State aid: EU guidelines for regional aid for 2014 to 2020
EU guidelines on how EU Member States can grant investment aid to companies to support the development of disadvantaged regions in Europe between 2014 and 2020 entered into force in July 2014.
Guidelines on regional State aid for 2014-2020 (Official Journal C 209 of 23.7.2013).
European Commission has produced guidelines as to how EU Member States can grant investment aid to companies in order to support the development of disadvantaged regions in Europe between 2014 and 2020.
The purpose of the revised guidelines is to encourage economic growth by promoting investments in projects that bring real added value for regional development, especially in Europe’s most disadvantaged regions.
More specifically, the regional aid guidelines set out the rules under which EU Member States can grant state aid to companies to support investments in new production facilities in the less advantaged regions of Europe or to extend or modernise existing facilities.
The guidelines also contain rules on the basis of which EU Member States can draw up regional aid maps to identify in which geographical areas companies can receive regional state aid and at what level.
Key features of the new guidelines include:
The overall share of regions where regional aid can be granted will increase to 47 % of the population of the EU. Currently, about about one in four Europeans lives in less developed regions (defined as regions with Gross Domestic Product (GDP) below 75 % of the EU average). About one in three Europeans lived in less developed regions when the 2007-13 guidelines were adopted. Despite this reduction in regional disparities, the Commission has taken account of the effects of the economic crisis and therefore increased the population coverage.
The guidelines adopt a stricter approach on aid for investments made by large enterprises in the more developed assisted areas. Aid to large enterprises in these areas will only be allowed for investments that bring new economic activity, for initial investments for the diversification of existing establishments into new products or for new process innovation, because it is more likely that these investments will be carried out thanks to the subsidy. In the poorest regions (regions below 75 % of the average GDP of the EU), the guidelines continue to allow aid for other types of investments by large companies as well.
To increase transparency and accountability, Member States will have to publish on the Internet data on how much regional aid they grant and to whom.
State aid — guarantees
Commission Notice on the application of Articles 87 and 88 of the EC Treaty to State aid in the form of guarantees
It updates the European Commission’s approach to State aid granted in the form of guarantees.
It aims to determine whether a guarantee constitutes State aid according to the EC Treaty. The Notice sets out conditions to meet and ways to calculate the minimum premium for a State guarantee to be deemed free of aid.
A state guarantee enables a firm to obtain better financial terms for a loan than those normally available on financial markets.
A state guarantee may or may not constitute State aid. If it doesn’t, it is deemed not to distort competition. The notice lists conditions under which the existence of aid is ruled out. The Commission is neutral as regards public or private ownership.
The notice applies to all economic sectors and to all guarantees where a transfer of risk takes place with the exception of export credit guarantees.
Guarantees granted by a EU country directly — i.e. by central, regional or local authorities — and guarantees granted by businesses under the dominant influence of public authorities may constitute State aid.
Aid beneficiaries are usually borrowers but can, in certain circumstances, also be lenders.
if an EU country forgoes the appropriate premium (charge) intended to cover the risks of non-payment of the guarantee there is aid to the borrower;
if a State guarantee is given after a loan or other financial obligation has been agreed, the lender may benefit through increased security of the loan.
Conditions ruling out State aid
If an individual guarantee or a guarantee scheme does not bring any advantage to a business, it will not constitute State aid.
To determine whether an advantage is being granted through a guarantee or a guarantee scheme, the Commission should base its assessment of the ‘market economy guarantor principle’*.
An individual state guarantee will not be considered State aid if all of the following conditions are fulfilled:
the borrower is not in financial difficulty;
the extent of the guarantee can be properly measured when granted;
the guarantee does not cover more than 80% of the outstanding loan or other financial obligation; this limitation does not apply to guarantees covering debt securities;
a market-oriented price is paid for the guarantee.
A state guarantee scheme will not be considered State aid if all of the following conditions are fulfilled:
the scheme is closed to borrowers in financial difficulty;
the extent of the guarantee can be properly measured when granted;
the guarantee does not cover more than 80% of the outstanding loan or other financial obligation;
terms of the scheme are based on a realistic assessment of the risk so that the premiums paid by the beneficiaries make it, in all probability, self-financing;
the adequacy of the level of the premiums is reviewed at least once a year on the basis of the effective loss rate of the scheme over an economically reasonable future time-period, and premiums adjusted accordingly if there is a risk that the scheme may no longer be self-financing;
premiums charged must cover the normal risks associated with granting the guarantee, the administrative costs of the scheme, and a yearly remuneration of an adequate capital even if the capital is not constituted or is only partially constituted.
Assessment and reporting
Guarantees that are not on market terms are State aid. The Commission has to assess whether such a guarantee is compatible with the internal market under one of the State aid Guidelines. The Commission will take into account the aid intensity, the characteristics of the beneficiaries and the objectives pursued;
EU countries must also present reports to the Commission on approved guarantee schemes.
Important Notice! This website is provided for informational purposes only! It is a fundamental condition of the use of this website that no liability is accepted for any loss or damage caused by reason of any error, omission, or misstatement in its contents.
Draft Articles; The articles on this website are in draft form and are subject to further review for typographical errors and, in some cases, updating and correction. It is intended to include references to the sources of materials and acknowledgements in the final version. The content of articles with [EU] in the title and some of the articles in the section on Agriculture are a reproduction of or are based on European or Irish public sector information.