Question

Using BE-COMP diagrams, demonstrate and discuss the effect of state aid as a response to European economic integration. [50 marks]

Answer 1

Economic and monetary union represent a major step in the integration of EU economies.launched in 1992 the union involves the coordinator of economic and fiscal policy and a common currency the European integration is the process of industrial political.State aid in the European Union is the name given to a subsidy or any other aid provided by a govt. That distorts competition under European Union competition law the term has a legal meaning being any measure that demonstrates any of the characteristics in Article 107 of treaty on the functioning of the European Union.The EU jurisdiction is a rare case where specific binding legal provisions were introduced for controlling state aid.these provisions in principle require the commission to authorize all grants of aid. In order to satisfy the requirements of the above-mentioned article five criteria shall be met:1 the use of state resources 2the measure must confer an advantage to certain undertaking 3 the the advantage must be selective 4 the measure must distort competition 5 affect trade between member states. State aid was formally introduced into European Union statute law by the treaty of Rome where it classified state aid as being any state intervention that distorts Comipition law. Treaty on the functioning of the European Union in 2007.it stated that any aid given to a company by a state within EU would generally be incompatible with EU common market. There are specific exemption to the treaty provisions with regard to state aid. Example in 2008 the British govt. Was granted permission from the EU to provide state aid to nationalise lyods TSB during the financial crisis of 2007-08.The EU has adopted a temporary framework to enable member states to use the full flexibly foreseen under state aid rules the support the economy in the context of covid 19 outbreak.To remedy that temporary framework provides for five types of aid 1 direct grants, selective tax advantage and advance payment 2 state guarantees for loan taken by companies from banks.3 subsidised public loans to companies 4 safeguards from banks that channel aid the real company. Among all the areas of competition policy state aid control is the branch that witness most changes in the past decade in 2012 the European commission aknowledment the need for reform by publishing a communication on EU state aid modernisation treaty on the functioning of the European Union the main provision in the treaty dealing with state aid and providing the legal framework to the EU commission to exercise it's control in this area. Any aid granted by a member state or through state resources in any from whatsoever which distorts or theaters to distort competition by favouring certain undertaking or the product of certain foods shall insofar as it affects trade between member states be incompatible with the common market. State resources economics advantage and selective and effect on Comipition and trade.state resources although it may seem uncontroversial the public origin of a measure is not always straightforward to determine.state aid must have incentive effect the EC treaty substantially reduces the freedom of eu member states to provide direct effect economic assistance to enterprise the main rationale for controlling the use of national state aid at the European level