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State Aid

“State Aid” is intended as any transfer of public resources in favour of certain undertakings or the production of certain goods which, by providing a selective economic advantage, distorts or threatens to distort competition.

Except for specific cases, State aid is prohibited under European legislation and the Treaty on the Functioning of the European Union governing this subject in Articles 107-108*.

In order to ensure compliance with European legislation, the Department for EU policies provides coordination between central and regional administrations in the matter through the Directorate General for the Coordination of State Aid.

State aid (granted either through administrative procedures or under the law) may lead to distortions of competition, since it gives advantage to certain undertakings or the production of certain goods. This may be considered to be compatible with the Treaty* if it attains clearly defined objectives of common interest.

Aid is allowed when (article 107(2) of the Treaty):

  • it fulfills objectives of common interest (services of general economic interest, social and regional cohesion, employment, research and development,  sustainable development, promotion of cultural diversity, etc.);
  • it represents the appropriate instrument to correct certain “market failures”.

For instance, dealing with a market failure may, in some cases, offset the distorting effects of competition: in such cases the aid is considered as compatible.

The task of verifying whether there is a fair balance between the negative effects on competition and the positive effects in terms of common interest is entrusted to the European Commission (DG competition), which has exclusive competence on State aid.

Control on State aid by the European Commission forms an integral part of EU competition policy as it ensures a level playing field for all undertakings operating within the European internal market.

Member States are responsible for seeking a balance between the national need for increasing economic efficiency and the need for fair competition on the markets.

Any draft provision intended to grant of a new benefit is promptly notified, together with all necessary information, by the Member State concerned to the EU Commission that adopts a decision establishing whether the aid is compatible with the rules of the Treaty.

The Commission initiates a formal investigation procedure once determined that the notified provision (Article 108 of the Treaty*) raises doubts about its compatibility with the common market.

At the end of the procedure (EU Regulation 2015/1589 codifying EU Regulation No 659/1999) the Commission may adopt:

  • a “positive” decision whereby  the provision is considered to be compatible;
  • a “negative” decision whereby the measure is considered to be incompatible and, in the event that the aid has already been granted, its recovery is ordered ;
  • a “conditional” decision whereby, although the measure is considered to be incompatible, its implementation is permitted under specific conditions.

 The DG State Aid of the Department for European Policies may carry out a first summary verification of the compatibility with the European measures and, where a draft is submitted for assessment by the proponents, ensures evaluation of the main procedures initiated by the European Commission .

 The DG notably takes part in the review and updating of EU provisions on State aid and ensures participation of Italy in such a process.  The DG also supports national positions resulting from the coordination between national and regional administrations and consultation of stakeholders. Finally, it promotes dissemination of European legislation on State aid in order to ensure its correct and homogeneous application.

 

 

 

 

Articles 107 and 108

Article 107 of TFUE defines when the State Aid may be considered to be incompatible with the internal market. According to Article 108 the Commission shall decide that the State concerned shall abolish or alter such aid.

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