State aid: Commission opens formal investigation into aeronautical R&D aid granted by Belgium

June 23, 2006

Brussels, 22nd June 2006

The European Commission has opened a formal investigation under Article 88(2) of the EC Treaty into a State aid scheme introduced by Belgium to provide research and development aid to companies in the aeronautical sector. In addition, the Commission has opened a similar investigation into individual aid granted under this scheme to the company Techspace Aero. The Commission has doubts as to the terms upon which loans provided by the state under the scheme would be repaid. Both investigations will be published in the EU’s Official Journal and interested third parties will have the opportunity to comment on the measures. The opening of a formal investigation procedure does not prejudge its outcome in any way.

Commissioner Kroes said “. I have to ensure that companies in Belgium do not get a more favourable treatment on R&D aid than is allowed by EU rules because the Commission has a duty to ensure that state aid does not distort competition between Member States

Under the scheme under investigation, Belgium grants loans to companies in the aeronautical sector for their participation in civilian aircraft programmes. For instance, Techspace Aero, a subsidiary of the French group SAFRAN, received a loan for its participation in the GP7000 engine programme. The total budget at stake for the scheme is about €200 million, €41 million of which is dedicated to the Techspace Aero project.

The beneficiary companies would have to reimburse the loans to the Belgian state only if the R&D programmes were successful.

This type of aid is not intrinsically unlawful under EC Treaty state aid rules. However, the Commission has to ensure that variations in the terms for repayment of the loans across Member States do not lead to certain companies being favoured. The Commission practice in this respect, in particular in the aeronautical sector, is to require that the loans be repaid in full where the R&D programmes are clearly successful. Such repayment has to comprise the payment of interest computed with the Commission’s reference and discount rate. This rate is updated and published periodically by the Commission for all Member States.

The Belgian aid system does not foresee the payment of any interest. The investigation procedure opened by the Commission aims at verifying in particular whether such a deviation from the practice in other Member States is compatible with the Single Market, or if the Belgian system will need to be changed.

Item source: IP/06/819 Date: 22/06/2006

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