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European Economic Integration – – 2014

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1 European Economic Integration – 110451-0992 – 2014
VII Core Policy 3 Cohesion Policy (CP) EU to focus funds for regional development on creating jobs and sustainable growth. Cooperation between regions Prof. Dr. Günter S. Heiduk Source:

2 Cohesion Principle: Financial solidarity (to the less prosperous regions and social groups) Cohesion: “The act or state of sticking together tightly” (Merriam-Webster) Cohesion Policy: “…is aiming at ensuring economic, social and territorial cohesion across the EU. Its integrated approach has largely proven to be beneficial to most territories across Europe, taking into account the different parameters that support the development of a region. Even if it is difficult to assess its precise impact, the tremendous contribution that cohesion policy makes to regional development and territorial cohesion in Europe should not be underestimated.” Assembly of European Regions (2010). Cohesion in Europe: Regions Take Up the Challenge, p 3. Transferring resources from wealthier to poorer parts of the EU. “More growth and jobs for all regions and cities in the European Union – this message is in the heart of cohesion policy and its instruments between 2007 and ” EU (2008). Working for the Regions. New development paradigm: Shift of the development strategy from the national level toward the regional/local level (territorialization), thus emphasizing the mobilization of endogenous resources Leonardi, R. (2006). Cohesion in the EU, 160. New policy design: Multilevel governance Causes of regional inequalities within the EU: Geographic remoteness Enlargement (“shock absorber” for new member states that are exposed to single market competition)

3 Principles Concentration - of resources on the poorest regions and countries (81.9% of structural funds) - of effort (e.g. research and innivation; information society; energy; environment; transport; health; employment; social inclusion) - spending (e.g. one programme=one fund; co-financing ceilings) Programming Multi-annual national programmes; no funding for individual projects Partnership Collective process (European, regional, local authorities, social partners, organizations from civil society) Additionality Financing from the European structural funds may not replace national spending by a member country. The Commission agrees with each country upon the level of eligible public (or equivalent) spending to be maintained throughout the programming period, and checks on compliance in the middle of the programming period (2011), and at the end (2016).

4 A brief history of European Regional Policy

5 Structural and Cohesion Funds 1975-2013

6 Building regions in the EU
Eurostat (2010). Regional Yearbook, p 12.

7 NUTS 1 - 3 The NUTS classification (Nomenclature of territorial units for statistics) is a hierarchical system for dividing up the economic territory of the EU for the purpose of : The collection, development and harmonisation of EU regional statistics. Socio-economic analyses of the region NUTS 1: major socio-economic regions NUTS 2: basic regions for the application of regional policies NUTS 3: small regions for specific diagnoses Framing of EU regional policies. Regions eligible for aid from the Structural Funds (Objective 1) have been classified at NUTS 2 level. Areas eligible under the other priority objectives have mainly been classified at NUTS 3 level. The Cohesion report has so far mainly been prepared at NUTS 2 level

8 NUTS 1 Regions

9 NUTS 2 Regions

10 NUTS 3 Regions

11 NUTS 1-3 Regions: Examples
Country NUTS 1 NUTS 2 NUTS 3 EU-27 97 271 1303 Germany 16 39 429 Italy 5 21 107 Germany: NUTS 3 regions (districts) (yellow: urban; white: rural) Italy: NUTS regions





16 GDP per inhabitants in PPS by NUTS 2 regions, 2010 (% of EU average, EU-27 = 100)
Range of the highest to lowest region; capital city market in greenin a country

17 Dispersion of Regional GDP per inhabitant, in PPS, NUTS level 2, 2000 and 2009

18 Employment rate, persons aged 20-64 year sby NUTS 2 regions, 2010

19 Dispersion of regional employment rates (persons aged 15 to 64 years) at NUTS 2 level (%)

20 Unemployment rate, persons aged 15 to 74 year, by NUTS 2 regions, 2011 (%)

21 Dispersion of unemployment rates (persons aged 15 to 74 years) at NUTS 2 level (%)

22 GDP per Inhabitant, in Purchasing Power Standard (PPS),
Highest and Lowest NUTS 2 Regions within Each Country, 2008 Source: EUROSTAT, news release, 46/2013.


24 Disposable Income of private households per inhabitant (in PPCS), highest and
lowest NUTS 2 regions within each country, 2008


26 Degree of Regional Specialisation by Activity, EU-27 and Norway, by NUTS 2 Regions,
2008 (%, share of non-financial business economic employment)

27 At-risk-of-poverty or social exclusion rate, 2011 and 2012
Source: EUROSTAT, ilc_peps01

28 Regional policy in the past
Annual resources of the Structural Funds and the Cohesion Fund, Regional Policy 2000 – 2006: European Regional Policy is conducted through two main types of funds. On the one hand, there are the European Structural Funds (€ 195 bn), which account for the main share (91.55 %) of Regional Policy expenditure. The Cohesion Fund resources amount to about €2.5 billion per year from 2000 to 2006, (a total of €18 billion at 1999 prices), or 8.45% of Regional Policy expenditure.

29 The Structural Funds European Regional Development Funds (ERDF), whose principal objective is to promote economic and social cohesion within the European Union through the reduction of imbalances between regions or social groups European Social Fund (ESF), the main financial instrument allowing the Union to realise the strategic objectives of its employment policy European Agricultural Guidance and Guarantee Fund (EAGGF - Guidance Section), which contributes to the structural reform of the agriculture sector and to the development of rural areas Financial Instrument for Fisheries Guidance (FIFG), the specific Fund for the structural reform of the fisheries sector

30 The Structural Funds 2000-2006 Objective 1 Outside Objective 1 regions
Objective 1 Outside Objective 1 regions Objective 2 Objective 3 Interreg III Urban II Leader + Equal ERDF X ESF EAGGF FIFG Leader achievements: a diversity of territorial experience  EQUAL

31 Regional Policy, 2000 – 2006, 213 billion Euro
European Structural Funds: 195 billion Euro ·        Objective 1: 70% of the funding goes to regions whose development is lagging behind (GDP per capita < 75% of EU-Average). They are home to 22% of the population of the Union. Objective 2:  11.5% of the funding assists economic and social conversion in areas experiencing structural difficulties. 18% of the population of the Union lives in such areas. Objective 3: 12.3% of the funding promotes the modernization of training systems and the creation of employment outside the Objective 1 regions. Community initiatives:  5.35% of the funding is spent on Community Initiatives seeking common solutions to specific problems, such as: ·        cross-border, transnational and interregional cooperation (Interreg III); ·        sustainable development of cities and declining urban areas (Urban II); ·        rural development through local initiatives (Leader +); ·        combating inequalities and discrimination in access to the labor market (Equal). Fisheries: 0.5% are allocated to the adjustment of fisheries structures outside Objective 1 regions. Innovation: 0.51% of funds are spent as provisions for innovative actions to promote and experiment with new ideas on development. Cohesion Fund: 18 billion Euro - improving the environment and developing the transport infrastructure in Member States whose per capita GNP is below 90% of the Community average.

32 Structural Funds by 15 „Old“ Member States, 2000 – 2006 (billion Euro)

33 Structural Funds by 10 “New“ Member States, 2004 – 2006 (billion Euro)

34 Results of EU Cohesion Policy (figures from 2000-2006 period)
8400 km of rail built or improved 5100 km of road built or improved Access to clean drinking water for 20 million more people Training for 10 million people each year Over 1 million jobs created GDP/capita up 5 % in newer Member States Source: European Commission, General presentation on proposals for Cohesion Policy ,

35 Evaluating the Regional and Cohesion Policy
Criteria: Beta convergence by a regression analysis (per capita income of a chosen period of time is estimated of a function of the initital level of per capita income) Indicator: Growth of GDP per head Problems: - Causality between growth and regional/cohesion policy measures - Dependency on country/region-specific environment - Evaluation of qualitiative effects (e.g. solidarity) - Defining regions (esp. regions without governmental institutions) - Territorialization of policy measures - Multilevel governance and administrative capacity EU‘s conclusion regarding the first phase: “ Between 1994 and 2001, growth of GDP per head in objective 1 regions taken together average almost 3% a year in real terms against just over 2% in the rest of the EU.“ European Commisison (2004). Third Cohesion Report, p ix. Results : 8 out of 59 objective 1 regions (GDP/capita below 75% of EU average) achieved after 8 years a level above 75%: Abruzzo, Molise, Lisbon-Setubal, Cantabria, Corsica, Northern Ireland, Scottish Highlands, major parts of Ireland.

36 Evaluating the Regional and Cohesion Policy
Beta convergence for Objective 1 and non-Objective 1 regions, (1/T)*log(Yit/Yi0) = α + β*log Yi0 + γ*Xit + uit Yit = real per capita income of a country in i at time t Yi0 = initial per capita income Xit = set of structural exogenous variables influencing the growth of per capita income T = time in which the dynamics of convergence is measured uit = stochastic error α = constant term Orlik, A (2003). Real Convergence and its differentMeasures Leonardi, R (2006). Cohesion in the European Union. Regional Studies, 40/2, 162.

37 Evaluating the Regional and Cohesion Policy
Interpretation of the beta-covergence: - When comparing the performance of the Objective 1 regions, much greater convergence rates are found compared with what has been reported within nation states. - Overall EU convergence has been driven, to a great extent, by the convergence of the Objective 1 regions toward the EU mean whereas the non-Objective 1 regions remained substantially stable. - Convergence is a fairly slow process. The comparison with convergence before 1988 shows that countries such as Ireland, Portugal, Greece, Spain have progressed considerably since they joined the EU and were in receipt of Cohesion policy funding. These countries’ performance in terms of GDP was consistent with the positive development of the employment. Low performing regions were Mezzogiorno, Germany’s East Bundesländer, France overseas territories, several regions in Spain (Andalucia, Galicia)


39 Structural and Cohesion Funds 2007-2013
The European Regional Development Fund (ERDF) The ERDF aims at encouraging regional development, economic change, enhanced competitiveness and territorial co-operation throughout the EU. • The European Social Fund (ESF) The ESF is meant to focus on employment, social inclusion and tackling discrimination. • The Cohesion Fund This fund applies only to member states with a Gross National Income (GNI) of less than 90% of the EU average, and covers the new member states as well as Greece and Portugal. Spain will be eligible for the Cohesion Fund on a transitional basis. The Cohesion Fund invests in the environment and trans-European transport networks. • These funds, in turn, are meant to meet three different main “objectives”: 1) Convergence (previously called Objective One): ERDF; ESF and Cohesion Fund. 2) Regional Competitiveness and Employment (previously called Objective Two): ERDF; ESF. 3) European Territorial Co-operation (ERDF). • The amount each member state gets is negotiated among the governments for a seven year period. Each fund has a national “managing authority” – i.e. a government department – through which the money is channeled. EU regulations govern how and to whom money can be granted. The grants are first paid out by the managing authorities, and the Commission then reimburses the member states. The Commission audits about five percent of the projects and has the right to withhold funds. • Each project that wants grants from the SCF must find “matching funds” from other sources than the EU, such as the national governments or private actors, usually amounting to around the same amount as that given by the EU.

40 Objectives of European Regional Policy 2007-2013
Convergence – solidarity among regions The aim is to reduce regional disparities in Europe by helping those regions whose per capita gross domestic product (GDP) is less than 75% of the EU to catch up with the ones which are better off. Some regions in the EU as constituted before the two most recent enlargements are now above the 75% threshold simply because the EU average GDP has fallen with the addition of the newest member countries. Those regions still need help from the cohesion policy, so they now receive "phasing out" support until 2013. Number of regions concerned: 99 Number of Europeans concerned: 170 million Total amount: €283.3bn (81.5% of total budget) Type of projects funded: improving basic infrastructure, helping businesses, water and waste treatment, high-speed internet connection, training, job creation, etc. Regional Competitiveness and Employment The aim is to create jobs by promoting competitiveness and making the regions concerned more attractive to businesses and investors. This objective covers all regions in Europe not covered by the convergence objective. In other words, it is Intended to help the richer regions perform even better with a view to creating an knock-on effect for the whole of the EU to encourage more balanced development in these regions by eliminating any remaining pockets of poverty. Some regions, which used to be under the 75% threshold that would qualify them for inclusion in the convergence group, receive extra funding to help them "phase in" to their new objective. Number of regions concerned: 172 Number of Europeans concerned: 330 million Total amount: €55bn (16% of total budget) Type of projects funded: development of clean transport, support for research centres, universities, small businesses and start-ups, training, job creation, etc. European territorial cooperation The aim is to encourage cooperation across borders. 40

41 Structural Funds 2007 – 2013: Eligible areas in the EU under the Convergence Objective and the European Competitiveness and Employment Objective

42 Structural and Cohesion Funds 2007-2013

43 Cross-border programmes under the European Territorial Cooperation Objective


45 Example: Operational Programme 'Development of Eastern Poland'
On 2 October 2007, the European Commission approved the Operational Programme entitled “Development of Eastern Poland” for the period The Operational Programme falls within the framework laid out for the Convergence Objective and has a total budget of around €2.7 billion. Community investment for five Polish regions (Warmińsko-Mazurskie, Podlaskie, Lubelskie, Podkarpackie and Świętokrzyskie) through the European Regional Development Fund (ERDF) amounts to some €2.3 billion. This represents approximately 3.4% of the total EU investment earmarked for Poland under the Cohesion Policy for

46 Example: Operational Programme 'Development of Eastern Poland'
Breakdown of finances by priority axis (euro): Priority Axis EU Contribution National Public Contribution Total Public Contribution Modern Economy Information Society Infrastructure Regional Growth Centres Transport Infrastructure Sustainable Tourism based on Natural Assets Technical Assistance Total


48 Example: Cross-border Cooperation Poland - Germany
Project example: Collegium Polonicum, Collegium Universalum Each morning, with a student card in their hand, they cross the border between Germany and Poland on the Oder River and divide their lives and studies between the two countries. This is the reality that students of the Viadrina European University in Frankfurt-am-Oder have been living since the university's creation in The Union with Poland grew even closer with the opening in 1993 of the Collegium Polonicum in Slubice where German students could sign up for a post-graduate programme devoted to Polish law. The idea arose as early as 1991 of creating, in collaboration with the Adam Mickiewicz University in Poznan, an institute for studies and research on the cultures, languages, economy and society of Eastern Europe. The Collegium Polonicum has, in addition to classrooms and the AMICUS student hall, rooms for tutorial classes and a library boasting books and 260 periodicals devoted to Eastern Europe: a genuine gold mine for the students and academic researchers. The courses taught there are intended to complement the programmes organised by the two founding universities. The students analyse the problems of the border regions or the impact of economic upheavals on the Central and Eastern European countries, study the different constitutional laws of these countries as well as international law and may also take language courses. This cross-border training programme opens up excellent prospects for employment in international organisations, in corporations, in the media or in the field of city and regional planning. The labour market problems on either side of the Oder are also being dealt with by the "Science and Labour World" cooperation centre of the Viadrina European University, nearby. The centre monitors the trends in cross-border relations and ensures collaboration between the German and Polish trade unions on the Interregional Trade Union Board. The new school attracts students and teachers, not only from Germany and Poland but also from the Czech Republic, France, Italy and even Russia and many other countries. It is therefore an important academic and cultural meeting point and a centre of intellectual and human influence for Europe. Total cost euros EU contribution euros

49 EU Cohesion Policy Source: European Commission

50 Connecting Europe Facility
“Ambitious but realistic” proposals issued by the Commission in June 2011 for the Multiannual Financial Framework (MFF) Cohesion Policy 33 % (€336 billion) Other policies (agriculture, research, external etc.) 63 % (€649 billion) Connecting Europe Facility 4 % (€40 billion)



53 Cohesion Policy 2013 + Selection of Priorities
Integrated approach: “Cohesion policy is aiming at ensuring economic, social and territorial cohesion across the EU.“ Multilevel governance: “Voluntary regions should be able to enter into a three- party agreement/contract with their Member State and the European Union.” New category: “Should transition regions become a full category, it should be named as a 4th objective, in order to keep the architecture clear. The criteria for this objective should therefore be made as fair as possible and straightforward enough to avoid any ambiguity on the status of one region or another.“ Additional indicators: “It seems clear however that cohesion policy is about much more than just increasing GDP per head…there is consequently an urgent data gap to fill in order to adequately distribute European funding…Increased effort should be dedicated to researching in the area of measuring the combination of wealth, competitiveness, sustainability and well-being.”

54 Cohesion Policy 2013 + Selection of Priorities
Principles and rules: Conditionality Rewarding efficient regions with a reserve fund Partnership Better participation of regional authorities Efficiency Simplifying the management of structural funds Uncertainty Reducing the room for interpretation by the different authorities amongst others. Evaluation Better assessing the quality of the programmes‘ implementation Partnership Simplifying the the involvement of the private sector Coordination Coherence between rural development and cohesion policy; stronger integration between ESF and ERDF

55 The Future of Cohesion Policy – 2014-2020
Legislative proposals for cohesion policy during the period were adopted by the European Commission on 6 October These will be discussed by the Council and European Parliament during The new Regulations should enter into force in 2014. The Fifths Cohesion Report, adopted in November 2010, set out ideas on how cohesion policy might be reformed, including: focusing resources on a few priorities closely linked to the Europe 2020 strategy defining clear and measurable targets, strengthening regulatory and institutional frameworks, conditionality and incentives, increasing the leverage effect of investments, private sector finance, simplification of the management rules, concentrating on the poorest Member States and regions. NEWS: Working paper on “A New regional Competitiveness Index: Theory, Methods and Findings” Brochure “Simplifying Cohesion Policy for ” RegioStars Awards 2013 (

56 Source: http://ec. europa

57 Source: http://ec. europa

58 Source: European Commission (2012), Country Fact Sheet – Polska.

59 If convergence will ever happen: WHEN?
Result of an OECD report: “..regional disparities are not falling, or at best are declining very slowly. At the current rate of convergence it would take years to half divergence across the regions in the EU.“ 59 OECD (2007). Economic Survey of the European Union Paris.

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