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EU Regional Policy: an overview

DG Regional Policy European Commission

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Outline of today’s presentation

• What is it EU regional policy?

• Why do we bother with a regional policy?

• How much does it cost?

• What do we spend the money on?

• Is it worth it?

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What is EU Regional Policy?

• Regional policy is the vehicle for delivering regional aid

• Biggest slice of the EU budget which helps:

poorer regions catch up

areas undergoing economic change to restructure

with the realisation of most other Community policies

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EU Budget 2007-2013

COMMITMENT APPROPRIATIONS BY HEADING

In billion of EUR, at 2004

prices

In %

1a. Competitiveness for growth and employment (research, innovation, competitiveness)

72.1 8,4%

1b. Cohesion for growth and employment (regional policy)

307.6 35,7%

2. Preservation and management of natural resources (Common Agricultural Policy, rural development, environment)

371.2 43,1%

of which market-related expenditure (CAP) 293.1 34,0%

3. Citizenship, freedom, security and justice (internal policies; public health, asylum, immigration)

10.3 1,2%

4. The EU as a global partner (humanitarian and development aid) 50.0 5,8%

5. Total administrative expenditure 50.3 5,8%

6. Compensations Bulgaria and Romania (after accession expected in 2007)

0.8 0,1%

Total commitments 862.4 100

In % of EU-27 GNI 1.045%

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What is its purpose?

• The EU is one of the world’s most prosperous economic zones

• But huge disparities exist among the 271 EU regions – weakens the EU’s dynamism

• Hence the political goal of reducing the gaps in development

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How does it do this?

Regional policy interventions to reduce disparities and promote economic convergence are spread through 3 funds:

• ERDF: European Regional Development Fund• ESF: European Social Fundand…• Cohesion Fund (applies to MS with <90% average

GNI and covers the new member states as well as Greece and Portugal. Spain is eligible on a transitional basis)

….financing thousands of project across Europe each year

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Why do we bother?

It is in the treaty“to promote economic and social cohesion by reducing

disparities between the regions”

Leaving disparities in place is not an option

that would wreck two of the policies on which Europe’s growth has been based: the single market and the European Monetary Union (EMU)

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<50

50 - 75

75 - 90

90 - 100

100 - 125

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Differences in development in the EU-27

GDP per head as a % of the community average

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EU 27 Member States GDP per capita in PPS in 2006Source: Eurostat structural indicatorsEU 27= 100

0

50

100

150

200

250

300

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Disparities across the European Union

Hi Lo Ratio

GDP per cap (% EU27 average)

Luxembourg251%

Bulgaria33% 7.6*

Population Germany82.5 million

Malta404,000 204

*In US, this difference is only 2.5 and Japan 2

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How much does it cost? One third of the EU budget 2007-2013

€347 billion over 7 years

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What does the EU citizen get for this?

The three funds target:

• ERDF (€201 billion): regional development, economic decline in industrial or rural areas, competitiveness and co-operation

• (ESF) (€76 billion): employment, social inclusion and tackling discrimination

• Cohesion Fund (€70 billion): environment and transport

with overarching aim of “boosting growth and employment”

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Research/Innovation

Environment

Transport

Information societySocial infrastructureEnergy

TourismCultureInstitutional capacity

Human capital

Employment

Adaptability of workers and firmsSocial inclusionCapacity buildingTechnical assistance

What do we spend the money on?European Regional Development Fundand Cohesion Fund (€271 billion)

European Social Fund (€76 billion)

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Does this fit with other EU priorities?

• Boosting growth and employment central to the wider EU agenda – “Lisbon Strategy”

• Lisbon is the EU’s blueprint for competiveness and sustainable growth

• Prioritises: increasing levels of innovation to help

businesses move up the value chainBringing more of Europe’s population into

employment

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Boosting growth and jobs: is regional policy putting this into practice?

• Concentration of the effort on competitiveness (21st century activities)

Member States must ‘earmark’ resources on such strategic investments (€230 billion now targeted on Lisbon priorities)

• Concentration of resources on least prosperous

Regions with GDP per head below 75% of EU average: over ¼ of population

Member States with GDP per head below 90% of average: 13 MS with 25% of population

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Who gets what?

• Convergence 81.9% (regions lagging behind the most)

• Competitiveness 15.7%

• Territorial co-operation 2.4%

• Total budget €347bn, which will unlock up to €700bn

A method based on what works: Programming, Partnershipand Decentralised Management

17Index EU 25 = 100 Source: Eurostat

Geographical Eligibility for Structural Funds Support 2007-2013

Objective 'RegionalCompetitiveness and Employment'Phasing-in regions, "naturally" above 75%

Convergence objectivestatistically affected regions

Objective 'RegionalCompetitiveness and Employment'

Convergence objective(Regions < 75% in EU 25)

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Who can apply for funds?

• Huge range of potential recipients: Businesses including SMEs

Public bodies

Associations

Voluntary groups

• All projects considered if meet selection

criteria of managing authority of relevant

programme

• Compulsory publication of beneficiary lists

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Is it worth it?

• Evidence suggests positive contribution to

growth, national convergence and reduction

of interregional disparities

• Ex-post evaluations demonstrate positive

employment effects

• Clear benefits in terms of regional governance

Since 2000, investments have created some 600,000 net jobs, 160,000 in new Member States.

Every euro invested led to an average € 0.9 in additional funding from public and private sources. In more developed regions, this induced expenditure can go as high as 3 times the initial investment.

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Some outputs…..

• Increasing per capita GDP in Greece, Spain, Ireland and Portugal – ( Greece increased from 74% of the EU average to 88% between 1995 and 2005)

• Helping to reduce income disparities between richest and poorest by roughly a sixth (between 2000 and 2005) through sustained high growth

• By 2015, it is estimated that regional policy will have generated an additional 440,000 jobs in Poland, as well as contributing an extra 6% to GDP and 21% to investment

• Over 44,000 km of road were built or reconstructed in the period 2000-2006. The equivalent figure for rail was nearly 12,000 km

• Supporting more than 250,000 small businesses in the UK • Over 25,000 RTD co-operation projects were supported in

the period 2000-2006

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What is the added value?

• Leverage effect of additional resources• Multi-annual planning, partnership, monitoring and

evaluation • Support for other EU objectives such as internal

market, sustainable development• Ring-fencing public resources• Interregional cooperation and sharing of best practice

But• Complexity of management and control structures• Reality on ground can be very variable• Unclear in some MS if effects are consistent or

attributable to policy• Effectiveness of monitoring and evaluation

undermined by poor data

Source: Cohesion Report, Bachtler and Gorzelak

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A success story? Tram system in Athens

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Regional incubation centre in Ireland

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The Guggenheim effect in Bilbao

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Innovation centre in Czech Republic

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Motorway near San Sebastian

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Centre for renewable energies in Burgenland

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Five things to remember

1. It has successfully reduced the gaps between regions in Europe and made a major contribution to prosperity and democratic stability.

2. It has improved management and governance in the regions by decentralising management and devolving responsibility: the Commission does not select projects!

3. It is, with research, the EU’s biggest budget heading;

4. It works by investing in infrastructure, training, innovation and research. No hand outs.

5. Its success is recognised by all candidate countries and by manyothers (China, S. Africa, Russia, Brazil…)

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For more information…

http://ec.europa.eu/regional_polic

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THANK YOU FOR YOUR ATTENTION!

Any questions?