PART III - THE EU BUDGET AND THE CONTRIBUTION OF STRUCTURAL POLICIES TO ECONOMIC AND SOCIAL COHESION

2 The contribution of structural policies to economic and social cohesion: results and prospects

2.2 Assessing the effects of Community intervention (1994-99)

Objective 6: improving accessibility and job creation

The accession of Finland and Sweden to the EU in 1995 significantly enlarged the land area and introduced a new type of sparsely populated region - the new Objective 6 - with extremely low population density, peripheral location, a general tendency for population to decline, small markets and long distances between towns and villages.

Evaluations show that the strategic choices made in the Objective 6 programmes strongly reflected Community priorities and that favourable results were achieved in terms of employment creation in particular, where the targets set were met in the regions concerned in both countries. These were to increase the number of jobs in private services and manufacturing by 17,500 in Finland and by 9,500 in Sweden.

Community Initiatives: institutional rather than economic value-added

The rationale for Community Initiatives, in general, is to tackle the problems or issues facing the EU as a whole, which can best be addressed through coordinated action between Member States. They are complementary to other programmes co-financed by the Structural Funds and negotiated on a regional or national basis. Between 1994 and 1999, there were 13 such Initiatives, with a Community contribution of nearly EUR 14 billion, representing around 9% of the entire Structural Funds allocation.

Community Initiatives cover a diverse range of themes, but have certain features in common. Four aspects, in particular, contribute to their added-value as compared with other Structural Funds measures:

• they encourage trans-national, cross-border and interregional co-operation;
  
  
• they increase involvement of people on the ground (because of their 'bottom up' approach);
  
  
• they stimulate innovation and the incorporation of the lessons learnt into regional, national or European policies;
  
  
• they help to diversify economic activity in areas affected by declining industries.

Transnational, cross-border and interregional cooperation

Transnational cooperation has been a feature of most Community Initiatives (Adapt, Employment, INTERREG II, Leader, Peace, Pesca, Regis II, SMEs), the aim being to promote the concept of national, regional, local and sectoral partners working together with their counterparts in other Member States. Under the Employment and Adapt Initiatives, for example, all projects involved participants from more than one Member State, while INTERREG entailed cooperation between regions in different countries.

While the benefits are difficult to quantify, those who have participated in transnational exchanges tend to acquire a greater appreciation of the European Union and of other societies and cultures. In institutional terms, added-value is evident in the sustainable European networks which have been established and which will continue the exchange of experience and transfer of best practice in the future, a form of cooperation which would be unlikely to develop to the same extent without Community support.

Leader, Pesca, Regis and SMEs emphasised the exchange of good practice and the establishment of networks between Member States. Leader promoted networks and more formal transnational cooperation through its European Observatory. The SMEs Initiative had a fund of EUR 25 million to finance three types of transnational activity: tourism and the internet, international buyers' exhibitions and the exchange of experience and good practice under the Reacte project.

Cross-border cooperation is concerned with the development of local and regional economies which share common borders. INTERREG II has promoted economic and social cooperation between regions particularly disadvantaged because of their border location and has also helped the applicant countries to prepare for accession through cooperation programmes with EU regions, many of them involving the transfer of know-how. Cross-border cooperation was also a major feature of the special Peace programme, agreed in 1994 to support the peace process in Northern Ireland, through assisting projects operating across the border with the South, as well as those aimed at encouraging reconciliation between the two communities in the province.

The mid term evaluations of INTERREG II indicate different levels of cooperation:

• At its most basic, cross-border cooperation involves the enhancement of physical links, whether in the form of roads, rail, sea ports or airports. Such projects have predominated in INTERREG II programmes in the southern Member States (Spain and Portugal, in particular), but a lack of real involvement by local and regional authorities was noted in the evaluations.
  
  
• More intensive cooperation is evident in the development of networks and partnerships between organisations and institutions situated relatively close to each other, but which, since they are separated by a border, focus on other parts of their region or country instead. Mid-term evaluations of INTERREG II programmes between France, Belgium, the Netherlands and Germany show cooperation becoming more intensive between INTERREG I (1992 to 1995) and INTERREG II (1995 to 2001).
  
  
• The Scandinavian countries have a long history of cooperation and INTERREG II has built on this by forging even stronger links in certain areas of regional policy, while also extending programmes to include the applicant countries. The mid-term evaluation of INTERREG IIA between Denmark and Sweden (Öresund) identified the development of new networks, the promotion of new initiatives and improved partnership as major benefits from the programme. It concluded that it had created a 'neutral platform' for the development of cooperation between Copenhagen and Malmö. According to the evaluation of the INTERREG IIC Baltic Sea programme, cooperation with the accession countries has been hampered by the different funding mechanisms and procedures involved in INTERREG, PHARE and TACIS, and these issues need to be addressed in the 2000 to 2006 period.

On the basis of these evaluations, a Commission Report on INTERREG (January 2000) concluded that border regions, particularly in southern Europe often lack experience of cooperation. Centralised administrative bodies inadequate acquaintance with each other and a lack of mutual trust make the creation of lasting cross border institutions difficult, as in the case of efforts at cooperation generally. As a result, the involvement of local and regional entities and of the social partners remains limited, and in some cases projects have not been genuinely cross-border.

So far as human resource development is concerned, the EU-wide evaluations of Employment and Adapt found problems in the establishment of transnational partnership between projects, especially in the early phases. Problems identified included responding to different selection criteria and time scales in different Member States and the difficulty of finding partners with projects which had a sufficiently common subject matter to make working together meaningful. These findings, which are equally relevant for INTERREG and other Community Initiatives, underline the need for greater efforts to develop the basis for transnational and cross-border cooperation in the future.

Area-based or 'bottom-up' approach

Several of the Community Initiatives focus explicitly on local areas, in recognition of the fact that national or regional responses are sometimes too generalised to tackle the particular needs of a locality and that those who live and work there are often best placed to develop appropriate measures. INTERREG II, Leader and Urban all followed this area-based approach, which led to capacity building, greater local autonomy and enhanced targeting of action, as well as a greater ability to concentrate on areas of particular need. The latter is a particularly valuable aspect of the Urban Initiative, which puts emphasis on involving residents in decisions on the design and development of programmes.

Both Urban and Leader also emphasise the need for integrated responses to area-based problems. Urban covers a wide range of projects combining renewal of obsolete infrastructure with measures designed to stimulate the economy and employment. Leader, whose acronym refers to 'links between actions for the development of the rural economy,' explicitly attempts to ensure that measures and projects, whether in the same sector or different sectors, are properly coordinated and integrated. At its most effective, this means adopting a comprehensive view of intervention, involving all the relevant aspects (economic, social, cultural and environmental) and endeavouring to implement as many multi-sectoral measures as possible.

Sometimes termed a 'bottom-up approach,' this is one of the most important aspects of the added value of the Community Initiatives and has been incorporated into mainstream programmes for the 2000 to 2006 period, in the increased emphasis on local development in the Structural Funds regulations. It has also been strengthened as a key feature of the four new Community Initiatives.

Innovation and mainstreaming

The support of innovative approaches, often developed on a transnational basis, was at the heart of several of the Community Initiatives (Adapt, Employment, Leader, SMEs), which encouraged the design of new approaches and the testing of their implementation. The EU-wide evaluation of Employment (2000) identified three different forms of innovation, process-oriented, goal-oriented and context-oriented, and found that all three were an aspect of most projects, with a particular emphasis on process-oriented innovation, while the development of new 'pathways to integration' was a theme running through many projects. The Adapt evaluation (2000) concluded that most projects were innovative 'to some degree,' but few were 'highly innovative.' Both evaluations recommended that future Initiatives should predefine areas and forms of innovation at the outset.

Linked to innovation is the concept of 'mainstreaming,' or the notion that the lessons learnt from the Community Initiatives should feed into regional, national or European policies as appropriate. This was a particular priority for the human resource Initiatives, Employment and Adapt, as well as Leader and some of the sectoral Community Initiatives. The evaluation of Employment identified two forms of mainstreaming:

• dissemination, where the project itself communicates the results through documentation, seminars, meetings and websites, usually to other projects;
  
  
• transfer, where the project engages with policy-makers at different levels to provide a means of feeding the results into regional, national and European policies.

The evaluation of Adapt found more evidence of horizontal than vertical mainstreaming, which is potentially more important but also more difficult to achieve. The strategies for bringing this about were generally weak in Member States, reflecting the complexity of the process of transferring experience gained through bottom-up action to national policy and underlining the need to develop appropriate mechanisms in the Initiatives and mainstream programmes in the 2000 to 2006 period.

Diversification

A group of Community Initiatives was aimed at supporting diversification in areas with an over-reliance on particular industries in decline, specifically, the defence industry, fishing, coal mining, the steel industry and textiles in the case of Konver, Pesca, Rechar II, Resider II and Retex, respectively, while Leader and Regis II had a similar aim. The timeframe for most of these Initiatives was limited in order to induce timely responses to the particular problems concerned.

More generally, many of the Community Initiatives have led to those living in areas where projects have been implemented developing a clearer understanding of the concept of 'Europe', as they see tangible benefits from the projects supported and possibly come into contact with people in other parts of the EU. Through the Initiatives, they have, therefore, gained a greater awareness of the Structural Funds and of the meaning of economic and social cohesion. This contrasts with many mainstream measures supported by the Structural Funds, for which, according to the evaluations carried out, people usually do not know that the EU is a major source of finance.

While the Community Initiatives appear to have had significant positive effects in the 1994 to 1999 period, evaluations have highlighted a number of deficiencies. Chief among them is the large number of Initiatives with overlapping aims and separate systems of administration. From the standpoint of local, regional and national authorities, as well as the Commission, a clearer and more streamlined approach would enhance effectiveness.

Added-value of Community regional policy

The value added of Community involvement in regional development is not only related to the expenditure incurred as such. Benefits also stem from the method of implementation developed in the 1988 reform of the Structural Funds, which was revised in each subsequent programming period. Some aspects of the method were discussed in the first Cohesion Report and so the focus here is on key elements of the 1994 to 1999 period.

Programming: a more strategic approach but over-complex procedures

Programming and management based on partnership are cornerstones of the 1988 reform of the Structural Funds. The extent to which administrative authorities have adapted to this has varied markedly between Objectives, countries and regions.

In Objective 1 regions, the programme-based approach adopted made it possible to learn from experience, which benefited those responsible for implementing measures on the ground.

Given the broad range of measures involved and administrative weaknesses - often a major factor behind lagging economic development - in many cases, the process proved to be difficult and failed to produce the expected results.

In Objective 2 and 5b areas, the methods were assimilated more quickly, although some authorities expressed concern about the burden imposed in relation to the resources allocated. In the case of Objective 3 and 4 measures, according to some Member States, these were more difficult to plan because the need for them depended on labour market conditions which were determined exogenously.

Finally, Objective 5a measures remained outside the programming process, because transfers continued to be based on reimbursing Member States for part of the expenditure incurred under existing support systems (apart from measures for the processing and marketing of agricultural, forestry and fishery products).

The multi-annual planning process encouraged participants to adopt a 'strategic' approach, resulting in better selection and greater coherence of co-financed projects. This change, however, has not yet produced all the results expected because there was often a failure to quantify programme objectives sufficiently and, therefore, some difficulty in evaluating them with any precision.

During the mid-term review of Objective 1 and 6 programmes, the Commission called for greater support of measures for increasing employment and there is concrete evidence of the willingness to address this issue: in Spain, Greece and, most especially, Italy, territorial employment pacts, for example, were integrated into general programmes.¹

Nevertheless, it should also be noted that approval procedures for Community Support Frameworks, for programmes and their modification have often proved excessively onerous in administrative terms, particularly for smaller programmes, which is hard to justify from an efficiency perspective.

The simplification that has already been put into practice and the application of the new regulations should allow greater flexibility in implementing procedures.

Partnership: an important aspect but still limited in practice

Partnership is the key to the implementation of structural policies, the aim being to ensure that all those involved in the preparation, implementation and evaluation of Community measures cooperate effectively. The application of the principle requires a clear definition of the respective tasks of each partner and the deployment of appropriate methods and instruments. The partnership approach has to balance the limits of coordination, the adoption of a global vision and the potential economies of scale realisable at a central level against the best understanding of local needs and the synergy and complementarity that can be achieved at a decentralised level.

The principle has been developed over the years in different ways:

• a range of vertical partnerships involving local and regional participants has been established to implement regional programmes;
  
  
• the social partners have been involved in human resource programmes and measures;
  
  
• cross-border cooperation programmes have enabled new structures of partnership to be established to the benefit of peripheral regions in the Union;
  
  
• innovative policies for local and rural development, the territorial employment pacts, in particular, have given rise to 'micro-partnerships', according a major role to those involved at the local level;
  
  
• other forms, such as informal, horizontal and transnational partnerships for exchanging experience between cities, regions and rural areas, often in different countries, have recently begun to be created..

These different forms of partnership have become a permanent means of exchanging information and experience.

The implementation of the Structural Funds, moreover, has pushed regions to define objectives and to use their financial resources effectively. According to a recent evaluation, 2 the introduction of the partnership approach has encouraged the priorities of all the participants as a whole to be considered and reconciled, so resulting in more coherent policies, as well as the identification of a set of objectives which is shared by all those involved.

The monitoring committees have proved to be effective means of agreeing on how to tackle problems and how best to modify programmes in this regard, even in Member States where decentralisation is least developed, because a pragmatic approach has enabled regional actors to be involved in the monitoring process.

The decentralisation of responsibility for implementation, however, has highlighted the technical and managerial limitations of regional and local authorities. In some Member States, there were serious delays in undertaking programmes managed at the regional level as compared with those managed centrally, necessitating significant budget reallocations. In this regard, Member States have not made sufficient use of the technical assistance, which should have accompanied decentralisation and enabled some of the problems encountered to be resolved.

In spite of Commission efforts, the participation of the social partners in the planning and monitoring of programmes was often unsatisfactory. They were not well represented on monitoring committees (except in respect of Objectives 3 and 4) and were not kept fully informed of developments.

Finally, experience indicates that there has been some confusion of roles and responsibilities in the organisation of tasks in cases where programmes were jointly managed, which suggests that responsibility needs to be defined in a more efficient and transparent way.

Management and financial flows: complex and often poorly transparent systems

Financial management systems were tried out during the first programming period and were then reformed with the aim of increasing flexibility.

Because of the cooperation between the Member States and the Commission and the vigilence of the Court of Auditors, there were relatively few cases of irregularity and fraud.

Nevertheless, the financial system governing the disbursement of Community funds in the Member States is often complex and varies between the different sources of funding. As a result, there were often lengthy delays in making payments in respect of many programmes, creating uncertainty among recipients and so reducing their economic impact. Indeed, even though delays may not actually have occured, the possibility was enough to make it difficult for those concerned to plan ahead.

The mid-term evaluations emphasised that the financial system in place made it difficult to apply the co-financing principle in a transparent way and that most Member States regarded Community support as reimbursement of expenditure already incurred.

The improvement of financial arrangements is one of the keys to improving the effectiveness of Community action.

Monitoring and evaluation: significant advances need to be consolidated

Two main factors stimulated the development of monitoring and evaluation from 1988 on. On the one hand, the new regulations encouraged Member States to do more in this respect, while, on the other, because of budgetary constraints, they became increasingly concerned to ensure the efficient implementation of programmes.

Since 1994, a series of measures has been introduced by the Commission to improve monitoring and evaluation procedures. In the first place, data on social and economic disparities between regions have been improved to make it easier to analyse progress in reducing them. Secondly, specialised evaluation units were established in the Commission to coordinate evaluation activities. Thirdly, the MEANS programme (Methods for evaluating action of a structural nature) was launched with the aim of creating a 'culture of evaluation' across the Union and facilitating exchange of experience between Member States.

For their part, Member States - in the south of the Union as well as the north - have progressively developed more effective monitoring systems, which, in the best cases, were based on quantified objectives, well-defined indicators and better information. National authorities, therefore, have increasingly established a more effective structure of evaluation with coherent guidelines, while regional authorities have in many cases set up their own evaluation systems in response.

While the benefits of an effective monitoring and evaluation system are widely recognised - for improving policy-making and transparency as well as for their own sake - the systems in place are not used in practice as fully and effectively as they might be. They are often not comprehensive and, in many cases, they are limited to financial indicators, which means that the evaluations carried out cannot be fully integrated into the decision-making process.

Leverage effects: inadequate balance between loans and subsidies

Support from the Structural Funds has been crucial to economic development in Member States with relatively limited budgets. It increased the level of investment possible and so gave an added impetus to growth, which in turn enabled private capital to be mobilised. Over the 1994 to 1999 period, this leverage effect was reinforced through a strengthening of the link between structural transfers and loans. In Greece, for example, around 29% of the finance for the overall investment undertaken came from private capital, though the figure was lower in many other parts of the Union. To maximise the investment achieved in the future will require loans and transfers to be combined in a way which is both judicious and manages public financial resources effectively.

1. European Commission, Mid term review of Objective 1 and 6 programmes - Better management through evaluation, 1997
2. Tavistock Institute, Thematic evaluation of the partnership principle, 1999

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