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Commission letter to Member States SG(89) D/4328 of 5 April 1989

Dear Sir

The Commission has the honour to inform you of its decision to examine in future State guarantees under the following conditions.

It regards all guarantees given by the State directly or given by the State's delegation through financial institutions as falling within the scope of Article 92(1) of the EEC Treaty.

Each case of the granting of State guarantees has to be notified under Article 93(3) of the EEC Treaty whether the granting is done in application of an existing general guarantee scheme or in application of a specific measure.

The Commission will accept the guarantees only if their mobilization is contractually linked to specific conditions which may go as far as the compulsory declaration of bankruptcy of the benefiting undertaking or any similar procedure. These conditions will have to be agreed at the initial, and only, examination by the Commission of the proposed guarantee/State aid within the normal procedures of Articles 93(3), at the granting stage.

Should the occasion arise that a Member State wants to mobilize the guarantee under different conditions than those initially agreed at the granting stage, the Commission will then consider the mobilization of the guarantee as creating a new aid which has to be notified under Article 93(3) of the EEC Treaty.

From the point of view of controlling the effect of guarantees on competition and intraCommunity trade, the Commission believes that the above decision will enable it to be in a position where it can prevent large amounts of State aid with possibly high intensity being granted to certain undertakings at the mobilization level of guarantees.

Yours faithfully

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