Third Cohesion report February 2004 Convergence, Competitiveness and Co-operation

Importance of the Cohesion reports December 2004 EN Importance of the Cohesion reports Every 3 years the Commission analyses the state of cohesion and the contribution EU policies have made (Art. 159 of the Treaty) 1st report (1996) the starting point for Agenda 2000 2nd report: (2001) launched debate on cohesion policy after enlargement 3rd report (February 2004): presented proposals for reformed cohesion policy after 2007 context

The report comprises 4 sections December 2004 EN The report comprises 4 sections Analysis of socio-economic situation and trends in the regions and factors of competitiveness The contribution of national policies to cohesion The contribution of community policies The impact of Cohesion Policy structure

Financial perspectives 2007-2013 December 2004 EN Financial perspectives 2007-2013 Promoting Europe's wealth - Policy challenges and budgetary means of the enlarged Union 2007-2013 Keeping the current expenditure ceiling (1.24% of the Union's GNI) Commission proposal: commitments 1.22% and 1.14% for payments A distinct change in the financial perspectives Four political priorities for the Union: Sustainable development – competitiveness, cohesion (for growth and employment) conservation and management of natural resources Citizenship, freedom, security and justice The EU – a global partner Financial aspects

December 2004 EN Reminder: EU budget 2000-2006 Ceiling as regards commitments per year: € 108.5 billion for EU25, of which € 37 billion for structural actions, at 2004 prices Financial Perspectives 2007-2013 Ceiling as regards commitments per year: € 146.4 billion for EU27, of which € 48 billion for structural actions, at 2004 prices (excluding rural development)

December 2004 EN % of GNI

Proportions of expenditure December 2004 EN Cohesion Policy represents 34% of EU budget (€ 336 billion for the period 2007-2013, at 2004 prices) represents about 0.41% of Union GDP (with rural development and fisheries: 0.46%) split 50-50 between current and new Member States (approx.) More than ¾ of the budget for regions and Member States lagging behind in development Context Proportions of expenditure

Categories of expenditure in Structural Funds December 2004 EN Categories of expenditure in Structural Funds Context For 2007-2013 + strengthening administrative capacity

Part 1 situation and trends: some results December 2004 EN Observations Significant convergence of cohesion countries Positive trend in Obj. 1 regions overall GDP, employment and productivity growth above European average Modernisation of economic structures and management methods Better governance at regional level Greater regional co-operation at European level Part 1 situation and trends: some results

GDP Growth in Cohesion Countries December 2004 EN GDP Growth in Cohesion Countries GDP per head growth in Spain, Portugal and Greece between 1998 and 2002 compared to average GDP growth in EU15

Unemployment rates in EU15, 1996 and 2002 (% of labour force) December 2004 EN Unemployment rates 1996-2001 Unemployment rates in EU15, 1996 and 2002 (% of labour force) 1996 2002 EU15 10,7 7,8 Part I Situation and trends Cohesion countries 17,0 9,6 Greece 9,7 10,0 Spain 22,3 11,4 Ireland 11,9 4,3 Portugal 7,4 5,1 Other Member States 9,5 7,5 Source: Eurostat, LFS

European cohesion policy or simple budgetary transfer? December 2004 EN European cohesion policy or simple budgetary transfer? Proportion of EU transfers to main beneficiaries spent on imports purchased from other Member States 17,4 % 18,9 % 26,7 % 35,2 % 42,6 % 14,7 % 10 20 30 40 50 Greece Impact and added value of Structural Policies Portugal Ireland New Länder Selon les États membres, 15 à +de 40% des ressources structurelles allouées aux régions Objectif 1 retournent - via les importations - vers les régions les plus riches de l’Union (D, F, UK, B, …) Mezzogiorno Spain

December 2004 EN Impact of enlargement Population of the Union grows from 380 to 454 million (EU 25) or 485 million (EU 27) New MS bring more dynamic growth (4% per year against 2.5% in EU 15) GDP per head drops: -12.5% EU 25; -18% EU 27 in euros Part I

December 2004 EN Impact of enlargement Population in the convergence objective goes from 84 million to 123 million Development gap between regions doubles: average GDP in Obj. 1 is 69%: new MS 46% Employment rate in EU 15 grew from 60% to 64% (1996 – 2002). In NMS 10 it was 56%: (59% in 1999) Part I

Part I Situation and trends December 2004 EN GDP per head PPS 2002 Index, EU25 = 100 Part I Situation and trends Source: Eurostat, National Accounts

Part I Situation and trends December 2004 EN Regional GDP 2001 GDP per head (PPS), 2001 Part I Situation and trends < 50 50 - 75 75 - 90 90 - 100 100 - 125 >= 125 No data Index EU 25 = 100 Source: Eurostat

Employment rate 2002 % of population between 15-64 December 2004 EN < 56 < 56.0 – 60.2 < 60.2 – 64.4 64.4 – 68.6 >= 68.6 No data EU-27 = 62.4 Standard deviation = 8.4 Source: Eurostat and NSI

Educational level 2002 % of total population aged 25-64 LOW MEDIUM December 2004 EN Educational level 2002 % of total population aged 25-64 LOW MEDIUM HIGH < 19.2 19.2 – 28.0 28.0 – 36.8 36.8 – 45.6 >= 45.6 no data EU-27 = 32.4 Standard deviation = 17.7 < 35.05 35.05 – 43.35 43.35 – 51.65 51.65 – 59.95 >= 59.95 no data EU-27 = 47.5 Standard deviation = 16.59 < 13.65 13.65 – 17.95 17.95 – 22.25 22.25 – 26.55 >= 26.55 no data EU-27 = 20.01 Standard deviation = 8.57 Source: Eurostat (LFS)

Regional competitive factors December 2004 EN Employment hi-tech 2002 Regional competitive factors < 7.45 < 7.45 – 9.55 < 9.55 – 11.65 11.65 – 13.75 >= 13.75 No data Average = 10.6 Standard deviation = 4.30 Sources: Eurostat

The contribution of national policies December 2004 EN The contribution of national policies National budgets are 47% of GDP on average The Cohesion budget is 0.43% of GDP National budgets give priority to basic services and income support The Structural Funds aim to improve the factors of regional convergence and support physical and human investment – about 80% of the total Part II Different approaches to promote growth

The contribution of other Community policies December 2004 EN The contribution of other Community policies Aim at specific objectives set out in the treaty Do not always have cohesion as an objective But there have been improvements A need to strengthen coherence between these policies and the objective of cohesion, especially for the new MS. Part III Need to promote coherence of policies

The impact of Cohesion policy December 2004 EN The impact of Cohesion policy Increase public and private investment in beneficiary regions (growth) Contribute to increasing GDP (convergence) Create jobs and maximise potential of human resources Increase physical and human capital Better regional and local governance Financial stability over 7 years Part IV Mobilising resources to promote growth

A new partnership for Cohesion December 2004 EN A new partnership for Cohesion In respect of the Union's priorities In respect of enlargement and the increased responsibilities of cohesion policy Covers all States, regions and towns – greater subsidiarity Reform of the policy Conclusions

December 2004 EN Priorities of the reform (I) First objective: Convergence and competitiveness Regions with less than 75% of EU 25 average GDP/head Statistical effect regions: less than 75% of EU 15 GDP/head but more than 75% of EU 25. States with less than 90% of EU 25 average GNI/head (Cohesion Fund) Special accessibility programme for OMR Budget: about 78% of the total Reform of the policy Conclusions

December 2004 EN Priorities of the reform (II) Second objective: regional competitiveness and employment Cohesion policy at the service of all other regions in the Union – no community zoning Contains two elements: first element: regional competitiveness innovation and the knowledge-based society accessibility and services of general interest environment and risk prevention would include responsibility for cities being delegated to the regions, no specific community initiative (URBAN+) (Lisbon and Gothenburg strategy) second element: employment - based on European Employment Strategy - adaptability of the workforce, - job creation, - accessibility to the labour market for vulnerable persons Budget: ca 18% of total FS= current Objectives 2 and 3 Reform of the policy Conclusions

December 2004 EN Priorities of the reform (III) Third objective: European Territorial co-operation The success of INTERREG, community added value makes possible harmonious and balanced integration of the whole Union Border regions, including sea borders Cross border co-operation (MS to propose changes to the 13 current zones of INTERREG III B) Interregional co-operation (also mainstream programmes) External cross-border co-operation – linked to the new European neighbourhood instrument, including multi-annual programming and just one financial instrument Budget: around 4 % of the total Reform of the policy Conclusions

Implementation system: evolution not revolution December 2004 EN Implementation system: evolution not revolution Confirmation of the principles which made cohesion policy a success –multi-annual programming, partnership, evaluation, co-financing, shared responsibility Retention of n+2 rule and system of advances Simplification: reduction in number of financial instruments: 6 to 3 and single fund programmes only Clearer division of responsibilities with the sustainable development policy Reducing the stages of programming (policy document from each MS, operational programmes) Simplification of financial management (priority axes) Controls: introduction of proportionality, contracts More strategic approach: Political discussion in Council, EP opinion, Commission mandate, annual report presented to spring Council Reform of the policy Conclusions

Proposed timetable Next stages December 2004 EN Proposed timetable 10 and 11 May 2004: European cohesion forum, Brussels July 2004: Commission adopts the legislative packet End 2005: Decision by Council and European Parliament 2006: Preparation of programmes for period 2007-2013 1 January 2007: Implementation begins Next stages