Hungary: Guarantee scheme applied by Rural Credit Guarantee Foundation.

Measure #0783 | Published 8 Oct 2009 ▲

Description

On 9 June 2009, Hungary notified a guarantee scheme ("Application of rules relating to aid in form of guarantees under the Temporary Framework for an existing method applied by Rural Credit Guarantee Foundation to calculate the aid element in guarantees") under the Temporary Framework for State aid measures to support access to finance in the current financial and economic crisis.
 
The crisis has affected the daily operation of the Hungarian business sector whose development perspectives have become much more uncertain. The access to credit is said to have become very difficult.
 
The Commission has already approved two other Hungarian guarantee schemes under the Temporary Framework, i.e. N 114/2009  and N 203/2009.
 
The aid under the above mentioned scheme will be provided in the form of subsidized guarantees for investment and working capital loans (including financial leasing for the procurement of production assets).
 
The scheme is to be run by Agrár-Vállalkozási Hitelgarancia Alapítvány (Rural Credit Guarantee Foundation, "AVGHA") on behalf of the Hungarian state.
 
The Hungarian authorities estimate that under the scheme a guarantee volume of HUF 15 billion (EUR 54 million) will be authorised amounting to HUF 0.8 billion (EUR 2.9 million) in aid.
 
The scheme is open to all sectors. It applies to the whole territory of Hungary.
 
 
The Commission stated that the notified measure constitutes state aid within the meaning of Article 87 (1) of the EC Treaty and gave the following assessment:
 
 

"State resources are involved in the notified scheme since financial obligations resulting from the guarantees given by AVHGA are counter-guaranteed by the state. Moreover, a regulation sets out for AVHGA the activities to be carried out in order to benefit from this counter-guarantee. The measure is thus imputable to the state. The measure is selective since guarantees are awarded only to certain undertakings. The measure confers an advantage by relieving the beneficiaries of costs which they would have to bear under normal market conditions since, without the intervention by the State, the beneficiaries would obtain loans only at higher costs, if at all. The measure affects trade between Member States since the scheme is not limited." (par. 33-36 of the official letter from the EC to Hungary - Brussels, 01.07.2009 C(2009)5396)
 
Article 87(3)(b) of the EC Treaty enables the Commission to declare aid compatible with the Common Market if it is "to remedy a serious disturbance in the economy of a Member State." This aid has to be applied restrictively and must tackle a disturbance in the entire economy of the Member State according to the interpretation of the Article 87(3)(b) by the Court of First Instance.
 
The Commission referred to its Communication on the financial crisis (Temporary Framework) and concluded that the Measure complies with the conditions laid therein. Therefore, despite the measure constituting State aid pursuant to the Article 87(1) EC, it is compatible with the Common Market according to the Article 87(3)(b) EC Treaty. The Commission raises no objections against the measure at issue and authorizes it as emergency intervention in the face of the current financial crisis. (par. 38-44 of the letter).
 
 

 
A state measure in the GTA database is assessed solely in terms of the extent to which its implementation affects the extent of discrimination against foreign commercial interests. On this metric, the state aid proposed here is discriminatory.
 

 
 

Any Evidence-Based Deliberation:

Question Result
Is there anything in the public record to suggest that evidence of the effectiveness of the proposed measure was considered during official deliberations? Yes
Is there any evidence that alternatives to the proposed measure were considered?
Is there anything in the public record that suggests that empirical evidence informed the comparison across the alternatives available to government?
Was such evidence identified?
Is such evidence publicly available?
Did the official decision-maker in question provide an explanation as to why a chosen measure was favoured over alternatives?
Is there any evidence to suggest that potentially affected trading partners were consulted before the measures were taken?
Is there any evidence that safeguards have been put in place to ensure that implementation of the initiative is transparent and non-discriminatory?
Did the government state its intention to review the measure within one year of implementation?

Implementing Jurisdiction:

Affected Trading Partners:

Measure type:

Affected Sectors:

Affected Tariff Lines:

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Date Discovered:

Implemented: No

Date of inception: 20 Jun 2009

Duration: 18 months

GTA Evaluation: Red

Source:

Official letter from the EC to Hungary - Brussels, 01.07.2009 C(2009)5396. Available from < http://ec.europa.eu/competition/elojade/isef/case_details.cfm?id=3_231654 >

Government Response:

Glossary of trade terms