According to the European Commission, aid granted by the Belgian Government to container glass manufacturer Verlipack S.A. is not compatible with EU state aid rules and therefore must be paid back.
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According to the European Commission, aid granted by the Belgian Government to container glass manufacturer Verlipack S.A. is not compatible with EU state aid rules and therefore must be paid back. The European Commission recently decided to go against an earlier decision made with the agreement of the former Competition Commissioner, Belgian Karel Van Miert, over aid granted by the Southern Region of Wallonia in 1997 to SA Verlipack, which was the country“s largest manufacturer of container glass at the time. The aid consisted of a non-notified capital contribution by the Belgian authorities of Euros 8.6 million towards a capital increase for Verlipack, a holding company. However, a contribution of Euros 12.3 million from a private investor, the Heye-Glas group, which at the time of the 1998 decision was an indication of the future viability of Verlipack, also came from public resources. According to a recent report, in 1997, when the aid was granted, the sector was hit by unexpected falls in prices. And the rapid downward trend continued, owing to competition from other packaging products (PET, cardboard and cans) and the collapse of the Russian market. Despite the injection of aid in the form of an equity stake and two loans totalling Euros 12.3 million, Verlipack“s plants in Ghlin, Jumet and Mol (Flanders) were unable to recover and were wound up in 1999. A capital contribution from public resources is compatible with the Common Market if it is carried out in circumstances that would be acceptable to a private investor operating under normal market economy conditions, the Commission notes. The Walloon Region“s Government, however, not only acquired a stake in Verlipack, but also financed, in the form of two loans, the injection by a private investor. The Heye-Glas group had agreed to use the funds lent by the Walloon authorities to recapitalise Walloon sites. It thus served as a vehicle for the transfer of funds. In line with European Court of Justice case-law, the aid recipient is the firm which benefited and effectively gained from it, i.e. Verlipack. The Commission said it therefore considers that the conditions under which aid was granted to Verlipack would not have been acceptable either to an investor or to a private financial institution and that the aid cannot be regarded as being consistent with the actions of a private investor.