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Chapter 3.5 The Credit Lyonnais Application To limit the economic damage of State aid the Commission stated that the “aid should be proportional to the objectives in question and the amount of aid should be limited to the strict minimum needed for restructuring so that the recipient company itself makes a maximum contribution to the recovery plan” This complies with the 1994 R&R Report. The Commission decided in “examining a measure to assist the restructuring of a firm in difficulty, its overall assessment (was) to consider whether the common interest is served by the maintenance of the firm in business, given the competition that exists in the industry and the way competition will be affected by the aid.” This “common interest” is the social objective by which the Commission currently justifies the use of State aid under Article 107 (3)(b). The Commission concluded “CL has received State aid equal to at least twice and possibly even three times its current own funds, which amounted to FRF 44 billion in 1997.” This had the result of enabling CL to not only avoid liquidation but to maintain a strong presence in the market. The Commission ensured proportionality via a “quid pro quo” approach. This reduced the State aid’s competitive effects. CL would be eligible for the aid however the firm must give something in return. The Commission minimised distortions to the Common Market by reducing the market share of CL by selling off assets and therefore “serving to offset as far as possible the distortion of competition caused by the aid.” The “quid pro quo” has the dual effect of raising funds for the beneficiary, through the selling of assets which were then used to finance the restructuring effort. The use of quid pro quo is significant. The Commission in this decision appears to have confused proportionality with quid pro quo. The proportionality test ensures aid is minimal, proportional and necessary. Quid pro quo is a concept outside the test of proportionality. It perpetuates a sense of equivalency, where proportionality imbues a sense of equilibrium.
Pentony, Eoin: Is the European Commission’s recent interpretation of Article 107 (3)(b) a departure from established State aid policy on the financial sector? Dublin, DIT, May 2010.