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BB200702, News in Brief

State Aid Scoreboard: more focus on horizontal objectives

08.02.2007

On 11 December 2006, the European Commission published the latest State Aid Scoreboard report, detailing the levels of state aid in each EU Member State for 2005. The Scoreboard report shows a total expenditure of €63.8 billion in 2005 (0.59% of the EU’s GDP) and notes that more than half of the Member States have redirected over 90% of their State aid towards horizontal objectives. The three main horizontal objectives were environment and energy savings (28% of total aid), regional economic development (19%) and R&D (12%).

According to the Lisbon agenda of March 2000, the EU should further its efforts to “reduce the general level of State aid, shifting the emphasis from supporting individual companies or sectors, towards tackling horizontal objectives of community interest, such as employment, regional development, environment and training or research.

As the Scoreboard report indicates, in 2005 the response to the Lisbon European Council’s call for less state aid has been ‘moderated’. The total amount of State aid granted by the EU Member States dropped from €65 billion (0.61% of the EU’s GDP) in 2004 to €63.8 billion (0.59% of the EU’s GDP) in 2005. More than 95% of the total aid amount was granted by the five largest Member States, with Germany giving out most aid (€20 billion), followed by France (€9.7 billion), Italy (€6.4 billion,) the United Kingdom (€4.5 billion) and Spain (€4 billion).

Although the overall level of State aid has scarcely changed, there is a clear move towards better targeted aid, with more than half the Member States awarding over 90% of their aid to horizontal objectives. On average, 84% of total aid, less agriculture, fisheries and transport, went to horizontal objectives. According to the European Commission, this increase can partly be attributed to a reduction in aid to the coal sector, combined with an increase in tax exemptions for the environmental benefits and energy savings. Indeed, the largest proportion of aid was directed exclusively to the environment and energy saving objectives (28%), which were extensively supported by Sweden (88% of total aid), the Netherlands (65%), Germany (47%), Denmark (47%) and Finland (40%). Regional development and R&D were the second and third most favoured horizontal objectives.

The report focuses particularly on rescuing and restructuring aid, which the European Commission recognises as “the most distortive form of aid”. The figures show that in 2004- 2005, €24 billion was spent in the EU25, with the ‘old’ EU15 accounting for €15.5 billion of this amount (7% of total aid).

The EU’s State aid is currently undergoing a process of reform to make it better targeted and more efficient. In the spirit of the Lisbon Strategy, in July 2005, Competition Commissioner Kroes launched a State Aid Action Plan 2005-2009. One of the priorities was to target research and focus aid to stimulate innovation without distorting competition. As a result, on 22 November 2006, the Commission adopted a new State Aid framework, providing a series of guidelines to Member States on how best to give State aid to research, development and innovation projects.

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