Coppi, Lorenzo --- "The Role of Economics in State Aid Analysis and the Balancing Test" [2011] ELECD 700; in Szyszczak, Erika (ed), "Research Handbook on European State Aid Law" (Edward Elgar Publishing, 2011)

Book Title: Research Handbook on European State Aid Law

Editor(s): Szyszczak, Erika

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781849802741

Section: Chapter 4

Section Title: The Role of Economics in State Aid Analysis and the Balancing Test

Author(s): Coppi, Lorenzo

Number of pages: 26

Extract:

4 The role of economics in State aid analysis
and the balancing test
Lorenzo Coppi


Economics did not suddenly drop out of the sky in 2005 like the famous apple
which hit Isaac Newton on the head. Like gravity, economics have always been
there, playing a part in determining whether a measure constitutes state aid or
not, and whether or not it should be allowed. But if truth be told, even if we
knew economic analysis was useful, we did not always make systematic use of
it. With the State Aid Action Plan, we therefore set out to refine our thinking,
and to develop a single methodology to assess the effects of aid ­ the so-called
`balancing test'. Neelie Kroes 2007.

Article 107(1) TFEU states: `Save as otherwise provided in the Treaties,
any aid granted by a Member state or through state resources in any form
whatsoever which distorts or threatens to distort competition by favouring
certain undertakings or the production of certain goods shall, in so far as
it affects trade between Member States, be incompatible with the inter-
nal market' (emphasis added). Articles 107(2) and 107(3) lay out several
exceptions, that is, circumstances in which the aid may be considered com-
patible with the Treaty.
The concepts of distortion of competition and effects on trade in the
general prohibition of State aid are eminently economic concepts, suggest-
ing that an economic analysis should be required in order to determine
whether aid would be in violation ...