State Aid Controlled by European Commission

After Croatia becomes an EU member, state aid will completely fall under the purview of the European Commission.  This will significantly change the authority of the Competition Protection Agency (AZTN), which will become a participating regulatory agency within the EC for the identification and reporting of state aid at the national level, without decision-making authority. The other significant change will be regarding the structure of acceptable state aid.  While state aid to business sectors within the EU27 makes up 15%, in Croatia, this figure is 68% of total state subsidies.  When Croatia becomes an EU member, state aid towards business sectors (e.g. shipbuilding, transportation, radio and television, etc.) will significantly decrease and will need to refocus towards “horizontal” support (e.g. employment programs, R&D, SME development, environmental protection initiatives, regional development, energy efficiency, etc.)  This means that state aid for sectors such as shipbuilding will continue to be allowed, but not directly towards the business management of particular companies or clusters, which then use the subsidies for the payment of corporate debt.  The aid will need to be specifically allocated for innovation and financing of exports, while having to directly compete on the open market.

The third area of state aid is the transition period from the old state aid model to the EC model.  This transition period will include state aid that is approved by the AZTN, which determines that the aid is compatible with the legal framework and is not opposed by the EC.  Also, in Annex IV of the EU Accession Treaty, seven state subsidies are listed that will continue after EU membership: Business zones, public Croatian Radio & Television, science & education, the Osijek and Rijeka airports, Rockwool, and publishing.

It is in the interest of state subsidies recipients that their subsidies are approved by 1 July 2013, projected date for EU membership.  Otherwise, their applications will fall under the review of the EC, who may decide against the subsidies.  Therefore, an increase of state subsidy applications towards the AZTN can be expected in the next 7 months.  The biggest “losers” of state aid in the future will be the shipbuilding, agricultural, fishing, and transportation sectors, while the biggest “winners” will be the SMEs and high tech and innovative companies.