Helping the economy through state intervention is in principle forbidden in the European Union. Article 107(1) TFEU, contains a general prohibition of state aid, defined as aid granted by MS (MS) through state resources, which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods. Article 107(2) and (3) TFEU, in turn, list several exemptions to this rule, suggesting that state aid is not always detrimental to the internal market, but can sometimes serve the common good and be used to create ‘a level playing-field for European industry’. The use and the existence of general principles of EU law in this policy field are oriented by its main specificity, namely the extent of and the variations in the discretion of the European Commission. Indeed, state aid is an area of EU exclusive competence, with the Commission overseeing the proper implementation of the law. The Commission has only marginal discretion in deciding what measures constitute state aid: this is done based on the objective set of legal criteria mentioned in Article 107(1) TFEU. Yet, it enjoys a wide discretion in relation to judging whether aid granted by the MS is compatible with the internal market. In order to introduce aid measures, MS need to ask the approval of the Commission. In case they grant aid without this approval, the Commission can order MS to recover it from beneficiaries.Sharing the pragmatic perspective that identifying the functions of the general principles of law is often more important than attempting to define them, this chapter shows how general principles of EU law can both limit the discretion of the Commission, and also support it in its mission to develop a state aid policy for the EU
