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Prague April 2006

Regional State aid Regional aid guidelines 2007-2013. Prague April 2006. Main policy objectives. Concentration of regional aid to investment in the least favoured regions

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Prague April 2006

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  1. Regional State aid Regional aid guidelines 2007-2013 Prague April 2006

  2. Main policy objectives • Concentration of regional aid to investment in the least favoured regions • Competitiveness and growth of all European regions, including flexibility for Member States and regions to pursue local regional policy • Continuity; a smooth transition from the current rules

  3. Current rules: RAG 2000-2006 • Basic principle: exceptional nature of regional aid • Overall coverage of 42.7% of Community population (EU-15) • Criteria for allocating the Community ceiling between Member States • Criteria for selection of regions: • Article 87(3)(a) less than 75% EU GDP/cap. Broad coherence with objective 1. • Article 87(3)(c) based on indicators chosen by MS. No coherence with Objective 2.

  4. Impact of enlargement • Overall coverage increased from 42.7% (EU-15) to 52.2% (EU-25) • (a) regions from 22.0% to 34.2% • (c) regions from 20.7% to 18.0% • Coverage would rise to 55.1% in EU 27

  5. The context of the revision • The current maps expire on 31.12.2006 • DG COMP made use of • Conclusions of European Councils: “less and better targeted aid” • Comments submitted by Member States; Consultations with EP and CoR • Experience with the present RAG; • Literature on the economics and effectiveness of regional aid • The Third Cohesion report: convergence, regional competitiveness and employment, and European territorial co-operation

  6. The different classes of regions post 2006 • Article 87(3)(a) regions ie less than 75% average EU- 25 GDP/cap • Statistical effect regions(‘phasing out’ regions)ie less than 75% average EU-15 GDP/cap (82.2% EU-25 GDP/cap) • Economic development regions (ex (a) regions with more than 75% average EU-15 GDP/cap • Low population density regionsless than 12.5 inhabitants km² • Possibly other Art 87(3)(c) regions • Non-assisted regions

  7. Population coverage under the RAG 2007-2013 Proposed coverage EU 25 43.1%42% + 50% safety net • Article 87(3)(a) 27.7% • Statistical effect 3.6% • Economic development+ low population density 4.0% • Additional (c) allocation 6.7% • 50% Safety Net 1.1%

  8. Aid in Areas eligible for Article 87(3)(a) • Aid for large companies in NUTS II regions with GDP/cap below 75% of the EU-25 average • GDP below 45%: 50% gross • GDP below 60%: 40% gross • GDP below 75%: 30% gross • Bonuses • Small companies + 20% • Medium-sized companies + 10%

  9. Aid in non-assisted regions • No regional investment aid for large enterprises • Greater flexibility for R&D, innovation, environmental investments, training etc • Significantly more flexible regime for SMEs

  10. Regional aid in the Czech Republic 2007-13 Art. 87(3)(a) GDP % EU-25 Aid intensity • Strední Morava 52,03 40% • Severozápad 53,29 40% • Strední Cechy 54,35 40% • Moravskoslezsko 55,29 40% • Severovýchod 55,59 40% • Jihovýchod 58,17 40% • Jihozápad 60,41 30% • Total population coverage 2007-2013 88,6 % • 7.7% transitional additional coverage 2007-2008 for the Prague region (GDP 147,2%) under Art.87(3)(c); intensity 10%

  11. Transitional provisions • Phasing in of reductions in aid intensity, for: • (a) regions > 15% reduction • economic development regions • Transitional safety net; 66% of current (c) coverage for 2 years • Two years to phase out operating aid

  12. RAG, scope and sensitive sectors • No major changes to scope:RAG apply to all sectors except: • Coal, Fisheries, Production of agricultural products • Prohibitions on regional investment aid: • Steel (except SMEs), Synthetic fibres • Apply subject to special rules to • Transport, shipbuilding, agricultural processing and marketing • No other sensitive sectors for investment aid

  13. Conditions for granting regional investment aid – main changes • Clarification of definition of initial investment • New rules on incentive effect • Maintenance of the investment for at least 5 years (reduced to 3 years for SMEs) • Member States may impose longer periods • Rules on discounting

  14. Eligible expenses for investment aid – main changes • Land, buildings, plant and machineryno ‘standard base’ • Clarification of rules on leasing • ‘Moveable’ assets should be newexceptions; SMEs and takeovers • Consultancy costs for SMEs • More generous treatment of intangible assets: up to 50% of eligible costs for large firms

  15. Large investment projects • Integration of MSF into RAG • Automatic scaling down mechanism for eligible expenses over € 50m • € 50 -100m - 50% of normal aid intensity • > € 100m - 34% of normal aid intensity • Transparency mechanism for eligible expenses > € 50m • Notification threshold – aid exceeds maximum allowed for a project with € 100 m eligible expenses • In depth assessment of investment aid where; • Beneficiary has more than 25% market share or • Capacity increase >5% in a declining market

  16. Operating aid • Permanent handicaps of the outermost areas • Possibility of a ‘safe-harbour’ for operating aid in outermost regions, up to 10% of turnover. • Permanent transport aid in the outermost and low population density areas • Permanent aid to offset depopulation in the least densely populated areas • Temporary and degressive operating aid to offset bottlenecks in 3(a) areas • Exclusion of operating aid to financial services sector • Transitional phasing out of operating aid in areas loosing 3(a) status over 2 years

  17. Enterprise aid • New form of aid to encourage business start-ups in the assisted areas • Widely defined eligible expenses in first five years of start-up • Maximum € 3m per enterprise in (a), € 2m per enterprise in (c) • € 1m bonus for (a) regions < 50% EU-GDP, low population density regions and islands • Intensities years 1-3 years 4-5 (a) 35% 25% (c) 25% 15%

  18. Next steps • Adopted by Commission, end 2005 • Proposals for appropriate measures • Maps approved by COM, 1st semester 2006 • Exemption regulation for transparent regional investment aid, Oct 2006 • Examination of regional aid schemes 2nd semester 2006

  19. Transparency • Obligation to publish all regional aid schemes on the internet Possibility to exclude costs incurred before publication of the scheme from eligible costs

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