EU Structural Policy and the Implications of Enlargement

Table of Content

Abbreviations

1. Introduction

2. Cohesion and Structural Policy

3. EU Structural Policy
3.1 Objectives
3.2 Means of EU Structural Policy
3.3 Agenda 2000

4. Implication of EU enlargement
4.1 Social and Economic Cohesion vs. the EU budget
4.2 PHARE, ISPA, SAPARD, or even XYZ?

5. Conclusion

Bibliography

Abbreviations

Abbildung in dieser Leseprobe nicht enthalten

1. Introduction

After the successful and Eu(ro)phoric introduction of Europe‘s new currency - the new symbol of the Europe’s unity - emotions, especially among the Brussels technocrats, cooled down rapidly. The negotiations with the Candidate Countries entered in a new stage. Latest since the Council Meeting in Laeken the enlargement of the EU is conducted in an increasingly rational manner¹. In February 2002 rumours indicated the difficulties, which the European Union faces after the enlargement.

A prominent objective of the EU is the regional cohesion, the relative regional equality, thus can hardly be accomplished in its today’s structure after the accession of up to 12 countries. The reform of the EU Agricultural and Structural Policy is inevitably today. It will need much more efforts to do so after the enlargement of the European Union. However, the agenda for enlargement is set by the political elites, not by EU bureauc- racy. Thus, the negotiations may be used for a certain kind of political blackmailing within the Community. Yet, the enlargement must not fail by financial disruption, since this could easily result in dissolution of all of the European experiment².

The EU Structural Policy has been so far a more or less efficient tool to bridge the une- qually distribution of wealth in the Community. It thus provided for a sustainable de- velopment and a well-balanced social climate among the Member States and its Re- gions. Accordingly, aim of this paper shall be first to define the term of cohesion and identify means of structural policy. The EU generated a variety of tools to accomplish its objectives in regard of “raising of the standard of living and quality of life, and eco- nomic and social cohesion”³. Accordingly, the second part of the paper shall be devoted to describe in a limited scope the actual mechanisms of EU Structural Policy. Finally, the approaching enlargement of the Community will provoke further inconveniences concerning the Agricultural and Structural Policy. Hence, the predictable implications of the enlargement will be discussed in the last part of this paper.

2. Cohesion and Structural Policy

Discussing the term of cohesion, one should distinguish between the rather technical use of the phrase in the EU bureaucracy, and the somehow metaphysic purpose among po- litical elites. Hence, pure cohesion is defined as the inner unity of parts of a whole⁴. This rather static explanation does not refer to benefits, which are probably resulting out of cooperation among heterogeneous territories and societies. In contrast, the EU’s ob- jective of social, territorial, and economic cohesion was introduced with the Single European Act “to signify the importance of promoting the development of the poorer regions and countries of the EU”⁵. Accordingly, Article 158 TEC states that in order “to promote its overall harmonious development, the Community shall develop and pursue its actions, which ought to lead to the strengthening of its economic and social cohe- sion”.

The same TEC Article requires to reduce the “disparities between the levels of deve l- opment of the various regions”. This, however, is far more than the declaration of an idealistically driven policy of the EU. Instead - and as mentioned above - Article 2 TEC claims “to promote throughout the Community a harmonious, balanced and sus- tainable development of economic activities, a high level of employment and of social protection, … sustainable and non-inflationary growth, … the raising of the standard of living and quality of life, and economic and social cohesion and solidarity among Member States”. Yet, VÖGELE intimates that it is a ‘popular Eurocrat’s method’ to ‘con- ceal unpleasant realities’ behind nice-sounding coinages’⁶. The notion of sustainable growth might only be assumed if the level of development of particular regions is not too heterogeneous. In the contrary case, the higher developed region might supposedly exploit the poorer one⁷. However, cohesion in this sense does not mean to level com- pletely the standard of living and the economic performance throughout the entire terri- tory of the EU. Yet, applying HAYEK’s fundamental writings, this may result in a de- crease of healthy competition or even political lethargy among the involved region⁸.

3. EU Structural Policy

The mentioned ‘unpleasant certainties’ imply financial interventions predominately in the system of European fiscal adjustment to bridge the regional disparities, while ac- complishing exact determinate purposes⁹. To put it in other words, the EU Structural Policy intends first and foremost to establish nothing but a relative equality of living conditions in the area of the Community, which in the end provide for a sound deve l- opment. All of Europe’s societies benefited from the establishment of the Common Market, and they will inevitably draw their advantages from the common currency. ALLEN thus argues that the Structural Policy rather hints on a short to mid term per- spective, “while, in the long run, the operation of the market itself should provide in- creased welfare for all and reduce the regional disparities”¹⁰. However, the formerly existing gap between poor and rich regions prevailed and prevails. From a EU perspec- tive, the Southern enlargement and the re-unification of Germany even increased these disparities. Yet, the principle of solidarity among the Member States of the EU, featured already through the founding Treaties leaves no alternatives but to cope with these une- qual developments¹¹.

3.1 Objectives

In particular the standard of living is determined by a multitude of factors, which is subject to the actual EU Structural Policy. The EC established a technically oriented catalogue of objectives, such as the promotion of regions with a significant backward- ness, the promotion of regions with a distinct decrease of industrial development, the fight against unemployment, the restructuring as a preventive means to adapt to future economical changes and challenges, the accelerated adaptation of agrarian structures to provide for the reform of the European Common Agricultural Policy, the promotion of predominately agricultural regions, and the promotion of regions with a declining population¹².

Following the attempts to reform not only the EU budgetary system, the later to discuss Agenda 2000 affected the Structural Policy as well. In particular, the determination of the objectives was elevated to a more workable definition. Accordingly, a set of six objectives was shrunk to only three, ho wever, covering the prevailing task of reducing regional disparities.

illustration not visible in this excerpt

Source: Busch (1999), p. 32

The table above shows the actual dimensions of EU Structural Policy. The sole criteria of being perceived as a less developed region is the per capita GDP. Regions with a GDP of less than 90% to the average of the EU may be eligible for grants from the EU Structural Policy¹³. However, Objective 1 regions generally reach only an average of less than 75% per capita GDP¹⁴.

The map on the left makes the distribution of wealth after the enlargement in the today’s Euro- pean Union and the Candidate Countries visible. Accordingly, 69,7 % of the payments from Structural funds are allocated to Objective 1, 11,5 % to Objective 2, and 12,3 % to Objective 3 re- gions. Correspondingly, 5 % of the payments are conferred to three initiatives of the Community to cross-border and inter-regional

illustration not visible in this excerpt

Source : Europäische Kommission (2001a), Statistischer Anhang, p. 8.

cooperation¹⁵. The reasons for such significant differences in per capita income are manifold: The peripheral geographic location, the insufficient allocation of ac- cessible investment capital, an underdeveloped infrastructure for both, companies and private households, an overall inefficient economic structure, i.e. a high rate of agricul- ture production and high unemployment rate. In addition to that formerly prosperous regions have occasionally to undergo a fundamental transformation towards a more compatible and globalized economy. Thus regions with concentration in coal and ore mining, areas depending on shipyards and textile or steal industry enjoy the benefits form EU Structural Policy, to provide the opportunity to adapt with future development of economic engagement, such as in the service sector. Accordingly, especially tradi- tionally developed and grown regions with old industries are today and in future focus points of efforts of the Community to accomplish a relative equality of standard of liv- ing¹⁶. As THIEL put it, people shall be given the possibility to stay in their home coun- tries. Hence, migration movements resulting from too diverse living conditions ought to be prevented¹⁷. This reveals that among the European bureaucracy the terms and defini- tions of cohesion, structural and regional policy seems to be mixed up. In the end, the inflow of financial means does not really make this differentiation a necessity for Brus- sels’ Eurocrats.

3.2 Means of EU Structural Policy

The EU Structural Policy is based on several funds, which are devoted to particular tasks, and thus particular objectives. This, however, does not imply that specific projects have exclusively to rely only on one source. The funds of the Structural Policy are the European Regional Development Fund (ERDF), the European Social Fund (ESF), the Guidance Section of the European Agricultural and Guarantee Fund (EAGGF-GS), and the actual Cohesion Fund (CF) ¹⁸ .

The ESF is due to its project tying character rather an instrument of the employment policy. Article 146 TEC constitutes its legal foundation. The financial means of the fund shall serve to increase the mobility and compatibility of the work force to changing cir- cumstances on the labour market. The EAGGF-GS predominately aims on the structural change of agriculturally determined regions. It is fixed in Article 159 TEC, which still is interpreted to provide for the protection of European agricultural production. On the other side, this is subject to the social and economic integration. Yet, the ERDF, based on Article 160 TEC, is devoted to level the most important regional differences and ine- qualities. This fund may be perceived to meet best the objective of social, regional and economic solidarity among the Community¹⁹. Finally, the CF - as a ‘Master piece of European type compromise seeking’²⁰ - is subject to Article 161 par. 2 TEC and thus “provide[s] a financial contribution to projects in the fields of environment and trans- European ne tworks in the area of transport infrastructure”.

The Community tries twofold to cope with the significant regional and structural di- verges. While the actual Structural Policy provides predominately financial assistance, the co-ordination and cooperation among the policies of the particular Member States is encouraged as well. Accordingly, the principle of subsidiarity is strictly applied²¹. The Community commits itself to the co-ordinate the work of the funds, which are subject to the Structural Policy²². Other working principles, which have to be taken into consid- eration to refrain from already experienced inefficiencies, are those of concentration. This implies that any financial assistance is limited to a particular subject. The principle of partnership aims on the establishment of an economically driven partnership among the actors involved in the particular project or - as ALLEN put it - a policy for the re- gions by the regions. The principle of programming or programme planning refers to the subsidiarity as well. Any project is encouraged to be planed sufficiently and effi- ciently, yet most often on national level. The principle of additionally, finally, shall pre- vent any type of national oriented moral hazard; i.e. all payments from the Structural funds are considered only to support up to particular level national and/or regional initi- ated projects²³. Accordingly, the amount of all payments from Structural funds to a par- ticular Member State shall not exceed the margin of 4 % of the respective national GDP²⁴.

3.3 Agenda 2000

The EU/EC’s budget faced already enormous constraints regarding its duty to finance the vast CAP. Yet, another dominant part of EU’s efforts is indeed the Structural Policy. Both areas occupy up to ¾ of the annual EU budget. Hence, the projected enlargement encouraged the Community to reconsider the concurrence of its leading principles and its objectives, i.e. the workability of its means. Thus, the Agenda 2000 aimed to reform the overall financial/budgetary system of the Community. Accordingly, the CAP had to be reformed to meet not only the new conditions of an increasingly liberalized and sta- ble world trade (which implied also a sustainable supply with food, an early objective of the Community), but also to prepare for the enlargement of the Community. The EU Structural Policy, however, gained importance relative to the CAP. Yet, enforcing the working principles of the Structural Policy, the financial means for the period form 2000 to 2006 will have to be concentrated to achieve efficiently the Objectives ²⁵ .

[...]

¹ Europäischer Rat (2001).

² Bünder (2002).

³ Article 2 TEC.

⁴ Schmidt (1995), p. 481.

⁵ Allen (2000), p. 244.

⁶ Vögele (1992), p. 89.

⁷ Following Ricardo’s theory of comparative advantageousness; Ricardo (1817); Siebert (2000), p. 62.

⁸ Hayek (1994); Hayek (1976).

⁹ Waniek (1994), p. 44; Walthes (1996), p. 45.

¹⁰ Allen (2000), p. 246; Europäische Kommission (2001c), p. 7.

¹¹ Thiel (2001), p. 122.

¹² Europäischen Gemeinschaften (1988), p. 11.

¹³ Ohler (1997), p. 417.

¹⁴ Seidel (2000), p. 326.

¹⁵ Thiel (2001), p. 126; Allen (2000), p. 256; these three programs namely are Interreg, Leader, and Equal.

¹⁶ Seidel (2000), p. 323.

¹⁷ Thiel (2001), p. 123.

¹⁸ Allen (2000), p. 244.

¹⁹ Ohler (1997), p. 417.

²⁰ Vögele (1992), p. 93.

²¹ Seidel (2000), p. 324.

²² Europäische Gemeinschaften (1993), p. 5.

²³ Ohler (1997), p. 417-422; Allen (2000), p. 255-260; Europäische Gemeinschaften (1993), p. 8.

²⁴ Thiel (2001), p. 127.

²⁵ Europäische Kommission (2000), p. 11.