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EU Regional Policy

Submitted by on 25 Nov 2013 – 15:18

By Sir Graham Watson MEP, Editor, Government Gazette

‘Solidarity’ is one of those oft-quoted words in the European policy-making sphere – its over-use perhaps diluting the force of its meaning. However what is certain is that nothing embodies the idea of European solidarity better that the EU’s regional policy.

The basic idea is a simple one: to reduce differences in economic development between rich countries and poor countries – or more specifically rich and poor regions. But the EU’s regional spending – which is set to account for just under 40% of the EU budget between 2014 and 2020, is not actually the result of pure altruism.

Although the EU’s regional development fund dates back to the 1970s, the cohesion fund – the money destined for Europe’s poorest regions – was in fact created as a counterweight to (or payback for) the birth of the single market and Economic and Monetary Union in the early 1990s.

Everyone knew that the single market was going to benefit Europe’s economic heartland disproportionately, favouring south east England, the Benelux countries, the Paris basin, southern Scandinavia, southern Germany and northern Italy. Furthermore, Economic and Monetary Union required budgetary and fiscal criteria which poorer countries would struggle to meet.

So a deal was done. It was decided that a large chunk of the EU budget should transfer money from this rich ‘core’ to the poorer ‘periphery’. Just as progressive taxation is used to redistribute wealth from the rich to the poor in any individual country, the same principle was applied to European regions.

The emphasis on regions and not countries is an important one, as the money is never supposed simply to flow into national treasuries. And even in some of the EU’s richer countries, such as Germany and the UK, there are regions such as Saxony or Cornwall, the very tip of my South West England constituency, which receive a considerable amount of EU support.

Turning to the present day, regional policy is as important as ever. With Greece going one way and Germany the other, differences in economic development, or ‘disparities’ as they are known in Brussels, are becoming more and more pronounced.

As things stand the plan is for about €322 million to go to the EU’s cohesion policy between 2014 and 2020, down from €354 million in the last seven year spending period. Although it sounds like a big cut, cohesion actually got a proportionally smaller cut than other parts of the multiannual financial framework – infrastructure investment, the EU’s external spending and research were all far bigger losers.

This is in large part thanks to the ‘Friends of Cohesion’ group of enlargement countries that got together during the negotiations to protect the EU’s regional policy spending. It worked – one of the first things European Council President Herman Van Rompuy did when he took over the MFF negotiations was to make an overall cut to all areas of spending – pleasing no one – and then bring cohesion up again to bring the ‘Friends’ on board.

This round of negotiations on the rules governing how regional funds are spent is also, thanks to the Lisbon Treaty, the first time the European Parliament has had  co-decision power over structural and cohesion funds. This means that Parliament has a say equal to that of the Council in how the money is allocated. As this newspaper was going to press, the European Parliament and the Council were still battling it out in ‘trilogue’ negotiations.

The key sticking points in the talks are the rules surrounding an extra 5% of money awarded for good results called a ‘performance reserve’ and the possible suspension of funding for countries that do not follow the EU’s macro-economic policies – the latter is being fiercely resisted by the European Parliament.

Also for the first time local – as opposed to regional – government will have more of a role in spending the funds, in an attempt to bring decisions down to the lowest level, to the people who really know their area.

And this year is also important because 2013 is the year that the EU’s transition regions will cease to get EU regional policy money – a ploy invented after the 2004 enlargement to slowly ease the middle income parts of the old member states off cohesion money. (One downside of cohesion spending is that it creates a culture of ‘donor’ and ‘recipient’ states in EU budget negotiations, and no matter what side they are on, all see it as ‘their’ money.)

Though it represents only 0.5% of the EU’s GDP, the EU’s regional policy is a noble achievement. It was and is an expression of basic economic solidarity first between North and South, and now East and West, that puts the rhetoric into action – puts the EU’s money where its mouth is. Long may that continue.