Regional policy of the European Union

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The regional policy of the European Union (EU), also referred as Cohesion Policy, is a policy with the stated aim of improving the economic well-being of regions in the European Union and also to avoid regional disparities. More than one third of the EU's budget is devoted to this policy, which aims to remove economic, social and territorial disparities across the EU, restructure declining industrial areas and diversify rural areas which have declining agriculture. In doing so, EU regional policy is geared towards making regions more competitive, fostering economic growth and creating new jobs. The policy also has a role to play in wider challenges for the future, including climate change, energy supply and globalisation.

The EU's regional policy covers all European regions, although regions across the EU fall in different categories (so-called objectives), depending mostly on their economic situation. Between 2007 and 2013, EU regional policy consisted of three objectives: Convergence, Regional competitiveness and employment, and European territorial cooperation; the previous three objectives (from 2000 to 2006) were simply known as Objectives 1, 2 and 3.

The policy constitutes the main investment policy of the EU, and is due to account for around of third of its budget, or EUR 392 billion over the period of 2021-2027.[1]

Notion of territorial cohesion

Territorial cohesion is a European Union concept which builds on the European Spatial Development Perspective (ESDP).[2][3] The main idea of territorial cohesion is to contribute to European sustainable development and competitiveness. It is intended to strengthen the European regions, promote territorial integration and produce coherence of European Union (EU) policies so as to contribute to the sustainable development and global competitiveness of the EU. Sustainable development is defined as development that "meets the needs of the present without compromising the ability of future generations to meet their own needs".

The main aim of the territorial cohesion policy is to contribute to a balanced distribution of economic and social resources among the European regions with the priority on the territorial dimension. This means that resources and opportunities should be equally distributed among the regions and their populations. In order to achieve the goal of territorial cohesion, an integrative approach to other EU policies is required.

Objectives

Classification of regions from 2014 to 2020:
  Less developed regions
  Transition regions
  More developed regions
Eligibility of regions for different objectives from 2007 to 2013:
  Eligible under Convergence objective
  Phasing out eligibility under Convergence objectives
  Eligible under Regional competitiveness and employment objective
  Phasing in eligibility under Regional competitiveness and employment objective.

Less developed regions

By far the largest amount of regional policy funding is dedicated to the regions designated as less developed. This covers Europe's poorest regions whose per capita gross domestic product (GDP) is less than 75% of the EU average. This includes nearly all the regions of the new member states, most of Southern Italy, Greece and Portugal, and some parts of the United Kingdom and Spain.

With the addition of the newest member countries in 2004 and 2007, the EU average GDP fell. As a result, some regions in the EU's "old" member states, which used to be eligible for funding under the Convergence objective, became above the 75% threshold. These regions received transitional, "phasing out" support during the previous funding period of 2007–13. Regions that used to be covered under the convergence criteria but got above the 75% threshold even within the EU-15 received "phasing-in" support through the Regional competitiveness and employment objective.[4] [5] Despite the large investment requirements of the EU, cohesion areas continue to have lower investment rates. Only 77% of businesses in transitional regions and 75% of those in less developed regions invested, compared to 79% of businesses in more developed regions.[6]

Financial limitations are more common in less developed areas, especially for small and medium-sized enterprises (SMEs). SMEs in these regions are more than twice as likely (11%) than their counterparts in transition (5%) and non-cohesion zones (5%) to report having financial difficulties.[7][8] Less developed regions also have the lowest percentage of businesses who have made investments to combat climate change or reduce their carbon emissions, at 46%.[6]

In less developed regions, bank loans account for 49% of finance. Grants make up a larger portion of the financing in less developed areas, accounting for 13% of external financing. [9]

Areas designated as less developed

Transition regions

These are regions whose GDP per capita falls between 75 and 90 percent of the EU average. As such, they receive less funding than the less developed regions but more funding than the more developed regions.

In transition regions, bank loans account for 69% of finance. [10][9] Particularly transitional regions appear to profit from investments in more developed regions. There is a 34% of the impact on GDP and 47% of the impact on employment in some circumstances.[11]

In the green transition, 19% of firms in transition regions claim that climate change is significantly affecting their business, while 43% believe climate change has a minor effect. [12] 25% of businesses in transition regions can also be categorized as "green and digital".

Areas designated as transition regions

  • Austria – Burgenland
  • Belgium – all of Wallonia (except Walloon Brabant)
  • Denmark – Sjælland
  • France – Auvergne, Corsica, Franche-Comté, Languedoc-Roussillon, Limousin, Lorraine, Lower Normandy, Nord-Pas-de-Calais, Picardy, Poitou-Charentes
  • Germany – Lüneburg, all of the former East Germany sans Berlin (except Leipzig)
  • Greece – Dytiki Makedonia, Ionia Nisia, Kriti, Peloponnisos, Sterea Ellada, Voreio Aigaio
  • Italy – Abruzzo, Molise, Sardinia
  • Malta – all
  • Poland - none
  • Portugal – Algarve
  • Spain – Andalucía, Canarias, Castilla-La Mancha, Melilla, Murcia
  • United Kingdom – Cumbria, Devon, East Yorkshire and Northern Lincolnshire, Highlands and Islands, Lancashire, Lincolnshire, Merseyside, Northern Ireland, Shropshire and Staffordshire, South Yorkshire, Tees Valley and Durham
  • Bulgaria – Southwestern region

More developed regions

This covers all European regions that are not covered elsewhere, namely those which have a GDP per capita above 90 percent of the EU average. The main aim of funding for these regions is to create jobs by promoting competitiveness and making the regions concerned more attractive to businesses and investors. Possible projects include developing clean transport, supporting research centres, universities, small businesses and start-ups, providing training, and creating jobs. Funding is managed through either the ERDF or the ESF.

In all regions, bank loans are the most prevalent type of external financing. In more developed regions, they account for 58% of finance. [10][9]

Areas currently eligible

European territorial cooperation

This objective aims to reduce the importance of borders within Europe – both between and within countries – by improving regional cooperation. It allows for three different types of cooperation: cross-border, transnational and interregional cooperation. The objective is currently by far the least important in pure financial terms, accounting for only 2.5% of the EU's regional policy budget. It is funded exclusively through the ERDF.

Instruments and funding

Main article: European Structural and Investment Funds

The cohesion policy accounts for almost one third of the EU's budget, equivalent to almost EUR 352 billion over seven years in 2014-2020,[13] and EUR 392 billion in 2021-2027,[1] dedicated to the promotion of economic development and job creation, and for helping communities and nations get ready for the European Union's transition to a more sustainable and digital economy.[14][15]

The main resource of EU's territorial cohesion policy is EU's structural funds. There are two structural funds available to all EU regions: the European Regional Development Fund (ERDF)[16] and the European Social Fund (ESF).[17] The ERDF is intended to be used for the creation of infrastructure and productive job-creating investment and it is mainly for the businesses, while the ESF is meant to contribute to the integration of the unemployed populations into the work life via training measurements. The funds are managed and delivered in partnership between the European Commission, the Member States and stakeholders at the local and regional level. In the 2014–2020 funding period, money is allocated differently between regions that are deemed to be "more developed" (with GDP per capita over 90% of the EU average), "transition" (between 75% and 90%), and "less developed" (less than 75%), and additional funds are set aside for member states with GNI per capita under 90 percent of the EU average in the Cohesion Fund.[18] Funding for less developed regions, like the Convergence objective before it, aims to allow the regions affected to catch up with the EU's more prosperous regions, thereby reducing economic disparity within the European Union. Examples of types of projects funded under this objective include improving basic infrastructure, helping businesses, building or modernising waste and water treatment facilities, and improving access to high-speed Internet connections. Regional policy projects in less developed regions are supported by three European funds: the European Regional Development Fund (ERDF), the European Social Fund (ESF) and the Cohesion Fund.

See also

Further reading

  • DG REGIO (2008). Working for the regions. Luxembourg: Office for Official Publications of the European Communities. ISBN 92-79-03776-5. Cat. No. KN-76-06-538-EN-C. Retrieved 28 July 2010.

References

  1. ^ a b "The EU's main investment policy". European Commission. Retrieved 28 October 2022.
  2. ^ "European Spatial Development Perspective". Retrieved 7 April 2009.
  3. ^ "European Spatial Planning Observation Network". Retrieved 7 April 2009.
  4. ^ Is my region covered?, European Commission Regional Policy. Accessed 11 June 2011
  5. ^ Santos, E., Lisboa, I., Moreira, J., & Ribeiro, N. (2020, October). Regional Competitiveness and the Productivity Performance of Gazelles in Cultural Tourism. In International Conference on Tourism, Technology and Systems (pp. 114-124). Springer, Singapore.[1]
  6. ^ a b "Regional Cohesion in Europe 2021-2022". EIB.org. Retrieved 9 August 2022.
  7. ^ "Inforegio-Newsroom". ec.europa.eu. Retrieved 9 August 2022.
  8. ^ "Coronavirus (COVID-19): SME policy responses". OECD. Retrieved 9 August 2022.
  9. ^ a b c "European Small Business Finance Outlook" (PDF). EIF.
  10. ^ a b "Regional Cohesion in Europe 2021-2022". EIB.org. Retrieved 9 August 2022.
  11. ^ "EIB Group Activities in EU cohesion regions in 2021". www.eib.org. Retrieved 15 September 2022.
  12. ^ "Regional Cohesion in Europe 2021-2022". EIB.org. Retrieved 9 August 2022.
  13. ^ "Cohesion policy". European Commission Glossary.
  14. ^ Bank, European Investment (12 July 2022). Regional Cohesion in Europe 2021-2022: Evidence from the EIB Investment Survey. European Investment Bank. ISBN 978-92-861-5367-9.
  15. ^ "Cohesion Policy 2021-2027". ec.europa.eu. Retrieved 8 August 2022.
  16. ^ "The European Regional Development Fund" Archived 1 February 2009 at the Wayback Machine
  17. ^ "The European Social Fund" Archived 28 February 2009 at the Wayback Machine
  18. ^ Cohesion policy

External links

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