MEMO/06/376

Brussels, 13^th October 2006

State Aid: Commission Guidelines on National Regional Aid for 2007-2013, Luxembourg and Malta – frequently asked questions

The European Commission has approved under EC Treaty state aid rules the regional aid maps covering the period 2007-2013 for Luxembourg and Malta (see IP/06/1393). These regional aid maps are approved by the Commission under the new Regional Aid Guidelines (see IP/05/1653 and MEMO/05/491).These decisions form part of a wider exercise to review regional aid systems in all Member States. (see IP/06/1176 and MEMO/06/327).

What is regional aid?

Regional aid is defined in Article 87(3)(a) and (c) of the EC Treaty as state aid granted by Member States to promote the economic development of certain disadvantaged areas within the EU. It consists mostly in investment aid to large companies, targeted on specific regions in order to redress regional disparities. Increased levels of investment aid, granted to SME located in disadvantaged regions are also considered as regional aid.

What is a regional aid map?

A regional aid map defines the regions of a Member State which are eligible for regional aid and establishes the maximum permitted levels of such aid in the eligible regions. These regions are known as “assisted regions”. The adoption of a regional aid map is a pre-condition for a Member State to grant regional aid. The current maps have been designed for the period 1999-2006 and will expire on 31/12/2006. Member States have to notify their new maps, based on the new regional aid guidelines adopted in December 2005, to the Commission sufficiently early to be approved before the new planning period starts on 1/1/2007.

What’s the proportion of assisted areas in the EU ?

In the light of the exceptional character of state aid, there must be substantially less assisted regions in the EU than there are unassisted regions. Moreover, given the European Council’s repeated calls for less state aid and the widely shared concerns about the distortive effects of investment aid for large companies, the Commission has fixed the overall population coverage to 42% of the current 25 Member States’ total population.

What are the criteria for qualifying as assisted area?

Article 87(3)(a) of the EC Treaty provides that aid to promote the economic development of areas where the standard of living is abnormally low or where there is serious underemployment may be considered compatible with the Single Market. This derogation concerns only areas, where the economic situation is extremely unfavourable in relation to the EU as a whole, that is, according to the regional aid guidelines, mainly regions with a gross domestic product (GDP) per capita of less than 75% of the EU average and the EU’s outermost regions. In addition, for regions whose GDP per capita exceeds 75% of the EU average only since the 2004 enlargement, a transitional period is foreseen until end 2010.

Article 87(3)(c) of the EC Treaty is wider in scope and allows regional development aid, provided it does not adversely affect trading conditions to an extent contrary to the common interest. This derogation concerns areas which are disadvantaged in relation to the national average. As the regional handicap of these areas is smaller, both the geographic scope of the exception and the aid intensity allowed are lower than for regions targeted by Art. 87(3)(a). To determine the scope, the Commission assigns a population ceiling to each Member State, taking into account, among others, population density, unemployment and GDP per capita. Within this ceiling, the Member States then select their eligible regions according to objective criteria set out in the regional aid guidelines. These include GDP per capita, population density, geographical situation, etc.

Malta

The following table from the annexes of today’s decision sets out the regional state aid map for Malta:

MALTA - National regional state aid map 1.1.2007-31.12.2013

Regions eligible for aid under Article 87(3)(a) of the EC Treaty until 31.12.2013

What are the changes for Malta compared with the period 2000-2006?

In the period 2004-2006, 100% of the Maltese population lived in 87(3)(a) regions. The maximum aid intensity for regional aid was 40%.

Malta remains as a whole an Article 87(3)(a) region.

However, in line with the objective of an overall reduction of state aid levels, the aid intensity decreases from 40% to 30%.

Luxembourg

The following table from the annexes of today’s decision sets out the regional state aid map for Luxemburg:

LUXEMBOURG – carte des aides d’Etat à finalité régionale 1.1.2007-31.12.2013

What are the changes compared with the period 2000-2006?

In the period 2000-2006, 32% of the Luxembourg population lived in 87(3)(c) regions. The maximum aid intensity for regional aid was 10%.

However, in line with the objective of overall reduction in state aid levels, the population coverage has been lowered by 50%. For the new regional planning period 2007 – 2013, 16% of the Luxembourg population remain covered by the derogation under Article 87(3)(c).

The regional aid ceiling remains unchanged at 10%.

In order to facilitate the transition and smoothen the impact of the reduction in population coverage (from 32%to 16%), Luxembourg is allowed to grant regional aid in regions covering a maximum of 5.1% of its population for a period of two years