State aid in the European Union and Croatia

Abstract

EU policy on the state aid granted by member countries to their national economies is based on a general presumption that state aid is incompatible with the running of the single market. The European Commission has the right to ban any state aid that distorts market competition by extending privileges to certain firms and sectors (or by favouring certain firms and sectors. The EU instruction is that national state aid should be reduced and that it be reoriented towards horizontal objectives, for only then are they assisting all firms and sectors alike. In the Republic of Croatia government expenditure to promote the economy is considerable and mainly directed towards certain sectors: shipbuilding, tourism, transport and agriculture. It is to be expected that in order to comply with EU policy Croatia will have both to reduce the extent of state aid and redirect it towards horizontal objectives.