GRW funding is dedicated to those regions that are structurally weak. The idea behind it is to boost investment activity in the region, 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 competitiveness, particularly that of SMEs’.
- 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 GRWthe map of Assisted Areas, the instruments available and the rules and maximum funding rates that apply are all set out in the which is agreed between the Federation and the Länder. The funding rules transpose the into national law.
With effect of 1 January 2020, the Federal and Länder governments expanded the range of GRW funding instruments. Going forward, the scheme will also cover investments by certain commerce-related research institutions that are not subject to state aid. Also, funding for cooperation projects in the field of applied research and development has been opened up to the research institutions involved. In addition to the existing support that is available for investments by trade and industry, a supplementary clause has been introduced to pave the way for the funding of investments in modernisation by small and medium-sized companies. As far as funding for communications infrastructure under the GRW is concerned, support is now only available for those connections that offer gigabit capability.
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 (referring to 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 shows the current area receiving funding as of 1 July 2014. Subsequent to the extension of the relevant EU state-aid rules and the European Commission’s approval of the continued definition of the funding area, the funding period has been extended by a year until 31 December 2021. 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 western 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 companies.
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 (cf. “Länder-specific rules and information issued by the Länder”).
For more detailed information and clarification, please see the . The report provides in-depth information about the GRWits conceptual and legal basis and its political priorities. It also looks at the future challenges for regional policy at national level.
Preparation of the GRW funding period from 2022
The GRW is a dynamic instrument that is continuously being honed and developed. The current GRW funding period is set to end on 31 December 2021. The regions that are eligible to receive GRW funding in the period from 2022 will be defined anew. Preparations such as these are being undertaken by federal and Länder representatives in the GRW subcommittee.
Each EU Member State is free to decide which of its regions are to benefit from support under its national regional policy. The maximum share of the total population represented by the designated areas receiving assistance in a Member State is specified according to EU regional guidelines. The Federal Government and the Länder have commissioned a study looking at how possible changes to the method of calculation to be used during the next funding period would affect the expected share of the population of the Assisted Areas in the total population and what impact this would have on the process of identifying national Assisted Areas. The European Commission has not yet presented a draft of the EU regional guidelines for the next funding period.
As part of preparations for the next funding period, the GRW looks at the economic performance of ‘labour market regions’. This serves to prevent any statistical distortions owing to differences between place of residence and location of employment. The Federation and the Länder have thus commissioned the RWI – Leibniz Institute for Economic Research to examine the delineation of the existing labour market regions and to develop proposals for defining new boundaries.
The review of the regional indicator model for the uniform nationwide assessment of the structural weakness of regions is supported by the academic study “Betrachtung und Analyse von Regionalindikatoren zur Vorbereitung der Neuabgrenzung des GRW-Fördergebiets ab 2021 (“Raumbeobachtung”)” (Consideration and analysis of regional indicators in preparation for the redefinition of the GRW Assisted Areas from 2021). On the basis of the results of this study, the GRW subcommittee has decided to retain the basic structure of the indicator model with its labour market, income and infrastructure indicators, and in future also to use indicators for underemployment, gross domestic product per person in work (productivity), the development of the number of those able to work as forecast for 2015-2035, as well as quality of infrastructure. These indicators and the newly defined labour market regions will be used to determine the structural weakness of the various regions; this will probably happen in 2021. The new GRW Assisted Areas will then be stipulated on this basis.
Regional policy – figures and review system
The amount of funding for investments by trade and industry approved under the GRW between 2015 and 2019 was worth more than €3.1 billion. It helped leverage an overall investment volume of over €18 billion, create more than 48,000 permanent jobs, and safeguard more than 178,000 existing jobs. Over the same period, GRW funds worth more than €2.2 billion were approved to support investments in commerce-related infrastructure worth a total of nearly €3 billion.
The GRW funding scheme is reviewed by external experts at regular intervals. In its evaluation study released in 2020, the Halle Institute for Economic Research (IWH) shows that employment growth in companies funded under the GRW remains almost twelve percentage points stronger for up to five years after the end of funding than in similar companies that are not being supported. GRW funding also has a considerable positive impact on turnover growth. The findings confirm the conclusion of previous evaluations that the GRW scheme helps to create new permanent jobs in regions that are structurally weak.