EU orders recovery of Malév subsidy

The European Commission found that financing granted to Hungarian flag carrier Malév between 2007 and 2010 in the context of its privatisation and renationalisation constitutes illegal state aid and must be repaid to the state.

The verdict says Malév would not have been able to obtain similar financing from the market on the terms conceded by the Hungarian authorities. Hungary now needs to recover the unlawful aid from the beneficiary.

Cristina Arigho, spokeswoman for László Andor, EU Commissioner for Employment, Social Affairs and Inclusion, told a press conference today: "At this stage, it is up to the Hungarian authorities to recover and to calculate the final amount it recovers."

EU rules

Under EU State aid rules, interventions by public authorities in companies carrying out economic activities can be considered free of aid if they are made on terms that a private player operating under market conditions would have accepted (the so called 'market economy investor principle'), the EC said in a statement.

The Commission's investigation concluded that "Malév, given its consistently difficult financial situation, would have been unable to secure such financing on the market on the terms conceded by Hungary nor possibly any financing at all."

No viable outlook

A company in difficulty may receive state aid under the strict conditions set in the 2004 EU Rescue and Restructuring Guidelines. However, the measures in favour of Malév did not meet these criteria, because Malév could not demonstrate how it would become viable again under its current business model.

Malév's business plan contained no evidence that a private source would be contributing to the cost of restructuring and the plan contained no compensatory measures to minimise the competition distortions brought about by the significant state support. Moreover, Malév had already repeatedly received state support over the last few years.

Must be recovered

In order to remedy the distortion of competition brought about by the economic advantages that Malév received from the state, Hungary needs to recover the aid from Malév. This will re-establish the situation that existed on the market prior to the granting of the aid, thereby cancelling out or at least alleviating the distortion of competition brought about by the aid.

This is necessary to ensure a level-playing field in the internal market. The Commission's recovery policy is set out in its 2007 Recovery Notice.

(source: portfolio.hu)