Sun fails to shine on EU tourism policy

Date: 29/07/1999

As Europe's multi-million-euro tourism industry hits its peak period, Simon Coss examines the EU's approach to the sector

IT'S holiday time again.

Across the EU, hoards of sun-starved employees are emerging blinking from their offices, throwing T-shirts, towels and swimming costumes into brightly-coloured hold-alls and heading off for two weeks' rest and recuperation. But for some 9 million Europeans, the arrival of the holiday season means three months of almost non-stop work.

Despite the increasing popularity of short 'weekend break' holidays which can be taken at any time, the EU's hoteliers, restaurant owners, tour guides and other tourism employees still do the vast majority of their business during the months of June, July and August.

Tourism is now considered to be one of the Union's largest growth industries. It already accounts for 5.5 % of the EU's total gross domestic product and almost a third of its total trade in services, and employs 6% of its total workforce - a figure which could rise to 9% by 2010 if, as the European Commission predicts, the number of people employed in the sector increases by a further 2 million.

Officials point out that nearly all businesses in the industry are small and medium-sized enterprises (SMEs) which employ less than 250 people. Anyone who has followed the recent discussions on the problem of unemployment in the Union will be aware that EU policy-makers firmly believe that SMEs represent Europe's largest single source of potential new jobs.

The tourism industry is also, by definition, an inter-regional, cross-border sector par excellence. Its success depends on attracting visitors from outside, encouraging 'inward investment' on a micro scale.

With such impeccable credentials, the sector would seem an obvious candidate for an EU-funded support programme. Yet in the gallery of good causes currently receiving money from the Union's coffers, the sector is conspicuous by its absence.

The EU currently has no specific budget set aside for promoting tourism. This means that every time the Commission wants to run a particular scheme aimed at supporting the sector, it has to ask permission from all 15 EU governments, which must approve the request unanimously.

The institution has tried this approach on a number of occasions, but up until now, national capitals have torpedoed nearly all its plans.

The last time the Commission attempted to set up a targeted support programme for tourism was in 1996, when Commissioner Christos Papoutsis unveiled a plan for a scheme called Philoxenia - the word for 'welcome' in Greek.

But Papoutsis' proposals did not go down well. They were given a rough ride in the European Parliament, where they were extensively re-drafted by MEPs, and they were finally laid to rest by EU governments in the Council of Ministers.

While some governments were in favour of establishing a support programme, others insisted that, because of its nature, the sector did not merit EU-wide funding. This camp, led at the time by Germany, argued that responsibility for promoting tourism should rest with regional or local government offices rather than being centralised in Brussels.

Bonn's argument, which was almost directly opposed to the Commission's philosophy of tourism as an EU industry, was that the needs of firms in the sector varied so widely in different countries and regions that any Union-wide programme would be so generalised as to have little effect.

Governments opposed to the Philoxenia approach also argued that, in many cases, the tourism industry already received a considerable amount of EU money through its structural funds.

These funds, which are one of the Union's largest single pots of cash after the agriculture budget, are specifically designed to iron out economic imbalances between the EU's richer and poorer member states. As many of the Union's top tourist destinations - such as Greece, Spain, Portugal, southern Italy and parts of southern France - are in areas officially classed as poor or underdeveloped, they automatically receive structural fund money.

Another reason why Union governments may be less than keen to entrust the Commission with EU funds to support tourism schemes is that on the one recent occasion when the institution was given such a responsibility, it 'lost' nearly €5 million of European taxpayers' money.

The fiasco which was the 1990 European Year of Tourism was one of the unhappiest chapters in the Commission's history. The idea behind the scheme was straightforward enough - for one year, the then European Community would go out of its way to support tourism in its member states.

In practice, however, the programme proved a recipe for fraud and mismanagement. Via a mixture of suspect contracts and unauthorised payments allegedly masterminded by two Commission officials, the institution paid out more than €4.5 million to fund schemes which either did not exist or did not fulfil the eligibility criteria.

When the scandal eventually broke, the two officials in question were arrested and their boss was obliged to resign. Criminal investigations into the case are still under way in several EU member states.

Since then, the Commission's tourism department has worked hard to rebuild its reputation, but has found it difficult to repair the damage done by the affair.

In the past two years, the department has had two new directors general and has had to endure numerous reminders of the 1990 incident, notably from members of the European Parliament.

Faced with the prospect of carrying around its embarrassing historical baggage for some time to come, it is perhaps just as well that the Directorate-General for tourism (DGXXIII) will be disbanded once incoming Commission President Romano Prodi and his team take office in the autumn. Under Prodi's plans, it will be absorbed into the new Directorate-General for enterprise, which will be overseen by Finn Erkki Liikanen.

Many observers argue this change will provide the perfect opportunity for those involved in formulating EU tourism policy to start afresh.

For the past five years, Liikanen has been in charge of personnel policy at the institution and has earned himself something of a reputation as a tough-minded reformer. Officials working in the tourism department will be hoping that when he takes on responsibility for enterprise, some of the Finnish Commissioner's reputation for transparency and efficiency will brush off on them.

If this does happen, the Commission may stand more chance of convincing EU governments that the Union's tourism industry, with its enormous potential for creating jobs, merits its own support programme.

Major feature. As Europe's multi-million-euro tourism industry hits its peak period, author examines the EU's approach to the sector.