State aid: Is cohesion at the national level successful?

Abstract: The entry of ten new countries in the EU has raised a number of questions about the type cohesion policies that the EU will need in the future and the kind of regional state aid that the EU should allow Member States to grant in the future. This paper examines the impact of regional state aid on regional disparities. It finds that the effect of state aid on regional cohesion is ambiguous, partly because state aid is not proportionally granted to the most needy regions. In the context of the forthcoming debate on reform of structural funds and regional policy it follows that Member States should limit the geographic coverage of regional aid and should take into account the possible negative effects of other types of state aid on regional development or cohesion.