STATE AID DAY Office for the Protection of Competition FINANCIAL AND REAL ECONOMY CRISIS AND STATE AID Roland Schachl Federal Ministry of Economy, Family and Youth Unit C1/8 – EU State Aid Law Brno, 17 April 2009

I – STATE INTERVENTIONS AGAINST THE CRISIS ON THE FINANCIAL MARKETS II – STATE INTERVENTIONS AGAINST THE CRISIS IN THE REAL ECONOMY

LEGAL BACKGROUND FOR MEASURES STRENGTHENING THE FINANCIAL SECTOR  Interbank Market Strengthening Law of 26 October 2008  Financial Market Stabilization Law of 26 October 2008  Regulation of 30 October 2008 on determining Stipulations on the Conditions and Impositions for Measures according to the Financial Market Stabilization and Interbank Market Strengthening Law

Duration of validity: National legal provisions will terminate with 31 December 2009, however, EC-decision requires notification of prolongation of measures for any new aid after 30 June 2009

VOLUME AND TYPE OF STATE INTERVENTION

BENEFICIARIES  credit institutes and insurance companies with license to operate banking business in Austria  minimum core equity capital (“Tier 1 – Ratio“) of 7 %  maintenance of a long-term equity capital of at least a level according to BASEL II + 2 %-points

THRESHOLDS ► € 2 billion for guarantees for individual liabilities, up to a maximum total of € 15 billion per bank ► € 3 billion for guarantees for assets per single bank ► € 3 billion for capital injections per single bank ► Amounts are fixed and supervised by a Clearing Bank.

INSTRUMENTS BY LEGAL BASIS Interbank Market Strengthening Financial Market Stabilization Guarantees for the issue of securities Guarantees for liabilities Guarantees for assets Loans Equity capital injections Acquisition of shares Take-over

COMPATIBILITY REQUIREMENTS FOR CAPITAL INJECTIONS Minimum interest to be paid:9.3 % for “Tier 1“-capital 8 % for „Partizipationskapital“ 7 % for debt titles Exception:placement also to private investors at a minimum portion of 30 per cent Repayment:at par in case of interest at 9.3 % at 110 in case of interest at 8 %; “step-up“-clause, limitation of dividends with 1-year-EURIBOR + 1,000 basis points

LEGAL BACKGROUND FOR TEMPORARY AID MEASURES IN THE REAL ECONOMY  Law of 10 November 2008 on stimulating the Business Cycle („Konjunkturbelebungsgesetz KBG 2008“)  Law of 31 March 2009 on stimulating the Business Cycle („Konjunkturbelebungsgesetz KBG 2009“)  Provisions for thermal insulation of industrial premises and private buildings (put into effect on 14 April 2009)

Business Cycle Stimulation Law 2008 : range of amendments to economic assistance legislation, in particular laying down an increase of back-guarantees for tourism and leisure industry from € 750 million to € 1.5 billion and for non- tourism industries from € million to € million possibility of acquisition of direct participation in SME

Business Cycle Stimulation Law 2009: amendments to tax legislation, in particular laying down a pre-depreciation rate of 30 % a premium of € 1,500.- for every car older than 13 years being sold for scrap on condition of purchasing a new car meeting specific environmental standards

SUBSIDIZATION OF THERMAL INSULATION Budget: € 100 million, € 50 mio. each for the private and the commercial sector Eligible costs: energy saving adaption of buildings Intensities: 40 % for enterprises 20 % for private households Form of aid:cash grant of a maximum of € 5,000.- per beneficiariy

PROCEDURAL STEPS UNDER THE “TEMPORARY FRAMEWORK” SO FAR  Notification of a package to EC at the end of January 2009  Adoption of measures under the € ,- rule on 20 March  Adoption of exceptions for risk capital aid on 26 March

PROCEDURAL STEPS FORESEEN  Additional information on specific conditions for guarantees unter point of the Framework  Clarification of need for the application of conditions for interest rate subsidies and aid for “green products”  No use of flexible “Escape Clause” in export credit insurance

IMPLEMENTATION OF TEMPORARY STATE AID Indicative total budget of € 300 million for all interventions in two years Inception of flexible provisions either as a separate guideline or by integrating the stipulations into existing schemes Application of provisions at all administrative levels, i. e. national, regional and local levels

Particular focus will be placed on guarantees for financing both investment and operating expenses at current accounts Utilization of exception for aid to firms in difficulty limited to cases wich positive gong-concern perspective

ASSESSMENT OF RULES Time for inception: realization in short notice possible Period of validity: appropriate at preliminary view Scope of instruments: lump sum aid offering broad variety Technical flexibility: impositions for guarantees Administrative requirements: monitoring within existing system; adaption of cumulation surveillance Expected results: better access to credit financing through risk sharing between public intermediaries and banks

EVALUATION OF TEMPORARY AID MEASURES reporting obligation for MS by 31 October 2009 data collecting in the course of annual reporting in-depth statistical analyses

RELEVANT INDICATORS FOR EVALUATION  liquidity available and credit volume provided  credit conditions offered  refinancing parameters  number of insolvencies  development of growth rates