Structural funds in danger?

Article published on May 4, 2005
community published
Article published on May 4, 2005

This article has not been vetted by an editor at Paris HQ

The structural funds distributed to European regions have been severely disrupted by the addition of ten new member states to the EU. So who is going to profit the most?

In the run up to the enlargement of the European Union in 2004, nine of the ten accession countries were poorer than the poorest of the original fifteen member states. There was panic amongst the principal contributors to the European budget that structural funds, which finance social and economic restructuring across the EU, would be sent East. After controversy over Atlanticism, the reference to Christian heritage in the constitution and centralisation, Eastern European countries have again concentrated the fears and resentments of ‘old Europe’.

“Save regional policy” says the West

Since the creation of the European Regional Development Fund (ERDF) 30 years ago, the policy of structural funds (also known as ‘regional policy’) has come to symbolise the solidarity plan of European integration. Under this plan, almost a third of the EU budget is redistributed to regions with economic, social and territorial cohesion problems. It is this that has allowed Spain, Ireland and Portugal to catch up; that has encouraged the launching of innovative projects related to Europe; that has prompted the modernisation of the running of public affairs and the reinforcement of local authorities.

Reform of the system was attempted under the Prodi Commission (1999-2004), which commissioned the Sapir Report to look into the economic functioning of the EU. Although President Prodi and his entourage backed its recommendation that structural funds should only be given to the very poorest regions, protests led by the then Regional Policy Commissioner, Michel Barnier, resulted in an abandonment of the reform. Despite this, certain regions which benefited from the funds became victims of the statistics of enlargement because after the accession of even poorer countries, their GDP rose in comparison with the EU average, resulting in them no longer being classed as regions in need of development aid. For others, the European funds have only been partially maintained on the condition that are used not only to aid cohesion but to achieve the strategy of economic competitiveness defined in Lisbon in 2000. Today, it is to be expected that European funds will be destined foremost for the new member states in the light of global convergence. It is all about the balance of the European space, the very reason for regional policy.

In the East, “who will set up the projects?”

Will the new member states be the clear winners in future regional policy? Perhaps, but they will only be able to make the most of the money given to them if they are able to count on solid local infrastructures which are capable of managing the funds. In Lithuania, the geographer Jurgita Maciulyte has pointed out that “today, there isn’t a real decentralised local authority that is autonomous and endowed with its own responsibility, except in cities of particular importance. [So] who will be in a position to set up projects?” Under pressure from the European Union, certain regional authorities have had to be set up from scratch in the ex-communist countries, which inherited a particularly centralised political and administrative system. But progress has been hampered by the fact that if the structural funds are not used in their entirety, the region receives less the following year. What is more, it seems that the funds do not really benefit local communities. In Poland, the MEP Jan Olbrycht warns that “it is the businesses of strong [western European] countries who set up in our regions that receive aid. [As a result], at least 50-60% of the funds will not stay in the regions – in other words funds are not transferred directly to us. They become the profit of the old members of the EU”. Thus fears about the future of structural funds are changing sides.

The heart of the problem

The future of European funds in an enlarged Europe cannot amount to opposition between the winners in the East and the losers in the West. The question is not only that of enlargement but also that of making sense of a Europe which includes 25 countries. Jan Olbrycht defends a rise in the budget for everyone: “Entering the EU to get money is completely stupid. But entering the EU to become stronger and more dynamic – that is interesting.” In order to face up to the entry of ten member states without slowing down the European dynamic, logic would demand an increase in the budget of the EU. But on the contrary, six of the principal contributing countries are currently hoping to reduce it from 1.24% to 1% of the Gross Domestic Product. With the Common Agricultural Policy (CAP) remaining as it is, the reduction of structural funds is the only way to meet this target - even if it means damaging solidarity, the Union’s most important tool.