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[November 2002]
European Commission Orders Recovery of Illegal Aid to Porcelain Companies
The European Commission said recently it had examined a number of support measures in favour of German porcelain maker Kahla Porzellan GmbH (Kahla I)and its legal successor Kahla/Thüringen Porzellan GmbH (Kahla II) during the last decade. It concluded that while an amount of 63.3 million euro either did not contain subsidies or they were legal, a further amount of 15.7 million euro presented no valid justification under the European Union state aid rules and must be recovered.Following complaints, the EC examined 10 measures in favour of Kahla I and concluded that some 37 million euro were not state aid and that a further 19 million euro were covered by approved aid schemes. It found no legal basis, however, for the remainder of 3 million euro.
Regarding Kahla II, the EC examined 23 measures and concluded that all of them constituted aid. Of the total amount, some 7.3 million euro is covered by approved aid schemes. However, aid of some 12.7 million euro the EC assessed compatibility with all state aid rules and guidelines and concluded that it was illegal.
Kahla II was also in difficulties in 1996, Therefore, the EC assessed the aid awarded during that period under the rescue and restructuring guidelines. However, it found that the aid had not been granted on the basis of any sound restructuring plan foreseeing measures to offset the negative effects of the aid for competitors. Moreover, the private financing brought in by the investor was not a substantial contribution to the restructuring.
The EC has ordered recovery of the incompatible aid. It said in a statement that it should be noted that roughly half of the 15.7 million euro consisting of loans from public sources and the participation of a public financing institution had already been repaid.
ENDS