WRITTEN QUESTION E-1787/98

by Angela Sierra González (GUE/NGL) to the Commission

(11 June 1998)

Subject: State aid for the outermost regions of the European Union

Articles 92(3)(a) and (b) of the Treaty on European Union establish different arrangements for state aid depending on the level of development of the EU regions concerned.

At present, the Canary Islands, as an outermost region of the EU within the meaning of Article 299(2) of the Treaty of Amsterdam, continue to enjoy special economic and tax arrangements geared to their specific economic and geographical situation.

Articles 299(2) of the Treaty of Amsterdam provides for the adoption of 'specific measures aimed, in particular, at laying down the conditions of application of the present Treaty to those regions, including common policies'. While Article 299(2), third subparagraph, stipulates that the Council 'shall take into account areas such as ... State aids' when adopting these measures. Has the Commission considered the possibility of including the Canary Islands as a region eligible for state aids under the provisions of Article 92(3)(a), bearing in mind the serious employment situation in the islands, where the rate of unemployment is more than 20 % of the working population?

If the Canaries were included as an eligible region for state aids under the provisions of Article 92(3)(c), what effects would this have on the allocation of funds in terms of the development of the region?

Answer given by Mr Van Miert on behalf of the Commission

(22 July 1998)

On 18 December 1997 the Commission authorised special economic and tax arrangements for the Canary Islands comprising aid schemes that would apply until 2003 or 2005, as the case may be. This decision, based on Article 92(3)(a) of the EC Treaty, provides a framework for offsetting during the period mentioned the disadvantages resulting from the islands' status as an outermost region of the EU.

As regards any future aid measures, point 3.5 of the Guidelines on national regional aid(1), which were also approved by the Commission on 18 December 1997, stipulates the following:

"Article 92(3)(a) provides that aid to promote the economic development of areas where the standard of living is abnormally low or where there is serious underemployment may be considered compatible with the common market. As the Court of Justice of the European Communities has held, 'the use of the words 'abnormally' and 'serious' in the exemption contained in Article 92(3)(a) shows that it concerns only areas where the economic situation is extremely unfavourable in relation to the Community as a whole'(2).

The Commission accordingly considers, following a tried and tested approach, that the conditions laid down are fulfilled if the region, being a NUTS(3) level II geographical unit, has a per capita gross domestic product (GDP), measured in purchasing power standards (PPS), of less than 75.0 % of the Community average(4). The GDP/PPS of each region and the Community average to be used in the analysis must relate to the average of the last three years for which statistics are available. These amounts are calculated on the basis of data furnished by the Statistical Office for the European Communities."

It should also be pointed out that the 75 % threshold is the same as that applied under the former regional aid rules and under the Structural Funds to determine whether a region's development is lagging behind.

When the regional aid map for Spain was last reviewed in 1995, the Commission took the view that aid to promote the economic development of the Canary Islands could be regarded as compatible with the common market by virtue of the derogation in Article 92(3)(a) of the EC Treaty since their per capita GDP/PPS was below the 75 % threshold. Accordingly, it approved on 18 December 1977 special economic and tax arrangements for them comprising aid schemes that would apply until 2003 or 2005, as the case may be. It has proposed that, following the 1999 review of the Spanish regional aid map, regional aid for the Canary Islands other than that approved in its decision of 18 December 1997 be covered by the aforementioned derogation in so far as the average per capita GDP/PPS for the last three years for which statistics are available as at 15 October 1998 remains below the 75 % threshold. However, if the average exceeded the threshold, regional aid to the Canary Islands could benefit only from the derogation in Article 92(3)(c) of the EC Treaty, and then only on condition that Spain planned to include the Canary Islands in the list of regions for which it requested a derogation.

The eligibility of regional aid to the Canary Islands for the derogation contained in Article 92(3)(c) does not have any bearing on aid measures carried out there by the Structural Funds since aid under such measures is granted in accordance with the specific regulations adopted by the Council pursuant to the Treaty provisions on economic and social cohesion.

(1) OJ C 74, 10.3.1998.

(2) Case248/84 Germany v Commission [1987]ECR4013, at paragraph 19.

(3) Nomenclature of Statistical Territorial Units.

(4) The underlying assumption being that the GDP indicator is capable of reflecting concisely both the phenomena mentioned.