European Union spending on state aid remained stable last year despite repeated commitments for cutbacks, but better targeting helped minimise distortions of competition, an EU report showed yesterday.

The EU Commission said the 25 member states spent €64 billion in 2005 on helping troubled companies and supporting industries and initiatives, slightly less than the €65 billion spent in 2004.

Competition commissioner Neelie Kroes said she was "disappointed that the overall level of aid has hardly changed" and warned she remained committed to tackling illegal aid "with all available means".

The commission has the final say on whether to allow state aid. It clears such payments only under strict criteria because, generally, state financial help distorts competition by supporting one or several companies against others.

But the commission encourages spending in undeveloped but useful areas, for uses such as helping firms to innovate or environmental initiatives.

The biggest spenders were the EU's old member states. Germany topped the list by granting €20 billion in aid, followed by France with €10 billion, Italy with €6 billion, Britain's €5 billion and Spain's €4 billion. Ireland allowed €1 billion in state aid.

In relative terms, Malta, at 3.16 per cent of GDP) was the most generous in terms of state aid. Irish state aid, at 0.63 per cent of GDP, was slightly ahead of the EU average.

More than half of member states gave over 90 per cent of their aid to initiatives such as the environment and innovation. - ( Reuters)