WRITTEN QUESTION E-2413/99

by Ewa Hedkvist Petersen (PSE) to the Commission

(16 December 1999)

Subject: Competitive disadvantage and regional aid in Sweden

The population density is low in northern Sweden and Finland, about 3,4 per square kilometre in the former. Undertakings operating in these sparsely populated regions for export markets have to transport their products for much greater distances than do those located close to major centres of population and urban markets. Regional aid such as reduced social contributions and transport subsidies is an important factor in making such undertakings less uncompetitive.

Sweden and the Commission are at present negotiating the conditions for regional aid in Sweden. Why is the Commission unwilling to help Sweden grant such aid so that these undertakings can compete on equal terms?

Answer given by Mr Monti on behalf of the Commission

(20 January 2000)

The Commission recognises that sparsely populated regions, such as North Sweden have special problems. It agrees that companies in these regions face particular handicaps due to the long distances to their markets. This is why the Commission decided in 1994, in anticipation of the accession of Sweden and Finland, to adopt special provisions favouring low population density regions(1). These special provisions were consolidated and further extended in the Guidelines on national regional aid(2).

The guidelines contain a number of provisions to ensure that Member States can include their low population regions in the assisted area maps under Article 87(3)(c), if they so desire. They also enable the Commission to authorise higher aid intensity ceilings for large firms in low population density regions. Finally, the guidelines provide that Member States may grant transport aid to compensate for the additional transport costs incurred by companies located in low population density regions. At the same time, though, the guidelines also specify that transport aid may serve only to compensate for the additional cost of transport of goods and that there should never be over-compensation of the additional transport costs.

On 26 October 1999, the Commission authorised a transport aid scheme for the North of Sweden, under which Sweden will provide direct compensation for the additional cost of transport of goods incurred by companies located in that region. This should enable companies in North Sweden to compete on equal terms.

On 22 October 1999, Sweden notified the reduced social contributions aid scheme for North Sweden. This scheme reduces the employers' social contributions in North Sweden. Sweden justifies the reduction in the social contributions as a compensation for the additional distance related costs of the companies concerned.

The Commission is now examining whether this second transport aid scheme is justified. In this context it has asked Sweden to demonstrate that the reduction of the employers' social contributions does not over-compensate the additional transport costs incurred by the companies concerned. The Commission is awaiting a reply to this question from the Swedish authorities.

(1) Commission notice concerning an amendment to Part II of the communication on the method for the application of Article 92(3)(a) and (c) to regional aid, OJ C 364, 20.12.1994.

(2) OJ C 74, 10.3.1998.