DG Competition 1

PragueApril 2006

Regional State aid

Regional aid guidelines 2007-2013

DG Competition 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

DG Competition 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.

DG Competition 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

DG Competition 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

DG Competition 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

DG Competition 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%

DG Competition 8

DG Competition 9

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%

DG Competition 10

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

DG Competition 11

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%

DG Competition 12

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

DG Competition 13

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

DG Competition 14

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

DG Competition 15

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

DG Competition 16

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

DG Competition 17

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

DG Competition 18

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%

DG Competition 19

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

DG Competition 20

Transparency

Obligation to publish all regional aid schemes on the internet

Possibility to exclude costs incurred before publication of the scheme from eligible costs