The European Commission has approved, under EU State aid rules, a €411 million capital injection by Croatia's government into the national development bank Hrvatska Banka za Obnovu i Razvitak ('HBOR'). The measure will be funded by the Recovery and Resilience Facility ('RRF') and will expand HBOR's remit to support Croatia's sustainable economic growth and competitiveness.
The Croatian measure
Croatia notified the Commission of its plans to grant a €411 million capital injection into HBOR, which will use these funds to support SMEs, renewable energy projects and infrastructure development. In line with its expanded remit, HBOR will prioritise investments in initiatives that drive digital transformation, promote eco-friendly technologies, enhance regional connectivity, and develop the defence industry. The measure aims at strengthening innovation, social inclusivity, and environmental sustainability.
The public funding will be provided through the RRF following the Commission's positive assessment of the Croatian Recovery and Resilience Plan and its adoption by the Council.
The Commission's assessment
The Commission assessed the Croatian measure under EU State aid rules, in particular Article 107(3)(c) of the Treaty on the Functioning of the EU ('TFEU'), which enables Member States to support the development of certain economic activities under certain conditions.
In particular, the Commission found that:
- The measure facilitates the development of economic activities, namely the promotion of sustainable and regionally balanced social and economic growth through the support of public sector entities, SMEs, mid-caps and large companies;
- The aid has an incentive effect, as HBOR would not invest or co-invest in key initiatives without the public support;
- The aid is necessary and appropriate to achieve the objectives pursued. In addition, it is proportionate as it is limited to bridging market gaps, so that distortions to competition are minimised;
- Croatia has committed to several measures, including the limitation of financial activities to relevant market failures and the implementation of no crowding out measures of private sector operators, to ensure that HBOR will not undercut private financial institutions active in the Croatian market.
On this basis, the Commission approved the Croatian measure under EU State aid rules.
Background
According to Article 107(1) TFEU, a measure shall constitute State aid if the following four cumulative conditions are met: (i) the measure has to be granted by Member States through State resources, (ii) the measure has to confer a selective economic advantage to certain companies, (iii) the advantage has to distort or threaten to distort competition, and (iv) the measure has to affect trade between EU Member States.
All investments and reforms entailing State aid included in the national recovery plans presented in the context of the RRF must be notified to the Commission for prior approval, unless covered by one of the State aid block exemption rules.
The Commission assesses measures entailing State aid contained in the national recovery plans presented in the context of the RRF as a matter of priority and has provided guidance and support to Member States in the preparatory phases of the national plans, to facilitate the rapid deployment of the RRF. At the same time, the Commission makes sure in its decision that the applicable State aid rules are complied with, in order to preserve the level playing field in the Single Market and ensure that the RRF funds are used in a way that minimises competition distortions and do not crowd out private investment.
