EN Regional Policy EUROPEAN COMMISSION Third Cohesion Report February 2004 Convergence, Competitiveness, Co-operation Budapest, 19/2/2004

Regional Policy EUROPEAN COMMISSION EN Third Cohesion report Third Cohesion report 19/02/2004 Budapest 2 Cohesion Policy "A harmonious, balanced and sustainable development of economic activities" throughout the Union (Article 2 of Treaty on European Union) Economic and social cohesion is to be pursued with the aim of "Reducing disparities between the levels of development of the various regions and the backwardness of the least favoured regions or islands, including rural areas" (Article 158 of Treaty on European Union) Context Proportions of expenditure

Regional Policy EUROPEAN COMMISSION EN Third Cohesion report Third Cohesion report 19/02/2004 Budapest 3 Context of Reform of Cohesion Policy enlarged Union requires enhanced solidarity leverage to the priorities adopted in Lisbon and Gothenburg higher profile as an international player citizenship and questions of justice and home affairs at heart of Community process context of reform

Regional Policy EUROPEAN COMMISSION EN Third Cohesion report Third Cohesion report 19/02/2004 Budapest 4 Financial perspectives Promoting Europe's wealth - policy challenges and budgetary means of the enlarged Union A refocusing in the financial perspectives. Four political priorities for the Union: Sustainable development – competitiveness, cohesion (for growth and employment): +212% Conservation and management of natural resources: +3% Citizenship, freedom, security and justice: +182% The EU – a global partner: +40%  Commission proposal to maintain level of own resources at 1.24% Community GDP Financial aspects

Regional Policy EUROPEAN COMMISSION EN Third Cohesion report Third Cohesion report 19/02/2004 Budapest 5 Financial perspective Proposal by Commission Average spending level of 1.14% of GNI per year 1.09% in 2006 Maintaining current level of own ressources: 1.24% of GNI in payment appropriations Financial Perspective

Regional Policy EUROPEAN COMMISSION EN Third Cohesion report Third Cohesion report 19/02/2004 Budapest 6 Financial perspectives For information: EU Budget  Total commitment allocations EU 25: € billion p.a. of which Structural Actions: € 37.0 billion p.a. Financial Perspectives  Total commitment allocations EU 27: € billion p.a. of which Structural Actions: € 48.0 billion p.a. (excluding rural development) Figures in 2004 prices Financial aspects

Regional Policy EUROPEAN COMMISSION EN Third Cohesion report Third Cohesion report 19/02/2004 Budapest 7 Cohesion Policy 1/3 of EU budget (€336 billion at 2004 prices) About 0.41% of Union GDP (0.46% with rural development & fisheries) Proposed split between current and new Member States Appx. ¾ of the budget for regions and Member States lagging behind in development Therefore, concentration on less prosperous parts of EU Context Proportions of expenditure

Regional Policy EUROPEAN COMMISSION EN Third Cohesion report Third Cohesion report 19/02/2004 Budapest 8 Categories of expenditure in Structural Funds Context For strengthening administrative capacity

Regional Policy EUROPEAN COMMISSION EN Third Cohesion report Third Cohesion report 19/02/2004 Budapest 9 Importance of Cohesion Reports Every 3 years Commission analyses state of cohesion and impact of its policies (Art. 159 of Treaty): 1 st report (1996) - the foundations for Agenda nd report: (2001) - launched debate on Cohesion Policy after enlargement 3 rd report (February 2004): presents proposals for reformed Cohesion Policy after 2007 context

Regional Policy EUROPEAN COMMISSION EN Third Cohesion report Third Cohesion report 19/02/2004 Budapest 10 The Report contains 4 parts 1.Analysis of situation and trends in the regions, and competitiveness factors 2.The contribution of national policies to cohesion 3.The contribution of other Community policies 4.The impact of Cohesion Policy structure

Regional Policy EUROPEAN COMMISSION EN Third Cohesion report Third Cohesion report 19/02/2004 Budapest 11 Observations of Cohesion Report Observations of Cohesion Report 1. Cohesion Policy has achieved undeniable results: Significant convergence of cohesion countries Positive trend in Objective 1 regions overall: –GDP, employment and productivity growth above European average –Modernisation of economic structures and management methods –Better governance at regional level –Greater regional co-operation at European level Part 1 situation and trends: some results

Regional Policy EUROPEAN COMMISSION EN Third Cohesion report Third Cohesion report 19/02/2004 Budapest 12 GDP growth in Cohesion Countries Part I Situation and trends Ireland: GDP +8% p.a. compared with EU average 2% p.a.

Regional Policy EUROPEAN COMMISSION EN Third Cohesion report Third Cohesion report 19/02/2004 Budapest 13 Unemployment rates Unemployment rates in EU15, 1996 and 2002 (% of labour force) EU15 10,77,8 Source: Eurostat, LFS 7,4 Cohesion countries 17,09,6 Other Member States9,57,5 Greece9,710,0 Spain22,311,4 Ireland11,94,3 Portugal5,1 Part I Situation and trends Part I Situation and trends

Regional Policy EUROPEAN COMMISSION EN Third Cohesion report Third Cohesion report 19/02/2004 Budapest 14 Impact of enlargement 2. Disparities in an enlarged Union will grow: Population of the Union grows from 380 to 454 million (EU 25) or 485 million (EU 27) New MS bring more dynamic growth (4% per year against 2.5% in EU 15 GDP per head drops (-12.5% EU 25: -18% EU 27) Part I

Regional Policy EUROPEAN COMMISSION EN Third Cohesion report Third Cohesion report 19/02/2004 Budapest 15 Impact of enlargement Population in the convergence objective goes from 84 million to 123 million (153 million with Bulgaria and Romania) Development gap between regions doubles: average GDP in Objective 1 is 65%: new MS 46% Employment rate in EU 15 grew from 60% to 64% (1996 – 2002). In new Member States 10 it is 56% (59% in 1999) Part I

Regional Policy EUROPEAN COMMISSION EN Third Cohesion report Third Cohesion report 19/02/2004 Budapest 16 GDP per head PPS 2002 Source: Eurostat, National Accounts Index, EU25 = 100 Part I Situation and trends

Regional Policy EUROPEAN COMMISSION EN Third Cohesion report Third Cohesion report 19/02/2004 Budapest 17 Regional GDP 2001 Part I Situation and trends GDP per head (PPS), 2001 < >= 125 No data Index EU 25 = 100 Source: Eurostat

Regional Policy EUROPEAN COMMISSION EN Third Cohesion report Third Cohesion report 19/02/2004 Budapest 18 Employment rate 2002 < 56 < 56.0 – 60.2 < 60.2 – – 68.6 >= 68.6 No data % of population between Standard deviation = 8.4 Source: Eurostat and NSI EU-27 = 62.4

Regional Policy EUROPEAN COMMISSION EN Third Cohesion report Third Cohesion report 19/02/2004 Budapest 19 Employment hi-tech 2002 Regional competitive factors < 7.45 < 7.45 – 9.55 < 9.55 – – >= No data Sources: Eurostat Average = 10.6 Standard deviation = 4.30

Regional Policy EUROPEAN COMMISSION EN Third Cohesion report Third Cohesion report 19/02/2004 Budapest 20 The contribution of national policies 3. EU Cohesion Policy crucial supplement to national policies: National budgets are 47% of GDP on average The Cohesion budget is 0.46% of GDP National budgets give priority to basic services and income support The Structural Funds aim to improve the factors of regional convergence and support physical and human investment Part II Different approaches to promote growth

Regional Policy EUROPEAN COMMISSION EN Third Cohesion report Third Cohesion report 19/02/2004 Budapest 21 The contribution of other Community policies 4. Other Community policies can also contribute to cohesion Policies at specific objectives set out in the Treaty Do not always have cohesion as explicit objective Need to strengthen coherence between these policies and the objective of cohesion: –Research and development expenditure –Environment policy contributes to sustainable development –Trans-European Networks –Competition policy's role in strengthening competitiveness Opinion surveys show, nevertheless, that Cohesion Policy and Agricultural Policy are most visible Part III Need to promote coherence of policies

Regional Policy EUROPEAN COMMISSION EN Third Cohesion report Third Cohesion report 19/02/2004 Budapest 22 The impact of Cohesion policy Increase public and private investment in beneficiary regions (growth) Contribute to increasing GDP (convergence) Create jobs and maximise potential of human resources Increase physical and human capital Better regional and local governance Financial stability over 7 years Part IV Mobilising resources to promote growth

Regional Policy EUROPEAN COMMISSION EN Third Cohesion report Third Cohesion report 19/02/2004 Budapest 23 Proposals for Reform: A new partnership for Cohesion Proposals for Reform: A new partnership for Cohesion Why a new partnership? To reinforce Union's sustainable development priorities (Lisbon and Gothenburg) Because enlargement increases the need for Cohesion Policy (15 out of 27 Member States will be major beneficiaries) Because Cohesion Policy will be of concern to all States, regions and towns Because of reinforced budget – 32% more Reform of the policy Conclusions

Regional Policy EUROPEAN COMMISSION EN Third Cohesion report Third Cohesion report 19/02/2004 Budapest 24 Priorities of the reform (I) First objective: Convergence and competitiveness Priorities of the reform (I) First objective: Convergence and competitiveness Who benefits? Regions less than 75% of EU 25 average GDP/head Statistical effect regions: less than 75% of EU 15 GDP/head but more than 75% of EU 25. States with less than 90% of EU 25 average GNI/head (Cohesion Fund) How much? Budget about 78% of the total Clear priority to new Member States in terms of convergence effort Reform of the policy Conclusions

Regional Policy EUROPEAN COMMISSION EN Third Cohesion report Third Cohesion report 19/02/2004 Budapest 25 Priorities of the reform (I) First objective: Convergence and competitiveness Priorities of the reform (I) First objective: Convergence and competitiveness What will be financed? ERDF-similar actions to present plus administrative capacity ESF-priorities of European Employment Strategy plus administrative capacity CF-transport and environment but emphasis on sustainable development (rail, multi-modal, ports, renewable energy and clean urban transport) Reform of the policy Conclusions

Regional Policy EUROPEAN COMMISSION EN Third Cohesion report Third Cohesion report 19/02/2004 Budapest 26 Priorities of the reform (II) Second objective: regional competitiveness and employment Priorities of the reform (II) Second objective: regional competitiveness and employment Cohesion policy at the service of all other regions in the Union – no community zoning Contains two elements: Employment (basis: European Employment Strategy) Regional competitiveness: -innovation and the knowledge society -accessibility and services of general interest -environment and risk protection would include responsibility for cities delegated to the regions (URBAN+), no community initiative (Lisbon and Gothenburg strategy) Budget: ca 18% of total FS= current objectives 2 and 3 Reform of the policy Conclusions

Regional Policy EUROPEAN COMMISSION EN Third Cohesion report Third Cohesion report 19/02/2004 Budapest 27 Priorities of the reform (III) Third objective: European Territorial co- operation Priorities of the reform (III) Third objective: European Territorial co- operation The success of INTERREG - Community added value Promotes harmonious and balanced integration Border regions, including sea borders Cross border co-operation (MS to propose changes to the 13 present zones of INTERREG III B) Interregional co-operation (also within mainstream) External cross-border co-operation – linked to the new European Neighborhood Instrument Budget: around 5% of the total Reform of the policy Conclusions

Regional Policy EUROPEAN COMMISSION EN Third Cohesion report Third Cohesion report 19/02/2004 Budapest 28 Implementation system: "evolution not revolution" Implementation system: "evolution not revolution" Confirmation of basic principles: –multi-annual programming; –partnership; –evaluation; –co-financing; –shared responsibility. Simplification - subsidiarity & decentralisation: –more strategic approach; –strategic framework adopted by EC (based on convergence, competitiveness & employment priorities); –operational phase – limited number of thematic & regional operational programmes; Reform of the policy Conclusions

Regional Policy EUROPEAN COMMISSION EN Third Cohesion report Third Cohesion report 19/02/2004 Budapest 29 Implementation system: "evolution not revolution" Implementation system: "evolution not revolution" Simplification and coherence of instruments: –Reduce number of financial instruments (ERDF, SF & CF); –Single fund programmes only; –Single strategy for ERDF & CF for transport and environment; –ERDF & ESF to include programmes to reinforce administrative capacity; –Maintain current co-financing (increment for rural zones, mountain zones and islands). Simplification of financial management: –Proportionality principle; –Declaration of assurance; –Payments system – advances (7%) and N+2 rule maintained. Reform of the policy Conclusions

Regional Policy EUROPEAN COMMISSION EN Third Cohesion report Third Cohesion report 19/02/2004 Budapest 30 Some considerations for Hungary Some considerations for Hungary 4% Capping Budapest Phasing out (natural) Become competitive on European level and beyond –Lisbon/Gothenburg Balanced development between capital and territory Meeting the challenge to implement –we are still in 2004! Hungary

Regional Policy EUROPEAN COMMISSION EN Third Cohesion report Third Cohesion report 19/02/2004 Budapest 31 Proposed timetable Proposed timetable May 2004: European Cohesion Forum, Brussels July 2004: Commission adopts the legislative package End 2005: Decision by Council and European Parliament 2006: Preparation of programmes for period Jan 2007: Implementation begins Next stages