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Objective 1: prospects

Take part in the debate on the future of the cohesion policy in an enlarged Union .

The Second Report on economic and social cohesion (January 2001) confirms that large differences in income and development opportunities are still present between the least developed regions and the rest of the Union, although gradual convergence is present in EU-15. With enlargement, however, the gaps widen once again.

  • With the reduction of gaps in endowments in certain types of infrastructure in the less developed regions of the EU15, less emphasis will need to be placed on basic investment and more on raising business competitiveness. Basic infrastructure needs remain considerable in the candidate countries.

  • The challenge for all of these regions in an enlarged Union is one of creating an innovative environment based around a qualified workforce, research and development and the information society.

  • Even if the human resource gaps are closing, eliminating the weight of the past in terms of the low level of qualification of the adult labour force is a long-term challenge in the EU15. In the candidate countries, the challenge is to adapt rapidly the workforce to a modern market economy.

Maintaining priority support for regions where development is lagging behind

For the less prosperous regions, the maintenance of direct zoning, for reasons of objectivity and transparency, represents the most appropriate method for concentrating support on regions most in difficulty.

The use of GDP per head (measured in terms of purchasing power standards - PPS) as a criterion and its level of application (NUTS 2 regions) still seem to be appropriate, as indicated by the comparative analysis presented in the first part of the report. For reasons of transparency and efficiency, however, there is a need to determine the principles which should apply to the definition of statistical territorial units - ie the regions.

How should the threshold for eligibility be set?

The eligibility threshold (currently set at 75% of the EU average GDP per head) needs to be decided on the basis of the following two considerations.

  • -First, enlargement will automatically reduce the average level of GDP per head in the Union substantially. On the latest data available (1998), the application of a threshold of 75% of GDP per head in a Union of 27 Member States would reduce the population in the present EU15 eligible for Objective 1 assistance by more than half. This raises the question of how to treat regions in EU15 that have improved in relative terms even if underlying conditions are the same as before enlargement.

  • Secondly, disparities between lagging regions in the enlarged EU would be wider than at present, with some regions having a level of GDP per head of three-quarters of the EU average and others only around a quarter. The number of regions involved is not only greater, they have more profound needs.

Four options for determining eligibility and temporary support

In the light of the foregoing, the exercise of Community cohesion policy in relation to lagging regions could take one of the following four forms:

  • the application of the present threshold of 75% irrespective of the number of countries joining the Union. This option on its own would eliminate a large number of regions in EU15. Their future eligibility for EU support would depend on the priorities and criteria for support outside the least developed regions
  • the same approach, but where all regions above this threshold but currently eligible under Objective 1 should receive temporary support (phasing-out), the level being higher the closer their GDP to the eligibility threshold. Two levels of temporary support could be envisaged, one for regions which, because of the extent of their convergence at the end of the 2000-2006 period, would no longer be regarded as having lagging development in an EU15, the other, set at a higher level, for those which would have been below the 75% threshold without enlargement;

  • the setting of a GDP per head threshold higher than 75% of the average, at a level which would reduce or even eliminate the automatic effect of excluding those regions in the EU15 simply because of the reduction in the average EU GDP per head after enlargement. It should also, however, be set at a level which excludes those regions which would no longer qualify at the end of the current programming period in an EU15 without enlargement;

  • the fixing of two thresholds of eligibility, one for the regions in EU15 and one for the candidate countries, and leading de facto to two categories of lagging region. This could have a similar result to the previous solution in financial terms in a situation where the aid intensity per head from Union funds is related to regional prosperity.

A further consideration relates to cofinancing rates (the ratio of Community to national support). After enlargement, the prosperity gap within the group of regions defined as least developed would be so large that a special maximum co-financing rate might be need to be set (relatively high) level to reflect the lower prosperity, and national budgetary capacity, of the very poorest Member States concerned.

A distribution of finance according to objective criteria

In the light of the needs, it would be difficult to sustain the case for a reduction in the resources allocated to the lagging regions - including any temporary support - as a share of the total funds available.

The essential question is that of how to ensure that the distribution of financial resources is as objective as possible according to needs. The decisions in this field under Agenda 2000 reflect considerable progress with regard to the use of objective criteria applied across the Community, at least as far as the least developed regions are concerned. This was one the more significant outcomes of the implementation of Agenda 2000. This way of proceeding should be maintained in the future, as a major element of the cohesion 'acquis.'

But a number of questions need to be addressed, including the following:

  • Should the existing criteria which have been used - population, regional and national prosperity and unemployment - be extended in the next round to include the employment rate, given the present prospects for the labour market and the conclusions of the Lisbon European Council on this? This is a question to consider in the light of the way the level of structural unemployment develops in Objective 1 regions over the next few years. At present, many of these regions still have a very high rate of unemployment.
  • Should the structural gaps between the regions and the Community average become part of the criteria for allocating funds?
  • Should the performance reserve become a more significant part of the Structure Funds? It would almost certainly be desirable to strengthen the conditionality attached to this instrument to achieve the expected results, including in relation to the pursuit of good financial management.

Maintaining the momentum in favour of an objective methodology depends heavily on the joint efforts of the Commission's statistical office, Eurostat, and national statistical offices to improve the quality of the harmonised data at the Community level. The extension of data series to cover the candidate countries, and to make available data on purchasing power standards at regional level, are major priorities for the success of future exercises to determine the next list of regions in which development is lagging.


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