Examination of Witnesses (Questions 260-279)
Mr Dirk Ahner, Mr Nicola De Michelis, Mr Eric Dufeil
and Mr Pascal Boijmans
6 MARCH 2008
Q260 Lord Woolmer of Leeds: Can I
make a general proposition to you and then ask question two. If
there was a single country with a population of 470 million and
there were 268 sub-units of government, and you were considering
how best to use less than half a per cent of overall income to
help development and do other things, I suggest to you that you
would be very, very selective across that kind of population and
that number of regions, yet the programmes and so on are not very,
very selective, every region gets something. I am looking at this
strategically. If I was running a business and I had got, heaven
forbid, 268 operating units across 470 million people I would
think very hard about which business unit needed my intervention
from the centre. I put that as a proposition to you. That is looking
at a clean sheet as opposed to where we are. With that in mind,
if you were designing the system from scratch now, would you really
do it the way we are doing it? Is that really the best way to
deliver targeted strategic intervention at a pan-European level?
Mr Ahner: Let me answer your thoughts.
Q261 Lord Woolmer of Leeds: It is
quite an important issue.
Mr Ahner: I follow your proposition totally.
I would say I have to target my money, I have scarce resources
and I want to use them in the best way. The next point is I would
ask what do I want to achieve, what are my objectives. In this
case I would be confronted with three objectives. The first objective
is to try to improve and strengthen the competitiveness of Europe,
generate growth and jobs across Europe and take the formulations
of the Lisbon Strategy. Then there would be a second objective
which would be to say, "Do this, but please do it in a sustainable
way". Then there would be a third objective which would tell
you, "Whatever you do, you should make sure that there is
an overall balanced development in your territory". When
I have these three objectives in front of me I would ask myself
how can I best put my money in a way to achieve these three objectives.
Then I would look at the leverage effects of the money. When I
put money there I have a number of objectives. I want to use the
little amount of money which I have for this territory as a lever.
I want to make sure that it brings development across the whole
territory. I would come to a model where you can discuss should
it be 80 per cent, 60 per cent or 50 per cent. I would come to
a model which I must say is not that far away from the model which
we have. Honestly, in economic terms I think this makes a lot
of sense. What would be the alternatives? The alternative would
be a model where I would say I would let it go, the market would
decide totally and fully on this. That is a possible model. In
this model I would come to a situation where—
Q262 Lord Woolmer of Leeds: Mr Ahner,
nobody is suggesting that. I was saying if you have got those
resources and you have got some objectives, would you be more
selective? If you were really prioritising a strategy is not everything.
Do not put up an Aunt Sally that no-one is suggesting.
Mr Ahner: With these three objectives in mind
I would honestly go for a similar model. If one of these objectives
did not exist, if there was not an objective of balanced spatial
economic development, I would look for a different model, absolutely.
If there was not an objective of long-term environmental sustainability
you might look for a different way of spending your money. I must
say I would follow this model which has a very strong concentration
of the money on a few regions, which we should not forget, 80
per cent in the current period goes to the poorest regions of
the Union.
Q263 Lord Woolmer of Leeds: How many
regions would that be? 80 per cent goes to how many of the 268
regions?
Mr Ahner: Seventy.[1]
Lord Woolmer of Leeds: So 80 per cent goes to
70. Thank you.
Chairman: I am sure you see where we are going.
We are picking away at the question of whether you would say of
these 270 regions, "I have only got a very limited amount
of money to sprinkle about, I am just going to forget about 200
of those regions and I will concentrate my money on the remainder".
Lord Woolmer of Leeds: You would not say forget,
you would say leave it for the Member States.
Q264 Chairman: Yes, just say to Member
States, "You can do that".
Mr Ahner: What I want to obtain is a number
of common objectives and I see in 200 out of these 270 regions
with a relatively small amount of money I can have a leverage
effect in the direction of these objectives which is extremely
positive.
Mr Dufeil: Mr Ahner, would you like me to outline
the negotiation we had with Baden-Wurttemberg?
Q265 Chairman: That would be most
helpful.
Mr Dufeil: Baden-Wurttemberg is one of the most
prosperous regions in all of Europe with very successful stories
and they get a very limited amount of money from the Structural
Funds, €142 million, €20 million a year. According to
your line of thought, you could have said, "Why take the
trouble" and just forget it. Under Mr Ahner's authority we
have negotiated very fiercely and strongly with Baden-Wurttemberg
and in the end they have thanked us for that difficult negotiation
because we have tried to obtain from them something with a leverage
effect which is exemplary in the field of research and innovative
development, which they have, but which they could transfer with
Structural Funds into pilots and demonstrative projects of high
value transferable to other cases. To that extent, we have attributed
a much higher value to that €142 million and we gained value
from that money.
Q266 Lord Trimble: Would Baden-Wurttemberg
not have done that themselves?
Mr Dufeil: No.
Q267 Lord Trimble: Why not?
Mr Dufeil: Really, they would not.
Q268 Lord Trimble: Do you mean to
say that they were not into research and development? Of course
they were.
Mr Dufeil: No, I am not saying that because
they do it, but with 142 million they were only thinking of very
classical measures in the field of rural development, which is
fine in principle but in their case it was a second-best solution.
Looking for that leverage effect we think that we have been able
to reach an upper level of efficiency on the Structural Funds.
Mr Ahner: Let me come back to the model for
a second. In fact, the policy is extremely simple in its principles.
We have a policy there which to a very large extent is an investment
policy. It is investment in physical capital, social and human
capital and research and development. These are the pillars of
this investment. These investments are directed towards objectives
which have been defined beforehand which are commonly agreed.
Within this framework it is the regional, and in some cases the
local level that is most concerned, but in a few cases the national
level. After an analysis they elaborate the programmes they see
as being the best for themselves. As an additional step they have
a discussion on this programme which adds to what is being done
at the national level. They have to justify, they ask a number
of questions, and at the end comes a programme on which they then
have a stability guarantee for over seven years as far as the
money that is available is concerned with the possibility that
if within the seven years there are changes in the overall objectives
and adaptations of the programmes which are needed, for whatever
reason, that is possible and can be discussed. In reality, it
is an approach, a method where different levels of governance,
European, national, regional and sometimes local, are involved
in a discussion in order to find solutions to specific problems
to achieve a number of objectives which have been commonly defined.
This has a leverage effect because what we see is that each euro
which is spent through this investment policy brings other euros
from the private side into the game. These are the principles
of the policy. I call it almost a common policy in the modern
sense of the word. It is not a common policy in the sense of the
Common Agricultural Policy, it is really a shared policy where
all the different levels participate in a process to achieve common
objectives. I must say, after one year of discussion and having
lived through the very intense period of last year I have been
personally astonished at how well this works, I did not expect
that it would work this well.
Chairman: Can we push a little, Mr Ahner. Lord
Trimble.
Q269 Lord Trimble: Just to make sure
I have got it right, I gathered from what you said that 80 per
cent of the money goes into the poorest regions, the one that
used to be Objective 1 but are now called convergence regions.
Mr Ahner: Yes.
Q270 Lord Trimble: Why 80 per cent?
Why not more?
Mr Ahner: It is a little bit more than 80 per
cent, but the 80 per cent is the outcome of a political negotiation.
The basis of this negotiation is a methodology which we have applied
which looks at the gap which exists between the poorest regions
in terms of gross domestic product per head and the average. This
methodology was the basis for the calculations which was accepted
by all Member States. On the last night of the negotiations under
the UK Presidency, you will remember there were some final gifts
made here and there in order to come to a compromise and the basis
was a methodology that had already been agreed in the 1990s.
Q271 Lord Trimble: If you could,
would you want to spend more on the poorer regions?
Mr Ahner: I must say "if you could"
has two conditions. The first is if I had more money available
and I set this aside. I would say a very cautious no. In particular
I see in the poorer regions of today there must be a capacity
to use the money which is available for good programmes, and this
must not be overlooked. This is one of the big discussions we
have with the new Member States, for example. Yes, we have agreed
on good programmes and they are programmes which look good to
us, but the programme in itself is a framework and within this
framework they have to put the money to concrete projects. To
come forward and find good projects which fit with these programmes
is not easy. That is the first point. The second point is the
money which is spent is European taxpayers' money so we ask them
to have in place a control capacity, a management capacity, which
in some cases they are still building up, if you look at Romania
and Bulgaria in particular. Finally, when they want to spend the
money they are under rules and supervision which sometimes, let
us be honest, are hampering the process. When we insist from Brussels
that public procurement rules are respected and if they are not
respected they cannot use the money on the projects—
Q272 Lord Trimble: I understand entirely
and we take entirely the points about capacity.
Mr Ahner: I would not see much more capacity
in these countries to absorb more money today and in the foreseeable
future.
Q273 Lord Trimble: With regard to
the poorest regions, you think they are getting as much as they
can cope with?
Mr Ahner: I believe that they cannot cope with
what they are getting and I would be reluctant to give more. They
may not be at 100 per cent of their capacity, I do not know, but
I would be reluctant to give more. First of all, I would like
to see the money they have got now they are able to spend on good
projects and in three years' time I would like to see the first
interim evaluation of what has been done. As far as the more administrative
aspects are concerned, we have a yearly monitoring of what is
going on in these countries. I would like to see this before I
make any decision whatsoever. When the Marshall Plan was decided
for Europe after the war I think it was about two per cent of
all gross domestic products and we are going up to three or four
per cent of GDP sometimes and this is a lot in terms of money
which has to be absorbed. At this stage, if I have more money
I would not put it in this game, I would let the system grow.
Q274 Lord Trimble: Just to be slightly
provocative, the 17-20 per cent that goes to countries that are
not the poorest, is that simply done for political reasons to
buy their consent to the existence of this or is there any real
objective for it?
Mr Ahner: For me there are certainly political
reasons but there is a real objective behind it. In these regions
we are very often confronted with quite serious problems of adjustment
and restructuring and the fact that statistically the income per
head in these regions is higher does not necessarily mean that
there is immediately a public capacity available to launch such
a process. We have a number of Member States and regions which
even today have big problems matching the money which comes from
the Community with national money. The little help they get from
the EU with its leverage effect can accelerate the adjustment
process in these regions considerably sometimes.
Q275 Chairman: Thank you very much,
Mr Ahner. We are juggling to arrive at a recommendation for the
future of the Structural Funds and one of the things that bears
on the question is, of course, the costs, which Lord Woolmer is
going to ask you about shortly. From the point of view of many
other European principles, like subsidiarity, it still strikes
the ear of a rich country oddly, a rich country with plenty of
administrative capacity. In a way, one would see a more rational
structure whereby EU assistance was confined to the poorer countries
and to fewer of them, to fewer regions, because then you would
think you could get more concentration. I think you have probably
made the case for intervention in the richer countries which may
still have pockets, but is this being done at a very high administrative
cost? If you could turn all the administrative talent in the Commission
and in other places into the poorer regions, one sort of feels
as a businessman you would get a terrific result.
Mr Ahner: I am not 100 per cent sure. If you
put all the money into the poorer countries, at this stage of
development I think you would get a real problem with digestion.
That is the first point. The second point is using the money in
the richer regions brings a certain number of advantages which
are important. I mentioned some of them and the other advance,
which is also important, is this makes the richer regions participate
in the overall process. I will come to the cost of the process
in a minute. What was quite interesting to see was in the negotiations
in general we had to be much more convincing with the richer regions
than with the poorer regions in terms of convincing them to do
things which were in line with the common objectives. This is
strange because very often it was the richer regions who in the
past have said absolutely to go for innovation and money has to
be put into research. When we saw the programmes and ideas that
were developed, we had to have a real discussion about what innovation
means, what could and could not be done. This dialogue brings
added value to the whole process. That is on the economic side.
On the political side, personally I am not 100 per cent convinced
that within Europe it would be a good thing to have a situation
where you could say, "There are the poor countries, they
get the money from the rich countries and that's it". That
is not how I would see a European-wide policy of development and
improvement of competitiveness. If I may say, everybody is under
a "common discipline" and you are not only under a discipline
because you are a poorer country, others also have to follow a
similar approach under discipline. I agree totally you can discuss
all this but last year I was extremely surprised, to be honest,
because with my prejudice as an economist I had not expected the
costs would go so far.
Q276 Lord Woolmer of Leeds: Just
remind me, of the 70 regions, what proportion of the 470 million
Europeans live in those regions? What is the population of those
70 regions?
Mr De Michelis: About a quarter, about 100 million
people.[2]
Q277 Lord Woolmer of Leeds: So it
is about the same proportion. It is about a quarter.
Mr De Michelis: Yes.
Q278 Lord Woolmer of Leeds: There
are two issues of cost that I would like to explore with you.
One is at Commission level itself, which is relatively easy I
suspect, how much it costs the Commission in terms of funds and
if that varies between countries. Secondly, the cost of the programmes
is felt from particular applicants, particular projects through
to administering regional authority or whatever it is, through
to Member States and yourselves. There is a series of layers of
cost of management, administration, financial systems, controls
and so on. That is going to vary between the regions you are dealing
with and the Member States you are dealing with. Have you done
any serious examination or study of those costs and how they relate
to the spend and how that varies?
Mr Ahner: On what happens in the Member States,
we are currently carrying out a study and we will have the results
next year. We are carrying out a study on what the costs are of
control in particular Member States.
Q279 Lord Woolmer of Leeds: Just
the control. If it is not impolite to ask, would it be possible
for you to send us a copy of the terms of reference of that study,
that would be very helpful, rather than go over it now.
Mr Ahner: Yes. The next point is as far as the
Commission is concerned we have made a standardised calculation
on the basis of standards which we normally use. If I take the
overall concrete management of the funds in DG Regio, so financial
management but also the overall management of the programmes,
and I take the managers, I set aside the economic analysts and
these people, I come to an amount of about €50 million per
year for €35 billion which we spent. This is about half a
per cent. If I take the whole of the Directorate-General and I
say everything has to do with Cohesion Policy I come roughly to
a good one per cent because there are all the other services,
legal advice, the economic analysis and so on. In total we have
600 officials in DG Regio. We spend €35 billion a year, €350
billion over the seven year period. When you compare it to other
Directorate-Generals, the biggest Directorate-General in the Commission
is the Research Directorate-General which has about 3,000 people
working for €70 billion. In fact, at the Commission level
the cost is not exorbitant. Part of the problem is you have to
be fair and our colleagues in DG Research are in direct management
of research programmes whereas we are in shared management with
the Member States and there is a lot of management which takes
place at the regional level. Let us be honest, even if no money
is spent from the EU, the management at the regional and national
level would have to take place. If I take the last enlargement
which we had with richer countries—Austria, Finland and
Sweden—when you looked at these countries there were quite
sophisticated management systems already in place and also for
development purposes.
1 Note by witness: Seventy is the number of
convergence regions. Yet, more regions are covered by 80% of cohesion
funding: 116. These include regions covered by the Cohesion Fund
and phasing out regions. Back
2
Note by witness: In line with footnote n.1, the 116 regions
covered by 80% of the cohesion budget are home to around 200 million
people or 40% of the total EU population. Back
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