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Review and the Future of Regional Policy

Review and the Future of Regional Policy

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Reports on economic and social cohesion

Sixth progress report on economic and social cohesion
Fifth progress report on economic and social cohesion
Fourth Report on Economic and Social Cohesion
Fourth progress report on cohesion: The Growth and Jobs Strategy and the Reform of European cohesion policy
Third progress report on cohesion – towards a new partnership for growth, jobs and cohesion
Third report on economic and social cohesion: the socio-economic situation of the Union and the impact of European and national policies
Third Report on economic and social cohesion: proposals for regional policy after 2006
Second progress report on economic and social cohesionArchives
First Progress Report on Economic and Social CohesionArchives
Second Report on Economic and Social Cohesion – an assessmentArchives
Second Report on Economic and Social Cohesion: conclusions and recommendationsArchives
10 questions for debateArchives

Lisbon Strategy and regional policy

Cohesion Policy: investing in the real economy
Cohesion policy to deliver the Lisbon Strategy (2007-2013)
Cohesion Policy in support of growth and jobs – Community Strategic Guidelines, 2007-13
Green paper on Territorial Cohesion
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The Community Lisbon ProgrammeArchives
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A European initiative for growth
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The Lisbon Special European Council (March 2000): Towards a Europe of Innovation and Knowledge

Thematic communications

Regional Policy serving innovation
The outermost regions: an asset for Europe
Review, challenges and strategy for the outermost regions
Cohesion policy and cities
Regions for economic change

Second Report on Economic and Social Cohesion: conclusions and recommendations

Second Report on Economic and Social Cohesion: conclusions and recommendations

Outline of the Community (European Union) legislation about Second Report on Economic and Social Cohesion: conclusions and recommendations

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Regional policy > Review and the future of regional policy

Second Report on Economic and Social Cohesion: conclusions and recommendations

1) Objective

To analyse the socio-economic progress made by the EU’s less developed regions and the factors likely to stimulate further such advances in a European Union of 27 members, and to open the debate on the future shape of EU cohesion policy.

2) Document or Iniciative

“Unity, solidarity and diversity for Europe, its people and its territory” – the Second Report on Economic and Social Cohesion, 31 January 2001 [COM(2001) 24 final – Not published in the Official Journal].

3) Summary

1. Every three years, the Commission submits a “report on the progress made towards achieving economic and social cohesion and on the manner in which the various means have contributed to it” (Article 159 of the Treaty). This report is, where relevant, “accompanied by appropriate proposals”.

2. Following the first Cohesion Report at the end of 1996, the Second Report was presented to delegates at the Cohesion Forum on 21 and 22 May 2001 in Brussels. It brings the statistical data for the regions and the Member States up to date to provide a snapshot of economic and social development within the EU.

3. Since data is now available for the applicant countries in most of the relevant fields as well, the report also provides the very first glimpse of the likely economic and social situation in the Member States and regions of a 27-member EU. Without anticipating when and how the new members will join, the report also presents a series of conclusions and recommendations designed to spark a public debate on what form cohesion policy should take in the enlarged EU. It is these conclusions that are described in this factsheet.

4. The analysis of the socio-economic situation in the EU’s Member States and regions shows the notable successes chalked up by EU cohesion policy, especially in the poorest regions. In reforming its regional policy by 2006, the EU will have to bear in mind a number of issues:

  • the considerable widening of socio-economic and spatial disparities that will be caused by enlargement;
  • globalisation in trade, the EU economy’s shift towards more knowledge-based activities and demographic trends;
  • the need to improve the performance of EU regional programmes and raise public awareness of them, while also ensuring that other EU policies also help its less developed regions make up their socio-economic deficit.

5. The following sections contain a number of questions and options intended to prepare the ground for a full and frank debate on the future shape of cohesion policy in the enlarged EU. They are intended to ensure that this debate revolves more around the substance of policy than questions of financing.

PROMOTING THE FACTORS CRUCIAL FOR CONVERGENCE

6. Under its cohesion policy, the EU finances measures identified as likely to reduce socio-economic and spatial disparities in the EU. Since a system based on tax transfers alone would not be sufficient for this task, EU action must be concentrated on those factors of competitiveness likely to close some of the wide gaps between different parts of the EU.

7. Productivity – determined by factors including quality of human resources, levels of physical infrastructure and capacity for innovation – is a key driver in the process of growth and convergence. For example, economic development is dependent on the existence of reasonable levels of physical infrastructure (transport, business services, etc.). In the EU, the foundations of long-term growth will be laid through investment in skills and modern communications technology, enhanced by business’ capacity for innovation. It is the task of EU cohesion policy to create a climate in which local economies in less developed regions can fully grasp the opportunities available in the single market. All such efforts should, moreover, be guided by the principle of sustainably managing natural resources.

PRIORITIES FOR ECONOMIC AND SOCIAL DEVELOPMENT

8. Currently action under the cohesion policy is targeted on several economic and spatial problems that fall within the numerous fields under the EU remit:

  • least developed regions – still the top priority for EU cohesion policy, given the persistence of regional disparities in income and development (set to be further widened by enlargement).
  • urban development – this issue lies at the heart of economic, social and spatial change. Towns and cities embody strategic potential for balanced and sustainable development. The main challenges they face are manifold internal disparities, the pressure they exert on the environment and their role as engines of growth for the surrounding area.
  • diversification of rural economies – this, together with the nature of the town-country relationship, will condition how the rural areas adapt to a changing world. With agriculture no longer a major employer, the task is to revive the countryside and stop the drift of people to towns by promoting a pattern of development likely to foster new competitive activities, especially in the service sector.
  • crossborder, transnational and interregional cooperation – to promote integration and reduce the economic fragmentation caused by national borders. Enlargement will increase the need for cross-border activities to further cooperation between old and new Member States.
  • postindustrial economic restructuring – this will continue to be a priority for cohesion policy in future. EU support is needed to counter job losses in sectors such as textiles, automobiles and heavy industry and stimulate the development of new activities.
  • areas with major geographical or natural handicaps – principally the outermost regions, islands and mountainous areas – these areas face considerable barriers to integrating with the EU economy on account of the extra costs imposed by their situation. They are also dogged by depopulation induced by lack of economic opportunities, and need structural assistance to promote development.

9. The cohesion policy priorities relating to employment must both tackle current problems and anticipate future needs. These priorities are:

  • more and better jobs – current low rates of job creation within the EU can be improved by taking a more strategic approach to creating employment and anticipating trends in industrial change;
  • nurturing the new economy and the knowledge economy – to counter the possible emergence of a digital divide with its in-built risks of social exclusion, it is essential to improve systems of education, training and lifelong learning and broaden access to information technology;
  • encouraging social integration and combating poverty and social exclusion, which are still at unacceptable levels in the European Union;
  • promoting equal opportunities and fighting all forms of discrimination, which lead to a waste of talent.

10. In future, cohesion policy must take a broader and longer-term view. Building on the achievements of the European Spatial Development Perspective (ESDP), the Commission intends to promote balanced development throughout the EU and is planning to put forward a spatial development strategy that could form the basis of future policy in this field.

OVERHAULING THE DELIVERY SYSTEM FOR COHESION POLICY

11. The Agenda 2000 reform of the Structural Funds improved the management systems for cohesion policy. Now, though, more fresh thinking is needed on the ways the policy is implemented: enlargement is just round the corner, priorities have been revised and programmes need to be more effective. At this stage, all we can do is look at the core issues and propose a set of solutions. In 2004, the third Cohesion Report will clarify future delivery methods for the policy.

12. The sections below address the following: (a) targeting/concentrating limited resources in the enlarged EU (b) the particular challenge of enlargement in the current programming period and (c) cohesion policy after 2006 in the enlarged EU.

A – Targeting limited resources in the enlarged EU

13. The next generation of cohesion policy will apply not just to parts of the new members but also to those regions in existing members where serious economic and spatial disparities persist. The basic principle must be the same as in the past, i.e. to concentrate limited resources on a reduced number of areas where action at EU level can help or on priority geographical areas, with the goal of building a critical mass of financing so that meaningful progress can be made. The programmes need to be refocused.

14. Top priority for funding is still given to underdeveloped regions, and the best way to concentrate resources in such areas is via the direct zoning method, on account of the objectivity and transparency it offers. This method combines the criteria of GDP per capita (measured in purchasing power standards, or PPS) with the level at which the assistance is delivered (measured in statistical territorial units – the NUTS system).

15. Currently, eligibility for assistance is determined by per-capita GDP levels (areas with less than 75 % of the EU average qualify). In future, two considerations will have to be borne in mind:

  • by simple mechanical effect, applying this criterion after enlargement would cut by more than half (in terms of population) the regions eligible for Objective-1 assistance in the pre-enlargement members. This raises the question of how to treat the regions in these countries, whose situation will notionally improve relative to the newcomers although their problems remain.
  • post enlargement, the disparities between the underdeveloped regions themselves will be more marked than at present, with some having per-capita income a quarter of the EU-27 average.

16. We therefore need a radical rethink of the advantages and disadvantages of the methods used to determine eligibility for structural assistance in the current programming period. For example:

  • direct regional targeting is used for Objectives 1 and 2, with the Commission drawing up in advance a restricted list of eligible areas. This system enables assistance to be concentrated objectively and transparently on the really deprived regions but it lacks the flexibility to respond changing socio-economic conditions in these regions;
  • indirect regional targeting is used for the Urban and Leader + Community Initiatives. The Member State governments determine the eligible areas using criteria set in advance by the Commission. This system is more flexible than the one above and could resolve some of the problems associated with the Commission’s role in the designation of eligible areas. With this method, the criteria are designed to concentrate funding at levels that can make a real impact;
  • horizontal targeting is used for Objective 3 programmes. Funding for investment in human capital is programmed at national level.

17. In the light of the above, assistance for underdeveloped regions could be delivered according to one of the four following methods:

  • applying the current criterion (per-capita GDP below 75 % of EU average), regardless of the number of new Member States. This approach would automatically exclude many regions in the old members from funding, leaving them dependent for future assistance on other EU programmes (i.e. not those aimed specifically at underdeveloped areas), eligibility for which is subject to different priorities and criteria;
  • applying the existing 75 % criterion as above, but including a transitional or “phasing-out” stage for EU-15 regions that are no longer eligible. This would be all the more generous, since the per-capita GDP of these regions would be close to the eligibility limit;
  • raising the eligibility threshold above 75 %, to mitigate or eliminate altogether the automatic disqualification from eligibility of certain EU-15 regions, without maintaining eligibility for regions that would no longer have been underdeveloped in the old 15-member EU;
  • having two separate eligibility criteria: one for EU-15 regions and another for those in the applicant countries. This would have the de facto effect of creating two distinct categories of aid recipient. The concentration of EU funding would depend on levels of prosperity in each region.

18. One way of accommodating the increase in income disparities among the EU’s least developed regions in the wake of enlargement would be to set a specific part-financing rate that takes account both of prosperity and fiscal capacity in the poorest Member States.

19. Other issues are also worthy of consideration:

  • should employment rate be added to the criteria already in use (population, regional and national GDP, unemployment)?
  • if structurally insufficient, could levels of actual convergence achieved by the eligible regions be included in the criteria for allocating funds?
  • should the link between financing levels and programme results be increased by placing more funds in the performance reserve?

20. The EU’s poorer regions are not the only areas with development problems. Cohesion policy will also have to provide support for other parts of the EU that are facing an ongoing process of fundamental structural change. With resources limited, efforts will have to be concentrated to build up a critical mass of funding to produce genuine results.

21. For these regions, the indirect zoning method would have the advantage of encouraging such concentration, as witness the experience of the Urban and Leader + Community Initiatives. The Commission would simply to set a minimum level of concentration for EU and national government subsidies -programming in the various priority fields would then be carried out from a budget allocated to each Member State on the basis of the relevant socio-economic indicators.

22. Given the promising results they achieved with specific structural programmes between 1995 and 1999, and their strategic importance for enlargement, the EU’s border regions could be included in the mainstream Structural Fund programmes.

B – The particular challenge of enlargement in the current programming period

23. In preparing for accession, the applicant countries have already started familiarising themselves with the management procedures for the Structural Funds, in particular through the Phare programme. An significant proportion of the budget for this programme is used for medium-term Objective 1-style measures which are preparing the way for day when EU assistance will be programmed under the Structural Funds.

24. The concept of regional development is a novelty for the authorities in the applicant countries. Decentralised management of aid programmes is also new, and raises the question of how well equipped the administrations in these countries are to handle and manage EU financing. This heightens the importance of the institution-building process in the prospective members, which aims among other things to:

  • create a national-level policy by establishing a qualified administrative framework with the relevant administrative procedures;
  • promote decentralisation by consolidating democratic institutions, developing partnerships and boosting economic effectiveness;
  • determine a development strategy that will promote balanced growth.

25. It is now highly likely that some of the applicants will join before 2006. This scenario was not factored into the EU’s forward budget planning schedule under Agenda 2000 for 2000-2006, confirmed at the 1999 Berlin European Council. Since structural funding will have to be made available to the new members as soon as they join, one solution could be to introduce a transitional or phasing-in stage, with transfers increasing progressively over time.

26. In this scenario, how would funding be divided between the Cohesion Fund and the Structural Funds? The former would replace ISPA and the latter Phare and Sapard. Given the requirements of the applicant countries in terms of transport and environmental infrastructure, a reasonable budget for the Cohesion Fund in the enlarged EU would seem to be around one third of all future EU cohesion funding. What is more, unlike the Structural Funds, the Cohesion Fund involves management at project level, which may be more suitable for civil services still lacking experience of programming and managing EU funding. And it also allows for high levels of part-financing without the need to comply with the additionality principle.

C – Cohesion policy after 2006 in the enlarged EU

27. The structural reforms introduced under Agenda 2000 led to a number of improvements such as extending decentralisation, a greater emphasis on partnership and evaluation and tighter management and financial-control practice based on a clearer division of responsibilities between Member State and Commission. While an in -depth study of how these changes have impacted on EU cohesion policy will have to wait until the next Cohesion Report is produced, some facts are already clear:

  • the decentralisation of decision-making processes is progressing well as far as national and EU policies are concerned. The role played by regional and local authorities and local interests should be enhanced by the greater emphasis on working in partnership and especially by the increase in local-level programming where suitable.
  • programming could be split into a two-level process, with the Commission devising overall strategy and identifying priorities for EU-level action and the actual programming carried out at the appropriate level (transnational, regional, local, urban, etc.).
  • the application of the additionality principle, which requires that EU funding supplement rather than replace financing by national governments, could be reviewed. While its value in making EU cohesion programmes more effective is no longer in doubt, the problem is that it is applied not to individual programmes but rather all programmes under a single Objective in a given Member State, causing a lack of transparency. Compliance with additionality rules can be verified at programme level rather than nationally, especially in the less developed regions.
  • the link between programme budgets and performance evaluation should be strengthened.

28. To increase consistency, the Cohesion Fund and the Structural Funds could be brought together into a single system. For example, the Cohesion Fund would be the sole channel for investment support for environmental and transport infrastructures, regardless of geographical area.

29. What is the financial outlook for cohesion policy in 2006 and beyond? The Second Cohesion Report highlights the more acute need for development assistance in the post-enlargement EU. While resources will be concentrated on the new members, the persistent problems of the existing members cannot be ignored.

30. Under Agenda 2000, the original Commission proposal for 2000-06 was for financing to maintain the levels reached in 1999, i.e. a cohesion policy budget equal to 0.46 % of EU GDP. At the Berlin European Council, the budget for structural measures was set at 213 billion over seven years (2000-2006). To this must be added pre-accession assistance worth 3 billion annually, the amounts set aside for countries joining before 2006 and the planned budgets for the new Member States. Altogether this equates to 0.45 % of projected GDP in the enlarged EU of 21 Member States in 2006.

31. The rules on financing for the 2000-2006 period state that in a given year no Member State may receive transfers under the Structural and Cohesion Funds worth more than 4 % of its national GDP. This cap will have serious implications for the poorest of the new members, called on to make efforts to meet the need for more balanced development and at the same time bear in mind their capacity to absorb funds.

32. Pre-accession assistance, adapted where necessary, should be continued for the countries applying to join on 1 January 2007.

33. For more information on the Second Cohesion Report, see the following:

  • the full report on the Commission’s INFOREGIO website (January 2001);
  • the transcripts of the debates held at the Cohesion Forum;
  • the SCADplus factsheet on the situation and trends in economic and social cohesion during the1995-1999 period;
  • SCADplus factsheet on the 10 questions for the debate on tomorrow’s regional policy.

4) Implementing Measures

5) Follow-Up Work

Commission Communication of 18 February 2004 – Third progress report on economic and social cohesion [COM(2004) 107 final – Not published in the Official Journal]
This report updates the analysis of economic and social cohesion. For the first time, the Commission has set out concrete proposals for regional policy after 2006.

Commission Communication of 30 January 2003 – Second progress report on economic and social cohesion [COM(2003) 34 final – Not published in the Official Journal]
This report updates the analysis of economic and social cohesion presented in the second cohesion report published in January 2001 and outlines the state of the debate on future cohesion policy for the period after 2006.

Commission Communication of 30 January 2002 – First progress report on economic and social cohesion [COM(2002) 46 final – Not published in the Official Journal].

This report updates the analysis of economic and social cohesion presented in the first cohesion report published in January 2001 and outlines the state of the debate on future cohesion policy for the period after 2006.

 

10 questions for debate

10 questions for debate

Outline of the Community (European Union) legislation about 10 questions for debate

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These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Regional policy > Review and the future of regional policy

10 questions for debate

In the Second Report on Economic and Social Cohesion, published at the end of January 2001, the European Commission:

  • appraises economic and social cohesion across the European Union during the period 1995-96;
  • assesses the future of cohesion policy and describes the outlook in the light of the substantial changes brought about by the globalisation of the economy and the challenges deriving from enlargement.

In order to launch a genuine debate on the future regional policy of the European Union, the Commission is also asking ten fundamental questions. It is calling on all the stakeholders (Member States, local authorities, local players, experts and European organisations) to turn their attention to this issue and to participate in the specific seminars to be held during the first half of 2002. These ten questions are as follows:

  1. What will be the role of cohesion policy in an enlarged Union of nearly thirty Member States in a context of rapid economic and social change? How is it possible to further economic convergence and preserve the European model of society?
  2. How should Community policies be made more coherent? How should the contribution of other Community policies to the pursuit of cohesion be improved?
  3. How should cohesion policy be modified in preparation for an unprecedented expansion of the Union? Should cohesion policy also address territorial cohesion in order to take better account of the major spatial imbalances in the Union?
  4. How can cohesion policy be focussed on measures which have a high Community added value ?
  5. What should be the priorities to bring about balanced and sustainable territorial development in the Union?
  6. How should the economic convergence of regions which are lagging behind be encouraged?
  7. What kind of Community intervention is required for other regions?
  8. What methods should be used to determine the division of funds between Member States and between regions?
  9. What principles should govern the implementation of Community intervention?
  10. What should be the response to increased needs with regard to the economic, social and territorial dimensions of cohesion?

First Progress Report on Economic and Social Cohesion

First Progress Report on Economic and Social Cohesion

Outline of the Community (European Union) legislation about First Progress Report on Economic and Social Cohesion

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Regional policy > Review and the future of regional policy

First Progress Report on Economic and Social Cohesion

1) Objective

To update the analysis of economic and social cohesion presented in the second cohesion report published in January 2001 and outline the state of the debate on future cohesion policy for the period after 2006.

2) Document or Iniciative

Commission Communication of 30 January 2002 – First progress report on economic and social cohesion [COM(2002) 46 final – Not published in the Official Journal].

3) Summary

Every three years, the Commission submits a “report […] on the progress made towards achieving economic and social cohesion and on the manner in which the various means […] have contributed to it” (Article 159 of the Treaty). Published in January 2001, the second report on economic and social cohesion pursues two objectives: to analyse the development of economic and social cohesion in a European Union with 27 members and open the debate on the future of Community cohesion policy.

In December 2001, the Laeken European Council concluded that, if the current rate of progress of the negotiations was maintained, all the applicant countries except Bulgaria and Romania could join the Union soon. This means that by 2004 the European Union could have 25 members.

The purpose of this progress report on economic and social cohesion is therefore:

  • to update the analysis of economic and social cohesion presented in the second cohesion report published in January 2001, including for the first time, an analysis of disparities in a Europe of 25;
  • to outline the state of the debate on future cohesion policy for the period after 2006.

SITUATION AND TRENDS

The progress report provides data on regional GDP in 1999 and on employment and unemployment in 2000. The updated analysis of growth, employment and factors promoting sustainable development confirms the main trends set out in the second report on economic and social cohesion:

  • “Although disparities between the present Member States still persist, they have diminished since 1998.”
    The main change concerns the countries receiving assistance from the Cohesion Fund. Spain, Greece and Portugal have made up a third of their development gap over 10 years. The Irish GDP rose from 64 % of the Community average in 1988 to 119 % in 2000.
  • “The reduction in regional disparities within the Fifteen continues, although to a lesser extent than at national level.”

    These disparities have grown within some Member States. The process of catching up will therefore be a long haul.
  • “Enlargement will be accompanied by a major fall in average per capita GDP and a widening of regional disparities on a scale without precedent in any previous enlargement.”

    The fall in GDP in a Europe of 25 will be 13 %. Nevertheless, that fall and the widening of disparities will be less pronounced than the previous assumptions for a Union made up of 27 Member States.
  • “In a Union of 27 Member States there would be three groups of countries”: A) nine applicant countries with a standard of living 41 % of the Community average; B) three applicant countries (Cyprus, Slovakia and the Czech Republic) and three cohesion countries (Spain, Greece and Portugal) with a GDP of 87 % of the Community average; C) the other current Member States, who would be well above that future average.

Economic and social cohesion in the existing Union and in the applicant countries

For the period 1995-99, it is now possible to examine per capita GDP at regional level. The analysis in the progress report highlights the following features:

  • At 3.2 %, the rate of growth in the twelve applicant countries was higher than in the existing Union (2.4 %) over that period.
  • “Three million jobs were created in the European Union in 2000.”

    Thus employment in the Europe of Fifteen rose by 1.8 % in 2000. Unemployment fell from 9.1 % to 8.4 %, the largest fall in almost ten years. This reduction also benefited the most disadvantaged categories such as the long-term unemployed, young persons and women.
    Nevertheless, “major disparities continue to exist, particularly between the regions”: in the regions least affected by unemployment (accounting for 10 % of the total population of the Union), the rate is 2.7 % as against 21.9 % in the regions most affected (also accounting for 10 % of the total population of the Fifteen).
    Over the same period, “employment fell by 1.4 % in the applicant countries”, i.e. 600 000 jobs were lost. This trend could become more pronounced in future with the restructuring currently underway in some sectors such as agriculture and manufacturing. In Central and Eastern Europe, employment in the tertiary sector – finance, business and services – is only three quarters of the EU average.
    In those countries long-term and youth unemployment is high while women are less affected.
  • “The phenomenon of demographic concentration is becoming more pronounced.”

    The regions whose population has the highest annual growth rate are already densely populated. Similarly, the regions with a falling population are the regions with the lowest population density.
  • “The general trend of a slow-down in population growth and an ageing population are more varied at regional level.”

    Though there has been a general increase in the level of education, wide regional disparities persist.
    The human factor will be decisive in enabling the least developed regions to catch up. Thus, education and training are two vital elements in ensuring that all Europeans are in a position to gain the knowledge and the skills necessary to live and work in the information society. To achieve this, the regions should also be given incentives and help to improve their technical infrastructure and increase their capacity for innovation and research.
    The population with the lowest level of education remains concentrated in southern Europe (Portugal, Spain, Italy and Greece), but also in Ireland and in some areas of northern France and Belgium. The highest levels of education are to be found in the Nordic countries, the United Kingdom, Germany and the Benelux, and in Paris, Madrid and the Basque Country.
    The level of Internet access (the percentage of households having access to the Internet from home) tends to be less than 30 % in the cohesion countries, while in the Nordic countries and the Netherlands it is around 60 %.

The updated information confirms the very high concentration of activities in a triangle formed by North Yorkshire (United Kingdom), Franche-Comté (France) and Hamburg (Germany).

The socio-economic role of the border regions is increasing and will be bigger after enlargement. Mountain, coastal and maritime areas, islands and archipelagos will cover a large part of the enlarged Union. The special needs of these geographic areas are the focus of studies on the natural handicaps that they face. Two of these are already in progress: one on the island regions (including the outermost regions) and one on mountain areas (including Arctic areas). The main aim of these studies is to establish a database for such areas with statistical information on sustainable development (based on the collection of socio-economic, environmental, demographic and other indicators) at all administrative levels in order to carry out an objective analysis of the situation in these regions.

A Union of 25 Member States

The progress report makes an initial assessment of economic and social cohesion in a Union of 25 Member States:

  • Using the current criterion for eligibility for Objective 1 of the Structural Funds, the regions whose per capita GDP is less than 75 % of the average in a Community of 25 would have a population of 115 million people, 25 % of the total population.
  • “The regions considered less developed under the present criterion will be more concentrated in the applicant countries.”

    Of these 115 million inhabitants, 40 % would live in the 15 current Member States and 60 % in the applicant countries. There would therefore have to be a shift eastwards of future regional policy.
  • The regions currently eligible under Objective 1 which, after enlargement, would be above the threshold of 75 % of average per capita GDP have a population of 37 million.
    About two thirds of the population of these regions, i.e. 25 million, would automatically cease to be eligible because of the statistical fall in the Community GDP average by about 13 %.
    The remaining third would in any case be above the 75 % threshold, irrespective of enlargement. This phenomenon demonstrates the genuine convergence of some Community regions.

ASSESSMENT OF DISCUSSIONS ON THE FUTURE OF COHESION POLICY

The European Cohesion Forum

The European Cohesion Forum, held on 21 and 22 May 2001, was attended by over 1 800 political leaders from the Europe of Fifteen and the applicant countries, who had the opportunity to express their opinion on the future of cohesion policy.

There is a broad consensus on the need for greater cohesion. Cohesion policy is the way the European Union expresses solidarity and bears witness to the existence in the Community of a special model of development. Regional disparities will increase as a result of enlargement, and it will be essential to help those regions in most need. If it is not to lose credibility, cohesion funding must be maintained at its current level of 0.45 % of the EU’s GDP as decided at the Berlin European Council. Cohesion policy is also beneficial because it has a knock-on effect, helping not only the regions receiving financial support but also their partners in the internal market.

The main conclusions of the Forum are as follows:

  • “Cohesion should not be confined to structural policy.”

    Other Community policies, particularly the Common Agricultural Policy (CAP) and rural development, environment and transport policy, must make a more effective contribution towards this goal.
  • “The Union needs a cohesion policy which addresses three types of region and structural problems”: (1) regions whose development is lagging very far behind, 60 % of which are in the applicant countries; (2) regions of the Fifteen which have not completed the process of real convergence (particularly in the three cohesion countries); (3) regions facing serious structural problems, such as some urban areas, areas affected by industrial conversion, rural areas dependent on agriculture and/or fishing, and areas suffering from natural or demographic handicaps (islands, mountain areas, outermost regions, etc.).
    To avoid funding being spread too thinly, cohesion policy should concentrate on those measures where the Community can add real value, resulting in stronger links between financial allocations, the value added by the measures and the anticipated results.
  • “The regions and local authorities would like to see real partnerships established with the Community institutions.”
    There is a need for greater decentralisation and clarification of roles in order to ensure that partnership is not restricted to the national level only. In the context of the White Paper on Governance, the regions would like to see full recognition for the action they take on the ground to promote economic and social cohesion. Thus, they would like to play a greater role in defining policies directly affecting them. In the context of subsidiarity, the Commission is therefore encouraged to more clearly define the division of responsibilities between the various administrative levels.

The discussions at institutional level

An informal meeting of regional policy ministers was held under the Belgian Presidency in Namur on 13 and 14 July 2001 to discuss the, “challenge of economic, social and territorial cohesion in the context of enlargement”. There was broad agreement on the need to continue with a strong cohesion policy and, in an enlarged Union, priority would be given to regions whose development is lagging behind. Assistance would be concentrated on those measures where Community added value was greatest and the involvement of the other Community policies would be sought.

A number of Member States took part in the debate and submitted positions on the future of cohesion policy. For example, the Spanish government sent a memorandum in June 2001 on the consequences of enlargement for regional policy, in particular in the cohesion countries. Lithuania, Italy, the Netherlands and Germany also sent in documents and studies on this subject.

The Economic and Social Committee delivered an opinion [OJ C 193, 10.7.2001] on the second report on economic and social cohesion. It favours raising the current threshold of 75 % for eligibility under Objective 1 of the Structural Funds (regions whose development is lagging behind). In its opinion on the same report, the Committee of the Regions concludes that the regional dimension should be strengthened and that the current Objective 1 regions, which have not completed the process of convergence after enlargement, should continue to be eligible. It also said that a sudden stop to structural aid should be avoided by expanding transitional support. The European Parliament resolution of 7 February 2002 stresses the need to reduce regional development disparities. At a technical level, it regrets the fact that no penalty can be imposed when Member States infringe the additionality principle. It believes that the Cohesion Fund should continue, but that it should become an instrument of structural policy subject to the rules of the Structural Funds. It would also like to see operational mechanisms made available to promote coordination between the Structural Funds and the EDF, Phare and Meda Programmes.

Throughout 2002, the Commission is organising seminars on the 10 questions relating to the future of regional policy after 2006. Aimed at identifying measures with a high value added, the discussions focus on the following subjects:

  • There is unanimous agreement that regional disparities will grow after enlargement, hence the importance of action for the least developed regions. “The question is therefore how to define regions whose development is lagging behind and lay down the limits of and rules for Community support.”
    The report reviews the four possible options for determining the eligibility of regions whose development is lagging behind: 1) application of the present threshold of 75 % irrespective of the number of countries joining the Union. This option would eliminate a large number of regions in EU 15; 2) the same approach, but all regions above this threshold currently eligible under Objective 1 would receive temporary transitional support; 3) setting a threshold of per capita GDP higher than 75 % of the average, at a level which would eliminate the automatic effect of excluding those regions in the EU 15 simply because of the reduction in the average per capita GDP in an enlarged Union; 4) setting two eligibility thresholds, one for the regions in EU 15 and one for the applicant countries, and leading de facto to the creation of two categories of lagging region.
  • “A regional or national approach?”

    Some studies argued for a national rather than a regional approach to both the eligibility of the applicant countries for Objective 1 and the economic development strategy to be followed in the Member States, the distribution of Community funds and the definition of the various political and administrative structures. This approach gives the Member States greater freedom, although it would require eligibility criteria to be defined which seem to be difficult to reconcile with the Treaty and Community secondary legislation. The regional approach is ambitious in that it is geared to greater autonomy and flexibility at local level.
  • “The second cohesion report did not cover the financial implications of enlargement for cohesion policy.”
    It simply refers to the figure of 0.45 % of GDP allocated to cohesion policy from 2000 to 2006. The Commission sees this rate as a minimum below which the credibility of future cohesion policy would be called into question.
  • “Simplification of the transfer and management mechanisms for the Structural Funds must continue to be a major objective of future cohesion policy.”
    The Commission is committed to further measures in this area. It announced that the basic texts for future cohesion policy would be adopted as quickly as possible so that assistance can begin to flow in the regions as soon as the next programming period begins in 2007.
  • “The other Community policies must take greater account of the regional dimension.”

    In a context of balanced regional development, they must not focus solely on the most prosperous areas of the European Union.

The Commission is aware of the challenge that enlargement poses for regional policy, and its proposals on cohesion policy after 2006 will be drawn up to take account of the suggestions developed in this major consultation exercise. It will incorporate them into the third cohesion report.

For more information on the cohesion reports, see the following:

  • SCADplus factsheets on the second report on economic and social cohesion (January 2001): an assessment, conclusions and recommendations, 10 questions for the debate on tomorrow’s cohesion policy;
  • the first progress report on economic and social cohesion (January 2002);
  • the second progress report on economic and social cohesion (January 2003);
  • SCADplus factsheets on the third report on economic and social cohesion (2004): the socio-economic situation of the Union and the impact of European and national policies, proposals for regional policy after 2006.

4) Implementing Measures

5) Follow-Up Work

Second progress report on economic and social cohesion

Second progress report on economic and social cohesion

Outline of the Community (European Union) legislation about Second progress report on economic and social cohesion

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Regional policy > Review and the future of regional policy

Second progress report on economic and social cohesion

1) Objective

To update the data on economic and social cohesion presented in the first progress report of January 2002, to give a summary of the debate concerning the future of regional policy after 2006 and to indicate how the Structural Funds will support the future Member States as from their accession.

2) Document or Iniciative

Commission Communication of 30 January 2003 – Second progress report on economic and social cohesion [COM(2003) 34 final – Not published in the Official Journal].

3) Summary

1. Every three years, the Commission produces a “report on the progress made towards achieving economic and social cohesion” and on the manner in which the Community policies have contributed to it (Article 159 of the Treaty establishing the European Community). The second report on economic and social cohesion, published in January 2001, had two objectives:

  • to analyse the development of economic and social cohesion in a Union of 27 Member States;
  • to start a debate on the future of European cohesion policy.

2. Since then, the European Commission has published, in January 2002, a first progress report which updates the data collected in the Second Cohesion Report for a Europe of 25 and gives an initial assessment of the debate. In January 2003, the Commission presented a second progress report. Taking account of the most recent data on the gross domestic product (GDP) and the unemployment rate, this report deals again with the two topics discussed in the previous reports. Moreover, it indicates how the Structural Funds will intervene during the two-year-period following enlargement (2004) and the end of the current programming period (2006).

SITUATION AND TRENDS

3. Despite the fact that economic growth slowed down significantly in 2001, the general trend towards economic convergence is confirmed in the current European Union. The “cohesion countries” (Spain, Greece, Portugal and Ireland, which are eligible for the Cohesion Fund) continue to catch up with their the other Member States. The GDP of Ireland has risen from 64 % of the Community average in 1988 to 118 % in 2001. While regional disparities remain unchanged on the European level, they have grown within the Member States. Moreover, statistics show that the economic catching up is a long-term process.

4. In terms of employment, a slower growth in 2001 within the Europe of 15 combined with a constant decrease in employment for five years in the candidate countries is causing a widening of regional disparities. Three million new jobs will be needed if the average level of employment in the future Member States is to be aligned on that of the EU of 15. The level of education will rise in the enlarged Union. Employment is going to increase in the agricultural sector, stagnate in industry and decrease in services.

5. In a Union of 25, three groups of countries can be distinguished:

  • the eight poorest future Member States whose per capita GDP is approximately 40 % of the average in the Community of 25: Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Czech Republic, Slovakia;
  • an intermediate group involves countries between 71 % and 92 % of the Community’s average GDP: Cyprus, Spain, Greece, Portugal, Slovenia;
  • the rest of the existing Member States with an average per capita GDP close to 115 % of the average EU.

6. With enlargement, the regional disparities will nearly double. Forty-eight regions in the existing Member States (18 % of the total population, i.e. 68 million inhabitants) have a per capita income less than 75 % of the Community average. In a Union of 25, the number of such regions will be 67 (25 % of the population, i. e. 116 million persons), two-thirds of which are situated in the new Member States. Only 30 regions in the current Member States (12 % of the population, i.e. 47 million) would remain under the threshold of 75 % and would thus be considered as “less-favoured areas”. According to the figures of 2000, the 18 regions which would lose their status by simple “statistical effect” are the following: Brandenburg, Mecklenburg-Vorpommern, Dresden, Halle, Magdeburg and Thüringen (Germany); Burgenland (Austria); Itä-Suomi (Finland); Asturias, Murcia and Ceuta y Melilla (Spain); Basilicata (Italy); Madeira (Portugal); Hainaut, Namur (Belgium); Merseyside, West Wales, South Yorkshire (United Kingdom). Nevertheless, the data to be used in 2006 are not yet available and this list has a merely indicative character.

New indicators and studies carried out

7. New indicators on technological progress confirm that southern European countries are lagging behind in terms of technological innovation. Finland, Sweden and Germany file double the number of patents per million inhabitants than the European average, whereas in Ireland, Italy, Spain, Greece and Portugal it is fewer than half the European average. Disparities are even more serious in the leading-edge technologies sector: expenditure related to research and development exceeds the threshold of 3 % of the GDP in 17 regions, out of which ten in Germany, two in Finland, two in France, and one each in the United Kingdom, Austria and Sweden. Among the candidate countries, the highest investment in this field is in the Czech Republic and Slovenia.

8. The results of the Commission study (pdf ) on the economic impact of Objective 1 between 2000 and 2006 are encouraging. The allocated funding steps up significantly the economic growth of the regions receiving assistance, but it also has a “knock-on effect”, with one quarter of the expenditure benefiting other areas in the European Union.

9. Other studies deal with the territorial and human factors of cohesion: two of them give an overview on the situation of island and mountain areas, two others analyse the role of individuals in regional development and the emergence of a knowledge and know-how based economy. The first results of the study on islands are as follows: 10 million Europeans live in 286 European islands, out of which 9,5 million in the Mediterranean (Sicily, Crete, the Balearics and Corsica); 87 % of the EU island population is covered by Objective 1; islands with the smallest population (less than 5000 inhabitants) face most difficulties.

DEBATE ON THE FUTURE OF COHESION POLICY

The issues most widely discussed

10. The main discussion topics concerning the future of the regional policy are the following:

  • priority to the least developped regions;
    To define these regions, it is widely accepted to use the criterion of 75 % of the Community’s average GDP applied at NUTS II level given its transparency and simplicity of calculation. Additional criteria may apply together with the inclusion of specific areas (islands, outermost regions, very sparsely populated regions) in this category.
    For the 18 regions concerned by the “statistical effect”, a fair arrangement is necessary.
  • aid outside regions whose development is lagging behind should continue;
    A thematic approach could be applied throughout the territory. A territorial approach could focus on areas suffering from special handicaps (urban areas, rural areas, areas dependent on fishing or cross-border areas). Zoning no longer seems to be appropriate.
  • the exchange of experience and cooperation has a beneficial impact;
    At cross-border level, a legal instrument may be necessary.
  • the simplification of procedures for policy implementation is broadly agreed upon;
  • a greater contribution from other Community policies to economic and social cohesion is desirable.

Within the institutions

11. The Council welcomed the first progress report on economic and social cohesion. The delegations of Member States felt that aid to the least developed regions should remain a priority, but the eligibility criteria of this assistance as well as its use should be discussed. Community assistance in other regions remains necessary and should concentrate on measures offering high Community value added. In terms of financial effort for the future cohesion policy, the Spanish presidency (1st half of 2002) thought the threshold of 0,45 % of Community GDP to be a good reference point, other delegations, on the other hand, will take position on the issue at a later stage. Furthermore, voices calling for a certain “renationalisation” of the regional policy do not seem to have gained ground.

12. During their meeting of 7 October 2002, the Ministers responsible for regional policy expressed their wish for a greater simplification and decentralisation of responsibilities as regards all aspects of financial management and control of European programmes. Enlargement will aggravate tensions between the double need for a more decentralised implementation, on the one hand, and the need for more effective control of financial flows on the other. This development must be carried out in the light of Article 274 of the EC Treaty which gives the Commission responsibility for budgetary execution.

13. On 6 November 2002, the European Parliament adopted an opinion on the first progress report. It supports the Commission’s position on the following points: the maintenance of a strong cohesion policy based on partnership, the threshold of minimum financial effort (0,45 % of the Community GDP), aid to areas with specific handicaps and greater cross-border cooperation. It also refers to the need to take account of other indicators (than per capita income) to determine the eligibility under the Structural Funds, to simplify the procedures and to strengthen the administrative capacity of the candidate countries. It asks the Commission to set out a time frame to ensure that programming for the period 2007-13 can be implemented from 1 January 2007 and to make concrete proposals on the future of Objective 2 and the Community Initiatives.

14. The European Economic and Social Committee has issued two opinions in favour of maintaining a strong regional policy after 2006 [“EU’s Economic and Social Cohesion Strategy” – Official Journal C 241, 07.10.2002]. In agreement with the Parliament, the Committee is in favour of raising the threshold, which is set at 0,45 % and adopting an open method of coordination to deal with the economic and social problems which the Objective 2 regions are encountering.

15. In its opinion of 10 October 2002 on the first progress report [Not published in the Official Journal], the Committee of the Regions underlines as well the importance of assistance for less-developed regions, the coordination of Community policies and the simplification of procedures. It stresses the need to introduce a transitional support period for regions affected by the “statistical effect” of enlargement.

At the seminars of the Commission

16. The seminar on the Community added value of regional policy took place on 27 and 28 May 2002. It brought together more than 600 participants from the Member States and candidate countries. Priority to regions whose development is lagging behind, maintenance of aid outside these regions, simplification of procedures and the importance of cross-border cooperation were widely agreed upon. In the perspective of a regional policy within an enlarged Union, the role and responsibility of the Commission would have to be clarified, in particular through the elaboration of tripartite contracts between the Commission, the Member States and the regions.

17. Six hundred people involved in the URBAN II programme gathered in London on 8 and 9 July 2002 and noted the important contribution of this Community Initiative to urban development. It encourages a high degree of partnership and constant learning through visible interventions in the field. Local parties underlined the need to continue and step up assistance to cities, in particular in the following fields: housing, exchange of experience and networking.

18. Within the framework of the International Year of the mountains, a seminar on “Community policies and the mountain areas”, held on 17 and 18 October 2002 in Brussels, brought together 500 participants from the Member States, candidate countries and elsewhere. The seminar reiterated the need for specific projects and the added value of cross-border cooperation.

2004-2006: PREPARATION FOR ENLARGEMENT

19. The Copenhagen European Council concluded the accession negotiations, thus paving the way to the accession of ten new Member States from 1 May 2004. The successful integration of these States into the enlarged Union is from now on an a key political priority. The Fifteen have thus allocated EUR 21,7 billion as additional resources for 2004-2006, though this amount is still inferior to the ceiling fixed in 1999 at the European Council in Berlin under Agenda 2000.

20. As identified in the regular reports of October 2002 on the preparation of the candidate countries, the most important problems concern the administrative capacity to absorb the funds provided and the implementation of financial control procedures. A final overall assessment of the preparation of the 10 future Member States is to take place six months before the actual enlargement. From now on, the future Member States have to overcome their weaknesses and finalise the programmes that they will implement from the first day of accession under the Structural and Cohesion Funds. They are also going to participate in the Community Initiatives INTERREG III and EQUAL.

21. Conscious of the challenge of enlargement concerning regional policy, the Commission will elaborate, taking account of the proposals emerging from the debate, its overall proposals together with a draft of financial perspective for a cohesion policy after 2006. These will be included in the Third Cohesion Report foreseen for the last quarter of 2003.

22. For more information on the Cohesion Reports consult:

  • SCADplus factsheet on the second report on economic and social cohesion;
  • SCADplus factsheet on the first progress report on economic and social cohesion;
  • SCADplus factsheets on the third report on economic and social cohesion: the socio-economic situation of the Union and the impact of European and national policies, proposals for regional policy after 2006.

4) Implementing Measures

5) Follow-Up Work

On 2 and 3 July 2003 the Committee of the Regions delivered its opinion on the second report [Official Journal C 256 of 24.10.2003].

On 16 and 17 July 2003 the Economic and Social Committee delivered its opinion on the second report [Official Journal C 234 of 30.09.2003].

Third report on economic and social cohesion: the socio-economic situation of the Union and the impact of European and national policies

Third report on economic and social cohesion: the socio-economic situation of the Union and the impact of European and national policies

Outline of the Community (European Union) legislation about Third report on economic and social cohesion: the socio-economic situation of the Union and the impact of European and national policies

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Regional policy > Review and the future of regional policy

Third report on economic and social cohesion: the socio-economic situation of the Union and the impact of European and national policies

Document or Iniciative

Commission communication – third report on economic and social cohesion [COM(2004) 107 final – Not published in the Official Journal].

Summary

The policy on economic and social cohesion is producing positive effects in those areas of the European Union facing difficulties. However, large socio-economic disparities persist between Member States and between regions. These disparities in levels of wealth and degrees of dynamism arose from structural deficiencies in certain key areas for competitiveness such as investment in physical infrastructure, in innovation and in human resources. Member States and regions therefore need support from Community policies to overcome their handicaps, develop their strong points and evolve in an increasingly competitive environment.

The enlargement of the European Union to 25 Member States on May 1 represents a challenge without precedent for the European Union. In particular, it jeopardises the current balance of regional policy. The third report on economic and social cohesion sets out concrete proposals for regional policy after 2006. The Commission bases its proposals on the socio-economic situation of the Union and on an analysis of the impact of regional policy, other Community policies and national policies.

SOCIO-ECONOMIC SITUATION OF THE EUROPEAN UNION

Economic growth

Since 1994, disparities in income between Member States and between regions have been decreasing. Gross domestic product (GDP) and productivity have been increasing more quickly in the four countries eligible for the Cohesion Fund (Spain, Greece, Ireland and Portugal) than in the rest of the European Union. The increase has been particularly high in Spain and Ireland and more modest in Portugal and Greece. Nevertheless, major differences still exist between States. In Greece and Portugal, the per capita GDP is still around 70 % of the Community average. One thing however is certain: the contribution made by the Structural Funds to growth in the four cohesion countries (1.5 % in Spain, 2 % in Greece, almost 3 % in Ireland and more than 4.5 % in Portugal). Over the last decade, trade between these four countries and the rest of the Union more than doubled. On average, almost a quarter of structural expenditure returns to the rest of the Union in the form of imports, with Germany being the principal beneficiary.

Within Member States, the regions whose development is lagging behind, eligible for Objective 1, have enjoyed annual growth of 3 % compared with slightly more than 2 % for the Union as a whole. However, the catching-up process varies widely from one region to another. Outside the four cohesion countries, weak growth in the national economy is slowing down that of Objective 1 regions. While the growth in GDP in the new German Länder is equal to the Community average, that of the regions of the Italian Mezzogiorno is lower. This is also true for the old industrial regions. Although not Objective 1 regions, the regions of north-east England, the regions of northern Germany and the very sparsely populated regions of northern Sweden have seen their annual per capita GDP increase less than the Community average since 1994.

Employment and social cohesion

There are still wide regional disparities in employment levels. Employment has increased over the past ten years in the cohesion countries, significantly in Spain and Ireland, to a lesser extent in Portugal and in Greece. Only 43 % of those of working age were in work in the regions of southern Italy in 2002. In the ten new Member States, economic restructuring of agriculture and traditional industries is increasing unemployment and 56 % of those of working age are in work as against 64 % in the current Member States of the Union.

In 2000, approximately 55 million people were at risk of poverty, i.e. 15 % of the European population. Poverty particularly affects elderly people (more than 65 years old), single parents, the long-term unemployed, ethnic minorities and the disabled. The countries of southern Europe, the United Kingdom and Ireland are particularly badly affected and the numbers concerned in many of the new Member States are above the Community average.

Over the coming decades, the progressive ageing of the population will gradually reduce the working population, with a serious impact on growth potential. Between now and 2010, this will begin to affect Germany, the four southern Member States and the majority of the new Member States. By 2025, there will be on average less than three people of working age for each elderly person. Faced with the prospects for population structure, steady economic growth, high employment and a reduction in the number of people retiring are vital. Immigration should also provide an important source of additional labour.

Narrowing disparities in regional competitiveness factors

The challenge for cohesion policy is to invest in the competitiveness factors so that Member States and regions can overcome their structural problems. The principal competitiveness factors that have been identified are:

  • physical infrastructure: transport and telecommunication networks.
    Since 1994, transport links both within the cohesion countries and between those countries and the rest of the Union have been improving. In 1991, the density of the motorway network in those countries was 20 % less than the Community average. With Structural Fund support, it has exceeded the average by 10 % since 2001, with Spain and Portugal being the principal beneficiaries. In Objective 1 regions as a whole, the motorway density is only 80 % of the Community average and much less than that (20 % less) in the new Member States. As for the railways, although the network throughout the Union has been modernised, there is still a major discrepancy between the dynamic regions and those whose development is lagging behind. In the new Member States, road construction is accelerating the transfer of passengers from rail to road. Considerable investment will be required to bring railways up to standard.
    In telecommunications, the number of fixed telephone lines in relation to population remains much lower in both the cohesion countries and the new Member States. This is tending to be offset by a rise in mobile phone use. Broadband access, essential for the use of high-speed Internet and the development of new information and communications technologies (NICT), shows wide disparities across the Union. These reflect relative levels of prosperity;
  • human resources: the adaptability and skills of the workforce.
    As regards investments in human resources, large structural weaknesses remain both in the Union of Fifteen and in the new Member States. The proportion of people with education beyond basic schooling remains very low in Objective 1 regions, especially in Spain, Italy and Portugal, the exception being the new German Länder. This proportion is markedly above the European average in the new Member States. On the other hand, in these countries, the average number of young people who complete university studies is below the average in the Union of Fifteen. This is also the case in Objective 1 regions, despite the clear progress that has been made. The situation is similar as regards continuing training;
  • innovative capacity.
    Innovation is one of the keys to regional competitiveness. However, innovative capacity varies greatly from one region to another in the same Member State, within the Union of Fifteen and within the Union of Twenty-five. Eight of the 213 European regions account for a quarter of total R&D expenditure;
  • sustainable development.
    There is a substantial need for investment in the environment in the cohesion countries and the need is even greater in the accession countries. The main areas concerned are water treatment, waste management and the control of emissions.

THE IMPACT AND ADDED VALUE OF STRUCTURAL POLICIES

The budget for regional policy over the period 2000-06 is EUR 215 billion. The sums transferred to Objective 1 regions represent an important proportion of the wealth of the cohesion countries. They amount to 0.9 % of national GDP in Spain and more than 2.5 % in Greece and Portugal. This funding has a genuine leverage effect on public investments. The increase in investment achieved is estimated at 3 % in Spain, 4 % in the new German Länder, 7 % in the Italian Mezzogiorno and 8-9 % in Greece and Portugal. In most cases, there has also been a similar knock-on effect on private financing, as the figures for Austria, Germany, the Netherlands and Belgium testify. Private investment nevertheless remains weak in France, the United Kingdom and the cohesion countries. Structural Fund support is also supplemented by European Investment Bank (EIB) loans, particularly in the areas of transport and the environment. Since 2000, they have totalled EUR 20 billion a year. More than half has gone to Objective 1 regions and EUR 3 billion to the new Member States

Over the period 1994-99, 82 regions in the twelve Member States received aid under Objective 2. This Objective supports the conversion of regions with serious natural or structural handicaps. More than half of the expenditure was concentrated on the conversion of old industrial sites and on business services. To a lesser extent, funds went to developing human resources and providing aid for R&D. Community support permitted the creation of 700 000 jobs, the modernisation of 300 000 small and medium-sized enterprises (SMEs) and the conversion of 115 million square metres of industrial waste land. In ten years, unemployment fell slightly more in Objective 2 regions than in the rest of the European Union.

Several spheres of activity show the value added by regional policy

As regards agriculture and rural development, the Structural Funds have maintained economic activities in the countryside. They have encouraged the economic diversification of rural areas through agritourism and environmental protection activities. The fisheries sector is concentrated in a limited number of regions in the European Union and structural measures aim in particular to stimulate their economic conversion.

During the 1994-99 period, the European Social Fund (ESF) provided support for the development of human resources amounting to a third of overall Structural Fund investment. Assistance under Objective 3 was aimed at integrating young people, the long-term unemployed and other social categories at risk of exclusion into employment. It was also targeted on promoting equal opportunities between women and men. The most successful measures were those combining guidance, training and assistance with finding a job. In addition, the ESF provides finance for adapting employment, education and training systems. Since 2000, it has provided EUR 60 billion for the national plans implemented as part of the European Employment Strategy (EES).

Cooperation and networking – two success stories

The four Community Initiatives allow the adoption of innovative regional development strategies. The cooperation between regions and networking achieved through them represent an important value added of structural policy:

  • over the period 2000-06, INTERREG III is providing EUR 5 billion to support cross-border and trans-national cooperation and the exchange of experience between European regions. Border regions will play an increased role in the enlarged Union;
  • URBAN II is providing support for innovative projects in 70 towns and cities. The emphasis is on boosting the economy of urban areas in crisis;
  • the aim of EQUAL is to combat all forms of discrimination and inequalities in the labour market. A heavy emphasis is placed on cooperation, the exchange of experience and best practice;
  • LEADER+ provides assistance in rural areas. With an annual budget of EUR 300 million, the Initiative provides assistance to SMEs and supports the development of tourism.

New pilot innovative actions were launched in 2001. With a budget of around EUR 400 million, they are increasing regional competitiveness through innovation, disseminating technology and promoting sustainable development. Three quarters of all the regions have now applied for these programmes.

Structural Fund management is improving, but further progress can still be made

The management of regional policy is based on four general principles:

  • programming involves planning expenditure over a number of years. It has brought more stability and consistency but, on the other hand, the time taken to adopt programming documents has increased;
  • the partnership during the drawing up and the implementation of programmes has been strengthened.
    This mobilises a series of players: the regional and local authorities, the private sector, the social partners and civil society. An effective partnership improves the targeting and evaluation of projects and the dissemination of information;
  • the concentration of funding means that financial support is directed towards those regions that need it most. It has been increased, although evaluations show that assistance is too thinly spread;
  • additionality means that Community financing for a project is additional to other public and private financing.
    This rule is generally respected under Objective 1. It is more difficult to verify for Objectives 2 and 3.

Improving the efficiency of programmes remains a major challenge. On the ground, the local players have criticised the delay in adopting rules, which put pressure on the utilisation of financing. Thus, only a third of Objective 1 projects were completed in time and another third were completed over a year late. In addition, two thirds of projects exceeded their budget. By requiring the utilisation of funding within two years of programming, the “N+2” rule tightens discipline. What is more, a financial incentive has been introduced for the 2000-06 period in the form of a mid-term performance reserve. It rewards 90 % of the programmes on the basis of criteria such as the rate of financial absorption and sound management.

Monitoring is an essential part of the system for implementing the Structural Funds, but it has not been as effective as expected because of the difficulty in collecting information. Programme evaluation is carried out in three phases: before implementation, at mid-term and at the end of the period. A greater involvement of all those involved will permit a further improvement in the analyses made.

THE IMPACT OF OTHER COMMUNITY POLICIES

Unlike structural policy, the main aim of the following Community policies is not to combat regional disparities but they do have a strong regional impact:

  • enterprise, innovation and education policies.
    Community enterprise, innovation and education policies are aimed at strengthening the competitiveness of EU producers. Regions are far from having equal innovation capacity, as the disparities in the take-up of Community financing for research testify. To remedy this problem, the Innovation Relay Centres and the Innovating Regions in Europe network aim to disseminate a culture of innovation. In addition, the sixth action programme for R&TD is in part aimed at improving links between research centres in the more dynamic parts of the EU and those in peripheral areas. In the field of education, the ‘Education and Training 2010’ programme aims to ensure a high level of life-long education and training;
  • social and employment policy.
    In March 2001, the Lisbon European Council defined a comprehensive strategy aimed at ensuring long-term economic growth, full employment, social cohesion and sustainable development. The European Employment Strategy provides support to Member States to reform their labour markets. As regards social integration, exclusion must be combated at all levels. The Union’s commitment to equality between men and women is part of a comprehensive approach. Measures aim, in particular, to attract women into employment, encourage them to stay in the labour market and make it easier to reconcile a working career with family responsibilities;
  • transport, energy, telecommunications and the trans-European networks.
    Liberalising the markets for transport, telecommunications and energy has led to increased efficiency and lower prices. It has also, however, brought the risk that particular social groups or regions could be excluded. The European Union has therefore established public service obligations, or ‘ services of general economic interest ‘(SGEI), which guarantee access to essential services of reasonable quality and at affordable prices. At the same time, the trans-European networks (TENs) in transport, energy and telecommunications have increased the accessibility of the more remote regions. The networks planned to link the European Union of Fifteen to the new Member States will have the same effect;
  • the environment, agriculture, rural development and fishing.
    The Sixth Environmental Action Programme aims to combat the negative effects of growth and the exhaustion of natural resources. For the 2000-06 period, aid for rural development is higher for Objective 1 regions (56 % of expenditure) than in the rest of the Union. This aid is supporting the emergence of a European agricultural sector based on quality, the enhancement of the countryside and the rural heritage and the economic diversification of rural areas. After 2007, expenditure under the common agricultural policy (CAP) will decrease, in particular with a fall in price support and an emphasis on rural development. In the fisheries sector, Community policy aims to conserve fish stocks and restructure the industry. The recent emergency measures will have serious economic and social consequences in some Spanish and Portuguese regions. Of the new Member States, Poland and the three Baltic States have a fisheries sector;
  • competition policy.
    If granted in strict compliance with European competition law, state aid contributes to cohesion by influencing the geographical distribution of economic activity. Since 1997, total national expenditure on state aid has decreased sharply. In 2001, state aid in the form of assistance to Objective 1 and Objective 2 regions accounted for 9 % and 6 % respectively of total state aid. It nevertheless remains greater in the relatively prosperous Member States than in the cohesion countries. In the context of enlargement, it will play a major role. Future reforms of the rules will aim at less but better targeted assistance.

THE IMPACT OF NATIONAL POLICIES

Public expenditure by the Member States amounts on average to 47 % of the GDP of the European Union, while the budget allocated to cohesion policy is less than 0.4 %. The policies of the Member States provide, in particular, income support and basic services: education, medical care, social welfare. On the other hand, public investment in human and physical capital accounts for on average only slightly more than 2 % of Community GDP. Expenditure on business support services, higher education, innovation and R&D is even lower. In relation to the sums allocated to structural expenditure by Member States, therefore, the budget for cohesion policy does not seems so small, especially as spending is concentrated in the regions which are most in need of assistance.

In the Member States, public expenditure on income support is in general much higher in the less prosperous regions because of the lower level of income. Government revenue, on the other hand, is proportional to income, in the main because most taxes in the Member States are levied centrally either on income or expenditure. Then redistribution mechanisms reduce disparities in the revenue available to regions. The general trend is now towards devolving responsibility for public services to regional and local level without a similar trend in respect of raising the money to fund these services. The main exception is Italy, where responsibility for raising revenue is being increasingly devolved to the regions without an increase in regional transfers.

Foreign direct investment (FDI) can potentially play a key role in reducing regional economic disparities. It is not only a source of income but facilitates the transfer of technology. However, foreign investors are not necessarily attracted to places where the need is greatest. Berlin apart, only 2 % of FDI in Germany has been in the new Länder and only 4 % of FDI in Italy has benefited the regions of the Mezzogiorno. Foreign investment is mainly concentrated in dynamic urban areas. In the new Member States, most investors are attracted to the capital cities. In 2001, two thirds of FDI in Hungary was in Budapest. The same holds for Prague in the Czech Republic and Bratislava in Slovakia.

For further information, consult the INFOREGIO website of the Directorate-General for Regional Policy:

  • the full text of the third report on economic and social cohesion;

Related Acts

Second progress report on economic and social cohesion [COM(2003) 34 final – Not published in the Official Journal].

See the specific SCADplus web page

First progress report on economic and social cohesion [COM(2002) 46 final – Not published in the Official Journal].

See the specific SCADplus web page

“Unity, solidarity, diversity for Europe, its people and its territory” – Second report on economic and social cohesion [COM(2001) 24 final – Not published in the Official Journal].

See the specific SCADplus web pages: an assessment, conclusions and recommendations, 10 questions for debate

Third Report on economic and social cohesion: proposals for regional policy after 2006

Third Report on economic and social cohesion: proposals for regional policy after 2006

Outline of the Community (European Union) legislation about Third Report on economic and social cohesion: proposals for regional policy after 2006

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Regional policy > Review and the future of regional policy

Third Report on economic and social cohesion: proposals for regional policy after 2006

Document or Iniciative

Commission Communication – Third Report on economic and social cohesion [COM(2004) 107 final – Not published in the Official Journal].

Summary

The policy on economic and social cohesion has positive effects on the areas of the EU in difficulty but major socio-economic disparities between the Member States and between the regions persist. These gaps in wealth and dynamism arise from structural deficiencies in certain key factors for competitiveness such as investment in physical infrastructure, innovation and human resources. The Member States and the regions therefore require support from the Community policies to overcome their handicaps, build on their comparative advantages and make better progress in an increasingly competitive environment.

PROPOSALS FOR A REFORMED COHESION POLICY

On 10 February 2004, the Commission adopted a budget proposal for the European Union enlarged to 27 Member States (the 15, the 10 new Member States, Bulgaria and Romania) for 2007-2013. In this communication on the financial perspective, it argues that the cohesion policy should have a single budget line with increased resources. The Third Report on cohesion follows this approach, noting the challenge which enlargement represents for cohesion policy. For the first time, the Commission makes concrete proposals derived from the debate on the future of the regional policy after 2006. In financial terms, it proposes a budget for 2007-2013 equivalent to 0.41 % of the Gross Domestic Product (GDP) of the Union of 27, or 336.3 billion for that period. The Commission is basing its proposals on the socio-economic situation of the Union and the study of the impact of the regional policy, the other European policies and national policies.

Enlargement completely changes the Union’s socio-economic situation

Enlargement on 1 May 2004 will increase the population of the European Union by 20 % and its area by about a quarter but GDP by only 5 %. Regional disparities will double. Per capita wealth in a Union of 25 will fall by about 12.5 % and the proportion of the population living in regions whose development is lagging behind will increase from 20 % to 25 %. At the same time, the disadvantaged regions of the present Union will not disappear and will require continuing support.

The European Union has entered a phase of economic restructuring as a result of the globalisation of trade, the introduction of the knowledge economy and an aging population. Furthermore, the economic situation has deteriorated over the last three years and unemployment has increased.

In March 2000, the Lisbon European Council set the European Union the goal of becoming the most competitive and dynamic area of the world. A strong knowledge-based economy will stimulate job creation and promote social and environmental policies offering sustainable development and social cohesion. The European Councils in Nice and Göteborg applied this across-the-board objective through sectoral strategies in the fields of social integration and sustainable development respectively. In addition, cohesion policy helps achieve the Lisbon objective. The reform of this policy should continue this process.

What Community support for the new Member States between 2004 and 2006?

The ten new Member States will receive Community support as soon as they join. Between 2000 and 2006, they will receive 3 billion in structural assistance under the pre-accession financial instruments ISPA (transport and the environment) and SAPARD (agriculture and rural development) and the Phare programme (improving administrative capacity). Following their accession, the new Member States together with Bulgaria and Romania will receive 1.6 billion per year in aid through Phare until 2006.

For the new Member States, 2004-06 will be a transitional period which will allow them to become accustomed to managing the Structural Funds in accordance with the current rules. They will receive support from those Funds totalling 21.8 billion. The measures will concentrate on a limited number of priorities: infrastructure, human resources and productive investment.

A revised cohesion policy for 2006-2013

The future regional policy will have a limited number of key topics: innovation and the knowledge economy, the environment and risk prevention, access and public services. To achieve them there will be three Community priorities replacing the current breakdown among Objective 1, Objective 2 and Objective 3:

  • The “convergence” Objective will support growth and job-creation in regions whose development is lagging behind.
    It will concern NUTS II regions whose per capita GDP is less than 75 % of the average in the Union of 25. It will receive about 78 % of the budget for the future regional policy and until 2013 will also provide transitional support to the regions currently eligible but which will no longer satisfy this criterion for purely statistical reasons. Since the GDP of the Union of 25 will be lower than that of the Union of 15, some regions currently eligible under Objective 1 will no longer meet this eligibility criterion.
    The European Regional Development Fund (ERDF) will part-finance the modernisation of basic infrastructure (transport, telecommunications and energy), the economic diversification of territories and the protection of the environment (treatment of water and waste, prevention of natural and technological hazards). The European Social Fund (ESF) will expand its role as the main Community financial instrument for the European Employment Strategy (EES) which helps the Member States to reform their labour markets.
    Only those Member States with a GDP of less than 90 % of that of the Community will also be able to benefit under the Cohesion Fund for investment in transport and the environment. The relative weight of this Fund will increase because it will distribute one third of the aid for the ten new Member States.
  • The “Regional competitiveness and employment” Objective will help make the economic fabric more dynamic in accordance with the Lisbon and Nice objectives.
    The Commission is proposing a twin-track approach, at both regional and national level. Regional programmes will help anticipate economic change better. Supported exclusively by the ERDF, they will concern the regions currently eligible under Objective 1 and which will naturally cease to be so eligible and the regions which do not come under the convergence programmes.
    National programmes will improve implementation of the EES. Supported exclusively by the ESF, they will concentrate on three priorities: the adjustment of the working population to changes in work (life-long learning), promoting employment and combating early departure from the labour market (active aging, greater participation by women), employment of categories in difficulty (the disabled, ethnic minorities).
    This Objective will have some 18 % of total funding, divided equally between the ERDF and the ESF. The funding will be divided among the Member States using economic, social and territorial criteria fixed at European level.
  • Territorial cooperation will promote the balanced development of the territory.
    Based on the acknowledged experience of the INTERREG III Initiative, the Commission is proposing a new Objective for cross-border, transnational and interregional cooperation which will receive 4 % of the funding for the future regional policy.
    All the NUTS III regions on internal and external frontiers, whether on land or sea, will be able to cooperate with their neighbours, particularly on the key topics of the Lisbon and Göteborg agenda.
    The Commission wants to set up two new legal instruments for cooperation: the “cross-border regional collectivity” on internal frontiers and a “new neighbourhood instrument” on the Union’s external frontiers. These instruments will cope with the legal and administrative problems which this type of cooperation poses.

Natural handicaps exacerbate development problems. The future cohesion policy will therefore pay particular attention to certain areas. Measures for urban areas will be fully incorporated into the regional programmes so that more towns and cities can receive support than did under the URBAN II Community Initiative. Under the future “Convergence” Objective, the Commission will set up a specific programme for the seven outermost regions (Guadeloupe, Martinique, French Guiana, Réunion, the Canary Islands, the Azores and Madeira). Many islands, mountain areas and thinly populated regions suffer from particularly severe access problems, of which account will be taken in the allocation of resources to the “Regional competitiveness and employment” Objective through the determination of regional criteria and an increase in the maximum rate of Community finance. In addition, the instruments providing aid for rural development and fisheries will be simplified and clarified. The LEADER+ Initiative, which supports innovative development strategies in rural areas, will be fully incorporated into general programming.

The complementarity of regional policy with the other Community policies is a key factor in economic and social cohesion. The innovation policy, education and training, equal opportunities for men and women and public procurement all have a territorial impact and coherence between competition and cohesion is a vital element. Regions whose development is lagging behind will remain eligible for state aid, as will the outermost regions for a transitional period. For the other regional programmes, the Commission is proposing to scrap the current system with its detailed map of areas eligible at sub-regional level. There will be consistency at the level of the priorities to be financed.

Reforming the management of the Structural Funds

The procedures for managing regional policy affect its efficiency. They impose uniform and tough rules. Programming, the partnership, part-financing and evaluation will remain the general principles of the future regional policy. Possible improvements to increase the utilisation of appropriations include:

  • A strategy increasingly based on the Union’s priority objectives.
    This strategy will be based entirely on the objectives set at Lisbon, Nice and Göteborg. It will also increase consistency with the main thrusts of economic policy (BEPG 2003). Each year, the European institutions will consider the progress made on the basis of a report from the Commission.
  • Simplified management increasingly based on subsidiarity.
    In programming terms, each Member States will prepare a policy document on its development strategy to serve as a basis for the adoption of the regional and national programmes. The programme complement and management by measures will disappear. The number of Funds is limited to three (ERDF, ESF and the Cohesion Fund) and each programme will be financed by one Fund only. For investments in the fields of transport and the environment, a single programming system will link the ERDF and the Cohesion Fund.
    Expenditure will be governed by rules on eligibility. Payments will be made at the level of each priority and not at the level of the measures. The system of payments on account and reimbursements will continue, as will automatic decommitment under the “N+2 rule”, which requires appropriations to be used within two years of programming.
    The extent to which the Commission is involved in inspections will depend on the Community part-financing. Under certain thresholds, the national system will suffice. However, to discharge its responsibilities for the implementation of the budget, the Commission will apply the closure of accounts procedures and financial correction mechanisms. There will also be heavier penalties and more rapid recovery of funds in the event of irregularities or fraud.
    The principle of additionality, under which Community resources must be over and above national resources, remains one of the key principles of the cohesion policy. The Commission will ensure that it is applied to programmes under the “Convergence” Objective.
    Finally, improved cooperation among the Member States, the local authorities, the social partners and civil society will consolidate the partnership. A greater role for the European Investment Bank (EIB) will improve the mobilisation of modern forms of financing, such as venture capital.
  • The concentration of resources will benefit the poorest Member States and regions, particularly in the new Member States.
    The Commission is proposing to abandon the present system of micro-zoning. For the “Regional competitiveness and employment” Objective, concentration will be at the levels of financial intensity through the introduction of minimum thresholds and of the three priorities announced: innovation and the knowledge economy, access and public services, preservation of the environment and hazard prevention.
  • Higher priority for results and quality.
    Evaluation before, during and after programmes is a vital element of their quality. The Commission is also proposing a Community performance reserve to reward the best performing Member States and regions. It hopes that the Member States will do likewise in order to cope rapidly with sectoral or local crises.
    The communication on the financial perspective proposes the establishment of a special instrument, the growth adjustment fund to permit a rapid reaction to economic recessions and trade crises. The Commission is proposing resources of 1 billion for this instrument from appropriations left unused by the ERDF and the ESF.

The Commission is basing its proposals on the socio-economic situation of the Union and the study of the impact of the regional policy, the other Community policies and the national policies. See the relevant SCADPlus factsheet.

For further information, consult the INFOREGIO website of the Directorate-general for regional policy:

  • the whole of the Third Report on economic and social cohesion;

Related Acts

Second progress report on economic and social cohesion [COM(2003) 34 final – Not published in the Official Journal].

See the relevant SCADPlus factsheet

First progress report on economic and social cohesion [COM(2003) 46 final – Not published in the Official Journal].

See the relevant SCADPlus factsheet

“Unity, solidarity, diversity for Europe, its peoples and its territory” – Second Report on economic and social cohesion [COM(2001) 24 final – Not published in the Official Journal].

See the relevant SCADPlus factsheets: progress and assessment; conclusions and recommendations; 10 questions for discussion.

Third progress report on cohesion – towards a new partnership for growth, jobs and cohesion

Third progress report on cohesion – towards a new partnership for growth, jobs and cohesion

Outline of the Community (European Union) legislation about Third progress report on cohesion – towards a new partnership for growth, jobs and cohesion

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Regional policy > Review and the future of regional policy

Third progress report on cohesion – towards a new partnership for growth, jobs and cohesion

Last updated: 24.10.2005

Fourth progress report on cohesion: The Growth and Jobs Strategy and the Reform of European cohesion policy

Fourth progress report on cohesion: The Growth and Jobs Strategy and the Reform of European cohesion policy

Outline of the Community (European Union) legislation about Fourth progress report on cohesion: The Growth and Jobs Strategy and the Reform of European cohesion policy

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These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Regional policy > Review and the future of regional policy

Fourth progress report on cohesion: The Growth and Jobs Strategy and the Reform of European cohesion policy

Document or Iniciative

Communication from the Commission of 12 June 2006 – The Growth and Jobs Strategy and the Reform of European cohesion policy – Fourth progress report on cohesion [COM(2006) 281 – Not published in the Official Journal].

Summary

This fourth progress report on economic and social cohesion follows on from the publication of the third progress report in May 2005. It concerns inter alia:

  • the cohesion programmes implemented in the new EU Member States following the May 2004 enlargement;
  • preparations for the 2007-2013 programming period, in particular the Interinstitutional Agreement signed in May 2006 by Parliament, the Council and the Commission on the Financial Perspectives for 2007-2013;
  • the relaunch of the Lisbon Strategy in 2005.

ECONOMIC AND SOCIAL DISPARITIES

In 2005 the EU economy was characterised by continued moderate growth. In the period 2000-2004, the average growth of the gross domestic product (GDP) of the 25 EU Member States (EU-25) was little more than 1.5% per year. However, the Commission anticipates that growth will pick up and exceed 2% across the EU between 2005 and 2007.

Disparities

With regard to disparities between Member States in terms of GDP, the report notes that the new Member States are growing faster than most of the EU-15 countries. However, convergence is still a long-term perspective.

In 2004, the average overall employment rate reached 63.3% (64.7% in the EU-15 and 56.0% in the EU-10). In order to reach the Lisbon Strategy’s employment rate target of 70% by 2010, 24 million new jobs would be needed in the EU-27 (EU-25 plus Romania and Bulgaria), which represents an increase of almost 12% on current employment levels.

Trends in disparities

This Communication gives an overview of the disparities between objectives and the disparities within each objective for the regions to be targeted by cohesion policy for the period 2007-2013 .

Disparities between objectives

The 100 Convergence regions (regions where GDP per capita is less than 75% of the EU average, 2000-2002) are characterised by low levels of GDP and employment, as well as high unemployment. Their total share in EU-27 GDP in 2002 was only 12.5%, although they account for 35% of the population.

Disparities within each objective

Under the Convergence objective, there are several regions with GDP per capita below 25% of the EU average in 2002, all of which are in Romania and Bulgaria.

The employment rate in the 155 regions covered by the new Regional Competitiveness and Employment (RCE) objective is 10 percentage points higher than in the Convergence regions.

In 2002, 10% of the EU-27 population living in the most prosperous regions accounted for over 19% of total GDP for the EU-27, compared with only 1.5% for the 10% of the population living in the least wealthy regions.

Research and development (R&D) and Information and communication technologies (ICT)

R&D is a key factor in determining a region’s innovative capacity. 35 regions, which account for 46% of total R&D expenditure in the EU-27, have R&D intensities exceeding the Lisbon target for an EU-wide average of 3% of GDP. In 47 regions (3.5% of GDP in the EU-27) R&D expenditure is below 0.5% of GDP.

Across the EU as a whole, almost half of all households had Internet access in 2005. There are marked differences between Member States, with penetration rates exceeding 70% in the Netherlands, Denmark and Sweden, whereas they are around 20% in Lithuania, the Czech Republic, Hungary, Slovakia and Greece. In today’s Objective 1 regions, only around one third of all households have Internet access.

POLITICAL BACKGROUND

Financial resources

With regard to the execution of the budget in 2005, a total of 27.1 billion was committed under the European Regional Development Fund (ERDF), the Cohesion Fund and the pre-accession fund designated for candidate countries (ISPA), and 11.2 billion for the European Social Fund (ESF). For the four Structural Funds, Cohesion Fund and ISPA taken together, payments made in 2005 reached more than 33 billion.

Based on the conclusions of the European Council in December 2005 and the adoption of the Interinstitutional Agreement of May 2006, the cohesion policy budget for the period 2007-2013 will amount to 308 billion (0.37% of the gross national investment (GNI) of the EU-27). The new Member States would receive 51.3% of total cohesion policy resources (an increase of almost 165% compared with the period 2004-2006).

Cohesion Policy 2007-2013 and the Growth and Jobs Strategy

In July 2005 the Commission published a Communication on the Community Strategic Guidelines for cohesion policy in 2007-2013, which:

  • provide a framework for the new programmes to be supported by the ERDF, the ESF and the Cohesion Fund;
  • reflect the role of cohesion policy as the principal instrument for contributing to growth and employment, in accordance with the renewed Lisbon agenda.

Cohesion policy is a key instrument in contributing to the Growth and Jobs Strategy, as:

  • cohesion policy represents one third of the Community budget;
  • strategies designed at local and regional levels must also form an integral part of the effort to promote growth and jobs;
  • the December 2005 European Council proposed that quantitative expenditure targets should be set for the new cohesion policy programmes for 2007-2013 so that a certain percentage of the funds will be used for purposes clearly linked to the Growth and Jobs Strategy (“earmarking” – 60% for the Convergence objective and 75% for the RCE objective).

Innovations in the new programmes

For the new programmes, specific initiatives have been launched to promote financial engineering for start-ups and micro-enterprises, combining technical assistance and grants with other instruments. There are three such initiatives:

JASPERS (Joint Assistance in Supporting Projects in European Regions), a new technical assistance partnership between the Commission, the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD);

JEREMIE (Joint European Resources for Micro to Medium Enterprises), a new initiative in partnership with the European Investment Fund (EIF) in order to improve access to finance for business development;

JESSICA (Joint European Support for Sustainable Investment in City Areas), enhanced cooperation between the Commission, the EIB, the CEDB (Council of Europe Development Bank) and other International Financial Institutions (IFIs) on financial engineering for sustainable urban development.

As a complement to the Strategic Guidelines, the Commission will present a Communication on the contribution of urban areas to growth and jobs in the regions.

Related Acts

Council Decision 2006/702/EC of 6 October 2006 on Community strategic guidelines on cohesion [Official Journal L 291 of 21.10.2006].

Communication from the Commission of 25 January 2006 to the Spring European Council – Time to move up a gear: The new partnership for growth and jobs [COM(2006) 30 final – Not published in the Official Journal]. 
This annual activity report (AAR) contains several recommendations regarding cohesion policy.

Council Regulation (EC) No 1698/2005 of 20 September 2005 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) [Official Journal L 277 of 21.10.2005].

Cohesion policy and cities

Cohesion policy and cities

Outline of the Community (European Union) legislation about Cohesion policy and cities

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Regional policy > Review and the future of regional policy

Cohesion policy and cities

Document or Iniciative

Communication from the Commission to the Council and Parliament of 13 July 2006 – Cohesion Policy and cities – The urban contribution to growth and jobs in the regions [COM(2006) 385 – Not published in the Official Journal].

Summary

The Community Strategic Guidelines 2007-2013 in the field of cohesion aim to encourage growth and jobs. They define the areas of intervention where priority should be given in the Operational Programmes for Cohesion Policy for 2007-2013 by focusing on the specific needs of certain territories, such as urban areas, and on social and environmental objectives.

Sustainable urban economic development should be accompanied by measures designed to reduce poverty, social exclusion and environmental problems. This is the reason why the objective of this communication is to present certain specific aspects of the urban dimension which are relevant in the context of the strategic guidelines.

The Communication presents and proposes actions in a large number of fields and reflects the possibilities for intervention by the Structural Funds. The actions examined are divided into six headings, i.e.:

  • making cities more attractive;
  • supporting innovation, entrepreneurship and the knowledge economy;
  • the creation of more and better jobs;
  • managing disparities within cities;
  • governance.
  • financing urban renewal.

Attractive cities

In order to rise to the different challenges and make themselves more attractive, cities should attract more investment and create jobs. Four main points should be taken into consideration when doing so:

  • the mobility and accessibility of transport. For example, cities and regions should make the best possible use of the whole transport infrastructure;
  • access to modern, efficient and affordable services, as well as to equipment;
  • the natural and physical environment;
  • a cultural sector based on the availability of facilities.

Supporting innovation, entrepreneurship and the knowledge economy

Cities can take measures to support innovation, entrepreneurship and the knowledge economy. These involve actions for SMEs as well as actions to put innovation and the knowledge economy at the service of growth. This means for example:

  • improving the economic infrastructure and adopting environmental management systems;
  • providing business support services;
  • cooperation between local partners and access to sources of finance;
  • the drafting of an innovation strategy for the whole region;
  • involvement of cities in research and development (R&D) projects (Seventh Framework Programme), and in the information society field (the i2010 initiative).

More and better jobs

Given that highly qualified people and those with very low levels of qualifications are over-represented in cities, cities offer both needs and opportunities. Under the “Convergence” objective, the Structural Funds can support:

  • actions to strengthen institutional capacity and the efficiency of public services at local and regional level;
  • initiatives to create jobs, fight unemployment and create partnerships for employment and innovation;
  • improving employability by raising levels of educational achievement and training.

Disparities within cities

Within deprived neighbourhoods of cities where high unemployment is compounded by other deprivations, this communication proposes actions to:

  • promote social inclusion and equal opportunities;
  • increase security for citizens, for example, by developing approaches to local crime reduction policies and creating safety-related jobs.

Governance

In order to improve governance and manage urban development, this communication proposes actions aimed at:

  • establishing good co-operation between the different territorial levels, e.g. by developing partnerships between cities, regions and the state or improving coordination between urban, rural and regional authorities;
  • developing an integrated approach to sustainable development. This, for example, calls for the development of a long-term plan for all the different factors promoting sustainable growth and jobs;
  • raising the participation and involvement of citizens;
  • establishing networks for the exchange of experience.

Financing urban renewal

The urban development projects could be supported within the framework of the European Regional Development Fund (ERDF), the European Social Fund (ESF) and the Cohesion Funds. The communication also suggests assistance from the new financial instruments JASPERS, JEREMIE and JESSICA, and from public-private partnerships.

Related Instruments

Council Decision 2006/702/EC of 6 October 2006 on Community strategic guidelines on cohesion [Official Journal L 291 of 21.10.2006].

Communication from the Commission of 5 July 2005 – Cohesion Policy in Support of Growth and Jobs – Community Strategic Guidelines, 2007-2013 [COM(2005) 299 – Not published in the Official Journal].