EU regional policy after enlargement[fr] 

The EU's regional policy is based on financial solidarity between the Member States whose contributions to the Union's budget go to the less prosperous regions and social groups.

For the 2000-2006 period, these transfers will account for one third of the EU budget, or 213 billion euro. 195 billion euro will be spent by the four Structural Funds (the European Regional Development Fund, the European Social Fund, the Financial Instrument for Fisheries Guidance and the Guidance Section of the European Agricultural Guidance and Guarantee Fund), 18 billion euro will be spent by the Cohesion Fund.

The Structural Funds focus on the following priorities:

• 70% of the funding goes to regions whose development is lagging behind (Objective 1);
• 11.5% of the funding assists economic and social conversion in areas experiencing structural difficulties (Objective 2);
• 12.3% of the funding promotes the modernisation of training systems and the creation of employment outside the Objective 1 regions where such measures form part of the strategies for catching up (Objective 3).

There are also four Community Initiatives seeking common solutions to specific problems. They spend 5.35% of the funding for the Structural Funds on:

• cross-border, transnational and interregional cooperation (Interreg III);
• sustainable development of cities and declining urban areas (Urban II);
• rural development through local initiatives (Leader +);
• combating inequalities and discrimination in access to the labour market (Equal).

The Structural Funds finance multi-annual programmes which constitute development strategies drawn up in a partnership with the regions, the Member States and the European Commission. The main objective of the programmes is to:

• develop infrastructure, such as transport and energy;
• extend telecommunications services;
• help firms and provide training workers;
• disseminate the tools and know-how of the information society.

In addition to the Structural Funds, there is the Cohesion Fund, which provides direct finance for specific projects relating to environmental and transport infrastructure in Spain, Greece, Ireland and Portugal.

The 10 Central and Eastern European candidate countries have received millions in EU development aid throughout the pre-ac cession period. The future Member States have been receiving EU assistance under the current instruments:

• the PHARE programme (from 1989) to improve institutions, administrations and public bodies to ensure the correct application of EU law and to assist new investments in the social and economic sectors where they are most needed (infrastructure, business, social measures);
• the SAPARD programme (Special Accession Programme for Agriculture and Rural Development; from 2000) to support the efforts to join the Union's Common Agricultural Policy;
• the ISPA programme (Instrument for Structural Policies for pre-Accession; from 2000) to finance the construction of large projects in environmental protection and transport.

 

Enlargement will greatly increase the wealth gap within the EU. Once enlarged to 25 Member States, the EU will have to spend 50 per cent more on the poorest areas after 2007 in order to boost the development of the new members without reducing EU aid to the poorest regions in the current Union, according to the Commission's second progress report on economic cohesion from January 2003.

The report will form the basis for the Commission's proposals for the Union's next seven-year budget plan for the period between 2007 and 2013. According to the report, the EU should increase its spending on structural funds for poor regions by 14 billion euro, from 33 billion euro today to 47 billion euro after 2007.

Currently 48 regions are receiving structural aid from the EU, because their GDP falls below 75 per cent of the Community average. After enlargement, the wealth gap between the richest 10 per cent and the poorest 10 per cent of the regions will increase significantly. In terms of per capita GDP, this ratio will increase from 2.5 today to 4.4 in an EU of 25. Accordingly, in an EU of 25 Member States, almost every fourth citizen (i.e., 116 million people) will live in a region posting GDP figures below 75 per cent of the Community average.

The report divides the enlarged EU into three groups:

•  
• the eight candidate countries with the lowest per capita income (Poland, Hungary, the Czech Republic, Slovakia, Lithuania, Latvia, Estonia and Malta) will have one fifth of the EU population but only 42 per cent of the per capita GDP;
• Spain, Portugal, Greece, Slovenia and Cyprus will have 13 per cent of the total EU population and an average 71 per cent of GDP per capita;
• the remaining 12 current Member States will account for 66 per cent of the total EU population and 115 per cent of the EU average GDP per capita.

The Commission proposes to concentrate most EU funds on the first group, and to phase out aid to old EU states gradually up to 2013.

The Commission has identified three major challenges for the enlarged EU's cohesion policy:

• Development disparities will be magnified: The population and surface area of the EU will increase by one third, but GDP by a mere 5% when 12 new members join the EU. A new group of States will emerge in the enlarged Union: those with income of less than 40% of the EU average.
• The centre of gravity of cohesion policy will shift to eastern Europe: In a Union of 25 Member States, 116 million inhabitants (25% of the population) will live in areas where the GDP per capita will be lower than 75% of the EU average.
• The present inequalities in the Union of 15 will not vanish: It will be necessary to contribute to the development of the regions most in need, but also to continue providing assistance for the enduring difficulties in the current Member States.

The Commission urged the 10 new Member States to urgently improve their management of the Structural and Cohesion Funds. In a Communication adopted on 16 July 2003, the Commission identified 10 areas in which the acceding countries need to speedily improve i n order to ensure the smooth absorption of the EU's solidarity funding:

• public procurement;
• institutional arrangements and inter-ministerial co-ordination;
• financial management and control;
• accounting systems;
• recruitment of additional staff;
• programme negotiations;
• project preparation;
• partnership, meaning the involvement of the relevant economic and social actors in programme design;
• monitoring systems;
• sources of national co-financing.

 

Germany, France, Britain and the Netherlands will come under pressure to increase their contributions for the EU regional policy. In light of the projected shifts in aid flows, the current main recipients of EU regional aid - Spain, Portugal, Ireland and Greece - will have to put up with a significant loss of aid.

The British government revealed its plans for a reform of the European regional policy in March 2003. Under the proposal, the EU would be stripped of powers to give aid for the poorest regions. Britain believes that the cost of the EU's regional policy will increase by 50 percent and will become unsustainable once the Union grows from 15 to 25 members in 2004. The UK is concerned that its poorest regions will loose billions of regional aid at the expense of 10 new EU members. The British Government argues that decisions on regional spending should be made at a local level. This would allow Britain to repatriate 1.5 billion pounds a year from the EU budget. The UK now contributes 3.6 billion euro to the EU's annual budget, and receives aid payments worth about 2 billion euro.

Under the UK proposal, Spain and Ireland would loose regional aid altogether. Only the poorest parts of Greece and Portugal, and the future east European Member States would be eligible to receive regional aid.

The Commission rejected the British plan, describing it as "selfish and unrealistic". However, the Netherlands and Germany , both big net contributors to the EU budget, have taken a similar position, arguing that the existing Member States should no longer rely on regional aid from Brussels.

A high-level expert group delivered a study on 17 July 2003 proposing the re-nationalisation of the CAP and regional funding, while introducing more flexibility into the EU's budgetary policy. The report, commissioned by Commission President Romano Prodi in July 2002, reviewed the EU's economic policy and concluded that growth should be made the first priority as the lack of it could risk further European integration.

Commissioner for Regional Policy Michel Barnier was irritated by the report's calling into question of cohesion policy and its proposals to re-nationalise this policy. The report's conclusions "have not taken account of reality", said Mr Barnier. Coinciding with the launch of the study of the high-level group on economic governance, the Commission published a new evaluation study demonstrating the contribution of the Structural Funds to higher growth, new jobs and sustainable development in the least developed regions. Mr Barnier defends the EU's regional policy, insisting that it "is symbolic of a certain ideal in the European Union, which is not just a big market". "Certain people want to devote less money to this policy when the EU enlarges... the enlarged Europe is going to become much more fractured, much more unequal," warned Barnier. He suggested raising Member States' contributions for the policy to 0.45 per cent of gross domestic product from 0.32 per cent now, with two-thirds of the funds devoted to the poorest regions and the rest to development of areas such as inner cities that would not otherwise qualify.

The CPB Netherlands Bureau for Economic Policy Analysis stated in its analysis of the EU cohesion poli cy that European cohesion policy is less successful than it could be. Cohesion policy aims at reducing differences in GDP per capita between regions within the European Union. According to the CPB, the actual growth record of recipient regions reveals that the benefits of the EU cohesion policy are of a limited extent. "For some of the poorest regions in Europe this means they miss out on half a percentage point of annual economic growth," states the CPB study. The CPB suggests three alternative options for reform of the EU cohesion policy: to strengthen the monitoring and control over the use of cohesion support by the European Commission; to move to a system in which funds are allocated to projects (instead of being allocated to regions); to replace the cohesion policy by a system of fiscal transfers from rich to poor countries.

A study by the Spanish Foundation for the Studies of Applied Economy (FEDEA) states that enlargement is expected to have, at least temporarily, a negative impact on the Spanish economy. Spain may become less attractive for foreign direct investment and trade as a result of competition from the new Member States. Furthermore, there is likely to be a reduction of the Spanish share of EU structural and agricultural support. Moreover, the Spanish economy is not expected to benefit so much from the expansion of the single market, as it has relatively little direct trade and investment flows with accession countries. Nevertheless, if Spanish economic agents reacted and decided to increase its exchanges with future Member States, the impact of enlargement in the Spanish economy could be improved.

A study by the German Institute for Economic Research (DIW) states that the enlargement should be taken as an opportunity to carry out the long needed reform of both the Common Agricultural Policy (CAP) and the EU structural policy. The DIW paper proposes a concentration of the EU's structural support on the poorer Member States. According to the study, only Spain and Greece would suffer from such a reform.