The Common Regional Policy The Common Regional Policy

and and

Regional DevelopmentRegional Development

within the EUwithin the EU

Barry BruntGeography DepartmentUniversity College Cork

Purpose of PaperPurpose of Paper

To review evolving nature of EU Common To review evolving nature of EU Common Regional Policy over the last 50 years.Regional Policy over the last 50 years.

1.1. IntroductionIntroduction

2.2. Reasons for introducing/strengthening of CRPReasons for introducing/strengthening of CRP

3.3. Changes within CRP and consequencesChanges within CRP and consequences

4.4. ConclusionsConclusions

IntroductionIntroduction

March 25March 25thth, 1957, Treaty of Rome signed , 1957, Treaty of Rome signed between 6 countries to form EECbetween 6 countries to form EEC

Focus of EEC on market/economic principle Focus of EEC on market/economic principle Free tradeFree trade Enlarged marketEnlarged market Economies of scaleEconomies of scale Comparative advantageComparative advantage

Under economic principles cores benefit Under economic principles cores benefit more than peripheriesmore than peripheries

Although EEC aspired to ‘harmonious Although EEC aspired to ‘harmonious development’ no policy to counteract free development’ no policy to counteract free market forcesmarket forces

By 1970s, recognised spatial inequalities By 1970s, recognised spatial inequalities were a threat to unitywere a threat to unity

Common Regional Policy (CRP) in 1975 Common Regional Policy (CRP) in 1975

Five reasons for CRPFive reasons for CRP1.1. EnlargementEnlargement

The accession of new member states (6-27)The accession of new member states (6-27) Increases the scale/complexity of problem Increases the scale/complexity of problem

regionsregions Each enlargement (except 1995) added the Each enlargement (except 1995) added the

least prosperous member stateleast prosperous member state 2004 enlargement most difficult 2004 enlargement most difficult

10 new member states10 new member states Most were former Communist statesMost were former Communist states All had GDP/ca well below EU (15) averageAll had GDP/ca well below EU (15) average

2004 and 2007 enlargement added a large new 2004 and 2007 enlargement added a large new eastern periphery to the EU (27).eastern periphery to the EU (27).

Five reasons for CRPFive reasons for CRP1.1. EnlargementEnlargement

The accession of new member states (6-27) The accession of new member states (6-27) Increases the scale/complexity of problem Increases the scale/complexity of problem

regionsregions Each enlargement (except 1995) added the Each enlargement (except 1995) added the

least prosperous member stateleast prosperous member state 2004 enlargement most difficult 2004 enlargement most difficult

10 new member states10 new member states Most were former Communist statesMost were former Communist states All had GDP/ca well below EU (15) averageAll had GDP/ca well below EU (15) average

2004 and 2007 enlargement added a large new 2004 and 2007 enlargement added a large new eastern periphery to the EU (27).eastern periphery to the EU (27).

European Union % Increase in population

% Increase in GDP

% Change in GDP per person

EU 6 to EU 9(first enlargement) 32 29 - 3

EU 9 to EU 12 (Second and third

enlargements)22 15 - 6

EU 12 to EU 15(Fourth enlargement) 11 8 - 3

EU 15 to EU 2729 9 - 16

Selected Data for the Enlarging EUSelected Data for the Enlarging EU

GDP per head(pps), 2004

2.2. DeepeningDeepening

The introduction of additional/stronger policies to The introduction of additional/stronger policies to promote EU developmentpromote EU development

Initially – only 3 policies (agriculture, competition, Initially – only 3 policies (agriculture, competition, transport)transport)

Enlargement and Single European Act demanded Enlargement and Single European Act demanded additional/more effective policiesadditional/more effective policies

Reformed CRP (1988)Reformed CRP (1988) Lisbon Agenda (2000) set goal for making EULisbon Agenda (2000) set goal for making EU

““the most competitive and dynamic knowledge-based economy the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion”and better jobs and greater social cohesion”

CRP/Cohesion Policy now recognised as pivotal for CRP/Cohesion Policy now recognised as pivotal for future development of EUfuture development of EU

3.3. GlobalisationGlobalisation

Two key influences:Two key influences:

(a)(a) MNCs and fdiMNCs and fdi EU largest host region for global fdi (45%)EU largest host region for global fdi (45%) MNCs attracted strongly to cores; branch plants relocated to low MNCs attracted strongly to cores; branch plants relocated to low

cost peripheries cost peripheries No longer sustainable option – cheaper alternative locations No longer sustainable option – cheaper alternative locations

available (eg. E. Europe, S. Asia)available (eg. E. Europe, S. Asia)

(b)(b) WTOWTO Objective to liberalise world trade and open up developed market Objective to liberalise world trade and open up developed market

economies to LDC exportseconomies to LDC exports Significant implications for EU peripheries – disproportionate Significant implications for EU peripheries – disproportionate

depending on low value productsdepending on low value products

Both influences demand reformed CRP to emphasise improving Both influences demand reformed CRP to emphasise improving competitiveness and diversifying economies of peripheral regions.competitiveness and diversifying economies of peripheral regions.

4.4. Demographic ConcernsDemographic Concerns

Demographic profile of EU changed Demographic profile of EU changed significantly – approaching 5significantly – approaching 5thth stage DTM stage DTM

Major consequences – dependency, declining and Major consequences – dependency, declining and ‘greying’ population, less enterprising culture‘greying’ population, less enterprising culture

Lisbon Agenda calls for more effective use of Lisbon Agenda calls for more effective use of human resources and family-friendly policieshuman resources and family-friendly policies

Regional/Cohesion Policy key role to meet Lisbon Regional/Cohesion Policy key role to meet Lisbon objectives objectives

Peripheries possess underutilised human resources Peripheries possess underutilised human resources eg. unemployment, low productivity rateseg. unemployment, low productivity rates

Release potential via directing funds to create an Release potential via directing funds to create an enterprise culture rather than a dependency culture.enterprise culture rather than a dependency culture.

Demographic Trends in an Evolving EUDemographic Trends in an Evolving EU

Total Population

(million)

Birth Rate

o/oo

Death Rate

o/oo

Fertility Rate*

% Population over 65

EU (16) 1960 170 18.2 10.7 2.6 10.3

EU (6) 1970 189 15.8 10.7 2.4 12.3

EU (9) 1980 261 12.6 10.6 1.8 14.4

EU (12) 1990 345 11.6 10.1 1.6 14.5

EU (15) 2000 377 11.0 9.9 1.5 15.7

EU (25) 2005 460 10.5 9.5 1.5 16.5

*Fertility Rate is number of children per female of child-bearing age.

Source: European Community (various years). Eurostat Yearbooks: Europe in Figures: Luxembourg.

4.4. Demographic ConcernsDemographic Concerns

Demographic profile of EU changed significantly – Demographic profile of EU changed significantly – approaching 5approaching 5thth stage DTM stage DTM

Major consequences – dependency, declining and Major consequences – dependency, declining and ‘greying’ population, less enterprising culture‘greying’ population, less enterprising culture

Lisbon Agenda calls for more effective use of Lisbon Agenda calls for more effective use of human resources and family-friendly policieshuman resources and family-friendly policies

Regional/Cohesion Policy key role to meet Lisbon Regional/Cohesion Policy key role to meet Lisbon objectives objectives

Peripheries possess underutilised human resources Peripheries possess underutilised human resources eg. unemployment, low productivity rateseg. unemployment, low productivity rates

Release potential via directing funds to create an Release potential via directing funds to create an enterprise culture rather than a dependency culture.enterprise culture rather than a dependency culture.

5.5. Environment and Sustainable DevelopmentEnvironment and Sustainable Development

Since late 1980s, concern with environmental Since late 1980s, concern with environmental issues and sustainability increased eg. issues and sustainability increased eg. Brundtland Brundtland Report (1987), SEA (1987), TEU (1993), Lisbon (2000)Report (1987), SEA (1987), TEU (1993), Lisbon (2000)

Peripheral EU has diverse range of high quality Peripheral EU has diverse range of high quality physical and cultural environments physical and cultural environments

If environments managed sustainably – good If environments managed sustainably – good prospects for developmentprospects for development

Effective CRP is vital for effective management Effective CRP is vital for effective management and promotion of peripheral EU (coordinate and promotion of peripheral EU (coordinate development)development)

CRP Changes and ConsequencesCRP Changes and Consequences

Introduction and evolution of CRP involve four Introduction and evolution of CRP involve four phasesphases

1.1. Absence of CRP, 1958-74Absence of CRP, 1958-74

2.2. Emergence of CRP, 1975-88Emergence of CRP, 1975-88

3.3. Modernisation of CRP, 1989-2006Modernisation of CRP, 1989-2006

4.4. Current CRP, 2007-13Current CRP, 2007-13

Phase 1: Absence of Phase 1: Absence of CRP, 1958-1974CRP, 1958-1974

Market principle Market principle anticipated economic anticipated economic growth would ‘trickle growth would ‘trickle down’ from core to down’ from core to peripheryperiphery

National governments National governments promoted strong promoted strong regional policies to regional policies to decentralise decentralise developmentdevelopment

Buoyant economies encouraged fdi (branch plants) Buoyant economies encouraged fdi (branch plants) in peripheriesin peripheries

Signs of convergence in prosperity between Signs of convergence in prosperity between member statesmember states

National DisparitiesIn per capita GDPby Member state *

Phase 2: Emergence of CRP, 1975-1988Phase 2: Emergence of CRP, 1975-1988

Enlargement (1973) and oil crisis (1973-4) result in a CRP Enlargement (1973) and oil crisis (1973-4) result in a CRP (1975) and ERDF to fund designated regions(1975) and ERDF to fund designated regions

Designated regionsDesignated regions receive: 17.5B Ecureceive: 17.5B Ecu benefit from: 765000 jobsbenefit from: 765000 jobs and: modernised infrastructureand: modernised infrastructure

Despite benefits:Despite benefits: Financial resources limited (average 7% Budget)Financial resources limited (average 7% Budget) Covers too large an area – lacks focusCovers too large an area – lacks focus Short –term, one-off projects dominateShort –term, one-off projects dominate

Result: Result: By 1987, problem regions remain same with addition of Mediterranean By 1987, problem regions remain same with addition of Mediterranean

regionsregions Divergence replaces convergent trends in prosperity levels between Divergence replaces convergent trends in prosperity levels between

member statemember state

Regions qualifying for Support under EU

Regional Policy in 1975

Phase 2: Emergence of CRP, 1975-1988Phase 2: Emergence of CRP, 1975-1988

Enlargement (1973) and oil crisis (1973-4) result in a CRP (1975) Enlargement (1973) and oil crisis (1973-4) result in a CRP (1975) and ERDF to fund designated regionsand ERDF to fund designated regions

Designated regionsDesignated regions receive: 17.5B Ecureceive: 17.5B Ecu benefit from: 765000 jobsbenefit from: 765000 jobs and: modernised infrastructureand: modernised infrastructure

Despite benefits:Despite benefits: Financial resources limited (average 7% Budget)Financial resources limited (average 7% Budget) Covers too large an area – lacks focusCovers too large an area – lacks focus Short –term, one-off projects dominateShort –term, one-off projects dominate

Result: Result: By 1987, problem regions remain same with addition of Mediterranean By 1987, problem regions remain same with addition of Mediterranean

regionsregions Divergence replaces convergent trends in prosperity levels between Divergence replaces convergent trends in prosperity levels between

member statemember state

Regions eligible underObjectives of the Structural Funds

1989 - 99

Phase 2: Emergence of CRP, 1975-1988Phase 2: Emergence of CRP, 1975-1988

Enlargement (1973) and oil crisis (1973-4) result in a CRP (1975) Enlargement (1973) and oil crisis (1973-4) result in a CRP (1975) and ERDF to fund designated regionsand ERDF to fund designated regions

Designated regionsDesignated regions receive: 17.5B Ecureceive: 17.5B Ecu benefit from: 765000 jobsbenefit from: 765000 jobs and: modernised infrastructureand: modernised infrastructure

Despite benefits:Despite benefits: Financial resources limited (average 7% Budget)Financial resources limited (average 7% Budget) Covers too large an area – lacks focusCovers too large an area – lacks focus Short –term, one-off projects dominateShort –term, one-off projects dominate

Result: Result: By 1987, problem regions remain same with addition of Mediterranean By 1987, problem regions remain same with addition of Mediterranean

regionsregions Divergence replaces convergent trends in prosperity levels Divergence replaces convergent trends in prosperity levels

between member statebetween member state

Phase 3: Modernising the CRP, 1989- 2006Phase 3: Modernising the CRP, 1989- 2006

CRP reformed in 1988 (enlargement, SEA, divergence, CRP reformed in 1988 (enlargement, SEA, divergence, Euroschlerosis)Euroschlerosis)

3 key elements3 key elements

1. 1. FundingFunding ERDF combined with ESF, Guidance Fund, FIFG to form ERDF combined with ESF, Guidance Fund, FIFG to form

Structural Funds (SF)Structural Funds (SF) Significant increase in SFsSignificant increase in SFs Cohesion Funds (1993) provided for four weakest Cohesion Funds (1993) provided for four weakest

national economies – Cohesion Fournational economies – Cohesion Four More realistic resource base to address scale and More realistic resource base to address scale and

complexity of spatial inequalitiescomplexity of spatial inequalities

2.2. ProgrammesProgrammes

Multiannual, integrated programmes Multiannual, integrated programmes replace one-off projectsreplace one-off projects

Encourages bottom-up planningEncourages bottom-up planning

Programmes – vital component of Programmes – vital component of national plans to secure SFs (eg. national plans to secure SFs (eg. Ireland’s NDPs)Ireland’s NDPs)

3. 3. Concentration on EU Concentration on EU ObjectivesObjectives

Problem regions defined Problem regions defined according to EU not national according to EU not national criteriacriteria

SFs to focus on EU objectivesSFs to focus on EU objectives 1989-93 5 objectives (3 spatial)1989-93 5 objectives (3 spatial) 1994-99 6 objectives (4 spatial)1994-99 6 objectives (4 spatial) 2000-06 3 objectives (2 spatial)2000-06 3 objectives (2 spatial)

Structural Funds 2004-2006Areas eligible underObjectives 1 and 2

Successes Successes Convergence Convergence

replaces replaces divergence in divergence in prosperity levels prosperity levels between between member statesmember states

Implications of Modernised CRPImplications of Modernised CRP

Some successes but on-going problemsSome successes but on-going problems

Success emphasised by above average Success emphasised by above average economic performance of Cohesion Foureconomic performance of Cohesion Four

Issues remainIssues remain

Most 1989-93 Most 1989-93 problem regions problem regions remain remain

Enlargement Enlargement adds to scale of adds to scale of problem regionsproblem regions

Divergence, rather than convergence, highlights trends Divergence, rather than convergence, highlights trends in prosperity levels between EU regionsin prosperity levels between EU regions

Contrasts between top and bottom two countries and regionsContrasts between top and bottom two countries and regionsmeasured in GDP per capita (EU-27=100)measured in GDP per capita (EU-27=100)

Country Index Region Index

Luxembourg 230 Inner London 303

Ireland 138 Luxembourg 230

…………….. ….. ……………….. ……..

Romania 33 Severozapaden (Bul)

26

Bulgaria 32 Nord-Est (Rom) 24

Source: European Communities (2006) Regions: Statistical Yearbook, 2006.

Luxembourg.

4. 4. Current CRP, 2007-13Current CRP, 2007-13

CRP reformed in 2006CRP reformed in 2006 Reality of enlargement in CEEReality of enlargement in CEE EU focuses all policies/resources to meet Lisbon EU focuses all policies/resources to meet Lisbon

objectives of growth and competitivenessobjectives of growth and competitiveness Limited progress to harmonious developmentLimited progress to harmonious development

SFs increased to €347B (more than one-third SFs increased to €347B (more than one-third budget) budget)

SFs reformedSFs reformed ERDF & ESF & CFERDF & ESF & CF FIFG and Guidance Fund removedFIFG and Guidance Fund removed

(emphasises urban focus)(emphasises urban focus) 3 new objectives3 new objectives

Structural Funds 2007 – 2013: Convergence and Regional Competitiveness Objectives

Implications of Reformed CRP (?)Implications of Reformed CRP (?)

1.1.Increased competition for SFsIncreased competition for SFs

Only 4 regions in CEE above 75% EU Only 4 regions in CEE above 75% EU GDP/ca GDP/ca

New Eastern periphery to receive 57% of New Eastern periphery to receive 57% of SFsSFs

Traditional problem regions in EU (15) Traditional problem regions in EU (15) lose dominancelose dominance

2.2. Fewer Fewer Convergence Convergence Regions in EU (15)Regions in EU (15)

Strong economic Strong economic performance of performance of some regions eg. S some regions eg. S & E in Ireland& E in Ireland

‘‘Statistical Effect’ of Statistical Effect’ of enlargementenlargement

16 regions to be 16 regions to be phased out by 2013phased out by 2013

Most convergent Most convergent objective regions in objective regions in CEECEE

3. 3. Emphasis on Lisbon objectives Emphasis on Lisbon objectives means:means:

Promoting a region’s indigenous resource Promoting a region’s indigenous resource base/infrastructure rather than base/infrastructure rather than dependency on ‘hand-outs’dependency on ‘hand-outs’

Changing basis of development in problem Changing basis of development in problem regions from low cost sites to competitive regions from low cost sites to competitive locationslocations

A longer-term perspective and sustainable A longer-term perspective and sustainable developmentdevelopment

4. 4. Above average growth of new member Above average growth of new member statesstates

Large transfer of SFsLarge transfer of SFs

Modernised infrastructureModernised infrastructure

Low costs and underdeveloped resourcesLow costs and underdeveloped resources

High market potentialHigh market potential

Expect convergent trend in prosperity Expect convergent trend in prosperity between member states to continue eg. between member states to continue eg. Baltic CircleBaltic Circle

5. 5. Lisbon objectives favour core regionsLisbon objectives favour core regions

Attributes of urban cores attract Attributes of urban cores attract investment more than rural peripheriesinvestment more than rural peripheries

Divergent trends between regions likely to Divergent trends between regions likely to continuecontinue

National policy/intervention vital to National policy/intervention vital to redistribute development opportunities redistribute development opportunities withinwithin countries e.g. NSS in Ireland countries e.g. NSS in Ireland

ConclusionsConclusions

Macro-economic forces are powerful and favour Macro-economic forces are powerful and favour core/urban regionscore/urban regions

CRP has been /remains vital to redistribute CRP has been /remains vital to redistribute resources from core to peripheryresources from core to periphery

Some successes achieved (Ireland), but large Some successes achieved (Ireland), but large problem regions remain (CEE)problem regions remain (CEE)

Focus of Lisbon Agenda on growth and Focus of Lisbon Agenda on growth and competitiveness makes CRP even more competitiveness makes CRP even more essentialessential

The goal of ‘harmonious development’ is likely to The goal of ‘harmonious development’ is likely to remain elusive – at least at regional levelremain elusive – at least at regional level