Briefing for Executive Vice-President Vestager
Meeting with Leo Varadkar,
Ireland’s Tánaiste and Minister for Enterprise, Trade and Employment
25/01/2021
SUMMARY
The meeting is with Mr Leo Varadkar and was requested by the Irish authorities.
Videoconference of 1 hour on 25/1/2021 from 16:45 – 17:45
Purpose of the meeting: discuss the effects of the revision of the Regional Aid
Guidelines, the COVID-19 crisis and the Brexit on Ireland.
Name of topic/case
Objective of the other side: To plead for a higher population coverage for regional
aid in Ireland for the period 2022-2027 (and probably also higher aid intensities).
Objective of the Commission: To manage the expectations of Ireland and to point to
the fact that the loss of population coverage is not linked to Brexit, but to the
economic development of the Irish regions. You might mention that you are
considering advancing the mid-term review by one year (2023 instead of 2024).
1
Basis 411
Briefing for Executive Vice-President Vestager
Meeting with Leo Varadkar,
Ireland’s Tánaiste and Minister for Enterprise, Trade and Employment
25/01/2021
REVISION OF THE REGIONAL AID GUIDELINES – IMPACT ON IRELAND
KEY MESSAGES
The Commission services are carefully reflecting on the comments and
proposals we received from all Member States on the draft guidelines, including
your position paper.
We received a clear signal from Member States that the regional aid maps are
outdated and need updating. An even further prolongation of the current Irish
regional aid map (which is based on economic data more than ten years old)
until 2024 appears therefore hard to defend.
In the past, Gross Domestic Product (GDP) has proven to be a good indicator for
regional aid purposes and is accepted by most Member States. The use of Gross
National Income seems less appropriate to define ‘a’ areas, already because of
the absence of a regional dimension of this data.
I noted the significant loss of population coverage for Ireland, however this is
linked to the relatively good economic development of its regions and not
caused by Brexit.
[CONFIDENTIAL We proposed, in the current inter service consultation on the
revised draft guidelines, to advance the mid-term review to 2023 (instead of
2024) to take into account the COVID-19 crisis and the Brexit effects. You might
want to hint at this. We also proposed to increase the overall population
coverage from 47% to 48%. However, this does not change anything for Ireland,
given the economic development of its regions. END CONFIDENTIAL]
NECESSARY FACTS AND FIGURES
The revision of the regional aid guidelines is based on a detailed evaluation process that
was performed in the context of the Fitness Check of the 2012 State aid modernisation
package to assess if the rules were still fit for purpose. The results showed that the
guidelines worked overall well as disparities in the EU could be further reduced, but
require some targeted adjustments for the following period.
The current guidelines are based on 2008-2010 Eurostat statistics. An update based on
more recent economic data is necessary to reflect current economic developments. The
Commission is well aware of the economic impact of the COVID-19 outbreak and Brexit
for Ireland and all other Member States. Since those are not yet reflected in the
available statistics, the draft text proposes a mid-term review that will allow updating
the regional aid maps to address the difficulties of Member States most affected. A
prolongation of the current maps until 2024 is however not appropriate, since those
maps are based on data which is 10 to 12 years old and therefore do not reflect
economic reality. The draft guidelines take into account the statistical Brexit effect in the
proposed population coverage of 47% and suggest to maintain the safety net provision,
which will prevent that Ireland will lose more than 50% of its current coverage.
2
Basis 411
Briefing for Executive Vice-President Vestager
Meeting with Leo Varadkar,
Ireland’s Tánaiste and Minister for Enterprise, Trade and Employment
25/01/2021
[CONFIDENTIAL: You decided to increase the overall population coverage from 47% to
48%. However, this does not change the population coverage for Ireland, given the
economic development of its regions. You decided to keep a potential change of the
safety net mechanism from 50% to 40% as a backup option. This option would allow
Ireland to increase its population coverage from 25.64% to 30.77%. Increase of the
safety net would also mean an increase in the population coverage for Northern Ireland
from 50% to 60%. CONFIDENTIAL END]
The methodology used for the calculation of the regional aid maps requires the use of
homogenous and reliable data that are sufficiently available at regional level for all
Member States. Historically, the indicator of the gross domestic product has been used,
as it fulfils all of the required conditions and adequately reflects the economic situation
of Member States. On the contrary, the gross national income is only available at the
statistical level of the Member State and not at the level of NUTS2 or NUTS3 regions.
Therefore the GNI is considered as not suitable to determine the economic situation of
disadvantaged areas in the EU.
In principle, regional aid rules allow for higher aid intensities for areas that share a land
border with a country outside the EEA or the EFTA. However, according to the Northern
Ireland protocol agreement, Northern Ireland is to be treated « as a Member State ».
We are therefore of the preliminary view that Ireland will not be able to make use of
this possibility. However, the same applies to Northern Ireland. [CONFIDENTIAL: We
proposed, in the final interservice consultation, a coverage for Northern Ireland of 50%
of population (currently fully covered as assisted area).CONFIDENTIAL END]
ANNEXES
HT.4131 REVISION OF THE REGIONAL AID GUIDELINES – IRELAND
BACKGROUND INFORMATION
1. Changes in % of the Irish population covered under the Regional aid guidelines
Current status
Public consultation
CONFIDENTIAL
(2014-2020)
(47% population
New proposal (48%
coverage and 50%
population
safety net)
coverage and 50%
safety net)
a coverage
0.00%
0.00%
0.00%
Predefined c
0.00%
0.00%
0.00%
3
Basis 411
Briefing for Executive Vice-President Vestager
Meeting with Leo Varadkar,
Ireland’s Tánaiste and Minister for Enterprise, Trade and Employment
25/01/2021
coverage
Free c coverage
51.28%
25.64%
25.64%
Total
51.28%
25.64%
25.64%
The new population coverage of Ireland is dependent upon the safety net. In the draft
guidelines as published for stakeholder consultation, we maintained the provision
according to which Member States cannot lose more than 50% of their current
population coverage.
2. Main issues raised by Ireland during the public consultation
Issue
Proposal/response
Ireland is using a lot of regional aid.
The Commission is well aware of the
Disparities are increasing, in particular in
challenges that Ireland is facing due to
sectors heavily affected by the COVID-19
Brexit. The population coverage of 47%
crisis (retails etc.). Brexit will also
takes into account the statistical effect of
significantly affect Ireland.
Brexit and the additional need for private
investments under the Green Deal.
However, looking at the statistics, Ireland
has several regions that have developed
very well. This would result in a
population coverage for Ireland of
23.42%. Thanks to the safety net, Ireland
will still have a coverage of 25.64%.
Review under these circumstances is
The revision of the regional aid guidelines
inappropriate because economic reality is
is based on a detailed evaluation in the
not properly reflected, regional aid maps
context of the Fitness Check. One of the
should be prolonged until 2024.
evaluation results was the urgent need to
update the guidelines based on more
recent economic statistics, since the
current Regional aid guidelines 2014-2020
are based on the Eurostat data of 2008. It
is obvious that those data cannot be
maintained for the next period.
The draft guidelines were updated based
on the Eurostat data on GDP of 2016-2018
and the unemployment data of 2017-
2019. Those are the latest data currently
available. To reflect the changing
economic reality, we have provided for a
mid-term review that will allow updating
the maps based on the latest available
statistics in 2024.
[CONFIDENTIAL
During
the
weekly
meeting you agreed to move the mid-term
review forward in light of the economic
4
Basis 411
Briefing for Executive Vice-President Vestager
Meeting with Leo Varadkar,
Ireland’s Tánaiste and Minister for Enterprise, Trade and Employment
25/01/2021
crisis from 2024 to 2023. This would
include the GDP statistics 2019-2021.
CONFIDENTIAL END]
Based on the proposed RAG, Ireland Looking at the statistics, Ireland has
would lose 50 % of its population several regions that have developed very
coverage
well. This would result in a population
coverage for Ireland of 23.42%. Thanks to
the safety net, Ireland will still have a
coverage of 25.64%.
[CONFIDENTIAL: You decided to keep a
potential change of the safety net
mechanism from 50% to 40% as a backup
option. This option would allow Ireland to
increase its population coverage from
25.64% to 30.77%. CONFIDENTIAL END]
Use instead of GDP/capita the Gross
The evaluation results showed that the
National Income (GNI) as an indicator
methodology for the definition of ‘a’ and
‘c’ areas worked well and we therefore do
not consider any changes.
It is also important to keep in mind that
the designation of assisted areas requires
the use of homogenous and reliable data
that are available at regional level. Gross
National Income is, as the name says, only
available at national level and therefore
not suitable for the methodology under
the regional aid guidelines and regional
cohesion policy. To the contrary, GDP
statistics are also available at regional
level.
Ireland proposed to recognise remote Despite the increased use of remote
working in RAG and to permit regional aid working because of the COVID-19
amounts on the basis of where employees outbreak, we do not plan any provisions
are based, e.g. where an employer can on this in the guidelines. To base aid
satisfactorily demonstrate that over 70% intensities on the location of employees,
of their employees for a particular project be it remote workers or commuters, could
are working remotely for at least 85% of have a counter-cohesion effect, as
their working time, the maximum level of undertakings would not be incentivized
aid intensity that applies to that project anymore to establish in the areas most in
ought to be the level of aid intensity need.
applicable to the region(s) where the
remote working is taking place.
Increased aid to large enterprises and Large undertakings tend to be less
support to small mid-caps
affected than SMEs by regional handicaps
for investing or maintaining economic
activity in less developed areas, since they
5
Basis 411
Briefing for Executive Vice-President Vestager
Meeting with Leo Varadkar,
Ireland’s Tánaiste and Minister for Enterprise, Trade and Employment
25/01/2021
can more easily obtain capital and credit
on
global
markets,
can
produce
economies of scale that reduce location
specific initial costs, are not bound to the
region in which the investment takes
place,
and
possess
considerable
bargaining power. Taking into account
that large investment projects are also
more likely to distort the internal market,
we consider the possibilities to support
large enterprises in ‘c’-areas proposed in
the draft guidelines on which stakeholders
were consulted to be sufficient. Support
for investments into new economic
activities can be supported also in the
future and for many areas, at a higher
maximum aid intensity
Separate coverage for JTF areas
It would be difficult to include a separate
‘c’-coverage since this would necessarily
increase the total coverage beyond 50% or
be to the detriment of ‘a’-areas.
The revision of the Regional aid guidelines
will take into account new policy
objectives, including the Green Deal and a
general increase of the aid intensities is
proposed to provide additional incentives
for private investments to support the
twin transition.
[CONFIDENTIAL You agreed to a bonus for
just transition regions located in assisted
areas of +5% for c-regions and +10% for a-
regions. CONFIDENTIAL]
Treatment of non EEA-border regions, in Ireland can still designate the Irish border
particular the border region to the UK. region as a non-predefined ‘c’-area
Based on the EU27 statistics, the region subject to a maximum aid intensity of
bordering the UK will not be designated as 15%.
an ‘a’-area
The draft guidelines as published for
stakeholder consultation provide for a
mid-term review in 2024 for all Member
States to take into account updated
statistics.
It has to be noted that the NUTS 2 region
“Northern and Western” (including the
border area) currently has a GDP of
6
Basis 411
Briefing for Executive Vice-President Vestager
Meeting with Leo Varadkar,
Ireland’s Tánaiste and Minister for Enterprise, Trade and Employment
25/01/2021
76.33%. It this figure would further
deteriorate, the region might qualify as
‘a’-area at the time of the review.
[CONFIDENTIAL
During
the
weekly
meeting you agreed to move the mid-term
review forward in light of the economic
crisis from 2024 to 2023. This would
include the GDP statistics 2019-2021.
CONFIDENTIAL END]
Updated on: 19/1/2021
7
Basis 411