2005 09 28

EU Cohesion Policy and the New Member States

The future design  of the European Structural and Cohesion Policy  has so far been completely  overshadowed by the discussions on the agricultural policy and the ways to finance the EU budget – this despite the fact that expenditure on this item is almost as large as the agricultural budget. And since the bulk of the cohesion policy funds will be spent in the new Eastern European member states, it is high time to investigate whether the proposed cohesion policy has been adapted to the specific needs and requirements of those countries.  As it turns out, the influence of the new members has been mainly restricted to adjustments and phasing-in with little room for questioning the policy as such.

In the words of the European Commission the proposal for a  European Cohesion Policy 2007 – 2013 has been elaborated within “a simplified and more transparent framework”. It  requires the new member states to work with "a core list of key themes" with "priority themes organized under three objectives." Some programmes, however, fall under no less "four policy priorities."  Other "integrated programmes" aim at  giving "an integrated response to territorial characteristics" while, of course, adhering to "the key principles of cohesion policy." There are special programs for "the outermost regions",  for "rural areas" and for "restructuring of the fisheries sector". The "Lisbon and Gothenburg objectives" must always be incorporated.

Of course, this is a rather mean-spirited caricature. But does it reflect a simplified and transparent framework? Hardly.

The consequences for the Eastern European member states of the proposal have been elaborated in a new study, From Policy Takers to Policy Makers by 6 independent research institutes - 5 in the new East European Member States and one in Austria -  under the aegis of The Swedish Institute for European Policy Studies (Sieps)¹. The study investigates the experience of the pre-accession structural support  and what the proposal for the future cohesion policy,  presently  on the negotiation table, will mean for the new member states. Will it allow them to go from a simple strategy of trying to obtain as much support money as possible to one of using available funds to further European cohesion in an effective manner?

The structural problems differ widely between the five participating Eastern European countries but  the study results are fairly unequivocal. Pre-accession support from the EU has greatly  helped to prepare for an effective future structural policy  but has also revealed a large number of grave deficiencies in absorptive capacity, particularly at regional and local levels.  Many of those problems will remain for years to come. The conflict between the simultaneous needs to reform public finances and to provide matching funds for structural policy projects is  evident even if, for instance, the contributors from Hungary and Poland also see the co-financing requirements as further incentives for budgetary reform.

If the new member states were free to set their own priorities for the cohesion policy, it would look very different from the present proposal, according to the participating institutes.  Rather than on large infrastructural and environmental projects, focus would be on human resource development and institutional reform, both in the short term and as a long-term policy for enhancing growth and productivity in line with the Lisbon objectives. Although a growth promotion policy to some extent might be in conflict with the goal of strengthening regional cohesion, there seems to be a certain preference for a policy that places more emphasis on  cohesion between member  countries rather than between regions.  More trans-border cooperation on infrastructure instead of prestigious national programmes  is also high on the list of reforms. There is a genuine dissatisfaction with what  is  perceived as  unnecessary bureaucracy and mistrust and a lack of understanding for the special conditions of the new Eastern European member states. 

The results of this collaborative effort between independent researchers from 7 countries, suggest that the break-down of the negotiations of the financial long-term perspective has presented a golden opportunity for a fundamental discussion also of the second largest item of the EU budget.   In such a discussion the voices of the new members themselves must be carefully listened to even if this might lead to a cohesion policy very different from the one presently being negotiated. If not, new members states may remain policy and support  takers rather than participating  actively with their unique experience as makers of a policy for European cohesion.

The study is available as pdf under this link. Swedish speaking readers may wish to read Ett sammanbrott... in Dagens Nyheter

¹ Disclosure: Your Chronicler is one of the co-editors of the study referred to.

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2005 06 08

The perfidious Albion

Following the French and Dutch referenda, the opinion in Denmark towards the proposed constitution moved with more than 10 percentage points in the negative direction, practically from one day to the other. Similarly, the general opinion towards EU in Norway turned around in the same drastic way.  The Swiss barely voted for joining the Schengen agreement last Sunday although with a margin that was drastically reduced compared to earlier forecasts, based on opinion polls.

Why this? Can you imagine Mogens and Synnöve exclaim in excitement: ”My God, how could I ever think that the proposed constitution was any good! I am really grateful to Jean-Pierre and Marijke for opening my eyes to the evils of QMV, a catalogue of rights, prolonged presidency periods, the possibility for citizens initiatives  and more power to the elected parliament. My gosh, this was a close shave: I almost made the wrong decision.”  And Urs and Heidi feel a bit unhappy:  “we should perhaps have listened to the French.”

No, that is not the way it is. Both the reasons for the no-votes and the opinion swings in other countries clearly demonstrate that the popular Referendum is entirely unsuitable for decision-making in the present context – a viewpoint we have long propagated in our various web chronicles. The results: the le Pens, Haiders, Bossis, Fortuyns (from an elevated position, hopefully), Lundgrens and Wollins, and of course all the British Europhobes, can rub their hands and breath morning air. This at the expense of millions of disenchanted no-voters.

The European project and the integration process –and this surely includes the monetary union- are, obviously, much too strong to be fundamentally damaged by temporary calamities. But it is also clear that the present political leadership does not have the moral and intellectual capacity to advance the process. Blair, Chirac, Schröder and Berlusconi will soon disappear from the scene – maybe a new generation will be more successful. But that would require that the concerns of the disillusioned population are taken seriously and that the policy is adjusted accordingly.

What are the real reasons behind the popular disenchantment that is spreading over Europe? The dissatisfaction is projected on the EU and its institutions but it has to do with EU only indirectly.  The reasons can be encapsulated in the old adage: “It’s the economy stupid!”  The economic policy of Europe must be overhauled and redirected towards employment creation and a fair distribution of the production gains. This will require an active financial policy and a reconquista of the abdicated political responsibility by reducing the influence of the monetarists and despite the protests of the market fundamentalists, the only winners from present conditions. If monetary policy really has anything like the importance that is pretended, the directives of the ECB should be thoroughly revised.

What will happen now? The task of the European Council in the middle of June has been further complicated by the recent English Alleingang on the Constitution issue with customary absence of any concern for supposed “partners” .  It would have been easy to wait until the forthcoming summit meeting of the European Council and at least  try to arrive at some common position before national measures were announced.

Nevertheless, Heads of States and Governments will need to show some kind of unity and ability to act when they meet on June 16. This may result in an unexpected agreement on the Financial Perspective for 2007 – 2013 although conventional wisdom so far has been that the various positions are too far away from each other  and also too rigid. But even if there is an agreement, it will unfortunately not result in a good system: it will be another patch on the quilt called “The Own Resources System” which is bound to break up sooner or later.  Nevertheless, an agreement is better than no agreement. The bone of contention, as always, will be the UK rebate on its contribution to the common budget. The proposal by the Luxembourg Presidency still contains the idea to freeze the rebate and introduce a successive scaling down. No English Prime Minister would accept this. All other member countries can be given more or less suitable concessions: Germany, Austria, the Netherlands and Sweden will just receive some money in order to keep quiet.  France is panicking and prepared to accept almost anything as long as the agricultural policy is not touched. It would in principle be possible to agree on a Financial Framework at a level of 1.05 – 1.07 % of GNI. This could be considered as a 'victory' for the budget refuseniks which originally insisted on 1 % as against the 1.24 % of the Commission. The new member states would be  losers but would at least avoid a difficult liquidity trap during the next few years. Practically everyone else would be reasonably satisfied. There would be little or no money for furthering the ill-conceived Lisbon objectives.

Mr. Blair, however, appearing arm in arm with Mr. Bush, has already declared that he is not prepared to compromise on the rebate. So for the second time within a couple of days the perfidious Albion has lived up to its name and reputation.  It is strange that the UK does not take its policy to its logical consequence and leaves the Union. It would be a gain for everyone, particularly for the British. The UK would benefit from all economic and market advantages of the European integration, there would be no need for introducing the Euro or joining Schengen. Presumably the UK, like Norway and Switzerland, would have to pay something but certainly less than today. They could develop the transatlantic relations, so dear to their hearts. For the European countries the issue of the rebate would be resolved and the major brake on cooperation would be eliminated. The language could be kept (but the silly extra letters in words like 'labour' or 'programme' could be abolished...)

And above all, we wouldn't have to read the boring comments on Margot Wallströms blog.

Note: The "UK rebate" was introduced in 1984 when England was one of the poorest countries in the Common Market. Roughly speaking, the UK gets 2/3 of its negative net balance refunded through payments from the other member states which nowadays include such wealthy economies as Latvia, Lithuania, Slovakia and the like. Soon also Bulgaria and Romania will help to relieve the British financial plight.  A freeze on the rebate would mean that Britain at least would have to pay their share for the enlargement of the EU to the latter countries. Mssrs Blair and Straw have openly declared, however, that they don't see that anything has changed since 1984.

The countries that 'suffer' most in absolute terms from the UK rebate are Germany, the Netherlands, Austria and Sweden. They also complain the loudest and were for that reason given compensatory cash payments as of 2002. This constitutes an additional burden on the remaining 20 member states, also the poorest ones.

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