Article 92
(1) of the EEC Treaty states that certain aids whose characteristics it mentions are incompatible in principle with the common market. As far as the derogations to this principle are concerned, those mentioned in Article 92 (2) of the Treaty are not applicable in this case, bearing in mind the nature and objectives of the aids in question. Under Article 92 (3) of the Treaty, aids likely to be considered compatible with the common market must be assessed within a Community context, not merely within that of a single Member State. To preserve the smooth operation of the common market and take into account the principle stated in Article 3 (f) of the EEC Treaty, the derogations to the principle of prohibition which is the subject of Article 92 (1) of the Treaty, which are provided for in paragraph 3 of said Article, must be interpreted restrictively when any aid scheme or individual aid measure is examined. In particular, the derogations may only come into play if the Commission finds that the free play of market forces, with no aids, would not in itself be sufficient to persuade potential beneficiaries to act in order to achieve one of the desired objectives. In its abovementioned Decision 88/318/EEC the Commission, basing itself on these principles and in particular the derogation provided for in Article 92 (3) (a) of the Treaty, authorized the aids scheme in favour of the Mezzogiorno referred to in Law No 64/86 of 1 March 1986. However, the Commission decided to subject the grant of aid to, inter alia, compliance with the following two conditions: - the maximum rates of the aids, and - exclusions and specific limits in respect of aids intended for products listed in Annex II to the Treaty. It should be noted in this respect that the levels of the aids in question (subsidies and interest rebates) are in line, thanks to changes made during the course of the procedure, with the limits fixed by Article 9 of Law No 64/86 (5) as authorized by the Commission in its Decision 88/318/EEC. The aids in question are listed in the following table: (in billion Lit) Type of investment and location of installations Subsidy Interest rebate Total aids A. INVESTMENTS IN INDUSTRIAL TECHNOLOGY 1. Sugar chemistry - Corigliano Calabro 42,35 25,78 68,13 2. Fermentation, yeast and other - Calabria 23,45 13,70 37,15 3. Fermentation, citric acid and other - Calabria 19,25 10,11 29,36 4. Alcohol - Crotone 21,35 12,72 34,07 5. Vegetable proteins - Manfredonia 21,90 12,72 34,62 6. Biodegradable plastics - Napoli 10,02 7,19 17,21 7. Fruit and vegetable canning - Calabria 5,60 2,03 7,63 TOTAL A 143,92 84,25 228,17 B. RESEARCH CENTRES Napoli 66,00 8,98 74,98 Eufemia Lamezia 18,00 3,85 21,85 TOTAL B 84,00 12,83 96,83 C. RESEARCH PROJECTS 100,00 - 100,00 D. STAFF TRAINING (INDUSTRIAL) 36,00 - 36,00 GRAND TOTAL A + B + C + D 363,92 97,08 461,00 As far as the second condition is concerned, it should be noted that the aids favour products falling within sectors for which there is currently no sectoral limitation under Article 9 of Decision 88/318/EEC. Consequently, the aids can in their present form be considered as compatible with the common market and therefore eligible for the measures provided for in the aid scheme under Law No 64/86. However, one should not ignore the link between starch and the products eligible for the aids in question, in the sense that these products may be derived and/or processed from starch. The starch sector is extremely sensitive and vulnerable because, inter alia, of excess production capacity and increased international competition (6). For this reason the Commission long ago adopted a highly restrictive policy an aids to starch by opposing subsidies to European Agricultural Guidance and Guarantee Fund (EAGGF) investments and State aids at the national level. As a result, to respect the current equilibrium in the starch market, the Commission finds that the aids in question should be prevented from causing indirect effects on starch production which are incompatible with the objectives of the common organization of the market in cereals. This would be the case if Italgrani were able to place on the (Italian, Community or third country) market new quantities of starch. Given the undertakings of the Italian authorities listed in Part III of this Decision, the Commission believes that it is necessary to subject the grant of all aids needed to implement the programme (as a whole) to strict compliance with the following conditions: (a) the products processed or derived from starch must be produced by Italgrani using exclusively starch of Community origin; (b) Italgrani's production of starch under the programme - whose envisaged annual capacity is about 150 000 tonnes - will be strictly limited to the quantities needed to meet the requirements of its own production of products derived and/or processed from starch; the starch production in question must therefore develop in accordance with the demand for derived and/or processed products and not increase beyond the level of that demand; (c) Italgrani can never place on the (national, Community or third country) market the quantities of starch produced under the programme; (d) the Italian authorities are obliged to take suitable control measures to ensure that the imperative conditions mentioned above are complied with; a detailed annual report in this respect must be transmitted to the Commission before 30 June following the calendar year in question; (e) the Italian authorities are obliged to mention the four conditions above in the decision of the CIPI regarding approval of the programme contract which will be published in the Gazzetta Ufficiale della Reppublica Italiana. As regards investment aids in favour of alcohol, given the overcapacity in the sector and the exclusion from Community financing of production installations under the terms of Council Regulation (EEC) No 866/90 (7), the Commission would like to remind the Italian authorities that the creation of new capacity is not desirable. This is a recommendation under the first sentence of Article 93 (3) of the Treaty, since alcohol is not yet subject to a common market organization, HAS ADOPTED THIS DECISION: