Regional Policy

EUROPEAN COMMISSION

Regional PolicyRegional Policy

Regional Policy

EUROPEAN COMMISSION

22

What is regional policy?What is regional policy?

• Article 158 of the Treaty states that:

"in order to strengthen its economic and social cohesion, the Community shall aim at reducing disparities between the levels of development of the various regions and the backwardness of the least favoured regions or islands, including rural areas"

• also called:– cohesion policy– structural policy– refers to the Structural Funds– or "EU money"!

Regional Policy

EUROPEAN COMMISSION

33

OriginsOrigins

Treaty of Rome set up:

• CAP

• European Social Fund

• No specific provision for regional policy or regional fund

Why?

• Common market thought to be enough

• Strong economic growth in 1950s and 1960s

Regional Policy

EUROPEAN COMMISSION

44

Why change?Why change?

• Recession of 1970s highlighted development gaps

• Regional disparities increased with accession of:– 1973: UK, Ireland and Denmark– 1981: Greece– 1986: Spain and Portugal

Regional Policy

EUROPEAN COMMISSION

55

Why is regional policy important?Why is regional policy important?

Socio-economic cohesion considered to be a priority for the European UnionSecond most heavily funded sector in the Union after the Common Agricultural Policy.From less than 5% of 1975 budget to 35% of 1999 budget€ 233 billion. (approximately £ 160 billion)Visible sign of the EUPromotes convergence (helping poorer regions develop)

Regional Policy

EUROPEAN COMMISSION

66

Economic rationaleEconomic rationale

• Effects of single market on regional disparities

• Migration to rich areas not poor

• Less mobility in Europe

• Social costs

Regional Policy

EUROPEAN COMMISSION

77

Political rationalePolitical rationale

• need to legitimize the new economic and political order

• fiscal and monetary policy seen as not being enough

• "sweetener" for Member State accession

Regional Policy

EUROPEAN COMMISSION

88

Slow economic growth:

since the mid-1990s, EU growth has averaged just over 2% per year

Greater differences between regions and Member States:

regional disparity levels are higher than national disparities but are also falling Over ¼ of EU-25 population lives in regions below 75% of EU average GDP13 Member States of EU-25 have GDP below 90% of average – 21% of population

Regional Policy

EUROPEAN COMMISSION

99

50 - 75

75 - 90

90 - 100

100 - 125

125

Index, EUR-27 = 100

<50

Regional Disparities in EU27GDP per head in % in PPP (2002)

Regional Policy

EUROPEAN COMMISSION

40% to 49,9% of EU population(155→224 Mio.) in eligible areas (Obj. 1 & 2)

233 bn. Euro(one third of the EU budget)

400 to 480 Structural Funds programmes

211 to 264Regions

EU regional policy 2000-06

Regional Policy

EUROPEAN COMMISSION

1111

How does it work?How does it work?

Objective 1:

• funding for regions with average per capital GDP less than 75% of EU average remote regions, e.g. French overseas départements, the Azores, Madeira and the Canary Islands

• in the UK: Cornwall, Merseyside, South Yorkshire

• approximately 2/3 (69.7% )of total fund or € 135.9 billion;

• 20% of total EU population benefit

Regional Policy

EUROPEAN COMMISSION

1212

How does it work?How does it work?

Objective 2:

• for regions with structural difficulties or in need of economic diversification

• e.g. declining rural areas, regeneration of urban areas

• in the UK: North Yorkshire, NW and NE England, West Midlands, Tower Hamlets in London, etc.

• 11.5% of total fund or € 22.5 billion

• 18% of total EU population

Regional Policy

EUROPEAN COMMISSION

1313AT BE CY CZ DK EE FI FR DE GR HU IR IT LV LT LU MT NL PL PT SK SL SP SW UK

Objective 1

Objective 2

Objective 3

Community Initiatives

Cohesion Fund

EU Structural Funds 2000-06Amounts available in bn Euro; for new Member States: 2004-2006

10

30

40

50

60

20

Regional Policy

EUROPEAN COMMISSION

2007-2013 – the future2007-2013 – the future2007-2013 – the future2007-2013 – the future

Regional Policy

EUROPEAN COMMISSION

1515

6,6

32,1

47,4

0,9

6,5 5,6

35,7

9,9

40,4

6,4

1,5

6,1

0

5

10

15

20

25

30

35

40

45

50

1A Competitiveness 1B Cohesion 2 Natural resources 3 Justice 4 Global role 5 Administration

2006

2013

New Budget Structure: Regional Policy gains

2006 vs. 2013 in %

Regional Policy

EUROPEAN COMMISSION

1616

Regional Policy

EUROPEAN COMMISSION

Convergence-Objective:Regions below 75% of EU25 GDPAverage 2000-2002

86 Regions 124 million inhabitants27.3%of EU population

Allocation: EUR 177.8 bn

Regional Policy

EUROPEAN COMMISSION

Objective Regional Competitiveness and Employment:(all other regions)

156 Regions 296 million inhabitants65.1% of EU population

Allocation: EUR 38.4 bn

Regional Policy

EUROPEAN COMMISSION

1919

ConclusionsConclusions

• Does it work?– across Member States yes– within Member States less

• What will enlargement do (Poland 40 million, Spain 40 million)– from 15 to 25 Member States– new Member States are much poorer– pressure on budget

• Causes friction between member-states– Poor vs. rich– South vs. North– East vs. West