Opinion of the Economic and Social Committee on the 'Communication from the Commission on the new regional programmes 1997-1999 under Objective 2 of the Community's Structural Policies - focusing on job creation` (98/C 235/09)

On 17 November 1997 the Commission decided to consult the Economic and Social Committee, under Article 198 of the Treaty establishing the European Community, on the above-mentioned communication.

The Section for Regional Development and Town and Country Planning, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 21 April 1998. The rapporteur was Mr Masucci.

At its 355th plenary session (meeting of 27 May 1998), the Economic and Social Committee adopted the following opinion with 114 votes in favour and one abstention.

1. Introduction

1.1. In November 1997 the Commission presented a communication setting out the new regional programmes for declining industrial areas (Objective 2) during the second programming period, which runs to the end of 1999.

The communication is based on an examination of 65 new Single Programming Documents (SPDs) and one Community Support Framework (CSF) for Spain.

The communication does not consider the SPDs for Austria and Sweden, as these countries opted for a five-year programming period ().

1.2. The communication summarizes the anticipated impact on economic development, and especially on employment.

According to information from the Member States, these programmes should create or maintain around 880 000 jobs, 90 % of which (801 000) are concentrated in the UK, France, Germany, Spain and Italy.

1.3. The planned measures fall into four main categories:

- support for the growth and competitiveness of industry and businesses, especially SMEs (47,4 % of expenditure);

- training and reskilling programmes, in particular to familiarize workers with new technologies (33,8 %);

- regeneration and improvement of run-down industrial and urban areas (12,3 %);

- environmental protection and promotion of clean technologies and green tourism (5,2 %).

According to the Note for Guidance which the Commission sent to the Member States on 30 April 1996 (), the paramount priority for the 1997-1999 Objective 2 programmes is job creation. This is to be achieved by improving production structures and raising the skills level of the workforce.

1.4. The Commission scrutinized each plan in the light of these objectives and assessed the following factors: extent to which the priorities have been taken into account; quality of analysis of the area concerned; consistency between the declared objectives and the resources allocated to them; concrete impact on employment; environmental impact of the strategy and related actions.

1.4.1. Account was also taken of the principles of partnership and additionality.

In particular, the plans were to include a commitment to ensure that the social partners played their full part, and were to link the Objective 2 programmes with other economic regeneration schemes in the region concerned.

As regards additionality, each Member State was to ensure the same overall level of expenditure as for 1994-1996.

1.5. The list of regions eligible for Objective 2 support is broadly the same as in the 1994-1996 period, as is the percentage of the EU population concerned (16,4 %).

Funding has been set at ECU 8,288 million (1997 prices); this is a real increase of 13,8 % compared to the previous period. To this figure should be added ECU 859 million of unutilized resources from the first period, making a total of ECU 9 147 million.

2. Problems identified by the Commission

2.1. The Commission recognizes that the framing of the new SPDs has drawn on experience gained in the previous programming period.

It also notes a strong degree of continuity of strategy between the new programmes and their predecessors.

Most plans had four or five clearly presented, explicit strategic objectives; some of these reflected an integrated approach to economic development, while others highlighted horizontal aspects such as environmental sustainability and equal opportunities.

2.2. In assessing the measures' consistency with the strategic objectives, the Commission notes that in some cases the broad range of interventions made complementarities and synergies more difficult to achieve.

2.2.1. Training schemes, in particular, were less closely targeted, although 'this may partly be due to the horizontal nature of human resources measures` ().

However, the Commission states that 'the integration of ERDF and ESF measures was relatively improved` ()

2.2.2. The Commission identified more serious shortcomings in the plans originally submitted; these plans showed 'an initial lack of quantification of objectives and outputs including the employment effects and absence of baseline data` ().

In particular, the Commission notes that little use was made of the methodological framework sent to the Member States, on ex-ante appraisal of employment effects.

2.2.3. Greater attention was paid to the environmental aspects. Most plans provided a strategic environmental assessment, and some gave detailed information on all the proposed measures.

2.3. Although most plans included an explicit commitment to the partnership principle, the participation of the economic and social partners was not always clearly defined.

2.4. Finally, problems in gathering and verifying data made it difficult to ascertain additionality.

For this reason, a clause was introduced in the decisions approving the SPDs 'suspending Community payments after the first advance pending ex-ante verification of the additionality principle` ().

2.5. Negotiations between the Commission and the Member State resolved some of these problems and significantly improved the quality and effectiveness of the plans, 'particularly in the light of the results of evaluation (...) and the paramount priority of job creation` ().

In some instances, increased importance was given to measures which promised most job creation. In other cases, the programmes were completely rethought.

3. General comments

3.1. The communication is important for a number of reasons, and firstly because it covers the last period of operation of Objective 2 in its current form.

3.1.1. This is because the reform of the Structural Funds anticipated in Agenda 2000 envisages a radical revision of structural policy.

The seven current objectives would be reduced to three. Two of these would be regionally based, while the third would exclusively cover human resources.

For the period 2000-2006, the Commission envisages a slightly lower average annual appropriation than for 1999, and stricter application of the 75 % of GDP threshold for regions included in the new Objective 1.

3.1.2. The percentage of the EU population covered by Objectives 1 and 2 would fall from the present 51 % to between 35 and 40 %; this means that some regions would have to be excluded. As all the Community initiatives will come under the new Objectives 1 and 2 (apart from those for human resources, which will form Objective 3), it follows that some areas might no longer receive any structural support at all - other than the Social Fund and the remaining Community initiatives - after 1999. For these areas, the measures discussed in the communication are thus of special importance.

3.2. There is a second reason why the communication is so important: in order to ensure that the reform of the Structural Funds is as transparent and effective as possible, a careful assessment must be made of the manner in which the decisions were reached on the SPDs for 1997-1999, and of the planned measures.

Key factors here might include:

- as regards the way the programmes were devised: a check on the existence of a horizontal partnership;

- as regards content: the selection of innovative projects and local development projects;

- as regards objectives: the creation of real additional, lasting jobs.

3.3. Thirdly and most significantly, the communication is important because of the contribution which the programmes contained in the SPDs can make to the drive to create and save jobs, as this is now the top priority of Community policies.

4. Assessment

4.1. The programmes described in the communication can thus be assessed:

- against the results of the preceding periods, in the light of the problems which emerged in the earlier administration of Objective 2;

- with an eye to the future, in the light of the structural policy reform proposed in Agenda 2000 ().

4.2. Comparison with earlier action

4.2.1. Firstly, it is worth seeing whether the programming for 1997-1999 has improved on previous programming.

A useful reference grid is provided by the issues that were highlighted at the April 1997 European Cohesion Forum, which considered some reports on the management of the Structural Funds ().

4.2.2. The forum's debate on Objective 2 revealed a number of basic problems. Broadly speaking, although Structural Fund assistance in declining industrial regions has done much to help structural adjustment over the years (in the period 1989-1993, for example, some 500 000 net jobs were created), its impact has been limited by the excessively small size of some areas, which has sometimes made an effective integrated approach impossible.

The limited duration of the support (two years) has encouraged short-term schemes, to the detriment of a strategic approach to development.

4.2.3. As regards programme content and implementation, any genuine reconversion of these areas has been seriously hampered by the fact that small firms are often unable to follow market and innovation trends, and therefore fail to produce any appreciable regional added value.

However, there has been a steady improvement on one important front. Programme content has given priority to intangible factors (development of businesses, innovation, training and skills, environmental protection), rather than to physical ones such as basic infrastructure.

The attention given to RTD and innovation is also important. However, care must be taken to ensure that investment does not just support whatever innovation is on offer, but is geared to the real needs of small businesses.

4.2.4. One of the most positive features of the Structural Funds is that they have committed the regions to make more permanent, structured provision for development.

Management methods still differ considerably, as they are influenced by the differing administrative traditions, and this fact is to be welcomed.

However, centralist administrations still find it difficult to accept a 'bottom-up` approach to regional development.

4.2.5. Another plus point is that the Funds have developed the horizontal partnership and have dovetailed more effectively with other national and regional assistance.

In some areas, setting up the partnership remains difficult because of the lack of an established tradition of relations between the public authorities and socio-economic organizations.

In the past, the private sector has hardly ever taken part in the framing of the programmes, unlike the public and semi-public sector.

4.2.6. Other important issues relate to the management of the programmes.

Alterations tend to be made on the basis of financial aspects rather than on changes in regional development priorities.

This is partly because there is no monitoring, and because the time frame is too short.

Many projects do not set operational objectives for implementation and impact. These criteria have rarely been instrumental in project selection.

Lastly, additionality has often posed a problem. Available funds have not been used because the regional and national authorities found it difficult to match the Community resources.

4.2.7. In the communication's conclusions, the Commission points out that the new programmes for 1997-1999 offer more incentives for investments which promote employment-intensive growth and sustainable development.

Greater attention is devoted to training and retraining schemes, promotion of entrepreneurship and encouragement of RTD.

Efforts will also be made to improve local services, which offer considerable employment potential.

4.2.7.1. Overall, the Committee is pleased to see a greater integration of Community, national and local initiatives. This is vital in order to make optimum use of resources and obtain better results.

4.3. The reform of the Structural Funds and State aid for the regions

4.3.1. The Commission states in Agenda 2000 that the new Objective 2 programmes 'will favour economic diversification, including in regions heavily dependent on a single declining economic sector` ().

It goes on to say that 'this will require increased support for small and medium-sized enterprises and innovation as well as a greater emphasis on vocational training, local development potential, the protection of the environment and combating social exclusion (...). Investment in human resources, based on anticipation and on activating the labour market (...) should be increased`.

4.3.1.1. The Commission would also like to see 'simpler, transparent and specific eligibility criteria developed for the various types of areas covered by the new Objective 2`. Each region is to have a single programme involving the various Funds (ERDF, ESF, EAGGF, FIFG).

4.3.1.2. The aim will be to concentrate resources on the worst affected regions at Community level.

Any current Objective 2 and 5b regions which are no longer eligible under the future selection criteria would enjoy limited financial support for a transitional period.

The Commission also states that, in order to simplify the operational arrangements, there will be a single multi-year programme for each Objective 1 and 2 region, a clear division of responsibilities between the national, regional and local authorities and the Commission, and stringent checks and verification of results.

4.3.2. Account must also be taken of the new guidelines for State aid to the regions, which were approved by the Commission on 10 December 1997 following an initiative by Mr Van Miert. These seek 'to set up a more transparent system` and 'to create positive discrimination with regard to the least favoured regions` ().

4.3.2.1. The main criteria will be that:

- aid should be concentrated on the poorest regions;

- national aid should be consistent with that used for the Structural Funds;

- special attention should be accorded to aid that is designed to boost employment; hence aid will no longer be restricted to productive investment, but may also cover the jobs that will ensue from it;

- the overall volume of regional aid should be reduced.

4.3.3. Of relevance here is the impact which the proposed reforms will have on the number of people covered by the Structural Funds after the year 2000.

This raises the question of how to ease the transition for the affected regions and adopt new eligibility criteria that are socio-economically justified.

4.3.4. The idea of making Objective 2 areas coterminous with those eligible for state aid (Treaty Article 92(3)c) is also a cause for concern. While recognizing the need to coordinate and integrate EU structural policies more effectively with national ones, the Committee feels that this could lead to an excessive reduction in areas.

5. Impact on employment

5.1. The employment impact of structural measures deserves careful consideration. According to the Delors white paper, the main objective of the Structural Funds is to help create conditions for lasting growth, competitiveness and economic development.

The March 1996 Commission communication on structural assistance and employment () established the priority goal as employment.

From Essen through to the recent summit in Luxembourg, European Councils have consistently made employment their most pressing priority.

The Amsterdam Treaty contains a new Title on employment, deeming it a 'matter of common concern`.

The Commission's 1998 work programme () also announces various draft regulations regarding structural policies, with a view to implementing the reforms proposed in Agenda 2000, and states that employment is the first of the 'political priorities` on which it intends to concentrate its action ().

5.2. The question of the employment objectives set in the various SPDs is worth considering here.

The data contained in Annex 4 to the communication, concerning the expected impact on employment in the Member States, vary greatly and are not always intelligible.

In the UK, for instance, over 380 000 jobs are expected to be created or maintained (including over 40 000 temporary jobs - around 10 %). The figure for Germany is less than 120 000 (including 4 100 temporary jobs - around 3 %), while for Italy it is 123 000 (including 6 200 temporary jobs - around 5 %).

Hence there are also considerable disparities in the average cost of creating each job.

5.3. Some of the statements made in the communication appear slightly contradictory.

The Commission begins with the caveat (chapter III, point v) that 'an initial lack of quantification of objectives and outputs (...) was one of the most disappointing features of the plans originally submitted`.

However, it adds that 'substantial progress was made subsequently` in the negotiations.

It immediately goes on to regret that the Member States made little use of the note on methodology which it sent them regarding ex-ante appraisal of employment effects.

Later again, it returns to the 'substantial progress (...) made in the quantification of employment effects`, and speaks of 'detailed estimates` ().

5.3.1. At all events, the assessments appear to have been made using different calculation methods.

5.4. A similar problem exists in relation to the comparison with earlier ex-post evaluations.

According to the eighth annual report on the Structural Funds, 850 000 gross jobs were created or maintained during the programming period 1989-1993.

For 1997-1999 (i.e. just two years), the forecast gross figure is 880 000 - in other words, a higher figure in half the time (a rise of over 200 %). This seems to be due to the greater commitment shown by all parties to employment.

However, it is not possible to make the most interesting comparison - concerning the creation of new jobs - because (surprisingly) data are not available on the number of net jobs; these data are provided only by the UK and France.

This gives a telling indication of the reliability of the data provided by most countries.

In contrast to this lack of precision, data on the number of temporary jobs is available for 12 Member States. The figure for these (106 115) is rather high when compared with the possible, realistic final figure for net jobs.

5.5. The Commission obviously has difficulty obtaining reliable information from the Member States, and lacks the manpower to carry out the large number of checks required. However, there remains the problem of the methodology to be followed, and - more importantly - the problem of checks on whether the objectives are being achieved; these checks are not being made at present.

Checks and verification are carried out meticulously when it comes to the accounting procedures for expenditure, but there is no ex post verification or monitoring.

These are not just issues of methodology; they have real practical consequences for employment.

5.6. Here the Committee would again stress that real economic growth - with an increase in demand and in available income - is a precondition for creating real, lasting jobs.

Support policies for generating new jobs must form part of a process of wider growth and development.

What is true at macro level is also true at micro level. Measures for introducing innovation and increasing productivity must be matched by measures for expanding demand.

In its recent report on Employment in Europe 1997, the Commission states that 'whatever the relationship between employment and output growth, it is clear that the major problem remains the creation of more jobs` ().

Structural measures, including those funded under Objective 2, must aim not only to boost the competitiveness of businesses and regions, but also to boost production, demand and income. This is the only way in which the improvements will produce additional jobs.

6. Concluding comments

The Commission communication highlights a few outstanding problems which must be solved with a view to the reform of the Structural Funds. It also provides an opportunity to consider ways of managing resources more effectively, in the interests of both the short term aim of saving or creating jobs and the strategic aim of economic and social cohesion.

6.1. Strengthening the partnership

6.1.1. The question of the partnership must be addressed clearly and firmly. The communication devotes only a short paragraph of Part I to this key instrument; it is not mentioned at all in the analytical tables for the Member States or in the conclusions. Only in the summary tables for territorial employment pact projects (Annex 5) do we find a list of the main partners.

6.1.2. As the Commission states in the Note for Guidance which it sent to Member States in 1996 (), many Objective 2 regions already have a tradition of partnership and this needs to be further developed. The Note stressed that in developing and implementing the new Objective 2 programmes, 'full use should be made of the regional and local authorities and the economic (such as, for example, SME representatives) and social partners`. This was necessary 'in order to ensure that programmes fully reflect local needs and conditions`.

6.1.3. However, the communication does not assess the nature or efficacy of this involvement, either in the framing of the programmes or in implementation and checks.

6.1.4. The Committee would again stress that the partnership must function right from the planning stage, and must continue during the implementation of structural measures. A strong partnership is essential for effective structural measures because it makes it possible to tailor projects to real socio-economic problems and to incorporate them in a regional development strategy.

The public authorities can no longer treat involvement of the socio-economic organizations as an optional extra or as a mere formality that complicates decision-takers' work. There must be an organized partnership, which must function across all Member States and for all structural measures.

6.1.5. Use of the partnership has improved since the reform of the Structural Funds and the 1993 regulation, but the degree to which Article 4 of Regulation 2081 is applied varies from country to country. The Committee has long asked that this article be reworded to give a clearer definition of the principles of the partnership, without giving too much leeway to the Member States. The Commission's new proposal (Article 8 of the recent proposal for the framework regulation) would appear to be a step forward which meets the Committee's recommendations. Common criteria also need to be established regarding the operation of the monitoring committees.

6.1.6. The Commission's report on the Structural Funds in 1996 () rightly notes the importance of:

- reformulating the legal framework so as to clarify the roles and responsibilities of each partner;

- improving the technical and operational capacities of partners where necessary, by supporting training, information and technical assistance measures.

The aim should be for the partnership to become an essential part of structural policy, and ensure genuine involvement of the public and private socio-economic partners in the framing of structural programmes.

6.2. Reviewing the length of the programming periods and regional eligibility

6.2.1. Rather than extending the 1994-1996 programmes, the Commission has opted for new programmes, as it feels that this will improve the use made of the funds. In this particular case the decision may be justified by the need to reorient the programmes towards the priority objective of employment.

In general, however, the Committee thinks that the productive side of a regional economy cannot be changed overnight, as the whole socio-economic geography may have to be altered. Re-allocating human resources also takes time, as people have to be properly trained for the new activities.

6.2.2. The Committee feels that, in future, longer term programming would be more in keeping with a more integrated strategy that has a stronger impact on conditions in Objective 2 regions. It goes without saying that there should always be a mid-term review, as this provides an opportunity not only for checks and adjustments but also to put forward new measures if necessary, so as to focus on the areas which offer the best prospects for improving local competitiveness and creating stable employment.

6.2.3. The eligibility criteria should be carefully reviewed. A more effective and integrated approach obviously also presupposes more flexible criteria for demarcating the geographical areas covered by measures.

6.2.4. One problem which needs to be solved with the help of the Member States and local authorities concerns the statistical indicators used for assessment and decision-taking.

It is important, with respect to crisis-hit areas, to define indicators based on inter-comparable, credible statistics.

6.2.5. The Committee generally endorses the need to concentrate resources in order to obtain a critical mass that will stimulate regeneration and new development. Resources should therefore be concentrated in the worst hit areas of the eligible regions.

6.3. Focusing on support for SMEs

6.3.1. In order to make Objective 2 measures more effective, especially on the employment front, priority should be given to SMEs. The development of existing SMEs and micro-businesses and the establishment of new and innovative ones are a vital way of diversifying production in areas that need regeneration.

SMEs should be helped to become competitive on the national and international market. Innovation-transfer schemes should be provided for them, gearing the regeneration exercise more closely to their needs.

As well as for infrastructure, Objective 2 resources should be used to improve the position of SMEs in intra-EU trade, with new products and access to new markets. The overall aims should be to create an operating environment conducive to the generation of profits, and to foster a spirit of risk-taking and innovation among young people.

6.3.2. The development of information and communication systems is of basic importance here - in other words, the implementation of the information society in manufacturing and service SMEs. One priority should be the establishment of centres providing services geared to the needs of SMEs.

It is necessary to eliminate a certain bias towards 'industry`, which leads all countries to skew their planning towards companies in traditional manufacturing sectors rather than services, trade and tourism.

It should be remembered that for some years now, while industry and agriculture have steadily shed jobs and created few new ones, services have registered a virtually uninterrupted rise in employment.

Services such as telecommunications, information technology and distribution still offer considerable scope for new employment. Both the Delors white paper and the most recent economic forecasts suggest that millions of jobs can be created by fully exploiting the opportunities of the information society. Programmes financed under Objective 2 should include funding for innovation (e.g. telematics in trade and services).

6.3.3. Two other fields deserve more attention as sources of new jobs:

- environmental protection (water treatment, recycling of industrial waste, improvement of the urban environment, and so on). The recent communication on environment and employment () is relevant here;

- tapping of new sources of employment to meet the changing needs of society. Objective 2 regions have a high population density, and industrial restructuring has left a large pool of labour.

6.3.4. The final important factor is the development of human resources, with the training system being geared to business needs. This is of special importance in Objective 2 areas, where hundreds of thousands of workers - many of them highly skilled - are obliged to acquire new skills at an advanced age. A continuing training system is thus vital, to help workers cope with the increasing pace of change.

Brussels, 27 May 1998.

The President

of the Economic and Social Committee

Tom JENKINS

() A summary of the programmes for these two countries is contained in the Commission communication on the implementation of EU regional policies in Austria, Finland and Sweden (COM(96) 316 final, 3.7.1996).

() COM(96) 952 final, 29.4.1996.

() COM(97) 524 final, 14.11.1997, Chapter III (i), point iv.

() COM(97) 524 final, 14.11.1997, Chapter III (i), point v.

() COM(97) 524 final, 14.11.1997, Chapter III (i), c.

() COM(97) 524 final, 14.11.1997, Chapter III (ii).

() See Part One, Chapter II, 2 of Agenda 2000.

() The report presented by Prof. Michel Quévit is particularly relevant.

() Agenda 2000, Part One, Section II (2).

() OJ C 74, 10.3.1998.

() COM(96) 109 final, 20.3.1996.

() SEC(97) 1852 final.

() COM(97) 517 final.

() COM(97) 524 final, Chapter III (iii).

() COM(97) 479 final, 1.10.1997, p. 1.

() COM(96) 952 final, 29.4.1996, point III.

() COM(97) 526 final.

() COM(97) 592 final, 18.11.1997.