[pic] | COMMISSION OF THE EUROPEAN COMMUNITIES |

Brussels, 12.6.2006

SEC(2006) 726

COMMISSION STAFF WORKING DOCUMENT Annex to the COMMUNICATION FROM THE COMMISSION

Fourth progress report on cohesion: Growth and jobs and the Reform of European cohesion policy {COM(2006) 281 final}

LIST OF GRAPHS

Graph 1 | Annual average growth of GDP (2000-2004) |

Graph 2 | GDP per head and labour productivity (in PPS) relative to the EU25average (2004) |

Graph 3 | Employment and Unemployment rates in the EU (2004) |

Graph 4 | Employment rates (2004) and GDP per capita PPS (2002) |

Graph 5 | Neighbourhood unemployment in large and midsize cities (2001) |

Graph 6 | Neighbourhood Unemployment in German, Belgium and France (1999-2001) |

Graph 7 | Employment rates in cities and Member States (2001) |

Graph 8 | % of households with internet access (2004) |

Graph 9 | % of households using a broadband connection (2005) |

Graph 10 | Share of the population aged 18-24 with only lower-secondary education and not in education or training (2000 and 2005) |

LIST OF TABLES

Table 1 | Cohesion policy objectives (2007-2013) |

Table 2 | Summary data on the features of Cohesion policy objectives (2007-2013) |

Table 3 | Indicative financial allocations (2007-2013) by objective and Member State |

Table 4 | Commission staff working paper “Cohesion Policy and cities: the urbancontribution to growth and jobs in the regions” |

Table 5 | Regional state aid guidelines 2007-2013 |

Table 6 | Maximum aid rates under Regional State Aid Guidelines 2007-2013 |

Table 7 | Regional Aid Coverage by Population, 2007 – 2013 |

Table 8 | Turkey: GDP/head: regional disparities (2001) |

Table 9 | Additional allocation for outermost regions, 2007-2013 |

LIST OF MAPS

Map 1 | R&D expenditure as% of GDP (2002) |

Map 2 | Household access to internet (2005) |

Map 3 | Economic Lisbon indicators (2005) |

Map 4 | Convergence and Competitiveness Regions, 2007-2013 |

Map 5 | Share of employment in agriculture, hunting, forestry and fishing (persons with main employment in the primary sector) in total employment (2001) |

Map 6 | Share of employment in agriculture (persons) in total employment (2003) |

Map 7 | Turkey: GDP/head NUTS II regions (2001) |

GRAPHS

Graph 1 Annual average growth of GDP (2000-2004)

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Graph 2 GDP per head and labour productivity (in PPS) relative to the EU25 average (2004)

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Graph 3 Employment and Unemployment rates in the EU (2004)

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Graph 4 Employment rates (2004) and GDP per capita PPS (2002)

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Graph 5 Neighbourhood unemployment in large and midsize cities (2001)

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Graph 6 Neighbourhood Unemployment in German, Belgium and France (1999- 2001)

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Graph 7 Employment rates in cities and Member States (2001)

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Graph 8 % of households with internet access (2004)

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Graph 9 Percentage of households using a broadband connection (2005) [1]

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Graph 10 Share of the population aged 18-24 with only lower-secondary education and not in education or training (2000 and 2005)

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[pic] | 2000 | [pic] | 2005 |

TABLES

Table 1 Cohesion policy objectives (2007-2013)

CONVERGENCE OBJECTIVE The Convergence objective shall be aimed at speeding up the convergence of the least-developed regions and Member States. Two types of regions are eligible for funding from the structural funds (ERDF and ESF) under this objective: The NUTS level II regions whose per capita Gross Domestic Product (GDP), measured in purchasing power parities and calculated on the basis of Community figures for the period 2000-2002, is less than 75% of the EU-25 average. These regions will be fully eligible for funding from the structural funds under this objective the so-called "statistical effect" regions, i.e. the NUTS level II regions which would have been eligible to full Convergence objective status had the eligibility threshold remained at 75% of average EU-15 GDP, but which lose eligibility because their per capita GDP level will now exceed 75% of the new (lower) EU-25 average. These regions will be "phased out" of the Convergence objective, that is the financial treatment will be decreasing over the period. In addition, the following Member States will be eligible for funding from the Cohesion Fund under this objective: The Member States whose per capita GNI, measured in purchasing power parities and calculated on the basis of Community figures for the period 2001-2003, is less than 90% of the EU 25 average and which have a programme for meeting the economic convergence conditions referred to in Article 104 of the Treaty the Member States eligible for funding from the Cohesion Fund in the period 2000-2006 and which would have continued to be so had the eligibility threshold remained at 90% of average EU-15 Gross National Income (GNI), but which lose eligibility because their per capita GNI will now exceed 90% of the new (lower) EU-25 average. These Member States will be "phased out" of the Cohesion Fund element of the Convergence objective, that is the financial treatment will be decreasing over the period. |

REGIONAL COMPETITIVENESS AND EMPLOYMENT OBJECTIVE This objective shall be aimed at strengthening regions' competitiveness and attractiveness as well as employment. Two types of regions are eligible for funding from the structural funds (ERDF and ESF) under this objective: the so-called "phasing in" regions, i.e. NUTS level II regions eligible for full Objective 1 region status in the period 2000-2006 which cease to be eligible in the next financial perspective period because natural growth has brought their per capita GDP level to over 75% of the EU-15 average, corresponding to over 82.19% of the new EU-25 average. These regions will be "phased into" the Regional competitiveness and employment objective, that is the financial treatment will be decreasing over the period. the NUTS level II regions not covered by the Convergence objective and by the "phasing in". |

EUROPEAN TERRITORIAL COOPERATION OBJECTIVE This objective aims at strengthening territorial cooperation at the cross-border, trans-national and inter-regional levels and at establishing cooperation networks and furthering the exchange of experience. This objective has three components: The development of cross-border economic, social and environmental activities through joint strategies for sustainable territorial development along the lines of the programmes financed under INTERREG IIIA in the current period. The regions eligible for cross-border cooperation financing shall be all NUTS level III regions along the internal land borders, certain NUTS level III regions along the external land borders and all NUTS level III regions along the maritime borders separated, as a general rule, by a maximum of 150 kms, taking into account potential adjustments needed to ensure the coherence and continuity of the cooperation action. The establishment and development of trans-national cooperation through the financing of networks and of actions conducive to integrated territorial development along the lines of the programmes financed under INTERREG IIIB in the current period. The list of eligible trans-national regions will be drawn up by the Commission following close consultations with Member States. The promotion of inter-regional co-operation, exchanges of experience, and actions involving studies, data collection, and the observation and analysis of development trends in the Community. The entire territory of the Community shall be eligible under this component. |

- Table 2 Summary data on the features of Cohesion policy objectives (2007-2013)

Number of regions | % pop EU27 | GDP/cap in PPS % EU25 | Employment rate 2004 | Unemployment rate 2004 | Growth rate 1995-2002 | %EU25 GDP 2002 |

Convergence | 84 | 31.7 | 51.9 | 55.5 | 13.7 | 2.6 | 12.5 |

Phasing-out | 16 | 3.4 | 79.2 | 59.5 | 12.2 | 2.3 | 2.6 |

Phasing-in | 13 | 3.9 | 89.9 | 61.7 | 8.8 | 3.4 | 3.3 |

RCE | 155 | 61.0 | 119.7 | 66.7 | 6.9 | 2.4 | 81.6 |

E27 | 268 | 100 | 95.6 | 62.7 | 9.2 | 2.4 | 100.0 |

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Table 4 Commission staff working paper “Cohesion Policy and cities: the urbancontribution to growth and jobs in the regions”

As a complement to the Community Strategic Guidelines on for Cohesion, 2007-2013, on 23 November 2005, the Commission published a staff working paper in the key field of the urban contribution to growth and jobs in the regions, drawing on the experience and evaluations of the URBAN Community Initiative, the Urban Audit and early results from the URBACT network for exchange of experience between cities. It was presented at the informal meeting of ministers in Bristol in December 2005 followed by a public consultation of all relevant stakeholders, which was closed on 17 February 2006.

The working paper has a strong emphasis on guidelines for action. A recurrent theme is the need to mobilise cities in pursuit of their own development and that of the wider region. While recognising that many competencies are held at the national or regional level, there is much that cities can do, particularly when their capacity for action is reinforced by European programmes.

The guidelines for various priority areas on which cities can take action include:

- attractiveness, or ‘investment readiness’, in terms of transport, environment, services and culture including the promotion of clean, efficient, affordable and effective mobility within cities, energy efficiency and renewable energy

- actions for entrepreneurship, employability and the growth of the knowledge economy. This includes the promotion of clusters of excellence and networks between local partners including planners, businesses, universities and the local community

- mediating between different communities and reducing disparities between neighbourhoods and social groups, improving local security and crime prevention.

Cohesion policy can provide cities with the following forms of support:

- providing a framework for the mobilisation of local authorities and local actors – provisions for subdelegation would offer them the opportunity to become full partners throughout the design and implementation of the relevant measures;

- promoting exchanges of experience and best practice , both through the URBACT network and its proposed extension for the 2007-2013 period

- providing innovative financial tools , including the JEREMIE and JESSICA initiatives, which should help to provide improved access to finance, including the micro-credit provision that can be so important to developing business activity even in the most difficult social circumstances and to promote integrated urban development.

The document, in the form of a Communication from the Commission, will serve as a reference for Member States and regions in drawing up their National Strategic Reference Frameworks for cohesion policy and the resulting operational programmes. Moreover, the results of the consultation exercise will help to shape the final version of the Community Strategic Guidelines 2007-2013.

Table 5 Regional state aid guidelines 2007-2013

In December 2005, the Commission adopted new regional aid guidelines under the EC Treaty state aid for 2007 to 2013[2]. The Guidelines set out the rules for allowing state aid which promotes the development of less developed regions, covering aid such as direct investment grants and tax reductions for companies. They specify the rules for the selection of regions which are eligible for regional aid, and define the maximum permitted levels of this aid. In line with requests from the European Council for less and better targeted state aid, the new Guidelines re-focus regional aid on the most deprived regions of the Union, while allowing for the need to improve competitiveness and to provide for a smooth transition.

Under the new Guidelines, the overall population coverage for regional state aid is fixed at 43.1% of the EU-25 population. This includes a safety net to ensure that no Member State loses more than 50% of its current entitlement. Regions with less than 75% of the EU-25 average per capita GDP qualify for the highest rates of aid under Article 87(3)(a), as well as for operating aid. These regions constitute 27.7% of the EU-25 population. Given the huge disparity in wealth between these regions, ranging from 32.2% to 74.9% of the Community average, they are divided into three categories shown in Table 6 in the annex to this report.

New guidance is also in preparation on state aid in the fields of innovation and risk capital, which are important elements in the realisation of the Lisbon strategy and future cohesion programmes.

Table 6 Maximum aid rates under Regional State Aid Guidelines 2007-2013

Regional GDP as% of EU-25 GDP | % of EU-25 population | Maximum aid rates for large companies |

<75% | 14.05% | 30% |

<60% | 6.30% | 40% |

<45% | 7.37% | 50% |

Table 7 Regional Aid Coverage By Population, 2007 – 2013

% of GDP corresponding to 10% of population in regions with lowest GDP/head | 3,7% | 3,6% | 4,2% |

% of GDP corresponding to 10% of population in regions with highest GDP/head | 16,7% | 16,5% | 16,6% |

ratio top regions/bottom regions | 4,5 | 4,6 | 3,9 |

ratio between extreme regions | 7,0 | 6,9 | 5,6 |

Gini coefficient * | 0,244 | 0,237 | 0,219 |

Main urban regions (level 2) |

Average 1987-88-89 | Average 1993-94-95 | 2001 |

GDP/head, index, TR=100 |

Istanbul | 167 | 150 | 143 |

Ankara | 130 | 139 | 128 |

Regional GDP as% of total national GDP |

Istanbul | 20,5% | 21,0% | 21,3% |

Ankara | 8,4% | 7,9% | 7,6% |

* reference years 1989, 1995 and 2001 |

Sources: national statistical institute, Eurostat, DG REGIO estimates |

Table 9 Additional allocation for outermost regions, 2007-2013

The draft regulations 2007-2013 foreseen an additional allocation under cohesion policy to compensate for the additional costs faced by the outermost regions resulting from their specific economic and social situation, due their remoteness, insularity, small size, difficult topography and climate and their economic dependence on a few products. This will be integrated as a priority axis into the Operational Programmes financed by the ERDF in those regions. The objective of this would be as follows: to contribute to reducing the additional costs of economic activity in these regions through both the Convergence and Regional Competitiveness and Employment Objectives, the ERDF could contribute to co-financing operating aid in the outermost regions to offset the additional costs incurred in incurring public service contracts and obligations as well as the additional costs incurred by financing investments (maximum 50%) the additional allocation cannot be used to support operations involving products falling within Annex I to the Treaty of European Union. The main areas of intervention would be: addressing the accessibility deficit due to due the remoteness, insularity, or difficult topography of the territory including improving the capacity of these regions to access the Community market. Particular attention will be paid to freight transport services, energy provision and access to ICT networks and services. addressing the lack of economic diversity in the regional economy, supporting innovative sectors including activities in research and innovation, investment in human capital and promotion of local production addressing environmental and climatic difficulties and the preservation of biodiversity by focusing on improving environmental conditions, waste treatment and offsetting additional costs linked to specific climatic conditions. Indicative special allocation for outermost regions, 2007-2013 (in M€): Madeira € 59 Canary Islands € 434 Martinique € 95 Guadeloupe € 107 Açores € 58 Réunion € 183 French Guyana € 43 |

- MAPS

Map 1 R&D expenditure as% GDP (2002)

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Map 2 Household access to internet (2005)

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Map 3 Economic Lisbon indicators

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Map 4 Convergence and Competitiveness Regions, 2007-2013

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Map 5 Share of employment in agriculture, hunting, forestry and fishing (persons with main employment in the primary sector) in total employment (2001)[5]

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Map 6 Share of employment in agriculture (persons) in total employment (2003)[6]

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Map 7 Turkey: GDP/head NUTS II regions (2001)

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[1] As the graph above shows, there are still wide differences in the% of households using a broadband connection across the EU25 regions. Broadband penetration in Objective1 households is nearly half the EU25 rate for outside Objective 1 regions. This difference can be observed also for the EU15 average, and for most individual Member States, though it is less pronounced in the Nordic countries and the UK, where the broadband penetration rates in households located in Objective 1 and non Objective 1 regions are getting closer.

[2] Commission Decision No. 54.

[3] Estonia, Latvia, Lithuania, Malta, Poland and Slovenia have 100% coverage under Article 87(3)(a) of the EC Treaty and are omitted from the table, but included in the EU-25 total.

[4] Bulgaria and Romania will also have 100% coverage under Article 87(3)(a) and are included in the EU-27 totals.

[5] CY, LU, PT, BG 2000; LV 2002.

[6] PT 2000. Total employed for AT, CZ, DK, GR, ES, IE, IT, LV, LT, HU, SI, SK, SE and UK year 2001; LU and CY year 2000. Poland: Individual holdings only.