The aid granted by the European Union has traditionally been focused on promoting the development of regions in Member States with low levels of income and high unemployment rates, as well as regions suffering processes of industrial delocalization. Nonetheless, after the approval of the “Lisbon Strategy” by the European Council held in March 2000, there was a move towards a redefinition of State aids toward the meeting of horizontal objectives such as the promotion of research and development, the optimization of human capital and the adoption of environmental protection and energy saving measures.
Most EU incentives supplement development plans financed by the Spanish State. Such aid is channeled through Public Authorities and financial institutions, which act as intermediaries.
Among the broad spectrum of incentives offered by the EU, the most significant are:
The European Investment Bank
The EIB supports projects that foster the development of underprivileged regions and projects of common interest to various Member States or which benefit the EU as a whole (i.e. environmental protection, improved use of energy sources, improved industrial competitiveness in the EU, development of SMEs and companies with average capitalization (MIDCAPSs), improvement of European infrastructure, or projects aimed at modernizing the healthcare and education industries).
Thanks to a €10,000 billion increase approved by the EU for 2012, the EIB has considerably increased its credit activity, reaching a figure of €75,100 billion in 2013 (37% more than in 2012). The forecast and commitment is to maintain this trend during 2014 and 2015.
The European Investment Fund
The EIF was created for the purpose of fostering EU objectives, particularly in the areas of entrepreneurship, growth, innovation, research and development, employment and regional development. Today, the core mission of the EIF is to provide support to SMEs and grant them access to funding at a time of reduced financing from credit institutions.
To meet this objective, it designs innovative financial products aimed at its partners (financial institutions), according to the needs of each regional market, to reach the local market through such financial intermediaries. The EIF generally operates by providing guarantees for loans of all kinds and by investing in venture capital to support SMEs.
European Structural and Investment Funds (ESI Funds)
The EU has redirected its cohesion policy for 2014-2020 in line with the Europe 2020 Strategy, with its main priority being smart, sustainable and inclusive growth. A new regulatory framework has been established with common and specific rules for the ESI Funds [European Regional Development Fund (ERDF), the European Social Fund (ESF), the Cohesion Fund, the European Agricultural Fund for Rural Development (EAFRD), and the European Maritime and Fisheries Fund (EMFP)].
The aim of the Funds is provide support, through multi-annual programs, which complements national, regional and local interventions, in order to deliver the 2020 Europe Strategy targets for growth, as well as the objectives specific to each Fund, including economic, social and territorial cohesion. In turn, the Member States will be responsible for preparing and implementing programs (which will define the targets, financial appropriations, etc.) in accordance with the Partnership Agreement, approved by the Commission, which explains the investment strategy and priorities of the Funds for each Member State for the period between January 1, 2014 and December 31, 2020.
The ESI Funds include the Funds under the Cohesion Policy (Structural Funds (ERDF and ESF) and the Cohesion Fund), which will contribute to enhancing economic, social and territorial cohesion.
The total budget envisaged to finance the Cohesion Policy in the period 2014-2020 is €351,800 billion (of which, €6,400 billion will be allocated to youth employment) with two goals: (i) investment in growth and jobs in Member States and regions; and (ii) European territorial cooperation. These two goals reflect the European 2020 Strategy, according to which all regions contribute to the general goal by investing in jobs and growth, but the methods and scope of the intervention are differentiated depending on the level of economic development of each one.
For such purpose, the following three categories of regions are proposed: (i) “less developed” regions (per capita GDP of less than 75% of the EU-27 average) which will continue to be the main priority of the cohesion policy, with a maximum co-financing rate of 75-85% for less developed regions and for outermost regions; (ii) “transition” regions (per capita GDP between 75% and 90% of the EU average), which will be able to choose a co-financing rate of 60%; and (iii) “more developed” regions (per capita GDP of more than 90% of the EU average), with a co-financing rate of 50%.
Research and Development Programs
The EU has been establishing multi-year plans that define the Community lines of action under the Community research and development policy, allocating significant resources to their execution. The current EU Research and Innovation Programme for the 2014-2020 period is called “Horizon 2020” and has the following principal aims: (i) to create excellent science; (ii) to make Europe an attractive place for investment in research and innovation; and (iii) to research the major issues affecting European citizens. This programme groups together and enhances the activities that were funded in the 2007-2013 period under (i) the “VII Framework Programme for Research and Technological Development”; (ii) innovation initiatives under the “Framework Programme for Innovation and Competitiveness (PIC)”; as well as (iii) the initiatives of the European Institute of Innovation and Technology (EIT).
This programme has a total budget of €77,028 million for the funding of research, technological development and innovation initiatives and projects with obvious European added value.
For more information on “Horizon 2020” as well as on the calls for proposals, please check the Participant Portal and the “Horizon 2020” online manual available on the European Commission website (http://ec.europa.eu/research/participants/portal/desktop/en/funding/index.html)
Parallel to “Horizon 2020”, the European Commission extends funding opportunities through additional programmes of significance in the context of the European Research and Innovation Strategy. This section includes two programmes with differentiated objectives and targets.
The COST (European Cooperation in Science and Technology) programme is one of the oldest European framework programmes supporting cooperation among scientists all over Europe in different areas of research. On the other hand, the EURATOM, (European Atomic Energy Community) programme arose under the Treaty of the same name, with a view to coordinating the research programmes of Member States in the pacific use of nuclear energy.
Community initiatives for corporate finance
The Community initiatives aimed at favoring corporate finance include most notably the COSME programme and the Gate2Growth initiative:
The COSME (Competitiveness of Enterprises and Small and Medium-sized Enterprises) programme is an EU programme which represents a part of the former CIP (Competitiveness and Innovation Program) and centers its activity on supporting SMEs through various finance mechanisms.The main objective of the COSME program is to help SMEs to start-up, access financing and internationalize, and to assist the authorities in improving the business environment and boosting economic growth in the European Union. COSME has a budget of €2.3 billion and supplements EU Member States in their SME policies, helping to strengthen the competitiveness and sustainability of the Union’s enterprises and foster entrepreneurial culture. The allocation of these funds will be managed by the intermediary bodies of each Member State, previously selected by the FEI.
The Gate2Growth initiative constitutes a one-stop shop for innovative entrepreneurs seeking financing. It also offers investors, intermediaries and innovation service-providers, a community for sharing knowledge and good practice.
Last updated: 22|06|2015