[1] Measures that fall within the definition of state aid are considered unlawful unless provided under an exemption or notified by the European Commission.
For example, it would be considered illegal state aid by the EU if a government took over an unprofitable company with the sole intent to keep it running at a loss.
The measures specifically allowed for: The framework was extended for another year on January 28, 2021, and expanded to double the ceilings for direct aid, the conversion of loans into grants, and the suspension of the list of countries with "marketable risk" for short-term export credit.
[15] The EU jurisdiction is a rare case where specific binding legal provisions were introduced for controlling state aid.
These provisions in principle require the commission to authorise all grants of aid, which has proven to be a difficult, if not impossible, task with 27 EU member states.
This control may seem unnecessary, as most subsidies (tax breaks) are supposed to "induce new firms to locate in the subsidizing state".
[16] Even though the argument cannot be dismissed prima facie, it is based on " the assumption that the lengths of the political and the economic cycles are the same".
Introduction of state aid provisions would be beneficial for all countries but governments tend to distance themselves from imposing disciplining devices unless there is an international treaty that does so.
[16] The EU–UK Trade and Cooperation Agreement of December 2020 requires the UK to introduce an alternative state subsidy system.
[20] In 2008, the British government was granted permission from the European Commission to provide state aid to nationalise Lloyds TSB during the financial crisis of 2007–08.
However, the Commission decreed that because Lloyds TSB's financial requirements had come about from their takeover of HBOS, in order for the state aid to be legal, they would have to sell part of their business.