1. An Assessment of Regional State Aid Prof. P. Nicolaides European Institute of Public Administration Maastricht, The Netherlands

2. Three themes Distribution of regional aid Effectiveness of regional aid Policy implications in view of the forthcoming reform

3. How much state aid? Total state aid (2001)€ 86 bn Agriculture & fisheries€ 13 bn Transport€ 39 bn Coal€ 6 bn Manufacturing€ 21 bn Services [tourism, financial, media] € 3 bn Employment/training€ 3 bn Total state aid (2001)€ 86 bn Agriculture & fisheries€ 13 bn Transport€ 39 bn Coal€ 6 bn Manufacturing€ 21 bn Services [tourism, financial, media] € 3 bn Employment/training€ 3 bn Total state aid (2001)€ 86 bn Agriculture & fisheries€ 13 bn Transport€ 39 bn Other sectors€ 10 bn Horizontal objectives € 24 bn Total state aid (2001)€ 86 bn Agriculture & fisheries€ 13 bn Transport€ 39 bn Other sectors€ 10 bn Horizontal objectives € 24 bn

4. How much regional aid? Total aid to “a” regions (2001): € 8 bn [25% of aid other than agric. & transp. or 33% of horizontal aid]D & I account for 50% of regional aid to “a” regions

5. How is regional state aid distributed? - time series Hypothesis: aid granted to reduce regional disparities => so it is distributed according to “need” [income disparity] D t+1 = a + bS t + e [D: income disparities; S: state aid] Test results: sign of independent variable (* = significant) [aid as % of GDP / aid per capita; per country during 1990-2000]

6. How is regional state aid distributed? - cross section Test results: sign of independent variable [aid as % of GDP / aid per capita; across EU, 1999 & 2000]

7. I E Member State experience: More resources for poor regions? Yes, but how about within poor regions & over time? UK

8. Similar situation in other Member States FIN F GR IRL

9. Multiple schemes & funding authorities complicate picture (Austria)

10. Is aid effective? (total aid) State aid as % of GDP (1995-97) v % change in regional income disparities (1998-00/1995-97)

11. Cont. (agriculture & transport aid)

12. Cont. (horizontal aid)

13. Cont. (regional aid)

14. Policy implications Statistical evidence There appears to be no systematic correlation between state aid and regional disparities State aid is unevenly distributed across regions and over time Regional aid is not proportionally granted to most needy regions Statistical evidence There appears to be no systematic correlation between state aid and regional disparities State aid is unevenly distributed across regions and over time Regional aid is not proportionally granted to most needy regions Impact of enlargement Average EU per capita income to decline by about 10% points About 20-30 million of EU15 population lose 87(3)(a) status Impact of enlargement Average EU per capita income to decline by about 10% points About 20-30 million of EU15 population lose 87(3)(a) status Policy implications Aid should be concentrated Enlargement offers «politically convenient» opportunity to carry out reform Policy implications Aid should be concentrated Enlargement offers «politically convenient» opportunity to carry out reform +