THE INTERNAL POLICIES OF

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• THE INTERNAL POLICIES OF
• THE EUROPEAN UNION
• Regional Policy in the EU
• Prof. D-r Jovan Pejkovski

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• Although the European Union is one of the richest
  parts of the world, there are striking internal
  disparities of income and opportunity between its
  regions.
• The entry of 10 new member countries in May 2004,
  whose incomes are well below the EU average, has
  widened these gaps.
• Regional policy transfers resources from
  affluent to poorer regions.
• It is both an instrument of financial solidarity
  and a powerful force for economic integration.

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• Solidarity and cohesion
• The two words, solidarity and cohesion, sum up
  the values behind regional policy in the EU
• solidarity because the policy aims to benefit
  citizens and regions that are economically and
  socially deprived compared to EU averages.
• cohesion because there are positive benefits for
  all in narrowing the gaps of income and wealth
  between the poorer countries and regions and
  those which are better off.

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• Big differences in prosperity levels exist both
  between and within member states.
• Even before enlargement, the ten most dynamic
  regions of the EU had a level of prosperity,
  measured by GDP per capita, which was nearly
  three times higher than the ten least developed
  regions.
• The most prosperous regions are all urban -
  London, Hamburg and Brussels.

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• The dynamic effects of EU membership, coupled
  with a vigorous and targeted regional policy, can
  bring results.
• The gap between richest and poorest regions has
  narrowed over the years.
• The case of Ireland is particularly heartening.
  Its GDP, which was 64 of the EU average when it
  joined in 1973, is now one of the highest in the
  Union. 

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• One of the current priorities is to bring living
  standards in the new member states closer to the
  EU average as quickly as possible.
• The causes of inequality
• Inequalities have various causes. They may result
  from longstanding handicaps imposed by geographic
  remoteness or by more recent social and economic
  change, or a combination of both.
• The impact of these disadvantages is frequently
  evident in social deprivation, poor quality
  schools, higher unemployment and inadequate
  infrastructures.

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• The EU policy to reduce regional disparities is
  built on four structural funds
• the European Regional Development Fund
• the European Social Fund
• the section of the EUs common agricultural fund
  devoted to rural development
• financial support for fishing communities as part
  of the common fisheries policy (CFP).

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• These funds will pay out about 213 billion, or
  roughly one third of total EU spending, between
  2000 and 2006.
• A further 18 billion was allocated to the
  Cohesion Fund, set up in 1993 to finance
  transport and environment infrastructure in
  member states with a GDP less than 90 of the
  Union average at the time (Greece, Ireland, Spain
  and Portugal).
• This has since been expanded to cover the new
  member states as well. Because of its strong
  economic performance, Ireland dropped out as a
  beneficiary in 2004.

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• The European Union's regional policy is based on
  financial solidarity inasmuch as part of Member
  States' -contributions- to the Community budget
  goes to the less prosperous regions and social
  groups.
• For the 2000-2006 period, these transfers will
  account for one third of the Community budget, or
  213 billion

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• How does it work?
• Europe's regional policy is a genuine shared
  policy based on financial solidarity.
• It permits the transfer of over 35 of the
  Union's budget, which comes mainly from the
  richest Member States, to the least favoured
  regions.

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• This approach not only helps the beneficiary
  countries but also those which are net
  contributors to the Community budget, as their
  enterprises profit in return from major
  investment opportunities and of economic and
  technological know-how transfers, particularly in
  regions where various types of economic activity
  have not yet really taken off.
• Regional policy enables all regions to help make
  the Union more competitive.

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• European solidarity is expressed primarily
  through the four Structural Funds.
• In all the Member States they exercise a
  multiplier effect on the economic and social
  factors likely to stimulate a region's economy.
• The Funds' contributions have grown from 8
  billion per year in 1989 to 32 billion per year
  in 1999. They will remain at about 28 billion
  per year from 2000 to 2006, or 195 billion over
  seven years (at 1999 prices).

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Annual resources of the Structural funds and the
Cohesion Fund ( million, at 1999 prices )
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• There is also a special Fund to assist Spain,
  Greece, Ireland and Portugal, as their transport
  and environmental infrastructure remains
  inadequate. This is the Cohesion Fund, whose
  resources amount to about 2.5 billion per year
  from 2000 to 2006, for a total of 18 billion (at
  1999 prices).

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• In all, 213 billion will be available from 2000
  to 2006 to improve the economic situation of the
  least favoured regions, areas with specific
  handicaps and at-risk groups in society. In
  addition, many specific projects will acquire a
  European dimension thanks to the Commission's
  guidelines and exchanges of know-how among the
  various regions.

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Where the money goes

• Unlike the Cohesion Fund, poor or disadvantaged
  regions in all EU countries can benefit from the
  four structural funds according to certain
  criteria or objectives.
• A total of 70 of funding goes to so-called
  Objective 1 regions where GDP is less than 75 of
  the EU average. About 22 of the Union population
  live in the 50 regions benefiting from these
  funds which go to improving basic infrastructure
  and encouraging business investment.

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• Another 11.5 of regional spending goes to
  Objective 2 regions (areas experiencing economic
  decline because of structural difficulties) to
  help with economic and social rehabilitation.
  Some 18 of the EU population live in such areas.
  
• An Objective 2 programme in Denmark, receiving
  162m from the structural funds, has succeeded in
  improving transport and telecommunications in
  small islands and coastal communities with
  limited access by land and little local fresh
  water.

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• Objective 3 focuses on job-creation initiatives
  and programmes in all regions not covered by
  Objective 1. 12.3 of funding goes towards the
  adaptation and modernisation of education and
  training systems and other initiatives to promote
  employment.

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The three priority Objectives

• To enhance its impact and secure the best
  possible results, 94 of structural funding is
  concentrated on three objectives defined as
  priorities
• Objective 1 (territorial)Helping regions whose
  development is lagging behind to catch up, i.e.
  providing them with the basic infrastructure
  which they continue to lack or encourage
  investments in business economic activity.

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• Some fifty regions, home to 22 of the Union's
  population, are concerned and they receive 70 of
  the funding available.
• Objective 2 (territorial)Supporting economic
  and social conversion in industrial, rural, urban
  or fisheries-dependent areas facing structural
  difficulties.18 of the Union's population lives
  in these crisis-hit areas, which receive 11.5 of
  total funding.

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• Objective 3 (thematic)Modernising systems of
  training and promoting employment.Measures
  financed by Objective 3 cover the whole Union
  except for the Objective 1 regions where measures
  for training and employment are included in the
  catching-up programmes. Objective 3 receives
  12.3 of total funding.

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• There are also four special initiatives,
  accounting between them for 5.35 of the
  structural funds
• cross-border and inter-regional 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). 

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Looking after new members

• With enlargement, the area and population of the
  Union has expanded by 20 while GDP has increased
  by less than 5.
• The GDP of the newcomers varies from about 72 of
  Union average in Cyprus to about 35-40 in the
  Baltic States (Estonia, Latvia and Lithuania).
  The Union has created tailor-made financial
  programmes for the period 2000-2006 to help the
  newcomers adjust to membership and to start
  narrowing the income gap with the rest of the
  Union.

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• These programmes are worth about 22 billion in
  all, with further funding now available for the
  post-entry period. The components are
• ISPA (the Instrument for Structural Policies for
  Pre-accession) finances environment and transport
  projects with a budget of 7.28 billion
• Sapard (Special Accession Programme for
  Agriculture and Rural Development) concentrates
  on agricultural development with a 3.64 billion
  budget.

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• They are additional to the older Phare programme
  whose budget for 2000-2006 is 10.92 billion and
  whose priorities are to
• strengthen the administrative and institutional
  capacity of new members. This accounts for 30 of
  its budget. 
• finance investment projects - which absorb the
  remaining 70.
• To supplement these programmes, the Union has set
  aside a further 23 billion from the structural
  and cohesion funds to be spent in the new member
  states in the period 2004-2006.

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Beyond the short term

• The European Commission has already (in July
  2004) published its proposals for a new-look and
  more integrated regional policy for the period
  2007-2013 after present programmes run out.
• Procedures will be simplified and funding
  concentrated on the most needy regions of the 25
  member states. For the new period, the Commission
  proposes a regional policy budget of 336
  billion, still the equivalent of one third of the
  total EU budget. 

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• The idea is to divide the spending into three
  categories. Of the total amount, 79 would go on
  reducing the gap between poor and richer regions
  while 17 would be spent on increasing the
  competitiveness of poor regions and creating
  local jobs there. The remaining 4 would focus on
  cross-border cooperation between frontier
  regions.

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• The European Unions regional and cohesion policy
  will have to meet four challenges during the
  200713 programming period.
• 1. Increase cohesion in an enlarged Union
• The enlargement of the Union to 25 Member States
  and subsequently to 27 or more will present an
  unprecedented challenge for the competitiveness
  and internal cohesion of the Union . As
  illustrated in this report, enlargement will lead
  to the widening of the economic development gap,
  a geographical shift in the problem of
  disparities towards the east and a more difficult
  employment situation socioeconomic disparities
  will double and the average GDP of the Union will
  decrease by 12.5 .

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• 2. Strengthen the Union s priorities
• In an effort to improve the performance of the EU
  economy, the Heads of State or Government of the
  Union meeting in Lisbon in March 2000 set out a
  strategy designed to make Europe the most
  successful and competitive knowledge-based
  economy in the world by 2010. The Nice Council in
  December 2000 translated the Lisbon objectives on
  poverty reduction into a coordinated EU strategy
  for social inclusion.

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• In June 2001, the Lisbon strategy was widened,
  adding a new emphasis on protecting the
  environment and achieving a more sustainable
  pattern of development. Cohesion policy is also
  necessary in a situation where other Community
  policies have important benefits with limited
  costs, although in a localised way. Cohesion
  policy helps to spread the benefits.

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• By anticipating change and facilitating
  adaptation, cohesion policy needs to incorporate
  the Lisbon and Gothenburg objectives and to
  become a key vehicle for their development via
  the national and regional development programmes.

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• 3. Improve quality to promote sustainable and
  more balanced development
• Strengthening regional competitiveness through
  welltargeted investment throughout the Union and
  providing economic opportunities which help
  people fulfil their capabilities will thus
  underpin the growth potential of the EU economy
  as a whole to the common benefit of all.

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• 4. Create a new partnership for cohesion
• The reform of cohesion policy should also provide
  an opportunity to bring greater efficiency,
  transparency and political accountability.
• This requires, first and foremost, the definition
  of a strategic approach for the policy, spelling
  out its priorities, ensuring coordination with
  the system of economic and social governance and
  allowing for a regular, open review of progress
  made.

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• The corollary to the above is the need to
  reinforce institutional capacities at all levels
  of government throughout the Union , building on
  one of the key strengths of cohesion policy.

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• Priorities for the future convergence,
  competitiveness, cooperation
•  On 18 February 2004 , the European Commission
  adopted A new partnership for cohesion in the
  enlarged Union convergence, competitiveness
  cooperation, the third report on economic and
  social cohesion, in which it describes its vision
  of the cohesion policy for the period 200713.

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• On the basis of the budget proposal presented by
  the Commission on 10 February 2004 , a little
  more than EUR 336 billion will be allocated to
  the cohesion policy for the new period, with the
  priorities indicated below

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• Convergence support employment growth and job
  creation in the Member States and least developed
  regions
• Regional competitiveness and employment
  anticipate and encourage the change
• European territorial cooperation ensure
  harmonious and balanced development throughout
  the entire Union.

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• Experience shows that regional policy can be
  successful only if it concentrates its efforts on
  a limited number of fairly large areas.
• That is why the rules on the Structural Funds
  adopted in 1999 attempted to reduce the
  scattering of funds and clarified the criteria
  for selecting the regions with the greatest need
  of public support for their development.

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• Part of Structural Fund resources is earmarked
  for social groups throughout the Union who face
  difficulties without defining any particular
  geographical criteria.
• The principle of "greater concentration" is meant
  to help the Union gradually integrate new Member
  States while continuing to provide substantial
  assistance to the less-favoured regions.

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• The Central and Eastern European countries
  (CEECs) who were candidates for accession to the
  EU lag behind the present Member States in terms
  of economic development.
• At the beginning of the 1990s, they embarked on a
  series of radical political and economic reforms
  unprecedented in Europe.
• These reforms intended to integrate them into a
  market economy which central planning had
  abolished thereby opening them up to
  international trade.

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• Their economies were radically restructured, and
  as a result the number of jobs available
  decreased and unemployment increased. By
  contrast, trading relations with the rest of the
  world increased substantially, as did foreign
  investments.
• As a precursor of Cohesion Fund interventions,
  the CEECs receive support from the Instrument for
  Structural Policies for pre-Accession (ISPA) to
  improve their infrastructure in the fields of the
  environment and transport.

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• The diversified funding offered by PHARE
  (institution-building, economic development
  programmes) will be replaced by the Structural
  Funds following accession. SAPARD introduces
  rural development instruments in anticipation of
  EAGGF interventions.
• Cyprus and Malta are covered by special
  protocols. Accession negotiations with Turkey
  have not yet begun.

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• European Union Since 1994, the local and regional
  authorities have been represented at Community
  level by the Committee of the Regions, which
  contributes to the efficiency of Community
  policies.
• The Committees' 222 members regularly give
  opinions on the implementation of the Union's
  regional policy and on the reduction of social
  and economic disparities within its borders.

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• Committe of the RegionsThe Committee of the
  Regions is also consulted by the Council and the
  Commission on the following topics
• Education and youth,
• Culture,
• Public health,
• Trans-European networks for transport,
  telecommunications and energy,
• Employment policy,
• Social policy,
• The environment,
• Vocational training,
• Transport.

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• Although substantial progress has been made in
  basic infrastructure, other imbalances still
  remain research and technological development,
  access to skills and the information society,
  opportunities for education and on-going training
  and the quality of the environment.
• The Structural Funds and the Cohesion Fund are
  helping to reduce these imbalances while creating
  favourable conditions for growth.

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• But the achievements of regional policy cannot
  merely be summed up in statistical terms.
• The Community-wide scale of certain measures
  (Community Initiatives), partnership among the
  various parties involved, the attention paid to
  the environment and equal opportunities,
  cooperation, networking, exchange of experiences
  and experimentation with new approaches to
  development (Innovative Actions) are all new
  assets which help the regions to move forward and
  make full use of their potential.

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• EU regional and cohesion policy has a different
  logic, seeking to invest in human and physical
  capital formation so as to raise the long-run
  growth potential of the weakest regions and to
  improve competitiveness across the regions as
  whole.
• Accordingly, European regional and cohesion
  policy measures broadly fall into four types,
  aiming to improve basic infrastructure
  endowments.

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• This covers transport and energy infrastructures,
  telecommunications and information technology
• to raise levels of RD and to support for
  innovation
• to support the labour market, mostly through
  training, to improve the adaptability of the
  workforce to changing economic circumstances and
• to develop enterprise including investment
  support especially for SMEs, and to improve the
  attractiveness of cities and regions for new
  business.

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• Second, embedded in the management system of
  European regional policy is the concept of
  ownership.
• Beyond the economic impact of additional
  investment, there is an equally important effect
  in terms of governance. Every programme is
  developed through a close partnership, involving
  the authorities at European, regional and local
  level, the social partners and civil society. As
  a result, the strategies are more effectively
  owned by those responsible for designing them,
  those who co-finance them and the people who
  benefit most from a successful outcome.

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• Third, European regional policy is based on a
  strategic approach
• Being involved in preparing European programmes
  obliges the regions to think long-term and to
  identify strategic priorities.
• The support from the European budget means that
  they are afforded a degree of isolation from the
  day-to-day political or other pressures that can
  have a distorting effect on any public
  expenditure strategy.

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• Today, the planning period stretches over seven
  years, well beyond the electoral cycle of any
  Member State, and long enough to invest in
  infrastructure projects that make a real
  difference to citizens quality of life for many
  years to come.
• Moreover, these are not the only positive aspects
  of the governance method. In order to ensure the
  effectiveness of expenditure, the implementation
  of programmes includes specific management,
  monitoring and evaluation requirements.

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• Providing information to potential beneficiaries
  and citizens is a very specialised task which
  must be carefully prepared and must be followed
  on through all the phases of the life of a
  programme using structural funding.
• That is why the Commission has asked the Member
  States to prepare and implement multi-annual
  communication plans rather than one-off measures.

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• Each communication plan should enable programme
  managers to inform potential project promoters
  about the funds available and how to obtain them.
  
• All available means, from the most traditional
  (brochures, leaflets, radio spots, television-,
  programmes, etc.) to the most innovative
  (Internet, CD-ROM), may be used to that end.