Opinion of the Economic and Social Committee on the '10th Annual Report of the Structural Funds - 1998'
Date: 2000-07-12
Institutions: European Economic and Social Committee
Subjects: Structural Funds, activity report

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Official Journal of the European Communities

19.9.2000

Opinion of the Economic and Social Committee on the ‘10th Annual Report of the Structural
Funds — 1998’

(2000/C 268/06)

On 1 March 2000 the Economic and Social Committee decided, under Rule 23(3) of its Rules of
Procedure, to draw up an opinion on the 10th Annual Report of the Structural Funds — 1998

The Section for Economic and Monetary Union and Economic and Social Cohesion, which was
responsible for preparing the Committee’s work on the subject, adopted its opinion on 6 June 2000. The
rapporteur was Mr Mengozzi.

At its 374th plenary session (meeting of 12 July) the Economic and Social Committee adopted the
following opinion by 111 votes to 0 with two abstentions.

1.

Introduction

ming period. Thus at the end of 1998 only 68 % of commit-
ments and 47 % of payments had been implemented.

1.1.
Once again this year, the ESC is issuing an own-
initiative opinion on the annual report on the use of the
Structural Funds, drawn up by the Commission under
Article 16 of the framework Regulation (EEC) No 2052/88 on
the Structural Funds — which makes it obligatory to present
the report to the Parliament, the Economic and Social Com-
mittee and the Committee of the Regions. It can be conjectured
that the failure to consult the ESC formally — as for the
9th Report — is due to a strict interpretation of the term
‘present’ as meaning that an explicit consultation is not
required.

1.2.
The Commission report contains assessments and
judgements, and indeed omissions, and it would be reasonable
to think that they could give rise to criticisms or useful
considerations and suggestions for the future, given the role
allotted by the Treaty to the Committee in the field of
economic and social cohesion and in relation to the European
Regional Development Fund (Articles 159 and 162) and in
view of the amount of work it does on the subject, as evidenced
by Chapter 7 of the report, on interinstitutional dialogue — in
this context with the Economic and Social Committee.

2.

The content and structure of the report

2.1.
1998 was the penultimate year of the 1994-1999
programming period — the year in which the last programmes
were adopted. At the end of the year there were 1 104 pro-
grammes running, 605 of them coming under the various
objectives and 499 under the Community Initiatives.

2.2.
The highest implementation rate was achieved under
Objective 1, for which at the end of 1998 the implementation
rate was 82 % for commitments and 64 % for payments, while
Objective 2 slowed down considerably in relation to 1997, in
terms of both commitments and payments. Special attention
should be drawn to the trend for Objective 4, which despite
the excellent implementation rate in 1998 did not manage to
catch up on the delay accumulated over the whole program-

In this context it is interesting to note that among
2.2.1.
the Community Initiatives the most progress was made in the
sectoral programmes for industrial conversion.

2.3.
One section is devoted to interim evaluations which
aim to assess the degree of implementation of the programmes
in relation to the objectives and to propose any necessary
adaptations.
In this context assessments are made of the
programmes’ macroeconomic impact on GDP and employ-
ment.

The thematic and horizontal evaluations concern
2.4.
SMEs, the research, technological development and innovation
sector, equal opportunities and partnership.

The chapter on the budget, apart from noting the
2.5.
extent of its implementation, lists the problems and deficienci-
es which have been brought to light by spot checks carried out
on the programmes broken down by Fund. Checks made by
the Commission’s anti-fraud unit (UCLAF) have brought to
light the fact that the number of cases of irregularities and
frauds communicated to the Commission by the Member
States is increasing, but involves a smaller amount of money
than in 1997. There were 407 cases of irregularity or fraud in
1998 amounting to a total of EUR 42,838 million, as against
EUR 55,9 million in 1997. It should be added that not all the
cases settled at national level were notified to the Commission,
despite the obligation to do so under Article 5 of the Regu-
lation.

2.6.
As regards additionality, the report notes a certain
reluctance on the part of Member States to communicate the
data within the deadlines laid down.

2.7.
Two short chapters are devoted to coordination with
other financial instruments and to compatibility and comp-
lementarity with the other Community policies. Comments on
these will be found below (‘Comments’ section).

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2.8.
In the chapter on interinstitutional dialogue, as regards
the Economic and Social Committee, the Commission draws
attention in particular to the merging of the regional and
economic sections of the ESC in the new Section for Economic
and Monetary Union and Economic and Social Cohesion. It
then cites some of the opinions drawn up in 1998: on the
urban agenda (1), the Eighth Report on the Structural Funds (2),
the new regional programmes for 1997-1999 (3), the territorial
employment pacts (4),
the European Spatial Development
Perspective (5), the reform of the Structural Funds (6) and the
Agenda 2000 proposals (7).

1998 was the year of preparing for the new program-
2.9.
ming period 2000-2006; on 28 March of
that year the
Commission adopted drafts of the new regulations on the
Funds, which consist of a general regulation and the simplified
regulations for the Funds. The report summarises the main
innovations of the reform and the priorities defined in the
guidelines adopted by the Commission for the 2000-2006
period.

2.10.
The horizontal theme chosen for detailed treatment
this year is that of local development: this is of special interest
to the Committee, which has produced a number of opinions
and information reports on this subject over a long period.
The concept of local development is defined, together with
related key terms, and the place it occupies in the programming
of the Funds is explained.

3. Comments

3.1.
In general the interim evaluations appear to be useful:
they often make it possible, through practical recommen-
dations, to reorientate programmes in mid-term. They also
throw light on the difficulties over financial and administrative
procedures, particularly for the more innovative measures, and
produce suggestions for improving monitoring systems and
strengthening the instruments used by public authorities.
However, on other aspects — such as employment and
partnership — they are inadequate.

3.1.1.
Despite the progress achieved in the economic
recovery of the more disadvantaged regions — according to
the data given in the 6th Periodic Report on the social and
economic situation of the regions (8) — employment problems
are getting worse. Indeed, point 1.1.2 of the Structural Funds
Report shows that in the 25 worst affected regions (23 of
them Objective 1 and one Objective 2) unemployment rose
from 20 % to 24 %.

(1) OJ C 95, 30.3.1998, p. 89.
(2) OJ C 235, 27.7.1998, p. 34.
(3) OJ C 235, 27.7.1998, p. 38.
(4) OJ C 407, 28.12.1998, p. 66.
(5) OJ C 407, 28.12.1998, p. 85.
(6) OJ C 407, 28.12.1998, p. 272.
(7) OJ C 19, 21.1.1998, p. 111.
(8) SEC(1999) 66 final.

3.1.2.
It is extremely difficult on the basis of the present
report to assess the impact of the Funds on employment,
although this is a priority of regional policy. Its importance is
emphasised in several chapters,
the guiding principles of
relevant Community policies are summarised — especially
those defined in 1998 — but it is not possible to obtain a
picture of the results — not even in general, provisional terms
— after four years of programming.

Such evaluations are of course difficult, but the data
3.1.3.
given in the report for Objective 1 alone — those on the
macroeconomic impact and on extra jobs created, as well as
the figures and comments scattered over the various chapters
— should be regrouped in a summary table, broken down by
country or region and by type of firm or major productive
sector (agriculture,
industry, services and public adminis-
tration, non-profit sector), and given more exhaustive treat-
ment.

For example, it would be of great interest to know
3.1.4.
how assistance of various
types given to more than
750 000 SMEs made possible the creation and maintenance of
two million jobs — concepts which differ considerably in the
effect they have on overall employment figures.

3.1.4.1.
The report makes a positive judgement on the
work of the Funds in the small and medium-sized enterprises
sector, stressing that 70 % of the projects could not have been
successfully completed without their support, and emphasising
the importance of financial engineering measures. However, it
is not possible to form an impression of the commitment and
results achieved in the services sector (such as commerce and
tourism) which is so decisive for employment.

3.1.5.
It is, however, understandable why it is impossible
to assess the employment impact of the 89 territorial employ-
ment pacts — involving the creation of about 55,000 jobs —
which have not yet reached their expiry dates. Nonetheless, it
is interesting to note that they contributed EUR 1,609 million
to the reorientation of the Funds — most of it coming from
national and local contributions and the private sector.

3.2.
No information is given on the spread of partnership
— something which the Committee regards as important —
but interesting comments are made on its positive contri-
bution, along with comments on its form and structure.

3.2.1.
The report raises the question of the multiplicity of
forms which partnership can take — something which can
cause problems — and expresses reservations about
the
suggestion of achieving a wide-ranging partnership.

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3.2.2.
The report does not provide further details, but the
Committee reaffirms what it has stated in the past — that
partnership cannot take on too rigid a form, because the
territorial differences are too great, and the organisation of
social forces too disparate (sometimes even for the same
organisation in different areas). As to the scale of partnership,
wider involvement is undoubtedly positive, provided that each
representative has a precise role and responsibility.

If one excepts the trans-European networks sector,
3.3.
where the European Regional Development Fund (ERDF) and
the Cohesion Fund are among the most important sources of
subsidies (and to some extent
the European Investment
Bank) it is difficult to ascertain from Chapter 5 what in fact
constituted the coordination with other financial instruments,
which was to be achieved in the strategies and objectives. It is
however desirable for such coordination to take place at both
national and Community levels.

3.4.
Coordination with the other Community policies con-
tinued satisfactorily in 1998, according to the report, particu-
larly as regards environmental protection, which is increasingly
integrated into the measures, promotion of the entrepreneurial
spirit, with increased exchange of good practice in the
SME sector, and the field of research and technological
development, where some operational programmes have been
reorientated to promote the information society.

3.5.3.
Also decisive would be a change in competition
policy leading to more severe and restrictive monitoring of
Community and national aid and of the application of the
rules in the stronger regions, combined with greater flexibility
in relation to Objective 1 and 2 regions. The policy can play
an important part in restoring a balance between the regions,
provided that it is not confined to the purely formal application
and guarantee of market rules, but accepts and incorporates
the objectives of economic and social cohesion, for example
as regards tax relief for SMEs in particular, and measures
designed to make unofficial labour more transparent.

3.5.4.
In this context it is worth quoting point 37 (third
indent) of the Conclusions of the Lisbon Summit: ‘... translating
these European guidelines into national and regional policies
by setting specific targets and adopting measures, taking into
account national and regional differences’.

3.6.
The horizontal theme selected for this report, namely
local development, is amply dealt with in the various chapters,
even if the statement that it ‘is not a policy priority for the
Community’ is somewhat baffling: firstly because the need for
stating this is unclear (why state what is not the case?), and
secondly because two European Summits are mentioned
immediately afterwards
(Florence and Dublin) at which
undoubted prominence was given to local development and
the employment pacts.

3.5.
On the other hand, not much can be learned from
the information given on coordination with the Common
Agricultural Policy, competition and transparency in public
procurement, which fails to make clear whether Community
directives are being followed and complied with.

3.6.1.
First and foremost an attempt is made to clarify the
concept of local development through a non-rigid definition.
It should be said that, rather than a ‘rather vague concept’ it is
a flexible and very broad concept, which can be defined not so
much by its content as above all by the types of measure
involved and by the size and characteristics of the territory
involved.

3.5.1. Moreover, given that the Funds are fairly active in
the cultural sector, it would be interesting to know which
European strategy these measures fit into. Similarly, it would
be useful to have an assessment of the relationship between
measures for outlying regions and external policies for areas
close to the EU.

3.5.2.
This chapter would be even more interesting if it also
contained comments, drawn from practical experience with
the Funds, on the compatibility of the other Community
policies with the objective of economic and social cohesion.
For example, in research and technological development (RTD)
policy the need has long been stressed to change priorities by
promoting not only excellence — which benefits research
centres in more developed regions — but above all by
increasing investment in the research and development poten-
tial of disadvantaged regions.

3.6.2.
The Committee agrees with the observation that
local development is perceived as an innovative approach,
which is gaining in support. It involves forms of action which
are particularly suitable for tackling the problems of urban
development (Urban), industrial conversion (indeed, for Objec-
tive 2 local development measures account for 15 %) and rural
areas (farm tourism, craft industries, culture and communi-
cation, Leader II) and in the framework of the pilot projects
for new employment catchment areas.

The report states that it is difficult to calculate the
3.6.3.
proportion of local development measures precisely enough,
and estimates it at about 10 % of total funding. An exact
assessment is indeed difficult, and should be made more on
the basis of types of measure than on the basis of the
objectives. The Committee takes the view that measures to
promote local development should be strengthened.

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4.

The reform of the Structural Funds 2000-2006

4.1.4.
The new reform brings in important innovations.
The political approach on which the reform of the Structural
Funds is based has five priorities:

4.1.
As stated above, 1998 was also the year in which the
Commission presented the proposals for new Structural Funds
regulations; they were adopted by the Council in June 1999
and entered into force this year. The European Union is once
again at a crucial stage of its development. The Treaty of
Amsterdam, concluded in 1997, has been in force for barely a
year, and already talks are in progress for a further revision of
the Treaty to tackle and solve the remaining institutional
In the course of the first decade of the new
problems.
millennium the EU will gradually be enlarged to include
another 11 countries or perhaps more. The globalisation
process and the development of the information society have
implications for institutions and for the organisation of
enterprises and markets: not all these implications are foresee-
able at present.

4.1.1.
At the end of 1999 unemployment affected about
10 % of the active population, i.e. almost 16,5 million people,
most of them living in the regions whose development was
lagging behind. The Treaty of Amsterdam and the conclusions
of a series of European Council meetings form a European
framework which lays down the priority areas for investments
in terms of employment and measures to encourage develop-
ment of human resources. The Structural Funds will need to
take action to promote the four aspects of the European
employment strategy (entrepreneurial spirit, suitability for
employment, adaptability and equality of opportunity) which
are the preconditions for development of human resources.

4.1.2.
It is against these challenges that the new reform of
the Structural Funds and the other Community policies must
be measured. All this called for a significant reform, drawing
lessons from the problems with earlier programming exercises
and making it possible to use resources more efficiently, so
that regions lagging behind and declining areas succeed at an
early stage in joining the areas which are developing and
modernising their infrastructure.

4.1.3.

The Commission proposals comprise:

— a general regulation which covers all the basic principles
of the Structural Funds (priority objectives and tasks of
the Funds, programming methods and general organising
principles, coordination between the Funds and the
various financial
financial management,
evaluation and control);

instruments,

— creation of

economic
employment;

the necessary conditions for sustainable
competitiveness,
development:

growth,

— increase in competitiveness and innovation, more support

for the development of SMEs;

— development of human resources to promote employ-

ment;

— sustainable development, protection and improvement of

the environment;

— equality of opportunity between men and women.

4.1.5.
action:

The proposed reform is based on three lines of

— greater concentration of aid;

— simplification and decentralisation of the allocation of

the Funds;

— improving effectiveness and monitoring.

For the 2000-2006 period, the proposal is to decentralise the
management of the Structural Funds and better to define the
role of the parties involved. In this context, the Commission
must take on responsibility for strategic programming, respect
for Community priorities, checking the results through super-
vision, evaluation and monitoring, and finally for allocating
resources. For their part, the Member States will be responsible
for implementing the programmes and managing the action
taken, on the basis of a wider, deeper partnership which would
involve the associations of partners — especially economic
and social actors — throughout the process of action under
the Structural Funds.

5. Conclusions

The Committee is pleased to see the progress achieved
5.1.
in making the annual report on the Structural Funds more
succinct and readable, and sums up as follows the main
suggestions made with a view to increasing the utility of the
report and further improving its content:

— earlier publication of each report;

— a single section dealing with unemployment in greater

depth;

— more information on partnership;

— four specific regulations for each of the Funds (ERDF,
EAGGF, ESF and FIFG), considerably simplified, and
confining themselves to specific provisions which essen-
tially cover the respective sectors for action.

— reference, however selective, to the compatibility of the
other Community policies with the objective of economic
and social cohesion;

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— more detailed examination of education and training
in view of the growing importance of an

measures,
economy based on knowledge.

In addition, the Committee feels that greater emphasis should
be placed on local development measures.

The conclusions of the Lisbon European Council of 23
5.2.
and 24 March trace a turning-point
in the direction of
development. They note that: ‘Long-term structural unemploy-
ment and marked regional unemployment imbalances remain
endemic in parts of the Union. The services sector is under-
developed, particularly in the areas of telecommunications and
the Internet. There is a widening skills gap, especially in
information technology where increasing numbers of jobs
remain unfilled. With the current improved economic situ-
ation, the time is right to undertake both economic and
social reforms as part of a positive strategy which combines
competitiveness and social cohesion.’ They go on to set a new
strategic goal: ‘to become the most competitive and dynamic
knowledge-based economy in the world capable of sustainable
economic growth with more and better jobs and greater social
cohesion.’

5.3.
The Committee endorses these statements and is
convinced that these new strategic guidelines will assist in
increasing awareness of the importance of new information
technologies and in general of that system of SMEs known
as the ‘new economy’ for the development of the more
disadvantaged regions of Europe. They represent an oppor-
tunity which may not be repeated, even in the long term, for
them to bridge the technological gap with the more advanced
regions through a fairly modest capital investment and an
entrepreneurial spirit found above all in the younger gener-
ations, which are the hardest hit by unemployment. If the
opportunity is not seized, the gap will become increasingly
difficult to bridge.

5.4.
The report does not make clear either the place
assigned to this key aspect — which although relaunched
politically now by the Council is not exactly a novelty — or
the progress being made thanks to the Structural Funds.
References to the ‘information society’ are frequent but generic.
It would certainly be desirable for the next report to give a
fuller, more in-depth picture, given the central importance this
topic is now taking on. Perhaps this could be the horizontal
theme of the next report.

5.2.1.
To achieve this goal, the presidency conclusions state
that it is necessary to prepare ‘the transition to a knowledge-
based economy and society by better policies for the infor-
mation society and R&D ... The shift to a digital, knowledge-
based economy, prompted by new goods and services, will be
a powerful engine for growth, competitiveness and jobs. In
addition, it will be capable of improving citizens’ quality of life
and the environment. (...) Information technologies can be
used to renew urban and regional development and promote
environmentally sound technologies.’

Of course the achievement of

5.5.
this new strategic
objective calls for an extraordinary effort, above all in the fields
of education, vocational training, communications infrastruc-
ture and liberalisation of services. The economic changes
which have occurred call for a reallocation of resources,
making visible this commitment which covers all sectors.
The new guidelines for the 2000-2006 programmes should
probably be updated, or at least the Commission should ensure
that this requirement is strongly emphasised in the new
programmes.

Brussels, 12 July 2000.

The President

of the Economic and Social Committee

Beatrice RANGONI MACHIAVELLI