The cancellation of debts will be done by OSE on the basis of a joint ministerial decision under Article 13(1) of the Greek Law 3891/2010.

The Commission observes that the debt cancellation will be done by OSE on the basis of a joint ministerial decision instructing the company to cancel TRAINOSE's debts.

In view of the above, the Commission considers that the debt cancellation involves the use of State resources, which is also decided by and imputable to the Greek State.

In this case, Greece will cancel EUR 748,6 million of debts directly related to railway activities of TRAINOSE. No reasonable market economy operator would cancel liabilities of such a magnitude without any remuneration. By freeing TRAINOSE from the legal obligation to service and eventually repay this debt, the measure will effectively provide TRAINOSE with additional funds can use for its commercial operations and/or investment and improve its financial indicators, which in turn could potentially reduce future borrowing costs and/or improve access to market funding. The debt cancellation is thus liable to provide TRAINOSE with an economic advantage not otherwise available at market conditions.

Greece asserted that the cancellation of TRAINOSE's debts towards OSE involves a compensation for discharging a PSO.

1. (a)

   First, the recipient undertaking must actually have public service obligations to discharge, and the obligations must be clearly defined.

2. (b)

   Second, the parameters on the basis of which the compensation is calculated must be established in advance in an objective and transparent manner.

3. (c)

   Third, the compensation cannot exceed what is necessary to cover all or part of the costs incurred in the discharge of public service obligations, taking into account the relevant receipts and a reasonable profit.

4. (d)

   Fourth, where the undertaking that is to discharge public service obligations is not chosen following a public procurement procedure to select a tenderer capable of providing these services at the least cost to the community, the level of compensation needed must be determined on the basis of an analysis of the costs which a typical undertaking, well-run and adequately provided with means to meet the public service requirements, would have incurred in discharging those obligations, taking into account the relevant receipts and a reasonable profit for discharging the obligations.

The Commission first notes that Greece had not provided it with any entrustment act related to the period under review (i.e. 2007-2010). Article 7 of Greek Law 674/1970 merely refers to the possibility for an operator, where the operation of new routes or the maintenance of the operation of existing routes is imposed in a mandatory way and results in or prolongs a loss-making activity, to request a Financial Agreement. Also according to Article 20 of Greek Law 674/1970, any losses stemming from the obligation to provide services at a specific price are to be regulated by a Financial Agreement. According to Article 18 of Greek Law 674/1970, such a Financial Agreement is also to regulate the financial relations between the rail operator (at that time OSE) and the Greek State, and contain the terms and conditions of the compensation to be paid to cover eventual exploitation losses for a period not exceeding 13 years from the ratification of that agreement. As confirmed by Greece, no such Agreement has been concluded between the operator and the Greek State for the period under review. It follows that TRAINOSE did not have clearly defined public service obligations to discharge and compensate during the period under consideration between 2007 and 2010. Therefore, Measure 1 does not comply with the first Altmark condition.

Second, even if according to Greek Law 2671/1998 the rail operator (at that time still OSE) would have been entrusted to discharge PSOs and operate certain routes at a certain price, the obligations of the Greek State to compensate the rail operator had been limited until 31 December 2007 as expressly provided in Art. 9.5 of the law.

Third, the Commission observes that the parameters for the compensation have not been established beforehand. The envisaged compensation is solely based on an ex post calculation based on TRAINOSE's financial estimates after its restructuring. The Commission therefore concludes that the parameters on the basis of which the alleged under-compensation was calculated by Greece were not established in advance and that, therefore, Measure 1 does not comply with the second Altmark condition either.

Considering the cumulative nature of the Altmark conditions, there is no need for the Commission to examine whether the other two conditions have been met in the present case.

Therefore, it is concluded that the decision of Greece to cancel TRAINOSE's liabilities will confer on that undertaking an economic advantage within the meaning of Article 107(1) of the Treaty.

To fall within the scope of Article 107(1) of the Treaty, a State measure must favour ‘certain undertakings or the production of certain goods’. Hence, only those measures favouring undertakings which grant an advantage in a selective way fall under the notion of State aid. As the debt cancellation will benefit TRAINOSE alone and is not available to other Greek undertakings as part of a general measure of economic policy, it is selective within the meaning of Article 107(1) of the Treaty.

In this case, TRAINOSE provides services in competition with other undertakings providing transport services in the internal market and some of those services are cross-border. Therefore, the selective economic advantage granted through the planned debt cancellation in favour of TRAINOSE strengthens its economic position, as it will relieve the railway operator from debts incurred in the period 2007-2010. Consequently, TRAINOSE will be providing railway transport services in the internal market without bearing all of the relevant investment and/or operating costs in the past.

The Commission concludes that the measure will distort or will threaten to distort competition in the internal market and is liable to affect trade between Member States.

In the light of the foregoing, the Commission considers that the debt cancellation that Greece plans to implement constitutes State aid within the meaning of Article 107(1) of the Treaty.

As stated in recital 109, the measure in question has to be financed from State resources and the decision to grant the measure must be imputable to the State.

The equity increase was financed directly from the Greek State budget and was decided by the Interministerial Committee for Public Enterprises and Organisations, a committee representing the Greek central authorities.

Therefore, the equity increase involved the use of State resources, which was also decided by and imputable to the Greek State.

Greece asserted that the equity increase does not confer any undue economic advantage on TRAINOSE, because any private investor in a situation similar to the one of Greece would have chosen to further invest into the company in order to maintain its existing investment rather than to seek the liquidation of the company. Greece expected that the equity increase leading to the restructuring of TRAINOSE and followed by its privatisation would allow it to recover a larger part of its investment and to avoid negative effects on OSE.

Greece asserted that its decision to inject capital into TRAINOSE aimed at avoiding collapse of the sole rail operator in Greece and any negative spill-over effects on the Greek economy as such.

Greece further stated that already in 2009 it was envisaged to restructure TRAINOSE with a view to privatising it, and therefore it could have expected an acceptable return on the injected capital within a reasonable period of time. Greece further emphasised that ephemeral lower returns would be acceptable to an existing investor.

Before the decision to inject equity of EUR 60 million was taken by the Interministerial Committee for Public Enterprises and Organisations in 2009, no profitability assessment of the expected return was conducted by Greece, using either any of the generally accepted standard assessment methodologies or any other methodology. No factual evidence showing any future profitability for the shareholder was brought by Greece to support the decision to inject capital into TRAINOSE. No document shows any illustration or calculation of the capital remuneration for the shareholder of TRAINOSE or an increase in the value of Greece's equity participation after the capital injection. The Commission observes that TRAINOSE's profit and loss forecasts merely show that the company was expected to return to profitability as from 2011. And even the expected profitability cumulated until 2013 (EUR 14 million) is insufficient to offset the expected loss of TRAINOSE in 2011 (EUR -165 million).

Greece had not assessed prior to the equity increase any prospects for proceeds from a hypothetical liquidation of TRAINOSE. The Commission observes that on 31 December 2008 TRAINOSE's asset book value amounted to EUR 104 million whereas the value of its debts amounted to EUR 376 million. Therefore, Greece as TRAINOSE's shareholder in a hypothetical liquidation scenario would be unlikely to benefit from any return. As a corollary therefore Greece would legally have no liability other than the loss of its shareholdings, without any further investment into the company.

Notwithstanding the social and political pressure that would result from a decision to allow TRAINOSE to enter the liquidation procedure, the Commission maintains the view that the costs for a MEO in a similar situation would be nil, as the Greek State is the sole shareholder of TRAINOSE. Under those circumstances, the capital increase could only involve a loss for the Greek State, which a MEO would not have consented to.

Therefore, the Commission considers that the decision to increase equity of TRAINOSE by EUR 60 million conferred an economic advantage on TRAINOSE which it would not have obtained under normal market conditions.

The equity increase benefitted TRAINOSE only and was not part of a broader measure of general economic policy available to Greek undertakings. It is, therefore, selective within the meaning of Article 107(1) of the Treaty.

For the reasons outlined in Section 7.1.2.4, the equity increase had distorted or had threatened to distort competition in the internal market and was also liable to affect trade between Member States.

In the light of the foregoing, the Commission considers that the equity increase of EUR 60 million implemented in 2009 constitutes State aid within the meaning of Article 107(1) of the Treaty.

The annual grants to TRAINOSE for the period 2011-2013 were granted directly from the Greek State budget, hence the measure involves the use of State resources, which was also decided by the State and is therefore imputable to it.

Greece asserted that the annual grants to TRAINOSE for the period 2011-2013 involve a compensation for discharging a PSO.

When the PSO is not established on the basis of a tendering procedure, the level of compensation needed must be determined on the basis of an analysis of the costs which a typical undertaking, well-run and adequately provided with means to meet the public service requirements, would have incurred in discharging those obligations, taking into account the relevant receipts and a reasonable profit for discharging the obligations.

The Commission notes that when the PSO Agreement was concluded in 2011, TRAINOSE was facing financial difficulties and its costs could not have been considered costs of a typical undertaking, well-run and adequately provided with means to meet the public service requirements. The PSO compensation for years 2011 to 2013 were based on estimates of TRAINOSE's restructuring plan without any counterfactual assessment of costs of a typical and well-run undertaking adequately provided with means to actually meet the public service requirements. Therefore, the Commission considers that this criterion has not been complied with.

Considering the cumulative nature of the Altmark conditions, there is no need to examine whether the other three Altmark conditions have been met in the present case.

Therefore, it is concluded that the grants to TRAINOSE in the period from 2011 to 2013 confers an economic advantage on TRAINOSE within the meaning of Article 107(1) of the Treaty.

The annual grants in the period 2011-2013 were made available to and benefited only TRAINOSE and were, therefore, selective within the meaning of Article 107(1) of the Treaty.

For the reasons set out in Section 7.1.2.4, the grants distorted or threatened to distort competition in the internal market and were also liable to affect trade between Member States.

In the light of the foregoing, the Commission considers that the annual grants implemented by Greece in the period 2011-2013 constitute State aid within the meaning of Article 107(1) of the Treaty.

The scheme for the transfer of TRAINOSE's employees originates from the Greek Law 3891/2010. It provides for the transfer of TRAINOSE's employees to other public sector employers such as Ministries or municipalities, which remunerate them with their public resources.

Therefore, the measure involves the use of State resources and is also decided by and imputable to the Greek State.

According to Greece, the reduction of workforce through the transfer of employees does not provide any advantage to TRAINOSE, since it is to be considered as a one-off compensation for the structural disadvantage that TRAINOSE continues to bear in relation to the remaining employees.

Alternatively, to quantify the possible advantage stemming from the transfer of employees, Greece provided a study prepared by a consultant. According to the study, the advantage amounts to the difference between ‘normal costs’ of a hypothetical VRS borne by a private company and the costs a hypothetical VRS for TRAINOSE's employees. The latter would amount to EUR 120 million. However, Greece argues that one should deduct from the costs of the hypothetical VRS the ‘abnormal costs’ which the company incurs by reason of the quasi-civil servant status of the TRAINOSE employees, both the transferred ones and the remaining 904 employees. According to Greece, the ‘true’ advantage from the transfer of employees amounts to EUR 37 million.

It therefore needs to be assessed whether the transfer of TRAINOSE employees corresponds to a relief from a structural disadvantage that TRAINOSE would continue to face, in the absence of the particular measure.

The Commission notes that TRAINOSE was facing a situation of overstaffing. Under normal market conditions, an undertaking would have to establish a VRS in order to encourage its personnel to retire. As argued by Greece, TRAINOSE however had no funds for such a scheme, and therefore the scheme for the transfer of employees to other public sector employers was established by the Greek State.

Moreover, the financial advantages of TRAINOSE resulting from the lower personnel costs due to the transfer of some of its employees to other public sector employers cannot be compared with the alleged disadvantages arising from the quasi civil servant status for the employees of TRAINOSE under the collective agreements.

To respond to the arguments invoked by Greece concerning the alleged disadvantages caused by the quasi civil servant status of TRAINOSE's employees, three considerations can be made. First, TRAINOSE, in the wake of the full opening of the Greek railway market to competition, had and continues to maintain trained and competent personnel, without which its market position could not have been maintained. Second, as pointed out by Greece, under the new Collective Employment Agreement, numerous benefits of TRAINOSE's employees were abolished and measures were taken to reduce the costs of existing personnel for TRAINOSE. Third, there are currently no other rail operators active in Greece and the general comparison conducted by Greece with other private sector employees with similar work experience cannot be considered as a valid benchmark taking into account the specificity of TRAINOSE's personnel.

In view of the above considerations, the costs related to the benefits stemming from earlier law appear to be normal costs to be borne by any company. Therefore, the relief of such costs through the transfer of employees favours TRAINOSE within the meaning of Article 107(1) of the Treaty.

The transfer of employees benefited only TRAINOSE and is therefore selective within the meaning of Article 107(1) of the Treaty.

For the reasons outlined in Section 7.1.2.4, the transfer of employees distorted or threatened to distort competition in the internal market and was also liable to affect trade between Member States.

In the light of the foregoing, the Commission considers that the transfer of TRAINOSE's employees to other public sector employers between 2011 and 2013 constitutes State aid within the meaning of Article 107(1) of the Treaty.

As stated in Section 3.5.5, in the Opening Decision the Commission expressed doubts as to whether the SLAs between TRAINOSE and OSE were concluded on market terms.

In response to the Opening Decision, Greece provided further clarifications on the method by which the fees for the services specified in the various SLAs between TRAINOSE and OSE were established. As stated in recital 72, Greece asserted that in line with the recommendations of the Troika, the SLAs were concluded on market terms and therefore did not confer any economic advantage on TRAINOSE.

The SLAs were not concluded by means of a competitive, transparent, non-discriminatory and unconditional tender, which would have provided direct and specific evidence of compliance with market conditions. The Troika recommended that SLAs be concluded to formalise the already existing commercial relations with OSE which was, at that point in time, not only the infrastructure manager, but also the provider of the rolling stock and maintenance services, personnel training, offices and coaches to TRAINOSE. At the point in time when the SLAs were concluded, TRAINOSE was the sole rail operator in Greece. TRAINOSE was also dependent on many of the services that OSE was supplying.

As regards the appropriateness of the aid to TRAINOSE to remedy a disturbance of a whole economy, the Commission notes that this is justified due to the particularities of the Greek rail transport sector.

First, the railway sector in Greece is unique and not comparable with other industry sectors. TRAINOSE accounts de facto for the whole economic sector of rail transport for freight and passengers.

Second, transport by rail is vital for the functioning of other industry sectors which depend on the transport of goods and persons from one place to another at any given time. Therefore, the rail transport services have a strong potential for triggering detrimental knock-on effects on the entire economy, if a service is not provided. No other industry sector has such a vital role when assessing the dependence of the other market economy actors on the services it provides.

Therefore, the aid is appropriate to address a specific risk for the railway system and averts discontinuation of provision of rail services to the Greek economy and the population, beyond the situation of and benefits to TRAINOSE. In light of the extraordinary and specific circumstances which the Greek railway sector is facing, the Commission considers that the aid to TRAINOSE is appropriate to remedy a serious disturbance of the Greek economy. This aid will be sufficient for the companies to return to viability or at last carry out their tasks reliably.

The support is limited in time as it consists mainly of one-off well circumscribed aid that was or will be primarily provided through a write-off of TRAINOSE's liabilities towards OSE, a capital increase of EUR 60 million in 2009, direct grants of EUR 50 million for the period 2011-2013 and a transfer of employees of TRAINOSE to other public employers. Without those measures totalling EUR 1,02 billion, TRAINOSE would go out of business causing serious disturbances and systemic implications for other Greek undertakings dependent on the transport services provided by TRAINOSE. Moreover, TRAINOSE will be fully privatised, which should allow the new ownership to reorient, to the extent necessary, the operations of the company to become more competitive once the problems on the railway market caused by the economic crisis in Greece are solved. The alleviation of the financial burden of part of past liabilities is a pre-condition for the privatisation to happen.

As far as the annual grants are concerned, the amounts appear to be proportionate since the grants are compensatory in nature and have furthermore been determined in agreement with the Troika. They have served to only partly cover operating losses incurred between 2008 and 2011 (see Table 1) and, therefore, have not provided TRAINOSE with additional resources which the company could have used to invest and/or expand its activities on other geographic or service markets. The same is true mutatis mutandis as far as the capital increase of EUR 60 million in 2009 and the planned write-off of liabilities towards OSE are concerned. The planned write-off is commensurate with the amount of debt TRAINOSE owes and, even combined with the past capital increase, will still fall short of absorbing past losses and bringing the debt to equity ratio of the company back to a strong solvency situation (see Table 1). The financial indicators of TRAINOSE throughout the period of economic crisis in Greece since 2008 show that the payments to OSE cannot be made from own resources at present. It would be unrealistic and detrimental in the context of disturbance of the Greek economy that TRAINOSE increased significantly its tariffs or prices to generate enough revenues in the short term in order to settle this debt.

As regards the transfer of 593 employees, the information provided by Greece shows that the measure has been confined and calibrated to alleviating the situation of overstaffing and reducing some of the legacy staff costs of TRAINOSE which stemmed from the specific quasi-civil servant status of its personnel and the past recruitment policy of the company. Other companies in Greece employing staff subject to common law, including actual or potential providers of railway services, do not bear costs of the same nature and amount. Therefore, the advantage provided to TRAINOSE through the transfer of 593 maintenance employees has not gone beyond putting TRAINOSE on a level playing field with actual and/or potential competitors as to staff costs.

Therefore, the Commission considers that the aid is necessary and proportionate with a view to allowing TRAINOSE to carry out its tasks reliably and avoiding that its possible dissolution worsens the serious disturbance of the economy which Greece is facing.

As regards the avoidance of undue negative effects on competition and trade between Member States, it has to be noted that the measures are directly connected with ensuring the interim survival of Greek railways, TRAINOSE, until the implementation and completion of the take-over of the company and cannot be deemed to have significantly adverse negative spill-over effects on other Member States.

The measures in question do not and did not serve to increase the capacity of TRAINOSE. On the contrary, Greece has restructured and reorganised TRAINOSE in order to increase its efficiency and as far as it was possible to limit the negative effects of the disturbances mentioned above. With the privatisation of TRAINOSE to TRENITALIA, Greece has definitely cut the links between its rail infrastructure manager and the rail operator.

In addition, Greece has committed to enhance the opening of the Greek railway market, such as to establish an independent contracting authority for public service contracts for rail passenger transport according to Regulation (EC) No 1370/2007, as from 2021 to award the PSO contracts by the independent contracting authority via public tenders for service bundles with a duration of maximum 5 years each, to provide the participants in those first tenders for PSO with relevant information and with sufficient time to prepare bid and to synchronise the rolling stock lease contracts with the PSO contracts.

In view of the above considerations and commitments of Greece, the Commission considers that the aid does not have undue negative effects on competition and trade between Member States.