Special regional aid rules to be extended

Date: 11/11/1999

By Peter Chapman

THE Czech Republic, Romania and the three Baltic states are set to benefit from special EU regional aid rules for the Union's poorest areas for another five years.

Proposals due to be approved by the full Commission later this month will confirm that the five candidates for Union membership still fall way below 75&percent; of EU average income - the threshold for qualifying for the special aid regime. Regions in this category are allowed to pay direct subsidies to firms or offer special tax incentives which would not normally be allowed under the Union's state aid rules.

The plan covers the whole of the five countries, and not just specific regions, allowing their governments to provide aid to promote economic development anywhere within their borders.

Commission officials insist, however, that the regional aid plan will not give candidate countries carte blanche to hand-out taxpayers' cash. They stress that only aid which meets tough quality control criteria will be accepted.

State aid is a key concern for EU member states and industry as enlargement moves closer. Countries which have bailed out ailing industries for decades must now face up to the need to phase out subsidies.

The Commission's proposal would extend the temporary regional aid status agreed as part of the candidates' 'Europe agreements' with the Union. Proposals to extend Poland's status have already been launched and Slovenia's existing agreement does not expire until 2003.

The next step, say officials, will be for the applicants to develop similar regional aid 'maps' to those used by the existing 15 member states as they become richer and move closer to Union membership. These maps, which have to be notified to the Commission, show areas within a country which are eligible for regional aid.