A quick Guide to Regional Policy

1
A quick Guide to Regional Policy

• Its origins and purpose

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What is regional policy?

• Article 158 of the Treaty states that
• "in order to strengthen its economic and social
  cohesion, the Community shall aim at reducing
  disparities between the levels of development of
  the various regions and the backwardness of the
  least favoured regions or islands, including
  rural areas"
• also called
• cohesion policy
• structural policy
• refers to the Structural Funds
• or "EU money"!

3
Origins

• Treaty of Rome set up
• CAP
• European Social Fund
• No specific provision for regional policy or
  regional fund
• Why?
• Common market thought to be enough
• Strong economic growth in 1950s and 1960s

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Why change?

• Recession of 1970s highlighted development gaps
• Regional disparities increased with accession of
• 1973 UK, Ireland and Denmark
• 1981 Greece
• 1986 Spain and Portugal

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Why is regional policy important?

• Socio-economic cohesion considered to be a
  priority for the European Union
• Second most heavily funded sector in the Union
  after the Common Agricultural Policy.
• From less than 5 of 1975 budget to 35 of 1999
  budget
• 233 billion. (approximately 160 billion)
• Visible sign of the EU
• Promotes convergence (helping poorer regions
  develop)

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Economic Rationale

• Effects of single market on regional disparities
• Migration to rich areas not poor
• Less mobility in Europe
• Social costs

7
Political rationale

• need to legitimize the new economic and political
  order
• fiscal and monetary policy seen as not being
  enough
• "sweetener" for Member State accession

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• Slow economic growth
• since the mid-1990s, EU growth has averaged just
  over 2 per year
• Greater differences between regions and Member
  States
• regional disparity levels are higher than
  national disparities but are also falling
• Over ¼ of EU-25 population lives in regions below
  75 of EU average GDP
• 13 Member States of EU-25 have GDP below 90 of
  average 21 of population

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Regional Disparities in EU27 GDP per head in in
PPP (2002)
50 - 75
75 - 90
90 - 100
100 - 125
? 125
Index, EUR-27 100
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EU Regional Policy 2000-06
40 to 49,9 of EU population (155?224 Mio.) in
eligible areas (Obj. 1 2) 233 bn. Euro (one
third of the EU budget) 400 to 480 Structural
Funds programmes 211 to 264 Regions
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How does it work?

• Objective 1
• funding for regions with average per capital GDP
  less than 75 of EU average remote regions, e.g.
  French overseas départements, the Azores, Madeira
  and the Canary Islands
• in the UK Cornwall, Merseyside, South Yorkshire
• approximately 2/3 (69.7 )of total fund or
  135.9 billion
• 20 of total EU population benefit

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How does it work?

• Objective 2
• for regions with structural difficulties or in
  need of economic diversification
• e.g. declining rural areas, regeneration of urban
  areas
• in the UK North Yorkshire, NW and NE England,
  West Midlands, Tower Hamlets in London, etc.
• 11.5 of total fund or 22.5 billion
• 18 of total EU population

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2007-2013 - New Budget Structure Regional Policy
gains 2006 vs. 2013 in

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Convergence-Objective Regions below 75 of EU25
GDP Average 2000-2002 86 Regions 124 million
inhabitants 27.3of EU population
Allocation EUR 177.8 bn
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Conclusions

• Does it work?
• across Member States yes
• within Member States less
• What will enlargement do (Poland 40 million,
  Spain 40 million)
• from 15 to 25 Member States
• new Member States are much poorer
• pressure on budget
• Causes friction between member-states
• Poor vs. rich
• South vs. North
• East vs. West