Regional aid fails to stem jobless rise in the Union’s poorest areas

Date: 21/01/1999

By Myles Neligan

THE European Commission's three-yearly snapshot of economic disparities within the EU reveals that regional aid worth hundreds of billions of euro has done little to narrow the gap between Europe's richest and poorest areas.

The study, which is due to be published on 3 February, shows that although average wealth in poorer regions has drawn marginally closer to that across the Union as a whole, these gains have been offset by a sharp rise in unemployment.

The report will provide ammunition for Spain and Portugal in their fight to continue receiving large EU aid transfers from the Union's budget over the next seven years. Germany and the Netherlands argue that the Iberian countries should receive less structural aid now they have qualified for economic and monetary union.

Much of the rise in the jobless figures identified by the report is attributed to a fundamental mismatch between existing skills and those demanded by employers, which means that even a sustained economic boom would not solve the problem.

“The labour market data are not good. Strong regional disparities remain, with long-term unemployment a particular problem in the poorer regions. There is also more evidence of social exclusion,” said a Commission official.

Focusing on a ten-year period between 1986 and 1996, the report reveals that the ten poorest regions' average gross domestic product per head - the standard measure of wealth - rose from 41&percent; of the EU average of €18,000 to 50&percent;. But the Union's ten richest regions pulled further ahead over the same period, with their GDP per head soaring from 153&percent; to 160&percent; of the EU average.

Although those regions with income levels below the Union's average in 1986 had collectively narrowed the gap during the decade covered by the report, their gains - just 3&percent; - were relatively modest.

But between 1987 and 1997, unemployment in the ten poorest regions jumped from 24&percent; to 28&percent;, as compared with a far more modest rise, from 2.2&percent; to just 3.6&percent;, in the ten wealthiest regions. One Commission official said that the report painted a picture of regional economic “stagnation”.

It shows that wealth is still overwhelmingly concentrated in Europe's urban conglomerations, with Brussels and Hamburg topping the league. Four of Europe's ten wealthiest cities are in Germany, although it lags behind Luxembourg, Denmark, Austria, and Belgium in terms of GDP per head.

But Regional Affairs Comm-issioner Monika Wulf-Mathies is expected to highlight figures showing that, overall, the income gap between the Union's four poorest countries (Greece, Portugal, Spain, and Ireland) and their better-off neighbours fell by 10&percent; over the same period.

She is likely to hail this as evidence that EU initiatives to help countries where economic development is lagging behind are working.

National governments will refer to the report in deciding which regions to target for aid once the ongoing reform of the Union's structural funds, used to finance regional development initiatives, is complete. Work on programmes for channelling this type of assistance must be completed by the end of this year.