DG Competition 1 Prague April 2006 Regional State aid Regional aid guidelines

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

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

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

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

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

DG Competition 7 Population coverage under the RAG Proposed coverage EU % 42% + 50% safety net o Article 87(3)(a)27.7% o Statistical effect 3.6% o Economic development + low population density4.0% o Additional (c) allocation6.7% o 50% Safety Net1.1%

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DG Competition 9 Aid in Areas eligible for Article 87(3)(a) o Aid for large companies in NUTS II regions with GDP/cap below 75% of the EU-25 average u GDP below 45%: 50% gross u GDP below 60%: 40% gross u GDP below 75%: 30% gross o Bonuses u Small companies + 20% u Medium-sized companies + 10%

DG Competition 10 Aid in non-assisted regions o No regional investment aid for large enterprises o Greater flexibility for R&D, innovation, environmental investments, training etc o Significantly more flexible regime for SMEs

DG Competition 11 Regional aid in the Czech Republic Art. 87(3)(a) GDP % EU-25Aid intensity u Strední Morava 52,0340% u Severozápad 53,2940% u Strední Cechy 54,3540% u Moravskoslezsko 55,2940% u Severovýchod 55,5940% u Jihovýchod 58,1740% u Jihozápad 60,4130% o Total population coverage ,6 % o 7.7% transitional additional coverage for the Prague region (GDP 147,2%) under Art.87(3)(c); intensity 10%

DG Competition 12 Transitional provisions o Phasing in of reductions in aid intensity, for: u (a) regions > 15% reduction u economic development regions o Transitional safety net; 66% of current (c) coverage for 2 years o Two years to phase out operating aid

DG Competition 13 RAG, scope and sensitive sectors o No major changes to scope: RAG apply to all sectors except: u Coal, Fisheries, Production of agricultural products o Prohibitions on regional investment aid: u Steel (except SMEs), Synthetic fibres o Apply subject to special rules to u Transport, shipbuilding, agricultural processing and marketing o No other sensitive sectors for investment aid

DG Competition 14 Conditions for granting regional investment aid – main changes o Clarification of definition of initial investment o New rules on incentive effect o Maintenance of the investment for at least 5 years (reduced to 3 years for SMEs) u Member States may impose longer periods o Rules on discounting

DG Competition 15 Eligible expenses for investment aid – main changes o Land, buildings, plant and machinery no ‘standard base’ o Clarification of rules on leasing o ‘Moveable’ assets should be new exceptions; SMEs and takeovers o Consultancy costs for SMEs o More generous treatment of intangible assets: up to 50% of eligible costs for large firms

DG Competition 16 Large investment projects o Integration of MSF into RAG o Automatic scaling down mechanism for eligible expenses over € 50m u € m -50% of normal aid intensity u > € 100m - 34% of normal aid intensity o Transparency mechanism for eligible expenses > € 50m o Notification threshold – aid exceeds maximum allowed for a project with € 100 m eligible expenses o In depth assessment of investment aid where; u Beneficiary has more than 25% market share or u Capacity increase >5% in a declining market

DG Competition 17 Operating aid o Permanent handicaps of the outermost areas u Possibility of a ‘safe-harbour’ for operating aid in outermost regions, up to 10% of turnover. o Permanent transport aid in the outermost and low population density areas o Permanent aid to offset depopulation in the least densely populated areas o Temporary and degressive operating aid to offset bottlenecks in 3(a) areas o Exclusion of operating aid to financial services sector o Transitional phasing out of operating aid in areas loosing 3(a) status over 2 years

DG Competition 18 Enterprise aid o New form of aid to encourage business start-ups in the assisted areas o Widely defined eligible expenses in first five years of start-up o Maximum € 3m per enterprise in (a), € 2m per enterprise in (c) o € 1m bonus for (a) regions < 50% EU-GDP, low population density regions and islands o Intensities years 1-3years 4-5 (a) 35% 25% (c) 25% 15%

DG Competition 19 Next steps o Adopted by Commission, end 2005 o Proposals for appropriate measures o Maps approved by COM, 1st semester 2006 o Exemption regulation for transparent regional investment aid, Oct 2006 o Examination of regional aid schemes 2nd semester 2006

DG Competition 20 Transparency o Obligation to publish all regional aid schemes on the internet Possibility to exclude costs incurred before publication of the scheme from eligible costs