DG State Aid – Control and Regeneraton of Deprived Urban ... - REVIT

N179/2004 Finnish Municipal Guarantees
The main purpose of this measure, by which the Municipal Guarantee Board (MGB) gives
state guarantees to a special credit institution Municipality Finance Plc’s (MFL) funding, is to
safeguard and develop the joint funding of the Finnish municipalities. The activities of the
MFL aim at supporting structural, economic and social policies and certain public tasks of the
Finnish municipalities, for instance, renting or production and maintenance of social housing.
The MBG is an institution under public law designated to grant guarantees to the
MFL, which is a special credit institution owned by Finnish municipalities and the
Local Government Pension Institution. The MGB and MFL are responsible for the
execution and administration of the joint funding system of the Finnish
municipalities. The MFL can only and exclusively grant loans to entities stipulated
in the Regulations of the MGB, which comprise municipalities, municipal
federations and other municipality-controlled entities and non-profit entities. The
MFL is controlled by the MGB. The operations of the MGB are monitored by a
Guarantee Board Auditor appointed by the Finnish Ministry of Interior.
In its assessment of the measure, the Commission stated that the application of the
established principles on special credit institutions is without prejudice to the examination of
their activities under the EU state aid rules vis-à-vis the beneficiaries. It is also without
prejudice to the application of other provisions of the Treaty and to the international
obligations of the EU concerning state aid and other subsidies. Special credit institutions may
use state guarantees for public (service) tasks, for instance, firstly, to finance entities of the
state sphere (e.g. municipalities) without restrictions (so-called “closed-cycle” approach) or,
secondly, to generate and distribute subsidies at the request of the public authorities but only
if this is in line with the state aid rules vis-à-vis the final beneficiaries. The Commission
concluded that on that basis also the Finnish special credit institution MFL may benefit from
state guarantees.
The Commission regarded favourably that the Finnish government has changed the
Regulations of the MGB so that any financing provided to entities owned or controlled by
municipalities or corporations, which are designated by state authorities and engaged in the
provision of (municipal) public services or social housing, must be given at preferential terms
in accordance with the state aid rules. This ensures that MFL can only generate/distribute
state aid (financing at preferential terms) to publicly owned or public service undertakings
which is in line with the state aid rules governing public services and social housing. It will
not be allowed to provide “normal” financing at market terms, which can be provided by any
other financial institution.
Only financing to municipalities, which are part of the public sphere and internal organisation
of the Member State’s authorities, can be granted either at market terms or at preferential
terms without restrictions under the state aid rules (“closed-cycle” approach).
Because of its compliance with the established principles on special credit institutions, the
Commission found that the measure constitutes no state aid under the EC Treaty.
For Further Information:
Decision:
http://ec.europa.eu/community_law/state_aids/comp-2004/n179-04-fi.pdf
http://ec.europa.eu/community_law/state_aids/comp-2004/n179-04-sv.pdf
37