The process of reform EU Competition policy control of regional aid is taking place against a complex background: the economic context is difficult, with the timing and depth of therecession varying between and within countries; the Commission has initiated a wide-ranging State aid modernisation programme (SAMI); and EU Cohesion policy is under review. DG Competition issued a Non-paper to Member States in December 2011, and draft Regional aid Guidelines were expected to be published in September 2012. The Non-paper does not cover all the aspects of the guidelines, but with the exception of the notification thresholds and compatibility assessment (in relation to large investment projects) most of the excluded items are fairly uncontroversial.
The proposals are neither complete nor confirmed, but nevertheless raise some interestingissues and questions, specifically: Is the elimination of large firms from eligibility in ‘c’ areas really sustainable or will DGCompetition back down? Is this a negotiating tactic or does the Commission mean it thistime? The ‘magic number’ for population coverage remains 42 percent – but why? Is it time torethink how the Commission disciplines regional aid? What appetite do Member Stateshave for a more thorough appraisal of the rationale and underpinnings of regional aidcontrol? Can the new approach to ‘c’ area coverage be justified against case law, which refersto areas ‘disadvantaged in relation to the national average’?
Some important data issues remain to be resolved and the choice of GDP data set haspotentially significant implications for the planning, stability and coordination ofpolicy. Lower rates of award are proposed, but a rationale for the new matrix is absent, otherthan a general principle that ‘less is better’. While there may be some merit in this view, there is also a debate about whether there is a point below which incentiveeffect is eroded and windfall gains are increased. What plans does the Commission have for the scrutiny of very large aid cases? Will the shifts in SAMI from concerns about the impact of aid on competition expressed in terms of market dominance or subsidising over capacity to a preoccupation with the effectiveness of policy, feed through into the screening and appraisal of large investment projects?