The European Union Explained: Institutions, Actors, Global Impact

11. Regional Policy and Cohesion

11 Regional Policy and Cohesion Cohesion intends to close the prosperity gap between rich and poor, or, more specifically , is the process of reducing economic and social disparities between regions. The EU has 268 regions, 81 in the 12 new member states and 187 in the old EU-15. Some regions are simply synonymous with established historical entities, such as Catalonia in Spain, Tuscany in Italy, or Bavaria in Germany, but regions had to be created in countries without a federalist tradition, such as the UK. Thus Britain has the SouthWest region, which has no historical precedent. A region ought to represent a coherent, geographical, administrative, and, above all, economic entity. The EU measures the wealth of a region based on its GDP per capita. Three questions surround the current picture of cohesion: Is EU cohesion simply a side-payment to buy support for European 1. integration? Has EU cohesion reduced economic disparities in the EU? 2. Should the EU be concerned with cohesion at all? 3. 12-EUE Ch11 (94-100).indd 94 9/24/08 9:11:10 AM Regional Policy and Cohesion · 95 The Rationale behind Cohesion There are three reasons why cohesion represents a desirable goal for any given society. First, from an economic perspective, in a liberal market economy, market forces alone cannot solve long-standing regional problems; the market will always go where the most affluent consumers are and where the highest profit margins are to be expected. Across Europe, one often sees a core with a very active and successful economy surrounded by a periphery, which is incapable of reaching comparable standards of living. Underutilized resources in the periphery, mainly human capital, could significantly contribute to growth and productivity if used more efficiently, which is the precise aim of cohesion. Second, from a social perspective, attempts to reduce the long-standing trend of people moving away from the periphery and into core urban areas could result in fewer urban problems, including overcrowding , traffic congestion, or crime. Moreover, efforts to preserve rural communities, and cultural and social traditions, seem worthwhile against the backdrop of the streamlining trends of globalization. And, third, from a political perspective, one might argue that every member of a society should have the possibility of sharing a country’s wealth. Any political system able to distribute wealth in a just manner will enhance its democratic legitimacy. Why should the European Union tackle such idealistic objectives? Cohesion and closing the gap between rich and poor would result in a more unified Europe, which is certainly in line with the ideals that brought the European project into existence some fifty years ago. Cohesion could also compensate for the negative effects of other EU policies, particularly the Common Agricultural Policy which mainly benefits large-scale producers, whereas the small-business farmers, so prevalent in Greece, Ireland, Spain, Southern Italy, and Portugal, find it hard to achieve acceptable standards of living. Another example is the Single Market Initiative; ever since the Single European Act was signed in 1986, economic activity has tended to concentrate on the so-called blue banana,1 with outer lying regions missing out. On the other hand, growth and economic prosperity in disadvantaged regions would lead to reduced unemployment and higher tax revenues for the state. And because the EU budget is the sum of national contributions in the region of around 1 percent of every member state’s GDP, the EU has a vested interest in spreading prosperity. Most important, though, is who but the EU would be in the position to tackle cohesion ? With bilateral aid the exception rather than the norm, poorer member states and their regions depend on support from Brussels. How Does the EU Implement Cohesion? Cohesion is organized around a number of funds and the process can get complicated , as often happens when money is at stake. Any investigation of how cohesion works will encounter a multitude of funds, some with confusing names and most of them with unique program objectives and their own bureaucratic jargon. 12-EUE Ch11 (94-100).indd 95 9/24/08 9:11:10 AM 96 · Policies In making its financial projections for 2000–2006, the EU’s cohesion policy did not properly address the integration of twelve new and largely poor countries. With the enlargement rounds of 2004 and 2007, the current multi-annual budget for 2007–2013 had to consider the vastly changing circumstances of...