How do we end the economic disparity

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GRW funding focuses on structurally weak regions. The aim is to create and secure permanently competitive jobs in the region by strengthening regional investment activity. Structurally weak regions are specifically activated instead of being funded.

Range of funding: A wide range

An effective regional policy adapts to the differences between different types of regions. For this purpose, the GRW offers a broad catalog of funding instruments that the regions can use according to their needs and strategies.

GRW funds are used to support commercial investments and investments in municipal business-related infrastructure, measures for networking and cooperation between local actors and measures to increase competitiveness, especially for small and medium-sized companies.

  • The promotion of commercial investment aims to strengthen the investment activity of companies in structurally weak regions. This will facilitate the structural change required for growth, from which the labor market and regional income will also benefit.
  • The expansion of an efficient municipal business-related infrastructure creates the prerequisites for the settlement of companies and thus strengthens the competitiveness of structurally weak regions.
  • Measures for networking and cooperation between local actors (regional development concepts, regional management and innovation clusters) improve the regional location conditions.

The basic guidelines of the GRW, the funding area, the instruments as well as the funding rules and rates are set out in the so-called coordination framework (PDF, 1 MB), which is decided jointly by the federal and state governments. The funding rules implement the (subsidy) framework specified by the European regional aid rules.

With effect from March 1, 2021, the federal and state governments have expanded the GRW's funding spectrum. The opportunities to support commercial investments not only as regional aid but also on the basis of the de minimis regulation and the federal regulation on small aid 2020 are being expanded. Small and medium-sized companies benefit from this, for which a wide variety of investment projects can be funded in the future with the help of the changed GRW regulation. At the same time, the scope for funding policy will be expanded by allowing the maximum funding rate for small companies to be up to 50 percent and for medium-sized companies up to 40 percent.

In addition, the “Energy Infrastructures” subsidy, which was originally limited to the end of 2020, was extended to the end of 2025 and its content focused on projects that are important to the regional economy.

There is no legal entitlement to funding from the GRW. It takes the form of a subsidy or interest reduction and is financed equally by the federal and state governments.

The regional aid map determines the supported regions

The funding opportunities and maximum rates of the GRW are closely based on the structural weakness of need in the respective region.

The structural weaknesses of the regions are assessed on the basis of a nationwide uniform procedure. Using a differentiated regional indicator model (labor market and income sizes as well as infrastructure), a sequence from the structurally or economically weakest to the structurally or economically strongest region is created, which determines the extent of the funding per region. The results of this procedure are checked in predefined cycles.

The nationwide development area map (PDF, 2 MB) provides information on the current development area since July 1, 2014. The subsidy period was extended by one year to December 31, 2021.

  • The new federal states and Berlin have been designated as a GRW support area across the board because of the pent-up demand that still exists.
  • There are also support areas in selected structurally weak regions in the old federal states.

The maximum funding rates for investment projects in the commercial sector are differentiated: They depend on the regional status of the region, which reflects the level of economic development, and the size of the company to be funded. Small and medium-sized companies receive higher funding rates than large companies.

Countries implement GRW funding

Without prejudice to the all-German framework agreed between the Federation and the Länder, according to Article 30 of the Basic Law, the Länder are primarily responsible for economic development in the regions. The implementation of the GRW funding is also a matter for the federal states alone. Within the framework set jointly by the federal government and the federal states, the state can set spatial or factual priorities: the state decides which projects are specifically funded and the amount of support granted, issues the approval notices and monitors compliance with the funding provisions by the grant recipients ( see "Country-specific regulations and information from the countries").

More detailed information and explanations can be found in the First Regional Policy Report. The report explains the GRW from its conceptual and legal basis to its political priorities and highlights the future requirements for national regional policy.

Preparation of the GRW funding period from 2022

The GRW is a dynamic instrument and is constantly being further developed. The current GRW funding period ends on December 31, 2021. For the funding period from 2022, it is necessary to redefine the regions in which regional development is to be funded with the help of the GRW. The federal and state governments are preparing the coming funding period in the GRW subcommittee.

In the EU, each member state determines in which regions national regional policy measures are to be taken. The maximum proportion of the eligible areas (in relation to the population) in the individual member states is determined by the EU regional guidelines of the European Commission. In a scientific study, the federal government and the federal states had investigated how possible changes to the calculation method used for the next funding period would affect the expected proportion of the population of the eligible area in relation to the total population and what effects this would have on the identification of national eligible areas. The European Commission intends to adopt the EU regional guidelines for the next funding period in spring 2021.

The GRW examines the economic performance of regions at the level of labor market regions. This avoids statistical distortions due to the divergence of places of residence and work. In preparation for the new funding period, the federal and state governments have updated the layout of the labor market regions on the basis of a study by the RWI - Leibniz Institute for Economic Research. Due to increased commuter links, there are now 223 labor market regions instead of the previous 257 (PDF, 162 KB).

The review of the regional indicator model for the nationwide uniform assessment of the structural weakness of the regions serves the scientific study "Consideration and analysis of regional indicators in preparation for the redefinition of the GRW funding area from 2021 (" spatial observation ")". On the basis of the results of this study, the GRW subcommittee decided to retain the basic structure of the indicator model with its labor market, income and infrastructure indicators and to use the indicators underemployment, gross domestic product per employed person (productivity), forecast of employable development 2015-2035 and infrastructure in the future . Using these indicators, the newly defined labor market regions will be used to determine the structural weakness of the regions in 2021, which will be used to determine the future GRW funding area.

Statistical overview and evaluation of regional funding

In the period from 2016 to 2020, within the framework of the GRW, funds of around 3.3 billion euros were approved for investments in the commercial sector. This initiated investments with a total volume of almost 20 billion euros, created more than 50,000 additional permanent jobs and secured over 180,000 existing permanent jobs. During the same period, GRW funds of around 2.8 billion euros were approved for investment projects in business-related infrastructure with a total volume of almost 3.9 billion euros (PDF, 298 KB).

The GRW funding is regularly evaluated by external experts. In its evaluation study presented in 2020, the Leibniz Institute for Economic Research Halle shows that employment in GRW-funded companies will grow by almost twelve percentage points more than in comparable non-funded companies up to five years after the end of funding. The GRW funding also has a clearly positive effect on sales growth. Like previous evaluations, the results confirm that the GRW will create permanent additional jobs in structurally weak regions.