An across-the-board reduction in the maximum subsidies national governments can give to industry - known here as "regional aids" - is proposed in a paper for discussion by the European Commission today.
The proposals for the post2000 period, which will also have to be approved by ministers, would mean cuts in the top levels of investment aid payable by the Irish Government from 55 per cent (and even more in the Gaeltacht) to 20 per cent over the course of four years to 2004.
The ceiling for operating aid, rarely dispensed by the Government, would be cut over two years.
The issue is one of those likely to be broached by the Taoiseach, Mr Ahern, when he comes to Brussels on Thursday to meet the Commission President, Mr Jacques Santer, to brief him on Ireland's attitude to Agenda 2000.
Mr Ahern is expected to argue for transitional arrangements more in line with the structural funds "soft landing" phasing, expected to be closer to six years. Ireland is squeezed two ways by the proposals. On the one hand the Commission is proposing ceiling reductions for all categories of regional aids. On the other hand, Ireland will move out of poorer-region eligibility for higher ceilings on grant aid - the elibility limit is currently set at 75 of EU average GDP income per capita, which Ireland will exceed by some 20 percentage points or more, depending on the reference year.
It therefore depends, as it does in structural funds, on generous transition arrangements and the possibility of looking at subdividing the national map to allow payments to continune to some of the most deprived areas.
The Commission's proposals, from the Competition Commissioner, Mr Karel van Miert, involve greater geographic concentration on the poorest regions, greater use of employment criteria in assessing aid levels, and a matching of regional aid maps with structural funds maps to ensure greater mutual coherence of Union policies. The reductions are necessary, the Commision says, because the aids create distortions in the market. It points to the fact that the most recent report on regional aids found that, between 1992 and 1994, 85 per cent of the £30 billion regional aid cash was consumed in the four richest countries. The four cohesion countries, including Ireland, consumed only 8.3 per cent. The Commission proposals involve the following ceilings for regional aid:
Most disfavoured regions - 65 per cent in ultra-peripheral areas, 50 per cent where GDP is less than 60 per cent of the EU average, and 40 per cent where it is between 60 and 75 per cent of the average.
Other regions - normally 20 per cent, but 30 per cent in Nordic regions, and only 10 per cent in regions where the GDP is over the Union average.
The Commission argues that its approach is much more transparent and equitable than the current method. It will set objective criteria, applicable to all, making the notification procedure more straightforward.
