State aid to enterprises is a form of government intervention. Under the Stabilization and Association Agreement with the EU Croatia has accepted certain obligations concerning the allocation and control of state aid. The objective of this research project was to assess the size and structure of state aid in Croatia and to compare it with the aid provided by Member States (and candidate countries). In 2001, State aid in Croatia represented 5.25% of GDP, and was five times the size of aid in the EU. At the same time, Croatia provided a much stronger support to certain economic sectors than the EU, particularly agriculture, transport, tourism and shipbuilding. On the other hand, the aid for research and development, small and medium-size enterprises or environmental protection, which are in the EU the main recipients of the so-called ‘horizontal aid’, the aid used by all enterprises and sectors and not only selected ones, was much smaller. It should therefore be expected that Croatia would have to reduce the volume of its state aid in the course of its adjustment to the EU, and gradually redirect the aid from selected sectors to all enterprises, through horizontal forms of aid. At the same time, it should improve its system of allocation and control of state aid.