Two types of region – or three? That is one of the most controversial questions at the heart of ongoing discussions on the future of the EU's regional policy and the priorities for the next wave of structural funds – due to start in 2014.
The European Commission wants to change the system for allocating EU funds to the 27 member states and their 271 regions, by splitting regions into three separate categories based on their level of economic activity, as measured by GDP (Gross Domestic Product) per person.
Under the current system, there are two broad categories. The poorest regions, defined as those where the GDP per person is less than 75% of the EU average, are put into the category of 'convergence' regions. All of the remaining regions are considered as 'competitiveness' regions.
The Commission wants to create a third category for regions that are poorer than average, but not poor enough to qualify as 'convergence' regions. The new category would apply to regions with a GDP per person that falls between 75% and 90% of the EU average.
The EU commissioner in charge of regional policy, Johannes Hahn, believes that adding such a new category would ensure "a more fair and balanced and transparent system".
Focus on the poorest regions
During the current programming period (2007-2013), over 80% of the budget for cohesion policy, which amounts to more than €40 billion per year, has been allocated to the 100 poorest regions. These regions are home to around 170 million people – or one third of the EU's population.
Most of the so-called 'convergence' regions can be found in the 'new' member states in Central and Eastern Europe (which have joined the EU since 2004) as well as in Greece, Portugal, Spain and southern Italy.
The rest of the money in the cohesion funds is currently being shared among all the other regions of the EU, on a more-or-less equal basis. Some €8 billion per year is used to co-finance projects under the 'regional competitiveness and employment' objective, while another €1.25 billion per year is used to promote cooperation between regions in different member states.
There is a huge difference between the two kinds of zone in terms of the amount of money that each region is entitled to receive. "The difference between 'competitiveness' and 'convergence' regions is about one to 10 in financial terms," said Commissioner Hahn.
Therefore regions have a lot to lose if and when they find that they are no longer eligible for extra support under the 'convergence' objective.
Moving towards a three-tiered approach
According to official figures used by the European Commission, at the start of the next wave of cohesion fund programmes in 2014, fewer than 70 regions will automatically qualify as 'convergence' regions because they have a GDP per capita below 75% of the EU average.
This means that the number of people living in 'convergence' regions is set to fall from 170 million people to 120 million – or one quarter of the EU population.
The Commission is pushing the idea of adding a new intermediate category of regions with a GDP per person between 75% and 90% of the EU average. These regions would receive less money than the 'convergence' regions, but they could still count on extra support from the structural funds.
The new category would apply to regions with a total of around 60 million inhabitants, or 12% of the EU population. The areas that would be covered include: seven French regions, four Spanish regions, four Italian regions, four Greek regions, the whole of eastern Germany (ex-GDR), eastern Finland, northern Scotland and the poorest parts of England.
At least three regions in the so-called 'new' member states would also qualify for inclusion in the proposed new intermediate category. They are: the Polish province of Masovia (including Warsaw), the Czech region of Central Bohemia (around Prague), and the Bucharest region in Romania.
Another important change from the current system is that funding would be spread more evenly across the whole of the period. So during the seven years from 2014 to 2020, each region would receive a more-or-less constant level of support. The Commission hopes that this increased stability would help regions to better plan their investments.
Third category 'fair and justified'
Commissioner Hahn believes that it is "fair and justified" to propose the introduction of a new category for 'transition' regions – between the existing categories of 'convergence' and 'competitiveness' regions.
The idea of adding a new category is also supported by Polish MEP Danuta Hübner, who chairs the European Parliament's committee on regional development and was previously (from 2004 until 2009) the EU commissioner in charge of regional policy.
Hübner argues that an intermediate category would be fairer than the current 'phasing-out' or 'phasing-in' provisions, because regions with a similar level of economic development would be treated in the same way, regardless of whether they had previously been included in the 'convergence' category.
In Hübner's view, continuing with a system based on only two categories of region would not be the most sensible solution, because the 'competitiveness' category would then include a wide diversity of regions – from those with a GDP per person that is only 75% of the EU average to the very richest regions with a GDP per person of more than double the EU average.
Speaking at the Cohesion Forum in Brussels last week (1 February), Hübner made her point by asking the audience a rhetorical question. "Is it correct in the regional policy to have all the regions between 75% and 220% in the same category?" she asked. "Because that is in fact what we are assuming if we don't have this new intermediate category."
Member states not yet convinced
The Commission faces a difficult task to convince all the member states that it would be a good idea to create a new third category of regions, in the context of continuing uncertainty surrounding the overall level of the future budget for EU cohesion policy after 2013.
Speaking at last week's Cohesion Forum, Peter Hintze, German state secretary for the economy, called for caution in introducing an intermediate category. "We need to think about the consequences and look exactly whether this can be a solution or whether it will create new problems," he said.
According to Hintze, the German position is that there should be a 'phasing-out' strategy for regions that have recently passed the 75% threshold, as is the case now. He said that further discussions would be needed to determine what form of support should be offered to these regions.
Alongside Germany, another net contributor to the EU budget, Sweden, is also not yet ready to support the setting up of a new intermediate category.
"I think that the resources will remain scarce and will become even scarcer," said Anna-Karin Hatt, Sweden's minister for regional affairs, who also took part in the final panel discussion at the Cohesion Forum in Brussels.
According to Hatt, the Swedish government continues to believe that most of the resources in the cohesion funds should be allocated to the poorest regions.
"For Sweden so far we are quite reluctant [with regard] to the idea of a new intermediate category," said Hatt.
"If we are to propose some transitional measures they must be limited in scope as well as in time, otherwise I think we will have some problems," she insisted.
For more details on the debate around the future of regional policy in the European Union, see EurActiv's LinksDossier on EU Cohesion Policy 2014-2020.
