Opinion of the Committee of the Regions on the "Communication from the Commission Second progress report on economic and social cohesion"
Date: 2003-07-02
Institutions: European Committee of the Regions
Subjects: EU regional policy, economic and social cohesion, report

24.10.2003

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II.2.1.

F i n a n c i a l
g r a m m e s :
n a t i o n a l
C o m m u n i t y f i n a n c i a l s y s t e m s

m a n a g e m e n t
c o m p a t i b i l i t y

( i n c l u d i n g

o f

r e g i o n a l )

p r o -
b e t w e e n
a n d

Simplification could be achieved by creating a single legal
framework and setting up a single regional fund to provide
Community financial assistance that would no longer pass via
the budget of the Member State. This solution is being put into
practice in certain countries, but it is too early to assess
whether it is really effective.

II.2.2.

F i n a n c i a l
g r a m m e s :
m e t h o d s

m a n a g e m e n t
C o m m u n i t y

o f
p r o -
f i n a n c i n g

The N+2 rule should be amended, since its application may
hamper the implementation of large-scale projects, is time-
consuming and induces management authorities to favour less
structured projects that absorb the available funding more
rapidly. An N+36 months rule, dating from approval of the
programming document, would overcome these problems
while maintaining the restrictive nature of the rule.

Payment application procedures should also be harmonised
and made more flexible.

By analogy, the rule on repayment of the payment on account
must be adapted on the basis of an N+30 months formula.

Brussels, 2 July 2003.

The President

of the Committee of the Regions

Albert BORE

Opinion of the Committee of the Regions on the ‘Communication from the Commission “Second
progress report on economic and social cohesion”’

(2003/C 256/02)

THE COMMITTEE OF THE REGIONS,

having regard to the Communication from the Commission — Second progress report on economic and
social cohesion (COM(2003) 34 final);

having regard to the European Commission of 30 January 2003 to request its opinion on this subject
under Article 265(1) of the Treaty establishing the European Community;

having regard to its Bureau’s decision of 11 February 2003, to entrust the Commission for Territorial
Cohesion Policy with the task of drawing up the relevant opinion;

having regard to its opinion on The structure and goals of European regional policy in the context of
enlargement and globalisation: opening of the debate (CdR 157/2000 fin) (1);

having regard to its opinion on the Communication from the Commission — Second Report on
Economic and Social Cohesion (CdR 74/2001 fin) (2);

having regard to its opinion on the Communication from the Commission — First Progress Report on
Economic and Social Cohesion (CdR 101/2002 fin) (3);

(1) OJ C 148, 18.5.2001, p. 25.
(2) OJ C 107, 3.5.2002, p. 27.
(3) OJ C 66, 19.3.2003, p. 11.

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having regard to the draft opinion (CdR 391/2002 rev.) adopted on 30 April 2003 by its Commission
for Territorial Cohesion Policy (rapporteur: Mr Michael Schneider, State Secretary (DE-EPP);

whereas:

1)

2)

3)

4)

5)

the Second Progress Report on economic and social cohesion is a further step towards drawing up
proposals for the shape of European cohesion policy post 2006 in the context of EU enlargement;

the report provides an updated analysis of the situation and trends in the Member States and regions
and of the major topics of discussion on the future of cohesion policy;

in the light of the findings of the Second Progress Report, the CoR is called upon to review the
proposals made in past opinions, to develop them further and to adapt them to current thinking;

the key yardstick for the Committee’s assessment continues to be the objective set out in Article 158
of the EC Treaty, i.e. strengthening economic and social cohesion in order to promote the overall
harmonious development of the Community. Reducing differences in the level of development of
the various regions and reducing the development shortfall of the most disadvantaged areas is also
the most significant contribution to strengthening the role of regional and local authorities in the
European Union;

the European Commission’s Second Progress Report provides up-to-date data on socio-economic
trends in both the present Member States and regions and the accession countries. It is clear from
the figures given that regional and structural policy must continue to be a joint task for Member
States, local and regional authorities and the European Union. The renationalisation of this policy
should therefore be rejected, as is suggested in the European Commission’s second progress report.
It is also essential that European regional policy be continued for less developed regions and that a
new regional policy be established for other regions.

unanimously adopted the following opinion at its 50th plenary session on 2 and 3 July 2003 (meeting of
2 July).

The Committee of the Regions

1. Analysis of the situation and trends

1.1.
points out that the unprecedented widening of econ-
omic disparities within the Union that enlargement will cause
will be the key challenge for European cohesion policy
post 2006. In particular, this will involve ensuring that the
increasing number of EU citizens who live in regions with a
per capita income far below the Community average are keyed
into the overall development of the Union, irrespective of
whether they live in an ‘old’ or a ‘new’ Member State;

1.2.
notes that the disparities between Member States in the
EU have decreased, but at the same time regional differences
within Member States have continued to grow. For the CoR,
for regional and
this means once more having to call
local authorities to be fully involved in the conception and
implementation of cohesion policy, which must take into

account, in particular, the recommendations laid down in the
European Spatial Development Perspective (ESDP), adopted in
Potsdam in May 1999;

1.3.
concludes that the economic slowdown which began
in 2000 is expected to hit harder in the weakest regions of the
EU. This underscores the additional importance of European
cohesion policy for strengthening the competitiveness of these
regions, particularly in economically difficult times, enabling
the Community to develop in a more polycentric way and
boosting economic, social and territorial cohesion in the
European Union;

1.4.
regards it as one of the successes of European cohesion
policy that the impact of the economic slowdown on employ-
ment has been reduced, also thanks to Structural Fund
interventions, and that regional differences in unemployment
rates have continued to decrease in the present EU. Neverthe-
less, this cannot obscure the fact that unemployment levels in
many regions and localities of the EU remain unacceptably
high and that additional efforts must also be made in the new
Member States to raise the employment rate and to cushion
the effects of inevitable structural change;

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1.5.
therefore feels that the views it has expressed to date
on European cohesion policy have been confirmed by the
findings of the study on the effect of cohesion policy. This is
borne out particularly in the fact that significant growth
has been achieved through Structural Fund interventions,
especially through Objective 1 support, and that, since 1989,
the difference in income between Objective 1 areas and the EU
average has decreased by three percentage points;

1.6.
recognises that, at the same time, it is apparent that, in
the regions facing the greatest problems, the factors which
determine the competitiveness of regions are particularly
poorly developed. Consequently, there must be more emphasis
on training, innovation and productivity in future cohesion
policy, in addition to urgently needed investment in non-
monetary capital and infrastructure. The Committee under-
scores the importance for all sectoral policies with a strong
regional impact to contribute to the objective of cohesion;

calls for appropriate transitional arrangements to be
1.7.
provided for, depending on the way that the aid objectives are
organised in the future, in the case of all those areas which, up
till now, have been deemed to have structural problems, but
which, in the next programming period, will no longer be
regarded as such;

1.8.
confirms that, in order to be credible, regional and
financial resources,
cohesion policy must have sufficient
and therefore considers that the proposal that 0,45 % of
Community GDP be earmarked for this policy is an acceptable
basis for discussion.

2. Priorities for future policy

statistical effect is neutralised, while the structural disadvan-
tages of the outermost and extremely sparsely populated
regions are to continue to be taken into account irrespective
of their GDP. At the same time, the own-resources ceiling of
the EU budget must be borne in mind;

2.1.2.
assumes that the configuration of Objective 1 already
provides enough flexibility to encompass Community pri-
orities like the Lisbon and Gothenburg process for employ-
ment, economic reform, social cohesion and sustainable
development. Care must therefore be taken to ensure that the
future configuration of competition law does not limit this
flexibility;

2.1.3.
encompass the following areas:

therefore expressly calls for the future Objective 1 to

2.1.4.
regions with a per capita GDP of up to 75 % of the
EU average (EU-25), regions hit by the so-called statistical
effect and regions with particular handicaps, extremely sparsely
populated and outermost regions irrespective of their GDP.

Transitional arrangements for regions which, thanks to favour-
able development, have gone over the 75 % (EU-15) threshold
(phasing out).

Substantial transitional and degressive support should also be
provided by the Cohesion Fund to those countries which
exceed 90 % of the Community average as a result of the
statistical effect.

feels that, at the present stage of the debate as presented by the
Commission, four main areas for action may be identified:

— action in the less developed regions or in regions with

structural problems;

— action outside the less developed regions;

— promoting cooperation across frontiers and between

regions;

2.1.5. makes it very clear that this position takes into
account the challenges arising from enlargement of the EU.
Appropriate solutions must be found both for the accession
countries and for the problems which continue to exist in the
regions of the present EU. The future configuration of cohesion
policy must not put the regions facing the most problems in
the present Member States at a disadvantage. In particular,
cohesion policy in the new Member States must not be funded
solely at the expense of current support areas which are not
able to cope with structural change without outside assistance;

— simplifying management.

2.1.

Less developed regions

2.1.1.
points out that, according to the Commission, the
opinions it has received have been almost unanimous in
endorsing continued support for less developed regions. Most
suggest retaining the 75 % criterion for determining which
areas receive support (75 % of per capita GDP in purchasing
power parities at NUTS II level), as long as the so-called

2.1.6.
also points out that the so-called statistical impact is
a particular problem for less developed regions. According to
the latest information from the Commission, 18 of the current
Objective 1 regions, comprising 21 million inhabitants, would
only lose eligibility for Objective 1 support because the EU
average GDP will go down with enlargement. These 18 regions
include regions in Belgium, the United Kingdom, Finland, Italy,
Austria, Portugal and Spain, as well as virtually all the east
German Objective 1 areas. The people in these regions could
get the impression that enlargement is to be funded at their
cost;

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2.1.7.
supports the European Commission, which refers to
this specific problem, saying that it favours a fair solution. For
reasons of aid legality and equality of treatment a solution
should be found within the future Objective 1 and the
associated legal provisions on aid. In the case of Objective 1,
regions with specific problems are given special consideration
in the existing Structural Fund regulations even in the current
programming period. Therefore, the regulations post 2007
should contain a provision to the effect that regions which
only go above the 75 % limit because of the lower EU average
should continue to retain their Objective 1 status. Regional
prosperity would be the criterion for the distribution of
Objective 1 resources to support areas as it is now and would
help to ensure a differentiated yet fair distribution of resources
without compromising the ceilings decided at the highest
political level. Steps should also be taken to ensure that these
regions retain their status as areas eligible for support under
Article 87(3)(a) of the EC Treaty and thus continue to be
subject to the support regime laid down in this same article.

2.2. Action outside the less developed regions

2.2.1.
endorses the Commission’s view on the need for
action outside the less developed regions and strongly rec-
ommends that the present instruments be improved, particu-
larly with a view to securing effective and efficient administrat-
ive procedures and financial control, so as to simplify and
decentralize implementation. It therefore calls for the launch
as of 2007 of a new Objective 2 for all regions ineligible under
Objective 1;

account should also be taken of

the particular
2.2.2.
situation of border regions which are adjacent
to a new
Objective 1 area and which may lose their assistance as
Objective 2 or Objective 3 areas. At least in respect of the first
programming period post 2006, special consideration should
be given to these border regions in the context of the new
support objectives or under the Interreg programme;

2.2.3. maintains that
the key concern of Community
intervention in this area is to reinforce the competitiveness of
the regions in accordance with the Union’s political objectives
as defined in the decisions of the Lisbon and Gothenburg
European Councils. It will only be possible to tackle decisively
the necessary structural reforms for more competition, inno-
vation, flexibility and growth envisaged in the Lisbon strategy
with effective input by the Union designed to give European
added value;

2.2.5.
on the one hand, there is the view that the regional
level remains the level most appropriate for the planning and
management of interventions. This option would have the
advantages of providing a high degree of continuity of support,
taking account of the territorial dimensions and ensuring
compatibility with European competition law and national
structural policy instruments;

2.2.6.
on the other hand, there is another option under
discussion which involves deriving separate, Community-
wide thematic support priorities from the factors affecting
competitiveness, such as transport links, diversification of the
production structure, knowledge-based society,
innovation,
research and development, the environment, employment,
social
inclusion and lifelong education and training. This
would have the advantage that the Union could react in a
flexible way to socio-economic problems outside the less
developed regions where doing so is not allowed under the
subsidiarity principle yet produces the greatest European added
value. However, for this approach to be used, problems
regarding the legality of aid would have to be clarified first and
care taken to ensure coherence with the Member States’
structural policy effort. EU-wide support goals should be
limited as far as possible to defining objectives, so as to leave
the regions enough scope to set their own structural policy
priorities;

2.2.7.
takes the view that a more thematic approach does
not rule out the regional level if the regional level plays a
central part in the definition of priorities and implementation
of Objective 2 programmes, and if these priorities are based
on territorial and thematic criteria clearly defined at Com-
munity level. The selection of regions which would receive
Objective 2 aid should — differently from Objective 1 — not
be selected on the basis of a GDP indicator, but other criteria
should be used like, for example, demographic trends, low
population density, the unemployment rate, level of education
and training, regional competitiveness (e.g. climate for starting
innovation, diversity of economic
businesses and SMEs),
activities and industrial density.

2.2.8.
asks the European Commission to examine in more
detail the different options for the future configuration of
cohesion policy outside the less developed regions in the Third
Cohesion Report. The new Objective 2 should also be given
adequate funding. The Committee points out in this context
that particular attention must be paid to regions with specific
disadvantages (upland areas, islands, rural areas which are not
readily accessible and areas of low population density);

points out by way of clarification that two basic
2.2.4.
options are being discussed for the future orientation of EU
structural policy:

2.2.9.
points out in this context that the issue of cities is of
great importance for economic and social cohesion in Europe
and reiterates what the European Commission observed in its
second cohesion report, namely that cities are at the heart of
economic, social and territorial change;

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2.2.10.
therefore expects measures in urban areas also to
be eligible for Structural Fund support. This includes measures
under the Lisbon process, measures aimed at greater conver-
gence in urban areas and measures to improve social cohesion;

2.2.11.
takes the view that a similar effort is also needed in
rural areas, especially those with special natural disadvantages,
as in the case of upland regions, as well as measures to preserve
functional links between urban and rural areas, preventing
urban and infrastructure pressure from triggering processes
which isolate and marginalise rural areas. This requires close
coordination of the future guidelines for EU structural policy
on the one hand and of the guidelines for a number of policies
with a significant territorial impact (agriculture and forestry,
transport, urban planning, research and innovation, employ-
ment and training, competition, etc.) on the other.

2.3. Cross-border and inter-regional cooperation

has already highlighted the considerable European
2.3.1.
added value of cross-border, transnational and inter-regional
cooperation measures in a number of opinions, and this view
is borne out in the Second Progress Report. Nevertheless, there
is an urgent need to simplify the management of programmes
and projects in this area so as not to allow delays to recur as
in the current programming period;

2.3.2.
supports the Commission in developing a strategic
approach comprising all aspects of the Europe-wide net-
working of regions,
localities and businesses to provide
opportunities for carrying out joint projects and learning from
one another. Europe-wide networking should be developed
further as a top priority;

2.3.3.
hopes that Community Initiatives will still be avail-
able as an instrument for specific objectives of European
significance. However, they should only be used for matters
which cannot be covered in targeted programmes, where a
high degree of European added value can be demonstrated and
a Europe-wide approach is called for, e.g. Interreg, an initiative

Brussels, 2 July 2003.

which has demonstrated its efficacy and should therefore
receive adequate funding.

3. Simplifying management

3.1.
called for the procedure for granting regional assistance
to be simplified and for the respective roles of the Commission,
Member States and regions to be clarified in compliance with
the subsidiarity principle in its opinion of 10 October 2002
(CdR 101/2002 fin (1)). It reiterates the need to integrate
the various existing intervention instruments (Objective 2,
Objective 3, etc.), whilst maintaining operation on a regional
basis. Community policies and funding instruments are also to
be better coordinated with economic and social cohesion
policy. Concrete proposals on this subject may be found in the
outlook report on simplifying the Structural Funds after 2006.

4. Procedure to be followed

4.1.
is called upon to continue to play an active role in the
debate on the shape of European cohesion policy post 2006.
This being so, the Committee should organise some initiatives
vis-à-vis the Commission, Parliament and Council to dissemi-
nate the findings of the outlook report on simplifying manage-
ment and the mandatory opinion on the Second Progress
Report, thereby winning over more allies at an early stage for
regional and local interests in this key area of policy;

4.2.
calls on the Commission to continue the wide-ranging
discussion on future cohesion policy, to consolidate it with the
Third Cohesion Report at the end of 2003 and to submit
concrete proposals for regulations shaping future cohesion
policy by the end of 2004 at the latest. The negotiations in the
Council and the Parliament should be completed in time to
leave enough time in 2006 to draw up and approve plans and
programmes so as not to allow delays to recur at the start of
the new programming period.

(1) OJ C 66, 19.3.2003, p. 11.

The President

of the Committee of the Regions

Albert BORE