Over the years, there has been a growing willingness at the level of both the EU and the member states to consider the effectiveness of State aid in pursuing public policy objectives. This has resulted in stricter requirements as regards the incentive effect criterion in the compatibility assessment of aid and in the introduction of an ex post evaluation requirement for large aid schemes. This article reviews the main policy choices in the recent State Aid Modernisation (SAM) in this regard and considers the nexus between the incentive effect of aid and distortions of competition and trade.
Keywords: Compatibility of Aid, Incentive Effect, Distortion of Competition, Effect on Trade