EUROPEAN COMMISSION Regional Policy EN Third Cohesion Report

EUROPEAN COMMISSION Regional Policy EN Third Cohesion Report February 2004 Convergence, Competitiveness, Co-operation Budapest, 19/2/2004 footer

EUROPEAN COMMISSION Regional Policy EN Third Cohesion report Context Proportions of expenditure Cohesion Policy "A harmonious, balanced and sustainable development of economic activities" throughout the Union (Article 2 of Treaty on European Union) Economic and social cohesion is to be pursued with the aim of "Reducing disparities between the levels of development of the various regions and the backwardness of the least favoured regions or islands, including rural areas" (Article 158 of Treaty on European Union) 2 19/02/2004 Budapest

EUROPEAN COMMISSION Regional Policy EN 19/02/2004 Budapest Context of Reform of Cohesion Policy Third Cohesion report • enlarged Union requires enhanced solidarity • leverage to the priorities adopted in Lisbon and Gothenburg context of reform • higher profile as an international player • citizenship and questions of justice and home affairs at heart of Community process 3

EUROPEAN COMMISSION Regional Policy EN Third Cohesion report Financial aspects 4 19/02/2004 Budapest Financial perspectives 2007 -2013 Promoting Europe's wealth - policy challenges and budgetary means of the enlarged Union A refocusing in the financial perspectives. Four political priorities for the Union: • Sustainable development – competitiveness, cohesion (for growth and employment): +212% • Conservation and management of natural resources: +3% • Citizenship, freedom, security and justice: +182% • The EU – a global partner: +40% Ø Commission proposal to maintain level of own resources at 1. 24% Community GDP

EUROPEAN COMMISSION Regional Policy EN Third Cohesion report 19/02/2004 Budapest Financial perspective Proposal by Commission • Average spending level of 1. 14% of GNI per year • 1. 09% in 2006 Financial Perspective • 5 Maintaining current level of own ressources: 1. 24% of GNI in payment appropriations

EUROPEAN COMMISSION Regional Policy EN Third Cohesion report 19/02/2004 Budapest Financial perspectives For information: EU Budget 2000 - 2006 Ø Total commitment allocations EU 25: € 108. 5 billion p. a. of which Structural Actions: € 37. 0 billion p. a. Financial aspects Financial Perspectives 2007 -2013 Ø Total commitment allocations EU 27: € 146. 4 billion p. a. of which Structural Actions: € 48. 0 billion p. a. (excluding rural development) Figures in 2004 prices 6

EUROPEAN COMMISSION Regional Policy EN Third Cohesion report Context Proportions of expenditure 19/02/2004 Budapest Cohesion Policy • 1/3 of EU budget (€ 336 billion at 2004 prices) • About 0. 41% of Union GDP (0. 46% with rural development & fisheries) • Proposed 50 -50 split between current and new Member States • Appx. ¾ of the budget for regions and Member States lagging behind in development • Therefore, concentration on less prosperous parts of EU 7

EUROPEAN COMMISSION Regional Policy EN Categories of expenditure in Structural Funds Third Cohesion report Context For 2007 -2013 + strengthening administrative capacity 8 19/02/2004 Budapest

EUROPEAN COMMISSION Regional Policy EN Third Cohesion report context 19/02/2004 Budapest Importance of Cohesion Reports Every 3 years Commission analyses state of cohesion and impact of its policies (Art. 159 of Treaty): 1 st report (1996) - the foundations for Agenda 2000 2 nd report: (2001) - launched debate on Cohesion Policy after enlargement 3 rd report (February 2004): presents proposals for reformed Cohesion Policy after 2007 9

EUROPEAN COMMISSION Regional Policy EN Third Cohesion report The Report contains 4 parts 1. Analysis of situation and trends in the regions, and competitiveness factors 2. The contribution of national policies to cohesion structure 3. The contribution of other Community policies 4. The impact of Cohesion Policy 10 19/02/2004 Budapest

EUROPEAN COMMISSION Regional Policy EN Third Cohesion report Part 1 situation and trends: some results 11 19/02/2004 Budapest Observations of Cohesion Report 1. Cohesion Policy has achieved undeniable results: • Significant convergence of cohesion countries • Positive trend in Objective 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

EUROPEAN COMMISSION Regional Policy 19/02/2004 Budapest EN GDP growth in Cohesion Countries Third Cohesion report Part I Situation and trends Ireland: GDP +8% p. a. compared with EU average 2% p. a. 12

19/02/2004 Budapest EUROPEAN COMMISSION Regional Policy EN Third Cohesion report Part I Situation and trends Unemployment rates 1996 -2001 Unemployment rates in EU 15, 1996 and 2002 (% of labour force) 1996 2002 EU 15 Cohesion countries Greece Spain Ireland Portugal Other Member States Source: Eurostat, LFS 13 10, 7 7, 8 17, 0 9, 6 9, 7 10, 0 22, 3 11, 4 11, 9 4, 3 7, 4 5, 1 9, 5 7, 5

EUROPEAN COMMISSION Regional Policy EN Third Cohesion report Part I 19/02/2004 Budapest Impact of enlargement 2. Disparities in an enlarged Union will grow: • 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) 14

EUROPEAN COMMISSION Regional Policy EN Third Cohesion report Part I Impact of enlargement • Population in the convergence objective goes from 84 million to 123 million (153 million with Bulgaria and Romania) • Development gap between regions doubles: average GDP in Objective 1 is 65%: new MS 46% • Employment rate in EU 15 grew from 60% to 64% (1996 – 2002). • In new Member States 10 it is 56% (59% in 1999) 15 19/02/2004 Budapest

EUROPEAN COMMISSION Regional Policy EN GDP per head PPS 2002 Index, EU 25 = 100 Third Cohesion report Part I Situation and trends Source: Eurostat, National Accounts 16 19/02/2004 Budapest

EUROPEAN COMMISSION Regional Policy EN Third Cohesion report Part I Situation and trends < 50 50 - 75 75 - 90 90 - 100 - 125 >= 125 No data Index EU 25 = 100 Source: Eurostat 17 Regional GDP 2001 GDP per head (PPS), 2001 19/02/2004 Budapest

EUROPEAN COMMISSION Regional Policy EN Third Cohesion report < 56. 0 – 60. 2 < 60. 2 – 64. 4 – 68. 6 >= 68. 6 No data EU-27 = 62. 4 Standard deviation = 8. 4 Source: Eurostat and NSI 18 Employment rate 2002 % of population between 15 -64 19/02/2004 Budapest

EUROPEAN COMMISSION Regional Policy EN Third Cohesion report < 7. 45 – 9. 55 < 9. 55 – 11. 65 – 13. 75 >= 13. 75 No data Average = 10. 6 Standard deviation = 4. 30 Sources: Eurostat 19 Employment hi-tech 2002 Regional competitive factors 19/02/2004 Budapest

EUROPEAN COMMISSION Regional Policy EN Third Cohesion report 19/02/2004 Budapest The contribution of national policies 3. EU Cohesion Policy crucial supplement to national policies: • National budgets are 47% of GDP on average Part II Different approaches to promote growth 20 • The Cohesion budget is 0. 46% 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

EUROPEAN COMMISSION Regional Policy EN Third Cohesion report Part III Need to promote coherence of policies 19/02/2004 Budapest The contribution of other Community policies 4. Other Community policies can also contribute to cohesion • Policies at specific objectives set out in the Treaty • Do not always have cohesion as explicit objective • Need to strengthen coherence between these policies and the objective of cohesion: – – Research and development expenditure Environment policy contributes to sustainable development Trans-European Networks Competition policy's role in strengthening competitiveness • Opinion surveys show, nevertheless, that Cohesion Policy and Agricultural Policy are most visible 21

EUROPEAN COMMISSION Regional Policy EN Third Cohesion report 19/02/2004 Budapest The impact of Cohesion policy • Increase public and private investment in beneficiary regions (growth) • Contribute to increasing GDP (convergence) Part IV Mobilising resources to promote growth • Create jobs and maximise potential of human resources • Increase physical and human capital • Better regional and local governance • Financial stability over 7 years 22

EUROPEAN COMMISSION Regional Policy EN Proposals for Reform: A new partnership for Cohesion Third Cohesion report Why a new partnership? Reform of the policy 19/02/2004 Budapest • To reinforce Union's sustainable development priorities (Lisbon and Gothenburg) • Because enlargement increases the need for Cohesion Policy (15 out of 27 Member States will be major beneficiaries) Conclusions 23 • Because Cohesion Policy will be of concern to all States, regions and towns • Because of reinforced budget – 32% more

EUROPEAN COMMISSION Regional Policy EN Third Cohesion report Reform of the policy Priorities of the reform (I) First objective: Convergence and competitiveness Who benefits? • Regions 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) How much? Conclusions 24 19/02/2004 Budapest • Budget about 78% of the total • Clear priority to new Member States in terms of convergence effort

EUROPEAN COMMISSION Regional Policy EN Third Cohesion report Priorities of the reform (I) First objective: Convergence and competitiveness • Reform of the policy • Conclusions • 25 19/02/2004 Budapest What will be financed? ERDF similar actions to present plus administrative capacity ESF priorities of European Employment Strategy plus administrative capacity CF transport and environment but emphasis on sustainable development (rail, multi-modal, ports, renewable energy and clean urban transport)

EUROPEAN COMMISSION Regional Policy EN Third Cohesion report Reform of the policy Conclusions 19/02/2004 Budapest 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: • Employment (basis: European Employment Strategy) • Regional competitiveness: - innovation and the knowledge society accessibility and services of general interest environment and risk protection would include responsibility for cities delegated to the regions (URBAN+), no community initiative (Lisbon and Gothenburg strategy) Budget: ca 18% of total FS= current objectives 2 and 3 26

EUROPEAN COMMISSION Regional Policy EN Third Cohesion report Reform of the policy Conclusions Priorities of the reform (III) Third objective: European Territorial cooperation The success of INTERREG - Community added value Promotes harmonious and balanced integration • Border regions, including sea borders • to Cross border co-operation (MS to propose changes the 13 present zones of INTERREG III B) • Interregional co-operation (also within mainstream) • new External cross-border co-operation – linked to the European Neighborhood Instrument Budget: around 5% of the total 27 19/02/2004 Budapest

EUROPEAN COMMISSION Regional Policy 19/02/2004 Budapest EN Implementation system: "evolution not revolution" Third Cohesion report • – – – Reform of the policy • Conclusions Confirmation of basic principles: Simplification - subsidiarity & decentralisation: – – – 28 multi-annual programming; partnership; evaluation; co-financing; shared responsibility. more strategic approach; strategic framework adopted by EC (based on convergence, competitiveness & employment priorities); operational phase – limited number of thematic & regional operational programmes;

EUROPEAN COMMISSION Regional Policy 19/02/2004 Budapest EN Implementation system: "evolution not revolution" Third Cohesion report • Simplification and coherence of instruments: – – Reform of the policy – Conclusions • Simplification of financial management: – – – 29 Reduce number of financial instruments (ERDF, SF & CF); Single fund programmes only; Single strategy for ERDF & CF for transport and environment; ERDF & ESF to include programmes to reinforce administrative capacity; Maintain current co-financing (increment for rural zones, mountain zones and islands). Proportionality principle; Declaration of assurance; Payments system – advances (7%) and N+2 rule maintained.

EUROPEAN COMMISSION Regional Policy 19/02/2004 Budapest EN Some considerations for Hungary Third Cohesion report • • • Hungary 4% Capping Budapest Phasing out (natural) Become competitive on European level and beyond – Lisbon/Gothenburg • • Balanced development between capital and territory Meeting the challenge to implement 2004 -6 – we are still in 2004! 30

EUROPEAN COMMISSION Regional Policy 19/02/2004 Budapest EN Proposed timetable Third Cohesion report Next stages 10 -11 May 2004: European Cohesion Forum, Brussels July 2004: Commission adopts the legislative package End 2005: Decision by Council and European Parliament 2006: Preparation of programmes for period 2007 -2013 1 Jan 2007: Implementation begins 31