State aid: Commission investigates support to Greek vehicle producer - Main contents

The European Commission has initiated a formal investigation under EC Treaty State aid rules into aid granted to Hellenic Vehicle Industry S.A. (ELVO) of Greece. In 1999, the Greek Government approved a write off of the company's debts toward the public sector that had accumulated between 1988 and 1998.

According to Greece, the aid, amounting to €3.5 million, favours only the military production of ELVO and would therefore be covered by Article 296 of the EC Treaty, which for reasons directly linked to essential interests of national security allows a derogation from inter alia the general prohibition on state aid. The Commission, however, doubts that the effects of the aid were actually limited to the military business of ELVO and believes that the aid may have also favoured its civilian activities. The Commission's decision to initiate a formal investigation procedure will give interested parties an opportunity to comment on the measure. It does not prejudge the outcome of the investigation.

"The EC Treaty ensures that Member States can protect their legitimate national security interests. But this safeguard cannot be used as a pretext for granting illegal state aid to civilian activities. We have to examine such cases with care in order to prevent distortions of competition on markets for civilian products" Competition Commissioner Neelie Kroes i commented.

ELVO is the main supplier of motor vehicles to the Greek army, with around 750 employees and an annual turnover of about €150 million. In addition to military vehicles such as tanks and armoured vehicles, ELVO produces civilian vehicles and dual use products, i.e. those which could be used for military as well as civilian purposes such as jeeps, and spare parts. In 1999, when the aid measure was adopted, ELVO's civilian production constituted a substantial part of its total turnover. Although Greece maintained that the aid measure favoured only the military production of the company, it did not provide arguments supporting this statement. On the basis of the information available, the Commission therefore considers that only part of the aid was for military production and therefore falls within the scope of Article 296 EC Treaty. The remaining aid has to be examined under the state aid rules.