Urban aid to promote jobs is approved

Date: 03/10/1996

By Mark Turner

THE European Commission has given the all-clear for national schemes promoting enterprise in poor urban areas.

A French initiative launched in January, which gave tax breaks to firms in inner cities, had provoked complaints of unfair state aid from some quarters. But the Commission judged that since the benefits were not linked to any particular sector, and were largely local in effect, the move did not contravene EU competition rules.

The Commission's Directorate-General for competition (DGIV) has now set down guidelines for national governments to judge whether similar schemes will be allowed in future.

For the next five years at least, governments will be allowed to give financial support to 'purely local' companies in 'difficult areas'.

A difficult area, as defined by the Commission's URBAN initiative, comprises between 10,000 and 30,000 people, within a town of 100,000 or more. Its economic indicators must be significantly below the national and town average, with high unemployment amongst vulnerable groups.

In broad terms, the Commission will favour plans which help the young unemployed, youngsters without professional training and women.

Governments will be allowed to provide companies in eligible areas with around 10,000 ecu per job they create, as long as at least a fifth of the jobs go to people living in the vicinity.

The rules stipulate that only 'proximity sectors' - such as construction, car and domestic appliance maintenance, hotels and restaurants, social services, and taxis - should qualify for aid.

Officials say the guidelines are needed because at present there are no provisions for helping small enterprises in such specific terms. Since market forces have not fostered sufficient economic vigour to pull the areas concerned out of their slump, some intervention is essential.