No L 215/16 Official Journal of the European Communities 2.8.91 COMMISSION DECISION of 26 March 1991 on aid granted by the German Government to Deggendorf GmbH, a producer of polyamide and polyester yarns located in Deggendorf (Bavaria) (Only the German text is authentic) (91/391/EEC) - THE COMMISSION OF THE EUROPEAN COMMUNITIES, Having regard to the Treaty establishing the European Economic Community, and in particular the first subparagraph of Article 93 (2) thereof, o Having given notice to the parties concerned to submit their comments in accordance with Article 93, Whereas: On 31 October 1989, pursuant to Article 93 (3) of the EEC Treaty and in accordance with the requirements of the Community rules on man-made fibres, the German authorities notified a plan to grant aid in the form of a grant and two soft loans for investments to be made by Deggendorf in the period 1987 to 1989. Further information concerning the recipient and the aids was supplied on 9 March 1990 at the request of the Commission. , The notification concerned a proposal to grant aid in different forms for investment totalling DM 45,2 million in the production of stockings and intermediate products (DM 24 million) and the preparation of combined (polyurethane and polyamide) elastic threads (DM 21,2 million). The aid consists of a 10% grant (DM 4,52 million) on the basis of the Investment Allowance Law (Investitionszulagengesetz) approved by the Commission by letter of 7 December 1987. At the same time, two loans amounting to DM 6 million and DM 14 million are to be granted from the budget of the Free State of Bavaria under the Bavarian regional assistance programme (Bayerisches regionales Forderprogramm) approved by the Commission by letter dated 27 December 1988; the loans are to be for 12 and eight years respectively, with a two-year grace period, at a 5% interest rate. Taking into account the total amount of the investments, the net grant equivalent of the different aids is about 12,6 %. Aid to the synthetic fibres industry is subject to a sectoral code on State aids, introduced in 1977, renewed every two years since then and most recently in 1989 (communication to the Member States of 6 July 1989). The main products manufactured by Deggendorf GmbH, i.e. polyamide and polyester yarns, are covered by the code which requires that all aid proposals, of whatever type, in favour of companies in the synthetic fibre and yarn sector must be notified to the Commission in sufficient time for it to submit its comments and, if necessary, initiate in respect of the proposed measures the procedure provided for in Article 93 (2) of the EEC Treaty. The same code reduces the range of the acceptable exceptions to the general restrictions on State aids to the sole case of incentives for disinvestments from the sector towards other productions, while it takes a generally unfavourable view of all measures which have the effect of increasing the net production capacity of companies in the synthetlc fibres sector. On the basis of the information supplied by the German authorities, the Commission considered that although none of the products concerned by the investments was covered directly by the present code on man-made fibres, which concerns the manufacturing of upstream components (polyamlde yarns), there was a risk of an indirect effect onthe company’s overall fmancnal position. Furthermore, it was not possible, on the basis of the information then available, to determine whether or not a clear and total distinction could be made between the synthetic fibre and the new investment. The Commission also took account of the fact that on 21 March 1986 it took a negative Decision in respect of incompatible aids granted to the same company between 1981 and 1983. This Decision (86/509/EEC) (!) required the recovery of a DM 6,12 million grant and DM 11 million soft loan. These aids have not yet been repaid and Deggendorf is therefore still benefiting from incompatible aid - which artificially improves its competitiveness. Finally, the Commission considered that in 2 Community market for polyamide and polyester yarns which is highly competitive due to the presence of several producers operating in all the national markets and which is characterized by stagnant demand, capital intensive investments and reduced margins, the aids in question were liable to distort competition and affect trade between Member States and were therefore incompatible with the (1) OJ No L 300, 24. 10. 1986, p. 34.