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studios - including the MGM studios. The French State provided the first aid in 1994 in the form of a capital increase of FRF 4,9 billion and the underwriting by the State of the risks attached to about FRF 42,7 billion of non-performing property assets transferred to a special hiving-off company. Only one year later, the State intervened again by creating another hive-off vehicle, the "Consortium de Réalisation" (CDR), which took about FRF 190 billion of CL’s troubled assets. These interventions were approved by the Commission in 1995 provided that the net cost to the State would not exceed FRF 45 billion. Important conditions attached to the approval were the separation of the ownership of CDR from CL and the future privatization of CL. However, in September 1996 the French authorities submitted to the Commission a new plan to grant emergency aid amounting to nearly FRF 4 billion together with a restructuring aid. The Commission approved the emergency aid but at the same time initiated the at-the-time art. 93(2) procedure (now art. 88(2)). In July 1997 the French authorities submitted a new restructuring plan for CL as requested by the Commission. The plan, which constituted an additional aid of value between FRF 53 and 98 billion, was subject to a series of modifications and finally received a conditional approval in May 1998 under the derogation of the at-the-time art. 92(3)(c). CL was fully privatized in 1999 and was finally acquired by Credit Agricole in 2003.

The episode of CL, which led to estimated costs for the French taxpayers between $20 and §30 billion (up to 2.5% of GDP at that time), illustrates several pitfalls. First, it shows that state ownership did not prevent bad transactions from taking place. Political interference and government guarantees blurred any notion of risk/return management and market discipline, thus leading to an accumulation of projects that eventually threatened the company's solvency. Second, the case showed the difficulty for the Commission to judge the compatibility of large aids with the Treaty, especially on short notice. Moreover, as noted by some commentators (e.g. Tsakatoura, 2002), the CL case showed that, despite not being clearly stated in the regulation, the Commission considered banking as a special sector with respect to state aid. Considerations linked to stability concerns presumably played an important role in the Commission’s final decision.


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