The review of the rescue and restructuring guidelines is a key element of the State Aid Modernisation (SAM) programme. The new guidelines aim to ensure that public funding is channelled where it is needed most and that investors in failing firms carry their fair share of the costs of restructuring, rather than leaving the burden to taxpayers.
Since the previous guidelines were adopted in 2004, the Commission has gained nearly ten years’ experience in dealing with rescue and restructuring cases, including perhaps the greatest challenge it has yet faced in this area, the support granted to rescue and restructure banks and other companies during the financial crisis.
That experience has shown that, although the basic principles of the guidelines are still sound they could be improved in a number of ways to ensure that aid is better targeted where it is needed most and that it is given in the least distortive form possible.
Joaqun Almunia, Commission Vice-President in charge of competition policy, said: “We have made another important step in the modernisation of state aid control. The new rules on aid for firms in difficulty ensure that public funding is granted only where it genuinely saves jobs and know-how on a lasting basis, and after the company owners have contributed their fair share of the costs.”
The main changes in the guidelines adopted are the following:
New rules allowing temporary restructuring support for SMEs, designed to simplify the granting of state funding for restructuring while reducing distortions of competition. Such support can now be granted for at most 18 months three times as long as the period for receiving rescue aid on the basis of a simplified restructuring plan. This will allow member states to better help SMEs address liquidity problems, something that is particularly important in the current economic context.
Better filters to ensure that state aid is used where it is really needed and to avoid waste of taxpayers’ money. Member states will have to demonstrate that the aid is needed to prevent hardship, for example in areas of high unemployment, and that the granting of restructuring aid will make a difference in that respect.
New rules ensuring that investors pay a fair share of the costs of the firm’s restructuring (‘burden sharing’). Company investors will be primarily responsible for covering incurred losses before any state aid is granted, and the state will receive a fair return on its investment if the restructuring plan succeeds. This concept was developed during the financial crisis, when burden sharing became necessary to protect the interests of taxpayers and consumers where large amounts of public money were made available to banks, and is now extended to apply to non-financial firms.