EU Cohesion policy Critical Analysis of Structural Policy

Inhaltsverzeichnis

1 Introduction

2 EU Economic policy

3 Competition and competitiveness in a regional sense
3.1 Introduction to competitiveness
3.2 Core vs. Periphery
3.3 Regional effects of economic integration

4 EU Regional Cohesion policy for overcoming regional disparities
4.1 Development of Regional Cohesion Policy
4.2 Present Cohesion Policy

5 Conclusion: Evaluation of Cohesion Policy

6 Annex

1 Introduction

In the 1990's the project of European economic integration came into a new stage comparable with the first steps after the establishment of the Communities in the 1950's. The events were the creation of the Common Market in 1992 and the establishment of the European Monetary Union (EMU) in 1999. These measures removed most of the economic barriers between the member states. Aim of the member states was "... to achieve the strengthening and the convergence of their economies..." and "to promote economic and social progress for their peoples".¹ A main concern of the integration process was the different level of competitiveness among the national economies and their regions in an enlarged market. It was feared that this will lead to a further widening of economic disparity. "... Within the context of the accomplishment of the internal market..." the European Union wants to influence the development in to the direction of "... reinforced cohesion...".² The focus of this paper is to analyse the EU cohesion policy. Cohesion is understood as "...the political tolerability of the levels of economic and social disparity that exist and are expected..." ³. This makes cohesion a subjective concept, depending on the persons, groups or political actors perception.⁴. In this paper exclusively the measurable economic disparity will be analysed. Cohesion and the measures related with it have two components. There is on the one hand social cohesion, which deals with the different levels of prosperity in the whole society and on the other hand spatial cohesion, the spatial differences of wealth. This differentiation is artificial, because less developed regions have also strong social disparities. In the richest regions, especially the biggest cities or agglomeration, the social disparity leads to social exclusion and "ghettoisation" and expresses itself in a spatial dimension on local level. The scope of this paper is limited to regional cohesion, the spatial aspect in a territorial wider sense.⁵ The Cohesion and Structure Fond of the EU are the second biggest item (35% of total budget)⁶ of the Union's expenditure. This makes this area to a political battlefield of the actors of European Union's policy. It is very natural that each country wants to keep its contribution as low as possible and their support payments as high as possible. The measures of cohesion policy are often object of "package-deals" between the member countries and the Commission. The objections of some member countries against political and economic projects in other areas are often "bought" with funding for structural policy. The decision making process in the area of Cohesion policy can only be understood, when the interests of the actors are taken into account. Beside the political debate there is also an academic. The intellectual and ideological dispute between neo-liberalists and state-interventionist (Keynesian, regulated capitalism) finds its expression in the literature about EU cohesion policy. This dispute influences also the political actors and the different theories and models developed are important, evaluating the result cohesion policy. The Community's economic policy is not taking place in a heretical closed worded. External factors influence the development of the European integration in a large extend. Therefore the increasing global competition, the rise and crisis of the emerging economies, the global free-trade pressed ahead by the US and the WTO and the prospect of an Eastern enlargement play a crucial role for the future economic policy of the Union.

In this paper the Cohesion policy of the European Union is described in the framework of the Community's economic policy (see pg. 3) and its effects in a regional context (see pg.5). In this chapter the stress is on the aspect of disparities of welfare but also competitiveness of regions. In the following part (see pg. 10) the mechanism of regional Cohesion policy and its implementation is described. Finally the results of the policy are critically evaluated (see pg.14).

2 EU Economic policy

The economic integration of Europe since 1952 is the most successful of all integration projects.⁷ In 1958 European Economic Community was established, creating a custom union in Western Europe. The integration of the economies was on of the factors leading to the so called "long boom" from the 1950's to 1973, when growth in Europe averaged almost 5% a year. The process of further integration was already stopped in the 1960's and challenged by the northern enlargement in 1973, the Mediterranean enlargement in 1981's and the oil crises in the 1970's. In this period the economic growth inside the European Economic Community slowed down and was lower than in the US. This period is politically often referred to as "eurosclerosis". In the 1980's a consensus among the member states of the European Community came to being that further economic growth and global competitiveness of the European economy can only be reached by further integration and deregulation. With the Single European Act (SEA) becoming effective in 1987 the tariff and much more important the non-tariff restrictions were removed. Since this time we can speak of a common market including the free movement of goods, persons, capital and services. The economic effect of this further integration set in rather slowly and not in the desired extend. From 1986 to 1991 the average economic growth reached again over 3% but the increasing competition from common and global market was a shock for many protected industries. The structural crisis faced by many of the countries, led to increasing unemployment and decline of steel, mining and textile industry on the economic side and it undermined the political will to establish a single currency.⁸

Therefore the establishment of the Economic and Monetary Union (EMU) as another milestone by the Treaty of Maastricht was only possible after finding compromises and opting out of some members states. The membership in the EMU is entailed with strict monetary and also fiscal conditions, the so-called Maastricht criterion. The convergence criteria require a low inflation rate, stable exchange rates, comparably low interest rates and a sustainable level of public debt. The latter condition is specified as an increase of public debts of maximum 3% per year and the sum of debts should not exceed 60% of the GDP. The establishment of the EMU has a monetary and a fiscal effect on the economies in the Eurozone⁹. The establishment of a single currency deprives the central banks of the countries to adjust via the change of exchange rate to the differences in economic development. This was used to protect the market from imports and to make exports easier. In future the ECB will set the interest rates common for the whole Eurozone, which can lead to high inflation in specific areas of the Community. The other factor is a fiscal dimension. The strict fiscal conditions set in the Maastricht Treaty forces all member states to cut public spending to set up balanced budgets. This limits the possibilities of the nation states to intervene directly into their economy also the public sector is forced to privatise its state or communal enterprises.¹⁰ Apart from these milestones of economic policy the European Union undertook further steps to liberalise and deregulate the internal market. These are a European anti-trust policy and the removal of bureaucratic obstacles for trans-border economic activities¹¹ A further step were the end of former "natural" monopolies like electricity supply and telecommunication. In public purchase a previous highly protected market, tenders now have to be invited over the whole European Union. Not only inside the European Community the barriers were reduced and the competition was increased also EU's foreign agreements are enforcing this policy. The creation of the European Economic Area in 1994 enlarged the Common Market over the EFTA countries¹². The association agreements with countries of the Mediterranean as well as Central and Eastern Europe enlarged the free trade area for industrial goods behind the EU borders. Finally the WTO agreements lead to a reduction of tariff and non-tariff barriers in a global sense.¹³

3 Competition and competitiveness in a regional sense

3.1 Introduction to competitiveness

The economic policy of the European Union is directed to improve competitiveness by increasing the competition inside the common market. Before the effect of increasing competition in spatial and regional aspects is described in this chapter, introduction competitiveness is given. In recent economic literature the importance of competitiveness for wealth is stressed. This means the wealth of a nation or a region is a result of the competitiveness of its industries, goods, and services in a global aspect.¹⁴ Competitiveness is understood as the "the ability of companies, industries, regions, nations and supra-national regions to generate, while being exposed to international competition, relatively high income and employment levels". ¹⁵ Several factors determine competitiveness of a country or region can be found. Michael Porters stresses four factors for competitiveness in his book "The Competitive Advantage of Nations". He stresses that weakened anti-trust policy, concentration of national industries to national champions, subsidising of exports and changes of exchange rates on the long term hamper competitiveness, also they might show advantages in the short term. The state should still play an active role in improving the competitiveness of its industries. The state's role is to keep domestic competition on a high level, by supporting the creation of new enterprises, to continue anti-trust policy and to improve the business environment by investing into education and infrastructure, the establishment of networks of administration, R&D and industry. The four main factors for competitiveness for Porter are:

1. Factor Conditions: The nation's position in factors of production, such as skilled labour and infrastructure, necessary to compete in a given industry.
2. Demand Conditions: The nature of home-market demand for the industry's product or service.
3. Related and Supporting Industries: The presence or absence of supplier industries and other related industries that are internationally competitive.
4. Firm Strategy, Structure and Rivalry. The conditions in the nation governing how companies are created, organised, and managed, as well as the nature of domestic rivalry.¹⁶

In another approach the system competitiveness is shown by dividing the factors determine competitiveness into different levels (see Figure 1). In this graph it can be seen easily on which levels the state and its institutions can influence competitiveness. The "meta level" are the fundamental factors, beyond economic live. They are embedded in culture, traditions and the social structure of a nation and also a region. Therefore these factors will change only in long-terms and can hardly be influenced directly by politics. On the "macro-level" we find those factors influenced by the EU's economic policy and where quite similar conditions are created in he Community. Common policy regulates also many factors on the "mezzo-level" but national or regional policy can have effect on competitiveness. The "micro-level" is based on the interaction between economic actors, in this field the state's institution can support and improve the business environment.

Abbildung in dieser Leseprobe nicht enthalten

Figure 1: Systemic Competitiveness¹⁷

Competitiveness is a precondition for wealth so the competitiveness of a region can measured indirectly by its wealth. Usual the GDP is used as a indicator for the wealth of a nation. The individual wealth is measured by the GDP per head. To take the different levels of prices in different countries into account the GDP is measured in its purchase power (PPP). The indicator GDP/head can be divided in three main components. The first one is the labour productivity, which is the main indicator to assess the competitiveness of the industry in a region. As a second component is the employment rate, expresses the extent the working-age population is able to participate in economic life. A third purely demographic factor is the percentage of the working-age population among the whole population. This factor is the reciprocal number of the dependency rate.¹⁸ Changes of the competitiveness of a region can evolve by the increasing competitiveness of its existing industry (increase of productivity) and increasing employment (this is not equivalent to decreasing unemployment). GDP/head increases also if the total population decreases due to migration. Usually only the active population leaves the region and the old and the young are left behind. This is expressed by an decreasing working-age population rate (increasing dependency rate).¹⁹

Abbildung in dieser Leseprobe nicht enthalten

Figure 2: Components of GDP per head in (PPP)²⁰

3.2 Core vs. Periphery

In this part of the paper will be explained how integration can lead to divergence between economic regions. The disparities emerge between the core and the periphery areas of the economy. The core is the economic strong area in which the majority of industry, high quality services and financial institutions are centred. In the core there are dense networks of infrastructure, they have easy access to the market and to supply as well as highly developed economic environment with business networks, logistic centres, R&D facilities and the centres of education. These areas are urbanised and located around a big city or an agglomeration. Significant for the core regions is a high GDP/head due to high labour productivity. Around these urbanised core areas are rural areas with easy access to the core. These areas profit from the core by offering unpolluted ecological environment for leisure and housing. Also highly specialised and productive agriculture can be found. A market can have several cores that are better linked among each other than with the peripheral areas. Peripheral areas on the other side have a lower share of industrial production and a higher share of agriculture. These areas are characterised by lower GDP/head especially due to lower productivity. These areas industry is based on labour intensive production due to lower wages, but there to the market is limited and infrastructure underdeveloped. The business environment is insufficient, which can be seen on significant lower level of education. Unemployment is an insufficient indicator for the core and periphery character of a region, because among the areas stricken with high unemployment are mostly areas under economic restructuring, which either belong to the core and periphery.²¹

There are two models how the core and periphery develop in time of increasing integration between them. Both lead to increasing convergence of the periphery, but they are based on different mechanism of adaptation. In the first model the lower costs of production of the periphery attract capital and technology. The weaker areas can offer tradable basic services (telework, sub-contractors in transport, call-centres) to the core. This leads to increasing production in the periphery and a higher creation of a higher GDP in general as well as per head. The core specialises in this model in high value-added production and services, but basic production will move into the periphery. This model is based on the Fordist mobility of production, which ignores the importance of "soft"-production factors and the importance of innovation for competitiveness in Post-Fordist economy (see micro-level of systemic competitiveness). The second model is based on the assumption that production, because of the removed barriers will be further concentrated in the core. Since the cost effect of large scale production is higher than the higher cost of the workforce. Reduced costs of transport make the closeness to the market a less necessary condition. The differences of wages will attract the workforce of peripheral areas to move to the core. Also the migration will lead to increasing GDP in the strong regions and to decreasing GDP in the periphery, but the demographic change will lead to a lower GDP/head in the core and a higher in the periphery. The second model is based on mobility of workforce.²²

3.3 Regional effects of economic integration

The EU shows a high level of disparities among the member states as well as among the regions. The development since the introduction of the Common Market showed that the regional and national economies are converging. The disparities between the member states are reduced much quicker than the convergence between the regions in the EU. This has several reasons. The strongest countries in Europe like the UK, Germany and Belgium showed lower growth rates than the average whereas the weaker countries were growing quicker than the average, especially Ireland but also Spain and Portugal. But in these countries only some regions a profiting of the development whereas the periphery of the peripheral countries may even decline. The differences are still high and the level of convergence is lower than expected.²³ In the EU 20% of the population live in regions with an average GDP/head below 75% of EU average (compared with 2% in the US, based on states) ²⁴. This rises the question why the upper mentioned theories do not work in the case of the EU. The first reason is that these theories are based on long term development, but in this paper only a period of 10 years (1986-1996)²⁵ is analysed. For many industries in peripheral regions, which relied on their domestic markets the shock of opening up of their markets was higher than the ability to compete on the common market. Companies either were forced to modernise their production or went bankrupt. Also the reduction of public spending reduced the demand of the state and also public employment was cut, which has a higher share of the total employment in weaker regions. The second reason is that industries following the first model, so work intensive low value-added industries often move to economic periphery outside of the European Union as the associated countries in the Maghreb, in Central and Eastern Europe, Turkey or even East Asia. Due to the strict EU work and environmental regulation weaker countries have difficulties to attract these industries. Finally despite the free movement of people, mobility is still hindered by languages and culture barriers or different pension systems. This leads to high unemployment in the Northern and Southern periphery, whereas some core regions shortage of skilled workers emerged.

The weakest areas in the European Union, those with a GDP/head of only 75% of EU average, improved their GDP/head following the numbers in Table 1 significantly. This improvement is based on an increase of productivity. This shows the effect of rationalisation of existing industries and the substitution of non-competitive industries by green-field investments. Modernisation of production and the increase of the working age population²⁶ led to a decrease of the employment rate. No major migration emerged inside the EU and is less important than the movements of working migrants (gastarbeiter) in the 1950's and 1960's. Also the weakest areas were able to reduce the economic difference to the average of EU the regional divergence was widened further because also the strongest regions were able to grow faster than the EU average. In 1986 the 25 richest regions of the EU had a level of 138% of EU average and in 1996 this reached even 143%.

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Table 1: Development of GDP/head in Objective 1 regions²⁷

4 EU Regional Cohesion policy for overcoming regional disparities

In the last chapter was shown that the weaker areas will be able to improve their competitiveness and hence reduce the disparity in living standard in long terms. Due to political reasons it is desirable to accelerated this process. It is necessary to give the weaker economy compensation for their problems faced with the deeper economic integration, so that they do not block the process of economic integration. The enormous differences between the living standards inside the European Union endanger the social and political stability of the member states and the Union. Both the nation states and the regions are interested in major movements of migration. This would on the one side undermine the nation states and may cause social or ethnic conflicts. Facing the global challenge the EU needs to improve its competitiveness. Therefore resources have to be used to create new regional locomotives for economic growth and innovation as well as for cultural, scientific and economic development.²⁸

Abbildung in dieser Leseprobe nicht enthalten

Figure 3: EU economic policy vs. cohesion policy

4.1 Development of Regional Cohesion Policy

The problem of different levels of economic development was recognised as a major problem for the European Community already in its early years. In the Treaty of Rome the member countries stated that they are "anxious to strengthen the unity of their economies and to ensure their harmonious development by reducing the differences existing between various regions and by mitigating the backwardness of the less favoured regions." ²⁹ However it took until 1975 that the Community undertook active measures for overcoming the economic disparity. Great Britain, demanding compensation for their contribution for the CAP pressed the introduction of the structural policy. The economic crisis following the oil-price shock and the need for restructuring of declining industrial areas made the other members willing to agree to this policy. In this time the grants were given as general-purpose grants to the member states without common rules and central supervision. With the Mediterranean enlargement in the 1980's the number of weak areas increased. At the same time the SEA was prepared and the support of the weaker countries for this step was "bought" by an increase of the Structural Funds in 1985 the so-called "paquet Delors". Also a fundamental reform of the Funds was realised which restricted the target groups, improved and standardised the procedures. This gave the Commission a stronger position in the management of the Funds. During Delors' presidency the focus of regional policy was on improving efficiency of the industries in the weaker countries.³⁰

The introduction of the EMU made further changes necessary. The budget constrains for the weaker economies to reach the convergence criteria limited their ability to modernise their infrastructure and to adjust their environmental facilities to EU standard. To get the support of the weaker countries (Portugal, Spain, Greece and Ireland) the Cohesion Fund was introduced (paquet Delor II) in 1992. For the period of 1993 to 1999 the cohesion budget amounted 200 billion ECU. The next challenge for the regional cohesion policy is the eastern enlargement of the European Union. To prepare the European Union for the enlargement AGENDA 2000 was set up. On the basis of this paper further changes were undertaken for the programming period 2000-2006. Also the budget will be increased to 210 billion Euro, this means a lower share of the general EU budget (for the first time the share of regional cohesion measures is declining). The number of regions eligible for EU support was reduced and also numbers of instruments. The four weaker countries will only receive to 2006 (Ireland 2003) money from the Cohesion Fund, which will be later only used for the new members. A small part of the budget is used for pre-accession help for the candidate countries.³¹ The historic development of cohesion policy shows that changes were always due to political demands and not due to the need of the weaker areas or due to principles written in preambles. A second point is that the redistribute policy of the EU is not a European welfare policy, but a centralised measure to improve the competitiveness and efficiency of the economies of the regions.³²

4.2 Present Cohesion Policy

In 1999 the Structural and Cohesion Funds were reformed and restructured. The reforms were aimed at more efficiency and transparency of the measures of cohesion policy. A main aim was concentration on the most important areas so the objectives were reduced from 7 to 3 and the community initiatives were reduced from 13 to 4. Management was simplified and the instrument will be used more flexible and taken the principle of subsidarity into account the management also will be decentralised. The previous automatic and systemic rebudgeting of projects will be avoided and for every new planning period revised. At the moment four major funds for structural policy exist:

- European Regional Development Fund (ERDF) managed by DG XVI (Regional Policies and Cohesion) (1999: 15,646 Mio Euro).For the reduction of regional disparities the EU gives financial assistance for regions lagging behind in their economic development and in areas with structural problems. Active in Objectives 1 and 2.
- European Social Fund (ESF) by DG V (Employment, Industrial Relations, Social Affairs) (1999: 9,611 Mio Euro). This fund offers financial help for measures to prevent and fight unemployment, also to develop human resources and social integration into the labour market. The means are used in all three objectives. With the decisions taken in Nice in 2000 in direction of European Employment Initiative this fund will receive a higher share of the budget.
- European Agricultural Guidance and Guarantee Fund (EAGGF) managed by DG VI (Agriculture) (1999: for guidance: 5,164 Mio Euro). These means are aimed to improve the infrastructure for production, processing and marketing of agricultural products. Also these resources support the development of rural areas. This fund is active in Objective 1.
- Financial Instrument for Fisheries (FIFG) DG XIV (Fisheries) (1999: 808 Mio EURO). For improving the competitiveness of fishery and sustainable development. Funding Objective 1 regions.³³

In Agenda 2000 three different objectives for structural policy are defined (Objective 3 is not described because it is aimed at social cohesion and not in the scope of this paper.) Objective 1: Areas eligible for objective 1 funding must have a average GDP/head (PPP) of lower than 75% of EU average GDP/head (PPP). Commission will apply this criterion strictly and areas overcoming this level have to phase out their programmes. The means are used for improvement of infrastructure, assistance for SME, the support of R&D institutions and improved technology transfer. By vocational training the integration of unemployed will be made easier. About 65% of the structural budget will be used for these regions. Objective 2: Areas eligible for funds for these objectives are areas in economic and social restructuring. These areas are hit by economic crisis, like declining industrial and rural areas or regions highly dependent on fishery. The criterion for this objective will be the rate of unemployment (especially youth unemployment) and one-sided employment in industry or agriculture. The measures are aimed to diversify the employment, create a better business culture and to improve the protection of environment.³⁴

Countries taking part in the third step of the EMU (introduction of Euro) and have an average GDP/head below 90% of the Community average eligible for the Cohesion Fund. The aim of the Cohesion Fund is "to provide a financial contribution to projects in the fields of environment and trans-European networks in the area of transport infrastructure".³⁵ These funds are available for the whole territory of the less prosperous Member State also these areas might be highly developed. The sum of this Fund have available of ca. 3 billion EURO a year.³⁶

The Commission uses these funds to steer and co-ordinate the activities in the member countries. Based on the principle of additionally only 25% of the funds are available from the European Union. This also means that initiatives not going along with the EU objective need 100% of national support. In the principle of partnership is defined that Community operations shall be established through close consultations between the Commission, the Member State concerned and the competent authorities regional level. The partnership covers preparation, monitoring and assessment of operations. This means that the common regional policy limits the sovereignty of the national governments because they need as well the input of sub-national bodies and the agreement with Brussels.³⁷

5 Conclusion: Evaluation of Cohesion Policy

Finally the question has to be answered what were the results of European Union's regional cohesion policy. The numbers of economic growth and successful approximation to the EU average on the weaker regions and especially in the Cohesion countries are impressive. The average GDP/head in the four Cohesion countries had risen in ten years from 1986 to 1996 (99) from 65% of EU average to 76,5%. (78,2%).³⁸ The official publications to this topic by the European Union are euphoric about these results of the Structural and Cohesion Fund.³⁹

Looking at the differences in development among these four countries it is striking how different the results are. (see Table 2) Also the financial instruments were implemented in the same way. Looking at the development in the New Länder it is obvious that since 2-3 years their economic growth is lower than the EU and German average, despite the enormous amount of money transferred.⁴⁰ This rises the question what was the effect of the regional cohesion policy and what were the effects of other activities like the inflow of FDI or inward investment. The effects of the measures are hard to assess, because no data are available for the situation without them. The analyses undertaken to with macro-economic models show great differences in their results and hardly can make the difference between demand and supply side effects.⁴¹ Therefore the conclusion will not be based on the results of these surveys.

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Table 2: Development of Cohesion Countries GDP/head 1986-1999⁴²

Critique on the results of the Community's regional policy on increasing of competitiveness is justified. Many of the measures supported by the Funds have no or very little impact in this dimension. The improvement of liquid or solid waste treatment, afforestation or improving rail links to reduce road-traffic has no effect on competitiveness. These measures still contribute to reduce regional disparities by improving the non-quantifiable living quality, which as well is an important issue. The measures supported by the Cohesion Fund help the countries out of a dilemma, which is produced by EU policy. The weaker countries have at the same time to fulfil the convergence criteria of the EMU and on the other side reach the environmental standards of the Common Market. The permanent use of the word competitiveness in the reports on regional policy are rather a fig leave to satisfy the supporters of the present neo-liberal "economic fashion".

This does not mean that structural policy will not increase the competitiveness. Most of the projects supported by the Structural Funds are aimed in that direction. That the means transferred to the weaker regions have a positive effect on their economic growth, the productivity and employment other conditions are necessary. Using the model of "systemic competitiveness" (see Figure 1) it is obvious that activities on the mezzo-level will have very limited effects. The comparison between the "Celtic Tiger" Ireland and Greece show that macro-economic stabilisation is a very important condition for economic growth. Also the social and cultural conditions of a nation or region (meta-level) and the specific business environment in an area determine the improvement of competitiveness. That infrastructure measures, R&D investment or support for SME are successful depends less on the proper management of funds, but much more on a political, economic and popular consensus to adjust to the terms of a globalising economy.

Finally it can be stated that the Union's regional policy is mainly a political issue and secondly an economic one (with quite positive results). The resources allocated, managed and redistributed by the Commission are used as a tool to buy political actors support for the project of European integration. For the Commission this is important to keep or improve its position. For nation-states this is the price they pay or profit they get for the liberalisation of the market. In this way the Union tries to buy support by stronger and stronger regional actors and last but not least the European people, for whom this "ever closer Union" was established.

6 Annex

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List of Figures

FIGURE 1: SYSTEMIC COMPETITIVENESS

FIGURE 2: COMPONENTS OF GDP PER HEAD IN (PPP)

FIGURE 3: EU ECONOMIC POLICY VS. COHESION POLICY

Robert Pernetta

[...]

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¹ from the preamble of the Treaty of Amsterdam: Office for official publications of the European Communities, Consolidated version of the treaty establishing the European Community (Treaty of Amsterdam, signed on 2 October 1997), http://www.europa.eu.int/eur- lex/en/treaties, pg. 1

² ibid. pg. 1

³ from Mayes D.,Conflict and coherence in the single European market, in: Amin A., Tomaney J. (eds.) Behind the myth of European Union,1994,London, pg. 1

⁴ The perception of disparity is very much depending also on the space of the "subject", even areas above the average of EU GDP per capita, will percive them weak disadvanteged, when they compare them self with the richest area in their own country. Examples for this and the deriving political demands are Schottland or the German Saarland.

⁵ Nomenclature of statistical territorial units (NUTS) is a three level hierarchical classification., NUTS 1 are for example German Länder, French regions, NUTS 2 are German Bezirke, Polish Wojewódstwy NUTS3, German Kreise and Polish Powiaty from Gilles Decand,Regional policy and statistics - A long story,in: Sigma 1/2000,2000,Brussels, pg. 8

⁶ see Altmann Frank, v. Baratta Mario, Brander Sybille, ..., Der Fischer Weltalmanach 2001, 2000,Frankfurt/Main, pp. 1064-1065

⁷ in comparison to the political integration via the Council of Europe or in the field of security by the Western European Union.

⁸ European Commission Directorate-General XVI, Sixth Periodic Report on the social and economic situation and development of the regions of the European Union,(http://www.europa.eu.int/comm/regional_policy/radi/radi_en.htm,1998,Brussels, pg. 1and Amin A., Tomaney J., The challenge of cohesion,in: Amin A., Tomaney J. (eds.) Behind the myth of European Union,1994,London, pp. 11-12

⁹ concerning the fiscal and monetary policy the eurozone includes the EMS II members Denmark and Greece

¹⁰ see Willem Molle, The Economics of European Integration ,1994,Aldershot, pp. 439-441 and for "Maastricht Criterion" see: European Central Bank, Monthly Bulletin, May 2000, 2000,Frankfurt/Main, pg. 5

¹¹ The European Court of Justice forced the states often to implement EU regulations or directives consequently.

¹² With Switzerland similar agreements were made on bilateral level.

¹³ see Altmann F.: for EU liberalisation and deregulation pp. 1045-1046, for EEA: pg. 971, for EU association agreements: pp. 1049-1051 and for WTO: 1030-1031

¹⁴ Michal Porter,What Forces Drive Competition in an Industry? excerpt from: "The Competitive Advantage of Nations",in: Ewa Miklaszewska (eds.) Competitive Banking in Central and Eastern Europe,1995,Krakow, pg. 11

¹⁵ European Commission Directorate-General XVI Sixth Periodic Reprot on the social and economic situation and development of the regions of the European Union,(http://www.europa.eu.int/comm/regional_policy/radi/radi_en.htm,1998,Brussels, pg. 32

¹⁶ quoted from Michael Porter, pg. 12

¹⁷ Source: K. Esser, W. Hillebrand, D. Messner, J. Meyer-Stammer; Systemic Competitiveness, New Challange; 1999; Tübingen, p. 60

¹⁸ Dependency rate = 1- (working age population rate)

¹⁹ see European Commission Directorate-General XVI, pg. 33. The measurability of wealth by GDP/head is discussed in,Jürgen Boeckh,Regional Disparity in Europe,A seminar paper for the international virtual seminar "Democratisation in Europe" at the Justus-Liebig- Universität Gießen,24/04/1999,Bochum

²⁰ ibid. pg. 32

²¹ ibid. pp. 6-12 and Amin A., Tomaney J. pp. 21-22

²² see Shepley S., Wilmot J. ,Core vs. Periphery, in: Amin A., Tomaney J. (eds.) Behind the myth of European Union,1994,London ;pp. 51-52; Begg I., Threats to cohesion,in: Amin A., Tomaney J. (eds.) Behind the myth of European Union,1994,London pp. 110-113 and Hix Simon,The political system of the European Union,1999,Houndmills/ England, pg. 262

²³ see W. Molle pp. 428-429

²⁴ see European Commission Directorate-General XVI (XXX), pg. 13

²⁵ The statistical material for this paper is based on the 1998 published 6th Report on the social and economic situation and development of the regions of the European Union.

²⁶ More young people came into productive age as old people left it.

²⁷ ibid. pg. 10

²⁸ for social effects of disparity see: Dunfold M., Cohesion, growth and inequality in the European Union, in: Amin A., Tomaney J. (eds.) Behind the myth of European Union,1994,London, pp.132-134, for competitiveness see: Kukli ski Antoni, The Role of Regions in Federal Europe of the 21st Century, Tadeusz Skoczny (eds.) Yearbook of Polish European Studies ,Volume 2/1998,Warszawa, pg. 21

²⁹ from the preamble of the Treaty Establishing the European Economic Community, in: Harryvan A. G., Harst, van der J., Documents on the European Union,1997,London, pg. 107

³⁰ Moravcsik Andrew, Choice for Europe, 1998,Ithaca, N. Y., pp. 258 and 303 and Amin A., Tomaney J. pg. 16

³¹ see Molle, pp. 437-438, Moravcsik, pg. 367 and Office for official publications of the European Communities, Agenda 2000, For a stronger and wider Union, in: Bulletin of the European Union , Supplement 5/97,Luxembourg, pp. 21 - 25

³² Hooghe Liesbet, EU Cohesion Policy and Competing Models of European Capitalism,in Journal of Common Market Studies,December 1998,Oxford, pg. 459

³³ see Hix, pg. 257 and Altmann Frank, v. Baratta Mario, Brander Sybille, pp. 1065 - 1066

³⁴ Agenda 2000, pp. 22-24 and European Commission Directorate-General XVI, Work Programme for 2000, 1999,Brussels

³⁵ Treaty of Amsterdam, Article 130d

³⁶ AGENDA 2000, pp. 24-25

³⁷ for partnership and additionality see Commission of the European Communities ,Proposal for a Council Regulation by the Commission, No. 2052, 12 March, Brussels and for the question of sovereignty Bocklet Reiner., Können die Regionen den eurpäischen Integrationsprozeß unterstützen?, Lecture at the Jagiellonian University,13.11.2000,Kraków

³⁸ from Sixth Cohesion Report, pp. 9-10

³⁹ European Commission Directorate-General XVI, Annual Report of the Cohesion Fund (1988), http://www.inforegio.cec.eu.int/wbdoc/docoffic/cohe98/cohe_en.htm,1998,Brussels, pp. 3-5 and 65-72 and European Commission Directorate-General XVI, Mid-term Review of Structural Interventions Objectives 1 and 6 (1994-99) Developing a management culture through evaluation: towards best practice,1999,Brussel, pp. 11-15

⁴⁰ see Altmann Frank, v. Baratta Mario, Brander Sybille, Table IX

⁴¹ demand side effect is the increased growth by implementation of the measure directly, like building of an airport employs people of the region. Supply side effects the increased growth by increased infrastructure by the new airport.

⁴² from Sixth Cohesion Report, pp. 9-10