The European Commission has approved state aid of HRK 975 million kuna (EUR 131.5 million) granted by Croatia to state-owned rail freight operator HZ Cargo. In May 2015, Croatia cancelled HZ Cargo’s debt held by the state, by way of its conversion into equity, to help the company overcome financial difficulties. “Such debt cancellation constitutes state aid because it relieved HZ Cargo from the repayment obligation, something the company would not have obtained on the market”, the European Commission explained.
The European Commission found that the aid complies with the EU state aid rules, particularly since the cancelled debt was incurred prior to Croatia’s accession to the EU in July 2013 and was directly linked to HZ Cargo’s transport operations. In addition, the company faced an excessive level of indebtedness which hindered its sound financial management. The aid was necessary to rectify HZ Cargo’s financial difficulties and did not prevent effective competition on the market.
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