1. The Common Regional Policy and Regional Development within the EU Barry Brunt Geography Department University College Cork

2. Purpose of Paper To review evolving nature of EU Common Regional Policy over the last 50 years. 1. Introduction 2. Reasons for introducing/strengthening of CRP 3. Changes within CRP and consequences 4. Conclusions

3. Introduction March 25 th, 1957, Treaty of Rome signed between 6 countries to form EEC March 25 th, 1957, Treaty of Rome signed between 6 countries to form EEC Focus of EEC on market/economic principle Focus of EEC on market/economic principle Free trade Free trade Enlarged market Enlarged market Economies of scale Economies of scale Comparative advantage Comparative advantage

4. Under economic principles cores benefit more than peripheries Under economic principles cores benefit more than peripheries Although EEC aspired to harmonious development no policy to counteract free market forces Although EEC aspired to harmonious development no policy to counteract free market forces By 1970s, recognised spatial inequalities were a threat to unity By 1970s, recognised spatial inequalities were a threat to unity Common Regional Policy (CRP) in 1975 Common Regional Policy (CRP) in 1975

5. Five reasons for CRP 1. Enlargement The accession of new member states (6-27) The accession of new member states (6-27) Increases the scale/complexity of problem regions Increases the scale/complexity of problem regions Each enlargement (except 1995) added the least prosperous member state Each enlargement (except 1995) added the least prosperous member state 2004 enlargement most difficult 2004 enlargement most difficult 10 new member states 10 new member states Most were former Communist states Most were former Communist states All had GDP/ca well below EU (15) average All had GDP/ca well below EU (15) average 2004 and 2007 enlargement added a large new eastern periphery to the EU (27). 2004 and 2007 enlargement added a large new eastern periphery to the EU (27).

13. Five reasons for CRP 1. Enlargement The accession of new member states (6-27) The accession of new member states (6-27) Increases the scale/complexity of problem regions Increases the scale/complexity of problem regions Each enlargement (except 1995) added the least prosperous member state Each enlargement (except 1995) added the least prosperous member state 2004 enlargement most difficult 2004 enlargement most difficult 10 new member states 10 new member states Most were former Communist states Most were former Communist states All had GDP/ca well below EU (15) average All had GDP/ca well below EU (15) average 2004 and 2007 enlargement added a large new eastern periphery to the EU (27). 2004 and 2007 enlargement added a large new eastern periphery to the EU (27).

14. European Union% Increase in population % Increase in GDP % Change in GDP per person EU 6 to EU 9 (first enlargement) 3229- 3 EU 9 to EU 12 (Second and third enlargements) 2215- 6 EU 12 to EU 15 (Fourth enlargement) 118- 3 EU 15 to EU 27 299- 16 Selected Data for the Enlarging EU

15. GDP per head (pps), 2004

16. 2. Deepening The introduction of additional/stronger policies to promote EU development The introduction of additional/stronger policies to promote EU development Initially – only 3 policies (agriculture, competition, transport) Initially – only 3 policies (agriculture, competition, transport) Enlargement and Single European Act demanded additional/more effective policies Enlargement and Single European Act demanded additional/more effective policies Reformed CRP (1988) Reformed CRP (1988) Lisbon Agenda (2000) set goal for making EU Lisbon Agenda (2000) set goal for making EU the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion CRP/Cohesion Policy now recognised as pivotal for future development of EU CRP/Cohesion Policy now recognised as pivotal for future development of EU

17. 3. Globalisation Two key influences: (a)MNCs and fdi EU largest host region for global fdi (45%) EU largest host region for global fdi (45%) MNCs attracted strongly to cores; branch plants relocated to low cost peripheries MNCs attracted strongly to cores; branch plants relocated to low cost peripheries No longer sustainable option – cheaper alternative locations available (eg. E. Europe, S. Asia) No longer sustainable option – cheaper alternative locations available (eg. E. Europe, S. Asia) (b)WTO Objective to liberalise world trade and open up developed market economies to LDC exports Objective to liberalise world trade and open up developed market economies to LDC exports Significant implications for EU peripheries – disproportionate depending on low value products Significant implications for EU peripheries – disproportionate depending on low value products Both influences demand reformed CRP to emphasise improving competitiveness and diversifying economies of peripheral regions. Both influences demand reformed CRP to emphasise improving competitiveness and diversifying economies of peripheral regions.

18. 4. Demographic Concerns Demographic profile of EU changed significantly – approaching 5 th stage DTM Demographic profile of EU changed significantly – approaching 5 th stage DTM Major consequences – dependency, declining and greying population, less enterprising culture Major consequences – dependency, declining and greying population, less enterprising culture Lisbon Agenda calls for more effective use of human resources and family-friendly policies Lisbon Agenda calls for more effective use of human resources and family-friendly policies Regional/Cohesion Policy key role to meet Lisbon objectives Regional/Cohesion Policy key role to meet Lisbon objectives Peripheries possess underutilised human resources eg. unemployment, low productivity rates Peripheries possess underutilised human resources eg. unemployment, low productivity rates Release potential via directing funds to create an enterprise culture rather than a dependency culture. Release potential via directing funds to create an enterprise culture rather than a dependency culture.

19. Demographic Trends in an Evolving EU Total Population (million) Birth Rate o / oo Death Rate o / oo Fertility Rate* % Population over 65 EU (16) 196017018.210.72.610.3 EU (6) 197018915.810.72.412.3 EU (9) 198026112.610.61.814.4 EU (12) 199034511.610.11.614.5 EU (15) 200037711.09.91.515.7 EU (25) 200546010.59.51.516.5 *Fertility Rate is number of children per female of child-bearing age. Source: European Community (various years). Eurostat Yearbooks: Europe in Figures: Luxembourg.

20. 4. Demographic Concerns Demographic profile of EU changed significantly – approaching 5 th stage DTM Demographic profile of EU changed significantly – approaching 5 th stage DTM Major consequences – dependency, declining and greying population, less enterprising culture Major consequences – dependency, declining and greying population, less enterprising culture Lisbon Agenda calls for more effective use of human resources and family-friendly policies Lisbon Agenda calls for more effective use of human resources and family-friendly policies Regional/Cohesion Policy key role to meet Lisbon objectives Regional/Cohesion Policy key role to meet Lisbon objectives Peripheries possess underutilised human resources eg. unemployment, low productivity rates Peripheries possess underutilised human resources eg. unemployment, low productivity rates Release potential via directing funds to create an enterprise culture rather than a dependency culture. Release potential via directing funds to create an enterprise culture rather than a dependency culture.

21. 5. Environment and Sustainable Development Since late 1980s, concern with environmental issues and sustainability increased eg. Brundtland Report (1987), SEA (1987), TEU (1993), Lisbon (2000) Since late 1980s, concern with environmental issues and sustainability increased eg. Brundtland Report (1987), SEA (1987), TEU (1993), Lisbon (2000) Peripheral EU has diverse range of high quality physical and cultural environments Peripheral EU has diverse range of high quality physical and cultural environments If environments managed sustainably – good prospects for development If environments managed sustainably – good prospects for development Effective CRP is vital for effective management and promotion of peripheral EU (coordinate development) Effective CRP is vital for effective management and promotion of peripheral EU (coordinate development)

22. CRP Changes and Consequences Introduction and evolution of CRP involve four phases Introduction and evolution of CRP involve four phases 1. Absence of CRP, 1958-74 2. Emergence of CRP, 1975-88 3. Modernisation of CRP, 1989-2006 4. Current CRP, 2007-13

23. Phase 1: Absence of CRP, 1958-1974 Market principle anticipated economic growth would trickle down from core to periphery Market principle anticipated economic growth would trickle down from core to periphery National governments promoted strong regional policies to decentralise development National governments promoted strong regional policies to decentralise development

24. Buoyant economies encouraged fdi (branch plants) in peripheries Buoyant economies encouraged fdi (branch plants) in peripheries Signs of convergence in prosperity between member states Signs of convergence in prosperity between member states National Disparities In per capita GDP by Member state *

25. Phase 2: Emergence of CRP, 1975-1988 Enlargement (1973) and oil crisis (1973-4) result in a CRP (1975) and ERDF to fund designated regions Enlargement (1973) and oil crisis (1973-4) result in a CRP (1975) and ERDF to fund designated regions Designated regions Designated regions receive: 17.5B Ecu receive: 17.5B Ecu benefit from: 765000 jobs benefit from: 765000 jobs and: modernised infrastructure and: modernised infrastructure Despite benefits: Despite benefits: Financial resources limited (average 7% Budget) Financial resources limited (average 7% Budget) Covers too large an area – lacks focus Covers too large an area – lacks focus Short –term, one-off projects dominate Short –term, one-off projects dominate Result: Result: By 1987, problem regions remain same with addition of Mediterranean regions By 1987, problem regions remain same with addition of Mediterranean regions Divergence replaces convergent trends in prosperity levels between member state Divergence replaces convergent trends in prosperity levels between member state

26. Regions qualifying for Support under EU Regional Policy in 1975

27. Phase 2: Emergence of CRP, 1975-1988 Enlargement (1973) and oil crisis (1973-4) result in a CRP (1975) and ERDF to fund designated regions Enlargement (1973) and oil crisis (1973-4) result in a CRP (1975) and ERDF to fund designated regions Designated regions Designated regions receive: 17.5B Ecu receive: 17.5B Ecu benefit from: 765000 jobs benefit from: 765000 jobs and: modernised infrastructure and: modernised infrastructure Despite benefits: Despite benefits: Financial resources limited (average 7% Budget) Financial resources limited (average 7% Budget) Covers too large an area – lacks focus Covers too large an area – lacks focus Short –term, one-off projects dominate Short –term, one-off projects dominate Result: Result: By 1987, problem regions remain same with addition of Mediterranean regions By 1987, problem regions remain same with addition of Mediterranean regions Divergence replaces convergent trends in prosperity levels between member state Divergence replaces convergent trends in prosperity levels between member state

28. Regions eligible under Objectives of the Structural Funds 1989 - 99

29. Phase 2: Emergence of CRP, 1975-1988 Enlargement (1973) and oil crisis (1973-4) result in a CRP (1975) and ERDF to fund designated regions Enlargement (1973) and oil crisis (1973-4) result in a CRP (1975) and ERDF to fund designated regions Designated regions Designated regions receive: 17.5B Ecu receive: 17.5B Ecu benefit from: 765000 jobs benefit from: 765000 jobs and: modernised infrastructure and: modernised infrastructure Despite benefits: Despite benefits: Financial resources limited (average 7% Budget) Financial resources limited (average 7% Budget) Covers too large an area – lacks focus Covers too large an area – lacks focus Short –term, one-off projects dominate Short –term, one-off projects dominate Result: Result: By 1987, problem regions remain same with addition of Mediterranean regions By 1987, problem regions remain same with addition of Mediterranean regions Divergence replaces convergent trends in prosperity levels between member state Divergence replaces convergent trends in prosperity levels between member state

31. Phase 3: Modernising the CRP, 1989- 2006 CRP reformed in 1988 (enlargement, SEA, divergence, Euroschlerosis) 3 key elements 1. Funding ERDF combined with ESF, Guidance Fund, FIFG to form Structural Funds (SF) ERDF combined with ESF, Guidance Fund, FIFG to form Structural Funds (SF) Significant increase in SFs Significant increase in SFs Cohesion Funds (1993) provided for four weakest national economies – Cohesion Four Cohesion Funds (1993) provided for four weakest national economies – Cohesion Four More realistic resource base to address scale and complexity of spatial inequalities More realistic resource base to address scale and complexity of spatial inequalities

33. 2. Programmes Multiannual, integrated programmes replace one-off projects Multiannual, integrated programmes replace one-off projects Encourages bottom-up planning Encourages bottom-up planning Programmes – vital component of national plans to secure SFs (eg. Irelands NDPs) Programmes – vital component of national plans to secure SFs (eg. Irelands NDPs)

34. 3. Concentration on EU Objectives Problem regions defined according to EU not national criteria Problem regions defined according to EU not national criteria SFs to focus on EU objectives SFs to focus on EU objectives 1989-93 5 objectives (3 spatial) 1989-93 5 objectives (3 spatial) 1994-99 6 objectives (4 spatial) 1994-99 6 objectives (4 spatial) 2000-06 3 objectives (2 spatial) 2000-06 3 objectives (2 spatial)

35. Structural Funds 2004-2006 Areas eligible under Objectives 1 and 2

37. Successes Convergence replaces divergence in prosperity levels between member states Convergence replaces divergence in prosperity levels between member states Implications of Modernised CRP Some successes but on-going problems

38. Success emphasised by above average economic performance of Cohesion Four Success emphasised by above average economic performance of Cohesion Four

39. Issues remain Most 1989-93 problem regions remain Most 1989-93 problem regions remain Enlargement adds to scale of problem regions Enlargement adds to scale of problem regions

40. Divergence, rather than convergence, highlights trends in prosperity levels between EU regions Divergence, rather than convergence, highlights trends in prosperity levels between EU regions Contrasts between top and bottom two countries and regions measured in GDP per capita (EU-27=100) CountryIndexRegionIndex Luxembourg230Inner London303 Ireland138Luxembourg230 ……………..…..………………..…….. Romania33Severozapaden (Bul) 26 Bulgaria32Nord-Est (Rom)24 Source: European Communities (2006) Regions: Statistical Yearbook, 2006. Luxembourg.

41. 4. Current CRP, 2007-13 CRP reformed in 2006 CRP reformed in 2006 Reality of enlargement in CEE Reality of enlargement in CEE EU focuses all policies/resources to meet Lisbon objectives of growth and competitiveness EU focuses all policies/resources to meet Lisbon objectives of growth and competitiveness Limited progress to harmonious development Limited progress to harmonious development SFs increased to 347B (more than one-third budget) SFs increased to 347B (more than one-third budget) SFs reformed SFs reformed ERDF & ESF & CF ERDF & ESF & CF FIFG and Guidance Fund removed FIFG and Guidance Fund removed (emphasises urban focus) 3 new objectives 3 new objectives

42. Structural Funds 2007 – 2013: Convergence and Regional Competitiveness Objectives

43. Implications of Reformed CRP (?) 1.Increased competition for SFs Only 4 regions in CEE above 75% EU GDP/ca Only 4 regions in CEE above 75% EU GDP/ca New Eastern periphery to receive 57% of SFs New Eastern periphery to receive 57% of SFs Traditional problem regions in EU (15) lose dominance Traditional problem regions in EU (15) lose dominance

44. 2. Fewer Convergence Regions in EU (15) Strong economic performance of some regions eg. S & E in Ireland Strong economic performance of some regions eg. S & E in Ireland Statistical Effect of enlargement Statistical Effect of enlargement 16 regions to be phased out by 2013 16 regions to be phased out by 2013 Most convergent objective regions in CEE Most convergent objective regions in CEE

45. 3. Emphasis on Lisbon objectives means: Promoting a regions indigenous resource base/infrastructure rather than dependency on hand-outs Promoting a regions indigenous resource base/infrastructure rather than dependency on hand-outs Changing basis of development in problem regions from low cost sites to competitive locations Changing basis of development in problem regions from low cost sites to competitive locations A longer-term perspective and sustainable development A longer-term perspective and sustainable development

46. 4. Above average growth of new member states Large transfer of SFs Large transfer of SFs Modernised infrastructure Modernised infrastructure Low costs and underdeveloped resources Low costs and underdeveloped resources High market potential High market potential Expect convergent trend in prosperity between member states to continue eg. Baltic Circle Expect convergent trend in prosperity between member states to continue eg. Baltic Circle

47. 5. Lisbon objectives favour core regions Attributes of urban cores attract investment more than rural peripheries Attributes of urban cores attract investment more than rural peripheries Divergent trends between regions likely to continue Divergent trends between regions likely to continue National policy/intervention vital to redistribute development opportunities within countries e.g. NSS in Ireland National policy/intervention vital to redistribute development opportunities within countries e.g. NSS in Ireland

48. Conclusions Macro-economic forces are powerful and favour core/urban regions Macro-economic forces are powerful and favour core/urban regions CRP has been /remains vital to redistribute resources from core to periphery CRP has been /remains vital to redistribute resources from core to periphery Some successes achieved (Ireland), but large problem regions remain (CEE) Some successes achieved (Ireland), but large problem regions remain (CEE) Focus of Lisbon Agenda on growth and competitiveness makes CRP even more essential Focus of Lisbon Agenda on growth and competitiveness makes CRP even more essential The goal of harmonious development is likely to remain elusive – at least at regional level The goal of harmonious development is likely to remain elusive – at least at regional level