Regional policy fails to close EU wealth gap

Date: 12/09/1996

By Mark Turner

THE strong are getting stronger and the weak weaker, a European Commission report on the impact of EU cohesion policies is expected to reveal later this year.

The draft report, which is keenly awaited as a first signpost to the future direction of EU regional policy, will analyse the results of efforts to reduce inequality since 1990 and suggest how best to proceed beyond 1999, when the current arrangements for the Structural and Cohesion Funds expire.

Work on the report is still at an early stage, but initial drafts do not paint an encouraging picture for the Union's regions. Whilst at a national level countries have made considerable progress in narrowing the gap between the EU's richest and poorest member states, regional disparities within individual countries have actually grown.

And while the report will praise progress in the Iberian peninsula and Ireland, it will express concern over developments in Greece and the Mezzogiorno region of Italy.

It is also likely to suggest that advances amongst the Union's poorer countries in terms of increased Gross Domestic Product (GDP) and better infrastructure have been counterbalanced by continued lack of success in the fight against unemployment.

What this will mean for future regional funding still remains unclear.

Officials hope to present a first draft of the report by the end of this month to the 'Cohesion' Commissioners: Monika Wulf-Mathies, Franz Fischler, Pádraig Flynn, Erkki Liikanen and Anita Gradin.

They will decide to what extent the report should launch an active debate on the merits of different cohesion policies, and recommend specific courses of future action. They will not, however, attempt

to set financial targets for the new millennium at this stage.

A final draft of the report should be ready for presentation to the full Commission by the end of October, for eventual action by regional policy ministers in March 1997.

Under current arrangements, three ingredients make up the Union's cohesion policy.

The Structural and Cohesion Funds are the most high-profile element. Structural Funds are governed by six objectives, and aim to help regions with low GDP, high unemployment, industrial and agricultural decline, or low population density.

The Cohesion Fund focuses more specifically on the Union's poorest countries - Spain, Greece, Portugal and Ireland - with under 90&percent; of the EU's average GDP.

But while spending on regional and social policies between 1994 and 1999 will reach almost 150 billion ecu, a third of the EU's total budget, officials stress that other measures are equally important.

These include applying regional considerations to other Commission policies (such as competition) and high-level coordination of macroeconomic policy.

The Cohesion Report will judge the success of all these elements by examining macroeconomic convergence, employment statistics, infrastructure, human resource development and productivity.

It could then determine whether the present objective-led approach is an effective way of organising funding.

But perhaps the biggest debate will be over whether the funds should continue to benefit large swathes of the Union (currently more than 50&percent;), or should concentrate on a smaller number of poorer regions (about 30&percent;).

This issue is especially important in the run-up to EU enlargement, amid mounting concern over the potential cost of admitting the countries of Central and Eastern Europe into the Union.

Regional Commissioner Monika Wulf-Mathies recently enticed member states with the 'Holy Grail': a regional strategy for Central and Eastern Europe without increased member state contributions. But exactly how that will be achieved remains unclear.

The Irish presidency expects to organise a meeting in mid-November to hold a first discussion of the report.

Until the final draft is released, however, DGXVI, the Directorate-General for regional policy is declining to make any comment on its contents.