EU regional assistance and the member states’ growth perspectives

Significant regional disparities in terms of economic well-being, income and unemployment still exist in the EU-27. EU’s regional aid aims at supporting economic development in disadvantaged areas while ensuring a level playing field among the member states. Present Regional Aid Guidelines specify two main items: a) conditions under which regional aid may be compatible with the internal market, and b) establishing specific criteria for identifying disadvantaged regions in need of assistance. 

In the Guidelines’ identification of the “most disadvantaged regions”, the so-called “a-regions” are those that include the EU’s outermost regions and regions whose GDP per capita is below or equal to 75 percent of the EU average. Then, there are the so-called “pre-defined c-regions”, which represent former “a-areas” and those sparsely populated European regions, in accordance with the Treaties (art 107, 3 TFEU).
The Commission constantly reviewed competition rules involved in the state aid to ensure they fit for the changing EU’s market conditions, e.g. one of the latest was evaluation of the Regional Aid Guidelines in 2019; at the end of October 2020, the Commission published “staff working document”, summarising the evaluation results. The evaluation concluded, on one side, that generally the state aid control system and existing rules “fit for purpose”; however, individual rules, such as the Regional Aid Guidelines, needed some adaptation, also in the light of the recent European Green Deal and the EU’s industrial and digital Strategies (more on these ides below).
As soon as the state aid rules represent vital part of the green transition, the Commission reviewed relevant state aid guidelines at the end of 2021; it included the Regional Aid Guidelines, IPCEI Communication, RDI Framework, Risk Finance Guidelines, Environmental and Energy Guidelines and relevant provisions of GBER. Other state aid rules that were part of the “fitness check” will be revised in the medium term.
Reference to Commission press release (April 2021) in: https://ec.europa.eu/commission/presscorner/detail/en/IP_21_1825

Commission’s revision of the EU guidelines on regional state aid sets out “adapted rules” under which the member states can grant public aid to companies involved in economic development of disadvantaged areas, while ensuring a level playing field among the states. The revised Guidelines entered into force in January 2022. The Regional Aid Guidelines are the first set of revised state aid rules following the announcement of the European Green Deal*), the European industrial strategy**) and the EU’s digital Strategy +).
*) The European Green Deal covers almost all sectors of states’ economy, incl. transport, energy, agriculture, construction, as well as such industries as steel, cement, ICT, textiles and chemicals. On “green deal” adopted at the end of 2019 in: https://ec.europa.eu/commission/presscorner/detail/en/ip_19_6691.
**) In March 2020, the Commission revealed the foundations for an industrial strategy that would support the twin transition to a green and digital economy; as well as making the European industry more competitive globally, and enhance Europe’s open strategic autonomy. European 14 industrial ecosystems are: aerospace and defence, agro-food, construction, cultural and creative industries, digital, electronics, energy intensive industries, energy-renewables, health, transport mobility and automotive, proximity-social economy-civil security, retail, textile and tourism. The EU-2020 industrial strategy represents a targeted innovative approach serving as a primary developmental tool both for big companies and for SMEs. In the latter, the attention is on start-ups, on reducing supply dependencies and/ or the accelerated green and digital transitions. The strategy also includes some measures facilitating SMEs response to increased resilience, combating late payments, and supporting solvency. On European industrial strategy in: https://ec.europa.eu/info/strategy/priorities-2019-2024/europe-fit-digital-age/european-industrial-strategy_en.
+) Modern trends in digital society, economy and technologies are associated with new ways of learning and educating, entertaining and working, etc. giving the citizens new opportunities to reach out beyond physical communities, geographical locations and social positions. Present challenges associated with the digital transformation have to be addressed during the EU present digital decade-2030 through an increase in technological strategic autonomy in cyber-security and, generally, the digital divide. The EU digital decade-2030 sets out some concrete targets and identifying goals to reach: a) digitally skilled population and highly skilled digital professionals, b) secure and sustainable digital infrastructures, c) digital transformation of businesses, and d) digitalisation of public services. Key policy areas to ensure these goals include: cloud computing, artificial intelligence, digital identities, data, and connectivity.
On the EU digital strategy in: https://digital-strategy.ec.europa.eu/en/policies/europes-digital-decade.

The revised Regional Aid Guidelines include a number of targeted adjustments to simplify and reflect experience gained from the application of the previous rules, as well as to reflect new policy priorities related to the European Green Deal and the EU industrial and digital strategies. The revised guidelines allowed for sufficient time for the states to prepare their regional aid maps; the states can notify their future regional aid maps to the Commission for individual approval.

Revised guidelines: key elements
• Increased overall regional aid coverage to 48% of the EU population (previously 47%) and updated list of assisted ‘a’-areas and predefined ‘c’-areas based on the latest available Eurostat statistics on GDP (2016-2018) and unemployment (2017-2019). The assignment criteria for assisted areas, which have proven to work well in the previous period, have remained unchanged. At the same time, states will have increased flexibility to assign so-called “non-predefined “c-areas” on the maps: in addition to the criteria which were already in place, the Commission introduced a simplification to allow the states to easily assign the non-predefined “c-area qualification” to “just transition areas*)” (JTMs), which are facing particular transition challenges. The JTMs are the key tool to ensure that the transition towards a climate-neutral economy happens in a fair way with a targeted support to help mobilise around €55 billion over the period 2021-2027 in the most affected regions in order to alleviate the socio-economic impact of the transition.
*) The Just Transition Mechanism addresses the social and economic effects of the transition, focusing on the regions, industries and workers who will face the greatest challenges, through three pillars: a) transition fund with €19.2 billion, which is expected to mobilise around €25.4 billion in investments; b) InvestEU “Just Transition” scheme providing EU-budgetary guarantee under the InvestEU program and the InvestEU Advisory Hub that will act as a central entry point for advisory support requests (expected to mobilise €10-15 billion in mostly private sector investments); and c) new Public Sector Loan Facility, combining €1.5 billion of grants financed from the EU budget with €10 billion of loans from the European Investment Bank, to mobilise €18.5 billion of public investment.
More in: https://ec.europa.eu/info/strategy/priorities-2019-2024/european-green-deal/finance-and-green-deal/just-transition-mechanism_en.

• Increased maximum aid intensities to support the European Green Deal and Digital Strategy objectives by enabling additional incentives for investments in the disadvantaged areas of the EU. In addition, the Guidelines include several aid intensity bonuses: a) for outermost regions, b) for border areas, c) for Just Transition Areas in the most disadvantaged areas, and d) for areas experiencing a population loss. SMEs maintain higher maximum aid support than big companies.

• Validity of regional aid maps for the period 2022-2027, with a mid-term review envisaged for 2023 based on updated statistics reflecting the recent economic developments and enabling regions to bounce back from the crisis.

• A general simplification of the structure of the Guidelines, a clarification of some of the definitions and terminology, and some targeted changes in light of the European Green Deal and the EU’s industrial and digital strategies. For example, the sectoral scope of the Guidelines was updated, as well as the criteria used for balancing the positive impact of the aid against its negative effect on competition and trade. This assessment may now also take account of other positive and negative effects, such as a substantial contribution to the green and digital transition or some related negative externalities.
At the same time, new Regional Aid Guidelines maintain strong safeguards to prevent the EU states from using public money to trigger the relocation of jobs from one EU state to another, which is essential for fair competition in the European Single Market.

 

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