(1)

Following press reports which came to the Commission’s attention that the Greek Agricultural Insurance Organisation (‘ELGA’) intended to make compensation payments of EUR 425 million after protests by a large number of Greek farmers in January 2009 about their revenue losses in 2008 due to damage caused by adverse weather conditions, a bilateral meeting with the Greek authorities was held on 4 February 2009. Subsequently, the Permanent Representation of Greece to the European Union, by letter of 9 February 2009, supplied information regarding this measure.

(2)

The Commission asked for additional information by letter of 23 February 2009. By letter of 20 March 2009, the Greek authorities replied to the Commission that ELGA had taken out a loan for the compensation payments of EUR 425 million in question, as well as another loan of EUR 444 million, mainly to make payments to compensate producers for damage, in 2008, to crop and animal production due to causes covered by ELGA.

(3)

The Commission asked for additional information by letter of 4 May 2009. The Greek authorities replied by letter of 16 June 2009. By letter of 13 July 2009, the Commission informed the Greek authorities that the compensation of EUR 425 million for 2009 had been registered as an alleged case under CP 196/2009 and that the compensation of EUR 444 million paid in 2008 had, for the part concerning compensation for damage due to causes covered by ELGA, been considered to be unlawful aid within the meaning of Article 1(f) of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article 93 (*1) of the EC Treaty (2) and had been registered under NN 39/09.

(4)

Following the reply by the Greek authorities, dated 18 August 2009, the Commission asked for further information by letter of 14 September 2009. In that letter the Commission also informed the Greek authorities that as a result of the information they had supplied, i.e. that the compensation of EUR 425 million for 2009 had been paid to the farmers concerned, those payments had also been registered as unlawful aid within the meaning of Article 1(f) of Regulation (EC) No 659/1999, also under NN 39/09.

(5)

The Commission decision to initiate the procedure was published in the Official Journal of the European Union on 20 March 2010 (3). The Commission invited interested parties to submit their comments on the measures concerned. The Commission received comments from third parties which were forwarded to the Greek authorities on 6 May 2010. The Greek authorities sent their observations on the comments of the interested third parties on 21 July 2010.

(6)

The Greek authorities provided additional information on the aid concerned by letters of 4 June 2010, 10 September 2010 and 14 September 2010. The Commission requested further information in a letter dated 17 November 2010. The Greek authorities replied by letter of 9 March 2011.

(7)

At the request of the Greek authorities, a bilateral meeting with the Commission took place on 31 March 2011. Subsequently, the Greek authorities sent additional information on 11 May 2011 and 12 July 2011. At the request of the Greek authorities, a second bilateral meeting with the Commission took place on 11 November 2011.

(8)

Greek Law No 1790/1988 on the organisation and operation of the Greek Agricultural Insurance Organisation (4) (‘Law No 1790/1988’) created a public service body known as the Greek Agricultural Insurance Organisation (ELGA), a private legal person wholly owned by the State. According to Article 12 of the above Law, ELGA is subject to supervision by the Minister of Agriculture. ELGA administers its budget items in line with the decisions of its Administrative Board, the members of which are appointed by decision of the Minister of Agriculture. ELGA’s main task is that of insuring crop and animal production and assets of agricultural holdings against damage due to natural risks.

(9)

Pursuant to Article 3(a) (5) of Law No 1790/1988, insurance with ELGA is compulsory and covers natural risks, in particular floods, storms, ice and excessive frost, snow, hail, high temperatures and sunlight, excessive or unseasonal rainfall, drought, plant entomological and phytopathological diseases, epizootic diseases, fire caused by lightning, earthquakes, risks caused by the sea, damage to crops by wild animals and a series of cattle, sheep and goat diseases.

(10)

According to Article 5(a) (6) of Law No 1790/1988, farmers who are members of the insurance scheme described in recital 9 must pay a special insurance contribution to ELGA. This contribution is in essence a charge levied by the legislator on the buying and selling of Greek agricultural products, the revenue from which goes to fund ELGA, a body tasked with preventing damage and providing compensation for damage to farms caused by natural risks.

(11)

Under Article 5(a) of Law No 1790/1988, the special insurance contribution is set at 3 % for products of plant origin and at 0.5 % for animal products (7). These contribution rates are set by the competent ministers on the basis of a proposal by ELGA to the Minister of Agriculture. ELGA’s income from the special insurance contribution, collected by the tax authorities, is included in the State budget as State revenue and is entered under a special heading. This revenue is paid to ELGA from the budget of the Ministry of Agriculture, now renamed the Ministry of Rural Development and Food, by a transfer of funds in the same amount each year, following a proposal to that Ministry by ELGA. ELGA has no other influence on the level of either the contribution or the compensation.

(12)

Natural and legal persons who own or operate agricultural, stock-breeding, poultry, fishing, aquaculture or other related undertakings are subject to insurance by ELGA. ELGA’s income mainly comes from the special insurance contribution. In addition, ELGA is, according to Law No 3147/2003, able to make aid payments as part of planning programmes in case of extreme need to compensate for damage to crop and fixed assets due to natural disasters, extraordinary events or adverse climatic conditions. This aid is financed by the State budget or by loans. These programmes concern State aid approved by Commission decisions.

(13)

Decree No 262037 issued by the Minister of Economic Affairs and the Minister of Rural Development on 30 January 2009 (‘Common Ministerial Decision’) envisaged emergency compensation totalling EUR 425 million for damage in 2008. Pursuant to the Common Ministerial Decision, this compensation was to be paid out by ELGA because of the reduction in the production of certain crops during the 2008 growing season due to adverse climatic conditions such as drought, high temperatures and rainfall and to entomological and phytopathological diseases suffered by these crops. This damage concerns almond, cherry, apricot, some peach, plum, pear and apple trees, as well as asparagus, oriental tobacco, potatoes, cotton, olive groves and cereals.

(14)

According to information supplied by the Greek authorities, apart from loss of production, deterioration in the quality of some crops (cereals, cotton) had also been taken into account when determining the level of damage. This loss or deterioration in quality resulted from a combination of meteorological phenomena and crop diseases due to the bad climatic conditions affecting these crops during the year in question.

(15)

To pay the compensation in question, ELGA took out a bank loan of EUR 425 million to be paid back over 10 years (2010-2019). For the first 3 years (2010-2012) this loan is subject to annual interest and a Greek State levy of EUR 28 513 250, and for the following 7 years (2013-2019) the interest, depreciation and levy will amount to EUR 89 227 536 in 2013, EUR 85 087 786 in 2014, EUR 81 025 536 in 2015, EUR 76 963 286 in 2016, EUR 72 901 036 in 2017, EUR 68 838 786 in 2018 and EUR 64 776 536 in 2019. The loan is guaranteed to ELGA by the Greek State.

(16)

According to the information provided by the Greek authorities, the payments made by ELGA in 2008 for damage covered by its insurance amounted to EUR 386 986 648. This amount came partly from insurance contributions of EUR 88 353 000 and partly from revenue obtained on the basis of a loan of EUR 444 million.

(17)

ELGA took out a bank loan of EUR 444 million on the basis of Article 13 of Law No 3074/2002 and Article 28(17) of Law No 3147/2003. The loan is to be paid back over 10 years (2009-2018). For the first 3 years (2009-2011) this loan is subject to annual interest and a Greek State levy of EUR 23 709 600, and for the following 7 years (2012-2018) the interest, depreciation and levy will amount to EUR 87 138 171 in 2012, EUR 83 789 143 in 2013, EUR 80 395 714 in 2014, EUR 77 002 286 in 2015, EUR 73 608 857 in 2016, EUR 70 215 429 in 2017 and EUR 66 822 000 in 2018. The loan is guaranteed to ELGA by the Greek State.

(18)

The other part of the loan, EUR 145 366 352, was for State aid approved by Commission decisions regarding emergency planning programmes for the 2006 and 2007 fires. This part of ELGA’s income is not affected by this Decision.

(19)

Measures granted through State resources: The Commission took the view that this condition was met in this case, given that the relevant national legislation (see recital 11) clearly states that the services provided by ELGA are financed by State resources and that the former are attributable to the State.

(20)

In the information provided prior to the initiation of the procedure the Greek authorities had indicated that they intended to raise the percentage of the special insurance contribution in order to increase ELGA’s income. However, the information provided on the increase in ELGA’s income did not contain precise figures at this stage of the procedure to allow the conclusion that this increase would be sufficient to repay the loans in question and the granting of compensation to producers during the relevant years. Therefore it was not possible to rule out that these measures would also be financed through other State resources available to ELGA.

(21)

Measures which affect trade and distort or threaten to distort competition: The payments made by ELGA in 2008 as part of the compulsory insurance scheme concerned numerous Greek animal products and products of plant origin, while those made in 2009 concerned several crops (see recital 13). At the beginning of the procedure, therefore, the Commission noted that the payments in question gave local farmers an advantage over those elsewhere in the Union who did not receive similar support. The agricultural sector is open to competition at Union level and is consequently sensitive to any measure favouring production in a particular Member State. The payments in question therefore threaten to distort competition in the internal market and to affect trade between Member States.

(22)

Measures which favour certain undertakings or the production of certain goods: Regarding the issue of whether the payments made by ELGA in the context of the compulsory insurance scheme against natural risks provided selective advantage, the Commission considered that, a priori, the selective nature of the measure results from the fact that the payments by ELGA were limited to certain agricultural production.

The Commission took the view that it was arguable that the special characteristics of the agricultural sector and its particular dependence on certain climatic conditions, as well as its vulnerability to natural risks in Greece, makes it necessary to set up a State scheme which assures a minimum level of compensation based on the principle of solidarity. In so far as the payments by ELGA as part of the compulsory insurance scheme are financed from the income from the special insurance contribution, the Commission took the view that these could be considered as not giving those benefiting from them an undue advantage.

Nonetheless, this justification based on logic and the nature of the scheme could not cover additional financial interventions by the Greek State for the scheme in question (beyond financing through compulsory contributions). However, the Commission did not have sufficient evidence that this was the case when it initiated the investigation procedure. In particular, the Commission doubted whether the measures in question had been financed without additional State intervention.

(23)

For these reasons the Commission concluded, when it opened the procedure, that it could not rule out that the payments by ELGA in 2008 and 2009 as part of the compulsory insurance scheme fall under Article 107(1) of the Treaty and constitute State aid.

(24)

The Commission considered that, since the aid was granted and paid without prior notification to the Commission, it is illegal aid within the meaning of Article 1(f) of Regulation (EC) No 659/1999.

(25)

As the Greek authorities had maintained that the measures in question are not State aid, the Commission did not, at the time the procedure was initiated, have the necessary information to determine whether the aid was compatible with the legal texts applicable when it was granted, i.e. in 2008 and 2009. These are the Community Guidelines for State aid in the agriculture and forestry sector 2007-2013 (8) (‘guidelines’), and in particular Chapter V.B, on aid to compensate for damage to agricultural production or the means of agricultural production.

(26)

On the basis of the information provided, the compensation for most of the crops concerned appeared to involve damage of a minimum threshold of 30 %, taking into consideration loss of production or deterioration in quality for certain products suffered during the year concerned due to a combination of more than one negative meteorological phenomenon and, for some crops, also due to plant diseases. The information transmitted by the Greek authorities did not supply any details about the method used to calculate this compensation.

(27)

Therefore the Commission has doubts whether the aid could be said to be compatible with Chapter V.B of the guidelines.

(28)

The interested parties which made comments are the European Liaison Committee for the Agricultural and Agri-Food Trade (CELCAA), the European Association of Cereals, Rice, Feedstuffs, Oilseeds, Olive Oil, Oils and Fats and Agrosupply Trade (COCERAL), and a third interested party which asked for its identity to be treated confidentially.

(29)

The interested parties, being independent traders (the third interested party) and, in the case of CELCAA and COCERAL, being charged with protecting the interests of independent traders, feel that this aid, while initially granted to farmers, in reality went to agricultural cooperatives and their associations which, because only they handle agricultural products, compete with the independent traders.

(30)

According to the interested parties, Greece failed to provide evidence to show that the payments in question were granted to compensate for losses caused by adverse climatic conditions. The Greek authorities failed to submit an analytic description of the climatic conditions concerned based on appropriate meteorological information, as called for by the guidelines.

(31)

In the opinion of the interested parties the Greek authorities had specified neither the method of calculating the payments in question nor the minimum threshold of losses. In addition, these payments were limited to certain agricultural products, while other producers who were excluded from these payments had also suffered production losses.

(32)

The interested parties also thought that the granting of these payments has had an impact on the price of the final products since the price of the products fell as result of these payments. This aid therefore gave the producers concerned an economic advantage by allowing them to market those products not affected by adverse weather under conditions which distorted competition. Moreover, the private marketers (such as traders, flour and feedstuff millers, poultry and pig farmers) were forced to pursue a price policy imposed by the agricultural cooperatives and their associations, thus putting these cooperatives into a monopoly position.

(33)

Also, the coverage offered by ELGA regarding the risks to which the agricultural sector is exposed had to respect the principles of proportionality and equality. According to the interested parties, it is not acceptable that the payments made by ELGA in 2008 and 2009 were three and four times, respectively, the total insurance contributions for the same years.

(34)

According to the interested parties, by taking out the new loan for 2009 ELGA excessively ‘mortgaged’ its income for the next 10 years, given that it was already obliged to pay back the loan it had taken out for 2008, for which it had ‘mortgaged’ its insurance contributions in advance for the following years. The interested parties also pointed to the two additional loans ELGA took out in 2009, i.e. a loan of EUR 350 million with the Bank of Piraeus and a loan of EUR 112 million with the Agricultural Bank of Greece and the National Bank of Greece.

(35)

The interested parties also thought that the loans of EUR 444 million and EUR 415 million represent income additional to that from the insurance contributions and paid under Greek law in the form of loans guaranteed by the Greek State. Those loans should therefore be considered as State resources.

(36)

According to the Greek authorities the compensation aid paid out by ELGA in 2008 and 2009 does not constitute State aid.

The insurance scheme in question is financed from compulsory special contributions paid by the farmers. Since this insurance scheme is governed by the principle of social solidarity, the compulsory special contributions need not be strictly proportionate to the insured risk and the benefits paid need not necessarily be proportionate to the income of the insured person (9). Therefore, according to the Greek authorities, these payments are genuine compensation given in order to make good damage to agricultural production due to adverse climatic conditions, in line with Greek law regarding agricultural insurance paid by ELGA.

Moreover, according to the Greek authorities, ELGA is capable of paying its financial obligations at maturity using the system of compulsory insurance. This capability is reinforced by the adoption of the new Law No 3877/2010 concerning the protection and insurance system for agricultural activities, which envisages additional sources of finance for ELGA. This Law therefore, in most cases, increases the special insurance contribution (from 3 % to 4 % for damage to crops and from 0,5 % to 0,75 % for damage to animal production). In addition, it establishes a voluntary insurance for losses not covered by the compulsory insurance, as well as a general insurance to be paid to ELGA by natural persons not practising farming as their main occupation and by legal persons the majority of whose shares do not belong to full-time farmers.

(37)

However, even if the compensation aid were to be regarded as State aid, the Greek authorities consider that it is compatible with Article 107(3)(c) of the Treaty and with the guidelines. The Greek authorities have provided the Commission with detailed data concerning all aid granted by ELGA in 2008 and 2009, indicating the name and tax number of each farmer concerned, the department in which the parcel is situated, the type of crop, the unit of measurement of the crop and the number of units used, the amount of aid and the date when it was granted, a description of the damage and its level compared to normal production.

(38)

With regard to the compensation aid in 2008 and 2009 for damage which led to the destruction of more than 30 % of normal crop production, the Greek authorities take the view that all conditions laid down in paragraphs 124 to 130 of the guidelines as well as in Article 11 of Commission Regulation (EC) No 1857/2006 of 15 December 2006 on the application of Articles 87 and 88 of the Treaty to State aid to small and medium-sized enterprises active in the production of agricultural products (10) (‘Exemption Regulation’) are met.

(39)

In the opinion of the Greek authorities the aid in question was paid to the farmers concerned or to the organisations to which they are affiliated, in line with the guidelines and the abovementioned Exemption Regulation. The Greek authorities confirmed in particular that:

(40)

With regard to the method of calculating normal production, the Greek authorities presented information on the method used and confirmed that the conditions laid down in paragraph 128 of the guidelines, which state that in case an alternative method is used, it should be representative and not based on abnormally high yields, have been met. In particular, the losses resulting from adverse climatic conditions have been evaluated at the level of the individual holding by agronomists, based on estimates made on site, as provided for in the ELGA insurance regulation. During the on-site inspection the evaluating agronomist measures the area of the parcel using all appropriate means (tape measure, parcel identification map, GPS) and, in the case of crop sites with trees, counts the number of trees. The agronomist then estimates the expected production of the parcel, taking account of the growing techniques used (in particular the density of planting, the pruning system for tree crops, early crops using plastic sheeting, irrigation system), the varieties of crops grown, the previous crop in the case of annual crops, crop control (particularly fertilisers, pest control), solar productivity and any special features of the production year (such as drought, setting problems). Lastly, the agronomist evaluates the expected damage to production in the parcel. To do this samples are taken from different parts of the parcel, taking into consideration the expected quantitative loss of production, the deterioration of quality due to the damage, crop control following the damage (such as additional crop protection, weeding or removal of damaged fruit).

(41)

Of the aid granted by ELGA in 2008, i.e. EUR 386 986 648, compensation of EUR 373 257 465,71 was paid to producers for loss of crop production due to adverse climatic conditions. Regarding this aid, ELGA applied Article 6 of the Regulation on insurance for crop production concerning compensation to producers of agricultural products for losses due to adverse climatic conditions, as provided for in Greek Law No 1790/1988 establishing the ELGA insurance system.

(42)

For the aid in question, Greece has provided meteorological information about the adverse weather conditions in the 2007/2008 marketing year. These adverse climatic events were formally acknowledged by the public authorities. They include, in particular, the heatwave which affected the entire country in late June and late July 2007, heavy rainfall in several areas of the country in October 2007, hot, dry katabatic winds in Crete in October 2007, storms and hail in a number of prefectures in the north-west and centre of mainland Greece in early August 2008, and storms in late August 2008 in the regions of Magnesia, Viotia, and East Attica, and on the islands of Evia and Crete.

In particular, the compensation in question was granted in respect of damage which exceeded the following percentages of normal production (13):

ELGA also made additional compensation payments totalling EUR 2 472 785,97 to farmers who had suffered further losses of the same crops due to adverse weather conditions. 6,98 % of the total amount of compensation paid was also for damage equivalent to 20-30 % of normal production; 93,02 % of the total amount was for damage which had destroyed more than 30 % of normal production.

(43)

Furthermore, aid granted by ELGA to farmers in 2008 included the following:

(44)

With regard to the compensation paid in 2009 on the basis of the Common Ministerial Decision of 30 January 2009, i.e. EUR 415 019 452, the table below provides details of the products concerned, the weather conditions which caused the damage and a description of the damage caused.

(45)

According to the Greek authorities, out of the compensation of EUR 415 019 452, aid totalling EUR 27 614 905 paid to 871 farmers is considered to be State aid compatible with the internal market within the meaning of Article 107(3)(c) of the Treaty and the guidelines.

(46)

The remaining aid, EUR 387 404 547, was paid to 784 408 farmers. According to the Greek authorities, the aid in question is compatible with the internal market under Article 107(3)(c) of the Treaty and the Exemption Regulation.

The Greek authorities take the view that the aid in question satisfied all the conditions laid down in Article 11 of the Exemption Regulation. In particular:

(47)

Moreover, the Greek authorities consider that, even if the aid in question cannot be considered to be genuine compensation (see recital 36) or deemed compatible with the Exemption Regulation (see recital 46), it should still be deemed compatible with Article 107(3)(b) of the Treaty and the Communication on the Temporary Framework.

The grant of the aid in question improved access to finance for the farmers concerned. Thus, the abovementioned compensation ensured financial liquidity for the primary production sector in Greece, the only sector on which the Greek State was able to depend during the first few months of the economic crisis in order to avert risks to other sectors of the Greek economy. However, the aid in question was granted according to strict criteria. Indeed, it was only granted where there were genuine economic problems linked exclusively to agricultural production and, more specifically, where this was affected by adverse weather conditions (see recital 44). For the majority of this aid, thresholds had not been set for the intensity or the extent of the problems faced by each farmer, as the aim was to support the Greek agricultural sector in general.

(48)

Furthermore, in accordance with point 7(a) of the Communication, in the case of non-notified aid (14) the Commission applies the Communication if the aid was granted after 17 December 2008. The Greek authorities therefore take the view that point 7(a) of the Communication applies in respect of the non-notified aid in question, since it was granted to farmers after 17 December 2008.

(49)

The Greek authorities consider that the aid in question, which is provided for in exceptional cases by the Common Ministerial Decision of 30 January 2009, fulfils all the conditions set out in point 4.2.2 of the Temporary Community Framework. More specifically:

(50)

In accordance with point 4.2.2(g) of the Communication on the Temporary Community Framework, as amended in October 2009, the aid in question received by each farmer concerned should not raise the total amount of aid received by the farmer concerned during the period from 1 January 2008 to 31 December 2010 to above the ceiling of EUR 15 000. The Greek authorities consider that the fact that ELGA did not obtain a declaration from the farmers concerned, in written or electronic form, about any other de minimis aid, or aid received pursuant to the Temporary Community Framework during the current fiscal year, should be regarded as a mere formality. Thus, the failure to observe that formality should not lead to the conclusion that the condition laid down in point 4.2.2(g) of the Communication on the Temporary Community Framework, as amended in 2009, was not satisfied, particularly since, as shown by ELGA’s computer records, Greece did not grant de minimis aid to farmers in the primary agricultural products sector or aid based on the Communication on the Temporary Community Framework during the period from 1 January 2008 to 31 December 2010.

(51)

Nevertheless, in the opinion of the Greek authorities, of the sum of EUR 387 404 547, aid of EUR 75 382 500 falls within the scope of the de minimis Regulation.

(52)

The Greek authorities consider that the abovementioned aid of EUR 75 382 500 meets all the conditions laid down in Regulation (EC) No 1535/2007 on de minimis aid. More specifically:

(53)

Greece argues that the interested parties have not provided any evidence to prove that the compensation in question has affected the position of their members on the internal market.

(54)

With regard to the observation that no description of the adverse weather conditions was provided, the Greek authorities emphasise that, under the Common Ministerial Decision on compensation, no such description is required, but that it was necessary to demonstrate the existence of adverse weather conditions and to prove that the damage caused had reached the minimum threshold of 30 % of normal production. Furthermore, Greece did provide, in the context of the observations it submitted to the Commission, analytical data concerning the weather conditions in question, accompanied by the relevant meteorological information.

(55)

With regard to the observation that Greece did not specify either the method used for calculating the compensation in question or the minimum threshold of the loss suffered, the Greek authorities reiterate that, in the context of the observations submitted to the Commission, it provided detailed information in respect of both factors.

(56)

The Greek authorities claim that the granting of the aid in question did not affect the end-consumer because the fall in the price of the agricultural products concerned did not lead to a fall in retail prices. To support this claim, the Greek authorities submitted articles from the Greek press showing that the retail price of several agricultural products, including those involved in this case, remained high despite the fact that the wholesale price of those agricultural products had fallen.

(57)

Article 107(1) of the Treaty states that any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods is, in so far as it affects trade between Member States, incompatible with the internal market. The Commission considers that, in respect of the measures in question, the abovementioned conditions have been satisfied.

(58)

Measures granted through State resources

In accordance with the Court judgment of 22 March 2003 in Case C-355/00 Freskot AE v Elliniko Dimosio (15) (‘Freskot case’), this condition is satisfied in the present case since the national legislation concerned clearly establishes that the benefits provided by ELGA are granted through State resources and are imputable to the State within the meaning of the Court’s case-law (16).

In the present case, as in the Freskot case, under Article 5(a) of Law No 1790/1988 (see also recital 11) and other provisions of Greek legislation in force, ELGA’s income from the special contribution was collected by the tax authorities, entered in the State budget as State revenue and paid to ELGA from the budget of the Ministry of Agriculture (now the Ministry of Rural Development and Food). Consequently, the fact that the contributions in question are entered into the accounts as State revenue is sufficient to consider that the payments made by ELGA were financed by State resources.

Furthermore, in accordance with Article 2 of Law No 1790/1998 (17), by decision of the Minister for Agriculture ELGA may pay aid or compensation to beneficiaries through a transfer of resources from the State budget or by means of loans taken out by ELGA and guaranteed by the Greek State where the Greek State is obliged to repay the loan.

However, it is clear from the case-law of the Court that benefits granted directly by the State and those granted by a public or private body designated or established by the State constitute State resources within the meaning of Article 107(1) of the Treaty (18). Therefore, in the case in question, the two loans taken out by ELGA for the compensation paid in 2008 and 2009 and guaranteed by the Greek State (see recitals 15 to 17) constitute State resources within the meaning of Article 107(1) of the Treaty since they are part of the resources of ELGA, a private legal person wholly owned by the State and under the supervision of the Minister for Agriculture (see also recital 8).

(59)

Measures which affect trade and distort or threaten to distort competition

The Commission notes that the compensation in question gives national farmers an advantage over those elsewhere in the Union who do not receive the same support. The agricultural sector is open to competition at Union level (19) and is consequently sensitive to any measure favouring production in a particular Member State (20). The compensation in question therefore threatens to distort competition in the internal market and affects trade between Member States.

(60)

Measures which favour certain undertakings or the production of certain goods

Moreover, in accordance with the case-law of the Court (21), measures which, in various forms, mitigate the charges which are normally included in the budget of an undertaking and which, therefore, without being subsidies in the strict sense of the word, are similar in character and have the same effect are also considered to be aid.

In the Freskot judgment, the Court found that the term ‘undertaking’ within the meaning of Article 102 of the Treaty does not cover a body such as ELGA in respect of its activities under the compulsory insurance scheme against natural risks (see paragraphs 79 and 88 of the judgment).

In fact, the compulsory insurance scheme in question essentially pursues a social policy objective with a view to ensuring adequate coverage for all agricultural holdings, including those which are at greater risk of damage caused by natural risks (see paragraphs 66 and 67 of the judgment). The insurance contribution applies to all agricultural products at uniform rates which are not related to the actual risk to which the farmer is exposed (based on the solidarity principle). ELGA is audited by the State since the amount of the contribution, on the revenue side, as well as the compensation rate is established by the relevant ministry.

As the Court noted in its judgment of 22 January 2002 in Case C-218/00, Cisal v INAIL (22), in the present case the two essential aspects of the ELGA insurance scheme, i.e. the amount of compensation and the level of contributions, are controlled by the State, and the compulsory participation characteristic of the scheme is essential in order to ensure its financial viability and to guarantee that solidarity principle is implemented, which indicates that the compensation paid to the insured party is disproportionate to the contributions made by the latter.

Unlike in the Cisal/INAIL case, however, the recipients of compensation from ELGA are undertakings engaged in economic activity. The fact that ELGA itself is not engaged in any economic activity is therefore not sufficient grounds for establishing that the beneficiaries of compensation paid by this body are not undertakings within the meaning of the Treaty and are not potential beneficiaries of State aid (see the Freskot judgment, paragraph 80).

With regard to the issue of economic advantage, the Court simply states in paragraph 84 of the Freskot judgment: ‘Accordingly, it is necessary to answer the question whether, and if so to what extent, in the absence of compulsory cover, Greek agricultural holdings should have and indeed could have obtained insurance cover from private insurers or taken other steps in order adequately to protect themselves against the consequences of natural risks for their farms and, second, to what extent the contribution corresponds to the actual economic cost of the benefits provided by ELGA under the compulsory insurance scheme, if indeed such a cost can be calculated.’ In the next paragraph, however, the Court finds that ‘the Court is not sufficiently apprised of the relevant points of fact and law needed in order to be able to answer the part of the question concerning the potential classification of the benefits granted by ELGA under the compulsory insurance scheme as State aid.’ However, the Court stated in paragraph 87 of the Freskot case that ‘it was not sufficiently apprised of the relevant points of fact and law needed in order to be able to answer the part of the question concerning the potential classification of the benefits granted by ELGA under the compulsory insurance scheme against natural risks as State aid’.

(61)

According to the case-law of the Court, neither the social character of the aid measure (23), nor the fact that it is fully or partially financed by the contributions imposed by the public authority and charged to the companies concerned (24) is sufficient to prevent the measure being defined as aid within the meaning of Article 107(1) of the Treaty, which does not distinguish between types of State aid according to the aims or objectives of the measure but rather defines it in terms of its effects (25).

The payments made by ELGA in 2008 as part of the compulsory insurance scheme concerned certain Greek animal products and products of plant origin, while those made in 2009 concerned certain crops. Accordingly, it follows that the compensation paid by ELGA to local agricultural producers could give a selective financial advantage to those producers as compared with producers elsewhere in the Union not receiving the same aid.

Moreover, where there is a higher risk of damage caused by natural risks, it is unlikely that the agricultural holdings would be able to obtain insurance cover from a private institution under the same terms. The Commission finds, therefore, that in the circumstances the compensation paid by ELGA through the scheme in question represents a selective financial advantage for the recipients.

(62)

The judgment of the Court in the Freskot case (see paragraph 86) raises the question of whether the aid measure in question may be justified in the light of the nature or general scheme of the system of benefits, which is a matter for the Member State concerned to prove (26). It should be determined whether the special characteristics of the agricultural sector and its particular dependence on certain climatic conditions, as well as its vulnerability to natural risks in Greece, could make it necessary to set up a State scheme which assures a minimum level of compensation based on the principle of solidarity. However, a measure introducing an exception to the application of the general parafiscal/tax system may be justified by the general scheme and nature of the tax system if the Member State concerned can prove that this measure results directly from the founding principles or policy of this system. A distinction should be drawn between the objectives assigned to a particular scheme and which are external to it and the mechanisms inherent to the scheme itself which are necessary for the achievement of such objectives (27).

Since it appears that ELGA is not solely financed by parafiscal levies but also by direct State contributions, it cannot be justified on the basis of solidarity between farmers, which means that the whole scheme must be regarded as being selective.

Thus, in the case in question, most of the compensation paid to farmers in 2008, i.e. EUR 386 986 648, was not financed by special compulsory contributions, as these amounted to just EUR 88 353 000. In this case, the payments made to insured farmers could not be regarded as being solely financed through contributions (28).

(63)

With regard to the compensation paid in 2009, i.e. EUR 415 019 452, the Commission finds that this was not financed by special compulsory contributions, which totalled EUR 57 015 388 in 2009. These payments were provided for in the Common Ministerial Decision of 30 January 2009 as insurance cover in exceptional circumstances for losses to crop production and they did not form part of the compensation that ELGA had to pay to farmers in 2009 to make good damage in the context of the compulsory insurance scheme. Consequently, the argument put forward by the Greek authorities that these payments should also be regarded as genuine compensation cannot be accepted by the Commission.

(64)

In order to pay these higher sums to producers of agricultural products, ELGA had to take out two loans to be repaid over a 10-year period (see recitals 16 and 17). On the basis of the information provided by the Greek authorities concerning the annual interest and capital repayments on the two loans taken out by ELGA to pay the compensation, ELGA will not be able to repay the loans over a 10-year period by means of the producers’ special insurance contributions, particularly since those contributions will have to be used to pay the compensation for the damage incurred during the years in question.

(65)

In the additional information they provided, the Greek authorities had stated that the new Law No 3877/2010 concerning the protection and insurance system for agricultural activities was adopted with a view to increasing ELGA’s revenue.

The Commission is of the opinion that the abovementioned law could in fact improve the functioning of ELGA in the future. However, increasing ELGA’s future revenue does not enable the conclusion to be drawn that it will be sufficient to repay the loans in question and to grant aid to farmers for the years concerned.

Thus, the loan taken out by ELGA for the year 2009 has placed an excessive burden on the revenue it will receive over the next 10 years, since it already had to repay the loan taken out for 2008 for which it had earmarked in advance the insurance contributions for the following years. As pointed out by the interested parties (see recitals 34 and 35), this situation can only be exacerbated by the existence of the two additional loans taken out by ELGA in 2009. It is not possible, therefore, to exclude the possibility that the measures in question will also be financed through other State resources available to ELGA.

(66)

However, it does not appear that the distinctions made under the aid scheme between undertakings in a comparable current legal position can be justified on the basis of the solidarity objective of the scheme in question, when considered in the context of the Greek legislation on compensation for damage caused by natural events. First, similar or comparable risks must be borne by the undertakings themselves in sectors other than those covered by the scheme in question and, second, it is clear that even within the agricultural sector which is covered by this scheme some farmers will always be more exposed to certain risks than others (as a result of what they produce or their geographical location) with the result that aid will always be paid disproportionately to certain categories of farmer at the expense of others.

(67)

For these reasons the Commission concludes that the compensation paid by ELGA to agricultural producers in 2008 and 2009 under the compulsory insurance scheme is covered by Article 107(1) of the Treaty and constitutes State aid.

(68)

Consequently, it should be examined whether a derogation from the general principle of prohibition of State aid under Article 107(1) of the Treaty can apply.

(69)

Given that the aid in question was granted and paid without being notified beforehand, it is unlawful aid within the meaning of Article 1(f) of Regulation (EC) No 659/1999.

(70)

Under Article 107(3)(c) of the Treaty, aid to facilitate the development of certain economic activities or of certain economic areas may be considered to be compatible with the internal market where such aid does not adversely affect trading conditions to an extent contrary to the common interest.

(71)

To qualify for that derogation, the aid in question must comply with the provisions of the legal texts applicable at the time it was granted, i.e. in 2008 and 2009. In this case these are the Community guidelines for State aid in the agriculture and forestry sector 2007 to 2013 and in particular Chapter V.B on aids to compensate for damage to agricultural production or the means of agricultural production and point V.B.3 on aid to compensate farmers for losses caused by adverse weather conditions, and Article 11 of the Exemption Regulation.

Chapter V.B.4 of the guidelines on aid for combating animal and plant diseases should apply to certain crops covered by the aid granted to producers in 2009 (oriental tobacco and summer potatoes). However, given that the Greek authorities have shown that the diseases in these crops resulted from adverse weather conditions (see also recital 44), in accordance with footnote 31 in Chapter V.B.4 of the guidelines, the Commission has evaluated the aid measures in accordance with the provisions of sub-chapter V.B.3.

(72)

The conditions in the abovementioned provisions of the guidelines of relevance in this case are as follows:

(73)

As regards the compensation aid of EUR 373 257 465,71 which ELGA granted to producers to make good the loss of their crops as a result of adverse weather conditions, the Commission finds that, for the most part, i.e. up to an amount of EUR 347 193 466,52 (see recital 42), it complies with the guidelines and the Exemption Regulation referred to in recital 72. As regards the aid for further losses of the same crops, amounting to EUR 2 472 785,97, for the most part, i.e. up to an amount of EUR 2 300 185,51, it also complies with the guidelines and the Exemption Regulation referred to in recital 72.

(74)

In particular, as the table in recital 42 shows, the condition referred to in point (a) of recital 72 is met, i.e. the level of the damage reached 30 % of normal production in the case of the compensation aid of EUR 347 193 466,52. As regards the aid for further losses, as regards 93,02 % of the total amount of this aid, i.e. EUR 2 300 185,51, the level of damage destroyed more than 30 % of normal production and, as a result, the condition referred to in point (a) of recital 72 is also met.

(75)

On the basis of the information provided by the Greek authorities (see recital 39), the gross intensity of the compensation aid in question compared with the reduction in income from the sale of the product complies with the ceilings laid down in Article 11 of the Exemption Regulation (see point (c) of recital 72). However, the calculation of the intensity does not refer to the average quantity produced over the preceding 3 years (or to a 3-year average) in accordance with Article 2 of the Exemption Regulation, given that a different method of calculating normal production was applied for the compensation aid in question (see recital 40 regarding the description of the method of calculation).

(76)

In accordance with point 128 of the guidelines, the Commission may accept methods of calculation other than those provided for in point 8 of Article 2 of the Exemption Regulation, provided that they are representative and not based on abnormally high yields. After having studied the description of the method of calculation used in this case, the Commission takes the view that it complies with the provision of the guidelines referred to above and, taking account of the intensity of this aid, that there is no risk of overcompensation of the losses suffered.

(77)

The Commission also finds that the meteorological data supplied by Greece on the events which occurred in the course of the 2007/2008 marketing year prove that climatic events justifying the grant of the compensation in question occurred.

(78)

Also, according to the information supplied regarding the aid in question (see recital 39), the aid was reduced by any amounts received from an insurance company and costs not incurred because of the event responsible for the loss. In addition, the loss was calculated at the level of the individual holding. Lastly, the deadlines for payment of the aid following the loss, as referred to in point (g) of recital 72, were met.

(79)

In the light of the foregoing, the Commission is therefore in a position to conclude that the compensation aid of EUR 349 493 652,03 granted by ELGA to producers in 2008 to make good their crop losses, of which EUR 2 300 185,51 relates to aid for further damage to the same crops, complied with the relevant provisions of the guidelines and the Exemption Regulation and may, consequently, be regarded as State aid compatible with the internal market under Article 107(3)(c) of the Treaty.

(80)

However, as the table in recital 42 shows, the compensation aid of EUR 26 063 999,19 granted by ELGA to producers of agricultural products in 2008 to make good their crop losses does not comply with point 8 of Article 2 of the Exemption Regulation relating to the damage threshold as compared with normal production. The Commission finds that this compensation aid does not comply with all the relevant conditions in the guidelines and the Exemption Regulation and, consequently, does not qualify for the derogation provided for in Article 107(3)(c) of the Treaty.

(81)

As regards the compensation aid of EUR 7 338 119,74 granted by ELGA to farmers in 2008 for livestock asset losses, it follows from recital 43 that, according to the Greek authorities, that aid, having been paid under the specific compulsory insurance scheme, does not constitute State aid. Although those authorities arrive at this conclusion in respect of all the compensation aid granted by ELGA in 2008 and 2009, it is only for the aid in question that it has not provided additional information enabling that aid to be regarded as compatible with the guidelines. For that reason the Commission concludes that that aid does not meet the relevant conditions of the guidelines and the Exemption Regulation and consequently does not qualify for the derogation provided for in Article 107(3)(c) of the Treaty.

In any event the Commission stresses that, in order to fulfil its duty to cooperate with the Commission, the Member State concerned must provide all the information necessary to enable the Commission to verify that the conditions for the derogation from which it seeks to benefit are satisfied (30). In this particular case the Greek authorities have never invoked the application of the guidelines, nor have they provided any document enabling the Commission to examine the data in the light of the guidelines, despite the indications made by the Commission in paragraph 21 of the decision to open the formal investigation procedure.

(82)

As regards the aid of EUR 114 374,86 for crop losses caused by bears, that aid is not covered by Chapter V of the guidelines on risk and crisis management. In accordance with point 23 of the guidelines, in the case of aid measures not covered by the guidelines, the Commission assesses them on a case-by-case basis and will only approve such measures if the positive contribution to the development of the sector clearly outweighs the risks of distortions of competition that they pose.

According to point 113 of the guidelines, where State aid for risk management is to be authorised, a minimum contribution from producers to the losses must be provided for to mitigate the risk of distortions of competition and provide an incentive for them to minimise the risks. However, in this case the intensity of the aid granted was 100 % and, in the Commission’s opinion, the complete lack of a contribution by producers to the losses incurred could pose a risk of distortions of competition. For that reason the Commission takes the view that a minimum contribution by producers of the order of 20 % should have been required in this case. As a result, this aid is compatible with the internal market up to a level of 80 % of its intensity, i.e. EUR 91 500. However, the remaining amount of the aid, corresponding to 20 % of its intensity, is deemed incompatible with the internal market.

(83)

As regards the aid for corrective action following inadvertent administrative errors in the evaluation reports on the aid for crop and livestock asset losses, Greece only submitted details of the total amount of the aid, i.e. EUR 3 803 901,72. However, no further details of the amounts relating to the corrective action in respect of the compensation aid for crop and livestock asset losses and crop losses caused by bears (see recitals 41, 42 and 43) were given in the additional information sent by the Greek authorities to the Commission. Given that the corrective action related to administrative errors constituting ELGA debts vis-à-vis the beneficiaries of the aid in question, the Commission concludes that this corrective aid could form part of the compensation aid concerned. However, since only the compensation aid for crop losses, i.e. EUR 349 666 252,49 (see recital 75), is considered by the Commission to be compatible, the Commission concludes that only the corrective action relating to that compensation aid can be regarded as aid meeting the relevant conditions of the guidelines and the Exemption Regulation and qualifying for the derogation under Article 107(3)(c) of the Treaty.

(84)

Of the compensation aid of EUR 415 019 452 paid by ELGA to farmers in 2009, aid amounting to EUR 27 614 905 complies with the provisions of the guidelines and the Exemption Regulation, as set out in recital 73.

(85)

On the basis of the detailed information provided by the Greek authorities for all compensation aid paid by ELGA in 2009 (see recital 37), the Commission finds that the condition referred to in point (a) of recital 73, i.e. that the damage threshold must reach 30 % of normal production, is met as regards the compensation aid amounting to EUR 27 614 905.

(86)

Following on from recitals 76 to 79 concerning part of the aid granted by ELGA in 2008, the same conclusions may also be applied as regards the aid amounting to EUR 27 614 905 granted in 2009, i.e. that aid also meets all the other conditions laid down in the relevant provisions of the guidelines and the Exemption Regulation.

(87)

In particular, the intensity of the aid in question, the method of calculation used in this case, the meteorological data relating to the events which occurred in the course of the 2008/2009 marketing year (see table in recital 44), the ruling out of overcompensation for the losses incurred and the times at which the aid was paid out after the loss comply with the relevant provisions of the guidelines and the Exemption Regulation.

(88)

On the basis of the foregoing, the Commission finds that the aid amounting to EUR 27 614 905 paid by ELGA to farmers in 2009 can be considered to comply with the relevant provisions of the guidelines and the Exemption Regulation. They therefore qualify for the derogation in Article 107(3)(c) of the Treaty.

(89)

As regards the remaining amount of that aid, i.e. EUR 387 404 547, the Commission finds, contrary to the opinion of the Greek authorities (see recital 46), that it cannot be regarded as meeting the conditions laid down in Article 11 of the Exemption Regulation.

(90)

On the basis of the detailed information supplied by Greece relating to all aid granted in 2009, the adverse climatic events in this case do not fall under the definition of adverse climatic event that can be regarded as a natural disaster provided for in point 8 of Article 2 of the Exemption Regulation, given that the adverse weather conditions in question destroyed less than 30 % of the normal production of the farmers concerned. In addition, in this case normal production was not defined in accordance with point 8 of Article 2 of the Exemption Regulation (31) and, as a result, the intensity of the aid in question was not established in accordance with the method of calculation laid down in Article 11(2) of the Exemption Regulation.

(91)

The Greek authorities also regard the aid in question as meeting all the conditions to be considered as complying with Article 107(3)(b) of the Treaty and the Communication on the Temporary Community Framework (see recitals 47 to 50).

(92)

The Commission takes the view that, as regards the non-notified aid in question, all of which was granted in 2009, Article 107(3)(b) of the Treaty cannot apply directly given that the Commission adopted the Communication on the Temporary Community Framework, which applies from 17 December 2008, on the basis of that provision. Point 4.2.2(h) of the Communication explicitly excludes undertakings specialised in primary agricultural production from its scope. As the Court has consistently held, in the specific field of State aid the Commission is bound by the frameworks and communications which it adopts, provided that they do not depart from the rules of the Treaty (32). However, by taking the view at the time in point 4.2.2(h) of the Temporary Framework that the aid scheme (aimed, it should be remembered, at supporting access to finance in the context of the financial and economic crisis) did not apply to undertakings active in the primary agricultural production sector, the Commission considered that, in view of the major distortions of competition likely to occur in that sector, such aid was not necessary or proportionate within the meaning of Article 107(3)(b) of the Treaty until the entry into force of specific rules and thresholds adopted for that sector (33). In the Commission’s view, therefore, in the present case the Communication as in force at the time applies to the aid granted from 17 December 2008 to 27 October 2009.

The guidelines applicable at the time the aid in question was granted are the Community guidelines for State aid in the agriculture and forestry sector 2007 to 2013. However, as stated in recital 90, the adverse weather conditions that occurred in this case destroyed less than 30 % of the normal production of the farmers concerned. Consequently, the relevant provisions of the guidelines cannot be regarded as being met in respect of the compensation aid in question.

(93)

As set out in recital 48, the Greek authorities take the view that point 7(a) of the Communication applies in respect of the non-notified aid in question since it was granted to producers after 17 December 2008.

However, the Commission considers that the possibility of declaring aid to the agricultural sector to be compatible by virtue of the Communication on the Temporary Framework can only cover aid in the agricultural sector granted from 28 October 2009, the date on which the amendment of the Communication on the Temporary Community Framework providing for a limited amount of aid to be compatible for undertakings active in primary agricultural production became effective.

(94)

In the present case, according to the detailed information supplied by the Greek authorities for all aid granted by ELGA in 2009, the result is that almost all the aid in question was granted to producers of agricultural products on dates prior to the abovementioned date of 28 October 2009. The major part of the aid was granted between March 2009 and July 2009 and other aid was granted in September 2009.

(95)

The Commission therefore concludes that the aid in question does not comply with the Communication and, as a result, does not qualify for the derogation under Article 107(3)(b) of the Treaty.

(96)

However, the Commission recognises that, in the case of the aid granted by ELGA to producers of agricultural products on dates after the abovementioned date of 28 October 2009 (very small amounts of this aid were granted in December 2009 and November 2010), the amendments made to the Communication for the agricultural sector may apply.

(97)

The aid in question meets the conditions laid down in point 4.2.2 of the Communication on the Temporary Community Framework. However, the condition laid down in point 4.2.2(g) of that Communication was not met, given that ELGA did not obtain from the farmers concerned a declaration about any other de minimis aid and aid pursuant to the measure under the Temporary Community Framework received during the current fiscal year. However, the Commission acknowledges the Greek authorities’ argument that, in the present case, that requirement is merely a formality, given that Greece did not grant any de minimis aid or aid pursuant to the measure under the Temporary Community Framework to agricultural undertakings in the period 1 January 2008 to 31 December 2010. As a result, the Commission concludes that the aid to which the Communication applies meets the conditions laid down in point 4.2.2 of that Communication and qualifies for the derogation in Article 107(3)(b) of the Treaty.

(98)

Also, the Commission takes the view that it is not impossible that some of that aid, amounting to EUR 75 382 500, meets all the conditions laid down in Regulation (EC) No 1535/2007 (see recitals 51 and 52).

(99)

The compensation paid by ELGA to producers in 2008, i.e. EUR 386 986 648, was financed only partly out of special compulsory contributions by farmers, given that those contributions only amounted to EUR 88 353 000 in 2008. As for the compensation paid in 2009, i.e. EUR 415 019 452, it was not financed out of special compulsory contributions.

(100)

As regards the two loans which ELGA had to take out in order to pay the compensation to the producers, ELGA will not be able, by means of the producers’ special insurance contributions, to pay the annual interest and make the capital repayments over 10 years, which is the period scheduled for repayment of the loans, particularly since those contributions will have to be used to pay the compensation for the damage incurred during the years in question.

(101)

Consequently, in the light of the foregoing, the compensation paid by ELGA in 2008 and 2009 under the compulsory insurance scheme cannot be regarded as being financed solely out of the special insurance contributions paid by producers. For that reason the Commission concludes that the compensation paid by ELGA in 2008 and 2009 under the compulsory insurance scheme falls under Article 107(1) of the Treaty and constitutes State aid.

(102)

The Commission finds that the Hellenic Republic implemented this aid in breach of Article 108(3) of the Treaty.

(103)

In the case of the compensation aid granted in 2008 under the special compulsory insurance scheme, the Commission:

(104)

In the case of the compensation aid granted in 2009 under the Common Ministerial Decision, the Commission: