State aid for Greek and Bulgarian railways approved

The European Commission has decided that financial support being provided by Greece and Bulgaria for their national railways is compatible with EU state aid rules. The Commission said its decisions showed that state aid controls are able to address ‘problematic issues’ around debt levels at some incumbent operators, helping them avoid serious financial difficulties or having to significantly reduce staff, while easing the transition to an open and competitive market ‘to the benefit of consumers and taxpayers alike’.

Restructuring of Greece’s state-owned infrastructure manager OSE and operator Trainose will help the two companies ‘become more efficient and provide better service to Greek passengers and business customers’, said Margrethe Vestager, Commissioner in charge of competition policy, on June 16. ‘This fits into the wider context of Greece's efforts to restore its economy's competitiveness and achieve significant growth. The aid will also facilitate the future privatisation of the companies and the opening of the Greek railway sector to competition.’ The completion of the sale of Trainose to Italian state railway group Ferrovie dello Stato Italiane under an agreement signed in January was subject to the closure of the state aid investigation.

For OSE, the Commission has decided that the transfer of 217 maintenance employees and annual grants of up to €340m implemented before October 22 2014 were in-line with state aid rules. The cancelling of €14bn of debt, transfer of 757 employees and grants implemented after October 2014 did not constitute state aid, as they related to OSE's activities as the infrastructure manager and as such could not distort competition or affect trade between member states.

The Commission concluded that debt cancellation, an equity increase and annual grants to Trainose worth a total of €1bn were also permissible, as they were intended to create the conditions for privatisation and the opening of the market to competition.

The Commission said the measures had the legitimate objective of avoiding serious disturbance to the Greek economy which could occur if the two companies could not continue to operate.

Regarding Bulgaria, the Commission concluded that support for incumbent BDZ under a 2011 restructuring plan was in-line with EU state aid rules. The planned cancellation of debts amounting €114m was permitted because the debts were incurred prior to EU accession, directly linked to transport operations and hindered sound financial management. State aid would not prevent effective competition, as BDZ is the only provider of passenger services.

The reimbursement of VAT that BDZ had paid on compensation received for fulfilling public service obligations involved no state aid, the Commission said, while the repayment of debts to the infrastructure manager was in line with market conditions.