‘Big picture’ fails to tell the whole cohesion story

Date: 05/12/1996

IT IS an old adage that governments rely on broadbrush statistics, while their opponents home in on the details.

By the same token, Regional Affairs Commissioner Monika Wulf-Mathies' presentation of the European Commission's first cohesion report was a masterful display of how the 'big picture' can disguise what is really going on.

According to Wulf-Mathies, the report - the publication of which was demanded by the Maastricht Treaty - revealed some simple trends. It found that in terms of gross domestic product, the EU's member states were growing closer together. The four 'cohesion countries' (Ireland, Greece, Portugal and Spain) have increased their income per capita by 10&percent; over the past ten years in relation to the Union average and, according to the report, should continue to grow closer as time goes by.

This was counterbalanced by continuing disparities in job rates - the bottom 25 regions had four times as much unemployment as the top 25 - and growing differences in wealth within member states.

Overall, however, even EU policies not specifically aimed at cohesion, such as the single market programme, were helping to create a more equitable social and economic landscape.

This should come as no surprise, say Wulf-Mathies' critics. They maintain that a fear (verging on paranoia) of adverse publicity did not encourage her to explore the more controversial findings of the report, which was itself substantially toned down by the time it saw the light of day.

But worse, they claim, this report was never more than a Trojan Horse designed to justify phasing out the cohesion funds after 1999.

As the end of the millennium approaches, these criticisms are likely to grow more virulent.

The cohesion report is crucial to the debate on how much EU money should be spent on what from 2000 to 2005/6 under the first Santer financing package.

Although the report itself shies away from any substantive discussion of future policy shifts, Wulf-Mathies will spark a debate on what its findings mean for regional funding in the 21st century when she tours national capitals next year.

Her tour will culminate in a spring conference where member states, social partners and European institutions will discuss where the EU's cohesion policy should head in the next century.

In broad terms, Wulf-Mathies will be calling for a concentration of structural funds in the Union's poorer regions - at the moment they are spread too thinly for political reasons - and a simplication of the way they are administered. But she will argue for total funding levels to remain at 0.46&percent; of GNP, dismissing fears that the cost of enlargement will inevitably force an increase.

Nevertheless, due to the lack of clues in the report, bets are still being taken as to the exact future of the EU's cohesion policy. In the meantime, as more people take the time to read beyond its first chapter, some of the document's more subtle revelations may begin to sink home.

“The report is ticking away like a time bomb,” explained one Brussels official. “At some stage someone is going to notice what some of its observations are implying.”

They will need to look closely. A brief skim through the executive summary reveals little; it was designed to do just that. Nor did Wulf-Mathies' carefully-staged press conference, one week later than expected after other Commissioners got cold feet, suggest anything untoward in the coherence of EU policies.

The only real cloud on the horizon she revealed was that regional disparities within member states were growing, especially in terms of unemployment. As this firmly laid the blame for drift on member states, it was hardly a blow for the Commission.

Despite the positive gloss put on most of the report's findings, some journalists did notice that the Common Agricultural Policy had left the EU's second poorest country, Portugal, a net loser, while Denmark, comparatively rich, was one of biggest net recipients - and that, in blatant contradiction to its raison d'être, the CAP was shown to favour large farmers over small landholders.

While Wulf-Mathies did not flatly deny what agricultural policy reformers have long been aware of, she played it down, stressing that in broad terms agricultural policy did help cohesion.

The report points out that at least things are getting better. Spain, which before 1992 also lost out under the regime, no longer does, and the average EU citizen's loss from the CAP fell from 34 ecu in 1991 to 7 ecu in 1994.

But fewer people commented on the report's reminder that EU research and development policies are continuing to make rich regions richer. Or that research institutes in poorer countries are being pushed towards the northern European agenda, working towards ends that suit their more developed partners.

The report warns that grants, particularly for research and development, “are likely to have an in-built tendency to favour the richer regions of the Community, where the research centres of the major companies are concentrated”.

Furthermore, small firms - relatively more important in the cohesion countries - have difficulty in benefiting from R&D programmes.

At the time, no one commented either on the barbed but well-hidden comments in the report on the impact of liberalisation, both overall and in specific sectors.

“In general, the four cohesion countries are more vulnerable to trade liberalisation because of weaknesses in their exporting and import-competing sectors. All have trade deficits in services, which is one of the sectors expecting to expand,” it says.

More specifically, it warns that air liberalisation could further isolate peripheral regions, as firms abandon aviation routes which are less profitable and have been maintained by cross subsidies from profitable markets.

The report also warns that market-based policies which favoured a shift away from roads - such as environmental costing - need to be examined carefully “since they may have an adverse effect on development prospects”.

In addition, it casts doubt on the cohesive effect of Trans-European Networks and (in the short-term) of telecoms liberalisation.

In the cohesion countries, high investment costs for telecoms with relatively low returns could compromise important universal service obligations.

Although in the energy sector the cohesion countries could benefit over time, the results of liberalisation in UK suggested to the report's drafters that the short-term cost might be quite high.

But perhaps the most damning implication contained in the report is that the EU's single market programme has actually left Greece worse off.

To be fair, much of this is probably self evident. The free market promotes survival of the fittest and the structural funds were created to compensate the weak.

“If you leave the globalisation of the market to work by itself, it will not give good results in terms of cohesion,” said a spokesman for the Committee of the Regions.

Theoretically, prosperity should rise if there are sufficient safeguards and, in net terms, everyone wins.

But from an institution built upon the philosophy that free markets are the Holy Grail, an admission that they can also harm should not go unnoticed.

Almost more worrying to southern Mediterranean countries, however, is a perceived shift in the cohesion agenda away from strict economics into the 'quality of life' - including the environment and social conditions.

This has provoked fears that the north is moving the goalposts to favour action to address its own problems.

Southern diplomats also argue that the final report took insufficient account of the effects of national redistribution policies, emphasising internal divisions at the expense of continuing differences between countries.

Commission officials insist these concerns are unfounded, maintaining that the report had no hidden agenda and merely sought to assess cohesion in as wide-ranging a way as possible. Some do admit, however, that bringing 'social cohesion' into the picture was nonetheless likely to alter the way the subject was treated.

Measuring cohesion is far from an exact science and will always run the risk of suiting one party over another. But suppressing debate certainly will not help.

Although hampered by unfortunate mistiming, the cohesion report still offers a very real opportunity for such a debate. It should not be thrown away.