Economics Contribution to State Aid

Does economics contribute anything to state aid cases beyond the analysis of the market economy operator principle (MEOP)? – Economics Contribution to State Aid. 

Does economics contribute anything to state aid cases beyond the analysis of the market economy operator principle (MEOP)?


Economics Contribution to State AidArticle 107 of the Treaty on the Functioning of the European Union (TFEU) contain provisions of the European Union (EU) relating to state aid (European Commission, 2018). According to the article, state aid is generally incompatible with the common market except for a few exclusions and some exceptions (European Commission, 2018). Considering the provisions of the article, EU member countries generally avoid engaging in activities that are considered to be state aid and that are not compatible with the EU. Companies within the EU and EU member states always need to evaluate the cases they face and the potential risks of engaging in actions that trigger state aid as they attempt to deal with these cases. To perform such evaluations, member states apply tools such Market Economy Operator Principle (MEOP), which are based on economic principles (Nicolaides, 2015; Koenig, and Wendland, 2017). The European Commission (EC) and EU courts also rely on such tools when adjudicating cases revolving around state aid. Beyond the market economy operator principle, economics finds a lot of application in evaluating and adjudicating state aid cases. This paper discusses the contribution of economics in state aid cases beyond MEOP.

State Aid in the European Union

State aid is any form of selective advantage conferred by national public authorities to undertakings (Werner and Verouden, 2016). For such an advantage to amount to state aid, some features must be proved. One of the features that must be proved in this regard is that there has been an intervention by the state or through state-owned resources (Department for Business Innovation and Skills, 2015). Interventions in this regard may take the form of grants, interest reliefs, tax reliefs, guarantees, preferential provision of services/goods and the holding of part or whole of a company by government. It must also be proved that the intervention selectively gives a recipient an advantage (Department for Business Innovation and Skills, 2015). In other words, the intervention must not be equally targeted at all industrial sectors or companies equally but the selection must be such that it targets only specific companies, industries or corporations within specific jurisdictions. Thirdly, the intervention must actually distort or have the capacity to distort competition (Department for Business Innovation and Skills, 2015). Read more … 

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