Global Journal of Human Social Science, E: Economics, Volume 21 Issue 4

Article 107(2) and (3) of Treaty on the Functioning of the European Union (hereinafter TFEU, 2012) allows that under certain circumstances State aid can be granted if it is for an equitable and well- functioning economy and if it contributes to the economic development. The difference between Article 107(2) and (3) of TFEU is the applicability, while in the case of the former the aid is automatically compatible with the internal market (e.g. subsidies for restoring natural disasters, social aid, supporting individuals etc.), in the letter case the aid can only be considered compatible (e.g. to support employment, regional development, environmental protection and energy savings, culture, heritage etc.). In the case of compatibility with the internal market it has to be assessed whether it can be block-exempted – meaning that the aid can be granted under national competence – which depends on the type of aid (categories such as regional development or R&D&I) and its amount, of course. Above a certain threshold determined in the so- called block-exemption regulations (hereinafter GBER). Under the GBER aid can be granted either for horizontal or vertical objectives of common interest. In several circumstances State aid can only be approved individually (i.e. case by case) by the EC, more precisely by the Directorate-General for Competition, meaning that a MS has no control over it anymore. II. T he E conomic P erspectives of S tate A id a) Macroeconomic Perspective Most of the main economic theories deal with the issue of State intervention and the efficiency of public spending and the possible impacts, respectively, from Adam Smith (1776) through Keynes (1936), Solow (1956) and Friedman (1962) to Krugman (1991; 1994); the opinions are basically heterogeneous. The basic question is whether the State is needed to intervene in the social and economic processes and if this is the case to what extent and by what means. b) Microeconomic Perspective The aim of the competing market players is to achieve the largest possible market share, the higher profit and the more secure market position in the market. If the advantage is obtained in compliance with the competition rules, i.e. not through an advantage that cannot be obtained on the market, it can be interpreted as meaning that an undertaking produces more efficiently, is more productive than its competitor(s), otherwise competition cannot be ruled out. Besides that the task of effective competition is to promote the raise of the living standard of the individuals and social welfare at the level of society as a whole in the long run, Volume XXI Issue IV Version I 19 ( E ) Global Journal of Human Social Science - Year 2021 © 2021 Global Journals Overall, in the public consciousness the concept of subsidy and State aid is still mixed nowadays, the lack of its unitary and consistent use is also confused and that is why should be considered a crucial issue among researchers. It can be assessed that State aid is State intervention but not vice versa: only a part of State sources qualify as State aid that are allocated to economic players during the redistribution. State aid therefore is a subset of State intervention according to the EU terminology, a narrow segment focusing on the interactions between the State and business sector with the exception of households (consumers and individuals). The rules basically determine the scope which under and the frames within that a MS can grant subsidies. In the 20th century, there can be seen many examples that those developed countries with mixed (public- and private property-based, at the same time) economic models realised that the economy can not work efficiently without State intervention, i.e. merely under market terms, on the one hand because of the inequality of the distribution in goods, services and income, therefore redistribution is needed. On the other hand, if the market mechanisms do not function properly, the state has to intervene in the economy. In the 21th century the global challenges such as climate change, overpopulation, migration, limited availability of (natural) resources, the decrease of the number of areas under cultivation and parallel to that the likely increase in prices at the same time raise such questions which can not be solved on a purely market basis. Due to the fact that the market is basically interested in maximizing profits and/or minimizing costs. For example we can see the increasingly importance of innovation and R&D sector in the digitizing economies during the 21st century; its relevance was already recognized by Schumpeter (1912) and the State's role in stimulating it. Of course, competitiveness can not be without innovation in the 21st century: if a company does not produce more efficiently than its (innovative) market competitors, it will not remain competitive over time. Undoubtedly, but one of the characteristics of innovation is the partial or complete replacement of human labor force. If there is no work, there is no disposable income, there will be no demand, consumption etc. which is a barrier to economic growth. The State must also be able to handle such a situation. Otherwise, the basic frameworks and fundamentals of society can be cracked or even collapse in extreme cases, as Krugman (1994) or Huntington (2005) also points out. Contrary to this, Keynes had the vision in 1930 that the economic and social problems will be resolved within hundred years and prosperity will be general. As regards the past decades it can be seen for example that the views of Kornai (1980) on the role of the State on the public administration and the private sector in full contrast with Piketty (2014) on the role of capital in the 21st century as regards income inequality. State Aid in the European Union: Where Law and Economics Meet