State aid is the part of public funds that are selectively allocated by public authorities (ministries, municipalities, public institutions, funds, agencies and other public bodies) to entities operating in the market for the purpose of general economic development. Incentives may take various forms, such as grants, exemptions from taxes and contributions or other legal obligations, soft loans, guarantees or capital injections that do not comply with market requirements. The granting of state aid confers an advantage on the recipients over competitors which they would not have enjoyed under normal market conditions.
Many people wonder why state aid rules and related restrictions are needed. In particular, they are intended to protect competition in the market and prevent public authorities from undermining the competitive position of other suppliers of goods and services on the market by granting state aid to certain business entities. They also prevent Member States from engaging in wasteful subsidy races against each other. Last but not least, the rules protect the interests of consumers looking for the best offer in the market and the interests of taxpayers who provide public funds.
What is state aid?
Not any public funding or funding from public resources is considered to be state aid. State aid occurs when all the following criteria are met:
- the beneficiary of the measure is a business entity carrying out an economic activity, whereby its legal status is not relevant;
- the measure involves a transfer of public funds or funds of public origin;
- the measure confers an economic advantage on the recipient which it would not have enjoyed in the ordinary course of business;
- the measure is selective in that it favours certain market operators or certain industries;
- the measure affects or is likely to affect trade and competition between the Member States of the European Union.
When can state aid be granted?
Before granting state aid, it must be assessed whether the criteria for granting the aid are met. A public authority which intends to grant public financial support to certain suppliers of goods or services on the market, or which doubts whether such aid constitutes state aid, must notify the planned measure before its implementation to the ministry responsible for examining, assessing and monitoring state aid, i.e. the Ministry of Finance, except for aid in agriculture, fisheries and partly in forestry and rural areas under the responsibility of the Ministry of Agriculture, Forestry and Food. If, in major cases, the competent ministry or the European Commission considers that the planned measure complies with the state aid rules, it approves it and only then can the public authority start implementing it.
Anyone, a legal or natural person, can report a suspicion of unauthorised state aid to the European Commission and the Commission will decide whether to examine the matter.
After a sharp reduction in state aid in 2016, there was a renewed increase observed in 2017 and 2018 in both absolute terms and in the share of GDP. Nevertheless, state aid is still lower than it was in 2011-2015, when the volume of state aid was the highest to date. It averaged EUR 550 million per year, i.e. 1.6 % of GDP.
Data for the last decade show that state aid volume and dynamics are fundamentally dependent on the volume and dynamics of the use of European Structural and Investment Funds, which are characterised by uneven spending and slower dynamics at the beginning and the majority of drawings in the second half of the programming period. The largest volume of state aid in 2011-2015 coincides with the period of intensive absorption of cohesion policy and rural development funds of the 2007-2013 programming period. In addition, higher rescue and restructuring aid contributed to a higher level of aid in individual years, i.e. in 2011, 2013 and in particular in 2015.
The content of the archived websites related to state aid is still available on the archived website of the Ministry of Finance and the Ministry of Agriculture of Forestry and Food.