects the idea of limiting the meaning of firms in difficulty to firms that are in formal insolvency proceedings and that it is putting more focus on behavioural measures such as bans on expenditure for expansion and acquisition and on advertising and the payment of dividends;
welcomes the stepping up of requirements regarding transparency by obliging Member States to publish on-line all of the relevant information on aid granted as well as the clarification regarding the interaction between the mechanism for state aid for rescuing and restructuring firms in difficulty and state aid for services of general economic interest (SGEIs);
reiterates its conviction that the process of modernising the state aid mechanism should focus on prohibiting aid likely to have a real and notable impact on the internal market and should reduce the bureaucratic burden for the actors concerned;
welcomes the confirmation that the Commission has abandoned the goal of a quantitative, undifferentiated reduction in state aid;
endorses the Commission's proposed non-exhaustive list of situations of social hardship or market failure that justify aid as being in the public interest, including an unemployment rate in the region concerned that is higher than the EU average or the national average and the risk of interruption to the continuity of provision of an SGEI.

Rapporteur

Mr Rouillon (FR/PES), Mayor of Coulaines

Reference document

Communication from the Commission on the Guidelines on state aid for rescuing and restructuring non-financial undertakings in difficulty (5 November 2013)

Opinion of the Committee of the Regions –
EU guidelines on State aid for rescuing and restructuring firms in difficulty

I. POLICY RECOMMENDATIONS

THE COMMITTEE OF THE REGIONS,

General comments

1.welcomes the fact that the European Commission has now launched a consultation on the review of the guidelines on state aid for rescuing and restructuring firms in difficulty, which is open to all stakeholders and sets out a number of options. Regrets, however, that the CoR has not been formally consulted and that the time frame for this consultation is so tight, limited in practice to only six weeks;

2.welcomes the detailed written response from the Competition Commissioner dated 7 November 2013, to the previous CoR opinion on state aid for rescuing and restructuring^¹ and is pleased to note that a number of the CoR's recommendations have been taken up by the Commission in the new draft guidelines, including:

3.the rejection of the idea of limiting the meaning of firms in difficulty to firms that are in formal insolvency proceedings (section 2.2. of the draft guidelines);

4.putting more focus on behavioural measures such as bans on expenditure for expansion and acquisition and on advertising and the payment of dividends (points 86-88 of the draft guidelines);

5.stepping up requirements regarding transparency by obliging Member States to publish on-line all of the relevant information on aid granted (point 101 of the draft guidelines);

6.clarification regarding the interaction between the mechanism for state aid for rescuing and restructuring firms in difficulty and state aid for services of general economic interest (SGEIs) and in particular the clarification that "when determining the burden sharing (...) the Commission will disregard any public service compensation that meets the compatibility requirements of the SGEI Framework" (point 106);

7.reiterates its conviction that the process of modernising the state aid mechanism should focus on prohibiting aid likely to have a real and notable impact on the internal market and should reduce the bureaucratic burden for the actors concerned;

8.welcomes the confirmation that the Commission has abandoned the goal of a quantitative, undifferentiated reduction in state aid, but feels that the draft guidelines insufficiently back up the assertion that "the revision also takes into account the Europe 2020 strategy" (point 5 of the draft guidelines);

9.welcomes the proposed introduction of the concept of "temporary restructuring support". Calls for its maximum duration to be set at 18 months so as to prevent such support not covering a full financial year;

10.endorses the Commission's proposed non-exhaustive list of situations of social hardship or market failure that justify aid as being in the public interest, including an unemployment rate in the region concerned that is higher than the EU average or the national average and the risk of interruption to the continuity of provision of an SGEI (point 45 of the draft guidelines). Calls on the Commission to specify the relevant territorial level for statistical purposes for measuring such failures;

11.regrets the bald assertion that "state aid for rescuing and restructuring steel undertakings in difficulty is not justified" because of the "present conditions of significant European and global overcapacity" (point 15 of the draft guidelines). This analysis seems purely quantitative and short term in nature, whereas the strengths of the European steel industry lie in a shift towards high-quality, more specialised production. It should also take into account the estimates in the study by the Organisation for Economic Cooperation and Development (OECD), according to which demand for steel will increase from 1.4 billion tonnes in 2013 to 2.3 billion tonnes in 2025. The Commission's analysis also seems to contradict the Steel action plan^², which suggests that steel firms may benefit from public support under the state aid rules. Therefore proposes that specific guidelines be drawn up for the steel industry;

12.as regards burden sharing, is in favour of option 1, which proposes a more flexible approach whereby the contribution by shareholders and creditors is to be determined in relation to the likely losses that they would have suffered in the event of insolvency (section 3.5.2). Reiterates its call, however, for the threshold for the firm's own contribution to be set below 50%, as is already the case for medium-sized companies under the current system;

13.restates its proposal that it should be possible to include the shareholdings of the firm's subcontractors or employees when calculating the firm's own contribution insofar as they are clearly separate from any form of aid and demonstrate that the firm's actors have confidence in the viability of their firm;

14.calls for the period applicable to the "one time, last time" condition to be reduced from ten years to five years as is already the case for primary agricultural producers under the current system. Reducing this time frame would also ensure consistency with the durability of operations clause in Article 57 of the current general regulation on the Structural Funds, which enables the recovery of aid where the investment is not maintained for five years, or three years for SMEs. Reiterates its call for this "anti-relocation" clause provided for in the Structural Funds to be applied to the mechanism for state aid for rescuing and restructuring firms in difficulty;

15.in the section on aid to SGEI providers in difficulty, wonders why the Commission does not address the scenario where option 2 is chosen in relation to burden sharing (point 106 of the draft guidelines);

16.deeply regrets the Commission's proposal to lower the maximum amount of aid granted for a scheme to rescue and restructure any one firm, without proper explanation, to EUR 5 million, when it had been set at EUR 10 million in 2007 and the CoR had called for it to be increased to EUR 15 million to take account of inflation and other relevant factors (such as the impact on GDP and on unemployment);

17.calls on the Commission to provide an analysis of the frameworks for state aid for rescuing and restructuring firms in difficulty that exist in other OECD countries.

Brussels, 30 January 2014

The president of the Committee of the Regions Ramón Luis Valcárcel Siso
	The secretary-general of the Committee of the Regions Gerhard Stahl

II. PROCEDURE

Title	EU guidelines on state aid for rescuing and restructuring firms in difficulty
References	Communication from the Commission – Guidelines on state aid for rescuing and restructuring non-financial undertakings in difficulty
Legal basis	Article 307(4) TFEU Articles 107 and 108 TFEU
Procedural basis	Revised opinion
Date of Commission letter	Letter from the Commissioner, Mr Almunia, of 7 November 2013
Date of president's decision	27 November 2013
Commission responsible	Commission for Economic and Social Policy (ECOS)
Rapporteur	Mr Christophe Rouillon (FR/PES), Mayor of Coulaines
Analysis
Discussion in commission	11 December 2013
Date adopted by commission	11 December 2013
Result of the vote in commission	Majority
Date adopted in plenary	30 January 2014
Previous Committee opinions	Opinion of the Committee of the Regions of 11 April 2013 on EU guidelines on state aid for rescuing and restructuring firms in difficulty (Mr Rouillon (FR/PES), CDR240-2013_AC) Opinion of the Committee of the Regions of 1 February 2013 on The regional state aid guidelines for 2014-2020 (rapporteur: Mr Denanot (FR/PES), CdR2232-2012_AC) Opinion of the Committee of the Regions of 29 November 2012 on EU State Aid Modernisation (SAM) (rapporteur: Mr Lindemann (DE/PES), CdR 1528/2012) Revised opinion of the Committee of the Regions of 11 October 2011 on EU State aid rules on services of general economic interest (rapporteur: Mr Lambertz (BE/PES), CdR 278/2011 fin) Opinion of the Committee of the Regions of 1 July 2011 on the Reform of the EU State aid rules on services of general economic interest (rapporteur: Mr Lambertz (BE/PES), CdR 150/2011 fin)^³
Date of subsidiarity monitoring consultation	N.A.

_____________

1Opinion of the Committee of the Regions of 11 April 2013 on EU guidelines on state aid for rescuing and restructuring firms in difficulty (CDR240-2013_AC).

2Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions – Action plan for a competitive and sustainable steel industry in Europe, COM(2013) 407.

3 OJ C 259, 2.9.2011, p. 40.

COR-2013-07451-00-00-AC-TRA …/…

Tags: 105th plenary, session, ecosv051, january, 105th, plenary