The European Commission has authorised more than €4,500bn in State aid since the beginning of the financial crisis, under exceptional measures that enable member states to support their financial sector and ease companies’ access to finance. The Commission is now planning for a return to normal market functioning.
Although the special provisions for aid to financial institutions have been extended for a year, from 1 January 2011, every bank requiring state support in the form of capital or impaired asset measures must submit a restructuring plan.
The Temporary Framework adopted by the Commission at the end of 2008 to minimise the impact of tightening credit conditions on the real economy has also been prolonged, but on a restricted basis – for example, subsidised working capital loans and guarantees will no longer be available to large companies, and firms in difficulty will no longer be eligible for aid under the Temporary Framework.
The Commission is preparing a detailed analysis of the measures in support of the financial sector, due to be published in the first half of 2011, which will assess the effect of the aid against the competition rules. Market conditions permitting, it intends to return to a normal State aid regime on 1 January 2012.
The financial crisis highlighted some weaknesses in the Rescue and Restructuring Guidelines and indicated that a ‘one size fits all’ approach may not be appropriate. The current Guidelines will expire on 9 October 2012 and the Commission is consulting on their application in recent cases involving the rescue and restructuring of industrial and financial institutions, particularly in light of the financial crisis. The Commission will work on modifications to the Guidelines in 2011.
Last year the Commission also carried out a public consultation on the application of the State aid rules to funding for the provision of public services (Services of General Economic Interest). Under the current framework (established in 2005), public service providers can receive compensation to cover their net costs, possibly including a reasonable profit. The rules will be revised in 2011, including further clarification on when funding a public service qualifies as State aid. This is important given that governments are increasingly looking at how the private sector can deliver public sector services.