Comprehensive Objectives and Funds for Financing the Structural Policy

regional aid policy’s compatibility were the aim of the Agenda 2000 reform package’s provision on structural and cohesion funds accepted in Berlin in March 1999, which reformed the financing system of the structural and cohesion policy from 2000. The common structural and cohesion policy were implemented via the Structural Funds and the independent Cohesion Fund which was established in 1993. Perhaps the biggest results of Agenda 2000 are the decisions on the reform of structural and cohesion policy, because they wanted to make the utilization of community subsidies more efficient not only by building on the previous experience, but they ensured the enlargement in a way that in the meantime the available funds for the present Member States were not reduced. In the course of the accession of Mediterranean countries they had to align to the changed circumstances when setting the new objectives, bounding the target areas to be supported and the instruments to be applied.

The most important objective in order to strengthen the economic and social cohesion the Structural Funds support:

 harmonious and sustainable development if the Community’s economic activity,

 the assurance of competitiveness,

 high level of employment,

 equal opportunities for men and women,

 high level protection, repair of the environment.

Structural funds are the summarizing name for four financial funds, built up as it follows:

 European Regional Development Fund (ERDF), the first numbered financial fund for all the regions with backward conditions or are in structural troubles caused by economic and social transformation.

 European Social Fund (ESF) that is used for the operation of EU employment strategy.

 Financial Instrument for Fisheries Guidance (FIFG) that assists for the structural development of agricultural and fisheries, however it also finances some rural development tasks.

 Guidance Section of the European Agricultural Guidance and Guarantee Fund (EAGGF) – it was divided into two parts in 2005: European Agricultural Guarantee Fund (EAGF) and European Agricultural and Rural Development Fund (EARDF) – that contributes to the operation of CAP by improving efficiency of production, marketing and potentials of local agricultural production.

The boundary of regions and other territories for support is based on the classification of regions, the Nomenclature of Territorial Units for Statistics (NUTS) that is build up by the EU Statistical Office (EUROSTAT) accompanied by the national statistical offices. Since then, the mass of subsidies were effectively concentrated on backward regions, where the GDP per capita is 75 percent lower than the EU average. Regions with transforming industry and service sector; or agrarian areas with depressing population; or urban areas with disadvantages; or depressed areas dependent on fisheries all considered being regions in economic and social transformation. Therefore, the Community concentrated on territories with less favored conditions that are nominated by the member states, too. Two third of the yearly budgetary must have been concentrated on regions with less favored conditions. By the integrated viewed development, measures have to concentrate on the level of regions, in line with:

 the rules on operation of different funds,

 the priorities of the Community,

 the economic and social policies of member states,

 the employment strategies and, first and foremost the regional policy in member states.

European Council had an extraordinary session on 24-26^th March, 1999, in Berlin. The major objective of this event was the closure of debate on AGENDA 2000. Some of the cardinal points of this document were the strengthening of economic and social cohesion inside the EU, the financial concentration of structural (subsidy) policies, the improvement of its efficiency.

The continuous enlargement of the EU, the joining of countries at different development stages caused the increased need for balance of differentiations in development, the harmonization of economic policies and financial resources. For this reason, the creation of territorial statistical system uniform at EU level was necessary. This is the basis for suitable regional policy in the EU. Later, above all in the programming period of 2000-2006, after the reforms on cohesion policy (AGENDA 2000) and the introduction of Community Initiatives, the Structural Funds and other financial instruments primarily focused on the realization of three highlighted objectives: developing regions backward in development and helping their structural adaptation (objective 1); support for conversion of economic and social structure in regions with structural difficulties (objective 2); support for the improvement and modernization of education, training and employment policies and systems (objective 3). In order to achieve these objectives, the region level units have two functions in the EU: on the one part, they are helping tools in moderation of regional level differences, the redevelopment of backward territories, the improvement of their competitiveness, and, on the other hand, they provide the mediation between the central and local (settlement level) administrative tasks, the organization of regional services and the moderation of local differences inside the region.

Important elements of structural subsidy policy financed by the economic and social cohesion, as a summarizing name for common funds of the EU are the community initiatives. After the reform of subsidy policy in 2000, he most important means of development policies in the EU are the Structural Funds, the strongly connecting Community Initiatives and the Cohesion Fund. As a result of changes coming from AGENDA 2000, the Community Initiatives are built up from sources as it follows:

 INTERREG III – financing cross border, interregional among regions and countries, as well as trans-national programs;

 URBAN II – financial assistance to cities and depressing urban areas, small and medium sized towns, that have significant economic and social troubles;

 EQUAL – subsidies for training and education in order to battle with discrimination on the labor market and inequality;

 LEADER+ – development and finance of new local strategies for rural development and sustainable development;

 Innovative Actions – financial support for R&D&I developments (Bolyán, 2002a).

The financial background of the EU regional policy is a mixture of several resources. It is especially true for the Structural Funds as the main source of regional (structural) policy, that had four significant pillars (ESF; ERDF; EAGGF; FIFG) at the beginning, but after AGENDA 2000 it was getting more types of financial resources. In spite of their separation, these resources can create a coherent system for realizing development objectives (Figure 3.1.).

Figure 3.1.: Financial Funds for Regional Policy in the European Union, 2000–2006

Source: Bodó, 2004.

The strategic role of structural policy can be seen by its significance in the EU budgetary: its ration within the expenditures was 4.8 percentage in 1975, already 8.1 percentage in 1998, while at the end of the 1990s, it covered one third of the total EU budgetary. The relative ratio of agricultural subsidies compared to regional policy decreased significantly in the past two decades, from ration of 10:1 to 1.3:1 (Table 3.2.).

Table 3.2.: Expenditures in EU Budgetary, 1994–2006

Issues 1994–1999 2000–2006 Yearly average

Billion ECU

% Billion

ECU

% Billion

ECU

%

Agricultural policy 220.3 47.8 329.2 44.1 42.3 45.6

Structural actions 155.1 33.7 275.0 36.9 33.1 35.7

Internal affairs 27.6 6.0 51.0 6.8 6.1 6.6

Foreign policy 28.5 6.2 49.9 6.7 6.0 6.5

Administration 22.2 4.8 35.6 4.8 4.4 4.7

Reserves 6.7 1.5 4.8 0.7 0.9 0.9

Total 460.4 100.0 745.5 100.0 92.8 100.0

Source: Annual Report of the CEC Agenda 2000.

Financial sources (Table 3.3.):

 Structural Funds

o European Social Fund

o European Agricultural Guidance and Guarantee Fund (Guidance Section)

 Financial Instrument for Fisheries Guidance

 Cohesion Fund

 Community initiatives

Table 3.3.: Distribution of Financial Sources For Regional Development, 1994-1999

Source Sum

billion ECU

Distribution

%

European Regional Development Fund 67.6 43.6

European Social Fund 39.0 25.1

European Agricultural Guidance and Guarantee Fund 20.5 13.2

Financial Instrument for Fisheries Guidance 2.5 1.6

Structural Funds 129.6 83.5

Cohesion Fund 12.7 8.2

Community initiatives 12.8 8.3

Total 155.1 100.0

Source: The Impact of Structural Policies on Economic and Social Cohesion in the Union, 1989–1999. Brussels, European Commission, 1997.

In the beneficiary regions, according to the principle of overall objectives, Council of Europe determined the objectives of Structural Funds in a given budgetary period. In the reform period of Structural Funds in 1988, objectives providing the target for utilization of Structural Funds till AGENDA 2000 were determined (Table 3.4.).

Table 3.4.: Population in beneficiary areas and subsidies from Structural Funds, 1994-1999

Beneficiary area Population Subsidy

Million capita % Million ECU %

1. target group 92.16 2.50 93.9 72.5

2. target group 60.47 16.4 8.7 6.7

3. target group ... ... }13.9 10.7

4. target group ... ...

5. target group 32.75 8.8 12.0 9.3

6. target group 1.29 0.4 1.1 0.8

Total 186.67 50.6 129.6 100.0

Source: First Report on Economic and Social Cohesion. Brussels, European Commision. 1996.

The six target groups were as it follows:

 target group 1: financial assistance to underdeveloped regions, where the sum of GPD per capita is under the 75% of the EU average., their economics is weak, the unemployment ration is high.

 target group 2: financial assistance for depressing regions, where the structure of the industry is obsolete, most commonly its basis is the heavy industry. By the end of 1999, 7-9% of funds were used for this target. After the reform period, the Community makes efforts to use the sources on the most significant troubles. During selection, when evaluating the structural problems, total and long-term unemployment rations are considered being at the first place. Member states have to participate in listing the most

disadvantaged region. Regions neighboring others in target group 1 or 2 can also be involved in this group, if their economic and social troubles are increasing because of population ageing or increasing level of unemployment due to the transformation of key sectors, whether they are industrial, agricultural or service types. However, regions can only be involved in target groups 1 or 2.

 target group 3: financial assistance for long-term programs, which moderate unemployment of the youth, mainly in regions where the ration of the youth is extremely high.

 target group 4: financial assistance for vocational retraining of workers and adaption to changes.

 target group 5: financial assistance for modernization of agriculture and fisheries, partly in agricultural regions, partly in rural areas with moderated development levels, high levels of agricultural employment, demographic erosion and disadvantaged geographical arrangement, weak city network.

 target group 6: financial assistance for adaption of regions with low population density (under 8 inhabitants per km²), only Scandinavian regions are involved in this category.

In document Integrated Regional Development (Pldal 36-40)