EN Official Journal of the European Union C 164/4

Opinion of the Committee of the Regions on the ‘Communication from the Commission to the Council and the European Parliament: Building our Common Future: Policy Challenges and Budgetary Means of the Enlarged Union 2007-2013’

(2005/C 164/02)

THE COMMITTEE OF THE REGIONS,

Having regard to the Communication from the Commission to the Council and the European Parliament ‘Building our Common Future: Policy Challenges and Budgetary Means of the Enlarged Union 2007-2013’, COM (2004) 101 final;

Having regard to the European Commission's request of 18 March 2004 for its opinion on this subject under Article 265(1) of the Treaty establishing the European Community and according to the cooperation protocol of September 2001 between the European Commission and the Committee of the Regions, which encourages the Committee of the Regions ‘to draw up strategic documents reviewing matters which the Commission regards as important’;

Having regard to the decision of its President of 26 May 2004, to entrust the Commission for Territorial Cohesion Policy with the task of drawing up the opinion and the decision of its Bureau of 15 June 2004 to set up a working group with the task of assisting the rapporteur in his task;

Having regard to the conclusions of the first (7 July 2004) and the second (16 November 2004) meetings of the working group held in Brussels and the contributions of the representatives of its internal commissions;

Having regard to the supplementary Communication from the Commission to the Council and European Parliament ‘Financial Perspectives 2007-2013’, COM (2004) 487 final, intended to develop a first set of detailed policy proposals;

Having regard to the report of the Committee on Budgets of the European Parliament on the Communication of the European Commission COM (2004) 101, A5-0268/2004, Rapporteur: Mr Terence Wynn; and the complementary opinion of the Committee on Regional Policy adopted on 18 March 2004, Rapporteur: Samuli Pohjamo;

Having regard to its outlook report on ‘Governance and simplification of the Structural Funds after 2006’ (CdR 389/2002 fin); (1)

Having regard to its opinion (CdR 120/2004) of 12 June 2004 on the Third Cohesion Report (2);

Having regard to its draft opinion (CdR 162/2004 rev.3) adopted on 26 November 2004 by its Commission for Territorial Cohesion Policy (rapporteur: Cllr Sir Albert Bore, Birmingham City Council (UK, PES));

Having regard to the European Parliament Resolution on the Financial Perspectives, adopted on 2 December 2004;

Having regard to the Communication of the European Commission to the European Spring Council on 2 February 2005,‘Working together for growth and jobs: a new start for the Lisbon Strategy’, COM (2005) 24;

Whereas the key yardstick for the Committee's assessment continues to be the objectives set out in Articles 2 and 158 of the EC Treaty (3). Strengthening economic and social cohesion and solidarity in order to promote the overall harmonious development of the Community and to reduce differences between regions particularly in respect of reducing the development shortfalls of the most disadvantaged areas, will make a significant contribution to strengthening the role of regional and local authorities in Europe, and contribute to the achievement of the Lisbon and Gothenburg agendas;

Whereas Article III-116 of the Draft Treaty establishing a Constitution for Europe strengthens the cohesion objective by introducing a territorial dimension, ‘In order to promote its overall harmonious development, the Union shall develop and pursue its action leading to the strengthening of its economic, social and territorial cohesion’.

adopted the following opinion at its 58th plenary session, held on 23/24 February 2005 (meeting of 23 February):

1. Building our common future issues relevant to local and regional authorities

THE COMMITTEE OF THE REGIONS

welcomes the adoption by the European Commission of a communication on the financial perspective for the period 2007-2013 ‘Building our Common Future: Policy Challenges and Budgetary Means of the European Union.’ (4)

1.1 Priorities and challenges of the enlarged Union

1.1.1 supports the Commission's proposals which respond to the needs and challenges facing an enlarged European Union of 27 Member States, including Bulgaria and Romania in line with the complementary objectives of the Lisbon and Gothenburg strategies for sustainable growth and sustainable environmental development agreed by member state governments to respond to the current and future demands of a single market;

1.1.2 points out that the European Union has been lagging behind its main economic competitors since 1995 (5);

1.1.3 notes that, since enlargement on 1 May 2004, the EU is the world's largest economic and trade bloc, housing many of the world's most productive and innovative cities and regions, but at the same time the EU is an economic area with a growth rate significantly below the global average;

1.1.4 highlights that unless all components of the European economy adapt to the structural changes enforced by globalisation, the European economy will decline further during the 2007-2013 period, jeopardising the prosperity, stability and security of our cities and regions;

1.1.5 recognises that the challenge to defend and sustain the European social model based on growth, competitiveness and solidarity is faced, in the context of increasing public doubt about its efficacy as well as a situation of global instability, and needs coordinated action across all spheres of governance;

1.1.6 also points out that the reunification of Europe through enlargement must continue to lead to renewed solidarity and a diversity that adds to the potential of the European Union. Nevertheless, this enlargement has simultaneously resulted in new and increased economic and social disparities in cities and regions. If left unchecked, these will threaten the cohesion and success of the single market and our shared Treaty objectives. Securing and strengthening the spirit of European solidarity is therefore a necessary precondition for a successful cohesion policy and for advancing the European Social Model;

1.1.7 acknowledges the Commission's view that an intensification of financial effort is required in order to redress the asymmetric impact of enlargement on the Community budget, bridging the gap between policy ambitions and addressing present incapacities to meet targets;

1.1.8 supports the Commission's proposals for a financial perspective that is responsive to modern governance and engages with local and regional authorities;

1.1.9 is of the view that this requires recognition of the need for multi-level ownership, coordinated joint action and accountability across Member States in order to maximise efficiency, visibility of the EU, added value for citizens and multiply the potential return of each euro of public money spent.

1.2 Budgetary means

1.2.1 welcomes the Commission's proposals to take account of existing policy commitments and match limited financial resources to a realistic assessment of what is needed and affordable to meet the objectives of the EU;

1.2.2 highlights that with enlargement, there has been a 5 % increase in Community GDP compared to an increase in population of 20 %;

1.2.3 points out that the average GDP per capita of the EU 25 has decreased by 12.5 %, reflecting the fact that with enlargement, income disparities have doubled and levels of deprivation have significantly worsened;

1.2.4 notes that although the Commission proposes to increase the payment appropriations to an average of 1.14 % GNI, commitment appropriations would average 1.22 % over the period. The own resources ceiling of 1.24 % GNI is retained for the financial perspectives 2007-2013 — the same level as the 2000-2006 period (6);

1.2.5 also points out that this contrasts with the increase in the ceiling of own resources of the EU over the first two financial perspectives but not for the current one. 1988-1992 1.15% to 1.20% GDP 1993-1999 1.24% to 1.27% GDP 2000-2006 1.27% GDP (or) 1.24% GNI;

1.2.6 highlights that enlargement has dictated a policy reaction by the Commission which (together with other external influences) is reflected in the commitment appropriations. There is an increase in commitments for cohesion and competitiveness (sustainable growth), there is a reduction in commitments for ‘on farm’ (sustainable agriculture) and an increase in commitments for ‘off-farm’ (rural development);

1.2.7 points out, however, that in this way, the inevitable costs of enlargement are to be met by reducing the margin between payment appropriations and the own resources ceiling, available in previous financial perspectives for unforeseen expenditure;

1.2.8 notes that the 1.14 % GNI payment appropriations for the financial perspective 2007-2013 include the European Development Fund and the Solidarity Fund. 1.14 % GNI is therefore equivalent to approximately 1.10 % GNI payment appropriations for the period 2000-2006;

1.2.9 acknowledges that the Commission's proposals are the subject of some disagreement and that a number of net contributor states have called for a more rigorous expenditure level not exceeding commitment appropriations of 1 % GNI (including pre-quantified commitments such as agricultural spending) (7);

1.2.10 is concerned that the position would result in payments at 0.9 % GNI and that the average annual figure for 2007-13 would therefore be significantly lower than the agreed payments figure for 2006 which is 1.09 % of GNI;

1.2.11 points out that this would represent a restrictive budgetary envelope which could prejudice policies with specific Treaty status and those with significant multiplier effects and effects which would also impact on the expectations of the new Member States;

1.2.12 believes that the Commission's proposals are a logical response to such budgetary concerns in Member States whose own resources are currently compounded by low economic growth rates across Europe and, accordingly, this Committee takes a similar view to that of the European Investment Bank in supporting a shift of resources towards the challenges of tomorrow;

1.2.13 notes that at 1.24 % of GNI, the EU budget amounts only to around 2.5 % of total public expenditure in the Union;

1.2.14 agrees with the Commission that it is unrealistic to expect more Europe for less money — new policy areas at EU level imply new financial requirements;

1.2.15 notes that, as there can be no financial perspective without an agreement between the European Parliament and the Council, as the existing Treaty foresees no obligation to have a financial perspective and only provides for annual budgets, the disagreements between member states on the financial perspectives need to be resolved swiftly. It would be unwise to repeat the delays which occurred when adopting Agenda 2000. Protracted negotiations would result in disruption to the future Structural Funds programmes;

1.2.16 believes that on the timeframe for the financial perspective 2007-2013, a seven-year phase is logical given the major structural challenges involved. Moreover, it offers the opportunity to establish workable mechanisms and instruments for further phases. Guaranteed European funding for seven years, as compared with shorter-term funding that often features with 4-5 year national mandates, offers cities and regions the timescale necessary to undertake long-term strategic approaches to sustainable economic and social development.

1.2.17 acknowledges that proposals for future phases of five-years could coincide with the European Parliament and Commission term of office and therefore bring more democratic legitimacy to the Financial Perspectives.

1.3 Expenditure approach

1.3.1 is of the view that the three main priorities outlined by the Commission within its communication on the financial perspective 2007-2013 are appropriate. Namely: — sustainable development; — giving full content to European citizenship; and — the EU as a global partner;

1.3.2 considers that the financial perspective 2007-2013 should recognise the need to broaden European-wide consensus on the common policy challenges it identifies, by clearly setting out the European dimension of these issues, highlighting simultaneously the added value of EU action but also, in line with the principle of subsidiarity, the distinct contribution made by each sphere of government — local, regional and national;

1.3.3 welcomes the Commission's consideration of the added value of action at the EU level and the issue of better governance in the implementation of EU policy across each of the budgetary headings of its financial perspective 2007-2013, as developed in its later communication;

1.3.4 agrees with the Commission's objective in this regard that the financial perspective 2007-2013 should not transfer funds to the EU level as an end in itself;

1.3.5 endorses the views of the Commission that expenditure in the next financial perspectives should ensure that action at the EU level will be: — effective, when results can be achieved only through action at the EU level; — efficient, when EU action offers better value for money; and — complementary, thereby through leverage, generating action in the national, regional or local sphere.

1.3.6 believes that the EU model is a balance between individual and society, state and decentralised authority, market gain, rules and regulations. As such, the Commission's prioritisation of policy headings within the financial perspective sets out the possibility for future sustainable growth of the model that has delivered stability and growth in Europe over the past 50 years;

1.3.7 feels that the Commission has adopted a balanced strategy for cohesion policy across policy headings giving particular emphasis to the needs of the new Member States by striking a careful balance between the economic, social and territorial disparities across the whole of the EU;

1.3.8 is of the view that across these policy headings there are key examples of the EU model delivering added value. EU investment in research and development, cross border exchange and infrastructure projects, join up Lisbon-Gothenburg objectives with a partnership approach that can lever in growth, convergence, competitiveness and long-term sustainability. Another element of Europe's partnership approach to research and development is widely spread education and research infrastructure that enables the high educational level of Europe's population and growth potential to be exploited to the full. Market-based solutions alone do not offer the sustainable future that Europe is seeking;

1.3.9 recognises that affordability and budget discipline are motivating factors behind the negotiating process, wherein there are two approaches to the methodology of setting a financial perspective: — identifying what is needed and allocating resources accordingly; and — identifying what is affordable and allocating priorities accordingly.

1.3.10 recognises that the Commission has advocated the first approach from a bottom-up perspective, constructed from an evaluation of bottom-up needs;

1.3.11 rejects the logic that the second approach could deliver a sustainable response to the economic, social, and democratic challenges for the EU.

1.4 Financial framework

welcomes the Commission's proposals to reconstruct a new financial framework around a limited number of policy goals:

— (1a) Competitiveness for growth and employment; — (1b) Cohesion for growth and employment; — (2) Sustainable management and protection of natural resources; — (3) Citizenship, freedom, security and Justice; and — (4) European Union as a global partner.

The Committee's main observations relate to the sustainable development chapter, 1(a), 1(b) and (2).

1.4.1 Sustainable growth

— recognises the economic coherence and political logic of using sustainable development as the budgetary vehicle for the three complementary pillars: convergence; competitiveness and employment; and territorial cooperation;

— welcomes the proposal for a Structural and Cohesion Policy budget of EUR 336.2 billion for 2007-2013 compared to Structural and Cohesion Funds of EUR 213 billion for 2000-2006, noting that 78 % (EUR 262.3 billion) is allocated to the convergence objective for regions whose development is lagging behind, 18 % (EUR 68.5 billion) is allocated to regional competitiveness and employment, and 4 % (EUR 13.5 billion) allocated to the territorial cooperation objective for cross border and inter-regional development (8).

— notes that the single budget line of EUR 262.3 billion allocated to the convergence objective, for regions where per capita GNI is less than 75 % of the EU25 average, EUR 22 billion is available to the EU15 cohesion countries currently eligible but who will no longer satisfy this criterion for purely statistical reasons (phasing out regions). This amounts to 66 % of the amount they would have received over 2007-2013 as full convergence regions.

— notes that the single budget line of EUR 336.2 billion is equivalent to 0.41 % of GNI (or EUR 344.9 billion, 0.46 % of GNI, including the Solidarity Fund administrative costs and other actions).

— emphasises that to deliver a sound macro-economy geared to sustainable growth, the programmes within these pillars must be directed explicitly to achieving the Lisbon-Gothenburg objectives.

— notes that the Lisbon Strategy was designed to promote sustainable economic growth and to strengthen social cohesion, with the following goals: — to increase the employment rate to at least 70 % by 2010; — to bring European productivity levels in line with the performance of the world's top companies; — to identify the challenges of the information society and set up a European research area; — to bring investment in research up to 3 % GDP.

— notes that the supplementary communication from the Commission acknowledges that we have fallen well short of meeting the goals for growth and a reduction in disparities, which underpin the Lisbon-Gothenburg Strategy. In part, this is a consequence of pressures to respond to global competition, productivity issues, an ageing population and increasing expectations for health care, with corresponding pressures on public expenditure;

— believes that critical success factors need to be identified and measured in order to monitor and deliver Lisbon-Gothenburg objectives as well as ways forward to mobilise civil society, regional and local authorities, and business leaders — all those with a stake in Lisbon's success so as to deliver a Lisbon-Gothenburg strategy for all.

— recognises that if the expenditure levels in the financial perspective are reduced below the 1.14 % GNI payment appropriations proposed by the Commission, the programmes that would be lost would be those relating to the sub heading ‘supporting regional competitiveness and employment outside the less prosperous regions within 1b) Cohesion for growth and employment heading’. The problem of regional disparities would be aggravated. Consequently, it would not be possible for all regions to participate on an equal footing to improve the competitiveness, growth and employment of the EU as a whole.

— has consistently supported the application of competitiveness and employment measures to ensure that the entire regional territory of the EU can be fully responsive to the Lisbon-Gothenburg Strategy, but questions to what extent the programmes within the pillar comprehensively deliver the Lisbon-Gothenburg objectives when lack of regional prosperity is the only indicator for funding;

— understands, as the Third Cohesion Report recognises, that GDP as the main indicator has a number of weaknesses and that it has been repeatedly demonstrated that disparities within regions — for example, clearly visible within the large and medium-sized cities (9)- are often more acute than disparities between regions;

— regrets therefore, that the problem within and between regions is compounded by the reduced level of the budgetary envelope allocated to this new ‘objective 2’ compared to previous programming periods, an 18 % budgetary envelope in 2007-2013 as compared to 23.8 % in 2000-2006 (10);

— welcomes the increased acknowledgement of the potential of major urban areas as drivers of economic growth, but believes that the proposed regulations for each national framework should contain an explicit reference to sustainable urban development to reflect the role of urban centres as economic drivers of the European economy;

— regrets that while there is proper recognition of the impact of ageing populations, through the Lisbon strategy, in reducing growth rates and lowering GDP — and the measures needed to combat these effects — there is not a similar recognition of the potential of young people in the delivery of a competitiveness and growth agenda.

(a) Competitiveness for growth and employment

— Promoting the competitiveness of enterprises in a fully integrated single market

— recognises the need to relaunch industrial policy in Europe by creating a business-friendly environment;

— urges the need to harness and encourage the potential for development of the SME sector as building blocks for growth in the single market in recognition that SMEs represent perhaps the greatest untapped potential of the single market;

— observes that in applying the rules of the single market to cohesion policy to stimulate small business, measurable added value can be identified through the increase in intra-community trade between less developed regions and the rest of the EU, since around one quarter of expenditure under competitiveness driven cohesion policy returns to the rest of the Union in the form of increased exports;

— believes that in the reform of State Aid rules, horizontal exemption regulations are required to support Research and Technological Development and for SMEs;

— believes that the introduction of impact assessments to better target State Aid — allowing greater flexibility for national, regional and local authorities to adopt measures that have limited effect on competition and trade at the EU level, but that tackle real market failures — contribute to the development of areas that are lagging behind and promote entreprenurship;

— Strengthening the European effort in research and technological development

— Is of the view that if the EU is to become a dynamic knowledge based economy then a number of measures and financial support arrangements are required–particularly, creating poles of excellence from Europe's widely spread education and research infrastructure that would drive wider regional economies, disseminate excellence and increase competitiveness throughout the EU;

— agrees with the European Commission that the strengthening of EU effort in Research and Technological development constitutes a major objective of the enlarged EU, but with a proper balance between public and private financing (11);

— endorses, therefore, the decision of the Barcelona European Council to increase Research and Development expenditure to 3 % of EU GDP by 2010.

— Connecting Europe through EU networks

— Agrees with the European Commission proposal to increase the scale of financial resources associated with developing trans-European networks. Giving particular priority to cross-border projects which encourage inter-modality and the use of sustainable forms of transport, especially the concept of motorways of the sea, provided that these fit into a comprehensive sustainable transport scheme;

— highlights the role that TEN-Ts, especially ‘motorways of the sea’ in the specific case of islands, can play in overcoming the difficulties which regions with natural and demographic handicaps have in accessing the internal market under fair conditions;

— acknowledges the limited capacity of member states to raise the required infrastructure investment sums at a time when they are trying to cut back on public expenditure with a view to complying with the Stability and Growth Pact rules;

— underlines that TEN-T funding from local and regional authorities can only remain peripheral given the heavy commitments to other infrastructure investments which are often vital to the smooth operation of TEN-Ts and the functioning of the local economy and social infrastructures;

— observes that facilitating competitiveness encourages the recognition of core interdependencies between cities and regions, which can in turn create critical masses capable of levering extensive growth across areas that are impossible to attract or establish by a city or region alone. Strategic European urban networks such as URBACT are good examples of this and should be facilitated at European level to ensure the exchange of best practice and expertise between territorial areas and the necessary investments to deliver Lisbon-Gothenburg objectives.

— Improving the quality of education and training

— underlines that local and regional human capital formation and training are vitally important for the development of the European single market and the implementation of the Lisbon strategy. Actions taken across the EU to support mobility will have real economic impact. Taken individually and as a whole, these measures represent extremely good value for money. Their additional cost to the budget should be acknowledged as essential to the smooth functioning and development of an integrated labour market and common European learning area.

— Helping European society to anticipate and manage social change

— endorses the Commission's view that there must be an appropriate regulatory framework for businesses and workers to establish social standards and basic rights.

(b) Cohesion for growth and employment

— recognises, that Community added-value is not generated by funding alone but through the Community Method that designs programmes to take account of and deliver regional strategies. Only a European institutional framework can guarantee a complementarity of sectoral policies and financial instruments that deliver the Community objectives of economic, social and territorial cohesion;

— recognises that the convergence objective must be prioritised with enlargement as an act of solidarity with new Member States and the weakest regions in the ‘old’ Member States to ensure that funds are channelled to regions and cities lagging the furthest behind;

— points out that the Commission's proposal for funding the EU Structural Funds in the next funding period also constitutes a fair compromise for the regions of the EU-15, in that EUR 109.8 billion are being set aside for the new Objective 1 and EUR 56.6 billion are being made available for the new Objective 2 in the ‘old’ Member States (compared to EUR 154 and EUR 46.6 billion respectively in the current funding period);

— warns against undermining the principles of partnership and solidarity in respect of those Member States which will no longer be eligible for the Cohesion Fund as a result of the statistical effect of enlargement;

— recognises the reasons for the introduction of an absorption ceiling of 4 % of national GDP, for all Member States, in the allocation from the ERDF, ESF and Cohesion Fund, including resource transfers as part of rural development and fisheries re-structuring (12). The reduction of economic and social disparities must remain a top priority of the European Union and these funds are necessary to assist those regions and Member States lagging behind in their economic and social development;

— accepts that the principle of the Berlin formula — the less developed the region, the more assistance it should receive — was well founded and should continue to be applied in the future. Consequently, the anomalies that arise with the application of the 4 % absorption ceiling of national GDP at a Member State level need investigation;

— cautions, however, that any adjustment to the overall payment appropriations will occur outside of this 4 % cap and, therefore, while cohesion funding will be guaranteed within the new Member States, this impact will seriously undermine the principle of a Lisbon-Gothenburg agenda for all;

— recognises the importance of improving capacity building within the decentralised authorities of member states and new neighbouring countries. Considerable progress can be made in cross border and interregional cooperation through the exchange of knowledge and expertise between experts from local and regional authorities.

1.4.2 Conservation and management of natural resources

welcomes recognition within the financial perspectives of the need to diversify activities within the countryside: enhance the environment; and improve quality of life, as a vital balance to achieving territorial cohesion within the sustainable development objectives of the Lisbon-Gothenburg Strategy;

expresses its concern that growth and development indicators, including employment, industry and diversity, are consistently lower in rural areas, undermining their liveability;

welcomes the potential of urban programmes to drive development into the wider countryside through specific research and development, entrepreneurial and social change initiatives although it is recognised that the more remote rural areas are unlikely to benefit from such initiatives;

emphasises, nevertheless, the need for balanced solutions to the different situations of rural areas, including those with natural handicaps and specific environmental constraints;

emphasises also the imperative of respecting territorial diversity within which the concept of an underlying urban/rural paradigm for growth and cohesion marks the movement away from industrial/agricultural models that are no longer responsive to challenges of globalisation;

encourages the recognition given to protecting the environment in all its aspects: global, regional, urban, rural and marine, as a horizontal element across programmes. In this context, the local and regional authorities responsible for maintaining NATURA 2000 sites should be assured appropriate funding from the relevant policy instruments.

1.4.3 Citizenship, freedom, security, justice

is pleased that the Commission wants to develop and give substance to the issues of European Citizenship, and to address in a managed way the difficult issues of migration and integration, freedom, security and justice which affect urban and rural areas across the European Union as stated in the preamble to the Charter (13);

recognises correctly that the challenges posed by immigration and asylum can no longer be met adequately by measures taken by Member States and emphasises that many local and regional authorities now provide front-line support measures and facilities;

underlines that both Europe's major cities and rural areas have extensive and growing experience of migrant labour and new settlements. Therefore this knowledge and experience of integration of migrants should be reflected in the provisions of the regulations being submitted on these matters by the Commission;

recognises that the current consumer, food safety and health programmes do not match the expectation of Europe's citizens;

supports accordingly, the introduction of two instruments: a food-safety programme and a consumer policy and public health programme.

1.4.4 External policies

agrees with the recognition made by the financial perspective 2007-2013 that with enlargement and growing local and regional imperatives, the EU should strengthen its capacity to safeguard human rights, promote democracy and combat poverty, in the new neighbourhoods of the EU through both multilateral and bilateral policies;

supports the Commission's view that there should be a coherence and consistency of external actions, to achieve more and better with the resources available;

welcomes the view of the Commission that there should be a new neighbourhood policy to build on positive cross-border developments that have been taking place since 1989 or earlier, the scope of which should be support for measures aimed at progressive economic integration, deeper political cooperation and the development of common infrastructure;

emphasises the importance of improving capacity building within the decentralised authorities of new Member States and neighbouring countries.

1.4.5 Corrective mechanism

understands that the negotiations on the financial perspective 2007-2013 will clearly involve mechanisms for the overall funding of the Union and the extent of contributions made by individual Member States. The Commission has made a separate proposal, which would end the existing UK rebate and introduce a generalised corrective mechanism to reflect the relative prosperity of a Member State;

believes that a fair system needs to be introduced to meet the Union's budgetary needs; and that this system should eliminate the rebate arrangements with some of the Member States;

endorses the view of the European Commission that this approach provides the opportunity to eliminate corrective mechanisms introduced in previous financial periods presently adjusting the excessive negative net balances arising for some Member States in relation to contributions to payment commitments from the EU budget. If this were to be accomplished, excessive fiscal burdens on individual member states would be avoided and EU-level solidarity maintained.

1.4.6 Stability and Growth Pact

recognises that, currently, the terms and conditions of the Stability and Growth Pact and its restrictive implementation, which does not allow a Member State to exceed 3 % of GDP limit on its budget deficit or 60 % for debt, only address stability concerns based on the economic conditions of the late 1990s, while the pressing need today is to move towards and properly address a more growth orientated policy framework. Without a focus on growth, it will be impossible to factor in the social and environmental facets of the Lisbon-Gothenburg strategy;

supports the European Commission's proposals for reforming the Stability and Growth Pact where reforms provide a flexible way of conducting economic policy so as to reduce problems arising within the economic cycle, but without ignoring the importance of having a stable economy. This will provide more room for manoeuvre so that countries can make provision for increased public spending and tax cuts during periods of economic downturns;

suggests that one approach could be to introduce a mechanism whereby capital investments in accord with certain areas of Community competence and agreed within the Lisbon strategy would be exempt from normal budgetary accounting procedures. This would enable necessary public investments aiding growth to be undertaken without violating the financial disciplines of the Pact;.

suggests that another approach would be to improve the enforcement mechanism of the Stability and Growth Pact in a manner which takes into account the proper economic situation of each Member State so that the medium term objective of a balanced budget would be differentiated for each Member State to take into account the level of investment, debt dynamics, sustainability of public finance and potential growth.

1.5 Delivery instruments and governance

1.5.1 A roadmap

notes that the final chapters of the financial perspective 2007-2013 are concerned with the efficiency of delivery instruments and appropriate governance arrangements, matters of importance to local and regional authorities;

points out that the communication does not elaborate on the distinctive contribution which each sphere of government — local, regional, national and European — could make to the resolution of the current deficiencies;

highlights that national action, coordination and public spending through EU budgets require the right combination of these measures at the right time. The Open Method of Coordination (OMC), underlying the Lisbon-Gothenburg strategy, sets goals, establishes indicators and benchmarks, sets national and regional policies through National Action Plans, and instigates periodic monitoring, evaluation and peer-review and as such is capable of bringing added value to the objectives through the transfer of knowledge and experience accumulated at local and regional levels;

believes however, that the process in its current form has not proved sufficiently effective in delivering the Lisbon-Gothenburg objectives. There has been little coordination of policies across Member States and no peer pressure to achieve the Lisbon goals. Moreover the OMC has failed to involve local and regional authorities who have a vital role to play in realising the city-region and regional competitiveness that can stimulate the peer pressure required;

is of the view however, that OMC remains an alternative to supranational decision-making and is capable of being re-shaped into an effective delivery process if there is a simplification of the myriad of existing requests away from unilateral discussions between the Member States and the Commission on individual policy themes;

believes that this would suggest the need to explore new, flexible methods; developing a tripartite model approach through contractual activity-based methods of involving local and regional government in delivering policy objectives to add bite and purchase to delivery mechanisms. This should not add complication nor represent more than abstract ideas, but represent real systematic dialogue with local and regional authorities;

strongly recommends that the roadmap proposed by the Commission — a shared programme involving actions and funding at national and EU level — must involve the local and regional authorities. The territorial component of framework programmes is important to the realisation of cohesion objectives between and within Member States;

restates that Tripartite Pacts are a way of embracing local and regional authorities into the governance arrangements of the EU. Delivery of framework programmes greatly depends on the engagement of local and regional actors.

1.5.2 Policy and programmes

notes that the financial perspective 2007-2013 and the supplementary communication proposes that the instruments available to the EU to further its policy goals will, as far as possible, be consolidated and rationalised into one instrument per policy area and one fund per programme;

welcomes that Cohesion policy programmes will be supported through single funds (Cohesion Fund, ERDF and ESF), with activities concerning agriculture and fisheries now to be resourced under the Sustainable Management and Protection of Natural Resources heading;

welcomes that the urban dimension has been mainstreamed across cohesion policy programmes, for the benefit of all urban areas, strengthening the importance of partnerships between cities and regions;

recognises that a new regulation will establish a structure for CAP funding with a single fund for each pillar: the European Agricultural Guarantee Fund (EAGF) and the European Agricultural Fund for Rural Development (EAFRD);

welcomes that all rural development measures are to be regrouped under a single instrument to deliver a single programme with attention given to coherence between rural development and cohesion measures:

— increasing the competitiveness of the agricultural sector through support for re-structuring,

— enhancing the environment and countryside through support for land management,

— enhancing the quality of life in rural areas,

— promoting diversification of economic activities;

welcomes the Commission's efforts towards simplification with the creation of a Financial Instrument for the environment (LIFE+), but would highlight the difficulty in identifying real opportunities for financing environmental projects through the various financial instruments that will be in place for 2007-2013. It is essential to coordinate the various types of funding in order to cover the different priorities and Community intervention arrangements;

is concerned that the Commission wishes to devolve a very significant part of the LIFE+ budget (75 %-80 % of the instrument) to the various Member States without establishing the arrangements and conditions for this ‘devolvement’ in the proposed Regulation;

notes that a new neighbourhood instrument is proposed, aimed at cross border cooperation between the EU and neighbouring countries, underlining the added value of the EU in promoting stability and prosperity beyond its external borders through sustainable economic and social development;

welcomes the creation of the EFF as a single instrument for the restructuring of the fisheries sector, closely linked to cohesion instruments and providing:

— sustainable development of coastal areas,

— adaptation of fishing fleets; aquaculture and fish processing industries;

considers that these proposals will assist in the transparency of the financial perspective for citizens.

2. The Committee of the Regions recommendations

2.1 Partnership

2.1.1 demands that the principle of partnership linking local, regional, national and trans-national spheres is a horizontal strand permeating all of the Commission's proposals. This principle needs to be acknowledged and implemented with some urgency by both the European Commission and the Council of Ministers and also communicated consistently across Member States and throughout the media, to demonstrate the added value of the EU;

2.1.2 calls for the consistent application of the partnership principle in the detailed regulations being submitted by the Commission on all policy elements identified within the financial perspective 2007-2013;

2.1.3 urges that the partnership principle be fully embedded in the new regulations dealing with programmes, in particular trans-European cooperation, and that these programmes should recognise the knowledge and expertise held by the relevant local and regional authorities.

2.2 Coherence

2.2.1 insists on the crucial importance of increasing the coherence between cohesion policy and specific sectoral European policies, notably those on agriculture, research and competition, environment and transport, allowing for area-based approaches. Alongside the application of the partnership principle, the new programmes need to demonstrate the commitment of both the Commission and the Council of Ministers to joined up government across all spheres of governance — local, regional, national and EU.

2.3 Tripartite Pacts and Agreements

2.3.1 recommends that the application of Tripartite Pacts and Agreements be extended so as to give substance to the governance of in the financial perspectives 2007-2013 and should represent an engagement of elected members of in local and regional authorities with the proposed roadmap, especially for the territorial component of framework programmes necessary for the realisation of cohesion objectives both between and within Member States;

2.3.2 suggests that local and regional engagement with the roadmap process, with regional strategies being part of the national strategy, would ensure not just greater coherence in delivery of a sustainable growth agenda, but also more visibility of European cohesion policy and the prioritising of resources to where they are needed most;

2.3.3 emphasises that these arrangements could be introduced without undermining the urgent need to simplify and streamline the shaping and delivery of Competitiveness and Cohesion programmes;

2.3.4 recommends an inter-institutional, critical impact-assessment evaluation to assess what has been done and what works across diverse public policy within Member States. A single audit arrangement would assist in determining whether strategic goals are being achieved — aligned to the Lisbon-Gothenburg Strategy — in prioritising resources where they are needed most.

2.4 Cohesion policy

2.4.1 re-emphasises the inextricable linkage between an effective European-wide regional policy and the implementation of the Lisbon-Gothenburg agenda. Future EU growth and competitiveness across all parts of Europe will be promoted by a continuation of EU cohesion policy rather than by a re-nationalisation of this policy– confirming the positive impact to date of EU regional policy in strengthening the Community's social, economic and territorial cohesion;

2.4.2 insists that all National Action Programmes for growth and employment drawn up by Member States and the Commission reflect consultation and engagement with local and regional authorities. Urban and regional strategic plans must shape the commitments and targets set by the National Action Programmes;

2.4.3 equally suggests that a facilitating mechanism should be set up for creating programmes through which two or more regions could participate in those activities that have a real influence on increasing local competitiveness;

2.4.4 insists that the Competitiveness for Growth and Employment pillar of the financial perspective 2007-2013 cannot be the adjustment variable for negotiations on payment appropriations for the next framework period; while accepting that within cohesion headings, priority should be given to the Convergence objective, the CoR however, is of the opinion that the EU should back the Competitiveness objective in order to anticipate and promote change to reach the objectives of the ‘new’ Lisbon strategy;

2.4.5 urges that cohesion policy is funded at not less than 0.41 % of EU GNI to ensure that the objectives of cohesion policy are fully met in the EU-25;

2.4.6 supports the need for coherence between the application of the 4 % absorption ceiling of national GDP at a Member State level and the implications of the Berlin formula for the less developed regions;

2.4.7 demands that sustainable rural development programmes are closely integrated with cohesion policy programmes and should not become surrogate agricultural programmes as a result of own resources pressures;

2.4.8 urges that the regional allocation criteria for the competitiveness and employment pillar be based on a mix of indicators that reflect regional and local needs, accessibility and opportunities, and are able to measure intra-regional disparities;

2.4.9 demands that the opportunities offered by cities for the social and economic development of the whole EU be recognised and factored into strategic planning at national level;

2.4.10 urges that the Committee of the Regions is actively consulted through participation at the Spring European Council's annual examination of competitiveness and cohesion agendas. This would provide local and regional authorities with opportunities to bring forward issues and good practice as required for improved functioning of the open method of coordination in the implementation of Lisbon and Gothenburg agendas.

2.5 Lisbon-Gothenburg Strategy

2.5.1 urges that a more coherent approach is taken to the introduction of macroeconomic measures, employment and social action and environmental and research initiatives as a means of revitalising the strategy and to guide Member State National Action Programmes;

2.5.2 calls for radical improvement in the governance of the Lisbon-Gothenburg Strategy to make it more effective and more easily understood;

2.5.3 calls therefore, for the mid-term review of the Lisbon Strategy to include a critical assessment of the implementation of governance and an analysis of the impact of the decentralisation of administration on the effectiveness of the implementation of the Lisbon Strategy;

2.5.4 emphasises that although the general picture with regard to implementing the Lisbon strategy is gloomy and pessimistic, some Member States have managed to achieve objectives in a large number of policy areas. The Committee of the Regions considers that the factors underlying this should be analysed more closely and taken into account when applying the Open Method of Coordination;

2.5.5 demands, specifically, that critical success factors at local and regional level are identified and measured across the EU and input to the framework of fourteen indicators and targets suggested by the Wim Kok report (14) that are to be used to identify good performance and bad performance at the Member State level;

2.5.6 emphasises that economic competitiveness is essential to achieve social cohesion and environmental sustainability;

2.5.7 urges that a greater role is given to local and regional government to diffuse the knowledge and introduce the innovation and enterprise required to successfully deliver on the Lisbon Gothenburg objectives, thereby giving the strategy greater political ownership;

2.5.8 also recommends that in the mid-term review of the Lisbon-Gothenburg objectives, a European Youth Pact is drawn up, focussing on the problems of unemployment, and social and professional integration, complementing actions in the Lisbon-Gothenburg agenda for ageing populations;

2.5.9 urges that progress in meeting the Lisbon-Gothenburg objectives should be subject to annual reports at both the national and EU levels, about which the Committee of the Regions would be consulted and enable the Spring European Council Meeting to focus on key policy issues to keep the Lisbon-Gothenburg objectives on track;

2.5.10 urges that following enlargement, the single currency and the single market, the next great project for the EU should be to maximise growth and employment — through a renewed focus on the Lisbon-Gothenburg agenda.

2.6 Research and technological development

2.6.1 requests that in the regulations relating to research and technological development, an area with a proposed substantial increase in the allocation of financial resources, there must be a clear recognition of the territorial components of the framework programme for research;

2.6.2 demands that national and regional research programmes and policies are coordinated to create a real European Research Area, capable of sustaining competitiveness and growth objectives;

2.6.3 calls for the development of Mutual Learning Platforms and Innovation Poles to help create and sustain regional research strategies and regional knowledge development models fostering the involvement of universities with their local economies. These platforms and networks should be designed to facilitate the fast application of new ideas and products; to encourage spin-outs from basic and applied research; and to shorten the time between innovation and application;

2.6.4 urges that Member States should delineate in their National Action Programmes the measures that will be taken to bring about the 3 % of GDP target for investment in research and development.

2.7 Mobility

2.7.1 welcomes the proposals to treble the number of Erasmus students and to increase the number of school student mobility actions and vocational training placements.

2.8 Governance

2.8.1 welcomes the proposals to strengthen partnership arrangements and to introduce simplified decision-making instruments — from local, regional, national and EU — across and between all spheres of government, but urges that these measures are introduced with some urgency;

2.8.2 recommends, that in the delivery of the Lisbon-Gothenburg objectives, National Action Plans should be evaluated annually by the European Commission and with the spatial aspects of such evaluations engaging local and regional authorities;

2.8.3 also recommends, that there should be an annual statement by the European Commission on the progress towards the policy challenges set within the financial perspective 2007-2013 and of the contribution by each sphere of government — local, regional and national — to provide an impetus, if necessary, to economic reform and the greater engagement and accountability of all agencies, local, regional and national governments.

2.9 EU Citizenship

2.9.1 underlines that apart from the increase in resources proposed by the Commission for actions with regard to citizenship, freedom, security and justice, there needs to be a full recognition that the work of Justice and Home Affairs is not simply a matter of negotiation between Brussels and Member States in respect of subsidiarity at a local and regional spheres of government. Particular attention should be paid to recognising local and regional authorities from new Member States in this regard;

2.9.2 requests that the visibility of mechanisms that identify the added value of EU programmes is stepped up across local and regional government, in order to raise public awareness and support for European policies delivered locally.

2.10 Financial Perspective 2007-2013

2.10.1 reiterates its agreement with a 1.24 % of GNI own resources budgetary ceiling for the financial perspective 2007-2013 as this ceiling reflects the need for budgetary discipline and community added value, and as this resource figure is the only means to deliver cohesion and competitiveness, the single market and our shared Treaty obligations;

2.10.2 warns of the potential dangers that may arise from a compromise budget;

2.10.3 supports the European Parliament, which believes that the current financial perspectives are part of an overall interinstitutional agreement, which can only be renewed in an atmosphere of mutual trust among the institutions and on the basis of common agreement with the two branches of the budgetary authority;

2.10.4 insists that those seeking reductions in the commitment appropriations are most likely to focus on Structural fund programmes, relating to regional competitiveness and employment within the sub heading (1b) Cohesion for Growth and Employment. Disproportionate budget reductions in this area would effectively re-nationalise regional policy for the majority of the former EU-15;

2.10.5 insists that any pressure on Commitment appropriation sub-headings within the Competitiveness for Growth and Employment pillar are explicitly resisted in regard to research and technological development initiatives so as to respect and maintain Member States' commitment to the Barcelona objectives and an increase in research and development expenditure to 3 % of GDP by 2010;

2.10.6 warns that delays to the start of the programming period as a result of protracted negotiations will lead to financial disruption and instability across the local and regional authorities of the EU;

2.10.7 urges that the outcome of the negotiations guarantees the maintenance of the solidarity principle which has guided EU policy since the creation of structural policy in 1973-1975, namely that the EU supports all regions in need of support, whether they are in richer countries or poorer ones.

2.10.8 calls on Member States to work in collaboration with their cities and regions to find a political solution for those Member States who will no longer be eligible for the Cohesion Fund in future as a result of the statistical effect of enlargement.

2.11 Single fund approach

2.11.1 welcomes the move towards single funds for various policy areas, including cohesion policy, rural development, environmental programmes and restructuring of the fisheries sector as this approach will harmonise the administrative requirements for implementing these measures and make implementation simpler.

2.12 State Aid

2.12.1 calls on the European Commission to provide a supportive framework for territorial differentiation in the State Aid rules and regulations, to allow for targeted public investment where this can correct real market failure without distorting competitive conditions or provide more scope to support research and innovation particularly in small and medium sized businesses, in order to achieve the territorial cohesion objective;

2.12.2 urges that there should be a new State Aid regulation that is responsive to the new cohesion and regional policy regulations to allow State Aid to be permissible in areas that are no longer eligible for cohesion funding — depending on the level of problems they face;

2.12.3 requests the Commission to clarify the future of regional aid under Article 87 (3)(c) in terms of distinctions between regions eligible under the heading ‘supporting regional competitiveness and employment’ outside the less prosperous areas of heading ‘Convergence’;

2.12.4 is of the view that sustainability is also an important consideration and public investment through State Aid should be broadly in line with sustainability principles.

2.13 Corrective mechanism

2.13.1 advocates the suggestion by the Commission to open a debate on the shortcomings of the current financing system for the EU;

2.13.2 endorses the Commission proposal for the creation of a new, fairer corrective mechanism.

2.14 Stability and growth

2.14.1 urges that as the implementation of the Stability and Growth Pact has been lacking consistency and credibility there is a considerable need for the Pact to take account of the present economic reality of the EU by improving the economic rationale of the Stability and Growth rules. The consistency between national and EU processes must be strengthened and national institutions must be better involved in the multi-lateral surveillance of economic policy and improvements made in ensuring coherency between fiscal and monetary policy;

2.14.2 suggests that as major problems are emerging in Member States' budgets through the current low growth of the European economies, which compound high unemployment levels and continuing social difficulties in many regions and localities, the most important way for the Commission to address this problem would be to revise the implementation of the Stability and Growth Pact to ensure the sustainability of economic policy. After all, the EU will not achieve the level of growth, employment and social cohesion it needs unless the European macroeconomic context is also in step with the Lisbon Strategy and the coordination of Community instruments improved.

Brussels, 23 February 2005. The President of the Committee of the Regions Peter STRAUB

(1) OJ C 256, 24.10.2003, p. 1

(2) OJ C 318, 22.12.2004, p. 1

(3) ‘In order to promote its overall harmonious development, the Community shall develop and pursue its actions leading to the strengthening of its economic and social cohesion. In particular, the Community shall aim at reducing disparities between the levels of development of the various regions and the backwardness of the least favoured regions or islands including rural areas’

(4) COM (2004) 101 final

(5) ‘since 1995, the growth rate for the EU15 has averaged 2.2 %, compared to a global average of 3.6 % and 3.2 % for the United States.’ COM(2004) 101 final pp.3

(6) The figure for commitments is higher than for payments because it represents resources which are committed to programmes lasting more than one year and which, therefore, may not be spent in the year for which budgeted. Payments are expected to be disbursed in the budget year to which allocated. Member State payments are calculated annually on the basis of payment appropriations entered into the budget. The ceiling of own resources is fixed by a Council decision and establishes a maximum amount of Member State contributions.

(7) REFERENCE TO LETTER BY SIX HEADS OF STATE ‘Average expenditure during the next financial perspective should in our view be stabilised around current expenditure levels, and should not exceed 1.0 % of GNI, including agricultural spending within the ceiling set by the European Council in October 2002.’

(8) The convergence objective concerns the regions whose per capita GNI is less than 75 % of the EU25 average and transitional support to the EU15 ‘phasing out’ regions with per capita GNI less than 90 % of the EU15 average. The 2000-2006 Cohesion Fund is EUR 18 billion and the four structural funds EUR 195 billion (ERDF, ESF, Financial Instrument for Fisheries Guidance and the Guidance Section of the European Agricultural Guidance and Guarantee Fund).

(9) According to the Urban Audit 2004.

(10) 11.5 % Objective 2 and 12.3 % Objective 3

(11) ‘The EU is currently spending only 2 % of GNP on Research and Development expenditure, about 1/3 less than in the USA. 80 % of this gap is due to under investment in Research and Development from the private sector.’ Paragraph 3.31 of the Communication of the European Commission to the European Spring Council COM (2005) 24 ‘Working together for growth and jobs: a new start for the Lisbon Strategy’,2 February 2005.

(12) The transfer of financial resources to the European Agricultural Fund for Rural Development and the European Fund for Fisheries is calculated after application of the ceiling in order to be budget neutral.

(13) ‘The Union contributes to the preservation and to the development of these common values while respecting the diversity of the cultures and traditions of the peoples of Europe as well as the national identities of the Member States and the organisation of their public authorities at national, regional and local levels’

(14) Facing the Challenge, the Lisbon Strategy for Growth and Employment, report from the High Level Group chaired by Wim Kok, November 2004.