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PR(96)05: Icelandic regional aid area authorised by the EFTA Surveillance Authority


The EFTA Surveillance Authority today authorised the map of areas eligible for regional aid in Iceland under the EEA State aid rules and the corresponding ceilings for regional aid in Iceland.

The decision was taken on the basis of a proposal from the Icelandic Government notifying the Authority of plans to establish the new aid areas as a basis for a well co-ordinated regional policy.

The area which is to be eligible for regional aid consists of the following electoral constituencies: Vesturland, Vestfirðir, Norðurland vestra, Norðurland eystra, Austurland and Suðurland, as well as the region referred to as Suðurnes, which consists of those municipalities belonging to the Reykjanes constituency, which are outside the capital (Reykjavík) region. 40.8 % of Iceland's population lives in the assisted area. The decision implies that enterprises located in the capital region, consisting of Reykjavík and eight adjoining municipalities, will not be eligible for regional aid.

The assisted area has been found to qualify for regional aid under Article 61(3)(c) of the EEA Agreement, on the basis of criteria in the Authority's State Aid Guidelines, according to which regions with low GDP per capita or high unemployment compared to the national average as well as regions with low population density (less than 12,5 inhabitants per square kilometre) may be eligible for regional aid. The assisted area in Iceland meets the last of these statistical criteria, as it has a population density of only 1,1 inhabitants per square kilometre.

As is foreseen by the guidelines on regional aid, the Authority has also taken into account other relevant factors. In particular it has acknowledged the relevance of a variety of demographic, economic and topographic factors, such as unfavourable population trends in the regions, their vulnerable and undiversified economic base with high dependence on agriculture and fisheries, long distances within the country and to European markets, as well as particularly harsh climatic conditions.

Maximum aid limits are linked to the map of assisted areas. After taking account of taxation, the aid ceiling in the assisted area is 17 % of eligible investment costs. Firms qualifying as small and medium-sized enterprises (SMEs) are eligible for an additional 10% subsidy before tax.

By this authorisation the Authority has taken a decision of principle on the compatibility with the rules on State aid in the EEA Agreement of the Icelandic system of regional aid, as regards its geographical coverage and admissible aid levels.

The Icelandic map of assisted areas will be applicable for a period of 5 years.

For further information please contact Gudlaugur Stefánsson (Competition and State Aid Directorate) on tel. 286.18.52 or Jorma Pihlatie on tel. 286.18.50.



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