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State Aid Law of the European Union edited by Hofmann, Herwig C H; Micheau, Claire (11th August 2016)

Part I Rationales for State Aid Rules, 1 State Aid Review in a Multi-level System: Motivations for Aid, Why Control It, and the Evolution of State Aid Law in the EU

Viktor Kreuschitz, Hanns Peter Nehl

From: State Aid Law of the European Union

Edited By: Herwig C. H. Hofmann, Claire Micheau

From: Oxford Competition Law (http://oxcat.ouplaw.com). (c) Oxford University Press, 2015. All Rights Reserved. Subscriber: null; date: 23 October 2019

Subject(s):
State aid provisions — European Union — Economics — State aid

(p. 3) State Aid Review in a Multi-level System

Motivations for Aid, Why Control It, and the Evolution of State Aid Law in the EU

Section 1.  Objectives of Aid and States’ Motivations for Giving

Highlighting the interplay between both the political and economic motivations that guide states and their sub-structures, it is possible to identify several related motivations for giving aid: the first consists of attaining political preferences of governments; a second, and often related reason is that political leaders may be guided by pure electoral pragmatism aimed to increase future votes; and third, State aid remains one of the few economic tools that Member States have at their disposal given increasing Europeanization. We consider each in turn.

First, from a broad perspective, states give aid because they are concerned about attaining ‘policy goals’, or ‘policy objectives’. Such goals may be reflective of a more ‘public’ or ‘general’ interest that guides states, for example to steer national economic development and preserve employment in certain regions. The attractiveness of using subsidies and State aids as a policy tool results from the possibility to regulate or influence behaviour by incentivizing individual behaviour. States quite creatively devise ways to seek to incentivize actors to act in a manner which without the subsidy they might not have done. By subsidizing, governments may try to reach policy goals often without using ‘traditional’ means of public law such as hierarchical command and control structures.1 Policy goals may include achieving regional development, employment of certain underrepresented members of the workforce, or even the initial development of entire sectors of the economy. Further examples of policy goals pursued by granting aid include the encouragement of activities which in the eyes of a government are expected to produce beneficial effects to the society as a whole, in addition to any individual profit generated by this activity such as, for example, investments in renewable energies or research and development investments. These objectives can be reached by incentives of individuals without using the state to directly provide services. But State aid and subsidies may also be employed to delay bankruptcy and temporarily preserve employment opportunities. In some instances, the objective of subsidies might also be outright to ensure that local producers are put in a more advantageous situation vis-à-vis foreign competitors. Governments, especially in modern ‘regulatory states’,2 thereby use public resources in order to implement their national policy goals and, in this regard, State aid can be seen as a prime steering tool to achieve policies of general interest.

These latter ideas suggest that ‘policy goals’ guiding states consist essentially of the economic policy which a government pursues, or even its underlying ideological preferences. (p. 4) Such orientation may help explain why states are ultimately predisposed to give subsidies or not. For example, even before the privatization wave that started in many countries in the late 1970s, not only EU Member States continuously subsidized firms in various sectors to prevent events such as bankruptcy and job losses.3 If competitive market forces were allowed free reign, it was—and is—argued, significant national companies might otherwise become insolvent; if such firms collapsed, unemployment would have risen. Implicit in this argument were the economic needs to grant aid: if certain sectors of the economy were under-performing, the correction of

‘market failure would be justified in order to provide support to certain economic operators or activities in this sector that would have otherwise ceased in absence of the aid, ultimately saving jobs and having an impact on goods and services from which citizens can choose. Starting in the 1970s, the European Commission also became more proactive in using the State aid provisions in the Treaties’4

to control granting of State aid. The economic argument here was that the creation of a single market not only required reduction of customs and regulatory limits to entry, but equally required that states could not in turn unilaterally re-create unfair conditions by supporting local industries. What is more, some economic theory suggested that the granting of a State aid involves using public funds, and because there should be only a limited role of the state in the economy there was no justification to spend public funds on specific branches of economic development since such spending was regarded to have sub-optimal results. None of this has taken away from the motivation to grant aids such as in forms of, for example, capital injections, loans, share purchases, and state guarantees.

Second, some authors have described government motivation of granting aid as a means to increase their chances of re-election. According to Dewatripont and Seabright,

politicians sometimes engage in wasteful spending not out of negligence, but rather out of a desire to improve their chances of re-election by signalling their commitment to supplying public goods … voters reward conspicuous spending because it is evidence of effort on the part of politicians – even though it is associated, on average, with some degree of waste.5

In this regard, pure electoral pragmatism may be a rationale in and of itself for giving aid, even if governments are successful or not in maximizing votes as a result of giving aid in the first place.

Finally, governments in the EU may be enticed to try to use the financially effective incentives as a tool for regulatory policies, especially in areas in which the EU has regulatory powers. Few policy areas are not ‘Europeanized’, in that they continue to be entirely under national control since many regulatory policies are formulated at the EU level, including in matters of public services such as telecommunications, rail and air transport, and energy supplies. Public authorities may in this context look for alternative methods of public intervention by initiatives rather than by direction of ownership or public monopolies.6

(p. 5) Section 2.  Why Control State Aid and Subsidies?

If the previous section helps us better understand the motivations that guide states when they give aid, it is important to note from the outset that the concept of the need for ‘control’ has normative, even philosophical, dimensions. The necessity for control and review could be linked to potential risks and disadvantages of aid. A key notion of analysing these risks of aid is the concept of inter-jurisdictional externalities: supporting economic development and activities in one jurisdiction may cause intended or unintended negative impacts on activities within other jurisdictions.7

Therefore, the diversity of objectives of granting support and ‘incentivization’ of economic actors is mirrored in the great variety of modes of delivery of forms of support: direct payments, tax incentives, or tax breaks, indirectly reducing the cost of input into the production of goods and services, for example, through reductions in social security bills. Other forms of delivering support may be by allocation of government resources through government-controlled assets (as in the case of preferential access to goods and services such as land, energy, water, production, or pollution quota) or by means of interlocutors such as government-controlled companies and associations, for example—in the case of preferential loans or loan guarantees—by government-owned or -controlled banks or hidden financing of research and development costs through state-financed contracts. The support can also be granted on the basis of contractual or other arrangements between public and private actors. The Court of Justice of the European Union (CJEU) has accordingly accepted the Commission’s interpretation of interpreting the notion of an ‘aid’ well beyond the simple financial hand-out.8 This approach, which has its functional equivalence in the World Trade Organization (WTO) level by the definition of Articles 1 and 2 of the Agreement on Subsidies and Countervailing Measures (SCM), has over the past decades led to an increasing importance of State aid rules as forms of meta-regulation of national spending policies.9 Admittedly, the definition of a certain activity as subsidy and aid under EU law and the law of the WTO does not exclude that such aid might be permissible. The question of which subsidies and aids should be regarded as permissible is decided in the light of the goals pursued by the controlling legal regime. On the WTO level, the objective of prohibition of certain types of subsidies is quite narrowly understood as aiming at ensuring that the acts of economic policy of one state do not harm the interests of actors within another state. In other words, it is predominantly oriented at avoiding negative externalities.

A.  Meta-regulation of national spending policies

The situation is—abstractly speaking—one of giving ‘voice’ to those interests which are not present in the jurisdiction, which decides upon a policy potentially beneficial to some in one jurisdiction but not to outsiders in other jurisdictions. This is the reason for having State aid and subsidy control generally taking place on a level ‘above’ states (in the case of the EU) and beyond the EU in the case of the WTO. Especially in the EU, with democratic legitimacy of public policy decision-making now no less developed than that of most Member State governments, giving voice is a central consideration of equalizing the effects (p. 6) of negative externalities. This is irrespective of the fact that the question of whether control is exercised, and if so to what degree and how much freedom of decision-making remains with the states, is one of a vertical distribution of powers in the quasi-federal system of the EU. Such ‘vertical’ distribution of competencies—especially when they are as potentially far reaching and not policy-specific as State aid control—is obviously not without conflict. In the case of the WTO, the control of subsidies is—in the absence of a central enforcement body comparable to the European Commission—more based on bilateral relations. This ‘horizontal’ dimension makes the conflicts no less problematic, since as with the vertical distribution of powers, the question remains how much one jurisdiction should be able to influence decision-making in another.

These considerations, however, do not absolve from deeper thought about the philosophy of the actual regulation of State aid and the criteria used to decide which types of aid are admissible and which are not. Within the EU, policing the use of State aids by Member States is designed to achieve public policy objectives which not only encompass the creation of an internal market without internal frontiers. Also, ensuring a level playing field of competition within a functioning internal market and enforcing a certain degree of fiscal discipline and fighting potential corruption are amongst the reasons for State aid control in the EU, which need to be further investigated in the following section.

B.  State aid control as competition law

The competition-policy-related reasoning for establishing State aid control is deeply embedded especially in WTO subsidy law and EU State aid control. For example, Article 107(1) of the Treaty on the Functioning of the European Union (TFEU) is not only part of the chapter on competition law, but also explicitly prohibits State intervention by means of aid, ‘which distorts or threatens to distort competition’ in the relevant market. Both WTO and EU law are designed to prevent negative externalities, which can be defined as overall welfare-reducing effects on the conditions of competition in another jurisdiction than that granting the aid.

The ‘competition model’ might thus seek to avoid that positive effects of a measure enjoyed in one jurisdiction do not produce externalities in the form of distortions of competition reducing the welfare or the competitiveness of industries spilling-over directly or indirectly into other jurisdictions.10 The reference to negative spill-overs which would distort conditions of competition to the disadvantage of other market participants also contains a strong logic of non-discrimination. Concepts of distortion and effects implicitly refer to the economic logic of overall welfare enhancement or welfare reduction.11 Within this concept, only those measures which have the ‘effect’ of distorting competition and trade should be targeted. Whether an externality ‘matters’ would thus be analysed on the basis of whether it is capable of distorting competition. The argument could then go that only those externalities should be targeted that significantly change conditions of competition. This effects-based approach implicitly favours the use of economic theory to distinguish potentially harmful from less detrimental forms of aid. Although the approach is generally a case-by-case analysis, the Organization for Economic Cooperation and Development (p. 7) (OECD), followed by the EU Commission, deducts from this the quite far-reaching general assumption that State aid and subsidies are ‘generally only the second best option to achieve optimal allocation of resources’.12

Nonetheless, the model of State aid control based on an analysis of effects on conditions of competition, despite its prima facie compelling economic logic, needs to be applied with critical reflection. There are at least two major systematic issues to take into account in the application of a competition-oriented and effects-based analysis.

One issue concerns the often unspoken but inherent assumptions of a competition-based economic analysis. One such assumption is that state intervention can result in ‘a distortion to the normal functioning of a market’.13 The ‘normal functioning of a market’, however, is a relative concept, and it might be better understood as a metaphor than a precise description of reality. No default ‘natural’ market exists in a ‘non-distorted’ way which could be used as a starting point of analysis. Conditions of competition in any market are in effect the result of political decisions that have over time established the complex regulatory system, including inter alia tax, environment, and trade rules, designing the legal regime applicable to that market. Any legal regime governing a market might be favourable to some and dis-favourable to other market participants. Simply amending the balance between those who benefit more and those who benefit less from a specific given legal framework of a market is not necessarily a subsidy or a State aid to the formerly disadvantaged parties. Only the specifically discriminatory changing of such historically and contextually established market conditions should be subject to investigation. This requirement of comparative markets complicates the application of State aid policy. An example is the very complex task of analysing tax aids by defining the comparable ‘normal’ situation without distortions and then attempting to define the specific distortions.14

A second issue, building on earlier ideas raised regarding the question of technocratic steering versus parliamentary legitimacy, concerns the question of what to do with the results of an effects-based competition test. Since State aid and subsidies policies are embedded in the constitutional context of other policies, a certain balancing of policy objectives, including the appropriate means to achieve them, will be necessary. State aid and competition policy are not regulatory islands. In view of this, claims made by the OECD and the European Commission that State aid and subsidies were ‘generally only the second best option to achieve optimal allocation of resources’,15 and hence that these policies should not generally be admissible, should be treated with great caution. In view of balancing policy objectives or in view of politically achievable outcomes, the optimal solution with regard to allocation of resources should not necessarily be regarded as the greatest enemy of a good politically achievable solution which aims at translating public policy objectives into ‘real life’. If as a general rule the theoretical possibility of a perfect outcome were to block real-life adoption of a second-best solution, policy-making might come to a standstill. Therefore, where the Commission states that ‘it should be verified whether another, less distortive measure could remedy the market failure’,16 the (p. 8) consequence should not be that only this less limiting measure should be legally possible. Also, the economic logic behind this analysis of the potential harmfulness of subsidies and State aids is not undisputed. It has, for example, been argued that the underlying concept is based on a distinction between net and gross subsidies. It is entirely possible that a subsidy offsetting a specific disadvantage of economic operators in one jurisdiction only allows it overall in a gross calculation to offset the beneficial terms of business in another jurisdiction. The ‘theory of the second best’, then, could also arguably be read to imply ‘that an action that would distort resource allocation in an otherwise first-best setting may well be constructive in the presence of other offsetting distortions’.17 On the other hand, given the near impossibility of calculating all the relevant regulatory factors that overall influence a market position of a company, it might nonetheless appear that subsidies and State aid control are the overall second-best approach by comparison to a complete laissez-faire of harmful subsidies competition.18

In other words, the economic logic of establishing an optimum solution should not be mistaken for the legal limits of discretion which a legally empowered body such as the Commission or the Member States have in terms of devising a policy designed to achieve public policy objectives through incentives and supporting measures. It would be problematic to make efficiency of the market and avoidance of any however defined ‘distortions’ the only objective.19 Given the extremely powerful legal and political role of State aid control as a tool of meta-regulation of economic policy, a weighing of economic efficiency versus democratically decided policy approaches should be maintained.20

This critical view might therefore argue in favour of using economic analysis similar to other forms of expert-based input into regulatory decision-making. Economic analysis would in regulatory terms become part of the risk-analysis, i.e. part of the full and impartial assessment of all relevant facts prior to decision-making.21 This would then be the basis for risk management decisions about the output side, where discretion is granted to assess the effects of decisions. These are based on, but not necessarily decided by, the previous risk-analysis.

(p. 9) C.  State aid control as contribution to integration through the creation and maintenance of the internal market

Article 107(1) TFEU has the ultimate goal of ensuring the compatibility of national policies with the EU’s objective of achieving an internal market. It has therefore been pointed out that the ‘Treaty requires that the application of State aid rules must never produce a result which is contrary to the Treaty rules governing free movement’.22 But since State aid rules are neither situation-specific nor sector-specific, they can and will often be applied ‘in circumstances not otherwise covered by free movement provisions’.23 An understanding of State aid policy under a broader internal market perspective might therefore be read as follows: the creation of distortions to markets by public support of certain economic actors may, for all practical purposes, reverse the effect of removing all types of trade barriers. In this view, a broad definition of State aid is necessary in order to cover possible alternative barriers to trade created by the States through financially effective regulatory and fiscal measures.

The consequence of the internal market-oriented model is slightly different than a purely competition-based approach. It leads more ‘to a vision of State aid as a legal process of formal typology, categorizing some State actions as aid and designating formal areas of derogation to the general prohibition of State aid’.24 Accordingly, this approach sees the problem of aid predominantly as a question of law in that State aid should be deemed illegal, unless a set of legal criteria either allow for exemptions or for a continuing competence of the Member States to address a specific policy area.

Beyond the more narrow concern of conditions of competition, the internal market objective thus requires taking into account all kinds of policy objectives linked to the single market.25 In that, the design of State aid control is set out to require balancing between competition and industrial policy with many other objectives recognized in the Treaties and now the Charter of Fundamental Rights of the Union. These include such issues as employment, regional and structural policies, research and development, environment, transport objectives, and questions such as energy policy objectives, to name just a few. From studying State aid control, one can therefore learn much about the interaction between EU and national levels, as well as the interaction of different policy areas in the EU.26 Economic analysis has a place in this model. It would review, whether or not the overall improvement of welfare exists, if the positive effects of a policy on the well-being of the society outweigh the direct and indirect cost of such granting of aid.27 The challenge for economic modelling lies in identifying State aids that are protectionist by design and/or by effect while, as Sykes argues, ‘leaving governments free to use subsidies for other purposes’.28

(p. 10) D.  State aid control as control of public spending

Within the EU, like in the WTO, the competition law rationale for controlling State aids and subsidies is also extended to avoiding what is often referred to as ‘wasteful subsidies races’. Control thereby leads not only to reducing the positive effects of elimination of internal frontiers, but also might result in an overall reduction of wasteful spending of public resources in order to attract businesses.29 Especially where subsidies are geared to attract private investment, one government granting subsidies can create an incentive for other governments to offer competing subsidies. Subsidies granted on different levels of government can influence each other if they either intend to reach the same goals (doubling effect) or intend to reach opposite goals. The efficient allocation of public resources might therefore be recognized as an additional, albeit arguably secondary, objective of the regulation of subsidies and State aid. The Commission in the context of the 2012 ‘modernisation of State aid control’ described its objective as being to ‘shape that instrument into a tool promoting a sound use of public resources for growth-oriented policies’.30 This could be regarded as the ‘financial controller’ function of public expenditure in the Member States—in effect, the precursor of the stability obligations within the economic policy cooperation envisaged in the context of the EMU.31 The effect is to protect Member State decision-makers against the internal effects of engaging in wasteful spending as the result of effective lobbying, leading to agency ‘capture’ by special interests or even outright corruption whilst at the same time protecting the neighbours against the externalities of such approaches.32

The public spending objective was developed from the pursuit of reducing the possibility of wasteful subsidies races. It is both linked to the economic analysis applied especially in the context of the competition law rationale as well as being deeply embedded in a broader constitutional law framework. State aid control would thereby be used not only in the sense of ‘negative’ integration for creating a level playing field between competitors within a market, but would also obtain a dimension of active, ‘positive’ integration leading to a more coordinated and harmonized common economic policy.33 Such internal market dimension of State aid policy would thus be aimed at ‘Europeanization’ through coordination of Member State economic policies with the objective of fostering deeper integration.34 Additionally, by avoiding discriminatory limitations to competition, some observers hope for an overall increase in transparency and predictability of the market conditions, which in itself might lead to a more favourable economic climate.35

However, if the control of public spending and the reduction of competing subsidies appear to be legitimate goals of State aid policy, then the EU’s own subsidies might arguably also need to be brought under specific and independent control—similar to the control of (p. 11) national subsidies by the EU.36 The German ‘Monopolkommission’, for example, considered that a lack of transparency in the system of allocation and distribution of EU funds and the total amount of funds being awarded EU aid could ‘give rise to considerable distortion of competition’. WTO rules on subsidies would not offer much redress given their application between the EU and third countries.37

All in all, the mixture of political, legal, and economic elements in the field of State aid control not only leads to the intellectual appeal of this policy area, but also is the origin of some of its particularities.

Footnotes:

1  An excellent overview over the economic and political motivation for subsidization is contained in the OECD, Directorate for Financial, Fiscal and Enterprise Affairs Committee on Competition Law and Policy Report, ‘Competition Policy in Subsidies and State Aid’, of 12 November 2001, DAFFE/CLP(2001)24, 7.

2  See eg Susan Rose-Ackerman, ‘The Regulatory State’, in Michel Rosenfeld and András Sajó (eds), Oxford Handbook of Comparative Constitutional Law (Oxford: Oxford University Press, 2012) 671–88.

3  See also Michael Schütte, this volume; Raj Chari, Life After Privatization (Oxford: Oxford University Press, 2015), 32–3.

4  Raj Chari, Life After Privatization (Oxford: Oxford University Press, 2015), 32–3.

5  Mathias Dewatripont and Paul Seabright, ‘“Wasteful” Public Spending and State Aid Control’ (2006) April/May 4(2–3) Journal of the European Economic Association 514.

6  Wolf Sauter and Harm Schepel, State and Market in European Union Law (Cambridge: Cambridge University Press, 2009) 193.

7  Mathias Dewatripont and Paul Seabright, ‘“Wasteful” Public Spending and State Aid Control’ (2006) April/May, 4(2–3) Journal of the European Economic Association 514; and Timothy Besley and Paul Seabright, ‘The Effects and Policy Implications of State Aids to Industry: An Economic Analysis’ (1999) 34 Economic Policy 13–53.

8  See the chapters on the ‘notion of aid’ in this book.

9  See the chapters on subsidies law under the WTO in this book.

10  Philip Lowe, ‘The design of competition policy institutions for the twenty-first century’, in Xavier Vires (ed), Competition Policy in the EU: Fifty Years from the Treaty of Rome (Oxford: Oxford University Press, 2009) 21–41.

11  Pietro Crocioni, ‘Can State aid policy become more economic friendly?’ 29 World Competition (2006), 89–108; Lorenzo Coppi, ‘The role of economics in State aid analysis and the balancing test’, in Erika Szyszczak (ed), European Handbook on State Aid Law (Cheltenham: Elgar, 2011) 64–89; Ralph Ossa, ‘A quantitative analysis of Subsidy Competition in the US’, National Bureau of Economic Research (NBER) Working Paper 20975.

12  Com (2005) 107 final, ‘State Aid Action Plan: Less and better targeted State aid: A roadmap for State aid reform 2005–2009’, Brussels (7 June 2005). DAF/COMP/GF(2010)5, ‘Global Forum on Competition: Roundtable on Competition, State Aids and Subsidies’, OECD (19 May 2011), available at http://www.oecd.org/.

13  See eg for many, Gustavo Luengo Hernández de Madrid, Regulation of Subsidies and State Aids in WTO and EC Law (Alphen aan den Rijn: Kluwer Law International, 2007) 14.

14  See eg the heavily criticized Gibraltar (joined Cases C-106/09 P and C-107/09 P Commission and Spain v Government of Gibraltar and UK) and Azores (C-88/03 Portugal v Commission (Azores) [2006] ECR I-7115) cases.

15  Com (2005) 107 final, ‘State Aid Action Plan: Less and better targeted State aid: A roadmap for State aid reform 2005–2009’, Brussels (7 June 2005). DAF/COMP/GF(2010)5, ‘Global Forum on Competition: Roundtable on Competition, State Aids and Subsidies’, OECD (19 May 2011), available at http://www.oecd.org/.

16  Ibid.

17  Alan O Sykes, ‘The Questionable Case for Subsidies Regulation’ (2010) 2 Journal of Legal Analysis 473–523, at 502.

18  This point is especially salient when comparing the regulated approach within the EU with the situation in the US marked by the absence of an EU-style State aid control on the federal level. A recent study by the National Bureau of Economic Research (NBER) has shown that US ‘states have strong incentives to subsidize firm relocations in order to gain at the expense of other states’. The study also shows for the example of the US that existing ‘subsidy competition creates large distortions’ and that ‘manufacturing real income can be up to 3.9 percent higher if states stop competing over firms’. See Ralph Ossa, ‘A quantitative analysis of Subsidy Competition in the US’, National Bureau of Economic Research (NBER) Working Paper 20975, February 2015.

19  Karen Yeung, ‘Competition law and the public/private divide’, in Jean-Bernard Auby and Mark Freedland (eds), The Public Law/Private Law Divide (Oxford: Hart Publishing, 2006) 131–63, at 142.

20  See to this effect the letter of the French Minister Arnaud Montebourg to the Vice President of the Commission Joaquim Almunia of 14 January 2014 questioning the logic of economic models as near-exclusive guidelines for the exercise of discretion by the Commission. In that letter, the French Minister writes inter alia: ‘Pour autoriser ou non des aides d’Etat dans l’industrie, vous référez à une notion aussi nébuleuse que contestable de l’investisseur avisé. Pourtant, la crise financière n’a-t-elle pas contribué à démontrer l’irrationalité—ou même inexistence—de l’investisseur avisé en éeconomie de marché clef de voûte des interprétations abusives de la Commission? Cette notion ne figure bien sûr pas dans les Traités. Que signifie-t-elle? Que tout action de la puissance publique en faveur d’un acteur privé fausserait la concurrence ou les échanges entre Etats dès lors qu’un acteur privé ne se serait lui pas engagé rationnellement dans une telle action. Mais qui peut légitimement juger de cela?’

21  Case C-269/90 Technische Universität München v Hauptzollamt München-Mitte [1991] ECR I-5469, para 12; Case T-212/03 MyTravel Group v Commission [2008] ECR II-1967, para 49; Case T-369/06 Holland Malt v Commission [2009] ECR II-3313, para 195; Case C-408/04 P Commission v Salzgitter [2008] ECR I-2767, Opinion of AG Bot, para 265.

22  Andrea Biondi and Martin Farley, ‘The relationship between State aid and the single market’, in Erika Szyszczak (ed), European Handbook on State Aid Law (Cheltenham: Elgar, 2011) 277–92, at 282, with reference to eg Case Commission v Italy (Sovraprezzo).

23  Ibid.

24  Thibaut Kleiner, ‘Modernization of State aid policy’, in Erika Szyszczak (ed), European Handbook on State Aid Law (Cheltenham: Elgar, 2011) 1–27, at 2.

25  Michael Blauberger, ‘State aid control from a political science perspective’, in Erika Szyszczak (ed), European Handbook on State Aid Law (Cheltenham: Elgar, 2011) 28–43, at 29.

26  Ibid.

27  Phedon Nicolaïdes, ‘The economics of granting and controlling State aid’, in Leigh Hancher, Tom Ottervanger, and Piet Jan Slot, EC State Aids (3rd ed) (London: Thomson Sweet & Maxwell, 2006) 17–29, at 20.

28  Alan O Sykes, ‘The Questionable Case for Subsidies Regulation’ (2010) 2 Journal of Legal Analysis 473–523, at 499.

29  Lorenzo Coppi, ‘The role of economics in State aid analysis and the balancing test’, in Erika Szyszczak (ed), European Handbook on State Aid Law (Cheltenham: Elgar, 2011) 64–89, at 76.

30  European Commission, Communication from the Commission to the European Parliament, the Council, and the European Economic and Social Committee and the Committee of the Regions, EU State Aid Modernization (SAM), of 8 May 2012, COM(2012) 209 final, 3 (para 6).

31  Lorenzo Coppi, ‘The role of economics in State aid analysis and the balancing test’, in Erika Szyszczak (ed), European Handbook on State Aid Law (Cheltenham: Elgar, 2011) 64–89, at 76.

32  Phedon Nicolaïdes, ‘The Economics of granting and controlling State aid’, in Leigh Hancher, Tom Ottervanger, and Piet Jan Slot, EC State Aids (3rd ed) (London: Thomson Sweet & Maxwell, 2006) 17–29, at 19.

33  Michael Rodi, Die Subventionsrechtsordnung (Tübingen: Mohr Siebeck, 2000) 142; Eberhard Grabitz, ‘Gemeinsamer Markt und nationale Subventionen’, in Siegfried Magiera (ed) Entwicklungsperspektiven der Europäischen Gemeinschaft (Berlin: Duncker & Humblot, 1985) 100.

34  Thibaut Kleiner, ‘Modernization of State aid policy’, in Erika Szyszczak (ed), European Handbook on State Aid Law (Cheltenham: Elgar, 2011) 1–27, at 4.

35  Phedon Nicolaïdes, ‘The Economics of granting and controlling State aid’, in Leigh Hancher, Tom Ottervanger, and Piet Jan Slot, EC State Aids (3rd ed) (London: Thomson Sweet & Maxwell, 2006) 17–29, at 21.

36  In fact, the report by the Monopolkommission, ‘The More Economic Approach in European State Aid Control’, translated version of Chapter VI of the Biennial Report 2006/2007, November 2009 (SSRN Abstract No 1332765), para 74 at p 20, stated that even at the pre-crisis levels, eg during the year 2007, the total EU subsidies were double the amount of those given by all Member States together—ie €126.5 billion from EU funds versus €66.5 billion from the Member States. The greatest number of EU subsidies were farm subsidies. It appears that this ratio between EU funds and national funds has changed further towards EU matters.

37  Ibid, para 77 at p 21.