EU terminology
7. The terms "cohesion",
"economic and social cohesion" and "solidarity"
are common parlance among those used to EU policies and papers,
but may have a less familiar ring to others. A brief explanation
of the use of these terms in the EU context may avoid possible
misunderstanding of this Report.
8. The Commission's
recently published Cohesion Report[2],
the first report provided in accordance with Article 130b of the
EC Treaty, opens with a chapter entitled What do we mean by
cohesion? The Commission's answer is given in the first sentences
of that chapter: "The organisation of society in European
countries reflects the values of the social market economy. This
seeks to combine a system of economic organisation based on market
forces, freedom of opportunity and enterprise with a commitment
to the values of internal solidarity and mutual support which
ensures open access for all members of society to services of
general benefit and protection." Later in the same chapter
it is stated "general aims such as solidarity and mutual
support must be distilled into substantive, and measurable, economic
and social targets"; and the next paragraph cites as inspiration
for the Commission's methodological approach the words of Article
130a, "reducing disparities between the levels of development
of the various regions and the backwardness of the least favoured
regions, including rural areas", which were quoted in paragraph
3 of this Report. Later the chapter states that social cohesion
requires ". . . the reduction of disparities which
arise from unequal access to employment opportunities and to the
rewards in the form of income . . .". It goes on to emphasise
that increasing cohesion is about change-increasing productivity
and competitiveness and accelerating innovation while matching
labour force skills to new requirements. The chapter stresses
that cohesion is not to be confused with harmonisation or uniformity:
its sole aim is to achieve greater equality in economic and social
opportunities.
9. The EU's policies
for cohesion have both economic and social aspects. The social
aspect is seen not simply as altruistic but as making the best
use of the Union's human resources which will be to the benefit
of all and improve the quality of life generally.
10. In EU discussions
cohesion is presented as an overarching policy to which specifically
targeted policy instruments should contribute. The Commission's
Cohesion Report, therefore, is concerned with the broad concept
of cohesion, far wider than the Cohesion Fund, which is but one
instrument to support the policy of cohesion in the broad sense.
The Cohesion Report discusses the contribution which a number
of specific Community policies-for example, the Single Market
and competitiveness policies-and actions have made to cohesion.
Funds: scale and purposes
11. The four funds,
generally known collectively as the Structural Funds, are the
European Regional Development Fund (ERDF), the European Social
Fund (ESF), the Guidance Section of the European Agricultural
Guidance and Guarantee Fund (EAGGF) and the Financial instrument
for Fisheries Guidance (FIFG). The EU has two other financial
instruments with which to implement its structural policies: the
Cohesion Fund and loans from the European Investment Bank (EIB).
The ERDF concentrates on productive investment, infrastructure
and the development of small businesses; the ESF concentrates
on vocational training and recruitment aid; the Guidance Section
of the EAGGF supports agricultural structures and rural development;
and the FIFG assists the adjustment of the fisheries sector.
12. The Cohesion Fund
was set up, as was indicated in paragraph 1 above, to help Greece,
Ireland, Portugal and Spain, (the Cohesion Four), meet the convergence
criteria required for admission to EMU. This Fund gives grant
aid of up to 85 per cent of the cost of projects in the two areas
of the environment and transport. The justification for this
Fund was that the Cohesion Four needed to make substantial improvements
in these areas in order to improve their economic and social cohesion
but that the necessary improvements would be held back by constraints
imposed on budget deficits by efforts to meet the Maastricht convergence
criteria.
13. Key facts on the
Structural Funds are set out at Appendix 3, which reproduces extracts
from a leaflet issued by the Commission. The Structural Funds
are concentrated on six Objectives, four of which apply in spatially
defined regions: Objective 1, (which accounts for about 70 per
cent of these funds), for the poorest regions in the EU whose
development is lagging behind; Objective 2, (about 11 per cent),
for regions seriously affected by industrial decline; Objective
5b, (about 4 per cent), for diversification of vulnerable
rural areas; and Objective 6, (newly created after the admission
of the Nordic Member States), (about 0.5 per cent), for development
of sparsely populated regions.
14. The other Objectives,
3, 4 and 5a, apply throughout the Community without geographical
limitation. Together they account for 15 per cent of the funding.
These are Objective 3, which focuses on long-term and youth unemployment
and the integration of excluded groups; Objective 4, which assists
the adaptation of workers to industrial change; and Objective
5a, which promotes structural adaptation in the agricultural and
fisheries sectors.
15. The resources made
available for structural policies have increased substantially
from 3.7 billion ecu in 1985 to 18.3 billion ecu in 1992 and are
planned to rise to 33 billion ecu by 1999. These increases reflect
decisions of the European Council, notably those taken at Maastricht
in 1991 and at Edinburgh in 1992, on the overall size of the EC
Budget and on the substantially increased emphasis to be given
to cohesion policy. Table 1 in Appendix 3 gives a breakdown of
structural funds and the Cohesion Fund by Member State 1993-1999.
16. Some other statistics
may help to put in perspective the figures given in the preceding
paragraph. The annual EC Budget for 1993 was about 70 billion
ecu at 1992 prices[3].
In accordance with the present agreement on the financial perspective,
which runs to the end of 1999, the annual EC Budget shall not
exceed 1.27 per cent of Community GDP.
17. From one perspective,
the structural funds are large: they form about one third of the
EC Budget, and, for the countries receiving most, they are estimated[4]
to amount to an annual average for the period 1994-99 of about
3.98 per cent of the national GDP for Portugal, 3.67 per cent
for Greece, 2.82 per cent for Ireland and 1.74 per cent for Spain.
From another perspective, these funds are small: they amount
to less than 0.45 per cent of Community GDP.
18. The Structural Funds
cover three types of assistance. First, (covering 90 per cent
of the Funds) there are programming agreements, called either
Community Support Frameworks (CSF) or Single Programming Documents
(SPD), drawn up between the Member State and the Commission, detailing
policy priorities, forms of assistance and total amount allocated.
CSFs comprise a number of programmes each of which requires separate
agreement whereas SPDs, as their name implies, integrate operational
measures into a single development strategy. Second, (9 per
cent), there are Community Initiatives (CIs) which are measures
proposed by the Commission to help resolve problems of special
EU interest. These include such measures as RECHAR II, for the
conversion of coal-mining areas, and INTERREG II, for cross-border
cooperation on energy networks, regional planning and the management
of water supply. A full list of CIs for the current funding period
is given at Appendix 3. Third, Pilot Projects, (1 per cent) are
innovative actions.
19. The structural funds
are intended, through investment, to strengthen the economic base
in recipient regions, including capital formation. They are not
designed as income transfers. They must be distinguished from
net interregional transfers made by national governments, through
public expenditure, within their own states which are of a different
order of magnitude: a Commission study of seven Member States,
containing over 80 per cent of the EU population, shows that such
national net transfers amount to 4 per cent of the GDP of the
donor regions and to 8 per cent of the GDP of the recipient regions.[5]
Principles of the Structural Funds
and the Cohesion Fund
20. The Structural Funds
were reformed, and their amount doubled, in 1988, following the
adoption of the Single European Act, 1987. Since the 1988 reforms
the Funds have operated on the basis of the following four principles:
concentration, programming, additionality and
partnership. These are explained briefly in the following
paragraphs and are further commented on in the following Part
of the Report.
21. Concentration
is intended to achieve focus funding on a limited number of
objectives, on spatially defined areas of greatest need, on the
severest problems and on certain thematic areas. The most obvious
practical effects of the application of this principle are: first,
the definition of the areas with Objective 1 status, which was
determined by the Council for the period from the reform up to
1999 broadly as areas with a per capita GDP of less than
75 per cent of the EU average; and, second, the large proportion
of the funds devoted to Objective 1 purposes or spent, under other
non-spatial Objectives, within Objective 1 areas. In 1995 75
per cent of structural fund payments made were in Objective 1
areas.[6]
22. Programming was
introduced in 1989: it is a process intended to lead, first, to
the diagnosis of problems; second, to the formulation of a strategy
to address them; and, third, to the definition of the specific
measures or projects to be adopted in order to implement the strategy.
Since 1994 programming has been "multi-annual" over
the six-year period 1994-99.
23. Additionality
is a concept easily grasped but elusive when verification
of its application is required. In simple terms, the principle
means that structural fund expenditure on a programme shall be
additional to and not a replacement for what would otherwise would
have been incurred by the relevant national public authorities
on that area of activity. Additionality, in the required sense,
cannot be assessed by considering whether an individual project
would have gone ahead without structural fund support.
24. Partnership is
a somewhat elastic concept. At the minimum, it requires that
the broad plans for using the Structural Funds are worked up by
the Member State and agreed with the Commission. In 1993 the
obligation of partnership was formally extended, by Council Regulation
2081/93, to include "within the framework of each Member
State's national rules and current practices, the economic and
social partners, designated by the Member State". At the
broadest level, partnership is seen, at least by the Commission,
as an application of the principle of subsidiarity in public policy
reflecting the value of decentralisation and the involvement,
at all levels, of the relevant authorities in lower tiers of government.
In application, the principle is flexible and adaptable to local
administrative structures and traditions. In the next Part of
this Report we consider the working of the principle and the influence
it may have had on these structures and traditions.
25. Further key elements
in the delivery of the strategic programmes are their financial
control, monitoring and evaluation. The policies introduced at
the time of the 1988 reform of the Structural Funds included both
ex ante and ex post evaluation. It is common ground
between the Member States and Commission that evaluation of the
first generation of programmes after 1988 was inadequate. For
the second generation of programmes, after 1993, strenuous efforts
have been made to improve the situation. Particular emphasis
has been given to the identification of quantitative indicators
of performance; Monitoring Committees have been set up and, in
1995, the Commission issued guidance to ensure that all partners
used the same procedures for qualitative and quantitative monitoring
of the financial situation and the progress made in implementing
programmes. A mid-term review process was also established, scheduled
for completion in 1996. The outcomes of the mid-term reviews
are intended to be used to improve current operations.
26. The Cohesion Fund
operates with significant differences from the Structural Funds.
The Cohesion Fund is restricted to the Cohesion Four Member States;
it is available only for large projects in the policy areas of
environmental improvement and transport; and it is project-based,
not programme-based. As the Fund is intended to ease pressure
on the national budgets of the recipient countries there is no
requirement for additionality. Like the Structural Funds, the
Cohesion Fund is subject to similar controls for the purposes
of financial control, evaluation and monitoring.
2
The report's full title is First Report on Economic and Social
Cohesion 1996, European Commission, 1996. Back
3
Table 23, in the Cohesion Report: see footnote 2. Back
4
Table 5.2b in the Cohesion Report: see footnote 2. Back
5
Page 6 of the Cohesion Report: see footnote 2. Back
6
Some of the payments made in Objective 1 areas, which are spatially
defined, are made in support of Objectives 3, 4 and 5a, which
are not spatially defined. Back
