State Aid Policy Research Articles

A Brief Overview of State Aid Policy in the Republic of Serbia

A Brief Overview of State Aid Policy in the Republic of Serbia

Have the rules of the game changed? Novel legal interpretations and their impact on the EU’s legitimacy communication

ABSTRACT Scholars have often argued that European Union (EU) policymaking should be less technocratic and more political. However, it remains unclear whether the politicisation of policy-making processes by the European Commission will strengthen its legitimacy. Some authors view the EU and its institutions as its most effective outside of political strife. Others suggest that more politicisation will increase EU legitimacy as it can lead to debates where European Integration objectives can be redefined. This study argues that the impact of politicisation on the Commission’s legitimacy ultimately depends on the endorsement of novel interpretations of an EU law or policy issue. Here, two state aid policy decisions are compared using a claims-making analysis. The study finds that new legal interpretations made by the Commission led to a politicisation surrounded by questions about the EU’s authority. However, if the European Commission follows pre-established rules, then politicisation can strengthen the EU’s legitimacy communication.

State aid policy in the Visegrad Group countries after their accession to the European Union

State aid policy in the Visegrad Group countries after their accession to the European Union

Strategic Development of Aviation in Latvia

Objective – The current paper investigates the role of creating public and private goods through aviation to determine state policy priorities and analyse the aviation industry's impact on the national economy in Latvia. Methodology – The current paper involves a multi-factorial approach, combining legal, economic, and social impact assessment elements. The quantitative analysis applies an input-output model to assess the aviation industry's direct, indirect, inducted, and catalytic effects. Findings – The assessment of multi-factorial indicators assumes paramount importance in ascertaining the contribution of the Latvian aviation sector to the nation's gross domestic product (GDP). Despite its immersion within an intensely competitive market environment, the aviation sector continues to witness substantial government interventions on a global scale. Thus, it becomes imperative to delineate the considerations that delineate public goods, ensuring their alignment with the tenets of equitable competition. Novelty – Compared to previous studies, the input-output analysis in the aviation industry is extended to evaluate the public and private goods created by the aviation industry to determine favourable state aid policies. Type of Paper: Empirical JEL Classification: D71; H11 Keywords: Aviation, Input-Output Model, State Aid, State Policy, Public Goods. Reference to this paper should be made as follows: Kokars, A.; Sergejs, H. (2023). Strategic Development of Aviation in Latvia, J. Bus. Econ. Review, 8(3), 76–88. https://doi.org/10.35609/jber.2023.8.3(2)

The race towards a more sustainable future: is current State aid policy fit for purpose?

Sustainability continues to gain traction as an important principle to be factored into competition law analysis, across antitrust, merger control and State aid. This article provides an overview of the mechanisms that are currently being introduced (and those already in place), to pursue sustainability objectives in the EU State aid framework. While the article focuses on the different aspects of the EU State aid rulebook, the analysis takes place against a broader international backdrop, with the US Inflation Reduction Act’s subsidies being a prime example of non-EU funding in the race to the ‘green transition’. As times have changed, so has the EU’s approach to State aid policy, and what comes out of the analysis of the constantly developing framework for sustainable State aid, is a gradual but clear convergence towards the incorporation of sustainability considerations into subsidies regulation, at the level of both legislative initiatives and judicial interpretation by the Court of Justice of the EU. While this is a development broadly in the right direction, the article points out the geopolitical risks associated with an inadvertent green subsidies war, as well as the risk – within the EU itself – of amplifying existing economic inequalities, due to the playing field being tilted in favour of Member States with deeper pockets.

State aid policy in the United Kingdom post-Brexit: a case of de-Europeanisation as orbiting Europeanisation

ABSTRACT Competition policy has been at the core of the European integration project from its very inception. The United Kingdom (UK) played a truly pivotal role in the development of European Union (EU) competition policy with the policy long presenting one of the best illustrations of Europeanisation. The public vote for Brexit in 2016 pushed the reset button for the UK’s engagement with the EU and saw successive UK governments all pursuing a de-Europeanisation trajectory as part of their objective of ‘taking back control’. State aid emerged as a contentious issue during the Brexit negotiations. The UK government hailed its new Subsidy Control Act (2023) as a clear departure from the EU state aid regime, but is this a case of de-Europeanisation or partial de-Europeanisation? This article argues that the UK has still not entirely broken free from EU’s state aid regime and finds itself in a state of orbiting Europeanisation.

Main developments in State aid control 2021–2022

The last two years of State aid policy and enforcement have been marked by two unprecedented back-to-back crises, namely the COVID-19 pandemic and Russia’s aggression against Ukraine. The Commission acted swiftly to mitigate their effects, by establishing specific sets of rules setting out the criteria for its assessment of national support measures. That enabled Member States to rely on the flexibility of State aid rules to weather those crises. On that basis, the Commission developed a rich and prolific decisional practice. During this period, the Commission also accelerated the review of several State aid guidelines as well as of the General Block Exemption Regulation, with a view to ensuring that those instruments are fit-for-purpose and aligned with its Green Deal and Digital Strategy objectives. That alignment is also evidenced in several Commission decisions. This article also discusses the main judicial developments in 2021–2022, notably on COVID-19-related measures in the area of aviation, on State aid and taxation and on a number of procedural and substantive issues.

The impact of state aid on economic growth: fresh evidence from a panel of 27 EU countries

ABSTRACT In this study, we examine how State aid policy in the European Union (EU) affects the level of economic growth. By applying several panel data econometric techniques, to a sample of 27 EU countries over the period 2007–2019, we investigate how state support and government interventions affect the level of economic growth in the EU member states. Based on the empirical findings, we document a positive impact of state aid programmes on fostering economic growth leaving significant room for the implementation of a new pan-European industrial policy. Lastly, we provide policy implications to government officials and policymakers on the effectiveness of the State Aid Modernization programme and the future of State aid control in the aftermath of the pandemic crisis.

State aid for airlines in the EU: policy changes during the COVID-19 pandemic

The paper analyses the developments in the EU state aid policy as a result of the COVID-19 pandemic breakout. The general framework for state aid in the EU was presented. Based on a case study analysis of selected airlines that benefited from state aid following the COVID-19 crisis, changes in the European Commission approach were identified. In general, investigation of arrangements between the state aid cases is a complex (and thus often lengthy) process. The outbreak of the COVID-19 pandemic was a challenge for EU member states and the European Commission as well due to the unexpected, turbulent, and very profound nature of the crisis. It made it necessary to look for new or revised policies for state aid to respond quickly and keep airlines afloat in times when the flow of revenue was practically stopped. One of the key issues that needed to be addressed was inflexibility and lengthiness of state aid approval processes. To this end, additional guidelines were introduced to make the state aid policy of the EU more flexible. This way member states could respond to the ongoing developments in a more targeted and objective-oriented approach, which possibly made state aid more efficient. It should be stressed that it could have been achieved without changes to pre-existing legislation and by adjusting executive guidelines instead.

Covid State Aid Policy for Aviation Backfired · Joined cases T-34/21 and T-87/21 Ryanair and Condor v Commission (Lufthansa; COVID-19) · Annotation by Tania Pantazi

Covid State Aid Policy for Aviation Backfired · Joined cases T-34/21 and T-87/21 Ryanair and Condor v Commission (Lufthansa; COVID-19) · Annotation by Tania Pantazi

State aid policy for environmental protection in Poland after accession to the European Union: did it meet expectations in the face of challenges?

In the face of years of negligence in the environmental protection in Poland, the membership in the European Union has caused the adoption not only of a restrictive legal framework and now ambitious environmental goals, but also restrictions on permissible support for entrepreneurs. To date there is a lack of research combining both legal and financial aspects in this field. The aim of this study is to identify the extent, to which Poland’s policy of financial assistance to entrepreneurs has exercised the legal framework for granting state aid for environmental protection. To this end, we conducted a comparative analysis of EU legislation on state aid and Polish aid schemes for environmental protection, as well as statistical analysis of changes in granting aforementioned state aid in terms of its intended uses and areas of support in Poland. We found the high degree of cumulation to certain sectors and incidentality of environmental aid in Poland, both in terms of its objectives envisaged by the Commission and of support areas. That support did not follow a well-thought-out, coherent and systematic policy of supporting entrepreneurs, but was merely a collection of isolated interventions, depending on the availability of fund resources in the EU financial perspectives.

The effects of state aid policy trade-offs on FDI openness in Central and Eastern European Countries

Scholarship suggests that much of the success of the FDI-led economic growth policies of Central and Eastern European Countries (CEECs) is due to investment incentives that national governments made available to multinational corporations, particularly in the form of state aid. Less attention has been given to how inward FDI policy among CEECs is affected by the policy trade-offs that the use of different state aid tools entails. This article builds on insights from qualitative case studies to argue that not all state aid is the same. It tests this proposition against those quantitative studies that failed to find a consistent effect of government incentive policy on the host country’s openness to – or reliance on – FDI on a sample of 11 CEECs between 2000 and 2018. The findings support the claim that those measures aimed at promoting regional development are associated with more openness to FDI, but also that this relationship has started to falter following changes in state aid control policy. The key policy implication is that the contradictions between the different levels of governance at which state aid is regulated affect the host countries’ use of this measure as a tool of investment attraction for economic growth policy.

The EU scheme for the state aid rules in the air transport sector during the Covid-19 crisis

Paper provides for a systematic overview of the EU scheme for the State aid rules applicable to the air transport sector during Covid-19 crisis. The COVID-19 outbreak is having a major impact on European air transport sector. In order to help air transport undertakings in Europe to overcome the financial troubles, to preserve jobs, to secure supply of essential food, medicals or other items, etc., the EU Commission adopted set of legislative measures enabling the EU Commission and Member States to authorise hundreds of State aid measures, not only to air transport sector, but also to other economic sectors, which were mostly affected by the pandemic. Since in normal circumstances member states State aid to national undertakings are subject to extremely stringent EU competition law regime, the intention of this paper is, firstly, to analyse to what extent and under what conditions that has changed during pandemic. Secondly, the intention of the paper is to explore to what extent and for what purposes different Member States granted State aid to their airline industries with special respect to the French, Austrian, Swedish and Croatian State aid policy. Lastly, the authors will raise question whether massive capital injection to air transport companies being made only by certain, wealthier, member states are going, in long term, to cause negative impacts on the competition in the air transport sector in the internal market

The Banking Union and evidence on bail‐ins and bailouts

AbstractThis article analyzes the euro area's banking sector regulatory framework, known as the Banking Union. It shows how distressed banks' noncompliance with supervisory, state aid, or central bank lending policies can trigger the application of resolution or liquidation measures. Further, it provides new evidence on large banks distress episodes in the European Union and the United States, suggesting that recapitalization is a more cost‐effective policy instrument than resolution or liquidation. Finally, it argues that the Banking Union lacks an appropriate recapitalization instrument for borderline distressed banks and that a more nuanced and structured stance on regulatory forbearance is probably warranted.

State aid and IFRS accounting policy

Introduction. This paper establishes that accounting policy is an important step in the organization of accounting. The paper shows that an effective accounting policy allows forming reliable and high-quality indicators in the financial statements. This study examines the main ideas by scholars on problems of IFRS accounting policy. Also, the paper gives a critical assessment their main positions. The purpose of the paper is to analyze the system of accounting standards for formation state aid accounting policy. Results. The study shows that the state aid transactions accounting policy is a complex system of interrelated standards. Firstly, the article examines the impact of international accounting standards on the formation of accounting policies in general. Secondly, research shows that other standards also have a partial impact. Also, disclosing of significant accounting policies allows bettering understanding the methodological basis of financial reporting. Moreover, business entities adhere to the principle of conciseness in the formation of accounting policies. Finally, the article highlights the main elements of the State aid transactions accounting policy in accordance with IAS 20: recognition of state aid; methods of accounting for state grants; types and forms of state aid; recognition of contingent assets and contingent liabilities at the recognition of state aid; methods of presenting information on government grants related to assets and government grants related to income; disclosure of information in the notes to the financial statements. Conclusion. Accounting policy is based on standards and judgments of management, which are proved by significant facts. Therefore, IFRS accounting policies should be viewed as a philosophy of choosing alternatives and accounting methods for business.

Partnerattiecību tiesiskā regulējuma ieviešanas iespējas

There are partners in every country who have chosen a long-term cohabitation oppose to a marriage, although they have no legal or any other barriers to get married. It is up to each country to decide whether to recognise and regulate such relationships or not. The Republic of Latvia is facing a similar choice. Latvia, like other countries, is trying to formulate the necessity and proportionality of such a regulation, as well as its topicality. In Latvia, law scientists, students, lawyers and researchers have conducted a number of studies on civil partnerships to determine the need. At the centre of the Latvian family policy is a traditional family model based on marriage, assuming that this ideal family model is the only desired one. Other forms of family, where a child is formally raised by one of the parents, are viewed as a traditional family in a crisis situation, rather than a respectable form of the family (Putniņa, Zīverte, 2008). The Maintenance Guarantee Fund emphasizes the increasing number of applications for material assistance from parents of children born outside the marriage or in civil partnerships, also of children left without paternity, which leads to a large number of these ‘other’ families being left outside the family boundaries set by the state aid policy. In the author’s opinion, such situation is unacceptable in a democratic country, and it is a gross violation of children’s rights to material aid, which can have a significant impact on the future development of children.

Posledice Bregzita po pravo i politiku konkurencije Ujedinjenog Kraljevstva i Evropske unije

The subject matter of this paper are the short-term and long-term consequences of Brexit, a historical event and a turning point in the development of the European Union (EU), as well as for the United Kingdom (UK) and the EU competition law and policy. The article first provides a comparative analysis of the historical development of legal regulation of competition in the UK and the EU, including relevant cases from the practice of competition authorities. In particular, the authors focus on the decisions of the European Commission regarding anti-cartel policy. The article further examines to what extent Brexit will influence the mergers and acquisitions policy, antitrust policy, anti-cartel policy, and state aid policy in the UK and the EU. The central question refers to the extent of Brexit's influence on the change of the UK and the EU business environment, and the repercussions that this change will have for the competition law. In the concluding remarks, the authors discuss the direction of future development of the UK competition law, particularly in terms of whether and to what extent the UK law will be harmonized with the EU competition law and case law in this area, or whether there will be a radical turn towards adopting a completely new concept of competition law and policy.

EU Health Union and State Aid Policy: With Great(er) Power Comes Great Responsibility

This contribution evaluates whether European Union State aid policy could play a role in achieving deeper and more solidary integration in the area of public health. According to Article 107 TFEU, the powers of Member States to grant aid to help their economies are seriously limited. Exceptions to the general prohibition to grant State aid are authorised by the European Commission, which enjoys wide discretion in weighing national objectives against European integration goals. The area of public health has been shielded from the application of these rules, with activities such as the provision of health insurance failing to be considered of economic nature (see most recently the Dôvera judgment). The COVID-19 experience shows that, in cases of major health crises, State aid provisions are practically suspended, with interventions allowed in the name of the fight against the pandemic. The eventual creation of a Health Union will require the re-evaluation of the application of the State aid rules to healthcare. This paper questions whether these rules should evolve as a reflective function of strengthened competences in healthcare or whether existing regulatory powers are enough to determine the interaction between national spending policies, a solidary European Health Union and fair competition.

Напрями вдосконалення механізмів державної допомоги в Україні в умовах міжнародної економічної інтеграції

Напрями вдосконалення механізмів державної допомоги в Україні в умовах міжнародної економічної інтеграції

State Aid Policies in Response to the COVID-19 Shock: Observations and Guiding Principles

As a general principle, state aid to firms and sector-specific support schemes should be used only when there are market failures; that is, when there are good reasons to believe that the market would not deliver efficient and/or equitable outcomes.