8.4 Regional policy

(I) Introduction

The impetus for developing a regional policy came from the first enlargement in 1973, when one of the British commissioners (George Thomson) was given the specific responsibility of overseeing EC policy towards the regions. He found that there was great disparity between the regions both within countries and within the Community as a whole. These disparities have been dramatically exacerbated by recent enlargements.

The current aims of the EU's regional policy are:

To ensure that regional problems are taken into consideration in other EC policies.
To attempt to coordinate the regional policies of the member states.
To provide a broad range of financial support for the development of the Community's poorer regions.

Two words, solidarity and cohesion, sum up the values behind the EU's regional policies.

(II) The Funds

The Structural Funds are the collective name for the funds set up to assist underdeveloped, declining or economically stagnant regions of the EU. From small beginnings, the Structural Funds have grown to nearly 35% of the total EU budget.

The Structural Funds are:

The European Regional Development Fund (ERDF). The ERDF is the central element of regional policy and was set up in 1975. In 1985 the rules governing the ERDF were changed in order to make them more flexible and more directed towards the least-favoured regions. The ERDF finances infrastructure projects and schemes to promote development and diversification of industry. The ERDF supports regional competitiveness, training, economic development and innovation. By 2001, the money allocated to the ERDF was €15.7bn (16.3% of the total EU budget).
The European Social Fund (ESF). The ESF supports human resource and equal opportunities schemes and training measures for the unemployed and young people. It was created under the original Treaty of Rome.
The Guidance section of the European Agricultural Guidance and Guarantee Fund (FEOGA). FEOGA supports agricultural restructuring and some rural development activities. The Guidance section counts as a Structural Fund, the Guarantee section is a central feature of the CAP and deployed on price support.
Financial support for fishing communities as part of the Common Fisheries Policy (CFP).

In addition, there is the Cohesion Fund. The Cohesion Fund was set up under the Maastricht Treaty (1992) with the aim of accelerating economic convergence in the run-up to EMU. At that time the only recipients were Ireland, Spain, Portugal and Greece. Member states are eligible for Cohesion Funds if their GNP is less than 90% of the Community average and their proposed programme is geared towards economic convergence. Ireland was deemed ineligible in 2003. Spain, Portugal and Greece and the 12 accession countries (of 2004 and 2007) are currently eligible.

When the first reform of the Structural Funds came into effect in 1989, 5 basic "objectives" were identified. (An Objective 6 category was added during enlargement negotiations with Austria, Finland, Norway and Sweden to allow for assistance for the Arctic regions.):

Objective 1: for assisting underdeveloped regions.
Objective 2: for assisting regions affected by the decline of traditional industries.
Objective 3: for combating long-term unemployment (defined as more than 12 months) & the integration of young people (under 25s) into the labour markets.
Objective 4: for helping workers adapt to technological change.
Objective 5: for the structural reform of agriculture and helping rural areas.

During the discussions under "Agenda 2000", in preparation for enlargement, the number of objectives was reduced to 3:

Objective 1: for assisting underdeveloped regions. The bulk of funds have been concentrated on this Objective. Eligible Objective 1 regions are:

Regions where GDP per capita is at or below 75% of the Community average. The most important criterion.
The thinly populated regions of Finland and Sweden (fewer than 8 people per sq km).
The outermost regions (French overseas departments, Canary Islands, Azores & Madeira).

Objective 2: for helping areas facing structural difficulties.
Objective 3: for education, training and employment in areas not covered by Objective 1.

The EU created tailor-made financial programmes for the 2004 accession countries for the period 2000-06. They were:

ISPA (the Instrument for Structural Policies for Pre-accession).
Sapard (Special Accession Programme for Agriculture and Rural Development).

For the current budget period of 2007-13, the EU is applying a new-look and more integrated regional policy. Old (EU15) and new (12) member states will no longer be treated separately. Spending under the combined budget of the Structural and Cohesion Funds will be divided into three categories:

79% will go on reducing the gap between poor and rich regions.
17% will be spent on increasing competitiveness of poor regions and creating jobs there.
4% will focus on cross-border cooperation between frontier regions.

RL, February 2007