After the Second World War, there had been attempts to re-unify the war-torn countries in Europe. However, there were many obstacles along the processes made. Problems still existed between rival countries such as between France and Germany, and economic situations in the European countries after the war was in a need of development. In order to cope with such problems of economy and relation between these countries, a community was created in 1951 by having first coal and steel as their central shared interests. This European Coal and Steel Community later developed in to the European Economic Community and finally in to the well-known European Union. This kind of community allows its member to improve their economic conditions through custom union and free trade, while advances their diplomatic relationship through their interactions. Efforts to integrate Europe can also be seen in 6 enlargements of the Union; allowing other states of Europe to join after they have accepted the community law. However, allowing other states to be members of the Union means there will be differences between the new and the old members of the union especially in economic terms. The most significant enlargement was the 5th enlargement in 2004 which was when the ten poor states in Europe decided to join the Union. In order to lessen the financial gaps between the members, the Regional Policy came in and played a major role in improving the economic disparities between states to allow their economy to grow. This paper will be focusing on the background of the regional policy, reasons why it is needed, main objectives, geographical eligibility, and who decides the funding.
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The idea of balancing the economic status of member states in the community has been there since the very early years of the European integration, or around 1950s. There were three sectors of financial support which were created during 1957- 1988; the beginning of the integration, to help funding the development missions of the European Community; the European Social Fund (ESF), the European Agricultural Guidance and Guarantee Fund (EAGGF), and the European Regional Development Fund (ERDF). In 1986, the cohesion policy was introduced after the agreement on the Single European Act with the objectives of re-uniting and developing the economy of member states all together. However, in order to achieve the goal of market development through support and competition between states, the members of the Union have to be equally strong or at least, the differences between countries shall not be very high in economic sense, or the poorer ones will not be able to survive within the Union.
Reasons for having the European Regional Policy
The European Union expansion has been achieved, but only in the number of members, not in economic and social development terms. Different countries have different financial and social status, but to unite them together and to improve their economic growth, these differences have to be reduced to the extent that they will not affect the countries with economic and social disadvantages in a negative way, but allow them to grow stronger together and compatible with the more-developed nations in the community.
The enlargement in 2004 has included 10 poorer countries in Europe in to the Union; Poland, Cyprus, Slovakia, Czech Republic, Slovenia, Hungary, Malta, Latvia, Estonia, and Lithuania and other 2 later on in 2007; Romania and Bulgaria, in to the European Union; making its numbers increased to 27 members (the EU’s 5th Enlargement, 2004). The population of the union has increased significantly by 20%, but there was only 5% increase in the GDP or the Gross Domestic Product of the Union. The problem here is that now the GDP per person is lower than the average level of the European Union-27 in the percentage of 25% (one in four regions); making it a need to diminish their differences (Regional Policy, 2009).
It is an idea agreed by all of the Union’s members that in order to improve the economy of each state and of the union as a whole, competition within the market is required. To survive in the competitive market and to improve its economy, a state needs to make itself capable of competing. The regional policy is there for financing the in-needed regions’ projects and helping the countries within the union to reach their goal of economic expansion, competitiveness, and solidarity. Ideas and technology can also be shared between states as in the process of development.
There are three main objectives divided by the Union; Convergence, Regional Competitiveness and Employment, and European Territorial Cooperation, and three structural funds and instruments; the European Fund for Regional Development, the European Social Fund, and the Cohesion Fund. The policy for integrating and balancing the economic and social conditions in Europe is also known as the Cohesion Policy; whose current budget of 2007-2013 is 347.41 billion euro or around 35.7% of the overall budget of the European Union (Regional Policy, 2009).
The Convergence Objective aims to promote economic growth and social development for the least-developed members of the Union in order to gain their ideal convergence. The areas of concern are environment, tourism, culture, transportation, energy, education, health, risk prevention, etc. The funding for this objective is consisted of around 282.8 billion euro (81.54% of the total Cohesion Policy funding) provided by the EFRD, ESF, and the Cohesion Fund [ibid].
The Regional Competitiveness and Employment objective helps supporting regions to toughen their economy by investing on the public and private sectors of the regional economy to emphasize on competition, attractiveness and employment. By doing so, they believe that it will provide more works with better standard for the people of each region which will also improve the regions’ economic and social conditions. This objective also has its aim on preserving the environment, improving transportation and communication system. The amount of funding for this objective is 55 billion euro (15.95% of the total Cohesion Policy funding) provided by EFRD and ESF [ibid].
The European Territorial and Co-operation objective is funded by the European Fund for Regional Development with the amount of 8.7 billion euro (2.52% of the total Cohesion Policy funding) [ibid]. This objective aims at improving the integrated regions’ social and economic conditions, transnational cooperation, and underlining the effectiveness of the Regional Policy.
The state members who are eligible for receiving the Cohesion Policy Fund are mostly countries from the 5th and 6th enlargements in 2004 and 2007, whose Gross National Income (GNI) are less than 90% of the average of the European Union. Regions which get this kind of funding are; Bulgaria, Czech Republic, Estonia, Greece, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Portugal, Romania, Slovenia, and Slovakia (Regional Policy, 2009). Spain is another country that fits in this category, however, for Spain it is a special case since its GNI was low enough for this category when EU had 15 members. In order to deal with this matter, Spain was put under the “phasing-out system,” so the country will not be much affected after the ten poorer states join the Union in 2004.
The Convergence objective’s funding is available for countries whose Gross Domestic Product per person is lower than 75% of the European Union average (Regional Policy, 2009). Examples of regions in this category (EU-25) are; the whole Bulgaria, Estonia, Latvia, Lithuania, Poland, Romania, and Slovenia, parts of Czech Republic, Germany, Greece, Spain, Hungary, Italy, France, United Kingdom, and Portugal. For the phasing-out system; which was introduced to help reduce the effect it might have on the poor countries receiving this funding before the poorer 10 countries join the EU, which concerns countries who were eligible at the time when EU had 15 members are some regions in Belgium, Germany, Greece, Spain, Austria, Portugal, Italy, and the United Kingdom.
The Regional Competitiveness and Employment Objective’s funding is available to regions who are not supported by the convergence objective, and until 2013- whose GDP is higher than 75% of the EU-15 average. Examples of these regions are those in Eire-Ireland, Greece, Spain, Italy, Hungary, Portugal, etc.
The geographical eligibility for the European Territorial Cooperation Objective consists of cross-border cooperation; transnational and interregional cooperation- including regions within a distance of 150km. alongside of inner, outer land borders, and maritime’s.
Who decides funds?
The European commission will discuss with its member states about the cohesion policy and the strategy for dealing with each state’s conditions in order to reduce the existing disparities between the more developed and the less developed regions within the Union. After come to an agreement, the Commission will draw out a proposal and hand it over to the European Parliament and the European Council who will take it into consideration and decide on the structural funds and their regulations.
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The expansion of the European Union is going well throughout the decades; however, after accepting new members from the poorer regions, especially in the enlargement of 2004, the European Union has faced with a bigger problem of social and economic differences between member states. In order to cope with this matter, the Regional Policy has been emphasized on more than in the past to improve the newly-joined-less-developed regions’ and the old-less-developed regions’ economic and social status, so that they are compatible with the more developed countries. In order to improve the European Union’s economic and social status, the market has to remain its competitiveness and solidarity, meaning that if the poorer countries are less capable, they may not be able to survive or improve their economy, but financially and socially fail. The Regional Policy helps improve the smaller bits of the member states in regional scale to make better environment for the future stronger economy of the countries and strengthen their conditions, so that they will be able to compete in the domestic and international market, improve their social and economic situations and also those of the Union as a whole.
Regional Policy, 2009. Regional Policy. European Commission. [online] Available at: http://ec.europa.eu/regional_policy/policy/history/index_en.htm [Accessed 20 March 2010].
The EU`s 5th Enlargement, 2004. The European Union in the World. Enlargement. [online] Available at: http://www.dellbn.ec.europa.eu/en/enlargement/index.htm [Accessed 20 March 2010].
Malais J. & Haegeman, H., 2009. Analysis on the European Union Regional Policy. European Union Regional Policy. [online] Available at: http://www.iiuedu.eu/press/journals/sds/sds1_july_2008/07_SECC_03.pdf [Accessed 20 March 2010].
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