(1) of the EEC Treaty lays down the principle that aid having the characteristics which it specifies is incompatible with the common market. As far as the exceptions from that principle are concerned, those provided for in Article 92 (2) of the EEC Treaty do not apply in the case in point, given the nature and objectives of the aid.
For the purposes of Article 92 (3) of the EEC Treaty, so as to maintain the proper functioning of the common market and take account of the objectives set out in Article 3 (f) of the EEC Treaty, the exceptions from the principle of incompatibility of aid must be construed restrictively in assessing any aid scheme or individual aid measure.
In particular, the exceptions may be applied only if the Commission establishes that, without the aid, market forces would not in themselves be sufficient to persuade any recipients to act in such a way as to achieve one of the desired objectives.
Applying the exceptions to cases which do not contribute to such an objective, or where the aid is not necessary for this purpose, would amount to conferring advantages on the industries or firms of certain Member States, whose financial position would be artificially strengthened and to affecting trade between Member States and distorting competition without any justification based on the common interest, referred to in Article 92 (3) of the EEC Treaty.
In view of the above, the aid to which this Decision relates does not qualify for one of the exceptions set out in Article 92 (3) of the EEC Treaty.
As far as the exceptions set out in Article 92 (3) (b) of the EEC Treaty are concerned, the aid is clearly not intended to promote a project of common European interest or to remedy a serious disturbance in the Italian economy. Nor has the Italian Government attempted to justify the aid on such grounds.
As regards the exception provided for in Article 92 (3) (a) and (c) (8) concerning aid to promote the development of certain areas and notably the exception in Article 92 (3) (a) in favour of aid to promote the economic development of areas where the standard of living is abnormally low or where there is serious underemployment, the Commission is aware of the fact that Nuova Cartiera di Arbatax is located in Ogliastra, Nuoro, on the island of Sardinia, which meets these definitions. Even though the Commission generally does not consider operating aid compatible with the common market, it decided on 2 March 1988 by Decision 88/318/EEC (9) to apply the exception of Article 92 (3) (a) to Law No 64/86, which provides for special intervention in the Mezzogiorno, for inter alia temporary aid to alleviate the transport costs of Sardinian companies.
In its letter dated 20 March 1991 with which it informed the Italian Government of its decision to initiate the Article 93 (2) procedure, the Commission invited the Italian Government to inform it of any other aid to NCA, such as the application of regional aid schemes in favour of this company's investments and transport costs.
Within the framework of the procedure the Italian Government replied that the transport aid had stopped on 30 September 1990. No other intervention in favour of NCA had taken place on the basis of Law No 64/86 in 1989 or in the following years.
On this point the Commission notes that Cartiera di Arbatax and subsequently NCA had the benefit of aid towards transport costs for several years. In 1990 NCA received Lit 1 billion for this purpose. The Commission also notes that NCA's restructuring plan foresees that investment aid under Law No 64/86 will be granted for its Lit 37 billion investments foreseen in the first phase of this plan, including the investments that took place during the period of amministrazione straordinaria. The Commission therefore concludes that the disadvantages which Nuova Cartiera di Arbatax faces due to its location in Sardinia are offset by a specific aid scheme and that there is no regional justification for additional aid in the form of capital or subsidized loans. Furthermore, the Commission is of the opinion that aid to a company without a perspective of viability cannot be said to promote the economic development of a region. As set out below, this perspective is lacking for NCA.
Lastly, as regards the exception set out in Article 92 (3) (c) of the Treaty for aid to facilitate the development of certain economic activities, where such aid does not adversely affect trading conditions to an extent contrary to the common interest, the Commission has examined the restructuring plan for Cartiera di Arbatax developed in 1987 and used for NCA in 1989. The Commission notes that this plan contained several indispensable elements, such as investment in order to reduce the use of cellulose as a raw material. But the Commission contests that this restructuring plan was sufficient for making NCA a profitable company, given that it was based on an aided sales price for the newsprint produced by NCA that was incompatible with the common market (see point IV). It was also too optimistic: the investments foreseen in the plan were not carried out within the time limits set, the social arrangements led to strikes and the local standards for the protection of the environment were not met. As a consequence NCA only reached 75 % of its production target for 1990 by producing 122 000 tonnes of newsprint, of which 97 % was sold to the ENCC, and made a loss of Lit 12 billion in that year. As stated above, losses for 1991 are expected to amount to between Lit 18 and 20 billion.
Within the framework of the procedure NCA and SFIRS recognized the limited value of the 1989 plan and claimed that a new restructuring plan for NCA was to be drawn up by June/July 1991. NCA explicitly requested the Commission to judge the compatibility of the interventions in 1989 on the basis of this new plan. Despite its requests to the Italian Government in the course of several meetings and to NCA by letter dated 31 July 1991, no new restructuring plan was submitted to the Commission within the framework of the procedure. The Commission is therefore obliged to assess whether the 1989 plan, on the basis of which the aids were granted, was likely to lead NCA to a situation of profitability. For the reasons set out in the preceding paragraph the Commission concludes that a perspective of viability was lacking for NCA. The Commission notes that its criticism of the restructuring plan is shared by GEPI's analysis dated 31 October 1991.
The Commission concludes that the aids granted to NCA in 1989 and 1990 permitted it to take over and continue Cartiera di Arbatax's loss-making activities, without effecting any changes that might bring about a profitable exploitation. The aid therefore does not facilitate the development of the newsprint industry, but merely serves artificially to preserve NCA. It is operating aid, i.e. aid for continued production, which allows NCA to compensate its operating losses.
Within the framework of the procedure the Italian Government also claimed that newsprint production is a strategic sector. The Commission recognizes the importance for the press in the Community to have access to cheap newsprint. This concern can, however, not justify the artificial maintenance of a company by means of operating aid. If the Italian Government was concerned about the future supply of newsprint to its press, it could have taken other measures which are compatible with the common market, such as the building up of stocks of newsprint acquired on the world market, in order to use these for bridging periods of short supply.
VIII
In conclusion, the aid granted by the Italian Government to NCA is not compatible with the common market, since it was granted in violation of Article 93 (3) of the Treaty and furthermore does not meet any of the conditions provided for in Article 92 (3).
The aid must be abolished and any aid granted must be repaid (see judgment of the Court of Justice in Case C-301/87 Boussac, ground 22).
The aid consists of Lit 66 billion capital provided by SFIRS and the ENCC in July 1989 and an interest subsidy of 9,66 % (the difference between the 5 % interest charged and the reference rate in Italy in 1990, which was 14,66 %) on a Lit 10 billion loan granted by SFIRS on 1 May 1990. From this date until 1 December 1991 the interest subsidy granted to NCA amounts to Lit 1 529,5 million. In case of non-repayment of this sum within the two months set by the present Decision, the interest subsidy on the Lit 10 billion loan will be increased by a supplementary amount of Lit 80,5 million for every month of delay.
Repayment must be made in accordance with the procedures and provisions of Italian law, in particular those relating to interest on arrears on State liabilities, with interest starting to run on the date on which the unlawful aid was granted. This measure is necessary in order to restore the status quo by removing all the financial benefits which the firms receiving the unlawful aid have improperly enjoyed since the date on which the aid was paid (see Judgment of 21 March 1990 in Case C-142/87 Tubemeuse, ground 66),
HAS ADOPTED THIS DECISION:
