Council of European Municipalities and Regions (CEMR)
European section of United Cities and Local Governments


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Local and regional governments as employers

Public services - 15.07.2005

A victory for common sense - Europe's local and regional government welcomes Commission package on compensation for public service obligation
The Council of European Municipalities and Regions (CEMR) expresses its strong support for the package of measures adopted on 13 July by the European Commission.
 
This package represents a victory for common sense and pragmatism, says CEMR secretary general Jeremy Smith. Pure compensation to undertakings to meet the cost of carrying out public service obligations should not be seen as state aid. But something urgently needs to be done to protect local governments who have been left in an untenable legal position.
The Commission has acted in order to resolve the legal and practical confusion caused by the European Court of Justice in the Altmark case (which says that even pure compensation is state aid unless the recipient can prove that its costs did not exceed those of a 'well run" company in its field of activity).
 
Under this new Decision, the Commission has now decided to exclude all small scale pure compensations from the duty to notify the 'aid".
 
The thresholds for such exclusions are:
  • Compensations granted to undertakings with an annual turnover of less than €100 million and
  • Annual compensation for the service not to exceed €30 million.
Jeremy Smith adds: We are delighted that the Commission has accepted the threshold levels that CEMR has advocated, and which are double the level which the European Parliament supported. In this way, most local public services can get on with their daily business without fear of red tape and unnecessary bureaucracy.
Hospitals and social housing bodies, carrying out general interest tasks, are also excluded from the duty to notify the Commission of any compensation paid.
 
Where the genuine public service compensation exceeds the thresholds, the duty to notify remains, but the 'aid" will now be deemed to be compatible with the internal market regulations.
We had hoped that other local and regional public services of general interest could be excluded from the duty to notify, says Jeremy Smith. Hospitals and social housing are vital services that need protecting from bad rules, but they are not the only ones.
CEMR continues to believe that the current legal test, laid down in the Altmark case, is wrong in principle, confusing in its application, and needs to be changed. We now have the chance, thanks to this new Commission package, to look again calmly at necessary changes to the whole legal position on local and regional Services of General Interest, in order to make the rules sensible, intelligible and practical. We need a better understanding of, and balance between, the respective roles of public services and of the market.
 
 
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