A quick Guide to Regional Policy Solihull Its origins and purpose

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"!

Origins Origins 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

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

Why is regional policy important?  Socio-economic cohesion considered to be a priority for the European Union  Second 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 EU  Promotes convergence (helping poorer regions develop)

Economic Rationale  Effects of single market on regional disparities  Migration to rich areas not poor  Less mobility in Europe  Social costs

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 GDP  13 Member States of EU-25 have GDP below 90% of average – 21% of population

 125 Index, EUR-27 = 100 <50 Regional Disparities in EU27 GDP per head in % in PPP (2002)

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 264 Regions EU Regional Policy

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 € billion;  20% of total EU population benefit

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

New Budget Structure: Regional Policy gains 2006 vs in %

Convergence-Objective: Regions below 75% of EU25 GDP Average Regions 124 million inhabitants 27.3%of EU population Allocation: EUR bn

Conclusions  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