1. DG Competition 1 DG Competition June 2004 Revision of the regional aid guidelines (RAG)

2. DG Competition 2 Main policy objectives o Concentration of regional aid to investment in the least favoured regions o Increased flexibility for Member States and regions to pursue local regional policy o Enhancing the long-term competitiveness and growth potential of all European regions

3. DG Competition 3 Current rules o Basic principle: exceptional nature of regional aid u Overall coverage of 42.7% of Community population u Criteria for allocating the Community ceiling between Member States u Criteria for selection of Article 87(3)(a) and Article 87(3)(c) regions

4. DG Competition 4 The context of the revision o The current maps expire on 31.12.2006 o DG COMP has made use of u Conclusions of European Councils u Comments submitted by Member States u Experience with the present RAG, aid maps and aid schemes u Literature (surveys, studies and academic papers) on the economics and effectiveness of regional aid u The Third Cohesion report

5. DG Competition 5 Conclusions of European Councils o The Lisbon, Gothenburg, Stockholm and Barcelona European Councils: less and better-targeted State aid o Questions u Is the award of aid for initial investment and linked job creation really the most effective way of promoting cohesion? u Can the aid levels allowed under the present guidelines be reduced without decreasing the effectiveness of such aid?

6. DG Competition 6 The Third Cohesion report o Three main objectives: convergence, regional competitiveness and employment, and European territorial co-operation u Convergence will be promoted by supporting growth and job creation in the least developed Member States and regions u 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 o 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

7. DG Competition 7 A new approach to regional policy o 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 u Regional investment aid to the poorest regions u Operating aid in limited cases (outermost regions and low population density areas) u Phasing out of regions that lose eligibility to Article 87(3)(a) u Horizontal thematic approach for the rest of the territory

8. DG Competition 8 Areas eligible for Article 87(3)(a) o NUTS II regions with GDP/cap below 75% of the EU-25 average u GDP below 50%: 50% gross for large companies u GDP below 60%: 40% gross for large companies u GDP below 75%: 30% gross for large companies o Operating aid in limited cases u handicaps of outermost regions u additional transport cost in low population density areas

9. DG Competition 9 Earmarked Article 87(3)(c) regions o Regions losing Article 87(3)(a) status because of the statistical effect of enlargement o Regions losing Article 87(3)(a) status due to economic reasons o Other outermost regions o Other low population density areas

10. DG Competition 10 o Total (provisional) coverage: 34.84% of Community population u Abnormally low standard of living: 27.11% u Statistical effect regions: 4.18% u Economic growth regions: 2.71% u Other outermost regions: 0.43% u Other low population density areas: 0.41% Population coverage

11. DG Competition 11 Any other regions o Thematic approach in State aid u Horizontal rules, many of which will be reviewed before 1.1.2007 u New approach for the assessment of lesser amounts of State aid and of certain aids with limited effects on trade (significant impact test) u Increased flexibility for Member States to tackle local problems and to differentiate between regions where this is considered to be necessary

12. DG Competition 12 Existing horizontal instruments o SMEs: aid for investment, advisory services and participation in trade fairs o R&D: aid for basic and applied research projects o Environment: aid for environmental investment (incl. energy saving, renewables, polluted sites, relocation), and operating aid for recycling and renewables o Training: aid for general and specific training of employees o Employment: aid for net job creation and for employment of disadvantaged and handicapped people o Rescue and restructuring: rescue aid (liquidity injection for 6 months) and restructuring aid o Risk capital: aid for risk capital funds o de minimis: small amounts of aid for anything

13. DG Competition 13 o Aid with limited spillovers (small distortions of competition and limited effect on trade) to be considered compatible with the common market u Based on economic rationale u Involving clear and easy criteria that require minimal or no assessment u Leading to a reduction in workload u Being transparent The significant impact test

14. DG Competition 14 Services of general economic interest o 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) u Definition of public service obligations u Compensation calculated in an objective and transparent manner u Compensation cannot exceed what is necessary to cover all or part of the costs incurred u Undertaking is chosen via public procurement, or the level of compensation is determined by comparison with the costs which a typical undertaking would incur

15. DG Competition 15 Other issues for the revision of the regional aid guidelines o Multisectoral Framework will become part of the regional aid guidelines o Possible block exemption for regional aid o Further differentiation between small and medium-sized enterprises o Consistency with Structural Funds o Net or gross grant equivalents

16. DG Competition 16 Proposed aid intensities LargeMediumSmall 87(3)(a) ≤ 50% GDP50%60%70% 87(3)(a) ≤ 60% GDP40%50%60% 87(3)(a) ≤ 75% GDP30%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%

17. DG Competition 17 Specific provisions for outermost regions o All outermost regions are entitled to a bonus of 10% in aid intensities, which will place them in a “higher” category o 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