Proposal for a COUNCIL REGULATION amending Regulation (EC) No 1260/1999 laying down general provisions on the Structural Funds

(presented by the Commission)

EXPLANATORY MEMORANDUM

1. Introduction

On 14 March 2000 the Commission adopted a report, in response to a request from the Cologne European Council, on the measures to implement Article 299(2) of the EU Treaty on the outermost regions. [1] The report was addressed to the Council and Parliament and was forwarded also to the Committee of the Regions and the Economic and Social Committee. In June the Feira European Council called on the Commission to make appropriate proposals.

[1] COM(2000) 147 final.

Several of the measures referred to in the report deal with the requirements for implementing the Structural Funds. The five attached regulations concern those measures.

2. The specific situation of the outermost regions

The seven outermost regions, defined specifically in Article 299(2) of the Treaty, are the Azores, Maderia, the Canary Islands, Guadeloupe, French Guiana, Martinique and Réunion. The average per capita income of six of them is between 40% and 55% of the European average, ranking them among the Union's ten poorest regions; in five, the rate of unemployment, of between 21% and 37% of the working population, is among the highest in the Union.

Since the Structural Funds were reformed in 1988, the seven outermost regions have been regarded, on account of their per capita GDP of less than 75 % of the Community average, as regions lagging behind in their development and consequently eligible under Objective 1.

In addition, the Council, acting on a proposal from the Commission, took decisions adopting for the French overseas departments in 1989 and for the Azores and Maderia and the Canary Islands in 1991 programmes of options specific to their remote and insular nature. [2]

[2] POSEIDOM - Council Decision 89/687/EEC of 22 December 1989 - OJ L 399, 30.12.1989, p. 39. POSEIMA - Council Decision 91/315/EEC of 26 June 1991 - OJ L 171, 29.06.1991, p. 10. POSEICAN - Council Decision 91/314/EEC of 26 June 1991 - OJ L 171, 29.06.1991, p. 5.

Article 299(2) of the Treaty adopted at Amsterdam on 2 October 1997 and which entered into force on 1 May 1999 acknowledges the specific nature of the combination of handicaps suffered by all the outermost regions. It states that their economic and social situation is compounded by their remoteness, insularity, small size, difficult topography and climate and economic dependence on a few products and that the permanence and combination of these factors severely restrain their development.

The Commission considers it necessary therefore to take fuller account, under the Structural Funds, of the specific nature of these regions, as defined in Article 299(2) of the Treaty.

3. Adjusting the differentiation of rates of assistance under the Structural Funds

As indicated in Article 299(2) of the Treaty, all the outermost regions face the same types of problems. Consequently, whether they belong to countries covered by the Cohesion Fund or not, they should qualify for the same arrangements concerning rates of assistance under the Structural Funds.

In addition, the small size of local markets and the constraints associated with supplies and storage put a strain on the production costs of small and medium-sized businesses, reducing their productivity and competitiveness compared with that of businesses located close to the main markets of continental Europe, putting a brake on job creation and interfering therefore with the lowering of the high rates of unemployment.

Three amendments are proposed then to cover these factors.

The first concerns the maximum contributions from Structural Funds. It involves, for all the outermost regions:

-setting the maximum contribution from the Funds at 85 % of the total eligible cost;

-raising the maximum assistance from the Funds from 35% to 50% of the total eligible cost in the case of investments in small and medium-sized firms.

The second concerns the maximum assistance set in the Regulation concerning support for rural development from the European Agricultural Guidance and Guarantee Fund for public expenditure on investments in agricultural holdings [and the processing and marketing of agricultural products], and support for maintaining and developing the economic, environmental and social role of woodlands in rural areas. It is planned, for all the outermost regions:

-to raise from 50% to 75% the maximum level of public assistance expressed as a percentage of the volume of eligible investment in agricultural holdings;

-to raise from 50% to 65% the maximum level of public assistance expressed as a percentage of the volume of investment in the processing and marketing of agricultural products;

-to extend Community financial support for woodlands and areas owned by individuals, associations of individuals, or municipalities or associations of municipalities, to woodlands and areas owned by any public, local, regional or national authority.

The third concerns certain rates of assistance under the Financial Instrument for Fisheries Guidance.

4. Regulations to be amended

The proposed amendments concern three regulations adopted by the Council:

-Regulation (EC) No 1260/1999 of 21 June 1999 laying down general provisions on the Structural Funds [3], based on Article 161 of the Treaty;

[3] Council Regulation (EC) No 1260/1999 of 21 June 1999 - OJ L 161, 26.06.1999, p. 1.

-Regulation (EC) No 2792/1999 laying down the detailed rules and arrangements regarding Community structural assistance in the fisheries sector [4], whose legal basis is Article 37 of the Treaty;

[4] Council Regulation (EC) No 2792/1999 of 17 December 1999 - OJ L337, 30.12.1999, p. 10.

-Regulation (EC) No 1257/1999 on support for rural development from the European Agricultural Guidance and Guarantee Fund (EAGGF) and amending and repealing certain Regulations [5].

[5] Council Regulation (EC) No 1257/1999 of 17 May 1999 - OJ L 160, 26.06.1999, p. 80.

However, in the case of the latter Regulation, it seemed preferable to include the proposed amendments in existing Council regulations laying down specific measures covering certain agricultural products for the outermost regions and providing for exceptional structural measures, in relation to rules adopted prior to those adopted in 1999. The three regulations in question concern the French overseas departments, the Azores and Maderia and the Canary Islands respectively. They are:

-Regulation (EEC) No 3763/91 introducing specific measures in respect of certain agricultural products for the benefit of the French overseas departments [6], based on Article 37 of the Treaty;

[6] Council Regulation (EEC) No 3763/1991 of 24.12.1991 - OJ L 356, 24.12.1991, p. 1.

-Regulation (EC) No 1600/92 concerning specific measures for the Azores and Madeira relating to certain agricultural products [7], based on Articles 36 and 37 of the Treaty;

[7] Council Regulation (EC) No 1600/1992 of 15.6.1992 - OJ L 173, 27.06.1992, p. 1.

-Regulation (EC) No 1601/92 concerning specific measures for the Canary Islands with regard to certain agricultural products [8], based on Articles 26, 36 and 37 of the Treaty.

[8] Council Regulation (EC) No 1601/1992 of 15.6.1992 - OJ L 173, 27.06.1992, p. 13.

On the amendment of the agricultural provisions of these three POSEI regulations, shortly to be presented by the Commission to the Council, the above changes relating to structural exceptions will be incorporated in the POSEI regulations, as amended, with a view to their consolidation in a single regulation.

5. Conclusions

As provided for in Article 299(2), the proposed amendments concern only the seven outermost regions facing common and specific handicaps. They are not liable to lead to distortions in the functioning of the Single Market or the application of the common policies.

They have no implications for the Structural Funds allocations made to the Member States concerned for the period 2000-06.

2000/0306 (AVC)

Proposal for a

COUNCIL REGULATION

amending Regulation (EC) No 1260/1999 laying down general provisions on the Structural Funds

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 161 thereof,

Having regard to the proposal from the Commission [9],

[9] OJ ...

Having regard to the assent of the European Parliament [10],

[10] OJ ...

Having regard to the opinion of the Economic and Social Committee [11],

[11] OJ ...

Having regard to the opinion of the Committee of the Regions [12],

[12] OJ ...

Whereas:

(1) Article 29(3)(a) of Council Regulation (EC) No 1260/1999 of 21 June 1999 laying down general provisions on the Structural Funds [13] provides for the possibility of awarding a contribution from the Funds of a maximum of 85% of the total eligible cost only for the outermost regions of a Member State covered by the Cohesion Fund and for the outlying Greek islands which are under a handicap due to their distant location.

[13] OJ L 161, 26.6.1999, p. 1.

(2) Article 299(2) of the Treaty states that all the outermost regions face the same types of problem, particularly remoteness and insularity, which may severely restrain their development. Accordingly, Article 29(3)(a) of Regulation (EC) No 1260/1999 should be amended so as to fix the maximum contribution of the Funds at 85% of the total eligible cost for all the outermost regions, whether of a Member State covered by the Cohesion Fund or not, where this does not involve investments in infrastructure projects generating substantial net revenue or investments in firms.

(3) Article 29(4)(b) of Regulation (EC) No 1260/1999 lays down that, in the case of investments in firms, the contribution of the Funds may not exceed 35% of the total eligible cost in the regions covered by Objective 1.

(4) All the outermost regions are eligible for Objective 1 of the Structural Funds for the period 1 January 2000 to 31 December 2006 in accordance with Commission Decision 1999/502/EC of 1 July 1999 drawing up the list of regions covered by Objective 1 of the Structural Funds for the period 2000 to 2006 [14].

[14] OJ L 194, 27.7.1999, p. 53.

(5) An increase in the maximum rate of assistance from the Structural Funds in the case of investment in small and medium-sized firms situated in the outermost regions would appear necessary in view of the difficulties encountered by these firms, in order to make a significant contribution to the development of those regions.

(6) Article 29(4)(b) of Regulation (EC) No 1260/1999 should therefore be amended so that, in the case of investments in small and medium-sized firms situated in the outermost regions, assistance from the Funds may amount to up to 50% of the total eligible cost,

HAS ADOPTED THIS REGULATION:

Article 1

Regulation (EC) No 1260/1999 is hereby amended as follows:

1. Article 29(3)(a) is amended as follows: "a) a maximum of 75% of the total eligible cost and, as a general rule, at least 50% of eligible public expenditure in the case of measures carried out in the regions covered by Objective 1. The Community contribution may rise, in exceptional and duly justified cases, to a maximum of 80% of the total eligible cost where the regions are located in a Member State covered by the Cohesion Fund and to a maximum of 85% of the total eligible cost for all the outermost regions and for the outlying Greek islands which are under a handicap due to their distant location;"

2. The following point is added to Article 29(4)(b): "ii) 50% of the total eligible cost in the outermost regions in the case of investments in small and medium-sized firms;" Points (ii) and (iii) become (iii) and (iv) respectively.

Article 2

This Regulation shall enter into force on the third day following its publication in the Official Journal of the European Communities.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels,

For the Council

The President