Opinion of the Committee of the Regions on the 'First cohesion report` (97/C 379/08)

THE COMMITTEE OF THE REGIONS,

having regard to the report 'on the progress made towards achieving economic and social cohesion` (Article 130b of the Treaty establishing the European Community) (COM(96) 542 final);

having regard to the decision taken by the European Commission on 9 December 1996, under Article 130b and the first paragraph of Article 198c of the Treaty establishing the European Community, to consult the Committee of the Regions on the matter;

having regard to its decision on 8 March 1996 to direct Commission 8 for Economic and Social Cohesion, Social Policy and Public Health to draw up the relevant opinion;

having regard to its decision on 8 March 1996 to direct Commission 1 for Regional Development, Economic Development and Local and Regional Finances to draw up a supplementary opinion;

having regard to the draft opinion (CdR 76/97 rev. 2) adopted by Commission 8 on 23 June 1997 (rapporteur: Mr Jardim);

whereas the supplementary opinion (CdR 105/97 rev. 2) adopted by Commission 1 on 20 June 1997 (rapporteur: Mr Tindemans) has been incorporated in the present draft opinion;

unanimously adopted the following opinion at its 19th plenary session on 17 and 18 September 1997 (meeting of 18 September).

1. Introduction

1.1. The first cohesion report

1.1.1. Article 130b of the Treaty requires the Commission to submit a three-yearly report to the European Parliament, Council, Economic and Social Committee and Committee of the Regions on the progress made towards economic and social cohesion and the manner in which the various means (Member States' economic policies and EU policies and actions, including structural policies and other financial instruments) have contributed to it. If necessary, the report is to be accompanied by appropriate proposals. The present report is the Commission's first on the subject.

1.1.2. The Commission divides its analysis into six chapters. It begins by offering a definition of cohesion and scrutinizing the convergence process and cohesion from three different angles: income and employment, social cohesion, and quality of life and European citizenship. It goes on to analyse the contribution of Member States' policies to cohesion, and to consider the EU's sectoral policies and Community structural policies and cohesion. Lastly, it looks at the results achieved so far.

1.1.3. The Commission links the EU's cohesion policies to the European social system. This system reflects the values of the social market economy, in which solidarity and mutual support ensure that all members of society have access to services of general interest and to social protection. The Commission thinks that this solidarity and support must be assessed against substantive economic and social targets.

1.1.4. The Commission bases its assessment on Article 130a of the EC Treaty, which defines economic and social cohesion in terms of 'overall harmonious development` of the Community.

1.1.5. The Commission takes the view that 'reducing disparities between the levels of development of the various regions and the backwardness of the least favoured regions, including rural areas` denotes a specific geographical dimension which 'reflects an explicit recognition that wide disparities are intolerable in a community, if the term has any meaning at all`.

1.1.6. The report considers cohesion from both the geographical and social angles, and discusses the changes in socio-economic disparities between Member States, regions and social groups.

1.1.7. In geographic terms, reducing disparities means convergence of income, competitiveness and employment levels. In social terms, it means reducing the disparities which arise from unequal access to wealth-generating activities and to the resultant income (long-term unemployed, the young unemployed, unemployed women, and the poor).

1.2. Annual report of the Cohesion Fund - 1995

1.2.1. In its 1995 report, the Commission has clarified two major principles of fund management: firstly, the balance between the funding of environment projects and infrastructure projects for the period 1995-1999, and secondly, the conditionality principle.

1.2.2. The Commission considers it important that conditionality should be perceived as a credible and reliable policy stance and at the same time be implemented without disrupting development in the cohesion countries.

2. General comments

2.1. For the first time, it is possible to have an overview of development in the Member States and regions, together with a detailed analysis of growth, productivity and employment trends and of the manner in which the various Community and national policies have contributed to cohesion.

2.2. However, the report glosses over the work of regional and local authorities, even though these authorities have considerable responsibility for regional development as they are in direct touch with the public and with local businesses.

2.3. The Commission has decided not to accompany the report with proposals, but has preferred to launch a public debate with all interested parties, including the other EU institutions and bodies, in order to prepare the future course of cohesion policy.

2.4. The COR has not allowed the delay in publication of all the language versions of the report to prevent it from responding to the Commission's invitation and issuing its opinion immediately.

The Committee of the Regions

2.5. Is pleased that the Commission has undertaken an analysis of the many aspects of cohesion, remembering in particular that improving the economic situation is not an end in itself but a means of serving the European public.

2.6. Regrets, however, that the analysis is descriptive rather than explanatory. The report sets out the results, but does not explain their underlying causes. The COR therefore recommends that detailed case studies of regional development strategy be carried out.

2.7. Also recommends that a survey be carried out of the indicators to be used in such studies. These indicators should show the qualitative aspects of production structures, labour and infrastructure.

2.8. Notes that no distinction is made between industrial and regional competitiveness. Companies have to be competitive in order to survive, and regions - or rather the business climate within them - must be competitive in order to keep companies there. The COR feels that the EU, national, regional and local authorities should give more attention to this matter.

2.9. Cannot hide its concern at how little the relation between the EU's central and outlying regions has changed. During the reference period (1989-1993), the disparities between the richest and poorest regions remained unchanged or even worsened, despite the existence of an EU cohesion policy which ploughed significant funds into reducing development disparities. Differences between Member States were reduced, however, as the relative position of the cohesion countries improved.

2.10. Agrees that the creation of wealth should widen opportunity and raise living standards and the quality of life generally, and that in this context development must be sustainable and a long-term view must be taken of the use of natural resources, with constant attention to social objectives.

2.11. Agrees with the Commission that 'imbalances do not just imply a poorer quality of life for the most disadvantaged regions and the lack of life-chances open to their citizens, but indicate an under-utilization of human potential and a failure to take advantage of economic opportunities which could benefit the Union as a whole`. It also agrees that solidarity with these regions is an important basis for progress, not only for social reasons but also for extending the economic potential of the EU as a whole.

2.12. Agrees with the statement by the 'Comité des Sages`, in its report For a Europe of civic and social rights, that 'if Europe is to refuse to countenance any exacerbation of inequalities and social marginalization and any generalization of passive assistance for "excluded" individuals, it will have to make a considerable effort to innovate, organize and mobilize in order to build a form of development which embraces everyone. (...) We shall have to recast our public policies to a substantial degree; they must prevent rather than remedy.`

2.13. Stresses that cohesion is concerned with increasing economic growth and new opportunities, and that this does not imply a reduction in either growth or employment in other regions ('negative convergence`).

2.14. Considers it important that cohesion is not confused with harmonization or uniformity, and agrees that cohesion and diversity are not contradicting objectives, but can be mutually reinforcing. Here it considers that the Structural Funds will have to be deployed with increasing flexibility, tailoring them to the specific problems of each region.

2.15. Considers, in this context, that the subsidiarity and partnership principles should underpin the implementation of structural policies. However, these principles continually fail to be applied in some Member States in the implementation of the Structural and Cohesion Funds. The involvement of local and regional authorities should be engaged in all phases of the funds, from priority setting to monitoring and evaluation, as it is at local and regional level - the level nearest to the public - that the innovative ideas needed to solve local problems will emerge.

2.16. Notes that the COR has already given its views on these matters in numerous opinions, and notably in its opinion on the White Paper on growth, competitiveness, employment, its report on the future of economic and social cohesion, and its opinion on the role of local and regional authorities in the administration of the Structural Funds.

2.17. Points out that economic and social cohesion, which is intended to reduce development disparities between regions, must take account of the concept of spatial planning, the coordination of territorial aspects of Community policies, and the need to ensure that they are consistent with and complementary to national planning strategies.

3. Specific comments

3.1. Growth, competitiveness, employment and poverty

3.1.1. Notes that economic growth has picked up considerably in the EU in recent years, but that the pace and geographical distribution of growth has been uneven.

3.1.2. Also notes that disparities between Member States' per capita incomes have narrowed in recent years, but that there are still major - and sometimes widening - disparities between regions; and that although in Objective 1 regions as a whole the rate of growth has been above average, cohesion policy has not been enough to secure regional convergence.

3.1.3. Notes that, over the years, the relative position of a number of regions has changed, bringing corresponding changes in the groups of regions with the highest and lowest per capita GDP; and that the changes reveal wide divergencies in the various indicators (income, employment and unemployment).

3.1.4. Notes that despite the progress made as regards economic growth, the EU economy has been less successful in creating new jobs, with the result that the average unemployment level remains high, at around 10,7 % in 1995, and the number of long-term unemployed has increased.

3.1.5. Notes that unemployment rates vary greatly within the EU, with the highest levels being found in Spain, Ireland and Finland; notes, however, that it is at regional and local level that the unemployment problem is most acute.

3.1.6. Notes that economic activity is strongly concentrated in the most urbanized areas of the EU, where per capita GDP is 14 % above the EU average and two-thirds to three-quarters of the wealth is generated; but notes that, despite this growth, urban unemployment is rising and in some areas has reached 30 %.

3.1.7. Also notes that at the end of the 1980s, 15 % of households were living below the poverty line, but that without social transfer payments from the Member States this figure would rise to 40 %. According to 'Statistics in focus`, which gives the main findings of the Community household panel on the distribution of income and poverty in the EU-12 in 1993, 17 % of households in the EU live below the poverty line. Portugal is well above the Community average, with 29 %, followed by Greece (24 %) and the UK (23 %). At the other end of the scale comes Denmark, with 9 %. Figures for the other Member States range from 13 % in Germany and Belgium to 21 % in Ireland. The relatively high figure for Luxembourg (14 %) is explained by the fact that the average income and hence the (relative) poverty threshold are high.

3.1.8. Notes that the most obvious long-term developments in the EU are an expansion of jobs in the service sector, coupled with a significant drop in agriculture and manufacturing, a rise in part-time work and a shift in the occupational structure of the work force towards those with high educational qualifications and technical skills.

3.1.9. Notes that job creation has not been equally dynamic throughout the Community, but that some regions have managed to combine a high level of productivity (production methods, low labour intensity) with high employment; and notes that this depends, above all, on the provision of modern communications infrastructure, a skilled and qualified labour force and advanced research and technological development capabilities, as these make the economy flexible, adaptable and innovative, so that new wealth-generating activities can be created.

3.1.10. Notes that the causes of unemployment vary between Member States and regions but that, as a rule, it is closely linked to economic growth in a context of a steady increase in competitiveness and thus to the EU's social development model, as GDP growth has mainly been the result of increased labour productivity.

3.1.11. In this context, considers that unemployment cannot be viewed solely from a short-term or sectoral perspective (whether that of traditional employment policy or of the Structural Funds), as this would mean analysing the effects but overlooking the causes, thus leading to ineffective solutions.

3.1.12. Therefore agrees with the guidelines set out in the Dublin declaration on employment, that:

a) labour market efficiency and investment in human resources need to be enhanced, and vulnerable groups should be given particular support;

b) taxation and social protection systems should be made more employment friendly;

c) efforts to modernize the markets for goods and services and exploit new sources of employment should be intensified;

d) action is need to advance European competitiveness and promote local development.

3.2. Member State policies

3.2.1. Notes that Member State policies are extremely important for cohesion. They have achieved progress in nominal convergence (inflation and interest rates), thereby improving the general climate for economic growth, and have reduced domestic disparities in per capita income. However, the fact that they are restricted to the national territory, and that Member States have differing economic potential, means that they are not sufficient to reduce regional disparities in the EU as a whole.

3.2.2. Regrets that the regional impact of Member States' policies - and even of their regional policies - is described very generally; and that no links are drawn with trends in regional disparities, the policy for meeting the EMU criteria being a case in point.

3.2.3. Considers that it is necessary to continue macro-economic policies geared to stability, growth and employment; and that, to boost the impact of these policies, appropriate adjustments should be made with a view to improving coordination between economic and structural policies.

3.3. Community sectoral policies

3.3.1. The non-structural sectoral policies of the EU, which have other objectives than cohesion, are important for overall EU growth. However, their effects differ considerably from one part of the EU to another, thereby prejudicing efforts to reduce disparities. The COR thinks that the adverse impact of these policies on the regions should be offset by the Community's socio-structural policy.

3.3.2. The impact which the non-structural policies have on cohesion will ultimately depend to a large extent on the specific position of each region.

3.3.3. The objectives of the non-structural sectoral policies should not be altered, but their positive effects should be extended throughout the EU. Thus it will be necessary to reinforce the mechanisms for coordinating structural policies with other EU policies, so that the latter help to further cohesion. The COR agrees with the Commission that 'a primary obligation is to ensure that efforts are made to maximize the cohesion effects of these policies in the context of the pursuit of their other objectives`.

3.3.4. Similarly, the COR would draw attention to the role of the European Spatial Development Perspective (ESDP), a first draft of which was presented at the informal Council of Ministers for spatial planning at Noordwijk (Netherlands) on 8 June 1997. This document, which has three basic aims - economic and social cohesion, sustainable development and balanced competitiveness for the European area - will facilitate the coordination of the territorial aspects of Community policies and cooperation in the field of EU spatial planning.

3.3.5. The Commission is to carry out studies on how to use the non-structural policies more effectively to strengthen cohesion. The COR very much hopes that the findings of these studies and the resulting policy proposals will be referred to it in good time for an opinion.

3.3.6. The COR would like to give greater prominence in its discussions with the Commission to the changing impact of the implementation of the non-structural policies at regional and local level.

3.3.7. The CAP reform which began in 1992 should continue, cutting protection in the sectors with the largest surpluses. At the same time, it should offer more balanced support that will guarantee the sustained development of the EU's regions for which agriculture is of strategic economic and social importance, inter alia by helping farmers to switch to different crops and by investing more heavily in the neediest regions and the most attractive products, with a view to safeguarding farm efficiency and incomes.

3.3.7.1. The neediest regions - and other regions badly affected by CAP changes - should receive compensation in the form of reinforced structural policy aid as part and parcel of an overall policy for sustainable development of rural areas.

3.3.8. Community RTD policy should be adjusted with a view to boosting the innovation capacities of outlying regions. RTD cooperation is needed between the wealthy regions and the most disadvantaged and outlying regions, so as to cater for the research and innovation needs of these latter regions.

3.3.9. The education and training measures undertaken in the last few years should be extended, with a view to rapidly reducing the disparities which still exist between the central regions and some of the outlying regions. This is one of the most important conditions for reducing regional disparities.

3.3.10. Competition policy is in general endorsed, including the efforts to achieve coherence between the regional policies of the Member States and Community structural policy, which is aimed at weaker regions. This should not however be a reason for the Member States to invest less in the development of their regions or for the EU to allow the Member States to pursue a regional development policy only for regions eligible for Community support.

3.3.11. Without prejudice to competition policy, and more especially the application of Article 92(2) and 92(3) of the Treaty, and with due regard for economic and social cohesion policy, the Committee would like to draw attention to four points:

a) the fact that some Member States are not able to make use of this opportunity to disburse aid is no reason to lower the ceiling and thereby restrict Member States with regional problems which are in a position to provide aid;

b) as long as world trade remains only partly liberalized, a high level of support for projects of strategic importance for the EU economy must continue to be permitted. Consolidating European industry must be a basic priority, especially for the regions or areas worst affected by technological and sectoral change;

c) it should be possible to grant a high level of aid in the event of disasters that cause structural damage to a region;

d) lastly, there is the special case of structural damage caused by a sudden change in the economic system, resulting in the existing economic structure being suddenly exposed to the competitive forces of the free market economy, at the cost of many jobs. EU policy must also take account of this type of special case.

3.3.12. Although international trade liberalization generally benefits the Community economy, it will have adverse effects in some regions. The main victims will be the less developed regions, those suffering sectoral or structural crises, and peripheral and sparsely populated regions, such as those covered by Objective 6, whose competitiveness needs to be increased. The EU should therefore devote special attention to them, and take more appropriate measures to cushion the adverse effects.

3.3.13. Account will also have to be taken of the impact of international mobility of capital. The more favourable conditions on offer in profitmaking terms induce companies to set up in countries which have no minimum social rules; these companies then compete with Community products, obliging the EU to consider possible disciplinary measures to safeguard the social rights of its citizens.

3.4. Community structural policies

3.4.1. The EU's structural policies have helped to further economic and social cohesion. They have played a major part in altering economic trends in the most disadvantaged regions and those in industrial decline.

3.4.2. The results achieved in terms of additional growth, investment and job creation and preservation have benefited the assisted regions.

3.4.3. It is already possible to see that extremely good results have been achieved in reducing disparities in road infrastructure and telecommunications systems, energy diversification and management of the environment. It is also likely that the disparities in education and training provision in the cohesion countries will be reduced. The COR also notes the substantial contribution made to economic competitiveness and diversification by soft infrastructure measures such as support for business administration and innovation structures in Objective 2 and 5b regions.

3.4.4. However, it is difficult to say whether a sufficient base has been created for the sustainable development of these regions. It is too early to draw conclusions regarding the overall results for Objective 2 and 5b regions. The data given in the report do not show whether the problem is due to these regions' stage of development and/or their often small size, or to the relation between the Member States' and the EU's support mechanisms. The COR suggests looking into the possibility of giving Objective 2 and 5b programming a more regional slant in some cases, fostering a broader perspective by setting a minimum geographical threshold.

3.4.5. At the same time, there are still major disparities between the wealthy regions and the more disadvantaged and outlying regions as regards infrastructure (roads, railways, ports, airports, telecommunications and basic sanitation), education levels, and RTD capacities. These disparities still impede faster growth in the less developed regions.

3.4.6. Infrastructure is also a key factor in a region's competitiveness; the improvement of infrastructure is vital for sustainable economic development, and can be as important as innovation. This is also true outside the reform of the Structural Funds.

3.4.7. The Commission report shows that structural policy is geared first and foremost to responding to change. For regional economic structures, this means modernizing or innovating. However, the Commission excludes infrastructure modernization from part of its structural policy. The COR stresses that the modernization of economic structures generally places new demands on infrastructure. This means that, as well as improving the accessibility of business centres, it is also necessary in the interests of regional development to improve infrastructure outside these centres.

3.4.8. The development of the most disadvantaged regions is necessarily slow, although their average growth rate is above the Community average (3 %).

3.4.9. The COR endorses the Commission's view that 'structural policies as a whole must become more flexible than at present in order to adapt to changing circumstances and, in particular, to be able to respond to new challenges and opportunities as they arise`.

3.4.10. The Commission report states that regional and social disparities indicate not only a lower standard of living but also under-use of economic potential, and that improving this is in the interests of the Union as a whole. This highlights two of the basic principles of Community structural policy, justice and efficiency.

A policy of eliminating cases of backwardness is based on the principle of justice. The contribution to the Community objective of lasting development on the other hand serves the goal of efficiency.

3.4.10.1. Where structural policy is guided by current regional objectives, it is dealing with long-standing problems, and is thus essentially reactive. This is more in keeping with the principle of justice than with that of efficiency. There can be no doubt as to the need to continue support for the least developed regions.

3.4.10.2. However, in the interests of efficiency thought could also be given to the possibility of involving other regions in structural policy to some extent, on a proactive or preventive basis. This would have to be without prejudice to the priority enjoyed by the most backward regions in development terms. Attention could be paid here to regions in the middle of the 'league table` currently experiencing problems or at risk of developing problems.

It is better, and generally easier, to prevent regions from falling behind than to rescue them once they have fallen behind. Preventive actions do nothing to reduce the gap between leaders and laggards, but they do improve overall convergence. And this helps make structural policy more efficient and contributes towards the aim of Community development.

3.4.11. The development levels of the EU's regions differ, and this requires flexible solutions which are tailored to the specific circumstances of each region.

To this end, the present system should be made more effective as regards the high number of separate objectives (six) and the criteria applied to them, and the corresponding legislation and decision-making procedures should be adapted.

3.4.12. The conclusion of the present programming period (1994-1999) will mark the end of the cycle of EU structural policies geared to the completion of the single market and thus designed to offset its adverse effects. These policies must now be reviewed against the background of declining regional disparities, Economic and Monetary Union, the growing liberalization of international trade, and EU enlargement.

3.4.13. The changes must be phased in gradually, so as not to jeopardize the progress already made towards real convergence.

3.4.14. The strengthening of economic and social cohesion must thus form the common thread linking the old and the new cycles.

3.4.15. The aim of economic and social cohesion is to promote the overall harmonious development of the EU by boosting growth and offering new economic opportunities to the poorest regions and the most disadvantaged groups in society. To achieve this aim, it will be necessary to increase the efficiency of structural support. This will mean targeting resources on the most disadvantaged regions and on the areas which have the most serious problems.

3.4.16. The Structural Funds must also continue to support measures for tackling the problems related to social exclusion, and hence to the results of unequal access to wealth-generating activities - youth unemployment, female unemployment, and long-term unemployment. Consideration should be given to the appropriateness of other indicators which identify aspects of social exclusion, such as health, mortality and poverty.

3.4.17. Special support must continue to be granted to the cohesion countries. The COR notes that the Cohesion Fund has made a crucial contribution to convergence between the Member States. Its continuity must be guaranteed, with a view to consolidating progress towards both nominal and real convergence, particularly at a time when the cohesion countries face budgetary restraint in order to meet the Maastricht criteria.

3.4.18. The COR notes that EU financial aid has led to a growing number of partnerships between local authorities, training centres and local firms and industries. This cooperation in pursuit of EU funding has helped to develop local partnership networks which in turn have helped to boost local competitiveness. The Cohesion Fund and the Community initiatives should also adopt the partnership principle for their funding and their operational implementation..

3.4.19. The regions covered by Objective 1 should be revised on the basis of the progress made by each region towards the target figure of 75 % of average Community GDP. However, the current criterion of GDP masks many of the underlying problems which Objective 1 regions continue to experience.

Before a revision of the areas covered by Objective 1 takes place, structural policies, eligibility criteria and instruments should be tailored more closely to the needs of each region. Per capita funding in Objective 1 regions should therefore be adjusted in line with the specific needs of each of these regions.

It will be necessary to revise the criteria, introduce new support instruments, or taper down EU support over the longer term, for any regions which qualify for assistance as a result of eastward enlargement of the EU.

3.4.20. The COR takes the view that during the preparatory phase of the reform of the Structural Funds, particular attention should be paid to the choice of selection criteria for regions to qualify for Community objective status, and that the criteria must be respected more strictly.

Consideration should in particular be given to the possibility of including in those criteria the most appropriate indicators from the European system of regional and local indicators called for in the Barcelona Declaration on the subject.

During the next programming period, great importance should also be attached to competitiveness and employment, and to the selection of appropriate indicators of weaknesses in regional competitiveness, such as GDP growth; survival and formation rates of SMEs; productivity growth; research and development expenditure.

Thought must also be given to measures to develop the information society, ensure sustainable development and promote interaction between regions and local communities at international level and cooperation between border regions.

3.4.21. The COR believes that regional policy should reflect the interdependence of urban areas and their surrounding rural areas, thereby promoting a new balance between them. This objective can be more easily achieved if such areas are included in a regional development plan, and receive Structural Fund support.

3.4.22. The COR stresses that although the resources are relatively modest, they have a leverage effect, thanks to additionality and co-financing. Also, the local and regional authorities alone could never generate the same fillip which Structural Fund aid has given to investment. Accordingly, the COR considers that the abrupt suspension of Structural Fund support is bound to have an extremely adverse effect on many regions, and may even cause a downturn in their development. This is of course equally true of aid from the Cohesion Fund.

3.4.23. The additionality principle should be strengthened and applied rigorously. Flexible use of intervention rates could take account of (i) the practical difficulties which the least favoured and most outlying regions have in matching Community aid in their budgets, and (ii) the budgetary difficulties facing the Member States as they strive to meet the Maastricht criteria.

3.4.24. Systematic regionalization of Structural Fund resources, including those of the ESF, would help to achieve a more effective structural policy. In this context, the COR would like to see an end to the all too frequent national practice of only transferring a part of these resources to the regional and local authorities.

3.4.25. Where possible, the EIB should play a greater role in the funding of Structural Fund projects, so as to provide additional funding and improve the balance between grants and loans.

3.4.26. Overlap between the Community initiatives and the Community Support Frameworks should be eliminated, with the Community initiatives focusing on a smaller number of objectives that are of genuine Community interest, are innovative in nature or have a real demonstrative effect.

Given the complications which arise when administering objective programmes and Community initiatives in regions which receive Structural Fund support from several headings, the COR asks the Commission to explore the possibility of adopting an integrated approach or providing global grants.

Sufficient funding must in future be guaranteed for interregional and cross-border cooperation, either via the Community initiatives or via special financing. Provision should also be made for other innovative pilot projects.

3.4.27. More effective monitoring and evaluation are needed, and the fight against fraud and irregularities should be stepped up.

3.4.28. The COR agrees that the role of the various members of the monitoring committees could usefully be clarified. It might be necessary to make a distinction between members with decision-taking powers (the authorities responsible for co-financing) and advisory members (the social partners and representatives of interest groups). An assessment should also be made of the application of the subsidiarity and partnership principles, drawing a distinction between the monitoring, review and evaluation duties of the local and regional authorities within the management structures of the Structural Funds and the Cohesion Fund. In order to further improve the work of the monitoring committees, they should be given additional responsibilities, including decision-making powers, particularly with regard to financial implementation. Thus, changes in the funds' financial participation should no longer require the approval of the Commission in addition to that of the monitoring committtee. Improvement is urgently needed here, particularly as Commission decisions now take a considerable time, impeding the speedy and smooth implementation of support.

3.4.29. Cohesion policy should exploit all the flexibility offered by the subsidiarity and partnership principles so as to involve the regional and local authorities in the framing of appropriate measures and action for tackling the problems of each region, thereby boosting the effectiveness of these measures. Only by galvanizing all the partners will future EU development improve the balance between its regions.

4. Enlargement

4.1. Eastward enlargement is considered a political priority which will have major implications at Community level. Accordingly:

a) accessions must be staggered, with each country joining when it meets the conditions agreed by the Copenhagen European Council in June 1993;

b) applicant countries whose preparation process proves slower must continue to receive EU pre-accession support (Phare);

c) EU structural policy funding for the eastern European countries should also be phased in gradually, as it will have to meet not only the needs but also the absorption possibilities of each country (bearing in mind the additionality principle);

d) lastly, enlargement must not jeopardize the active principle of solidarity, in the accepted sense of the term.

Brussels, 18 September 1997.

The Chairman of the Committee of the Regions

Pasqual MARAGALL i MIRA

APPENDIX

Comments on the annual report of the Cohesion Fund 1995 (COM(96) 388 final)

The Committee of the Regions

1. Is pleased that the European Commission has taken account of its comments concerning the inclusion of representatives of regional and local authorities on the monitoring committees in all the cohesion countries, and concerning the public hearing held by the Fund with the regional and local authorities with a view to gathering their suggestions and points of view.

2. Notes the Commission's readiness to finance more projects in the outermost regions; and hopes that this readiness will soon be translated into action.

3. Regrets that the Commission has not supplied data on the economic and social impact of the Fund in the Member States and on the EU's economic and social cohesion, but hopes that this will be possible in the next report, as the Commission has already commissioned studies on the methodology for this analysis; notes, however, that the report does give data on direct and indirect job creation in the period 1993-1995.

4. Is pleased to note that the Commission has applied the conditionality principle flexibly when granting Fund support, given the excessive deficits.

5. Is also pleased to note that in 1995, 48,5 % of projects concerned the environment and 51,5 % concerned transport infrastructure, this being close to the desired balance and representing an improvement on the figures for 1993-1995 (46,1 % and 53,9 % respectively); thinks, however, that this balance should not be set in stone, but that the needs of each region should be accommodated in a flexible manner.

6. Notes that the Fund financed five of the 14 priority projects decided in Essen (high-speed train south, Greek motorways, Lisbon-Valladolid motorway, Cork-Dublin-Belfast rail link, Ireland-UK-Benelux road link).

7. Asks the Commission, in its next report, to give tables showing the total funding granted to the four countries between 1993 and 1996, for both environmental and transport projects, so as to provide an overall picture of the financing approved by the Fund.

8. Notes that the Commission has adopted a set of rules and administrative procedures designed to prevent the risk of overlap and the funding of projects which do not comply with EU environmental directives or public procurement legislation.

9. Also notes that the Commission checks that projects to be financed in the transport sector form part of the trans-European networks or provide access to these networks.

10. Regrets that the Fund has no figures for projects which have been turned down, although it does give the main reasons for refusals.

11. Welcomes the fact that there were no reports of irregularities or fraud in connection with the projects approved.

12. Endorses the Commission's statements that:

'Enlargement will profoundly affect the cohesion of the Union; any reform of or change to cohesion policies must be progressive and be implemented over time.`

'The general application of cohesion policy throughout the Union should be maintained. The cohesion countries should benefit from a guarantee of continued solidarity which takes account of the success achieved in economic and social cohesion. The shape of policies should provide a clear signal that the principle of budget discipline is being concretely respected in a situation when most Member States are going through a process of rigorous budget management in order to meet the Maastricht criteria.`

'The Cohesion Fund is just one of the instruments aiming at economic and social cohesion to be examined in this context.`