New state aid rules for remote regions

Date: 20/07/2000

By John Shelley

COMPETITION chief Mario Monti is set to unveil proposals to loosen the EU's state aid regulations for outlying territories such as the Canary Islands and the Azores next week.

The proposed new rules would give the Union's more distant territories special exemptions from tough regulations which restrict member states' ability to hand over taxpayers' cash to support ailing enterprises.

The changes would allow the French, Spanish and Portuguese governments to provide money for their overseas territories to compensate for difficulties created by their remoteness, insularity and small size, in a bid to boost the economies of some of Europe's poorest regions.

Under the proposals, which will have to be approved by member states before they can come into force, governments would be allowed to provide some aid permanently, without the usual requirement that the funding level be gradually decreased. The level of grants would, however, be reviewed by the Commission on a regular basis. "The aid will be authorised by the Commission for a limited period in order to ensure that regular re-evaluation guarantees its long-term relevance to the situation of the region concerned," states a draft version of the proposal.

Monti's move is envisaged under the terms of the Amsterdam Treaty, which recognises that the French overseas departments, the Portuguese Azores and Madeira, and the Spanish Canary Islands suffer economic disadvantages because of their locations and island status. But this is the first time that concrete proposals for changing state aid rules to take account of those difficulties have been put forward.

Under Monti's plans, governments would be allowed to provide 'operating aid' which directly and permanently compensates businesses for the extra transport and similar costs incurred by their remote status.

Because some of the outlying regions are also among the least-developed of Europe's territories, other forms of aid which would directly reduce a firm's expenses would also be permitted for a limited time.

Competition chief Mario Monti is set to unveil proposals to loosen the EU's state aid regulations for outlying territories such as the Canary Islands and the Azores.