The European Commission has adopted guidelines on how Member States can grant investment aid to companies in order to support the development of disadvantaged regions in Europe between 2014 and 2020. These guidelines are part of a broader strategy to modernise state aid control, which aims at fostering growth in the Single Market by encouraging more effective aid measures and focusing the Commission’s enforcement on cases with the biggest impact on competition. The guidelines will enter into force on 1 July 2014.
The regional aid guidelines 2014-2020 have been adopted after extensive consultations with many stakeholders (Member States, regional and local authorities, business associations, interest groups, individual companies and citizens) and with the European Parliament, the Committee of Regions and the European Economic and Social Committee. The guidelines contain rules on the basis of which Member States can draw up regional aid maps to identify in which geographical areas companies can receive investment aid and at what level.
Key features of the new guidelines:
The overall share of regions where regional aid can be granted will increase from the current level of 46,1% to 47,2 % of the EU population. Today only about one out of four Europeans lives in less developed regions (regions with GDP below 75% of the EU average) compared to one out of three at the time when the previous guidelines for 2007-2013 were adopted. Despite this reduction in regional disparities, the Commission has taken account of the effects of the economic crisis and therefore increased the population coverage.
Fewer aid measures will be subject to Commission scrutiny as more aid categories will be exempted from the obligation of prior notification to the Commission, allowing Member States to spend smaller aid amounts with limited administrative burden. This is expected to facilitate the absorption of EU funds in cases where aid measures are co-funded by structural funds. The Commission will focus on the cases which are most likely to distort competition, which will be subject to a tighter scrutiny in order to preserve a level playing field in the Single Market.
Large aid measures will be subject to in-depth assessment of their incentive effect, proportionality, contribution to regional development and effects on competition. The Commission will examine such aid in detail to ensure that it is granted only and to the extent it is necessary for the investments that would not have taken place without the aid, ensuring that public money is spent in the most efficient and effective way.
Based on the Commission’s experience, the guidelines adopt a stricter approach on aid for investments made by large enterprises in the more developed assisted areas. Indeed, evidence shows that large companies’ decisions to invest in a given region are prompted by factors such as the cost and availability of production factors (workforce, land, capital, etc.) and the general economic context (taxes, business environment), rather than by state aid. Granting aid in such a context, where a large company would have invested in any event, amounts to handing out “free money” that merely reduces the company’s ordinary operation costs which its (local) competitors have to meet without aid. This leads to a waste of taxpayers’ money and to competition distortions in the Single Market with damaging effects on growth. Therefore, aid to large enterprises in these areas will only be allowed for investments that bring new economic activity, for initial investments for the diversification of existing establishments into new products or for new process innovation, because it is more likely that these investments are carried out thanks to the subsidy. In the poorest regions (regions below 75% of average EU GDP), the guidelines continue to allow aid for other types of investments by large companies as well.
In outermost regions and sparsely populated areas, the possibility for Member States to grant operating aid to companies is maintained and simplified.
The maximum levels of aid (so-called “aid intensities”) remain unchanged for the least developed regions. For other assisted regions, intensities are slightly lowered by 5 percentage points given the general reduction in EU regional disparities and the need to avoid subsidy races between Member States in times of tight budgetary constraints.
Anti-relocation provisions are strengthened and regional aid that has caused a same or a similar activity to relocate within the European Economic Area (EEA) will not be allowed.
To increase transparency and accountability, Member States will have to publish on the internet data on how much regional aid they grant and to whom.
Background
The current regional aid guidelines, which expire at the end of 2013, will be extended until 30 June 2014.
The regional aid guidelines set out the rules under which Member States can grant state aid to companies to support investments in new production facilities in the less advantaged regions of Europe or to extend or modernise existing facilities. The ultimate purpose of regional state aid is to support economic development and employment. The guidelines therefore also contain rules on the basis of which Member States can draw up regional aid maps to identify in which geographical areas companies can receive regional state aid and at what level (aid intensity).
A review process was launched in 2010 to adapt the guidelines to the overall reduction in regional disparities in the EU over the last seven years, to the effects of the economic crisis and to the objectives of state aid modernisation (SAM) as well as to ensure coherence with the EU Cohesion policy. In light of the comments and views gathered in the two public consultations and in intensive dialogues with all stakeholders, the Commission has finalised the guidelines, which will enter into force 1 July 2014 to allow enough time for Member States to prepare their new regional aid maps.
The population coverage for the regional aid maps ensures that aid will continue to focus on the regions that are less developed from the EU perspective while also giving Member States sufficient room to tackle their own internal regional disparities:
To ensure that Member States cover the regions that are disadvantaged from an EU perspective, the Commission has predefined eligible regions on the basis of their relative level of development (regions with GDP below 75% of EU GPD per capita) and permanent handicaps (outermost regions, sparsely populated regions).
Moreover, in order to ensure a smooth transition, regions that were previously below the threshold of 75% of EU GDP will continue to be pre-defined at EU level as eligible for regional aid.
The remaining population coverage is distributed between Member States according to socioeconomic criteria which take into account regional disparities, including unemployment, at both EU and national levels. It is then for each Member State to decide how to best use this room for manoeuvre to define more eligible area in order to address its internal regional disparities, in line with the subsidiarity principle.
Over the period 2007-2011, regional aid expenditure represented 0.11% of EU GDP. During this period, 85% of regional aid was spent in the less developed regions (regions with GDP below 75% of the EU average). Around 40% of all regional aid was spent under the general block exemption regulation, which exempts aid from prior notification to the Commission when certain conditions are met.
In the current programming period (2007-2013) about 20% of cohesion policy (ERDF, ESF and Cohesion funds) is spent in the form of State aid to companies. For State aid measures co-financed by structural funds, Member States do not predominantly rely on the regional aid guidelines but use other state aid guidelines as well (in particular the guidelines on state aid for R&D and innovation, risk finance, broadband and environmental protection, and the general block exemption regulation).
Regional Aid Guidelines – Legislation 2014 – 2020 C(2013) 3769 /3
Source: European Commission
