Transformation of Structural and Cohesion Policies – Agenda 2000

During the enlargement process in the period of 2000-2006, the EU had to find solution for this complex problem. The best way to answer the question was the Agenda 2000 that was totally acceptable for new and already existing member states and, on the other hand introduces reforms that saved the EU budgetary. The major fundamentals of this new reform package were laid down by Agenda 2000 published by the European Commission in 1997. Finally, the presidents and prime ministers of the member states adopted the new frames of Structural and Cohesion Policies as a crucial point of Agenda 2000 at Berlin Summit, 24-25^th March, 1999. At that event they also made decision on budgetary for this objective in the period of 2000-2006. Agenda 2000 is the EU strategy for economic enlargement, the strengthening of world competitiveness, as well as for the the improvement of efficiencies of employment situation and major common policies, and finally for the extension of Eastern borders of the Community. The Community already faced the situation, according to that policy reforms cannot be realized while ignoring Eastern enlargement and financial limitation (Bolyán, 2002a).

The program package evaluated the preparedness of the ten pre-accessing Central and Eastern European countries. The document suggested starting the accession negotiations with the five most prepared ones, such as Hungary, Poland, Estonia, Czech Republic and Slovakia, and this group was complemented by Cyprus. The document determined the EU budget at 75 billion ECUs for enlargement in the period of 2000-2006 (Table 3.5.).

Table 3.5.: Extra Costs of Enlargement in EU (million EUR)

Identification 2002 2003 2004 2005 2006

Agriculture 1 600 2 030 2 450 2 930 3 400

Structural Funds 3 750 5 830 7 920 10 000 12 080

Internal policies 730 760 790 820 850

Administration 370 410 450 450 450

Total 6 450 9 030 11 610 14 200 16 780

Source: www.europa.com/eu/inz/comm/council

Agenda 2000 presented three major challenges the EU:

1. Strengthening the EU and making common policy reforms that make the enlargement possible and meet the requirements for sustainable development, high level of employment and improving living standards.

2. Starting the accession negotiations with most prepared voluntary countries.

3. Finding the best way to finance the enlargement in order to use it as an advantage for the EU and the improvement of internal policies (Bolyán, 2002a; Forman, 2004).

Strengthening the EU was primarily based on the reform of common institutions.

Key elements of the institutional reform are:

 Strengthening the awareness of “Europe of citizens” by democratization of decision making, subsidiarity, the increase of capability to be involved in decision making.

 The Treaty of Amsterdam confirmed the statuses and jurisdictions of the Commission and its President in order to increase efficiency.

 As a compensational action, means and jurisdiction of EU Parliament that controlled EU Commission were extended.

Four major priorities to further development of internal policies aiming the seed up of economic growth, the enlargement of employment, as well as the improvement of living standards were developed:

1. Creating the preconditions for sustainable growth and high level of employment. Getting closer to the economic and monetary union, the task of the Community is to assist stability, market efficiency and investments. The objective is to encourage economic growth and job creation by maximum exploitation of the common market. In order to achieve this, the improvement of operation conditions for small and medium sized enterprises, the built up of trans-European networks, primarily to the direction of Eastern-Europe are considered being essential.

2. Support for knowledge-based policies, in order to give a strong impetus to the Community in the fields of research and engineering, and education and training. To serve this objective, the cross-border mobility of the youth inside the EU and the development of institutions for information society are supported.

3. Modernization of employment systems that makes possible the economic growth, the improvement of the competitiveness and the creation of new jobs. This contains the reforms of pension- and healthcare insurance systems, as well.

4. Improvement of living conditions includes the ambition to increase the number of beneficiaries of economic growth. Public health and the better operation of environmental regulations are getting greater attention. The integration of environmental considerations into the planning and operation of all common policies is improved. The aims of increasing living standards cover the improvement of mobility, internal safety and judicial institutions.

The increasing economic and social cohesion will be assisted by the improved efficiency of Structural Funds. After the Eastern enlargement, the major challenge for the EU will be the creation of cohesion, as the GDP per capita in pre-accessing countries is about 30 percent of that of the EU average. Resource concentration and increased efficiency are traceable in the numerical decrease of objectives (Figure 3.2.).

The up to date first objective assists further development, structural transformation, the realization of regional policy aims in the most disadvantaged regions. Considering its target areas, it covers the earlier objectives 1, 6 and partly 5. As a conclusion of this, the budget for objective 1 – that is 69.7% of the total budget for Funds – can provide support to regions, where the GDP per

capita is lower than the 75% of the EU average, moreover, to the farthest overseas regions as well as sparsely populated Northern areas (Bolyán, 2002a; Forman, 2004).

The valid second objective serves as a support for economic and social conversion in regions struggling structural transformation. This cover areas, where significant industrial, social conversions are at present in the industrial and service sectors, and moreover, where underdeveloped areas facing depressed agricultural, urban and fishery-dependent areas can be observed. As a conclusion of this, this objective combines the earlier second and fifth objectives, and furthermore, it compliments them. Support to solve unemployment, especially the long-term unemployment is highlighted. The new second objective is financed by 11.5%

ration of the total budget for funds, and the payments can cover only a maximum 18% of EU inhabitants.

The new third objective that combines the earlier third and fourth objectives assist for the adaptation and modernization of educational, training and employment systems and policies, but still in areas that are not involved in objective 1.

Depending on the number of targeted inhabitants, each of the member states gets a given part of the determined financial budget of objective 3. The significance of this is the fact that all member states including the richest ones as well can get financial assistance from the Structural Funds and according to this message, an increased ownership of the funds can be developed in the total EU population. 12.3% of total budget for funds goes to objective 3 (Table 3.6.).

Figure 3.2.: Objectives supported by Structural Funds

Source: own edition

Table 3.6: Structural Funds in operating objectives in the period of 2000–2006

ERDF ESF EAGGF FIFG

Objective 1 X X X X

Objective 2 X X X X

Objective 3 X

Source: own edition

Task coming from the objectives are financed from the Structural Funds, the Cohesion Fund and the community initiatives. After the introduction of Agenda 2000, Structural Funds

programs operated in 1999, one document part introducing the Steering Committee of Common Initiatives and another one listing the programs only the interregional, the rural development programs remained and others for struggling inequality. 5% of expenditures inside Structural Funds have to be spent on community initiatives.

It was also an important question how to manage the effects of enlargement on member states. While the expenditures of the funds were always concentrated on the first objective, regions with GDP per capita under 75% of EU average got much of the support.

Due to the enlargement, many of these regions achieved this threshold, and so they shall not qualify for earlier support. In order not to decrease the income dramatically and immediately, the European Commission suggested to open temporary application sources for these regions.

For example, the intension level of temporary supports for regions, where the previous supports have been closed in 1999 is having been gradually decreasing and even ceased finally in 2005.

After a long debate, Agenda 2000 kept the Cohesion Fund in unvaried form for the period of 2000-2006. This fund was originally established for environment, transport and traffic infrastructural investments in countries where the GNP per capita is below the 90% of the EU average. Among the four concerned member states, Greece, Ireland, Portugal and Spain the latter three ones joined the group of countries establishing the monetary union in 1999. At that time, several member states have suggested that these three countries have been no longer qualified for financial support of this Fund. However, as a result of the pressure coming from the concerned governments, the Council of Europe finally decided not to follow this suggestion. Due to these and more over to the Spanish claims, the budget of the Cohesion Fund has been extended to the limit of 18 billion EUR from the previous 15 billion EUR in the period of 1993-1999. However, considering the already achieved development level and changed macro-economic conditions, the sources are shared among euro zone countries on the basis of development levels achieved in the previous period. The year of 2003 was the first time, when the group of countries for Cohesion Fund was revised considering the 90% of the average GNP level. The budget of the fund proportionally decreases when a country gets out of this beneficiary group.

Agenda 2000 also laid down the maximum intension levels of community financing for structural and cohesion supports. According to this, the maximum ration of community financing for a given project connecting to objective 1 in Structural Funds is 75% of the total budget from 2000 (for beneficiaries of Cohesion Fund it is 80-85%), for others connecting to objectives 2 and 3 it is 50%. The ration of community financing of Cohesion Fund remained 81-85%. In order to limit the support per member state, a new rule has been initialed: the total yearly country-level income from Structural and Cohesion Funds cannot exceed the amount of 4% of the country level GDP.

In the budgetary period of 2000–2006 the European Commission increased the European level of community initiatives furthermore in order to balance the aims of the structural policy and the community initiatives even in a better way. In order to utilize the financial means more efficiently and concentrated, the number of initiative has been decreased to four: INTERREG (cross-border, interregional cooperation), URBAN (economic / social renewal of cities and urban areas), LEADER (rural development) and EQUAL (international / interregional cooperation for fighting against labor market discrimination and social discrimination). The total budget of programs is 10.44 billion euro that sum covers 5.3% inside Structural Funds. It has to be highlighted that taking the enlarging possibilities of INTERREG into consideration, the EU seriously concerns the importance to develop the cooperation with pre-accession countries further.

In the EU regional policy the application and usage of the given financial means already connects to different regional and local regional development (NUTS 2) levels.

Cohesion Fund provides financial support sources for country parts or groups of region (NUTS 1), Structural Funds, primarily due to objective 1, target the great regions (NUTS 2), however,

due to objective 2, also target the smaller territorial units, such as the counties (NUTS 3).

Community Initiatives – for example INTERREG – are for counties (NUTS 3), the LEADER is for sub-regions (NUTS 4), while others, such as the URBAN focuses on settlements (NUTS 5).

Among others, considering the eastern enlargement of the EU, new situation was emerging that resulted in important changes in structural policy after the millennium. The enlargement process had several effects on the future of structural and cohesion policies, so problem solving had to be in a hurry. The major results of the reform package AGENDA 2000 is considered being the decisions on reforming the structural and cohesion policies. A major reform feature is that the more effective utilization of community supports was wanted to achieve not only on the basis of previous experiences but also on the basis of balancing the enlargement possibilities and the financial budget frames for already existing member states (Bolyán, 2002a).