The Rescue & Restructuring Aid Guidelines of the European Commission - An Economic Point of View

19 Pages Posted: 5 Feb 2015 Last revised: 12 Mar 2015

See all articles by Frank P. Maier-Rigaud

Frank P. Maier-Rigaud

ABC economics; IESEG School of Management (LEM-CNRS), Department of Economics and Quantitative Methods

Christopher Milde

Compass Lexecon

Date Written: December 31, 2014

Abstract

In the context of its ambitious State Aid Modernisation work, the European Commission presented new guidelines on Rescue and Restructuring (R&R) aid in 2014. In this paper the consequences for generic R&R aid and in particular the balancing test for State aid proposed by the guidelines are discussed. Given the severe and pervasive harm of R&R aid explicitly recognized by the guidelines, granting R&R aid can only be justified under the proposed balancing test if the R&R aid contributes strongly to an objective of common interest. This objective of common interest may either be addressing a market failure or increasing social or economic cohesion. As is argued here, R&R aid can, by definition, not address or alleviate a market failure. Regarding social and economic cohesion, while R&R aid may plausibly prevent the increase of unemployment in a particular region or prevent the interruption of a service of general economic interest, it is rather doubtful that R&R aid is an appropriate policy instrument in these circumstances. In summary, in all but possibly two special cases R&R aid would fail the balancing test. To the extent that the economic principles set out in the new guidelines are taken seriously, the guidelines for R&R aid may therefore ultimately mean nothing less than the abolition of R&R aid in practice.

Keywords: State aid, rescue and restructuring aid, 2014 guidelines, balancing test, regional aid, common principles for the assessment of State aid

JEL Classification: K21, K23, L40, L50

Suggested Citation

Maier-Rigaud, Frank P. and Milde, Christopher, The Rescue & Restructuring Aid Guidelines of the European Commission - An Economic Point of View (December 31, 2014). Maier-Rigaud, Frank and Christopher Milde (2015) The Rescue and Restructuring Aid Guidelines of the European Commission - An Economic Point of View, World Competition: Law and Economics Review, 38(2), Forthcoming., Available at SSRN: https://ssrn.com/abstract=2560227 or http://dx.doi.org/10.2139/ssrn.2560227

Frank P. Maier-Rigaud (Contact Author)

ABC economics ( email )

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HOME PAGE: http://www.ABCecon.com

IESEG School of Management (LEM-CNRS), Department of Economics and Quantitative Methods ( email )

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Christopher Milde

Compass Lexecon ( email )

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Berlin, 10117
Germany

HOME PAGE: http://www.compasslexecon.com/professionals/bio?id=6441

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