DG Competition 1

DG CompetitionJune 2004

Revision of the regional aid guidelines (RAG)

DG Competition 2

Main policy objectives

Concentration of regional aid to investment in the least favoured regions

Increased flexibility for Member States and regions to pursue local regional policy

Enhancing the long-term competitiveness and growth potential of all European regions

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Current rules

Basic principle: exceptional nature of regional aid

Overall coverage of 42.7% of Community population

Criteria for allocating the Community ceiling between Member States

Criteria for selection of Article 87(3)(a) and Article 87(3)(c) regions

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The context of the revision

The current maps expire on 31.12.2006

DG COMP has made use of Conclusions of European Councils Comments submitted by Member States Experience with the present RAG, aid

maps and aid schemes Literature (surveys, studies and academic

papers) on the economics and effectiveness of regional aid

The Third Cohesion report

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Conclusions of European Councils

The Lisbon, Gothenburg, Stockholm and Barcelona European Councils: less and better-targeted State aid

Questions

Is the award of aid for initial investment and linked job creation really the most effective way of promoting cohesion?

Can the aid levels allowed under the present guidelines be reduced without decreasing the effectiveness of such aid?

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The Third Cohesion report

Three main objectives: convergence, regional competitiveness and employment, and European territorial co-operation

Convergence will be promoted by supporting growth and job creation in the least developed Member States and regions

Regional competitiveness and employment will be promoted by supporting a limited number of domains of intervention: innovation and the knowledge economy, environment and risk prevention, accessibility and services of general economic interest

The choice of a thematic approach rather than one based on selected geographic areas (map-based approach) allows for coherence between regional and competition policies

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A new approach to regional policy

Shifting from subsidies that temporarily compensate for regional disadvantages to the provision of public goods and incentives permanently increasing the potential of regions to growth

Regional investment aid to the poorest regions Operating aid in limited cases (outermost

regions and low population density areas) Phasing out of regions that lose eligibility to

Article 87(3)(a) Horizontal thematic approach for the rest of the

territory

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Areas eligible for Article 87(3)(a)

NUTS II regions with GDP/cap below 75% of the EU-25 average GDP below 50%: 50% gross for large

companies GDP below 60%: 40% gross for large

companies GDP below 75%: 30% gross for large

companies

Operating aid in limited cases handicaps of outermost regions additional transport cost in low population

density areas

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Earmarked Article 87(3)(c) regions

Regions losing Article 87(3)(a) status because of the statistical effect of enlargement

Regions losing Article 87(3)(a) status due to economic reasons

Other outermost regions

Other low population density areas

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Total (provisional) coverage: 34.84% of Community population

Abnormally low standard of living: 27.11%

Statistical effect regions: 4.18%

Economic growth regions: 2.71%

Other outermost regions: 0.43%

Other low population density areas: 0.41%

Population coverage

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Any other regions

Thematic approach in State aid

Horizontal rules, many of which will be reviewed before 1.1.2007

New approach for the assessment of lesser amounts of State aid and of certain aids with limited effects on trade (significant impact test)

Increased flexibility for Member States to tackle local problems and to differentiate between regions where this is considered to be necessary

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Existing horizontal instruments

SMEs: aid for investment, advisory services and participation in trade fairs

R&D: aid for basic and applied research projects

Environment: aid for environmental investment (incl. energy saving, renewables, polluted sites, relocation), and operating aid for recycling and renewables

Training: aid for general and specific training of employees

Employment: aid for net job creation and for employment of disadvantaged and handicapped people

Rescue and restructuring: rescue aid (liquidity injection for 6 months) and restructuring aid

Risk capital: aid for risk capital funds

de minimis: small amounts of aid for anything

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Aid with limited spillovers (small distortions of competition and limited effect on trade) to be considered compatible with the common market

Based on economic rationale

Involving clear and easy criteria that require minimal or no assessment

Leading to a reduction in workload

Being transparent

The significant impact test

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Services of general economic interest

Financial support which merely represents compensation for public service obligations imposed by the member states does not have the characteristics of State aid (Altmark ruling)

Definition of public service obligations Compensation calculated in an objective and

transparent manner Compensation cannot exceed what is

necessary to cover all or part of the costs incurred

Undertaking is chosen via public procurement, or the level of compensation is determined by comparison with the costs which a typical undertaking would incur

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Other issues for the revision of the regional aid guidelines

Multisectoral Framework will become part of the regional aid guidelines

Possible block exemption for regional aid

Further differentiation between small and medium-sized enterprises

Consistency with Structural Funds

Net or gross grant equivalents

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Proposed aid intensities

Large Medium Small

87(3)(a) ≤ 50% GDP 50% 60% 70%

87(3)(a) ≤ 60% GDP 40% 50% 60%

87(3)(a) ≤ 75% GDP 30% 40% 50%

87(3)(c) ‘statistical effect’ regions

30%→20% 40%→30% 50%→40%

Other 87(3)(c) earmarked regions

20% 30% 40%

Non-assisted areas - 10% 20%

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Specific provisions for outermost regions

All outermost regions are entitled to a bonus of 10% in aid intensities, which will place them in a “higher” category

Outermost regions eligible to Article 87(3)(c) are treated as “statistical effect” regions, with maximum aid intensities gradually decreasing from 40% to 30% in the course of the period covered by the aid map