At head of title: Ifo-Institut fèur Wirtschaftsforschung.

During the transformation of planned economies to market economies subsidies can play a dual role: they can be used either to make enterprises viable in a market environment or to perpetuate structural adjustment problems. In consequence they may either foster or distort Community an din a wider sense European competition. The outline of this study launched by DG II stated that the Community has so far only a partial approach to the assessment of subsidies in transforming economies. The report structures the questions involved in the use of subsidies in the context of the economic transformation from a planned to a market economy. It develops criteria to distinguish subsidies which are necessary to correct distortions and subsidies which threaten to distort Community in a wider sense European competition and it develops practical proposals for Community State aid policy in this context.