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

2.3 Outlook for the new programming period, 2000-2006

The new programming period opens up new challenges. It should be possible to achieve renewed progress towards convergence and higher rates of growth in the less prosperous parts of the Union because of a more favourable outlook for the EU economy as a whole and a more efficient combination of Member State and Community structural policies. This will not happen to the fullest extent possible unless investment is allocated to priority areas where the impact is greatest. Moreover, the effectiveness of intervention is heavily dependent on respecting the implementation and management conditions which have been jointly established with the Member States.

The two main conclusions to be drawn from model simulations of economic developments over the new programming period are, first, that structural policies can create the conditions for higher economic growth without increased inflation and, second, that through this, they can increase employment and, therefore, reduce structural unemployment (see Box: Convergence, cohesion and growth: impact of CSFs in 2000-2006 ).

Coherence of national and community priorities

Strategic guidelines¹ for the 2000 to 2006 period have been adopted to achieve an optimal and more targeted use of Community resources. Priorities and strategic objectives have been established by the Member States after consultation with the Commission.
Ex-ante evaluations initiated by Member States helped, in most cases, improve the coherence and quality of plans, notably by relating priorities and objectives more closely to the analysis of social and economic problems. The Commission, moreover, encouraged Member States to concentrate more resources on priorities and high-impact measures, making Community intervention more visible and efficient.

Under Objective 1, the Community guidelines imply a significant adaptation of regional development strategies over the programming period.

Transport: towards a better balance

Transport is a major priority in the new programming period (accounting for around 19% of the Structural Funds allocation - Table A.36, in annex). The balance between different modes of transport has been shifted towards rail from road. For example, under the CSF in Portugal, the number of passengers travelling by rail is planned to increase by 600,000 in 7 years (from 3.8 to 4.4 million a year), as well as the metro link between Lisbon and the airport being completed. The plan envisages a doubling of investment in rail in terms of Euros per head (from EUR 193.6 in 1996 to EUR 373 in 2006), while spending on road improvements will remain unchanged.

Under the CSF in Greece, at least 650 km of double-track railway lines are planned to be electrified in order to complete the trans-European Network by 2006 and new metro lines will be constructed in Thessaloniki and Athens, signalling a shift towards more environmentally friendly forms of transport. In due course, 26% of journeys in Athens will be made by metro.

In Objective 1 regions in Spain, new high-speed train routes are planned, doubling the length of track from 623 km to 1140 km in 2006.

In Germany, very few infrastructure projects were financed in the previous period, other than those aimed at supporting productive activity, such as roads linking industrial sites or ports. Over the 2000 to 2006 period, in contrast, investment of EUR 1.5 billion is planned for German Objective 1 regions, around a third on rail projects.

Upgrading road and motorway networks, nevertheless, remains a priority in the cohesion countries, given their present state and the need to make up deficiencies in respect of the trans-European networks.

The need to ensure sustainable development was already a priority during the previous programming period, all infrastructure and transport projects being subject to environmental assessment. The orientation of the CSF for the present period makes clear that this will be continued, as reflected in the choice of strategic objectives, such as limiting cross-city traffic, the extension of public transport and the construction of high-speed rail links.

Reduction in direct support for firms

A marked reduction is planned in the share of transfers going to direct support of firms, particularly in the cohesion countries and Italy, as a result of stricter regulation of state aids and the recognition of the significance of deadweight losses from these. Ireland is the most extreme case, with the Structural Funds providing no direct aid to industry (except for research and innovation programmes). In Italy, the national aid scheme to support industry (Law 488) has been revised to tailor assistance better to the specific sectoral and territorial features of firms in the Mezzogiorno.

Increased efforts to promote innovation and human capital

Total funds allocated to research, technological development and innovation (RTDI) are planned to remain unchanged, at around 3.5% of total Structural Funds expenditure, except in Italy and Ireland, where the shares have risen to 8% and 10%, respectively. This, however, conceals a relative decline in investment in infrastructure and research projects and a shift towards a more open approach to innovation and collaboration between research institutes and industry.

In the Member States where the RTDI shortfall is greatest, a shift in the orientation of policy is most evident, in the form of:

• improved links between RTD and the needs of firms, through measures to transfer innovation and technology; this could lead, for example, to an increase in private RTD in Spain (to 45% of the total in 2006 as against 35% in 2000);
  
  
• an increase of employment in the RTD sectors, of 40% in Greece, and to 0.5% of the total in Portugal and Objective 1 regions in Spain;
  
  
• increased involvement in international networks (a 50% increase in scientific publications with Portuguese involvement, for example).

The Information Society: a strategic reorientation towards demand

Investment in telecommunications will be substantially reduced in the new programming period, due to privatisation and competition between providers. Most effort is aimed at services and applications in support of SMEs (e-commerce) and the public sector (health and education), which represents a significant change in regional policy. Accordingly, the Structural Funds are making a major contribution to the development of an e-Europe. Support of telecommunication infrastructure is generally limited to the most isolated areas, where the return does not justify private investment. Member States have set relatively ambitious targets under their CSFs, including:

• providing Internet access for schools (the proportion of schools in Greece connected to the Internet increasing from 5% in 2000 to 100% in 2006) and the population at large (the proportion connected in Spain being planned to rise from 5% in 1998 to 25% in 2006);
  
  
• a wider spread of electronic commerce in SMEs (to 15% of SMEs in Greece in 2006 from 1% in 2000).

Human resources: link to the European Employment Strategy

Investment in human resources plays a strategic role in Community policies for economic and social cohesion, accounting for 30% of the Structural Funds in the new programming period, the same as in the previous one. The objectives are twofold: to help realise the human resource potential of the Union and so contribute to economic development in Member States and regions and to allow everyone equal access to the labour market. The European Employment Strategy has encouraged policies on employment, the labour market and the fight against social exclusion to be integrated and the new programmes have a similar aim together with that of promoting policy convergence across the EU.

Over the next 6 years, the ESF will provide around EUR 60 billion to support the European Employment Strategy (EES), in addition to Member States' own financing of labour market policies, a contribution of some 9% to total expenditure in this area. Other Structural Funds will also play an important role in supporting the EES, but the ESF is the main financial means at the EU level of pursuing the strategy.

The programmes for 2000 to 2006 reveal a strong link between the ESF and the EES, most obviously in the greater focus on the preventive action, in the form of support for those most at risk of becoming long-term unemployed. In addition, future ESF programmes will have a firmer commitment to gender equality, social inclusion and wider access to information and communication technologies to combat what might be termed 'the digital divide'. In most Member States, the ESF has been extended beyond a narrow focus on training to wider support of measures designed to improve the effectiveness and responsiveness of labour market policy. For some countries, the ESF 'policy frame of reference'² has also provided a useful basis for securing a coherent approach to the various policies under the three Objectives of the Structural Funds and to the various groups involved.

A preliminary review of the ESF support for Objectives 1 and 3 ³ under the 4 pillars of the EES indicates that between 2000 and 2006:

• around 60% of funds will go towards improving the employability of the work force, to co-financing active labour market policies and measures to promote social inclusion and support lifelong learning. Objective 1 regions, in particular, will use ESF support to modernise their public employment services to improve the functioning of labour markets;
  
  
• some 12% of funds will go to support the development of entrepreneurial skills, helping business start-ups and establishing networks of entrepreneurs to help maximise the benefits of support;
  
  
• around 20% of funds will go to supporting adaptability in the workplace, much of it to promoting continuing training of the work force. There will also be a sharper focus on the specific needs of SMEs than previously;
  
  
• around 6% of funds will go to supporting equal opportunities for women, the fourth pillar of the EES, much of it to helping the development of effective child-care measures. ESF support for equal opportunities, however, will far exceed this figure.

Greater integration of environmental aspects

The environment is increasingly recognised as a key aspect of cohesion policy. In line with the Amsterdam Treaty, the Commission guidelines emphasise the importance of incorporating the concept of sustainable development in the new structural programmes. The new regulation explicitly includes a requirement to carry out an environmental evaluation, which includes an environmental impact assessment, compliance with Community legislation on the environment and the involvement of environmental authorities in the preparation and implementation of programmes.

Member States and regions are becoming increasingly proactive in both the conception and implementation of environmental aspects in regional development programmes, including carrying out ex-ante evaluations of the situation in eligible regions and of the impact of proposed measures and establishing appropriate criteria for follow-up.

More generally, the Structural Funds seem increasingly to provide a favourable means of implementing EU environmental policy. For example, respect of the HABITAT directives, concerning the protection of natural sites, was set as an essential condition for accepting plans and programmes.

Taking account of equal opportunities

Securing equality of opportunity between men and women has been given new emphasis by its inclusion as one of the Community tasks set out in the Treaty of Amsterdam. The regulations for the Structural Funds for 2000 to 2006 reflect this by stipulating that there should be a greater consideration of equal opportunities in all policies and at all stages.

In the 1994 to 1999 period, equal opportunities were mostly addressed through pilot projects or ring-fenced allocations for positive action and, in general, they were viewed as an issue for the ESF alone.

The 1999 regulation explicitly requires ex-ante evaluation of this dimension in all plans and Single Programming Documents (SPDs). While the appraisals carried out by Member States were variable in quality, the fact that they were carried out at all represents an important first step. The evaluations undertaken in Finland, Germany and Wales are examples of good practice, while Italy has developed an innovative approach to examining direct and indirect benefits on men and women.

Contribution of EAGGF Guarantee to rural development policy

Twenty-seven different measures were co-financed by the EAGGF Guarantee as part of its contribution to rural development policy. On the basis of the programmes approved up to now by the Commission, the allocation from this fund go, in the main, to measures which are directly linked to the agricultural sector (see Table A.44, in annex). Less than 7% of allocations go on measures for economic diversification outside agriculture.

Improving efficiency and the evolution of instruments

The new regulations impose a programming system organised by Objective as before, but in a simplified and more flexible form, with stricter controls on additionality, more inclusive and responsible partnership and greater focus upon results.

Simplified and decentralised programming

In the new programming period, negotiations have already taken place and, in most cases, agreement reached on the CSF, SPDs and Operational Programmes (OPs) for Objectives 1, 2 and 3, the guidelines have been adopted and the Community Initiatives (INTERREG III, Urban II, Equal, Leader II) and the new generation of innovative measures have been launched. ⁴

In line with the new rules, the number of programmes has been greatly reduced, to around 400, from 1134 in the previous period (including 524 Community Initiatives). In the few cases - mainly in Spain - where programmes were separated by Fund, the authorities established an integrated multi-fund OP or SPD, allowing positive synergy between the measures envisaged.

Once the operational programmes have been approved by the Commission, Member States will prepare complementary information, containing details of the measures, while leaving scope for more flexible management without infringing the regulations laid down, notably in terms of quantifiable objectives and indicators for monitoring.

Additionality: a means of increasing effectiveness

Since 1989, the application of the additionality principle commits Member States to maintaining at least the same level of public expenditure on structural measures - excluding the EU contribution (Table A.45). The principle was defined in 1993 and the 1999 reform simplified the procedures for verification. There are, however, exceptions, such as economic circumstances or exceptionally high expenditure in the past, which allow Member State to reduce expenditure.

Additionality is assessed in respect of expenditure under each Objective. For the 2000 to 2006 period, the procedure has been simplified in two ways:

• for Objectives 2 and 3, additionality is jointly verified on the basis of active market expenditure across each Member States as a whole;
  
  
• verification is carried out only three times, before adoption of programmes (ex-ante), at the mid-point, and towards the end of the programming period.

Towards inclusive and responsible partnership

Partnership has progressively been widened in successive programming periods, from the inclusion of regional and local authorities in 1989 to 1993, and of the social partners in 1994 to 1999, to the planned inclusion of representatives from various groups (such as non-governmental organisation, or the equal opportunities movement) in 2000 to 2006.

This widening reflects the efficiency gains achieved in the last two programming periods (Table 21).

The preparation of the new CSF highlighted the increased awareness of the roles of the various participants in the programming phase. In Italy, the authorities set up a broad consultative framework, bringing together local representatives (regional, provincial, communal), central Government Ministers (for employment, agriculture, environment and equal opportunities) and representatives from employers' organisations, trade unions and non-governmental organisations. This led to the production of interim reports, which formed the basis of the development plan for the Mezzogiorno. Such a broad structure of partnership and the need to consult with all members can, however, give rise to delays in the decision-making process.

In the 2000 to 2006 period, responsibility for management has been determined according to the principles of decentralisation and subsidiarity. The counterpart to this is the need to improve transparency, especially for financial management, control of specific measures and project selection procedures. It is important to establish new procedures for sharing information to ensure that each participant can operate effectively and exercise their responsibility.

In particular:

• responsibilities need to be defined and divided between those involved in the programming, those managing the measures and those paying for them;
  
  
• information networks need to be set up to collect and transmit data for monitoring;
  
  
• the responsibility of all those involved needs to be increased to improve transparency of financial flows;
  
  
• scope for initiative needs to be widened to improve operational efficiency and simplify procedures.

Partnership and decentralisation (the corollary of the former) are the basic principles underlying a new approach to structural policy, which is more in line with the need for a new form of governance, in place of traditional management, to conceive and implement the programmes in question.

Management focusing on results

The new regulations emphasise the importance of monitoring and evaluation to increase the effectiveness of structural policies.

The aim of the Commission and the Member States is to ensure effective monitoring by defining quantitative objectives and appropriate indicators in respect of approved programmes. The indicators are intended to measure the impact of the programme, both directly (the infrastructure constructed, the amount of training provided and so on) and indirectly (the gains in efficiency, for example) as well as the wider economic and social effects (such as on employment). ⁵ Electronic information systems for the collection and processing of the relevant data are increasingly being established in Member States.

The new regulations provide for financial management procedures which are simpler, but more rigorous, with Member States taking primary responsibility for controlling expenditure, a task they will need to perform more strictly than before. In particular, a provision has been introduced for suspending a project automatically if the funds allocated are not absorbed within two years.

Regular and reliable evaluation of intervention can be regarded as evidence of transparency and efficiency. Substantial progress has been made in this regard, especially in Member States where there was not much of an evaluation culture. On the one hand, the managing authorities have an essential responsibility for organising intermediate evaluations and the (proactive) use of the results. On the other, the Commission is responsible for ex-post evaluations, identifying the results achieved and drawing lessons for the future.

The introduction of the 'performance reserve' adds a new dimension to evaluation by giving an incentive to achieve the objectives set beforehand for each measure. Even though the Commission's more demanding proposal was not accepted (to allocate 10% of funds to the reserve), Member States will, nevertheless, have to assign 4% of total Community funds (around EUR 5 billion) to programmes according to certain criteria, linked to the efficiency of financial management and their effectiveness. In implementing this provision, however, account will need to be taken of administrative and institutional features of Member States.

The Commission has played an important role in establishing these new arrangements, through discussions and by defining the methodological guidelines. Though demanding and difficult to implement, a system of management by results has become necessary to improve the transparency and effectiveness of policy.

1. European Commission, The Structural Funds and their coordination with the Cohesion Funds - Guidelines for the 2000-2006 programmes, COM (1999) 344 Final
2. A document which sets out the context for support for employment and human resources development in each member state
3. At the time of drafting full details on Objective 2 programmes was not available
4. The Commission has announced priorities for the four Initiatives and has decided the allocation of the overall amount (EUR 10.44 billion or 5.3% of the total Structural Funds) between Member States.
5. European Commission, Indicators for monitoring and evaluation, Working Document n°3, 1999

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