Discussing the EU’s cohesion policy

BRUSSELS - On Jan. 31-Feb. 1, the Cohesion Forum, which was named Investing in Europe’s future: The contribution of cohesion policy to Europe 2020, took place in Brussels. The forum brought together about 800 people including high level representatives from EU institutions, national and regional representatives, economic and social organizations, NGOs, and academics. It was the last opportunity for 27 EU member states and regions to make their voices heard before the Commission presents its legislative proposals on the future cohesion policy for 2014-2020, due out in summer 2011. The cohesion policy, which is co-financed from the EU budget, constitutes a significant part of the economies of the Baltics and, therefore, some possible future cuts in the EU structural funds and some changes in their objectives can have an impact on the Baltic States’ future. The final decision on the 2014-2020 funding is expected to be made in a year by the European Council, i.e. heads of the EU member states.

“It is the issue of solidarity. I hope that the amount of allocated money would not be much different than for 2007-2013. The most important issue is to use the money effectively,” Lithuanian Prime Minister Andrius Kubilius told The Baltic Times after his speech at the Cohesion Forum in Brussels.
The European Commission’s President Jose Manuel Barroso, Hungarian Prime Minister Viktor Orban, Polish Prime Minister Donald Tusk, and Kubilius were the highest ranking officials addressing the Cohesion Forum. All four used one key word in their speeches - “solidarity.”

Now almost half of the EU’s economic output and some 75 percent of investments in research and innovation are concentrated in just 14 percent of the EU’s territory, in the so-called pentagon between London, Hamburg, Munich, Milan and Paris. The wealth difference between the EU’s wealthiest state, Luxembourg, and the EU’s poorest states, Romania and Bulgaria, is several times. The EU’s cohesion policy was created to fight such disparities which, for comparison, are unknown among the states of the USA.

There are 347 billion euros allocated within the current EU financial framework of 2007-2013, which makes available for spending on cohesion policy almost 50 billion euros per year, which is 35.7 percent of the total EU budget. The cohesion policy spending is channeled through three funds, which are called “structural funds” in eurojargon. These are the Cohesion Fund, the European Regional Development Fund (ERDF) and the European Social Fund (ESF). The three main objectives of the EU’s cohesion policy are convergence, regional competitiveness and employment, and European territorial cooperation.
Over 80 percent of the cohesion policy budget is allocated for the convergence objective, i.e. to the poorest regions, which are those where the GDP per capita is less than 75 percent of the EU average, or slightly above this level. This money is spent on measures to boost economic growth, including transport and other infrastructure projects. These regions have a combined population of some 170 million people, which represents just over one-third of the total population of the EU. The ‘convergence regions’ are all the post-communist EU member states in Central and Eastern Europe, including Eastern Germany, as well as Malta, almost the entire territories of Greece and Portugal, half of Spain, southern Italy, the western outskirts of the UK, and overseas territories of France.

The total funds of 2007-2013 allocated for Estonia are 3.4 billion euros, for Latvia – 4.6 billion euros and for Lithuania – 6.9 billion euros. For comparison, only 901 million euros are allocated for Ireland, which has the same size territory and population as Lithuania. Such projects as a major upgrade for Tallinn Airport’s passenger terminal, the restoration of the Kuldiga road bridge in Latvia and protection of the dunes in Lithuania’s sea coast sand beaches were co-financed with the structural funds.
Until the end of 2010, 56 percent of the 347 billion euros available for 2007-2013 had already been allocated to specific projects throughout the EU, while in Lithuania it is 66.5 percent (the Cohesion Fund and ERDF).

During the Cohesion Forum, Johannes Hahn, the EU commissioner in charge of regional policy, urged regions to speed up spending because otherwise, the European Commission would have a problem to convince the European Council to avoid cutting the structural funds for 2014-2020. He also promised to simplify the procedures in dealing with the structural funds in 2014-2020, which would maybe introduce some concept of a tolerable risk of error allowing the funds’ users to do the job, instead of devoting their time to form-filling.

Currently, European leaders are tackling the debt crisis of some EU states and implementing tough austerity measures in their countries and, therefore, the financial perspective for the cohesion policy of 2014-2020, as well as some changes in the usage of funds, is not so clear yet. France wants the EU to create a new category of ‘transition’ regions for those areas that are not poor enough to qualify as ‘convergence regions,’ but which nevertheless have a GNP per capita significantly below the EU average. Germany supports this French position, as well as the European Commission’s idea of focusing resources on a limited number of priorities, but Berlin insists that regions must be allowed to choose these priorities for themselves.

Germany also wants to simplify the application procedures and reduce the administrative burden on grant recipients and managing authorities. The UK stated that it is in favor of restricting the overall size of the EU budget, which would also have consequences for structural funds, while the Czech Republic, Slovakia, Hungary, and Poland (the latter is receiving the biggest amount of the EU’s help) agree with the Commission on the need to maintain the size of the budget for cohesion policy, and to focus most of the resources on the ‘convergence regions.’

“The EU regions which are the furthest away from the most developed EU regions got hit the hardest by recession. It is impossible to imagine the withdrawal from the crisis in those remote regions without the cohesion policy,” Polish Prime Minister Tusk said at the Cohesion Forum, adding that the EU’s rich regions also profit from the cohesion policy because their companies participate in the projects in ‘convergence regions.’

The geographic distance from the wealthy ‘pentagon’ is an important factor, an official, who is responsible in the European Commission for the Lithuania-related cohesion policy, said during his meeting with The Baltic Times, Lithuanian public TV and the ELTA news agency in Brussels. “The Czech Republic is much closer to Brussels than Estonia,” he said. Indeed, the recession did hit Estonia much harder than the Czech Republic. That European official said that “Lithuania is doing pretty good in comparison with other countries” and it is among the EU leaders in terms of spending money from the structural funds, but he urged the Lithuanians to pay more attention to the areas of the environment and sustainable development as well as research and development, especially IT development, describing these areas as “the most problematic in Lithuania.”

A quite popular idea among the eurocrats in Brussels is the concentration of the cohesion policy of 2014-2020 mostly on research and environment issues. This scares some Baltic politicians. “If this idea will be adopted, 65 percent of the European funds will go directly for solving climate change issues, supporting science and developing education, while the member states will decide on only about 35 percent of allocated money. […] This trend, regarding the European funds, has the task to raise the competitiveness of the EU as a whole. However, it would be more important to continue to make emphasis on the development of economic infrastructure, i.e. building roads, bridges and supporting business in Latvia, where GDP is just 48-49 percent of the EU average,” Ivars Godmanis, Latvian member of the budget committee of the European Parliament and Latvia’s prime minister in 1990-1993 and 2007-2009, told Latvia’s Russian-language newspaper Telegraf.

The participation of Orban and Tusk in the Cohesion Forum was due to the fact that Hungary holds the EU presidency in the first half of 2011, while Poland will hold it in the second half of 2011. Lithuania will hold the EU presidency only in 2013, but Kubilius arrived at the forum to receive an award for achievements in cohesion policy implementation. During the forum, Barroso presented the award “Regions of Excellence” to Lithuania, Wales and the German state of Brandenburg.

Lithuania was awarded for two projects which were co-financed with structural fund money: the profitable cafe Mano Guru (“My Guru”) in downtown Vilnius, where 140 former young drug addicts were employed, and the project named Langas I Ateiti (“Window to the Future”), promoting computer literacy skills in mostly small towns and rural areas during which over 50,000 adults with an average age of 43 learned how to use computers.