Commission finds State aid rules on guarantees still relevant but can be updated
The European Commission has found that the State aid rules on guarantees are still relevant as they increase predictability and legal certainty, but that some improvements and simplification are necessary. In a Staff Working Document (‘SWD’) published today, the Commission finds that there can be improvements regarding estimating aid amounts, complexity for SMEs, and passing-on of risk benefits.
The SWD summarises the findings of its evaluation of the Commission Notice on the application of Articles 87 and 88 of the EC Treaty to State aid in the form of guarantees (‘Guarantee Notice’), which describes how the Commission assesses State guarantees on loans and other financial instruments. Launched in August 2022, the aim of the evaluation was to assess whether the Guarantee Notice, which has not been revised since 2008, remains ‘fit for purpose’ and to identify any existing shortcomings as well as any scope for improvement and simplification.
As part of the evaluation, the Commission gathered evidence to understand how the Guarantee Notice has functioned since its adoption. This evidence includes feedback obtained from a public consultation and a targeted consultation, a workshop with bodies that administer and grant guarantees, as well as information provided by Member States. The Commission has also commissioned an external study conducted by a consortium of independent experts. The final report of the external study has also been published today.
Main findings of the evaluation
The evidence gathered in the evaluation has shown the following:
The Guarantee Notice has a clear added value, as it provides a framework within which the Commission can approve guarantee methodologies developed by Member States. The Guarantee Notice has therefore increased predictability and legal certainty and ensured a level playing field between Member States.
The Guarantee Notice remains relevant as it describes the conditions for ensuring that a State guarantee is awarded on market terms and hence is free of aid. The continued relevance of the Guarantee Notice is also clear from the increasing number of Member States’ (pre-)notifications of guarantee methodologies.
The evaluation also shows that the Guarantee Notice could be improved in the following specific areas:
Due to developments in the financial markets, the evolution of interest rates, and the changes in capital requirements applicable to lenders since 2008, the implementation of the Guarantee Notice may result in an underestimation of the aid amount (i.e. the premium charged for a State guarantee may be too low). However, for the simplified approach that can be applied for State guarantees to smaller companies (the so-called ‘safe harbour option’), there may be an overestimation of the aid amount (i.e. the premium charged may be too high), especially for State guarantees targeting riskier SMEs.
It may be the case that lenders do not fully pass through to borrowers the risk-reduction benefits they obtain through the State’s guarantees, although this effect is insufficient for lenders to achieve any statistically significant aggregate gains.
Compliance with the provisions of the Guarantee Notice can be complex and costly, especially for smaller measures and smaller Member States. In addition, there is insufficient availability of reliable data on approved guarantee measures, which demonstrates that the reporting framework of the Guarantee Notice is not functioning as intended. This could be due to the costs involved.
The Guarantee Notice contains elements that are incoherent with the broader State aid framework. Most notably, there are some inconsistencies over the use of market benchmarks and the mechanisms for ruling out aid to lenders, which are both established under the Commission Notice on the notion of State aid as referred to in Article 107(1) TFEU (‘Notice on the Notion of Aid’).
Next steps
The Commission intends to launch a review of the Guarantee Notice in the first quarter of 2026 with the aim to address the issues identified in the evaluation. Stakeholders will have the possibility to comment on the call for evidence which will be published for feedback. The revision is currently estimated to be finalised by June 2027.
Background
To ensure that a State guarantee involves no aid, the guarantee premium paid to the State should be in line with what a market operator would expect to receive as remuneration for that guarantee under normal market conditions. The Commission’s market conformity assessments therefore focus on whether the transaction’s compliance with market conditions can be directly established through transaction-specific market data or, in cases where such data is unavailable, whether other methods could be used.
The most direct way to rule out aid is for the State to set the guarantee premiums equivalent to those charged by private operators. If there is no equivalent transaction, market conformity may instead be established using market benchmarks from comparable market transactions on that company or on a sample of comparable companies. In practical terms, most of the Commission’s assessments of guarantee measures focus on a situation where the State acts alone, and where no reliable or consistent market benchmarks exist. In those cases, the Member States may develop their own methodologies to calculate market proxies for the guarantee premium. The Guarantee Notice sets out conditions for ruling out aid. The Guarantee Notice also helps Member States set up measures involving an aid element, by providing conditions on how to accurately calculate the aid amount in the State guarantee. Under the Guarantee Notice, Member States can, subject to the Commission’s approval, set up methodologies that achieve market conformity by taking into account the specific risk and cost elements that are typically considered by market operators. Simplified options, including a safe-harbour option, are also provided to for small and medium-sized enterprises (SMEs).
For More Information
More information on the Guarantee Notice and its evaluation is available on the Commission’s competition website and on the dedicated Guarantee Notice evaluation webpage.
Quote(s)
Our evaluation shows that the Guarantee Notice remains a useful tool to help Member States provide guarantees in line with EU competition rules. At the same time, financial markets have evolved and we identified several areas where it should be updated to reflect market developments and simplified to reduce complexity. We will now work to address these issues to ensure the rules remain clear, consistent, and fit for today’s economy.
Teresa Ribera, Executive Vice-President for Clean, Just and Competitive Transition
Joint press release: 23rd EU Week of Regions and Cities showcases cohesion policy’s impact
Today, the Executive Vice-President for Cohesion and Reforms, Raffaele Fitto, and the President of the Committee of the Regions, Kata Ttto, launched the 23rd European Week of Regions and Cities.
Under the motto ‘Shaping tomorrow, together,’ this three-day event brings together 6,500 participants from all over the EU, including policymakers, practitioners, project promoters, civil society, and researchers. ‘Cohesion and Growth for the Future,’ ‘Right to Stay: Unlocking the Potential of Every Territory,’ and ‘Cities Building Tomorrow’ are the three focal topics of the week’s over 200 sessions.
Executive Vice-President for Cohesion and Reform Raffaele Fitto said: ‘The European Week of Regions and Cities offers a great opportunity for dialogue on the most important issues for our citizens. Representatives from all over the European Union give us the possibility to work on tailor-made solutions and ensure a place-based approach. Cooperation and partnership are key for the success of cohesion policy. We are committed to improve the lives of our citizens, reducing disparities and promoting territorial development in all regions.’
President of the Committee of the Regions, Kata Ttto said: ‘The European Week of Regions and Cities provides a unique platform for all those who work every day to make Europe stronger on the inside, thanks to EU’s cohesion policy. Facing multiple crises, regions and cities invest cohesion funds to stabilise and innovate regional economies, counter industrial decline, fight poverty and increase our communities’ preparedness and resilience. The European Commission is our crucial partner in this endeavor and we must preserve this strategic, daily cooperation in the future, as regional and local leadership can make a difference for the EU to achieve its objectives, including on new priorities as internal safety and international competitiveness.’
Cohesion policy: A proven catalyst for progress
Discussions will be framed by three evaluation reports published today by the Commission on the 2014-2020 cohesion programming, the 2021-2027 mid-term review and the Covid crisis repair and recovery fund REACT-EU. These evaluations offer concrete evidence of the policy’s achievements and impacts despite the numerous challenges of the past years:
In 2014-2020, cohesion policy supported over 2.5 million SMEs, the creation of 370,000 jobs and childcare facilities for 24 million children.
Over pound 66 billion were invested in climate-related projects, while the EU’s capacity for renewable energy production increased by more than 6,000 Megawatts, and 8 million households got access to broadband.
Cohesion policy contributed to boosting the EUs GDP by 0.6%, as well as job growth and mitigation of regional disparities.
The evaluations show that to maximize effectiveness, the policy must be supported by robust governance, strong administrative capability, and a conducive economic and business environment.
Advancing towards a modern and adaptive cohesion policy
Cohesion policy’s recently approved mid-term review increased flexibility and simplicity by allowing Member States and regions to reallocate funds towards strategic priorities such as competitiveness, defence, affordable housing, water resilience, and energy transition. It also aligned with the objectives of the ‘Strategic Technologies for Europe Platform’, which has already supported investments over pound 12.2 billion in critical technologies, including clean tech, deep tech, and biotech.
Unlocking every territory’s unique potential
Addressing regional and social disparities remains central to the EU’s agenda to ensure that, irrespective of location, citizens have the right to remain and grow within their communities. Through 2021-2027, cohesion policy has and will continue to provide substantial support to that end, including pound 7.2 billion for healthcare and long-term care, pound 5.6 billion for education and training, pound 7.5 billion for housing, and pound 40.5 billion for enhanced connectivity and access to efficient transport systems.
A new EU Agenda for Cities
The Commission has also released the ‘EU Social Progress in Cities and Urban Areas’ study, highlighting both opportunities and challenges in areas such as affordable housing and sustainable mobility. To address these challenges, a new EU Agenda for Cities is set for adoption later this year.
Background
The European Week of Regions and Cities, co-organised by the European Commission and the European Committee of the Regions, is the biggest Brussels-based event dedicated to cohesion Policy.
The programme highlights include the REGIOSTARS Awards celebrating the excellence in EU-funded projects in EU regions and the Megalizzi-Niedzelski prize for aspiring journalists showing a strong attachment to EU values.
More information
European Week of Regions and Cities website
Quote(s)
The European Week of Regions and Cities offers a great opportunity for dialogue on the most important issues for our citizens. Representatives from all over the European Union give us the possibility to work on tailor-made solutions and ensure a place-based approach. Cooperation and partnership are key for the success of Cohesion policy. We are committed to improve the lives of our citizens, reducing disparities and promoting territorial development in all regions.
Raffaele Fitto, Executive Vice-President for Cohesion and Reforms
The European Week of Regions and Cities provides a unique platform for all those who work every day to make Europe stronger on the inside, thanks to EU’s cohesion policy. Facing multiple crises, regions and cities invest cohesion funds to stabilise and innovate regional economies, counter industrial decline, fight poverty and increase our communities’ preparedness and resilience. The European Commission is our crucial partner in this endeavor and we must preserve this strategic, daily cooperation in the future, as regional and local leadership can make a difference for the EU to achieve its objectives, including on new priorities as internal safety and international competitiveness.
Kata Ttto, President of the Committee of the Regions
Statement by President von der Leyen on the release of hostages and on the agreement ending the war in Gaza
The return of the Israeli hostages is a moment of pure joy for those families.
And a moment of relief for the entire world.
It means that a page can be turned. A new chapter can begin.
Europe fully supports the peace plan brokered by the United States, Qatar, Egypt, and Trkiye.
The finalisation of the agreement ending the war today in Sharm el-Sheikh will be a historical milestone.
We stand ready to contribute to its success with all tools at our disposal.
In particular, by providing support on governance and for the reform of the Palestinian Authority.
We will be an active force within the Palestinian Donors Group. And we will provide EU funding for the reconstruction of Gaza.
Statement by President von der Leyen at the joint press conference with Albanian Prime Minister Rama
Dear Edi,
What a pleasure to be back in Albania and begin my traditional annual tour of the Western Balkans in Tirana.
My first message is very clear: Albania is on the right track towards the European Union. You have come a long way, you have made progress. And I want to emphasise that there has been a stunning and outstanding record speed acceleration in the last three to four years. Five of six negotiating clusters are already open. We plan to open the last one this autumn. I know the personal effort you, Prime Minister, and your team, have invested in this journey. Your goal is to close negotiations by 2027. This is ambitious but we like ambition. And let me assure you: we will be with you every step of the way.
Because the geopolitical momentum is now. Russia’s aggression against Ukraine has reshaped our continent. Every European nation must choose its place. Albania has made its choice, very clearly. You are fully aligned with the European Union’s foreign and security policy. Together we are acting as one.
My third message is that getting closer is not only about geopolitics. It is also smart business. We will discuss this at the investment conference later today. Two years ago, we launched the Growth Plan for the Western Balkans. The principle is very straightforward. Your economy gains access to our Single Market and new EU investments. In exchange, you deliver on key reforms. This is how you get a level playing field with the EU. The door of areas of our Single Market is open to your companies and our companies gain a bigger common market. Everybody wins.
The Growth Plan has the potential to double the economy of the Western Balkans in this decade. And it is already delivering. Let me give you three precise examples. First, you have made strong progress in key reforms. Thanks to this, I am glad to announce the disbursement of nearly EUR 100 million. Now it is about implementation and you I know you are well on track. This is how you can get all the money from your Growth Plan. We are talking about almost one billion. Second, the Single Euro Payments Area, SEPA. Two years ago, we first spoke about Albania joining the SEPA. At that time, this looked as an extremely ambitious and challenging project. But you have made it happen in record time. Since last week, transfers of money between Albania and the EU are safer and especially much, much cheaper. A big advantage for the citizens and the companies. My third example is roaming. In 2023 here in Tirana, we achieved a landmark agreement with operators. You remember that. Next year, we will abolish roaming charges between Albania and the EU. This is good for business, good for tourism, and especially good for bringing our people together.
Dear Edi,
My final message is this. Perhaps the strongest case for enlargement is not economic or geopolitical. It is the will of the people. Albanians want Europe. A recent poll shows that if a referendum were held today, 92% of Albanians would vote for EU membership. And across our continent, young Europeans are with us and with you. Two-thirds of those aged 15 to 40 support enlargement. This is the clearest signal of all. Our young generations want to live in a stronger, safer, united European Union.
So dear Edi, I wish you every success as you continue on your EU path. You can count on me to support you every step of the way.