Scope for state aid

BRUSSELS – The European Commission yesterday announced measures to allow member states to provide relatively small-scale subsidies for public services without notifying Brussels. The initiative addresses a politically charged area. The «no» camp, which won the French referendum on the EU constitution, portrayed the proposed treaty as being ultra-liberal and threatening areas such as hospitals and social housing. Neelie Kroes, the European commissioner for competition, said a member state will not have to tell Brussels about a subsidy if it is less than 30 million euros ($36.57 million) a year and if turnover is less than 100 million euros annually. «This package demonstrates clearly the Commission’s determination to rationalize and simplify state aid rules, and as important, to minimize administrative red tape,» Kroes told a news conference. The Commission said the changes stem from a European Court of Justice ruling that said that under certain conditions funding services of general interest does not amount to state aid. Such aid is restricted under EU rules designed to promote fair competition between member states. The EU executive body said the new rules would give legal clarity on the extent to which money can be given to public services, such as home-care services, hospitals, social housing, local radio stations and local public childcare facilities. Small ports and airports will also be eligible to obtain subsidies under the new rules without notifying Brussels. Subsidies must, however, meet a clearly defined public service aim, be outlined in advance, should only allow for a reasonable profit, and be awarded after a public tender. Subsidies above these thresholds would still need approval from the European Commission. Kroes said the change will do away with «thousands» of notifications for aid the Commission received annually. The definition of public service will be left to member states and will only be examined if there are objections. To stop abuses, a company that receives a subsidy must provide a separate set of accounts to show the funding is spent only on public services and that any spare cash is not used to subsidize other activities by the back door, Kroes said. Competition officials said member states are expected to begin applying the new rules over the next few months but will have a year to adapt their systems. Kroes has promised the European Parliament to review the new measures after four years but will step in sooner if they are not working properly.

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