Global Trade Alert

On 27 February 2009, Malta notified a temporary aid scheme for granting limited amounts of compatible aid.
 
The Maltese authorities consider that the financial crisis is affecting the whole economy. They indicate that recent developments in the Maltese economy point to an overall economic slowdown when compared to previous periods, largely reflecting developments in the manufacturing and tourism sectors.
 
The Maltese authorities emphasized that the country's small size and openness make the Maltese economy relatively more susceptible to external shocks than larger and less open economies. The substantial number of Maltese companies working on reduced labor hours provides early signals of a worsening labor market performance. The manufacturing and hotels and restaurants sectors (which together contribute to almost one-fourth of Malta's gross value added) were the worst hit sectors by the global economic slowdown.
 
"The aim of the notified scheme is to grant temporary aid to undertakings that have been affected by a sudden shortage or unavailability of credit as a result of the global financial and economic crisis. It will help to maintain current employment and possibly will help to stimulate the creation of new jobs. The scheme provides for the provision of limited amounts of compatible aid to undertakings until the end of 2010." (par. 4 of the letter from the EC to Malta - Brussels, C(2009) - State aid No. N 118/2009).
 
The aid will be provided in the form of a direct grant. The aid volume available under this scheme is estimated by the Maltese authorities to be EUR 40 million. The aid scheme will be financed through the national budget. The scheme applies to small and medium-sized enterprises ("SMEs") and large firms. The aid shall not exceed EUR 500 000 per undertaking
 
The scheme is explicitly based on Article 87(3)(b) EC Treaty, and relies on section 4.2.2 of the Commission communication "Temporary Community framework for State aid measures to support access to finance in the current financial and economic crisis" ('Temporary Framework').
 
The Commission considers 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 the aid is granted from national state resources, via the respective aid granting authority Malta Enterprise Corporation. The measure is selective since it will be granted only to certain firms. The measure conveys an advantage by making available limited amounts of aid which would not be available to the beneficiaries without the measure. The measure affects trade between Member States since the scheme is not limited to beneficiaries which are active in sectors where no intra-community trade exists. The measure distorts or threatens to distort competition." (par. 22-26 of the letter).
 
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 (the Temporary Framework) and concludes 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. 28 - 34 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.