Phedon Nicolaides

European Structural and Investment Funds Journal, Volume 6 (2018), Issue 2, Page 122 - 127

State aid statistics reveal that some Member States grant more aid in the form of financial instruments than in the form of risk capital/risk finance. This articles examines how this statistical discrepancy can be explained. It presents several possibilities: The aid in the financial instruments is not channelled through a fund managed by a financial intermediary and/or it does not seek to leverage private participation and/or it is primarily intended as a repayable grant. The article also examines the consequences of using financial instruments to provide repayable grants.

Phedon Nicolaides

European Structural and Investment Funds Journal, Volume 6 (2018), Issue 3, Page 253 - 257

Financial Instruments should not be considered or used as repayable grants. This article shows that the amount of aid in grants is in most cases larger than in financial instruments. For this reason, and contrary to popular belief, financial instruments are not likely to incentivise aid recipients to work harder. However, financial instruments used in the context of “risk finance” measures are more useful than grants when their objective is to provide working capital to SMEs. They are not linked to any identifiable eligible costs and therefore cover expenditure which is not necessarily linked to investment projects.

Phedon Nicolaides

European Structural and Investment Funds Journal, Volume 4 (2016), Issue 1, Page 12 - 16

Public authorities may assign public service tasks to private undertakings. The undertakings that provide such services are required to become gradually more efficient during the period of assignment. At the same time, they are not allowed to earn unreasonable profits and be overcompensated for the extra costs of those tasks. Given the fact that efficiency means reduction of the costs of delivery of the services, the question arises how they can incur lower costs without making excessively high profits. This article shows how providers of public services can be incentivised to improve their efficiency and at the same time be compelled to share cost reductions with the public authority that imposes the public service tasks. This is achieved through an appropriate reduction in the amount of compensation.

Phedon Nicolaides

European Structural and Investment Funds Journal, Volume 4 (2016), Issue 1, Page 1 - 1

Phedon Nicolaides

European Structural and Investment Funds Journal, Volume 4 (2016), Issue 2, Page 68 - 72

This article asks whether financial instruments provide stronger incentives to their recipients than grants. It finds that aid recipients in fact have a stronger incentive to work harder to make a grant-aided project successful. By contrast, aid-granting authorities should prefer financial instruments over grants because repayable public funding results in smaller outlays from public budgets. The article concludes that different forms of public support should be granted in different situations: grants for non-commercial projects, repayable advances for risky projects and financial instruments for projects which in principle are financially viable.

Phedon Nicolaides

European Structural and Investment Funds Journal, Volume 3 (2015), Issue 1, Page 32 - 36

European Structural and Investment (ESI) Fund rules for the programming period 2014-2020 define ex-ante conditionalities that ha ve to be satisfied by managing authorities that use ESI Funds to grant State aid. The ex-ante conditionalities aim to strengthen the administrative capacity of managing authorities to grant State aid correctly. The European Commission has issued guidance on arrangements that can lead to improved administrative capacity. Similar arrangements can usefully be adopted by any public authority that grants State aid. Failure of compliance is a systemic problem. This paper proposes two additional conditionalities for strengthening public administration systems. Public authorities can only gain by improving their systems and procedures.

Phedon Nicolaides

European Structural and Investment Funds Journal, Volume 3 (2015), Issue 2, Page 83 - 93

The new State aid rules for 2014-2020 explicitly allow the granting of State aid for several types of infrastructure (research, energy, local, etc). The aid must be for the benefit of owners or operators of infrastructure. Users must be charged a market price or a price that covers either full or incremental costs. This paper examines how Member States can prevent the leakage of aid to the benefit of users. The paper, however, also criticises current rules for not being clear as to how to define market prices and the costs that should be charged to users.

Phedon Nicolaides

European Structural and Investment Funds Journal, Volume 2 (2014), Issue 3, Page 221 - 230

Examining the main requirements of the State aid rules on financial instruments and risk finance and considering how they may apply to financial instruments co-financed by European Investment and Structural Funds (ESI Funds) lie in the focus of this article. It starts by summarising the main Structural Funds provisions concerning financial instruments in order to make clear, how they relate to State aid. Then, it reviews the findings of recent reports concerning the actual effects of ERDF support for small and medium-sized enterprises (SMEs) and financial instruments. Having set the context in which the new State aid rules should be understood, the article examines the new risk finance rules in the Guidelines and the General Block Exemption Regulation (GBER). It concludes by drawing lessons from the joint application of Structural Funds and State aid rules and makes a number of recommendations concerning the compliance with State aid rules.