GRW funding is dedicated to those regions that are structurally weak. The idea behind it is to strengthen regional investments, which in turn will generate attractive local jobs for the long term. This means that regions that are structurally weak are encouraged to play an active part in their development, rather than remain in a passive role.
A broad range of funding instruments is available
For regional policy to be effective, it needs to take account of the differences that exist between different types of regions. The GRW puts at regions’ disposal a large toolbox of funding instruments and strategies that they can use in line with their specific needs.
GRW funds are used to support investments by trade and industry, investments in local commerce-related infrastructure, measures designed to encourage networking and cooperation between local players, and measures designed to improve SMEs’ competitiveness.
- The idea behind supporting investments by trade and industry is to provide incentives for companies to invest in regions that are structurally weak. This helps with the structural change that is needed for growth, employment and local income.
- Building a strong commerce-related infrastructure is essential for weaker regions to be able to attract companies and thus become more competitive.
- Greater networking and cooperation between local players (e.g. by means of development strategies or within regional management bodies and innovation clusters) helps improve the local business environment.
The basic guidelines for the GRW, the map of Assisted Areas, the instruments available and the rules and maximum funding rates that apply are all set out in the coordination framework which is agreed between the Federation and the Länder. The coordination framework transposes the European rules on national regional aid (subsidies) into national law.
There is no legal entitlement to funding under the GRW. Funding is provided in the form of grants or low-interest loans and is financed half and half by the Federation and the Länder.
The map of Assisted Areas shows which regions are eligible for support
The exact terms and maximum rates of funding that apply under the GRW vary depending on the level of structural weakness/needs of the region.
The level of structural weakness for each region is assessed on the basis of a national procedure. A complex system of mixed regional indicators (which is based upon the respective sizes of the labour market, income levels, and the quality of infrastructure) is used to rank regions according to their overall performance, starting with the region that is structurally the weakest (structurally and in terms of economic performance) to the one that is the strongest. The resulting list is used to determine the degree of support each region is to receive . The outcomes of the procedure are reviewed at regular intervals.
The current map of Assisted Areas, which applies from 1 July 2014 through to 30 December 2020, was approved by the GRW Coordination Committee of the Federation and the Länder on 7 April 2014. On 11 March 2014, the decision was approved by the European Commission as compliant with state-aid rules.
- All of the New Länder as well as Berlin continue to have a lot of catching up to do, which is why all of their territory is designated part of the GRW Assisted Areas.
- There are also some Assisted Areas located within selected regions that are structurally weak and situated within the Old Länder.
Depending on the class of Assisted Area a region belongs to (which itself depends on its level of economic development) and on the size of the company receiving the funding, different maximum funding rates apply when it comes to aiding investments by trade and industry. Small and medium-sized companies are eligible to receive higher rates of funding than large corporations. For details, please refer to the .
The Länder are in charge of allocating GRW funding
Notwithstanding the national framework that has been agreed between the Federation and the Länder, Article 30 of the German Basic Law applies, which stipulates that responsibility for fostering regional economic development lies primarily with the Länder. As a result, the task of administering and managing GRW funding is reserved to the Länder. Within the bounds of the legal framework established by the Federation and the Länder, each Land is free to target funding at certain areas or at meeting certain objectives. The Land or the region in question decides for itself which projects are to receive what amount of funding, issues letters of approval, and verifies that beneficiaries adhere to the terms under which the funding has been approved.
The GRW as a living system
The GRW is a dynamic instrument that is continuously being honed and developed. The Coordination Committee of the Federation and the Länder approved a new coordination framework on 27 June 2014, which took effect on 1 July 2014 and applies throughout the 2014-2020 funding period. Under this new framework, the rules according to which funding is made available have been adapted and amended, the Federal funds made available to the GRW have been reallocated, and a new drawn up.
On 10 June 2015, the Coordination Committee made several additional adjustments to the . Most of these adjustments were made in response to a need for clarification and modification of the rules according to which investments are funded, in order to bring them into line with EU state-aid rules as clarified by the European Commission.
More information on regional policy and the GRW
For more detailed information and clarification, please see the . The report provides in-depth information about the GRW, its conceptual and legal basis and its political priorities. In 2015, the Federation tabled some initial key points on how a post-2020 scheme providing funding to regions in Germany that are structurally weak could be designed. Unlike the current system, the new scheme is to include regions from the whole of Germany, rather than being limited to the regions that used to be GDP territory up until 1990. In its , which was adopted by the Federal Cabinet on 13 September 2017, the Federal Government has confirmed its commitment to supporting regions that are structurally weak, including for the time after the Solidarity Pact II expires at the end of 2019. The report sets out the underlying concept for German post-2020 regional policy and provides information on measures that have already been taken.
Each EU Member State is free to side which of its regions are to benefit from support under its national regional policy. However, Member States must comply with a rule set out by the European Commission imposing a ceiling on the share of the overall population must be covered by the funding, meaning that regions must be chosen accordingly. The Federal Ministry for Economic Affairs and Energy has commissioned a study to see how this requirement can be met.
Regional policy – facts and figures
The amount of funding for investments by trade and industry approved under the GRW between 1991 and 2015 was worth more than 46 billion euros. It helped leverage an overall investment volume of 250 billion euros, created more than 1.1 million permanent jobs, and helped safeguard more than 2.4 million existing jobs. Over the same period, GRW funds worth more than 23 billion euros to support investments in commerce-related infrastructure worth a total of 35 billion euros.
The GRW funding scheme is reviewed by external experts at regular intervals. A study entitled was commissioned by the Federal Ministry for Economic Affairs and Energy and published in September 2015 by Prognos AG.