Special Report: Policymakers jostle for EU regional funding

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Policymakers in the EU institutions, national governments and regional authorities are fighting for control over Europe's future regional policy spending after the European Commission last week tabled budget plans for the post-2013 seven-year period. 

Last week (29 June), the European Commission published proposals for the EU's next long-term budget for 2014-2020, proposing a 5% rise in the bloc's spending to 971.5 billion euros for 2014-20, equivalent to 1% of EU gross national income (GNI).

The plans must now be approved unanimously by EU governments to become law.

New member states to fight their corner

Central and East European member states are expected to fight for the continuation of generous funding under the EU's regional policy in the next period.

Funding for Europe's poorer regions under the EU's cohesion policy would amount to €376 billion, or 35% of the total budget of almost €1 trillion. Most of these regions are from the new member states.

Ivan Kor?ok, who heads the Permanent Representation of Slovakia to the European Union, told Slovak press agency TASR that his country had singled out cohesion policy as a key stimulus for future growth.

"We want to underline that the money we are asking for is not for the improvement of our infrastructure, but it is a benefit for our economic growth, which also benefits the whole internal market," he said.

It remains to be seen how such hopes will sit with the new 'intermediate regions' category, introduced by the Commission's Fifth Report on economic, social and territorial cohesion published at the end of last year.

The new category is designed to help regions that move out of the poorest region category – so-called 'convergence regions' – but are still well below the EU average. Such regions will continue to receive generous aid until their GDP surpasses 90% of the EU average.

EU statistics seen by EURACTIV show that around 50 regions, with a combined total of 72 million inhabitants (14% of the total EU population), could qualify for inclusion in the new intermediate category.

However, Ton Van Lierop, spokesman for EU Regional Policy Commissioner Johannes Hahn, told EURACTIV that it was still "far too early" to draw up a definitive list of regions that fall into this category or the funding they would obtain.

"Thus the creation of the intermediate category does not impact directly on the allocations for the new member states," he insisted, noting that it addresses the specific needs of regions whose GDP per capita is between 75% and 90% of the EU average: which also includes a number of regions in new member states.

"So there is no direct correlation with old member states," the Commission spokesperson said. 

Under the current system, regions that were previously considered poor are entitled to extra financial support for several years after their economic situation has improved, to ensure a kind of 'soft landing'.

Indeed, regions falling under the 'convergence' category currently receive up to ten times as much funding as those under the 'competitiveness' banner, which can be of the same size and have the same level of wealth.

"This led to abuse and did not offer regions any incentive to surpass the 75% mark," an official from the body representing European regions in Brussels, the Committee of the Regions (CoR), told EURACTIV.

This system will therefore be replaced, and 'intermediate regions' will be created to make up for the loss of funding experienced as former 'convergence' regions no longer receive that extra money.

"The objective is to make sure that regions at the same level of development – all those whose GDP is 75-90% of the EU average – receive a fair level of support whatever their starting point," the CoR official explained.

Indeed, many former 'poor' regions are expected to surpass the 75% GDP threshold at some point during the next funding period. The money saved will be used to help intermediate regions instead.

Regions gear up for battle with governments

The Commission's budget proposals have received strong backing from the Committee of the Regions.

CoR President Mercedes Bresso vowed to "lobby strongly to ensure that negotiations do not lead to any distortion or watering down of these proposals, notably by the Council of Ministers.

Indeed, with divisions also reported between Commission President José Manuel Barroso and some other College members the fight over the future of EU cohesion policy appears far from over.

Meanwhile, a separate multi-billion-euro EU fund for transport, energy and telecommunications infrastructure is causing concern among regions, which fear being sidelined by national authorities when it comes to allocating the money.

The Commission's budget proposal includes a new 40-billion-euro fund for cross-border energy, transport and technology infrastructure projects

Officials in Brussels have been wrestling with the new funding instrument in recent weeks amid concerns among MEPs that its budget would divert money away from existing regional funding.

Indeed, the row even moved Johannes Hahn, the EU's commissioner for regional policy, to reassure MEPs that the new funding instrument would in no way touch on existing money allocated to cohesion policy when he appeared before the European Parliament's committee for regional development (REGI) on 22 June.

A parliamentary source close to the dossier told EURACTIV that the new fund would provide for so-called trans-European transport (TEN-T) projects, energy and telecommunications.

Its budget is expected to be in the range of €16 billion for the 2014-2020 period, according to the same source, and would be separate from Barroso's plans for an EU project bond, first floated in December last year.

Concerns overnew infrastructure fund

Officials in Brussels, meanwhile, are urging regions to keep up spending on large infrastructure projects in an effort to stave off recession.

"We always encourage member states not to cancel big infrastructure projects because they bring jobs and investment in the long term. But ultimately it's up to governments how they spend cohesion money," EU Transport Commissioner Siim Kallas told journalists last week.

The EU executive is looking to change the eligibility criteria for regional funding so that it can support large cross-border infrastructure projects in the transport sector.

"There will be centralised [EU] funding for transport. But the largest part will have to come from national governments and the private sector," Kallas explained, noting it will become clear over the next 18 months how much Europe can finance.

However, some regions are worried that the Commission's proposals could mean a loss of influence for regional governments in the use of EU funds in their areas, as transport and energy infrastructure are traditionally covered by regional policy.

Indeed, the adoption in the European Parliament on Tuesday (5 July) of the assembly report on the future of regional funding drafted by German European People's Party MEP Markus Pieper, rejects "absolutely all proposals to nationalise or sectoralise cohesion policy".

It argues that "new thematic funds (for climate, energy and transport) would undermine the tried and tested principle of shared management and integrated development programmes and jeopardise the availability of synergies and the effectiveness of interventions".

While the report has no legal force, it will provide a strong indication of the Parliament's position in the upcoming budgetary debates.

French regional leaders – in Brussels recently to defend the current system and warn EU policymakers that creating the new category risked slashing aid for their regions – cautioned that cohesion funding must continue to support all Europe's regions if the continent is to continue to recover from recession.

Andrew Williams

"It's too simplistic to characterise the intermediate regions debate as new member states vs. old ones. Countries that don't want the EU budget to increase are generally wary of intermediate regions. The issue's not so much whether most of the money should go to poorer regions or not – it will –  but those who are in favour say it won't increase the budget, and those who are against say it will," Estelle Delangle, policy coordinator at the Assembly of European Regions, told EURACTIV.

"Some regions in older member states like Germany and Sweden are generally against intermediate regions because they fear they won't get as much funding, while French regions are more in favour because more will qualify," Delangle said.  

German MEP Marcus Pieper (European People's Party), who drafted a European Parliament report on the EU's strategy for the post-2013 cohesion policy, remains strongly opposed to the idea of creating 'intermediate regions' despite the plenary having given its backing to the plan on Tuesday. 

"If such a category came true, the basic philosophy of the EU cohesion policy, which is to support the poorest regions, would be lost," he warned.

"Establishing a new fund on a permanent basis would remove all incentives for these regions to use EU money efficiently in order to provide structural improvements. It's easy to lie back and do nothing," Pieper said, making his opposition known.

Pieper told EURACTIV that the introduction of a new 'intermediate' category could cost up to €20 billion over a seven-year period. He likened the idea to the sleeping car of an overnight train, warning that regions would feel "too comfortable" with such a system in place.

He is also opposed to the creation of a new fund for infrastructure despite admitting that European networks need to be strengthened. Instead, he favours "an infrastructure instrument which would be in the responsibility of the regions and in close coordination with the structural policies".

Polish MEP Danuta Hübner (European People's Party), who chairs the Parliament's REGI committee, told EURACTIV that she supports the idea of a new intermediate category because it would ensure that all regions facing similar challenges are treated on an equal basis.

She said it was not fair that under the current system, regions with identical levels of wealth, as measured by GDP per person, can receive very different levels of support from the European Regional Development Fund (ERDF) and other EU funds.

"The introduction of the new category of regions in transition is clearly a major victory, but let's not forget that it is fully justified. It is a response to the fragile state of certain regions that have been hard hit by the crisis," said Mercedes Bresso, president of the Committee of the Regions (CoR).

"We also support the idea of strong linkage with the 'Europe 2020' strategy. For Europe to get out of the crisis, this strategy needs resources and wide ownership, extending beyond the narrow circle of national governments," Bresso cautioned.

"Local and regional authorities, socio-economic players and the residents of our regions, cities and villages must all have a stake in it," she urged.

František Palko, chairman of Slovak think-tank the Economic Policy Institute, predicts that it will be very difficult for all EU member states and the European institutions to come to an agreement on the future EU budget.

Palko believes protecting Slovakia's current share of regional policy funding will be his country's top priority in the upcoming negotiations.

"We're not budget eaters, but we want to maintain funding at current levels," Jean-Yves Le Drian, vice-president of the Association of French Regions, told EURACTIV.

"Keep the European Social Fund, treat all regions equally and move towards increasing EU cohesion funding under the 'Europe 2020' strategy," he urged policymakers.

"Our biggest worries are that funding for cohesion policy will be reduced and certain regions will not be recognised," said Le Drian, who is also president of Brittany.

The regional policy (or cohesion policy) of the European Union has the overall goal of promoting economic prosperity and social cohesion throughout the 27 member states and their 271 regions.

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 European 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, referred to as ‘intermediate regions’, would apply to those with a GDP per person that falls between 75% and 90% of the EU average.

  • Sept. 2011: Commission to unveil legislative package on cohesion policy including general regulation and individual regulations on the Social Fund, Cohesion Fund, Regional Development Fund and territorial cooperation.
  • End 2011: Commission to propose common strategic framework for all EU funds. 
  • 2011-2012: Member states and European Parliament to discuss and amend Commission's budget proposals.
  • By end 2012: Deadline for approving EU's long-term budget for 2014-2020.

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