Opinion of the Economic and Social Committee on the "EU's Economic and Social Cohesion Strategy"
Date: 2002-07-18
Institutions: European Economic and Social Committee
Subjects: EU policy, Structural Funds, economic and social cohesion, economic policy, regional disparity, social policy

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Opinion of the Economic and Social Committee on the ‘EU’s Economic and Social Cohesion
Strategy’

(2002/C 241/29)

On 12 July 2001, the Economic and Social Committee, acting under Rule 23(3) of its Rules of Procedure,
decided to draw up an own-initiative opinion on the EU’s Economic and Social Cohesion Strategy.

The Sub-Committee on the EU’s Economic and Social Cohesion Strategy, which was responsible for
preparing the Committee’s work on the subject, adopted its opinion on 14 June 2002. The rapporteur
was Mr Christie.

At its 392nd Plenary Session (meeting of 18 July 2002), the Economic and Social Committee adopted the
following opinion with 84 votes in favour and six abstentions.

1. The Structural Funds in Context

1.1.
Since 1988, the EU structural operations have been
guided by the four principles: concentration of effort, program-
ming of economic assistance, additionality on the part of
Member States, and partnership in the design and implemen-
tation of regional economic assistance measures. Successive
reports by the Commission — the most recent being the
Second Cohesion Report — have established that the measures
implemented by the structural operations have made steady
progress in narrowing the economic and social disparities
between the EU regions. Unsurprisingly, the convergence gains
have been most marked in those regions eligible for assistance
under Objective 1 of the Structural Fund regulations. While per
capita incomes in the EU’s richest regions remain significantly
higher than that recorded in the poorest regions, the data does
show that per capita income in the EU’s poorest regions has
moved closer to the EU average since 1988.

1.2.
The impact of the 1988 reforms has been considerable,
particularly with respect to the EU’s least-favoured regions
where significant gains in economic cohesion have been
achieved.

1.2.1. With respect to economic cohesion, as measured by
regional disparities in per capita income, the Structural Funds
have achieved considerable progress in meeting their aims.
The data presented by the Commission in its Second Cohesion
Report reports that per capita income in the EU’s three poorest
Member States (Greece, Portugal and Spain) has risen from
68 % of EU average in 1988 to 79 % in 1999. Nonetheless,
even if economic convergence continues at this rate, the
Commission estimates that it will take a further 20-30 years
for the capita income disparity between these countries and
the current EU average to be eliminated, such is the long-term
nature of this process.

Social cohesion, as measured by changes in regional
1.2.2.
unemployment, has proven to be a more difficult problem to
address. Notwithstanding the strong job creation experienced

by the Union since the mid-1990s, which has seen the rate of
unemployment decline from over 11 % to around 8 %, regional
disparities in unemployment widened over the course of the
1990s following from the reduction which occurred in the
high employment growth years of the late 1980s. As the
Second Cohesion Report notes, unemployment in regions
where rates were lowest averaged 3 % in 1999 (much the same
as in the early 1970s), it averaged 23 % in regions where rates
are highest (much higher than in the early 1970s). The first
progress report on economic and social cohesion reports that
whereas the employment rate in the EU’s top 10 % of regions
averaged 77,2 % in 2000, it stood at only 46 % in the bottom
10 %.

One bright spot has been the slight decline in the
1.2.2.1.
number of people classified as long-term unemployed (those
unemployed for more than one year) which has fallen from
49 % to 46 % of the total unemployed between 1997 and
1999. However, as with other aspects of unemployment, long-
term unemployment varies markedly across the EU ranging
from over 60 % in Southern Italy, a number of Greek regions
and in Belgium to under 20 % in some regions in Austria,
the United Kingdom and Finland. The level of long-term
unemployment is particularly difficult to reduce, even during
periods of relatively robust economic growth.

1.2.2.2.
Unemployment among young people is a further
feature of the EU labour markets. In Spain, Finland and Italy
youth unemployment was over 30 % in 1999, while in some
regions of Italy and Spain it exceeded 50 %.

1.2.2.3.
Although female unemployment has fallen since
the beginning of the 1990s, standing at less than 10 % in
2000, there remains a wide gender gap in many Member
States and regions. It is clear that this particular problem is set
to worsen with enlargement, and gains in female employment
remains a source of considerable growth potential for the EU
as a whole.

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1.3.
Developments in EU labour markets indicate the
challenges that remain if the EU is to meet the employment
targets set at the Lisbon Summit two years ago. At that time,
the EU set the objective of raising the employment rate to
70 % by 2010 (from 63,8 % in 2000), and to increase the
number of women in employment to 60 %. These targets have
since been further endorsed by EU Heads of State and
Government at the Nice and Barcelona Summits.

1.3.1.
Indisputably EU economic and social cohesion poli-
cies are central to the realisation of the Lisbon employment
targets. EU structural policies are a key mechanism for
enhancing the economic growth potential
in the lagging
and industrial declining regions and thereby raising the
employment creation possibilities in those regions.

1.4.
Over the short term a number of concerns remain with
respect to sustaining progress towards greater economic and
social cohesion.

1.4.1.
First, maintaining a high rate of job creation depends
on the continuation of relatively strong economic growth in
the EU economies. The downturn in the USA economy,
coupled with the economic aftershocks from the 11 September
terrorist attacks and continuing uncertainties in global financial
markets, have adversely affected the EU economies such that
forecasts of economic growth over the next year have been
revised downwards. Current data suggest that EU economic
growth in 2001 was 1,7 % compared to an initial forecast of
3 %.

1.4.2.
Second, despite the high level of unemployment,
labour shortages recently have emerged in many EU econom-
ies. This points to the emergence of a ‘skills gap’ which can
best be addressed by forward-looking policies, involving all
actors including employers and employees, designed to match
the skills of the workforce to the changing circumstances of
economic development.

1.4.3.
Third, concerns are expressed by some over the lack
of flexibility of EU labour markets which it is argued act as a
disincentive to firms hiring additional labour in the fear that
they may not be able easily to down-size once economic
conditions change.

Fourth, regional disparities in unemployment may
1.4.4.
increase should the incidence of sectoral economic shocks
increase, a particularly strong likelihood in regions with a

heavy dependence on agricultural and fisheries’ activities.
Further reforms in the Common Agricultural Policy shall,
inevitably, produce further job losses in rural areas and this
will be bound to widen social disparities between those regions
and the EU average.

1.4.5.
All of the factors noted above highlight the continu-
ing need for strong Structural Fund policies to be applied
within the disadvantaged regions of the EU.

1.5.
Progress towards greater economic and social cohesion
at the EU level represents the EU’s principal effort to address
problems of poverty. Although the EU effort through the
Structural Funds is only one small element in the overall
package of measures targeting poverty — most of which are
national measures — it remains the case that the economic
activity-promoting and job-creation aspect of the Structural
Funds are a visible and effective element in the broad fight
against poverty across the EU.

Among the primary factors linked with low incomes
1.5.1.
on a persistent basis are unemployment,
low educational
attainment, and a high incidence of economic dependency
within the family. While other, demographic factors are also
significant and lie beyond the scope of EU policy, it is to be
expected that continued economic growth and higher levels of
employment may reduce the proportion of people with low
income. It is in this environment that the EU Structural Funds
are most likely to contribute effectively to the fight against
poverty and social exclusion.

1.6.
It is clear from this overview of the context and
achievements of the Structural Funds that they remain a central
aspect of EU policies aimed at raising the rate of economic
growth, promoting employment, and fighting social exclusion
in the less advantaged regions of the EU. It is also evident that
a considerable amount with respect to economic and social
cohesion remains to be achieved within the regions of the EU.

1.7.
But the significance of achieving a greater measure of
economic and social cohesion can be seen by considering not
only the positive gains that accrue to EU society as a result,
but also by reflecting on the consequences of not enhancing
cohesion. In that event, that is where EU economic and social
cohesion policies are scaled down, an essential condition for
developing the cohesion of our society would be lost and the
material welfare of the marginalized and excluded groups in
society is likely to deteriorate; this may well undermine the

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present degree of political solidarity across the EU. As the
current debate on ‘governance’ makes clear, the EU has to
demonstrate its relevance to the fundamental needs of its
citizens. Any weakening in the EU efforts to achieve greater
economic and social cohesion is bound to damage the
credibility of the EU as a political and economic system capable
of meeting the aspirations of the ordinary citizen.

— the challenges to economic and social cohesion — progress-
ively increasing over time. Second, the share of corporate
investment occurring within the EU may fall as both domestic
and foreign corporations move to exploit more profitable
investment opportunities elsewhere. To the extent that EU
outward investment
increases, and/or inward investment
decreases, the challenge to employment and income growth
within the EU will increase.

2. The Broad Challenges Facing EU Economic and Social

Cohesion Policies

2.3.1.
In this context, and given the relative weakness of
individual Member States to devise policy capable of redressing
consequent economic imbalances, the provision of a collective
and coordinated cohesion effort at the EU level will become
increasingly important.

2.1.
A key element in the forthcoming debate over the
the Structural Funds will be the rationale for
future of
maintaining or enhancing the role of the EU in the delivery of
economic and social cohesion policies. It is the view of this
Committee that the EU should retain its central role in the
design and delivery of Structural Funds. Not only will this
ensure that the successes achieved by the structural activities
thus far will be consolidated and further progressed, it will also
be appropriate in the context of the challenges to economic
and social cohesion that are likely to emerge in the future.

2.2.
Enlargement. The forthcoming enlargement of the EU
will bring within the Union up to ten countries generally
characterised by low levels of per capita income, unemploy-
ment problems, and economic backwardness (although there
are notable exceptions within and between the candidate
countries). And while membership of the EU will, of itself,
improve the economic prospects of these countries (as well as
the EU 15) — through enhanced trading opportunities and via
foreign direct
investment — in the absence of positive
economic assistance as is available through the Structural
Funds it is highly unlikely that the economic catch-up process
will be sufficiently rapid to meet the legitimate aspirations of
the citizens of these countries. Moreover, the benefits of the
Structural Funds extend beyond their financial aspect and
include additionally key economic development lessons that
have been learned since their reform in 1988. It is essential
that the EU retains the ability to oversee regional economic
development efforts to ensure that best-practice techniques are
applied to the new Member States.

2.3.
Globalisation. Inevitably the phenomenon of globalisa-
tion will continue to intensify. This is likely to have two effects
on the EU in the context of the activities of the Structural
Funds. In the first place it is set to change the structure of EU
employment in all productive sectors as global corporations
adjust their buying and selling strategies in the light of the new
opportunities that will arise from the progressive liberalisation
of international trade in both goods and services. Accordingly,
the EU may well find the challenges of economic adjustment

2.3.2.
In particular, the Committee stresses the need for
Structural Fund measures that will reduce regional imbalances
in competitiveness and productivity levels. Only then will all
regions across the EU be able to take advantage of the
opportunities arising as globalisation progresses. This is in line
with the Lisbon strategy, and points to human-resource
development as the central element for a future economic and
cohesion strategy.

Core-Periphery Imbalances.

2.4.
If we are to consider
enlargement and the process of globalisation together, there is
an acute risk that the overall economic consequence will be to
exacerbate the centre-periphery dynamic within the EU as a
whole. This is a topic which the Committee has discussed
before, and the Committee notes that it
is one that has
been explicitly recognised by the Commission in the Second
Cohesion Report.

2.4.1.
Economic dualism is often used to describe an
economy characterised by a prosperous, high employment
and dynamic economic core which is flanked by a slow-
growing, high unemployment and economically sluggish
periphery. In effect, this describes a situation in which two
distinctly different (and potentially divergent) economies co-
exist within a unified economic territory. The problem in such
cases is that, left to themselves, market forces are more likely
to consolidate than to reverse the process that leads to
economic dualism. The risk is that economic dualism will
undermine the longer term productive potential of the area as
a whole in that it destroys the productive and competitive
potential of the periphery. It might also produce an unaccept-
able divergence in economic and social cohesion.

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2.4.2. While there are benefits to companies from locating
within the central economic area, the aim of economic and
social cohesion policies is to increase the relative attractiveness
of the peripheral regions. This is not best achieved by imposing
restrictions on the location decisions of corporations, but
rather by continuing to develop and apply policies which raise
the competitiveness of the peripheral regions — investing in
human capital, modernising economic infrastructure (com-
munications and transport systems), and undertaking measures
that raise the general amenity of the locality (research and
educational facilities, improving the environment, etc.).

monetary policy and the SGP-imposed constraints on stabilis-
ation policies in Member States (i.e. restricting the size of the
budget deficit), the demands on EU structural policies may
intensify over the medium term. As they presently exist, these
funds are ill-equipped to respond to sudden disturbances in
employment or income levels within Member States. This may
lead EU citizens to question the role of the EU in contributing
to, or failing to respond to, unexpected economic disturbances.

the same time,

2.4.3.
The compelling argument supporting the further
refinement and further development of EU structural policies
is that the economic benefits of globalisation and enlargement
will, otherwise, be enjoyed only by a few central regions within
the many peripheral regions
the EU. At
(including the very disadvantaged mountain areas and island
communities) are set to lose — not necessarily in absolute
terms, but certainly in relative terms. While the spatial
dispersion of economic activity across the EU has not altered
significantly over the past 20-30 years, the combined effects
of European monetary union, enlargement to the CEECs and
the rapid acceleration of globalisation is almost certain to lead
to an increased concentration of economic activity over the
next decade or so. Consequently, there is a strong case for
extending structural actions at the EU level to meet these new
and potentially dramatic challenges.

2.5. Macroeconomic Stability. Progress towards economic
and social cohesion will be made considerably easier against a
background of macroeconomic stability and sustained econ-
omic growth. Completion of the third stage of economic and
monetary union has led to greater economic and political
stability in the EU overall, and has boosted the EU’s role in the
global economy. In future, however, the only way to advance
the requisite European economic policy will be through more
effective broad economic policy guidelines from the European
Commission and more coordinated procedures with binding
decisions. The Community-level macroeconomic policy mix
— implemented in a way that reflects Member States’ differing
structures — must therefore be reinforced and complemented
by active structural policy at all
In the event of
an asymmetric shock impacting (unevenly) across the EU,
economic stability may be jeopardised within a few countries
in order to maintain stability for the majority.

levels.

2.5.2. While the Lisbon conclusions and the open-method
of policy coordination have much to commend them, ulti-
mately the EU may need to consider a higher commitment to
structural actions (and possibly extend these to include a
stabilisation function) in order to provide appropriate assist-
ance to Member States or regions experiencing economic
problems that otherwise cannot be adequately tackled.

European Social Model. The European social model
2.6.
and the social market economy remain central elements in the
economic and social arrangements of the European Union. By
providing for the participation of all actors in the economic
and social decision-making process, these arrangements serve
to advance the principles of solidarity and social inclusion
among the citizens of the EU. Crucially, the European social
model is the principal framework for fighting poverty and
social exclusion within the EU Member States. Any steps to
radically change these arrangements risks damaging cohesion
and placing additional burdens on EU structural actions.

2.6.1.
At the same time it is important that the arrange-
ments of the European social model continue to support the
operation of EU labour markets by encouraging the enterprise
culture that is necessary to fuel the process of economic
growth. Employment, and so private and public sector invest-
ment, remains the main weapon in the fight against social
exclusion and poverty, especially among groups in society
which traditionally find difficulties in finding employment —
especially women, the young, and the long-term unemployed
and other marginalized or disadvantaged groups in society. EU
labour-market policies should continue to develop in a manner
consistent with a vibrant market-based economy capable of
meeting the challenges of intensified international competition.

2.5.1.
To date, the EU has not developed any economic
policy instrument explicitly geared to stabilising the levels of
employment and/or income at the level of the Member State
or the region. Given the ‘one-size-fits-all’ nature of Euroland

Therefore it

2.6.2.
that, where necessary,
is important
reforms to EU labour-market practices continue where this
will deliver higher levels of employment and progress the aim
of economic and social cohesion. Ultimately this will permit
EU structural actions to concentrate fully on regions most in

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need of support. This view is consistent with the conclusions to
the Lisbon Summit where the Heads of State and Government
committed themselves to modernising the European Social
Model.

3.1.5. What role is to be assigned to the economic and
social partners in any reformed arrangements for the design
and implementation of cohesion policies?

2.7. Monetary Union. Although monetary union will pro-
vide considerable economic advantages to the EU,
there
remains a risk that regions subject to adverse economic shocks
will experience difficulties in combating a resultant increase in
local unemployment. At the same time, the requirements of
the Stability and Growth Pact may limit the extent to which
national governments are able directly to assist the ‘shocked’
region. In this context, Structural Funds may have a greater
role to play in the future than has been the case thus far.

3. The Future of Economic and Social Cohesion Policies

3.2.
Cohesion in the future. Economic and social cohesion
is a Treaty obligation for the European Union, and should not
be compromised by short-term considerations. It has long
been the view of the Committee that this implies that Member
States should be prepared to finance an EU budget to the
extent that is required to achieve this goal. This may require a
revision to the ceiling on Structural Fund expenditures as a
share of total expenditure set at the Berlin summit. Moreover,
it is clear that the employment objectives set out in the Lisbon
summit are consistent with, and may be promoted by,
EU Structural Fund activities — particularly those measures
specifically designed to improve the economic competitiveness
the backward regions and those regions experiencing
of
industrial decline.

3.1.
It is clear that a wide range of challenges confront the
EU economy and society, and that the discussion concerning
the future of the Structural Funds post-2006 has to be framed
accordingly. To help consider the Committee’s response to
these challenges, it is useful first to consider five underlying
questions that have to be addressed in the forthcoming policy
(and political) debate, viz.:

Regions with low levels of per capita income require
3.2.1.
considerable fiscal
transfers to allow for similar levels of
private and public consumption within, and between, Member
States. If we are to avoid long-term dependency, arrangements
must be in place to ensure the poorer regions have the
conditions required for their economic development and to
ensure their population has access to a similar quality of public
services which other regions enjoy.

3.1.1.
Is the EU prepared to commit itself post-2006 to
sustaining the efforts it has made since the policy and financial
reforms of 1988 to achieving a greater degree of economic
and social cohesion across the Union as a whole?

3.1.2.
Is it willing to continue with the same underlying
approach to economic and social cohesion post-2006 as that
which has prevailed since 1988; an approach which is built
upon the four principles of concentration, programming,
partnership and additionality?

How can it incorporate the lessons learned from the
3.1.3.
past in the design and implementation of future cohesion
policies — that is, best-practice arrangements?

3.2.2.
The implication here is that EU structural actions
post-2006 must be properly financed, appropriately targeted
and properly managed, if they are to continue to be successful.
The current ceiling on the global total of Structural Funds that
may be applied to a Member State (of 4 % of national GDP)
may need to be revised in the light of the extent of the regional
economic development needs in the applicant states. At the
same time, of course, it is essential that these countries have
the capacity to absorb Structural Fund assistance in economic
development programmes
that contribute positively to
regional economic development, and which do not distort
local labour and/or capital market conditions.

3.1.4. What role is to be played by the Commission in
future cohesion policies? Is the EU to retain the current
arrangements, with the Commission jointly managing the
design and implementation of the policy along with Member
States, or are Member States to acquire an enhanced role in
this policy process?

3.3.
The four principles of economic and social cohesion.
On the basis of the evidence presented by the Commission —
both in the Second Report on Economic and Social Cohesion
and the First Progress Report on Economic and Social Cohesion
— the Committee takes the view that the four underlying
principles of the Structural Funds must be retained, and
developed, during the post-2006 funding period.

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3.3.1.
Of these four principles, it is the future of concen-
tration that is likely to be the most controversial. Given the
challenges of enlargement, there appears to be an emerging
consensus — which this Committee shares — that Objective 1
of the Structural Funds be retained post-2006 and not only for
the candidate countries. However, the 75 % per capita GDP
threshold for Objective 1 eligibility may have to be revised
upwards to ensure that regions currently eligible for assistance,
and whose need will continue beyond 2006, are not rendered
ineligible due to the statistical effect of enlargement, which
will lower the EU average per capita GDP level and thereby
push some current beneficiaries above the eligibility threshold.

practice regional economic development policies throughout
the Union. While no single approach is likely to work in all
Member States due to differences in local economic conditions
and potentials, nonetheless the Commission has at its disposal
considerable evidence on what approaches work best and least
efficiently. It is in the common interest that the Commission
utilises this information in designing the post-2006 Structural
administrative measures
Fund Regulations
accompanying these regulations.

and in the

In the ensuing review, particular attention should
3.3.1.1.
be given to the special needs of the EU’s island, mountainous,
sparsely populated and ultra-peripheral regions.

3.4.1.
An example of this will be the lessons learned from
the economic development of the new German Laender, and
that experience to the CEEC applicant
the relevance of
countries.

3.3.2.
Also, the future of Objective 2 will require to be
considered. Since the Agenda 2000 reforms, Objective 2
includes not only industrial areas in decline, but also urban
areas, rural areas and areas dependent on fisheries. This
Committee considers that the Objective 2 category of support
should be retained, although the degree of support (e.g. the
rate of assistance from the Structural Funds, the definition of
eligible projects) may have to be revised.

3.3.2.1.
The case for continuing to recognise Objective 2
territorial support rests not only on the continuing economic
development problems that are likely to confront those regions
eligible for support. It is also based on a recognition that EU
Structural Funds represents a key device for retaining domestic
regional policy support, and for engaging private finance in
the regional economic development effort. Further, EU policy
is an important mechanism for Member States to incorporate
‘best-practice’ approaches to regional economic development
within their own policies. In both these respects, EU structural
policies provide considerable value-added to Objective 2
regions.

3.3.3.
It is also essential that the EU commitment to human-
resource development through the horizontal measures under
Objective 3 of the Structural Funds remains a priority. It is
through these measures that the EU will be able to raise the
rate of employment and economic growth over the long term
and achieve the aims set out at the Lisbon summit.

Best practice techniques of regional economic develop-
3.4.
ment. As implied above, the EU structural policies and their
accompanying Regulations offer scope for disseminating best-

3.5.
Role of the Commission. To what extent should the
role of Member States’ governments — both national and sub-
national — change in the design and delivery of the Structural
Fund programmes? The Committee remains convinced that
ultimate oversight of the Structural Funds at the EU level is an
important aspect in the success that the funds have had to
date, particularly in the Objective 1 regions. As has been
stated above, not only is the Commission able to exercise
responsibility for the disbursement of common funds, it has a
crucial role to play in ensuring that regional development
programmes are consistent with the aims and objectives of the
funds and that best-practice techniques are used by all recipient
authorities.

3.5.1.
Pro-active regional policy on physical and human
capital under the aegis of the Structural Funds is indispensable
for the catching-up of poorer regions. This requires the
ongoing evaluation of efficiency and of long-term impacts,
and the focus of evaluation should not principally be on
short-term employment gains. The Commission is the most
appropriate institution to undertake this task, and to ensure a
proper degree of coordination between the structural policies
and other EU policies.

3.6.
Subsidiarity. At the same time, there is a clear need for
full and effective subsidiarity in the design and management of
Structural Fund programmes. This points to a full and active
participation by sub-national governments and the economic
and social partners and not — at least not solely — a greater
role for national authorities. The Committee sees no merit in
any proposal that effectively returns control over the Structural
Funds to Member State governments, as was the case prior to
1988.

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3.6.1.
Indeed, the rules governing the Structural Funds
should continue to reflect common EU priorities in the design
and delivery of structural actions. It might be that a greater
degree of conditionality (as in the case of the current perform-
ance-linked reserve) in the uses to which the funds may be put
will be appropriate in the future. For instance greater emphasis
might be placed by the Commission on the outcomes (e.g.
rates of return in employment and growth terms) that the
funds are expected to generate.
In a situation of greater
demands being placed on limited resources, it is vital that the
returns to the application of the funds are maximised.

3.7. Modulation of assistance. The Committee would ask
the Commission to consider greater modulation in the rates of
assistance available under the Structural Funds, particularly
with respect to Objective 1 regions. Since it may not be
possible to fund totally the greater Structural Fund demands
within an enlarged EU, it may be necessary to involve the
private sector (and private sector finance) more fully in regional
development activities. One method for so doing is to
encourage, within the terms of the post-2006 Structural
Fund Regulations, a greater reliance on public-private sector
partnerships where this is both possible and contributes to the
objectives of EU policy. It is likely that this will be more
appropriate in, for example, current Objective 2 regions, and
less appropriate in Objective 1 regions within the candidate
countries.

3.8.
Role of national policies. Structural Fund measures will
work best where these are accompanied by the reform of
national policy and practices that either fail to exploit, or
suppress the scope for, regional economic growth. National
policies play a more important role, and it is unrealistic to
expect EU actions to offset the impact of national policies
which serve to widen regional economic and social disparities.

3.8.1. Within the macroeconomic policy framework of
European monetary union Member States retain control over
domestic budgetary policies, although subject to the conditions
set out in the Stability and Growth Pact (SGP). There is a risk
that, in the event of a cyclical downswing or an asymmetric
shock, a particular Member State will be unable to continue to
meet the SGP guidelines.

and social cohesion. It is therefore important that Member
State budgetary policies typically are in balance, or surplus, to
flexibility to permit
ensure that
counter-cyclical policies to be followed during an economic
downswing. Otherwise the aim of economic and social
cohesion will become considerably more difficult to achieve.

there is sufficient

fiscal

3.8.2.
The development of national educational resources
broadly defined is central to the cohesion effort across the EU.
In the absence of adequate education and training, the returns
to EU structural actions are likely to be lower than potentially
is possible. This Committee considers that greater attention
should be given to the development of national education and
training policies, and human-resource development generally,
in the preparation of regional economic development plans,
and the integration of this with actions financed under the
Structural Funds,
in order to maximise the benefits from
EU regional policy. This is especially important within the
Objective 1 regions, where there tends to be under-investment
in educational resources.

In addition,

3.8.2.1.
the Committee urges that greater
attention is given to the delivery of education and training
within eligible regions. If the economic development potential
of individual regions is to be exploited, it is essential that there
is sufficient involvement of both the private and the public
sector in delivering education and training, much of which
occurs within firms and other non-state actors.

The conclusions to the Lisbon European Council
3.8.3.
introduced the idea of a new,
‘open’ method of policy
coordination between Member States, the aim being to ensure
a coherent approach between Member States with respect to
the strategic aims of the Union. This Committee regards
economic development policies as an instance where the ‘open’
method can be applied. Not only will this encourage the
dissemination of best-practice economic development policies,
it will also contribute to the delivery of coherent economic
development strategies both within and between Objective 1
and 2 regions. Further, extending the ‘open’ method to regional
policies is fully consistent with the principle of subsidiarity,
but it should not be used to replace EU financial commitments
to the Structural Funds.

3.8.1.1.
During those periods the social expenditures of
government rise whilst tax receipts fall, and this can result in
an increase in the public sector deficit close to — or above —
the 3 % of GDP ceiling imposed by the SGP. In this event,
governments are required to lower public spending and/or
raise levels of taxation, both of which will exacerbate the
economic downswing leading to greater pressure on economic

Enlargement. Enlargement will alter radically the con-
3.9.
text within which EU cohesion actions operate. If we consider
only enlargement to include the central and east European
applicant countries, this will increase the territory of the EU by
over one-third; the population by 36 %; but will only add
some 5 % to the wealth of the EU. Accordingly, after 2004 the
EU will comprise up to 10 new Member States with a per
capita income of below one-half of the current EU average.

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This will present fundamentally new problems of cohesion to
the EU and will result in intense pressure to considerably
increase the resources applied to EU cohesion policies.

3.9.1.
Arguably one of the key issues that yet has to be
resolved is the capacity within the candidate countries to
effectively administer the Structural Funds as required by
the relevant Regulations.
It is therefore essential that the
Commission devotes resources to assisting these countries
prepare the required procedures and administrative arrange-
ments ahead of enlargement.

Transition Issues. The challenges of enlargement are
3.10.
not only financial. Beyond that, it is likely that some regions
currently in receipt of support under the Structural Funds will
no longer be eligible for assistance. This raises not only both
political problems; it also involves potentially considerable
economic difficulties for regions that remain under-developed
and unable to generate sustainable employment on a suf-
ficiently large scale.

3.10.1.
This Committee has taken the view that it would
be wrong automatically to graduate-out of Structural Fund
eligibility any Objective 1 region unable to meet the criterion
of achieving self-sustaining economic growth and employment
opportunities but which nonetheless records an average per
capita income above 75 % of the EU average.

3.10.1.1.
In that event, the Commission should introduce
appropriate phasing-out arrangements, or should raise the
the
eligibility threshold beyond 75 % in order to meet
legitimate needs of the under-developed regions of the EU as a
whole. While the 75 % threshold was chosen in 1988 as
appropriate to the economic conditions of the EU at that time,
there is no virtue in retaining that threshold in the face of the
scale of change that will follow this prospective enlargement.
It is essential that a discussion of the resolution to this problem
takes place in good time. There are many important issues at
stake in this matter, and the Commission and Member States
should aim to reach a consensus position which best meets
the needs of the Objective 1 regions.

fundamental obligation under the terms of the EU Treaties.
Accordingly, it is the Committee’s view that the discussions
concerning the EU’s future cohesion policies should begin
now. Certainly it would be inappropriate for these discussions
to be compressed into a short time-frame whereupon the
likelihood would be that financial considerations rather than
economic and social ones would dominate the outcome.

In order to inform its deliberations, on 29 April 2002
4.2.
the Committee conducted a series of hearings at which a
number of organisations presented evidence concerning their
views with respect to the future of EU economic and social
cohesion actions.

The general tenor of the comments made by the
4.2.1.
representations participating in the hearing were broadly in
line with the Committee’s views as set out in this opinion. In
this concluding section we review the various issues addressed.

4.3.
There is a clear consensus that territorial assistance
under Objective 1 of the Structural Funds should continue
after 2006. It is accepted that this poses a financial challenge
to the Member States, but it is widely agreed that this is a
challenge that has to be met. The economic and social cohesion
needs of the candidate countries are considerable, while there
will remain a significant number of regions across the current
EU15 whose need for support will continue beyond 2006.
Otherwise the gains made thus far from the application of
Structural Fund assistance are liable to be reversed.

it

Accordingly,

4.3.1.
is essential that regions currently
eligible for Objective 1 support, and whose eligibility post-
2006 is jeopardised solely by the statistical impact of enlarge-
ment on EU average per capita GDP, continue to receive
assistance. This can either take the form of raising the 75 %
threshold, or providing satisfactory transitional support over
the medium term. If the latter option is taken, however, the
period of transition must be linked to real improvement in the
economic conditions within the eligible regions.

4. The Future Cohesion Debate

4.1.
It is clear from this report that the economic and
cohesion policies will confront a number of important chal-
lenges over the next few years. Nonetheless, it is vital that there
is no overall diminution — financial and otherwise — in the
EU’s efforts towards promoting cohesion as this remains a

4.4.
The direct financial implications of enlargement with
respect to economic and social cohesion, coupled with the
continuing need of current EU15 regions for Objective 1
support implies that the current ceiling of 0,45 % GDP placed
on the Structural Funds almost certainly will need to be raised.
The Committee supports this as an inevitable consequence of
enlargement. Any new ceiling that is fixed should respect the
Treaty obligation to achieving a greater degree of economic
and social cohesion.

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4.5.
No clear view has yet emerged with regard to the
future of Objective 2 support post-2006. Whilst it is clear that
the overall financial commitment to Objective 1 will have to
be raised, it is not universally accepted that this should be at
the expense of Objective 2 support.

economic and social cohesion (benchmarks) and then directing
domestic economic policy to this end. Not only does this have
the advantage of lessening the burden on the EU budget, it
ensures that decisions are taken at the most appropriate level
within the EU governance arrangement.

4.5.1.
A number of representations to the Committee have
pointed to the importance of this facility, especially with regard
to unexpected economic shocks that destabilise particular
economic sectors within specific regions and as a device for
facilitating economic diversification within regions hitherto
dependent upon the declining traditional
industries. Both
enlargement and the accelerating trend towards globalisation
are likely to exacerbate this problem for current, and candidate,
Member States.

4.5.4.1.
If an ‘open method’ is adopted in this policy area,
it is vital that it utilises the key lessons learned over the
period since the 1988 reforms which have resulted from the
widespread adoption of an EU-method of structural policy
support — especially partnership and programming. It is
essential that any increase in the role of Member States in the
context of EU cohesion efforts should continue to observe the
underlying principles of that policy; principles which have
been central to its success.

4.5.1.1.
Serious consideration should be given by the
Commission to creating a facility within the EU budget to be
used to help stabilise regional income in the event of an
unexpected economic shock which the Member State may not
be able to respond to due to the domestic fiscal constraints
imposed by the Stability and Growth Pact. This facility need
not be large, as it would be used only exceptionally, and could
be deployed only under strict conditions determined by the
Commission and the Council acting jointly. This could be
described as being an enhanced ‘own-initiative’ facility.

4.5.2.
There are two fundamental points the Committee
would note. First, that some Structural Fund facility should
continue to exist to enable the EU to respond to unanticipated
economic shocks that threaten to destabilise severely a particu-
lar region. This may be dealt with by an extension and further
consolidation of the Community Initiative scheme. Second,
that the highly specific needs of the geographically disadvan-
taged regions (for instance, peripheral, rural, mountainous,
and maritime regions) continue to be supported from the EU
Structural Funds.

4.5.3.
Just as is the case within the Objective 1 regions,
economic disadvantage is closely associated with social disad-
vantage and it is essential that efforts at the EU level continue
to be directed to disadvantaged regions generally, and not
entirely to the dominant sub-set within this group.

4.5.4.
However, there may be room for adopting alternative
mechanisms for dealing with certain aspects of economic and
social cohesion problems within the Objective 2 regions.
In particular, the Committee recommends that research is
conducted into the possibility of adopting the ‘open method’
of coordination in this area. This would see Member States
adopting specific policy targets with respect to measures of

4.5.5. While the Committee encourages an examination of
the appropriateness of the ‘open method’ to tackle some part
of the economic development problems of current Objective 2
regions, any such move should incorporate the various ‘best-
practice’ arrangements for the delivery, implementation and
monitoring.

4.6.
Economic and social cohesion policies, in whatever
guise, should continue to prioritise investment in policy
areas necessary to enhancing the long-term economic growth
potential of the region. Public policy through the Structural
Funds will continue to have a key role to play in three areas
within less favoured regions:

— investment in economic infrastructure;

— investment in education and training programmes;

— investment in technology and technology transfer.

The Committee encourages that a broader review of
4.7.
economic and social cohesion be undertaken in the lead-up to
the next period of structural policy actions. Since the reforms
of 1988, economic and social cohesion has been defined
according to narrow economic criteria — per capita income
levels, and unemployment data. While both indicators have
the merit of easy availability, objectivity and comparability,
neither captures crucial aspects of social deprivation that must
be addressed. The Committee commends the work by the
Social Protection Committee to define appropriate indicators
for social
inclusion and underlines that additionally the
territorial dimension is taken into account in such indicators.

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4.8.
There is broad consensus that Objective 3 interventions
are a crucial aspect of a successful strategy for achieving
economic and social cohesion, and that these measures should
be retained under future reforms to the structural policies. An
important task within this Objective is to develop efficient
pathways of integration into employment for the most disad-
vantaged groups in society. Within this context, consideration
should be given to the role of enterprise — or entrepreneurship

— in the delivery of training and re-training measures. While
difficult to measure, there is general acceptance that cultural
and educational attitudes towards entrepreneurship play an
important role in releasing the economic development poten-
tial at the regional
level. The Committee urges that such
considerations form part of the review process, both at the EU
level and at the level of the Member State.

Brussels, 18 July 2002.

The President

of the Economic and Social Committee

Göke FRERICHS

Opinion of the Economic and Social Committee on the ‘Amended proposal for a Council
Decision concerning the rules for the participation of undertakings, research centres and
universities in the implementation of the framework programme 2002-2006 of the European
Atomic Energy Community (Euratom)’

(COM(2001) 823 final/2 — 2001/0327 (CNS))

(2002/C 241/30)

On 28 May 2002 the Council decided to consult the Economic and Social Committee, under Article 7 in
conjunction with Article 3 of the Euratom Treaty, on the above-mentioned proposal.

The Economic and Social Committee decided to instruct the Section for the Single Market, Production
and Consumption to prepare the Committee’s work on the subject, and to appoint Mr Malosse as
rapporteur-general.

At its 392nd Plenary Session (meeting of 18 July 2002), the Economic and Social Committee adopted the
following opinion unanimously.

1.

Introduction

The delay in making the referral

1.1.
is regrettable, the
EESC having exclusive powers regarding consultation on
Euratom Treaty matters. The EESC attaches great importance
to these powers, in view of the controversial nature of nuclear
energy within society and the need for proper information and
consultation.

security evaluation models in this area by means of permanent
information, consultation and training structures. The aim is
to launch a process of better governance with a view to
identifying the best strategic options, and to addressing public
concerns about the use of nuclear energy and its long-term
impact.

1.2.
Atomic energy raises serious public involvement issues,
on account of the need to exploit new, non-polluting sources
of energy and the major risks and waste processing problems
inherent in the nuclear sector. The EESC calls for a clear
statement of intent to strengthen performance and safety/

2. Rules for participation in the 6th RTD framework

programme (Euratom)

2.1.

On 21 February 2002 the EESC issued an opinion on