German Alcohol Monopoly

9 July 2010. On 26 June, the Commission adopted a report and draft Regulation on the German Alcohol Monopoly (see COM(2010) 336 and COM(2010 337)).

Germany has a derogation from State aid rules for many years, allowing it to support the production of alcohol of agricultural origin in certain distilleries. According to the Single CMO (Common Market Organisation), the existing derogation has to end on 31 December 2010.

The draft regulation proposes the derogation from State aid rules for the German Alcohol Monopoly (Branntweinmonopol) for supporting farm distilleries producing alcohol of agricultural origin (e.g. from cereals & potatoes) to be extended beyond the end of this year, but phased out by the end of 2013. However, there will be a longer phasing out period, until the end of 2017, for small-scale distilleries (Abfindungsbrennereien), distillery users (Stoffbesitzer) and fruit cooperative distilleries (Obstgemeinschaftsbrennereien) which are locally-oriented and produce very small quantities of alcohol mainly from fruits (up to 300 litres per year). Various degressive limits should apply in the meantime to ensure that the process is gradual. The proposal will allow the derogation to apply retro-actively in case the extension is not approved under the co-decision procedure before the end of the year when the current derogation expires.

The Commission presented the report and the draft proposal to the Agriculture & Fisheries Council that met in Brussels on Monday 12 July.

At the exchange of views that ministers held on the basis of a Commission report two delegations supported the proposal and no delegation opposed. Germany and the Commission would like to see this regulation adopted as soon as possible since it should apply as from 1 January 2011 as the current derogation will end on 31 December 2010.

Under the provisions of the Lisbon Treaty, the ordinary legislative procedure provides that the modifications proposed for this
Regulation have to be adopted by the European Parliament. The proposal has already been referred to the European Parliament's Agriculture and Rural Development Committee.

Under the "single CMO regulation" (Council Regulation 1234/2007) Commission is required to report to the Council and the European Parliament on the application of the derogation provided in respect of the German alcohol monopoly, giving an evaluation of the aids granted in the framework of that monopoly and proposing measures if needed.

This derogation allows Germany to grant aid, through the federal monopoly administration for alcohol (Bundesmonopolverwaltung für Branntwein - BfB), for "ethyl alcohol of agricultural origin". The state aid granted corresponds to the difference between, the cost of purchasing raw alcohol from producers (distilleries and farmers) at above market prices, and the income generated by selling that alcohol at the market price, taking into account the collection, processing and operational costs borne by the BfB.

According to the report more years are thought necessary to complete the phasing out of the monopoly and end the relevant aid, and on that basis the legislative proposal accompanying the it provides for the derogation to be extended later than the 31 December 2010 and for a gradual reduction in the monopoly's production and sales until it closes its doors in 2017.

Medium-sized agricultural distilleries would remain in the monopoly until the end of 2013 with specific compensations when leaving the system; small-scale distilleries locally-oriented and producing very small quantities of alcohol from fruit would remain in the monopoly until the end of 2017. At the request of the Commission, the German authorities have undertaken to amend their national legislation on this monopoly in order to avoid its potential adverse effects on the single market.