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REFORM OF STRUCTURAL FUNDS - FULL TEXT OF SPEECH FROM COR PLENARY SESSION

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'Reform of the Structural Funds'- Speech given at the plenary session of the Committee of the Regions by Monika Wul...
'Reform of the Structural Funds'- Speech given at the plenary session of the Committee of the Regions by Monika Wulf-Mathies, member of the European Commission, 10 March

opening address,

I.

The meeting in closed session of the foreign ministers, and the informal talks between the heads of state and government at Petersberg, signalled the start of the final phase of negotiations on Agenda 2000.

Despite the persistence of considerable differences of opinion concerning the general financial framework, all parties now agree on the desirability of concluding the negotiations at the Berlin summit.

This is not only essential if regional programmes are to be adopted in time for the new programming period and there is to be no disruption to structural funding for the poorest regions and groups in the union. Failure to reach agreement at the summit would call into question the ability of the European Union to act and to enact reforms and deal a psychological blow to the process of enlargement.

I would therefore like to express my gratitude to the Committee of the Regions for the unreserved support it has given not only to the agreed timetable, but also to the efforts of the Commission to prevent backsliding and to preserve the level of consensus achieved thus far. This support was expressed in the draft resolution presented by its expert committee 1, chaired by Mr Zaplana.

It will surprise no-one that the sticking point for the negotiations on the reform of the Structural Funds has proved to be the financial arrangements.

Clearly, structural policy must take account of the realities of national budgets and the limits to the financial burdens that can be placed on taxpayers. This is why the Commission proposal focuses on the stabilisation of expenditure and more efficient use of funds.

So what exactly do we mean by stabilisation in this context?

The stabilisation scenarios that have been discussed thus far have used different years as a basis for their calculations. In the model proposed by the Commission, cohesion expenditure would be capped at 1999 levels; the 'net payer' model, on the other hand, is based on the average expenditure between 1993 and 1999, and would result in a cut of 18% in the year 2000 as compared with 1999.

In such circumstances, the term stabilisation would seem to me to be a misnomer. A reduction of this magnitude strikes at the very heart of the cohesion policy and tarnishes the credibility of the policy of social cohesion as a counterweight to the single market and EMU.

Even the model proposed by the Commission would imply a contraction, since cohesion spending would no longer grow at the rate it has in the past, but rather would be progressively reduced from 35 billion in 2000 to 31 billion in 2006. These reductions would allow the financial room for manoeuvre needed to cope with enlargement. No other Community policy can lay claim to such manifest credentials of solidarity in its expenditure patterns with regard to the pre-accession strategy and accession of new Member States, for which, in 2006, 30% of the funds under heading 2 of the EU budget will be available.

Despite this, the Commission proposals enable solidarity with the poorest regions of the Community to remain unchanged. However, I am opposed to any questioning of the very principle of cohesion itself, and I know that the European Parliament and the Committee of the Regions share my view on this.

II.

Even though we may be far from reaching agreement on the financial package to put in place, we have already made considerable progress and taken some important preliminary decisions regarding the architecture of the new structural policy. At the general session of the Council of Ministers, for example, agreement has already been reached vis-à-vis the following points in the proposal for the General Regulation:

Concentration on the proposed three Objectives.

The introduction of a performance reserve, the disbursement of which will be decided on at the halfway stage of the programming period. However, the extent of this reserve will be limited to 4% of total funding expenditure, which will be spread among the different programmes at national level. In light of this, the Committee of the Regions insist that this Regulation includes measures to ensure that the various regional authorities can also be held accountable.

The decisions on the use of the reserve will be made in partnership between the Commission and the Member States.

Agreement on the principle of creating greater synergy between the areas eligible for assistance under structural policy and national regional aid programmes, in order to increase the efficiency of regional assistance. The fact that the compromise settlement no longer sets a fixed percentage for the permitted margin of flexibility is a recognition of the misgivings that have also been expressed in the Committee of the Regions.

As regards the move to limit the number of Community Initiatives to three, and reform the financial rules and the details of the programming procedure, there is a broad consensus in favour of the Commission proposal or of compromise proposals from the Presidency; this makes me optimistic that we can make rapid progress on these issues.

III.

There are still, however, certain issues to be resolved concerning the details of the three Objectives in future structural policy:

While a majority of Member States insist on the strict application of the 75% criterion for GDP per head for Objective 1 funding, others are in favour of adding an extra criterion, namely that of 'low population density'. The Commission continues to resist this and is prepared only to include the current Objective 6 areas in future Objective 1 coverage on the basis of the Accession Treaties with Finland and Sweden.

As previously, the Commission is of the opinion that Objective 1 areas should receive around two thirds of the funding made available under European structural policy. As regards distribution of expenditure among the Member States, the relevance of national wealth as a criterion for evaluating aid intensity is still in dispute. However, overall, the Member States support the Commission approach of relying on objective and transparent criteria for calculating aid intensity.

As regards former Objective 1, 2 and 5(b) areas that no longer meet the criteria for aid eligibility, the Commission proposal makes provision for a gradual phasing out of aid. This is intended to avoid cutting off assistance abruptly, which could have deleterious effects on the development of the regions in question. There is general consensus in favour of this approach in the Council and the European Parliament. However, certain member states regard the amount and duration of the transitional aid provided for in the Commission proposal as being over-generous.

There is widespread agreement to differentiate between 'hard' and 'soft' criteria when deciding on areas eligible for Objective 2 funding. The principle of subsidiarity is guaranteed in the process for selecting eligible areas under Objective 2 both by the very broad definition of the soft criteria and by the flexible percentages set for national criteria. Certain Member States are nevertheless pressing for even more flexibility in this area. Even the existence and application of the safety net are still in dispute.

The Commission proposals regarding the Community Initiatives are supported by most Member States. Even the prioritisation of Interreg and its greater integration with Phare and Tacis are the object of broad consensus in the Council and the Parliament. However, the Parliament (supported by several Member States) is calling for at least one more initiative, i.e. Urban. With this in mind, I would like once more to stress that the current Community Initiatives, and in particular the decentralised arrangements for their implementation, will not simply be abandoned, but rather are to be integrated into mainstream programmes. This applies particularly to the urban dimension of the programmes and the measures to combat unemployment and social exclusion. For this reason, the Commission will, in the General Regulation, strongly re-emphasise the importance of urban measures for all three Objectives, as well as make a corresponding declaration on mainstreaming.

We are still therefore of the opinion that there is no need for a separate Urban Community Initiative.

IV.

I would like to address one more subject that has a high profile both in the Resolution you are debating today, and in Council discussions, namely the future of the Cohesion Fund. The Commission remains in favour of maintaining this Fund and its dual role as a tool of cohesion policy and a means of assistance in the pursuit of nominal convergence. According to the Treaty and the relevant protocol, Member States are eligible for assistance from the Cohesion Fund when their GDP is less than 90% of the EU average. Even participation in EMU does not disqualify a country from eligibility for assistance. However, it is no secret that both the eligibility issue and the question of the financing of the Cohesion Fund are still hotly disputed subjects within the Council.

V.

The Committee of the Regions has in the past not only debated the amendment of the Structural Fund Regulations, it has also on several occasions discussed questions relating to the practical implementation of structural policy in the next programming period. I would therefore also like to take the opportunity at today's meeting to bring you up to date as regards the status of discussions on the new structural policy guidelines.

On 3 February 1999, the Commission presented the draft guidelines as a working paper. These guidelines are intended to benefit and assist the

regions, by:

reducing planning work and preventing duplication of effort;

enabling coherent cooperation with clear objectives; and

introducing Community priorities into the regional policies of the Member States.

No definitive decision is due to be taken on these guidelines until the General Regulation has been adopted, although they are intended to provide practical pointers for programme planning at local level, which is already under way everywhere.

They are based on the assumption that assistance from the Structural Funds should be targeted on those issues of most immediate concern to the citizens, i.e. primarily on the creation of jobs.

As far as the economic infrastructure is concerned, measures that increase regional competitiveness are to be supported. This means translating the principle of sustainability into practical regional development scenarios:

A healthy environment is not only an asset in itself, it is becoming an increasingly important factor in investment decisions, a stimulus for technological innovation and a growth factor in the labour-intensive service sector.

Much greater emphasis must be placed on this issue when formulating the objectives of the entire programme. This applies not only to traditional issues such as water conservation and waste disposal.

The polluter-pays principle should therefore also be realised by introducing a greater degree of differentiation in the levels of assistance.

In the transport sector, it is vital to achieve a better balance between developing different transport networks, improved intermodality and a greater emphasis on increasing the efficiency of rail networks.

In the energy sector, the expansion of the networks will continue, albeit accompanied by a radical shift of emphasis towards more efficient power generation and renewable energy sources.

In the telecommunications sector, there must be a reorientation of the priorities with regards to the liberalisation of the market:

Any investment in hardware must be neutral in its effect on competitiveness.

Nevertheless, the priorities in this sector should be to increase the use of information technology by SMEs, provide incentives for new services and applications and to establish technology networks involving a partnership between industrial and academic research.

As well as improving infrastructure, the creation of jobs must also be about increasing corporate competitiveness.

Initial efforts should focus on assisting SMEs, since it is in this sector that the greatest capacity lies for creating jobs.

In this sector we need to reorient strategies towards utilising more private investment as well as the strategic bundling of the many assistance measures for SMEs. The effects of 'deadweight' must be reduced, and assistance itself must be easier for SMEs to handle.

This also means that the Commission expects the private sector to be involved to a much greater degree than previously in the formulation of aid strategies.

As regards job creation measures, the new guidelines attach particular importance to harnessing the considerable potential for employment opportunities and growth for SMEs that resides in the environmental, tourism and cultural sectors, as well as in the new sources of employment (local services).

The principal engine for the development of human resources on a broad front should be the new Objective 3; measures should be based closely around the national employment programmes.

The key concepts here are:

Support for active labour market policies [e.g. training and integration schemes, especially to counter long-term unemployment];

Measures to combat social exclusion (integration of minorities, the disabled, etc.);

Measures to promote employability, mobility and training levels via life-long learning;

Measures to stimulate entrepreneurship, and to increase adaptability to changing market conditions;

Systematic promotion of women, who must become one of the core constituents of the new generation of programmes.

The guidelines also highlight once again that integrated development scenarios for urban and rural areas are a prerequisite for a successful regional policy.

I have serious misgivings about the growing tendency in the discussions within Council to favour individual sectoral programmes with a national dimension, in defiance of academic findings and practical experience. This is true of the fisheries sector and, to a lesser extent, also of rural development.

At a time when we are starting to see the beginnings of a consensus on a Community framework for sustainable regional development, it would be a step backwards if structural policy were to promote sectoral diversification rather than integrated development schemes.

This is particularly true of the regional development of urban and rural areas, where we need greater cooperation in order to stop the depopulation of rural areas, improve economic prospects and promote sustainable development. It is not enough to implement a policy for rural development in isolation; structural policy measures must also promote to a greater degree the interdependence of town and countryside development. In view of the importance of towns andcities for the economic, political and cultural evolution of the European Union, regional policy should also take greater account of the role of urban areas than was previously the case, and, in doing so, place more emphasis on integration.

VI.

Ladies and Gentlemen,

There are only two weeks remaining until the Berlin summit.

I hope that our discussions here today help to convince the Council and the European Parliament of the need to make the necessary decisions now, and that everyone must play his or her part in this process. To arrive at a fair settlement requires not only that all sides are willing to compromise, but also that we agree on a package which every government can confidently present to its people.

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