EUKN - European Urban Knowledge Network - Several member states to lose 50% of regional state aid coverage

Several member states to lose 50% of regional state aid coverage

04-01-2006

On 21 December 2005, the European Commission adopted a new set of regional aid guidelines for the period 2007-2013. It gives member states latitude in determining which regions should receive assistance and contains provisions designed to ensure a smooth transition from the old to the new regime. A special clause ensures that no member state loses more than half of its current level of aid. The rules for granting public aid designed to boost regional development will apply from 1 January 2007.

Under these new guidelines, 43.1% of the EU population lives in regions eligible to benefit from regional State aid. The current rate is 52.2%; by member state and compared with the current situationthe changes are as follows:

Cyprus, Denmark, Ireland, Luxembourg and the Netherlands lose 50% of coverage;
Portugal loses 23.3%;
France loses 18%;
the Czech Republic 11.4%;
Slovakia 11.1%;
Italy loses 10%;
Finland loses 9%;
Austria, Belgium, Germany lose 5%;
Spain and United Kingdom lose 4.8%;
Sweden loses 1%;
Estonia, Greece, Hungary, Latvia, Lithuania, Malta, Poland and Slovenia stay the same.

The new guidelines provide clarification on permitted state aid for the period 2007-2013. The EU will work with different aid regimes for different regions. The one regime is more advantageous than the other. Throughout the consultation on the new aid regime, the overriding question has therefore been which regions should be eligible, for what and according to what aid ceilings.

The regions eligible for the most advantageous aid regime are:

those with per capita GDP under 75% of the EU average;
the EU's seven ultra-peripheral regions (Madeira, the Azores, the Canaries, French Guiana, Réunion, Martinique and Guadeloupe);
regions whose per capita GDP rises above 75% of the EU average as a result of enlargement, but only until December 31, 2010. The situation of these regions will then be reviewed and their status may shift to a different aid regime.

Given the huge disparity in wealth between regions eligible for the most advantageous regime, ranging from 32.2% to 74.9% of the EU average, the Commission has divided them into three categories (GDP below 45%, 60% or 75% of the EU average) to determine maximum aid rates.

Aid rates can be increased in all assisted areas by 20% where aid is given to small firms and 10% where it is given to medium-sized enterprises. The new form of aid will also be allowed to encourage business start-ups in assisted areas, which will apply to the establishment and expansion phases of small businesses during the first five years.

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Source: Europe Information Service Source: European Commission

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