Regional Policy EUROPEAN COMMISSION Regional Policy

EUROPEAN COMMISSION 2 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 3 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

Regional Policy EUROPEAN COMMISSION 4 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 5 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)

Regional Policy EUROPEAN COMMISSION 6 Economic rationale Effects of single market on regional disparities Migration to rich areas not poor Less mobility in Europe Social costs

Regional Policy EUROPEAN COMMISSION 7 Political 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 8 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

Regional Policy EUROPEAN COMMISSION  125 Index, EUR-27 = 100 <50 Regional Disparities in EU27 GDP 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 264 Regions EU regional policy

Regional Policy EUROPEAN COMMISSION 11 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

Regional Policy EUROPEAN COMMISSION 12 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 13 AT 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 Amounts available in bn Euro; for new Member States:

Regional Policy EUROPEAN COMMISSION – the future

Regional Policy EUROPEAN COMMISSION 15 New Budget Structure: Regional Policy gains 2006 vs in %

Regional Policy EUROPEAN COMMISSION 16

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

Regional Policy EUROPEAN COMMISSION Objective Regional Competitiveness and Employment: (all other regions) 156 Regions 296 million inhabitants 65.1% of EU population Allocation: EUR 38.4 bn

Regional Policy EUROPEAN COMMISSION 19 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