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3 Competition Policy

The provision of State aid is one of the instruments at the disposal of national and regional authorities to influence the spatial distribution of economic activity. The results of the Eighth Survey on State aid in the EU1 show that State aid still occupies a central place in the industrial and regional policies of most Member States. Over the period 1996 to 1998, the total amount of State aid granted in the Union averaged EUR 79.8 billion a year, or 2.4% of total government expenditure (though this was slightly less than over the period 1994 to 1996 - see Table 6 on national aid).

The results of the Survey show that there are significant disparities between Member States in the granting of State aid. In terms of all three indicators presented in the table below, the difference between the lowest and the highest level is three to one.

The following features are apparent:

  • expenditure on State aid per person employed and per head of population in the four cohesion countries in terms of Euros has remained well below the EU average, and well below that in many of the more prosperous Member States, such as Germany, Italy, France and Belgium, though the gap deminished over the period 1994 to 1998; in the period 1996 to 1998, the cohesion countries accounted for 10.5% of total expenditure on State aid in the EU as against 9.5% in the period 1994 to 1996;

  • the volume of State aid has declined in recent years, especially in the more prosperous Member States, where expenditure per head and per person employed is above the EU average. The main exception is France, where in recent years, expenditure increased significantly, in both absolute and relative terms.

Given its effect on the regional distribution of economic activity and income, the control of State aid will remain a key instrument of Community cohesion policy. Allowing high levels of State aid in the most prosperous Member States and regions would undermine the effectiveness of both Community and national regional policy efforts in support of the weakest regions. Financial assistance to support businesses in the latter is vital to correct regional disparities, and it is important that the effectiveness of this is not compromised by the granting of disproportionate State aid elsewhere. Strict control of State aid should, therefore, be regarded as an essential complement of Structural Funds support for the less favoured regions.

Regional State aid is by far the largest single category of State aid in the EU. Between 1996 and 1998, Member States granted EUR 18.8 billion in State aid for regional purposes, which represented 57.6% of all State aid granted to industry and services in the Union. In the 1990s, there was a proliferation of regional aid measures throughout the Community, and a gradual extension of the areas qualifying for regional aid, giving rise to a real danger of the effectiveness of regional aid being undermined as a means of furthering economic and social cohesion.

At the end of 1997, the Commission adopted new Guidelines on national regional aid, with the aim of strengthening control over its deployment. These consolidated the criteria used to assess the compatibility of national regional aid measures and clarified the rules for the demarcation of regions qualifying for aid under Article 87(3)(a) and (c) of the Treaty. Member States were invited to bring their existing regional aid systems into line with the new rules by the year 2000.

A key element of the exercise was the review of regional aid maps in each country, with a view to bringing about a sizeable reduction in the coverage of aid. In the course of 1999-2000, new regional aid maps were established for each Member State. The main aims were achieved, in that the new maps were defined on the basis of a transparent and objective method which ensured equal treatment for all Member States. At the same time, the total population in the EU covered by regional aid was reduced from 46.7% to 42.7%. A strict application of the eligibility criteria has resulted in a tighter demarcation of the assisted regions, enabling Member States to focus regional assistance on the regions suffering the most severe economic problems and so increasing its effectiveness.

A final element to take into account is the role that services of general economic interest can play in lagging regions, as stated in Article 16 of the Treaty.

  1. Commission of the European Communities, Eighth survey on State aid in the European Union, COM(2000)205 Final, 14.4.2000.

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