WRITTEN QUESTION E-1396/99

by Hedwig Keppelhoff-Wiechert (PPE-DE) to the Commission

(1 September 1999)

Subject: Contradictions arising from assistance under structural objectives

There is a sharp difference between the economies of the economically strongest areas of the European Union and structurally weak areas. The aim of European structural policy is to bridge this gap. To that end, the European Commission has determined six main tasks of structural policy and defined them as objectives.

1. Is the Commission aware of contradictions arising from assistance granted under structural objectives, where, for example, a business relocates, in order to receive EU funds, from an area which is not structurally weak to an area qualifying for assistance, but as a consequence of the relocation hundreds of jobs are lost at the old location and the economic strength of the town or city is diminished?

2. What does the Commission intend to do in order to remove this paradox, which involves jobs being created on the one hand and destroyed on the other?

Answer given by Mr Barnier on behalf of the Commission

(11 October 1999)

1. The right of firms within the Community to choose a geographical location appropriate to their particular needs is assured by the right of establishment enshrined in the EC Treaty. Any decision to relocate an existing establishment is a complex matter affected by many factors such as companies' wider strategies to restructure, specialise or concentrate their operations in the interest of improving efficiency.

The Community has, however, a particular interest where a firm undertaking a relocation has been supported by public funds either in its present or future location. In examining individual cases, the Commission will have to take into account all the circumstances, bearing in mind that among the options open to the firm are those of relocating outside the Community, or complete closure.

2. The success of the single market depends to an important degree on Community competition rules, in particular, the rules on state aid which seek to prevent distortions and to underpin fair competition. The Commission has included specific provisions in the recently adopted rules in the fields of both state aid and of the structural funds, to address possible problems linked to relocation. In particular, the Commission's state aid guidelines reduce permitted intensities for investments in officially notified assisted regions. The new levels seek to allow less favoured regions the possibilities to attract mobile new investment through inducements, while at the same time the reductions can be expected to reduce the risk of regions engaging in competitive bidding. Furthermore, both the guidelines and the structural funds regulation (Council Regulation (EC) 1260/1999 of 21 June 1999 laying down general provisions on the structural funds(1)) introduce the condition that the supported investment should remain in place for a minimum of five years.

Finally, the Commission pays particular attention to major projects as it has to confirm or modify the support by the structural funds for such projects (investment level of more than 50 million) on an individual basis. Part of its analysis consists in analyzing the employment effects of such projects on a Community level.

(1) OJ L 161, 26.6.1999.