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2.4.

98 EN Official Journal of the European Communities C 100/7

STATE AID
CØ78/97 (ex NNØ33/96)
Greece

(98/C 100/05)

(Articles 92 to 94 of the Treaty establishing the European Community)

Commission communication pursuant to Article 93(2) of the Treaty to other Member States
and interested parties concerning aids which Greece has decided to grant for debt consolidation
of agricultural cooperatives and aids for reorganisation of a dairy cooperative AGNO

By the following letter, the Commission informed the encourage early retirement of farmers. However, added
Greek Government of its decision to open the procedure. to the text of Greek law No 2237/94 is a series of
provisions concerning the debt of agricultural cooper-
atives. According to Article 5 of this law, the ABG may,
‘1.ÙThe complaint within specified parameters, assist agricultural cooper-
atives with the payment of outstanding debt. These
arrangements apply to any debt outstanding at 31
By letter of 20 November 1995, a complaint was received December 1993 which is attributable to objective and
by the Commission regarding an aid to the dairy coop- external circumstances (e.g. not to mismanagement).
erative AGNO in Northern Greece. According to this law, no interest is payable on the loan
for the first half of the term, whereafter interest is
chargeable at a rate of 50Ø% of the normal market rate
for such loans.
According to the complainant:

—Ùthe Greek authorities decided, through the Agri- According to this law, assistance to cooperatives is
cultural Bank of Greece (ABG), to assist AGNO, a subject to the previous submission of a development/
dairy cooperative company, in paying some or all of modernisation feasibility study, demonstrating that the
its debts, possibly a sum around GRD 13Ø000 million, cooperatives are able to reimburse the rescheduled debts.
Furthermore, assistance may be conditional to the
execution of certain conditions (such as administrative/
—ÙAGNO has also benefited from fiscal concessions organisation modernisation, reduction of personnel, rein-
available to cooperative companies in the agricultural forcement of own capital, etc.).
sector in Greece.

The complainant also makes reference to circulars of the


ABG which set out implementing guidelines for Article 5
The debt payment of Greek law No 2237/94.

The complainant cites Greek law No 2237/94 which


provides for concessionary loans from the ABG to coop- Concerning the relationship between the Greek auth-
erative companies which process and/or market agri- orities and the ABG, the plaintiff cites Greek law No
cultural products in order to pay debts outstanding at 1914/90. According to this law, the sole shareholder of
31ÙDecember 1993. the ABG is the Greek State, and its administrative board
is appointed by government decision. The board is stated
by the complainant to act under government surveillance,
which is carried out by the Ministry of Agriculture.
According to the complainant, AGNO has benefited
from the following concessionary loan elements: a grace
period of three years, payment of capital only for a
period of five years, and payment of capital and interest The fiscal concessions
but at a concessionary rate (which is decided by the
ABG) for the remaining years of the term of the loan.
According to the complainant, cooperative companies in
the agricultural sector in Greece benefit from a series of
Greek law No 2237/94 is a law implementing Council fiscal concessions on the basis of Greek laws No
Regulation (EEC) No 2079/92 concerning aid to 2238/94 and No 2169/93.
C 100/8 EN Official Journal of the European Communities 2.4.98

The beneficiary high, and for all products — especially dairy products —
rates were higher than the cut-off rates which appear in
Community legislation for the purposes of paying
According to the information at the Commission’s compensation from the Community budget. All coop-
disposal, AGNO is a significant operator on the Greek erative companies in the agricultural sector with
market in milk and dairy products, occupying third processing facilities were, despite the high rates of
position in sales of fresh milk and fourth position in sales contamination, nevertheless required according to the
of yoghurt, cheese and ice cream. The turnover of Greek authorities to buy up the production of their
AGNO in 1994 is about GRD 20Ø000 million. In recent members. Furthermore the company has received an
years, AGNO may have been the second highest investor important amount for milk deliveries of non-member
in the milk and dairy sector in Greece in volume terms producers that somehow managed to deliver milk to the
(GRD 13Ø000 million for a dairy plant in Salonika, cooperative. Much of what AGNO then produced was,
Northern Greece). according to the Greek authorities, unsaleable. As a
result of this, cooperatives suffered financially and
recourse was made to loans.
For a number of years, the return on capital of AGNO
seems to have been low even though the accounts for
1994 do not seem to include interest payment on debt to
the ABG, nor provision for pension payments. The Greek authorities indicate that they have wiped out
Concerning debt to the ABG, Greek law No 2237/94, outstanding debts of AGNO to the ABG, according to
and circulars No 150/94 and No 22/95 of the ABG are the provisions of Article 32 (2) of law No 2008/92. They
mentioned. The accounts for 1995 reveal that long-term have indicated that, although the above provision allows
debt is about GRD 17Ø000 million compared with the coverage of debts between 1982 and 1989, they have
1994 figure of about GRD 9Ø000 million. only covered the period between late April 1986 and the
end of 1987. The overall amount that the Greek
government took in charge is GRD 851 million, as well
as GRD 530 million in interest, according to Article 19
2.ÙThe comments of the Greek authorities of Greek law No 2198/94.

Following receipt of the above complaint, the


Commission called open Greece to provide full
information about the aid by letter of 27 December Greek law No 2237/94
1995. The Greek authorities requested and obtained
an additional period in which to reply. By letter of
27 February 1996, the Greek authorities replied
providing some elements of substance but essentially According to the Greek authorities, Article 5 of law No
referring to the aid scheme provided for in Greek law 2237/94 concerning consolidation of debts by agri-
No 2008/92 already notified to the Commission (Aid No cultural cooperatives does not constitute State aid in the
N 515/93). Initially, the elements of substance provided meaning of Article 92(1) of the Treaty. In fact, they
by Greece in order to justify the aid were two: the need sustain that the Greek state has not in the framework of
to offset the effects of the Chernobyl nuclear disaster on this law paid any form of economic aid, either to
the agricultural sector, and the very high interest rates AGNO, o to the ABG. This law envisaged only to allow
for loans in Greek drachmas in the period following the the ABG to execute some assistance to cooperatives to
Chernobyl disaster. At this early stage, the Greek auth- restructure debts in a restricted financial environment.
orities made no reference to Greek law No 2237/94, or The cost of these operations is said to be an exclusive
to any fiscal concessions. cost of the ABG.

Two bilateral meetings were held, at the request of the


Greek authorities, on 16 May 1997 and 23 July 1997 Furthermore, the Greek authorities state that resche-
between the Greek authorities and the Commission duling of loans is a normal banking practice in all EU
services. As a result of these meetings, the Greek auth- Member States and it is nowhere foreseen that the Greek
orities have supplied additional information by letters State should bear the cooperative debts. They sustain
dated 9 June 1997 and 29 August 1997. that there is no discrimination and, thus, no State aid,
since there are mechanisms in Greek legislation (Act of
the Bank of Greece’s Governor No 1620 of 5 October
Greek law No 2008/92 1989), allowing longer duration of loans and more
favourable provisions than in law No 2237/94.

According to the Greek authorities, nuclear contami-


nation from Chernobyl affected Greece more severely
than other Member States on account of the weather The ABG signed with AGNO a loan for regularisation
conditions at the time. Levels of radiation were relatively of debts outstanding at 31 December 1993 at the latest.
2.4.98 EN Official Journal of the European Communities C 100/9

The overall amount of this loan is GRD 10Ø145 million. No 1620 of 5 October 1989. The loan is granted for 10
This amount is due to financial charges incurred for years (including a two-year-period where only simple
investment projects linked to the removal and modern- interests will be calculated), at the rate in force for
isation of the dairy industry. An extremely long adjudi- medium term loans. They also consider by the same
cation process affected in an unfavourable manner the reasons as above mentioned that this debt reschedule
investments’ financial plan. Thus, for an expected cost of cannot be considered State aid.
GRD 8Ø500 million, the project has been finished with a
total cost of GRD 13Ø500 million. This has had the effect
to increase the debt of the cooperative to the ABG that
financed the investment project. Fiscal concessions

In what concerns the eventual fiscal concessions granted


Overall debt amount of GRD 10Ø145 million can be
to AGNO, the Greek authorities have indicated that
divided in three parts: capital providing from bank loan
Greek law No 2238/94 does not concern aid to cooper-
to the project (GRD 764 million), financing granted by
atives or their organisation, but the general tax law of
the ABG supported by investment subsidies (GRD 4Ø955
Greece. Furthermore, according to the cooperative
million) and capitalised interests during the construction
status, there is no taxable income and consequently
period (GRD 5Ø426 million). The loan contracted with
cooperatives are exempted from tax.
the ABG has a duration of 15 years, with a three-year
grace period. On the first half of the reimbursement
period, no interest is to be paid on the capital to be
rescheduled. On the second half of this period, an
Equally in what concerns Greek law No 2169/93, the
interest rate equivalent to 50Ø% of the applicable rates
Greek authorities sustain that they have not granted aid
for investment aid is to be applied.
to AGNO. They indicate this law refers to the general
financing of farmer’s organisations and that AGNO has
never received any benefit from this law.

According to the Greek authorities, AGNO, as well as


other cooperatives, has benefited from the debt resche-
duling after submission of a feasibility study, evaluated
and approved by the ABG according to purely banking 3.ÙThe assessment
criteria, and subject to the realisation of a concrete
programme for restructuring of the milk industry, for
which the execution is followed by a special expert
committee. Article 92(1)

On the basis of the infomation at its disposal, the


According to Greek authorities, initial measures for Commission considers that the assistance given to
financial restablishment are reductions of operational AGNO to pay its debt is an aid within the meaning of
costs, such as personnel (150 persons in three years), Article 92(1) of the Treaty. The Commission has no
extra hours by 80Ø%, wages over legal thresholds by information enabling it to conclude that the aid has been
20Ø%, publicity expenses by 2Ø% and general costs by granted under an existing aid scheme within the meaning
GRD 50 million. These measures include also ensuring of Article 93(1) of the EC Treaty.
new resources, such as recovery of cooperative capital,
increase of cooperatives fees by GRD 50Ø000, imposition
of a special levy on delivered milk (GRD 1,5/kg on the
first three years and GRD 3/kg after 1998) and sale of Even if the ABG is indicated to be a private company,
real estate. A secondary set of measures is equally the sole shareholder of the ABG seems to be the Greek
foreseen. State, and its administrative board seems to be appointed
by government decision.

Other debts Furthermore, the Commission took account that ABG’s


decisions are not independent from the Decisions of the
Greek Government, since the latter has the power to
influence its commercial behaviour by legislation. In fact,
Although this is not the object of the complaint, Greek there is a legal provision in which the Greek State auth-
authorities indicate that AGNO has also benefited from orises the ABG to reschedule debts of cooperatives
a debt rescheduling of GRD 1Ø899 million in the dealing with the processing and marketing of agricultural
framework of the Act of the Bank of Greece’s Governor products.
C 100/10 EN Official Journal of the European Communities 2.4.98

In the conditions described above, the ABG would be Equally, aid given in the framework of Article 32(2) of
regarded as a public enterprise in the meaning of law No 2008/92, aiming to compensate enterprises for
Commission Directive 80/273/EECØ(Î) on transparence extraordinary events (such as the Chernobyl nuclear
of financial relations between Member States and public disaster) self-evidently fulfils the conditions set out in
enterprises, as modified. Article 92(1) of the Treaty.

By itself, the rescheduling of debts by a bank (even if


State owned) cannot be considered a State aid in the Article 92(2)(b)
meaning of Article 92(1) of the Treaty if the Member
State acts according to the principle of the private
investor in a market economy.
This provision has been invoked by the Greek authorities
in attributing part of the debt of AGNO, in respect of
which a total aid of GRD 1Ø380 million is paid, to the
The Commission does not consider that this principle has effects of the Chernobyl nuclear disaster. Commission
been followed in the present case. On the one side, the policy in this area is to allow aid to offset up to, but no
conditions of the consolidation loan (loan of 15 years more than, 100Ø% of losses exclusively related to natural
with grace period of three years, no interest during the and assimilable disastersØ(Ï). However, even if aid to
first half of the 15-year period, and an interest rate compensate for the economic effects of natural and assi-
equivalent to half of the reference rate for the rest of the milable disasters is deemed compatible by the EC Treaty
period) are extremely favourable for a company that in itself, all instances of such aid are notifiable under
difficulty and not able to comply with their debt service. Article 93(3) of the EC Treaty and the Member State
Furthermore, it is not shown in the information supplied must justify the aid. Only in this way can the
by the Greek authorities that the high level of risk of Commission satisfy itself that an aid of this type is in fact
consolidating loans to a cooperative in such a financial caught by Article 92(2)(b).
situation has made the ABG require strong securities.

In addition, since there are legal provisions authorising Although the Greek authorities have notified Greek law
all banks in Greece to execute debt rescheduling No 2008/92 and explained that this law is meant to
practises (Act of the Bank of Greece’s Governor No address problems related to Chernobyl, they have not at
1620 of 5 October 1989) and since there are legal this stage provided the necessary details to allow the
provisions (law No 2237/94) specifying that the ABG is Commission to conclude that the entire scheme of aid
authorised to reschedule debts of agricultural cooper- provided for under Greek law No 2008/92 can be
atives, the Commission can assume that these operations deemed to fall under Article 92(2)(b). It should indeed
would not take place in normal market conditions, i.e., if be noted that although the Greek authorities have
the ABG operates according to the private investor invoked problems related to Chernobyl as the justifi-
principle using commercial banking criteria. cation for the aid, they at the same time state that Greek
law No 2008/92 refers to aid to compensate for losses
incurred between the years 1982-1989. This period
clearly includes losses made in years predating the
Chernobyl disaster (1986). Furthermore, it seems that
The same reasoning applies to the debt consolidation reasons for debts to be cleared under the scheme
obtained by AGNO on the basis of the Act of the Bank provided for in Greek law No 2008/92 can cover not
of Greece’s Governor No 1620 of 5 October 1989. only natural calamities and assimilated events, but also
investments, lack of own funds and others. This
provision is currently under investigation in the
framework of State aid Case N 515/93.
Consolidation of debts has been allowed selectively to
several processing and marketing cooperatives (including
AGNO) which are active in an economic sector (agri-
culture) for which there is a significant intracommunity
trade. In what concerns the particular case of the aid granted
to AGNO under the provisions of Greek law No
2008/92, the Commission noted that the Greek auth-

(Ï)ÙCommission services’ working document VI/5934/86 of


(Î)ÙOJ L 195, 29.7.1980. 10 November 1986.
2.4.98 EN Official Journal of the European Communities C 100/11

orities have indicated that this cooperative received aid in In conclusion, the Commission cannot conclude that the
relation to the Chernobyl nuclear disaster falls self- aid to offset debts to AGNO as a result of the Chernobyl
evidently within the definition of extraordinary event in disaster is compatible with the common market.
the framework of Article 92(2)(b) of the Treaty.

The Commission took account of the fact that the Greek Article 92(3)(c)
authorities have indicated that even though Greek law
No 2008/92 foresees the compensation of losses
predating the Chernobyl disaster, the aid paid to AGNO
under this law covered only losses between late April This provision has not been invoked explicitly by the
1986 and the end of 1987. Greek authorities. However, the Commission must
examine to what extent it is applicable, in particular the
Commission guidelines for rescue and restructuringØ(Ð).
These guidelines contain, on the one hand, detailed
However, the Commission noted also that the Greek general rules applicable, in the absence of conflicting
authorities compensate the cooperative’s losses during sectoral rules, to all sectors of the economy and, on the
the year 1992, for an event whose effect they claim had other hand, a reference to special rules applicable only to
ended five years sooner (late 1987). Although the agricultural sector (i.e. aid in relation to products in
Commission practise for State aids for natural calamities Annex II to the Treaty) which may be applied as an
and extraordinary events does not refer to a deadline alternative to the general rules. The most recent revision
after which compensation for this event may not occur, of these guidelines, published in Official Journal C 283
the Commission notes that the Greek authorities have of 19 September 1997 will enter into force after
failed to provide information on the reasons why the 1 January 1998, and it is therefore not applicable to the
compensation for Chernobyl related lossses is only done present aid.
five years after the event.

Special rules for the agricultural sector


The Commission took account of the fact that, although
its guidelines for the implementation of Article 92(2)(b)
of the Treaty apply exclusively at the level of agricultural
producers, it is common practise to apply them to Commission policy in this area is based, except in the
processing and marketing undertakings, whenever it can case of (upward) readjustment of interest rates, upon the
be justified that producers’ losses are recuperated at the notion of viability: the beneficiary of the aid must be
processing level. In this particular case the Commission capable of being viable before the aid, and must actually
considers these conditions are met since AGNO, be viable after the aid.
contrary to private undertakings and due to its statutory
requirements, kept receiving producer’s milk after the
nuclear disaster. These products could not be marketed
due to their high level of radioactivity. Concerning the special rules in the agricultural sector
which may apply as an alternative to the general rules,
aid is in essence limited in volume by specific elements of
the capital stock of the farm or company in question.
Nevertheless, the Commission does not have enough Where the farm or company in question is at risk
information to consider that there was no overcompen- through inability to pay debt — however caused — it is
sation of losses incurred by AGNO. The Greek auth- present Commission policy that Member States may
orities managed to demonstrate that this company safeguard these investments by granting aid within
incurred losses of GRD 760 million (GRD specific parameters.
40/kg؍Ø19Ø000 tonnes) corresponding to sales loss
during May-June 1986. However, the Commission does
not have at its disposal any information allowing justifi-
cation of the difference of GRD 91 million for the total
debt cleared of GRD 851 million. Concerning the specific parameters applicable to rescue
and restructuring aid in the agricultural sector, there are
two elements. First, aid for processing and marketing
may not be given on the basis of investments in product
Furthermore, the Commission does not have at its sectors where the Community excludes, on account of
disposal any information allowing to demonstrate that structural overcapacity, cofinancing of investment aid.
the interests of GRD 529,89 million cleared by the Second, the aid may not exceed a ceiling expressed as a
Greek State in the framework of Article 19 of Greek law percentage of total investment costs which the
No 2198/94 do not constitute overcompensation of
losses. (Ð)ÙOJ C 368, 23.12.1994.
C 100/12 EN Official Journal of the European Communities 2.4.98

beneficiary could have received as an incentive to make isation of AGNO’s dairy plant. However, the
the investment in question. This ceiling must take into Commission cannot conclude that the whole amount of
account any aid actually received as an initial incentive this debt is linked to the execution of the project.
to make the investment.

In fact, more than half of this amount (GRD 5Ø426


The Commission’s previous practice on the agricultural million) concerns capitalised interests during the
sector can be summoned as follows: construction period. Taking account that the capital
provided by bank loans to the project was GRD 764
million and that the construction period was four years,
‘‘The aids in question must concern the financial burdens it is not clearly demonstrated that all this amount of
resulting from debts incurred to finance investments interest results the initial capital. Furthermore, even if
already made; this can be demonstrated, the Commission took account
of the fact that the Greek authorities indicate that these
interests are a result of an extremely long period for the
adjudication procedure. In these conditions, interests
The aggregate subsidy equivalent of any aid granted resulting from a construction period qualified as
when the debts were contracted plus the aid in question extremely long could not be considered by the
may not exceed the rates generally allowed by the Commission to be expenses linked to the execution of an
Commission, namely: investment, but to operational costs linked to the
company’s management.
—Ùin the case of investments in primary agricultural
production, 35Ø% or 75Ø% in less-favoured areas
within the meaning of Article 21(2) of Regulation Another major debt componant is the financing granted
(EC) No 950/97 (ex-Directive 75/268/EEC), by the ABG in exchange for the investment subsidies.
According to the Greek authorities, this amount is GRD
4Ø955 million. The Commission should note that this
—Ùin the case of investments in the processing and item could not be covered by the debt, since if the ABG
marketing of agricultural products, 55Ø% (or 75Ø% in advanced the amount in subsidies to the beneficiary, the
Objective 1 areas) for projects not excluded by the ABG would also receive in exchange the subsidies related
Community guidelines for investments in processing to the project. Taking this into account, only the interest
and marketing of agricultural productsØ(Ñ). rates referring to the time difference between these
advancing capital and receiving subsidies could have
been taken into consideration. Furthermore, Commission
Decision C(90) 950/93 of 29 June 1990 approving the
The aids in question must be granted following investment project for a EAGGF grant in the framework
adjustments of the interest rates on new loans, made to of Regulation (EEC) No 355/77 considers a total
take account of changes in the money rate (the amount subsidy of GRD 1Ø900 million (GRD 1Ø188 million from
of aid must be less than or equal to the rates of the new EAGGF and GRD 712,8 million from national funds).
loans) or must concern farms that offer viability guar- On the other hand, Greek authorities indicate that the
antees, in particular in cases where the financial burdens amount advanced by the ABG is GRD 4Ø955 million. In
resulting from existing borrowings are such that the these conditions, it is not possible for the Commission to
farms are at risk, possibly of bankruptcy.’’ consider all this amount to be provided by investment
costs.

Concerning the provisions of Article 5 of Greek law No


2237/94, the Commission concludes that these do not It arises from the previous paragraphs that the special
seem to respect the special criteria for restructuring of criteria for agriculture do not apply to the aid granted to
agricultural enterprises, by the simple fact that debts to AGNO in the framework of Article 5 of Law No
be rescheduled are not necessarily linked to the 2237/94.
execution of investments. Indeed, the objective and
external circumstances referred to in the above
mentioned article may cover other reasons for
indebtedness. General Community guidelines on aid for rescue and
restructuring of companies in difficulty

Concerning the aid to AGNO granted on the basis of Concerning the Community guidelines on aid for rescue
Article 5 of Greek law No 2237/94 for the rescheduling and restructuring of companies in difficulty, the general
of GRD 10Ø145 million of debts, the Commission notes principle applied by the Commission is to allow restruc-
that this debt is in some manner related to the execution turing aid only in circumstances where it can be demon-
of an investment project for the removal and modern- strated that the approval of restructuring aid is in the
Community interest. This can only be possible when the
(Ñ)ÙOJ C 29, 2.2.1996, p. 4. following general conditions are fulfilled:
2.4.98 EN Official Journal of the European Communities C 100/13

1. Restoration of viability according to restructuring plan Concerning the conformity of Article 5 of Law No
2237/94 with the provisions of the general Community
guidelines for rescue and restructuring of companies in
All restructuring plans must restore long-term viability difficulty, the Commission acknowledges that it
and health of the firm within a reasonable timescale constitutes an aid scheme for restructuring of agri-
and on the basis of realistic assumptions as to its cultural cooperatives. According to points 4.1. and 4.2. of
future operating conditions. Improvement of viability the guidelines, approval of aid schemes is only possible if
must mainly result from internal measures and companies fall within the definition of small and medium
external factors only to the externt that assumptions enterprises (SME) in the meaning of point 3.2.4. of the
on the evolution of these factors are widely accepted. said guidelines. For companies not fulfilling the defi-
To fulfil the viability criterion, the restructuring plan nition of SME’s, individual notification of the awards is
must enable the company to cover all its costs required.
including depreciation and financial charges and
generate a minimum return of capital such that the
firm will be able to compete in the market on its own
merits; Since Article 5 of Law No 2237/94 was not notified to
the Commission according to Article 93(3) of the Treaty,
the conformity of the aid can only be assessed a
2. Avoidance of undue distortions of competition through posteriori. The Commission noted that 116 cooperatives
the aid benefited from this scheme. The Commission assumes
that at least some of them would not be considered
SME’s and would then require an individual notification
of a restructuring plan. In these conditions and in the
Measures should be taken to avoid as far as possible
absence of details about the individual approvals under
the adverse effects on competitors. When an objective
the scheme, Commission’s following appraisal is
assessment of the demand and supply situation
applicable to both schemes and individual notifications.
demonstrate that there exists an excess of production
capacity, the restructuring plan must make a
contribution, proportionate to the amount of aid
received, to the restructuring of the relevant market in
the European Community by irreversibly reducing or The Commission took account of the fact that the
closing capacity; scheme and the implementation provisions do not specify
criteria for the cooperatives to be considered in
difficulty. This is particularly important since in case the
3. Aid in proportion to the restructuring costs and benefits companies cannot be considered to be in financial
difficulty, the aid ceilings and sectoral limits set out in
the Commission policy for investment aid would apply.
The amount and intensity of the aid must be limited
to the strict minimum needed to enable restructuring
to be undertaken and must be related to the benefits
anticipated from the Community’s point of view. Aid In what concerns respect of Commission’s criteria for
beneficiaries will be expected to make a significant restructuring, the Commission considered that the feasi-
contribution to the restructuring plan from their own bility study for the modernisation and development of
resources or from external commercial financing; cooperatives required by Article 5(2) of Law No
2237/94 has as a main objective to allow companies to
regularly reimburse its obligations to the bank. In order
to respect these conditions, the ABG may impose
4. Full implementation of restructuring plan and
conditions that could fit within a restructuring plan
observance of conditions
designed to restore long-term viability (organisational
modernisation, staff reduction, sale of assets, rein-
forcement of own capital).
The company must fully implement the restructuring
plan agreed upon by the Commission and must
discharge all obligations laid down by the
Commission;
In what concerns the respect of the second condition,
Article 5 of Law No 2237/94 does not show any
provision concerning measures taken by the Greek State
5. Monitoring and annual reports to offset as far as possible adverse effects on competitors.
Furthermore, the aid scheme applies for cooperatives
covering all the agricultural sector, including sub-sectors
Granting of restructuring aid must be monitored at for which there is a structural excess of production
regular intervals through adequate reports. capacity, as mentioned in point 2.3 of the Annex to
C 100/14 EN Official Journal of the European Communities 2.4.98

Commission Decision 94/173/CE of 22 March 1994Ø(Ò), Commission analysed in particular the aid given to
which sets out sectoral limits for the Community AGNO in the framework of this legal text, with a view
guidelines for aid for processing and marketing of agri- to assess conformity with the Community guidelines for
cultural products. The aforementioned article does not rescue and restructuring of firms in difficulty. Since this
foresee any provision to improse on the benefiting coop- aid is not a case of application of an existing aid scheme,
eratives an irreversible reduction or closure of capacity as and appears to concern a non-SME company which,
a contribution to the restructuring of the relevant market inter alia, makes non-Annex II products, an adequate
at a European level. business plan, including appropriate physical reorgani-
sation of the company, would have to be supplied to the
Commission.

The third condition concerns the proportion between the


costs of the aid and its benefits. Article 5 of Law No
2237/94 does not show any provisions limiting the
amount of aid to the strict minimum necessary to enable In what concerns the respect of the first condition of the
restructuring. Nevertheless, the scheme provides for the Community guidelines (restoration of viability), the
ABG to require, if necessary, the beneficiaries to make a Commission noted that the Greek authorities have
significant contribution from their own resources. The supplied a set of measures to be implemented, as well as
ABG may in fact require beneficiaries to sell assets (land, a copy of AGNO’s submission to the ABG to reschedule
buildings or shares), the product of which would reduce outstanding debts. Insofar as these measures can be
debts. It can also require cooperatives to reinforce their considered as a restructuring plan, the Commission
own capital either by imposing special fees on members noted that they concern mostly reducing operational
for delivery of their products, or by increase of coop- costs and increasing own capital. These measures
erative capital of the members. These measures could envisage to re-establish financial balance: they involve
eventually be adequate to fulfil this condition, as long as staff reductions (150 jobs in three years), extra hours by
the beneficiary contribution can be deemed balanced 80Ø%, wages over legal thresholds by 20Ø%, publicity
with the restructuring aid. expenses by 2Ø% and general costs by GRD 50 million.
These measures include also ensuring new resources,
such as recovery of cooperative capital, increase of coop-
erative fees by GRD 50Ø000, imposition of a special levy
on delivered milk (GRD 1,5/kg on the first three years
In what concerns the respect of the fourth condition, and GRD 3/kg after 1998) and sale of real estate. The
concerning full implementation of the restructuring plan, Commission notes that they do not concern modifi-
the Commission requires normally a commitment from cations in the organisation/production plan of the coop-
Member States when the State aids are analysed a priori, erative.
in conformity with the procedure laid down in
Article 93(3) of the Treaty. Since the present scheme is
non notified, it is not possible to assess respect of this
condition. Consequently, the Commission cannot
conclude that this condition is respected. The same Although the hard-core of the measures to be taken
conclusion applies to the fifth condition concerning could eventually be considered as a restructuring plan in
monitoring. For this purpose, the Commission calls upon principle capable of restoring viability of the company,
Greece to supply a detailed annual report on the Greek authorities failed to provide information necessary
implementation of the measures, containing all relevant to show in which manner these measures influence the
information to allow the Commission to assess the financial balances of the cooperative and to demonstrate
implementation of the restructuring programmes for all that it achieves long-term viability within a reasonable
cooperatives. timescale.

Taking account of the precedent, the Commission


cannot conclude that the provisions of Article 5 of Greek In what concerns respect of the second condition of the
law No 2237/94 comply with the Community guidelines Community guidelines, documents supplied by the Greek
for rescue and restructuring of companies in difficulty. authorities do not show any measure taken to offset as
far as possible adverse effects on competitors, in a
sub-sector for which the Greek authorities recognise
there is a strong competition. Furthermore, the aid is
destined to a company active in the processing and
Following the analysis of conformity of the general marketing of milk and dairy products, for which there
provisions of Article 5 of Greek law No 2237/94, the are sectoral limits pursuant to Commission Decision
94/173/CE of 22 March 1994. The Commission does
not have any information at its disposal allowing to
(Ò)ÙOJ L 79, 23.3.1994, p. 29. demonstrate that an irreversible reduction or closure of
2.4.98 EN Official Journal of the European Communities C 100/15

capacity was imposed on AGNO in order to contribute allow the Commission to monitor the implementation of
to the restructuring of the relevant market at a European the restructuring programme.
level.

Taking account of the precedent, the Commission


cannot conclude that the consolidation loan granted to
Pursuant to the third condition of the Community AGNO in the framework of Article 5 of Greek law No
guidelines, aid given must be in proportion to benefits 2237/94 complies with the Community guidelines for
expected. For this the amount and the intensity of the rescue and restructuring of companies in difficulty.
aid must be limited to the strict minimum needed to
enable restructuring. According to the calculation
method normally followed by the Commission, the
consolidation loan has a subsidy equivalent of 64,7Ø%. Other debts
This represents a total aid of GRD 6Ø600 million. It was
not demonstrated by the Greek authorities that a loan Concerning the aid to AGNO in the framework of the
with such favourable conditions leading to this important debt rescheduling for a total amount of GRD 1Ø899
amount of aid is the strict minimumn to enable restruc- million on the basis of the Act of the Bank of Greece’s
turing. Governor No 1620 of 5 October 1989, the Commission
notes that, according to the very scarce information
available, it does not seem to fulfil either the special rules
applied to the agricultural sector or the general rules for
Aid beneficiaries are expected to make a significant restructuring of companies in difficulty. Consequently, it
contribution to the restructuring effort from their own should be considered as operating aid, incompatible with
resources. When analysing the primary set of measures Commission’s rules on State aids.
imposed on AGNO by the ABG, the Commission
considered that the increase of the cooperative capital
could be considered as a contribution from own
resources. This contribution is estimated to represent a Fiscal concessions
total amount of GRD 309 million, i.e., 5Ø% of the total
restructuring aid granted. The imposition of a special
levy per kilo of milk delivered (GRD 1,5 per kilo until The Commission normally deems fiscal concessions
1997 and GRD 3 per kilo after 1998) could also be caught by Article 92(1) of the EC Treaty to be incom-
considered as a contribution from the co-operative’s own patible operating aid where the concessions are not tied
resources. If applied during the whole period for the to particular criteria which would indicate otherwise.
consolidation of the loan, this levy would generate an
amount of GRD 1Ø100 million. The total combined
effort of both measures would generate a beneficiary Taking into account the fact that the Greek authorities
contribution of GRD 1Ø400 million, equivalent to 22Ø% have indicated that AGNO did not receive any benefits
of the total restructuring aid. The Commission could from laws No 2238/94 and No 2169/93, the
eventually consider this own resources contribution as Commission considered that no State aid in the meaning
significant. Nevertheless, the Commission noted that the of Article 92(1) of the EC Treaty is involved.
imposition of this special levy on milk deliveries seems to
constitute the main item to increase the cooperative’s
internal resources. Processing industries are free to fix
milk prices to suppliers. In these conditions, a measure 4.ÙConclusion
imposing a special levy, if incorrectly applied could be
compensated by artificial increases in prices in order not
to damage farmers. Adequate monitoring is then On the basis of the above, the Commission has decided
necessary in order to assess to what extent the imposition to open the Article 93(2) procedure in respect of the aid
of a special deliveries levy can constitute a sound granted to AGNO:
measure to increase internal resources. The Greek auth-
orities are requested to supply detailed information about —Ùto assist with debt payment pursuant to Article 5 of
this subject. Greek law No 2237/94 (amount: GRD 10Ø145
million),

Since the present scheme is non notified, it is not —Ùthe consolidation loan obtained pursuant to the
possible to assess respect of the fourth condition. Act of the Bank of Greece’s Governor No 1620 of
Consequently, the Commission cannot conclude that this 5ÙOctober 1989, (amount GRD 1Ø899 million),
condition is respected. The same conclusion applies to
the fifth condition concerning monitoring. For this
purpose, the Commission calls upon Greece to supply a —Ùto compensate for an extraordinary event in the
detailed report on the implementation of the AGNO framework of Greek law No 2008/92 (amount:
restructuring plan, containing all relevant information to GRD 1Ø380 million).
C 100/16 EN Official Journal of the European Communities 2.4.98

Furthermore, the Commission has decided to open the published in the Official Journal of the European
procedure provided for in Article 93(2) of the EC Treaty Communities C 318 of 24 November 1983 where it was
in respect to the provisions of Article 5 of Greek law No recalled that aid granted illegally, that is aid granted
2237/94. without awaiting the final decision of the Commission
under the Article 93(2) procedure, may be required to be
All these aids are illegal given that they have been recovered. Recovery must be made in accordance with
introduced without prior clearance by the Commission the provisions of Greek law. Interest, which is payable
under Articles 92 and 93 of the Treaty. The Commission from the date of granting of the aid in question, must be
regrets that the Greek authorities have not fulfilled their calculated according to the reference rate used by the
obligations under Article 93(3) of the EC Treaty and Commission in connection with regional aid.
requests the Greek Government to take the adequate
measures to respect this obligation for future measures. Independently of possible recovery of aid, the
Commission may refuse to charge to the EAGGF expen-
Within the framework of this procedure, the diture on national measures directly affecting
Commission notifies the Greek Government to submit its Community measures.
observations, which should reach the Commission within
one month of the date of this letter. This information Please note that any Commission decision on these
should be based on the considerations set out in this particular aids are without prejudice to its ultimate
letter and should allow the Commission to form a Commission position on Aid N 515/93. The Commission
judgment as to compliance or otherwise of these aids recalls that it has requested the Greek authorities to
with Community State aid provisions. The Commission supply information on this aid essential to taking a
invites the Greek authorities to inform AGNO and the decision under Articles 92 and 93 of the EC Treaty. To
other aid beneficiaries as soon as possible of this decision date, the Greek authorities have failed to supply this
to open the Article 93(2) procedure. information.’

Further, the Commission informs the Greek authorities The Commission hereby gives the other Member States
that, within the framework of this same procedure, it will and interested parties notice to submit their comments on
invite the other Member States and any interested party, the measures in question within one month from the date
by publication of this letter in the Official Journal of the of the publication of this notice to:
European Community, to present any comments within
four weeks of publication of this letter. European Commission,
Rue de la Loi/Wetstraat 200,
The Commission draws the attention of the Greek auth- B-1049 Brussels.
orities to the letter which it sent to all Member States on
3 November 1983 concerning their obligations under The comments will be communicated to the Greek
Article 93(3) of the EC Treaty, and to the memorandum Government.