generally be incompatible with the EU's Common Market. Within the new law under the treaty, the first chapter of it defines what is not allowed to be done with state aid and the second chapter defines actions that can be done within legal limits. 1. Save as otherwise provided in the Treaties, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market. The intent of this was that in order to avoid favouring a certain company or commercial group, an EU member state should not provide support by financial aid, lesser taxation rates or other ways to a party that does normal commercial business. For example, it would be considered illegal state aid by the EU if a government took over an unprofitable company with the sole intent to keep it running at a loss. However state aid can be approved by the European Commission in individual circumstances. but the aid reclaimed by the EU if it breaches the treaty. There are specific exemptions to the treaty's provisions with regard to state aid. State aid can be given to parties involved in charity or "to promote culture and heritage conservation". The treaty also stated that aid given in response to natural disasters would be lawful. An exemption was given to allow Germany to provide aid providing the aid was used in relation to promoting development in former East German locations affected by the division of Germany after Germany's loss in the Second World War. Limitations of the EU State Aid The EU jurisdiction is a rare case where specific binding legal provisions were introduced for controlling state aid. These provisions in principle require the Commission to authorize all grants of aid, which has proven to be a difficult if not an impossible task with 27 EU member states. This control may seem unnecessary as most subsidies (tax breaks) are supposed to "induce new firms to locate in the subsidizing state". The argument is that since countries are keen to compete for bringing firms into their territory by providing good infrastructure, education, health care, etc., state aid should not differ much (e.g., locational aid). Even though the argument cannot be dismissed prima