The Correlation between State Aids and Competitiveness

• Author: Rodica Pripoaie
• Pages: 161-169

ISSN: 2067 – 9211 Performance and Risks in the European Economy

161

The Correlation between State Aids and Competitiveness

Rodica Pripoaie1

Abstract: This paper aims to establish the correlation between state aids received by companies and

competitiveness, because an enterprise which receives a subsidy provided by a government has an advantage

over other firms and competition may be distorted. State aid isan advantage conferred by national public

authorities under certain conditions and for certain areas of activity. The E.U. rules for state aids are ensuring

applied equally by European Commission, so state aids can be applied after approval by the Commission. But

in some circumstances government interventions are necessary f or an equitable economy. Measures of state

aids can be implemented onlyif were approved by the European Commission.

Keywords: state aid; correlation; competitors; European Commission

JEL Classification: D29; E22; E29; F23; F35

1. Introduction

State aids in the European Union represent asubsidy provided by a government, as Article 107 of

Treaty on the Functioning of the E.U. These state aids distort competition and they are classed by the

E.U. as illegal state aids. State aids in the E.U. were taken from Article 87(2) of the G.A.T.T. (General

Agreement on Tariffs and Trade) where they were defined as aid “grantedby a Member State or

through state resources in any form аСatsoever”.The European Court of Justice consider these state

aids give an advantage over its competitors and competition has been or may be distorted.

State aid was defined into E.U. law by the Treaty of Rome asbeing any state intervention that distorts

competition law and after many years, in 2007 was improved in Treaty on the Functioning of the E.U.

But insome circumstances government interventions are necessary for anequitable economy.

Measures of state aids can be implemented only if approved by the European Commission.

2.1. The Control State Aids

The control state aids are necessary because the companies which receive a subsidy government have

an advantage over other companies. The Treaty of E.U. accepts state aids аСo’s justified by reasons of

economic development, so these state aids can be considered compatible. The E.U. rules for state aids

are ensuring applied equally by European Commission, so state aids can be applied after approval by

the Commission.

Also, the firms and persons may notify the Commission ormay submit notifications tothe Official

Journal of the European Union for open a formal investigation procedure.

1AssocТate Professor, PСD, Dunărea de JosUnТversТtв of GalatТ, RomanТa, Address: 47 Domnească Strada, 800008, Galati,

Romania, E-mail: rodica.pripoaie@ugal.ro.