Reflections on the Third Cohesion Report on Economic and Social Cohesion

1
Reflections on the Third Cohesion Report on
Economic and Social Cohesion

• EPRC Regional Development Seminar Series
• 27 February 2004
• John Bachtler
• European Policies Research Centre
• john.bachtler_at_strath.ac.uk

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New developments and implications

• Context EC financial perspective
• Context Reform debate
• The Third Cohesion Report
• Rationale for EU cohesion policy
• Cohesion policy priorities
• Convergence
• Competitiveness and employment
• Territorial cooperation
• State aids
• Implementation

3
EC financial perspective
4
EC financial perspective
5
Reform debate Member State positions

• Rationalisation
• Status quo
• Expansion

UK, Ger, NL, Swe, Aus, Den
Be, Fr, Fin, Ire, Ita, Lux
Portugal, Spain, Greece New Member States
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Reform debate main policy options

• Option 1 EC model
• keep or expand a well-funded EU regional policy
• EU continues to intervene in regional problems
  across Europe
• promotion of convergence and competitiveness
• Option 2 Net payer model
• limit EU regional policy to the poorest countries
  (cohesion model) or poorest regions
  (concentration model)
• richer countries deal with their own regional
  problems
• reduction in contributions to the EU budget 

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The Third Cohesion Report

• Article 159 of EU Treaty requires report every
  three years
• Aim to report on the progress towards economic
  and social cohesion and the means for achieving
  it
• Review of
• Trends in economic and social cohesion
• Impact of Member States policies
• Impact of Community policies
• Impact and added value of structural policies

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Convergence with the EU15
GDP 2.5 gt EU15 GDP 1.5 gt EU 15
N12 2023 2036
Slovenia - -
Cyprus - -
Czech Republic - -
Hungary 2006 2008
Slovak Republic 2013 2019
Estonia 2019 2029
Lithuania 2020 2030
Poland 2023 2037
Latvia 2026 2040
Bulgaria 2040 2040
Romania 2040 2040
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EU cohesion policy - rationale

• Why is cohesion policy needed?
• Reducing disparities growth and cohesion are
  mutually supportive
• Compensation cohesion policy helps spread the
  benefits of other EU policies
• Balanced development cohesion policy reduces
  pressures of over-concentration and bottlenecks
• A new philosophy?
• Past objectives of convergence and restructuring
  time-limited, geographically focused policy
• Future objective of balanced development a
  permanent policy, for all regions

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EU cohesion policy - structure

• Three priorities for Structural and Cohesion
  Funds
• Convergence growth and job creation in the least
  development Member States and regions (78 of
  budget)
• Regional competitiveness and employment (18)
• anticipating and promoting regional change
• helping people to anticipate and respond to
  change
• European territorial cooperation harmonious and
  balanced development of the EU territory (4)
• Community Initiatives mainstreamed
• Rural development organised under the CAP

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Convergence priority

• Less-developed regions (Objective 1)
• strict application of 75 per capita criterion
• no other criteria sparse population regions
  excluded
• increase in coverage from 22 of EU15 population
  (2000-06) to 25.6 (2007-13) of EU25 population
  (116.6 million people)
• Statistical effect regions (O1 in EU15 but not in
  EU25)
• 5.2 of EU25 population (23.7 million people)
• seven-year transition period
• support higher than current O1 phase-out regions
  (ie. 126 per head pa)
• special provisions for national regional aid
• Cohesion Fund
• strict application of 90 of EU GNP
• all new Member States (except Cyprus), Portugal,
  Greece
• no provision for statistical effect (Spain)
• Special programme for outermost regions

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Competitiveness and employment priority

• Budget 61 bn (18 of cohesion policy
  allocation)
• Coverage
• O1 transitional regions (phase in regions)
• 3.6 of EU25 population (16.4 mill population)
• six-year transitional period
• regional programmes (ERDF/ESF)
• All other regions
• no zoning at EU level
• funding divided 5050 between
• regional competitiveness programmes (ERDF)
• national employment programmes (ESF)

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Competitiveness and employment priority

• Allocations to Member States
• not specified
• possible starting point of existing O2/O3
  funding?
• use of GDP, employment, unemployment?
• Allocations within Member States
• Thematic concentration innovation/RD
  accessibility environment
• Geographical concentration references to
• industrial, urban and rural areas
• use of territorial criteria for regions with
  geographical handicaps
• more emphasis on cities
• take account of sparse population (also higher EC
  contribution)
• Resource concentration rules on minimum
  financial volume of programmes and priorities

14
Competitiveness and employment priority

• Implications
• sizeable amount of Objective 2/3 funding
• thematic concentration may not be major
  constraint
• fits with Smart Successful Scotland strategy
• some repackaging of existing interventions
  possible
• gaps tourism? community development?
• maximum of three themes
• requirements for geographical targeting are
  implicit rather than explicit
• Member States will have different approaches to
  geographical concentration
• top-down versus bottom-up
• blank sheet versus status quo

15
Territorial cooperation priority

• Significant increase in funding 4 of budget
  (13.5 bn)
• Coverage
• Cross-border cooperation (all land and maritime
  borders)
• New Neighbourhood Instrument on external borders
• Trans-national cooperation
• Interregional cooperation integrated into
  regional programmes
• EC-organised networks of regions and cities
• Implications
• definition of maritime borders
• major redefinition of spending priorities - more
  on infrastructure
• may be a problem of co-financing

16
State aids radical changes

• Pressures
• limit population coverage in EU-25
• need for flexibility in current rigid guidelines
• need to reduce aid intensities
• move away from investment aid to large
  enterprises
• Radical changes to State aids
• less-developed regions Article 87(3)(a)
• statistical effect regions Move from Art
  87(3)(a) to 87(3)(c)
• other regions no maps consistency with
  applicable state aid rules
• simplification of rules aid amounts (LETS) and
  aid impacts (LASA)
• Implications
• no regional aid outside Article 87(3)(a) areas?
• problems with implementing programmes?

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Implementation

• Simplification
• Three funds (ERDF, ESF, Cohesion Fund)
• Mono-fund programmes
• New planning framework
• EU Cohesion Policy Strategy adopted by Council
• National Development Strategy by each Member
  State
• National/Regional Operational Programmes (short
  documents at high priority level)
• No Programming Complement
• Annual reporting to Council
• Devolution of financial control (within limits)
• Simplification of financial management

18
Implementation

• Retention of key programming principles
• More accountability
• retention of N2 and performance reserve
• more rigorous monitoring mechanisms
• redefinition of evaluation tasks to be more
  strategic and results oriented
• More emphasis on partnership
• further decentralisation to partnerships on the
  ground
• tripartite contracts of Member States, regions
  and local authorities
• more involvement of social partners and civil
  society
• ERDF and ESF independent or coherent?
• Structural Funds and rural development
  coordinated?

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Implementation

• Implications
• Higher profile for cohesion policy at Council
  level
• Devolution of responsibility to Member States but
  more accountability
• Genuine simplification but limited
• New challenges for programme managers
• continued accountability for financial absorption
  
• new accountability for policy results

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EC timetable

• 10-11 May 2004 European Cohesion Forum
• July 2005 EC legislative proposals
• End 2005 Council and Parliament decision
• 2006 preparation of 2007-13 programmes
• 1 January 2007 start of new programmes

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Conclusions

• Key messages
• A new philosophy of cohesion policy balanced
  development
• Increase in funding for cohesion policy
• Three priorities convergence, competitiveness,
  cooperation
• All regions eligible for funding
• Thematic focus on innovation, accessibility and
  environment
• Radical changes to State aid control
• Rationalisation of implementation but more
  accountability