There is probably no surprise that the recent EU enlargements that brought the membership count up to 27, have actually pinpointed some major integration challenges that affected both existing and new member states. Considering this context and the EU regional policy’s contribution to the enlargement processes, it is maybe interesting to question how appropriate is this policy to deal with future enlargements and regional disparities. This is even more important now, as the economic crisis makes the future of some European countries uncertain.
The first challenge
Looking back at how regional policy evolved, two key moments of reform stand out. These reforms coincide with the 1985 and 2004-2007 enlargements, two of the most problematic enlargements of the European Communities and later the EU. The first emphasized issues not considered before by the EU policy-makers, in terms of funding and coordination; the latter actually increased the EU membership by 85%.
Regional policy was formally implemented in 1975 and was represented trough the European Regional Development Fund (ERDF). At that time though, the policy was at most simplistic and rudimentary, and it did not address cross-sectoral or governance issues. The funds were negotiated by governments and distributed according to quotas, calculated according to the amount of contribution. In simpler terms, wealthier states with large quotas absorbed more funding, in the detriment of poorer states with smaller quotas.
The integration of Spain and Portugal in 1985 doubled the population of regions with the GDP below 50% of the Communities’ average. Moreover, and unprecedented need was felt for a structural change in the way the ERDF was distributed and coordinated. In short, at that time 3 major issues of regional policy were made evident:
- 1970s regional policy targeted integration processes not disadvantaged regions, and distributed funding according to quotas;
- The European Commission had little to no control over how funds were distributed (especially at sub-national levels);
- There was a lack of coherence across member states in terms of sub-national/regional framework.
Based on these issues the 1988 reform of regional policy pushed forward the cohesion term as the way in which regional policy would from now on, deal with regional disparities. Not only that, but structural changes would be put in place to ensure the involvement and participation of sub-national actors, and a homogeneous implementation of the policy across all member states.
For the first time, the cohesion concept shifted the attention from new member states to all member states, and to their deprived regions. This shift was the reason why the 1988 reform allowed these regions to secure funding, without neglecting any of the member states and without considering a participation quota. Considering the economic development level of Spain and Portugal and the moment of their integration their quotas would have been very small, and the old system would have actually enlarged the development gaps. Another key measure put in place was the system which allowed the European Commission not only to ensure proper spending of the funds by member states, but also the commitment of member states to the programmes.
The reform was based on four major principles, which combined together allowed for the integration of the European supra-national level of decision making with national and sub-national levels, creating what academics called today multi-level governance, and which are still in place today:
Different voices questioned the European Communities’ control over national and sub-national (i.e. regional) policy. However, even with the role of the Commission of regulating fund usage governments still retained, what Ian Bache called, their gate-keeping role. As a result sub-national actors were often left with formal roles, which offered no real power in negotiating funding or its expenditure.
In the late 1980s context this reform gave Spain and Portugal access to large quantities of structural funds, which was involuntary or not an incentive for institutional restructuring and decentralization. At the same time, the reform modified the status of the main contributors to the European budget: France, the UK and Germany. As a result their interest shifted towards how exactly the funds are distributed and spent, and how are their priorities and those of the European Communities’ regional policy being met.
Moving towards the Union
Following the European Union Treaty of 1992 a new reform of regional policy was set in motion in 1993. This was caused by the prospect of further enlargement, but also by the need to counterbalance the ERDF funding decrease for current member states, according to the post-integration requirements. The latter was resolved though the creation of the Cohesion Fund which would address disadvantaged regions throughout the programming periods and regardless of the statute of the states.
To assess the effects of regional policy in a clearly measurable way is extremely difficult as it involves a variety of indicators and scales of measurement. Overall, signs of diminishing regional disparities in ascension and new member states were and still are visible. But we must consider that general statistics are usually focused on national GDP modifications, which are not always in sync with regional ones. This in turn makes the results doubtful in terms of relevance.
The greatest enlargement of them all
Looking at the 2004-2007 enlargements of the EU, we can say that both left a significant mark of change on regional policy. The existing EU policy was not able to sustain positive economic development and cohesion considering the scale of disparities brought by the enlargements. This would have put at risk not only the ascension countries, but also the existing members as all the regions of the new members qualified for structural funding, producing a shift in the structural funding flows.
Enlargements in the uncharted political territory of Central and Eastern Europe contributed also to the way in which regional and later cohesion policies were designed and implemented. This happened not only because of the shift in funding towards the East, but also because of the Central and Eastern European centralist governments. These governments inhibited sub-national actors involvement in funding and policy-making processes, creating an impediment for the partnership priority of the EU regional policy.
The 1999 reform of regional policy had to also consider the interest of the old member states, which were targeting the single market programme. This was probably one of the incentives for the countries like France, Germany and the UK to shift funds towards the East, after the 2004-2007 enlargements. The reform focused on 4 key modifications:
- higher fund concentration;
- a simplified programming method with the European Commission in a strategic role;
- the introduction of pre-ascension instruments, required to prepare ascension states for integration;
- co-financing programmes by both member states and ascension countries.
The modification of regional policy’s objectives did in fact focus the funds in disadvantaged regions, but the modifications also created a dependency of the regions on the European Commission, which decided on the objectives, eligibility status and criteria. In hindsight this might have been based on the centralist character of Central and East European governments, and tried to ensure a better policy implementation process. However, this did not actually happen in full as the structural policy allowed national governments to still play the gate-keeping role and managed to regulate both policy and funding expenditure.
Pre-ascension funding played an important role in preparing ascension states for a theoretical seamless integration. But considering the co-financing principle instituted by the Commission this might not actually be so advantageous. Because of this principle, the poor ascension states had to match the EU’s contribution in order to access the funds. From the Western perspective this way of doing things was not wrong, as it meant more national involvement by increasing their responsibility towards fund management.
The present tense
In 2006, the experience of the 2004 enlargement called for a new reform that would reinforce the objectives of the policy. The result was a set of three objectives, which included convergence, regional competitiveness and employment, and European territorial cooperation. The reform also reinvented the strategic frameworks tools, resulting in the operational programmes being the single financial and management instruments. The restructured frameworks gave the national governments a much more extended role in the sub-national distribution of structural funds.
The present economic crisis makes it difficult to assess if the effects of these reforms are positive or negative. Even more, the contract between the EU institution and its member states raises difficult functional issues. First, in spite the economic crisis the commitments made to national governments have to be maintained so that operational programmes are not interrupted. Second, the funds distribution requires revisions, but it has to maintain the proportionality of funding between member states. In addition, at this point in time national governments are more prone to look at resolving internal issues rather than international ones. This is the context in which the regional policy of the EU has to be pursued further or abandoned in favour of the renationalisation of policy and institutions.
Bright future ahead?
From a governance standpoint, regional policy served as the tool of the European Commission through which it tried to decentralize the decision-making process away from itself and national governments towards regional actors. Did it succeed? In some member states such as Germany or Belgium it has had some level of success, but it also encountered major resistance from countries with centralist cultures, such as the ones of Central and Eastern Europe.
The 1985 and 2004-2007 enlargements brought one clear conclusion. Total decentralization of the decision-making processes is not going to happen soon. But all is not lost for regional policy, as partnerships built upon funding conditionality can actually lead to institutional change. Can we fully understand the drive behind the EU’s regional policy and its vision of decentralization? It depends on your perspective. It might be a strategy to move member states towards the single market by increasing regional competitiveness. But at the same time it can be a strategy to create a transparent system of structural funds distribution, that would protect the interests of major contributors to the EU budget. Whatever the reason, as EU cohesion reports showed the resulting structures and networks have indeed led to a more even distribution of structural funds, a decrease of regional disparities and increased competitiveness.
Based on the last 30 years of experience it is clear that regional policy has played a major role in the outcomes of EU strategies. It would be a mistake to dismiss this role and to abandon regional or local approaches towards policy-making, based only on economic statistics or the initiative of centralist or EU sceptic governments. It is however true that the existing regional policy requires new reforms and adaptation to accommodate the current economic climate, power shifts and member states requirements.
The current economic crisis has been crippling for national economies and made them unreliable in terms of long-term funding. It is therefore important that member states build their strategies on operational programmes with regional scales of implementation that offer a much more stable funding source for long term projects, enabling further decreases of economic and social disparities.
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