Opinion of the European Economic and Social Committee on How to achieve better integration of regions suffering from permanent natural and structural handicaps
Date: 2005-02-10
Institutions: European Economic and Social Committee
Subjects: economic development, environmental protection, less-favoured region, mountain region, sustainable development, telecommunications, tourism, transport policy

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Opinion of the European Economic and Social Committee on How to achieve better integration of
regions suffering from permanent natural and structural handicaps

(2005/C 221/23)

On 27 January 2004,
in accordance with
Rule 29(2) of its Rules of Procedure, to draw up an opinion on How to achieve better integration of
regions suffering from permanent natural and structural handicaps.

the European Economic and Social Committee decided,

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 19 January 2005. The rappor-
teur was Mr Barros Vale.

At its 414th plenary session of 9 and 10 February 2005 (meeting of 10 February), the European Economic
and Social Committee adopted the following opinion by 80 votes, with no votes against and three absten-
tions.

1. Introduction and general comments

affected by this type of disadvantage, comprising measures indi-
vidually tailored to their specific needs.

1.1 Identification and definition of

the concept of

regions with

permanent natural and structural handicaps

1.1.1
One of the European Union's strategic objectives is to
achieve the overall harmonious development of all its territory,
in particular by removing all factors — socio-economic, histor-
ical, physical or natural — which might compromise the
competitiveness of given areas and hamper their development.

1.1.2
Inaccessibility is one of the most significant obstacles,
seriously affecting the way life is lived in certain areas, such as
island regions or mountain areas. Low population density is a
further handicap to development in various regions. Some terri-
tories experience more than one handicap at the same time, as
in the case of mountainous islands, with increased difficulties
as a result.

1.1.3
As part of its efforts in favour of economic and social
cohesion, the European Commission has recognised the exis-
tence of permanent natural handicaps (specific geographical or
natural and demographic disadvantages) in some regions of the
EU — upland regions, areas of
low population and island
regions — which are an obstacle to economic activity and
represent a real disadvantage for the development of
the
regions concerned.

1.1.4
The EESC considers, however, that European regional
policy has not overall provided a fully satisfactory response in
the sense of taking proper account of the powerful constraints
affecting these regions.

1.1.5
A series of Community measures exists, targeting and
either actually or potentially involving some of these regions.
But there is no structured European policy for all the territories

1.1.6
The EESC believes that this situation has come about
largely because of the lack of a genuine Community definition
of ‘regions suffering from permanent natural and structural
handicaps’ in legal and institutional terms.

In the present context of a post-enlargement Europe
1.1.7
of 25 Member States, the EESC considers the legal and formal
recognition of this concept to be of the utmost importance as a
starting-point for devising a specific framework for action.

1.1.8
The EESC considers that such areas merit special atten-
tion, specifically through the introduction of a specific frame-
work including permanent measures, which are in the final
analysis the only ones capable of minimising the most persis-
tent structural problems. This is the only way to avert the
danger of such regions becoming more isolated/marginalised
and to help them to be integrated into the Community of
which they are part on fair conditions.

In its opinion on the future of upland areas in the
1.1.9
EU (1), the EESC argued that the first step towards instilling a
common vision was to enshrine the special position of these
areas within the Treaties, as had already been done in Arti-
cles 158 and 299 of the Treaty of Amsterdam. Such recogni-
tion was justified by the disadvantages and challenges facing
these areas, which could be given the right to solidarity, differ-
ence and experimentation.

1.1.10
The EESC has always believed that such areas require
recognition enabling them to build on the basic principles
which would in turn allow them to realise their full potential as
regions characterised by authenticity and diversification.

(1) OJ C 61 of 14.3.2003, p.113.

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1.1.11
The EESC therefore welcomes the inclusion in the
European Union's Constitutional Treaty, adopted on 18 June
2004 by the Intergovernmental Conference attended by the EU
Heads of State and Government, and still subject to ratification
— in an article which appears to be a reworded version of
Article 158 of the Treaty of Amsterdam — of an explicit refer-
ence to regions affected by permanent structural handicaps
such as islands, mountain areas, or those with low population
density.

1.2 Problems of European Union island regions

1.2.1
Insularity is indicated as a geocultural factor and a
permanent handicap representing an additional constraint on
competitiveness in the areas concerned.

1.1.12
In the section on economic, social and territorial
cohesion, Article III-220 adds the following paragraph to the
two already contained in Article 158 of
the Treaty of
Amsterdam: ‘Among the regions concerned, particular attention shall
be paid to rural areas, areas affected by industrial transition, and
areas which suffer from severe and permanent natural or demographic
handicaps such as the northernmost regions with very low population
density, and island, cross-border and mountain areas’.

1.2.2
In institutional terms, clear reference is made to island
regions (Article 154 of the Maastricht Treaty, Article 158 of
the Amsterdam Treaty and Declaration No. 30 appended to the
latter) which recognise that the structural handicaps linked to
their island status seriously impair their economic and social
development and recommend that Community legislation may
include, where justified, special measures in favour of these
regions in order to integrate them better into the internal
market on fair conditions.

1.1.13
The EESC is convinced that the fact that regions with
this type of handicap are now clearly mentioned in the Consti-
tutional Treaty will serve as a political lever, opening the way
to future national and Community measures which are more
appropriate to actual circumstances in these areas and aimed at
substantially reducing permanent structural handicaps or at
least reducing their impact.

A March 2003 report on island regions (1) stated,
1.2.3
however, that however important these institutional references
might be, they had so far produced very little in terms of
specific measures.

1.1.14
The EESC welcomes the European Union's conti-
nuing commitment to encouraging economic and social cohe-
sion, and believes that the recognition in the Treaty of these
areas' specific features definitely represents an opportunity for
their future. However, the EESC considers that the establish-
ment of a real
legal benchmark for recognising the areas in
question necessarily entails clarification of the concept, and in
particular of
‘permanent natural or demo-
graphic handicaps’,
‘regions with very low population density’
and ‘mountain areas’.

the meaning of

1.1.15
make an objective definition of which areas are eligible,
order
specific measures for these regions.

It is now important for Community legislation to
in
future permanent

to ensure the implementation of

Formal acknowledgement of

this concept would
1.1.16
certainly lend greater strength to Community policy measures,
tailored to the specific features of
these regions, aimed at
compensating them for the structural handicaps they suffer.

1.2.4

The study of the 286 island regions (2) showed that:

— they have a population of almost 10 million people who
occupy an area of 100,000 km2 (approximately 3 % of the
European Union's total population and 3.2 % of its total
area);

— their estimated total GDP of these areas is EUR 18 billion
(i.e. 2.2 % of EU GDP) and that per capita GDP (in
Purchasing Power Standard) is EUR 16,300 (72 % of the EU
average) with major disparities between the various island
regions;

— with a few exceptions, their economic and social situation
is less favourable than that of the country to which they
belong. Their per capita GDP is generally lower than the
national average, although not necessarily the lowest in the
country to which they belong (being substantially higher
than that of the EU's ten poorest regions);

(1) Final report (2000.CE.16.0.AT.118), Analysis of the island regions

and outermost regions of the European Union, March 2003.

(2) The five criteria which Eurostat uses to define islands are as follows:
they must have an area of at least one sq. km; they must be at least
1 km from the continent; they must have a permanent resident
population of at least 50; they must have no permanent link with
the continent; and they must not house an EU capital.

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— island economies are very vulnerable, as they concentrate
on a limited range of activities with hyper-specialisation in
certain sectors such as agriculture, fisheries and tourism.
The lack of raw materials hampers the development of the
secondary sector (the secondary sector employment rate in
island regions is lower than the EU average). A number of
strategies seeking to enlarge the economic base and reduce
seasonal activities have been implemented;

1.2.5
The Eurostat definition of an ‘Island’ excluded any
island which houses an EU capital. Prior to enlargement this
effectively excluded Great Britain and Ireland, however now it
also excluded two relatively small islands Cyprus and Malta.
The EESC suggests that the definition be revised to allow for
the possible inclusion of these two new Member States. This
has already been acknowledged by the EU Commission in its
proposal for the new Structural and Cohesion Funds (1) as well
as in the context of the new European Constitution (2) which
included a declaration to this effect.

— they have a high percentage of small firms. The small size
of domestic markets, the continuing low level of qualifica-
tions and the lack of a tradition of establishing firms make
these businesses particularly vulnerable;

1.3 Problems of upland regions

— the breakdown of the island population is highly unba-
lanced among the three geographical areas: 95 % of this
population is concentrated on the Mediterranean islands
and only 5 % on the Atlantic and northern islands. A break-
down by island makes this imbalance even more marked
(five islands or groups of islands account for some 85 % of
the population);

1.3.1 Mountain areas cover some 40 % of the EU's territory,
with a population of nearly 66.8 million (17.8 % of the total
EU population).

Because of

1.3.2
their specific geophysical, cultural and
economic features (mountains often coincide with national
borders), upland regions are unsuited to many economic activ-
ities. This has an impact on the way of life of local populations.

— population size is the determining factor in the handicaps
they suffer. There appears to be a threshold of 4-5,000
inhabitants above which the rate of population growth is
generally positive, the level of facilities and infrastructure is
high and the population is younger. Below this threshold,
islands are especially vulnerable to out-migration and
ageing, and are noticeably under equipped;

A recent study on mountain areas (3) not only high-
1.3.3
lighted their various natural, economic and social handicaps,
but also focused on the considerable disparities between these
areas.

— alongside population size, geomorphologic and natural
conditions constitute a triple disadvantage:
island status,
mountainous terrain and being part of an archipelago. Most
of these regions are mountainous and must also deal with
the constraints imposed by belonging to an archipelago;

1.3.4
The study concluded that national policies for moun-
tain areas varied, in some countries taking on a sectoral char-
acter, directed basically to agriculture/rural development, while
in others they aimed at multisectoral development, especially in
areas
the environment and
tourism.

such as public infrastructure,

1.3.5
The study also pointed out that the environment, land-
scapes and cultural values, representing a heritage in them-
selves, are now better protected under national and Community
laws, but argued that closer coordination with development
strategies was required.

— island regions do however possess a number of advantages
which must be put to greater, and better use, especially in
connection with leisure activities (tourism, sport, second
homes, etc.), so that they can play an important role in
connection with the ‘motorways of the sea’.

(1) COM(2004) 492 final, Art. 52, point 1b) i)
(2) Appendix XIX
(3) Mountain Areas in Europe: Analysis of mountain areas in EU Member
States, acceding and other European countries, European Commission,
January 2004.

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1.3.6
The study warned of three risks arising from globalisa-
tion: the trend to turn mountain areas into ‘outdoor museums’
(nature/cultural
the trend to
reserves and leisure areas),
promote economic growth with no regard to the principle of
sustainability, and the trend to population loss.

1.4 Problems faced by areas with a low population density

1.4.1
For areas with a low population density the main
problem is usually transportation, in terms of both the length
of time and cost. In many cases the problem is a real lack of
transportation facilities. Economies of scale are seldom to be
found in such areas, which is not only a problem for private
production but also for social and other public services. This
puts national solidarity in society to the test when public
services for areas such as these are to take up a larger part of
public expenditure than the size of the population would indi-
cate.

1.4.2
A further problematic characteristic of these areas is
the climate. Low population density and a cold climate often
go together. On top of the costs for long journeys there are
also among other things higher costs for heating.

1.5 Questions linked with transport and transport costs, either in per

capita or in absolute terms

1.5.1
In its Resolution of 12 February 2003 on the White
Paper on transport policy, the European Parliament highlighted
the need for transport policy to contribute to economic and
social cohesion and take into account the specific nature of
island and mountain regions and regions with low
outlying,
population density and stressed that their particular needs must
also be taken into account. Given their geographical position,
transport is of strategic importance to these regions.

services are regular
represents a further obstacle to their
economic development. These economic disadvantages are, in
practice, reflected in the high cost of passenger and goods
transport to and from these regions (in island regions, the cost
of transporting goods to the external market is higher because
of the need to use sea or air transport, both of which are more
expensive than road or rail for the same distance),
in high
distribution costs (given the need to maintain large stock
volumes in order to prevent shortages in the event of bad
weather or other events, and in order
to meet seasonal
demand), and in higher production costs (aggravated by the
small size of the local market and, in some cases, the high cost
of land and low local investment capacity).

Although their economic and demographic weight is
1.5.4
modest
in relation to the EU as a whole, some regions,
including the more remote and outermost ones, represent a
potential platform from which Europe can develop its trade
relations with neighbouring areas.

1.5.5
It has been argued that the common transport policy
is crucial if the specific needs of these regions are to be met in
a way permitting their economic and social development, in
particular by better integration of their airports and ports into
the trans-European networks.

1.5.6
In its Report on structurally disadvantaged regions, the
Committee on Regional Policy, Transport and Tourism points
to the role that the major trans-European networks can play in
in order to ensure better
the transport and energy sectors,
connections between them and the rest of the EU, and to
reduce the internal fragmentation of regional markets.

1.6 Telecommunications questions

1.5.2
Furthermore, the fact that some of these regions are
archipelagos accentuates their dependence on transport, since
air and sea transport services are vital
for their political,
economic and social relations with the mainland.

1.6.1
Long distances to main European markets as well as
within the regions seriously hamper their competitiveness and
their possibilities for development.

1.5.3
remoteness of

The additional transport costs generated by both the
these regions and the need to ensure that

1.6.2
munications networks, multimedia and technological
tion offer real opportunities to these regions.

The development of the information society, telecom-
innova-

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1.6.3
By removing the constraints of time and distance, the
new information and communication technologies are seen as
a means of reducing the effects of
insularity and helping
provide islands with a range of services (especially in the fields
of education and health, in the latter case by means of devel-
oping telemedicine); they are also one of the main prerequisites
for the growth of businesses in these regions.

national question. The EESC,
therefore, urges the Member
States to create social service systems characterised by socio-
geographical solidarity.

1.7.3
Although information and communication technolo-
gies have provided some solutions, progress in this area has
remained very slow in most of these regions.

1.6.4
Aware that these issues are crucial to the development
of local economies, the European Union has been backing the
efforts of the regions and of both public and private economic
operators
infrastructure,
build up the services needed to complete the information
society and mainstream them more effectively into the regional
setting.

to modernise telecommunications

Like the European Parliament, the EESC considers that
1.7.4
the reform of Community competition policy must make it
possible to enhance the impact of regional aid on regions with
permanent geographical handicaps and to ensure that quality
public services are preserved therein.

to the regions'

1.6.5
Studies show, however, that in spite of considerable
telecommunications infrastruc-
improvement
tures, regarding the quality and number of lines, regional and
national connections, and international communications, and
the development of telematics services, which has enabled users
of public and private services to be better informed, important
disparities persist with regard to regions on the European main-
land.

1.6.6
In brief, despite significant progress, not all problems
have yet been fully resolved, but it is hoped that technological
advances will pave the way for positive changes in the next few
years to lessen the feeling of psychological isolation suffered by
people in such regions.

1.7 Infrastructure and access

services, namely ports,
to public
airports, railways, roads, health services, education and training
and knowledge policy

1.8 Constraints and possibilities relating to the environment; diversity

of ecosystems

1.8.1
The environment of several of these regions is very
fragile, and growth of tourism, especially on a number of Medi-
terranean islands, is further increasing the pressure. However,
huge opportunities also arise from, for example, the very diver-
sity of ecosystems. Balanced and sustainable use of these oppor-
tunities can and should be made.

1.8.2 With regard to energy, island regions — especially the
most remote — are typically highly dependent on oil supplies
(on account of their location, distant from the major energy
networks, and the higher cost of electricity generation because
of the average size, often very small, of the electricity networks
to be supplied). For this reason, alternative sources of energy
— with which these regions are generally well provided —
must be harnessed.

1.7.1
The regions suffering from permanent natural and
structural handicaps have on the whole found it very difficult
to keep their populations.

1.9 Problems concerning economic activity; concentration of sectoral
activities and the lack of alternatives; employment situation

1.7.2
The absence of a critical mass generally leads to quali-
tative or quantitative public service shortcomings in these
areas. The additional costs of basic services, such as transport,
have affected the economic development of these regions. It is,
therefore, the view of the EESC that public services are also
vital to the territorial dynamism of the regions in question, on
account of their social impact.

1.9.1
One of the main problems faced by these regions is
unquestionably the low capability for establishing and consoli-
dating businesses due to a lack of capital and, in large part, to
an economic and social climate which is unfavourable to busi-
ness growth.

1.7.2.1
As the provision of public services is a responsibility
of the Member States, the policies for these services is mainly a

Some studies recommend that the economies of these
1.9.2
regions, and especially those which depend exclusively on
tourism, should be diversified, and that new integrated sources
of locally-generally development should be promoted.

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1.9.3
Some studies consider that a training programme
designed to support innovation and business creation is essen-
tial to the development of new sectors or to allow tourism to
take off, and by this means, to promoting employment.

1.11 Capacity to attract investment and generate opportunities to
keep the population in a region and to develop its endogenous
potential

The structure of employment in general shows the
1.9.4
considerable weight of the agricultural sector. Employment is
also high in the service sector, but is largely due to employ-
ment in the public sector.

Since these are regions with objective, permanent
1.11.1
disadvantages which constantly generate additional costs, the
EESC views it as of the utmost importance that active policies
be implemented, e.g. through tax measures, to promote the
development of local economies so that local populations can
remain in place.

1.10 Opportunities for tourism and recreation

Tourism is without question of great importance as a
1.10.1
powerhouse of economic activity and, as such, for overcoming
the development gap of regions with permanent structural
handicaps. The sector is the largest in terms of wealth-creation
in some regions.

1.10.2
The EESC believes that efforts to bring these terri-
tories into closer line with the more developed regions of the
EU require that maximum advantage be drawn from the role of
tourism, put on a truly professional basis, and its potential for
economic development,.

1.10.3
The EESC continues to argue that tourism must not
be the sole foundation for these territories' economies, which
should be diversified and multifaceted.

In its earlier opinion on the future of upland areas in
1.10.4
the EU (1), the EESC maintained that, with due respect for the
need for
sustainable development, upland tourism must
become more diversified so that it is spread out more evenly
over the year (better seasonal balance of visitors) and spatially
(better spatial distribution of visitors).

Given the characteristics and constraints specific to
1.11.2
these regions, and the clear importance of securing,
in each
case, the strategy most in line with the objectives, the EESC
believes that it is particularly important to support the growth
of sustainable and high-quality tourism, together with local
production, in order to enable a local economy to develop and
contribute to the creation and/or preservation of jobs. One way
of doing this might be to develop support services close to
businesses and encouraging the creation and development of
small and micro enterprises.

1.11.3
The EESC also feels that greater cooperation/involve-
ment between local authorities and the social partners of these
regions, for example through integrated actions, could build up
the conditions and critical mass which would help in taking
in
greater advantage of the regions' development potential,
order to bring them more into line with the more developed
regions of the EU. Because of their tourism-related impact,
these regions serve to disseminate the European Union's values.

1.11.4
The EESC believes that access to high quality educa-
tion and vocational training is the key to the development of
these regions.

The EESC continues to hold that the attraction of
1.10.5
upland areas as a destination for tourists from other areas or
simply for recreation is to a large extent
thanks to their
intrinsic qualities, but considers that this role must be nurtured
and adjusted to changing demand.

1.12 Remoteness from the main markets and major decision-making
centres; absence of a ‘critical mass’ for the economic sustain-
ability of multiple activities

1.10.6
Studies show that tourism and recreation are key
values for these regions, but warn of the disadvantages of
excessive specialisation in this economic sector.

(1) OJ C 61 of 14.3.2003, p. 187.

The remoteness of
these regions and also their
1.12.1
internal
fragmentation present an obvious obstacle to their
development, especially since their small size implies difficulties
in securing returns on heavy investments and creating econo-
mies of scale, or ensuring the economic sustainability of
multiple activities.

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1.13 Situation of representative economic and social movements of

the regions in question

building and modernisation of vessels, fish farming, equipping
of fishing ports, processing and marketing.

1.13.1
In the EESC's view, public policies matching the
specific needs of each region can only be put in place with
proactive, representative economic and social movements. The
absence of a critical mass (people, infrastructure, services, etc.)
in many of these regions, and the lack of effective levels of
organisation among the economic and social partners are
restraining factors on development and competitiveness.

1.14.6
Some investments have also been made in the area
of training (creation of infrastructure and training courses) with
a view to boosting intake capacity and matching the needs of
certain sectors.

1.14 Community and national policies for minimising permanent

structural problems

1.14.1
The Structural Funds have covered a significant part
of the population of these regions (in the case of islands, more
than 95 %), as they are eligible under Objectives 1 and 2.

1.14.2
A number of programmes have been implemented
with the support of Community and national policies in order
to bring about sustainable development in these regions, based
on the exploitation of
Important
instances are support for the development of local craft activ-
ities, tourist projects, and new transport, training and environ-
mental infrastructures.

their specific advantages.

1.14.3
A substantial proportion of Community funding has
been earmarked for modernisation and reinforcement of
economic sectors in order to help create or maintain busi-
nesses. As well as conventional direct aid for investment,
actions include certain financial engineering devices (guarantee
arrangements, strengthening of own resources, preferential
interest rates, etc.) which have had a lever effect in mobilising
resources on the capital markets. Public aid has also been
applied to aspects affecting the business environment, such as
equipping business areas, supplying common services, devel-
oping applied research projects and technology transfer, and
making use of the new communication technologies.

In the agricultural sphere, specific actions have been
1.14.4
implemented to strengthen traditional
local crops, and to
stimulate diversification. applied research and experimentation.

1.14.5 With regard to fisheries and aquaculture,
some
regions were able to receive financing for projects concerning

1.14.7 Measures have also been taken in connection with
the environment, seeking to reduce pollution, particularly with
regard to the handling and processing of residues and liquid
effluents of industrial and domestic origin.

1.14.8
Community rural development measures specifically
aimed at supporting upland regions were intended to ensure
land in the less
the continued exploitation of agricultural
productive areas and to provide greater support for investment
in them. Agricultural production methods compatible with the
demands of environmental protection and conservation of
natural areas were supported by agrienvironmental measures.

1.15 Development of these regions over the years, in the light of the

public policies which have been applied to them

1.15.1
Community policies, particularly by means of the
Structural Funds, have played a very important role in the
overall development of these regions, especially with regard to
convergence with the rest of the European Union. The impact
of these policies has been very considerable, or even decisive,
in a number of fields, such as transport infrastructure or fish-
eries and agriculture, two essential economic sectors.

1.15.2
The creation or development of infrastructures redu-
cing external isolation has been one of the most visible aspects
of the projects co-funded by the European Union in each of the
regions. Accessibility has clearly improved in all regions, to the
industry.
benefit of both local populations and the tourist
Internally,
road
improvements and, in some cases, measures to develop public
transport.
infrastructures underpinning
economic activity have been boosted to cope with changing
requirements.

regions have benefited from major

In some

spheres,

the

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Together with enhanced air and sea links, advanced
1.15.3
communications
(teleconferencing,
remote diagnostics, telematics and cable networks) have also
helped to lessen the inherent disadvantages of island status and/
or remoteness.

technology

initiatives

cities of these regions are taken into account when it comes to
the targeting of resources within regional programmes, and
that territories with permanent geographical handicaps should
benefit from an increase in the maximum Community contri-
bution.

The

1.15.4
efforts made with regard to the various
economic sectors have contributed to enhanced productivity
for companies and supply more in line with the opportunities
of local and export markets.

1.16.6
The EESC believes that special attention should be
given to situations where there is an accumulation of such
factors (for example, islands with mountain areas and sparse
population).

1.16 The solidarity effort in structural policies

such territories
1.16.7 Moreover,
should be reflected not only in cohesion policy, but in all Com-
munity policies.

the specific needs of

1.16.1
In the context of the reform of the Structural Funds
for 2006-2013, the specific situation of the islands and regions
with permanent handicaps and their permanent structural
constraints should be taken into account in addition to their
socio-economic characteristics.

1.16.2
the Third
The EESC is particularly pleased that
Report on Economic and Social Cohesion, adopted by the
European Commission on 18 February 2004, refers to the par-
ticular problems of these regions and to the need to adopt
measures in line with their circumstances.

1.16.8
The EESC is convinced that, in tandem with the need
for cohesion policy to address the competitiveness-related
problems of regions with permanent structural disadvantages
affecting their development, other Community policies — such
as competition policy — should take account of their direct
and indirect and positive and negative implications for these
regions, in order to integrate them fully into the Community to
which they belong.

1.17 Objective 1 regions: a sustained and well-adapted effort

In the EESC's view, the way resources are allocated
1.16.3
under Priorities II (Regional competitiveness and employment)
and III
(European territorial cooperation), envisioned in the
new architecture for EU cohesion policy for the 2007-2013
programming period, should take proper account of criteria
which assess permanent structural handicaps such as remote-
ness, isolation, poor accessibility and low population density. It
is known that such factors represent serious obstacles to the
economic and social development of the regions affected.

1.17.1
The economic and social development of the least
favoured areas of the Union is not only socially just, it is also
important for the political stability and harmonious develop-
ment of the Union itself. It is legitimate that priority be given
to those regions whose levels of development rank among the
lowest in the EU and which suffer from the most acute social
problems.

1.16.4
The EESC therefore supports the European Commis-
sion's intention to take due account of the territorial dimension
alongside the economic and social dimension as part of the
new Structural Funds approach for the new financial program-
ming period. The European Commission proposes that Com-
munity aid under Priority II should apply territorial criteria
reflecting the relative disadvantage of regions with geographical
handicaps (islands, mountain areas and regions with low popu-
lation density).

1.17.2 Within the Structural Fund envelope earmarked for
Objective 1 post 2006, constraints linked to permanent handi-
caps should,
in proportion to their respective intensities, be
regarded as determining factors in the distribution criteria. The
budgetary allocations should also take account of aggravating
factors
the archipelago effect, desertification and
problems of accessibility linked to rough terrain.

such as

1.16.5
The EESC agrees with the European Commission's
proposal that the Member States should ensure that the specifi-

It matters little whether such an instrument is legally
1.17.3
framed as a stand-alone programme, or as a set of special
measures in the framework of a new ‘Objective 2’ regulation, as
long as a number of ends and criteria are met:

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1.17.3.1
The existence of durable or permanent geographic
or demographic constraints should be an explicit criterion for
eligibility.

1.18 Revising the state aids systems (1)

1.17.3.2
The areas in which it is applied should be those
which clearly entail durable geographic or demographic
constraints. In particular, by:

1.18.1
The aid mechanisms operated within the Member
States concern comparatively greater sums of money than the
Structural Funds. It is therefore crucial for these regions that
the various aid systems controlled by the Community take
account of the additional costs and constraints linked to their
specific features.

— financing the purchase or renewal of fixed or mobile trans-

port infrastructure;

— financing risk capital for developing new sea or air links,

within the EU or with third countries;

— financing public infrastructures the proliferation of which is
justified by an archipelago-type situation, or by isolation
due to rough terrain or low population density;

— covering certain additional costs arising from the applica-
tion of EU legislation in these areas (e.g. application of stan-
dards in the field of the environment, waste management,
water management, etc.);

— aid to island companies

for
promotion and market canvassing campaigns,
insofar as
this aid helps them overcome the problems linked to the
small size of their local market.

(particularly small ones),

1.17.3.3
The manner in which this instrument is allocated
should be based on the principle of proportionality, based on
the intensity of the handicap suffered, measured in terms of
degree of accessibility, demographic situation, and, possibly,
productivity. It should also be possible to take account of the
accumulation of constraints which affects many island regions
(such as archipelago-type fragmentation, a difficult demo-
graphic situation, or the mountainous nature of part of their
territory) in the criteria for distributing aid.

1.17.4
If the creation of such an instrument is to be more
than merely symbolic, significant resources must be allocated
to it. These should range from an amount of aid corresponding
to that currently granted to Objective 2 regions, at the lower
end of
to that currently granted to Objective 1
regions, at the higher end of the scale.

the scale,

1.18.2
The case made by the representatives of such regions
for a more flexible framework is based on the fact that the aid
designed to offset the additional costs linked to their situation,
far from distorting the market, contributes to rebalancing it.

1.18.3
EU legislation on aid, in particular state regional aid
and agricultural aid, therefore needs to be revised. Such aid
must, in accordance with the principle of positive differentia-
tion,
include the constraints of their particularities and their
possible accumulation with other permanent constraints of a
geographic or demographic nature. The following are some
examples:

1.18.3.1
The state regional aid system takes account of the
constraints suffered by very low population density regions,
and currently allows them higher aid levels, together with the
possibility of direct aid to transport. It does not, however make
any reference to the islands (apart from an anecdotal reference).
A minimum requirement, therefore, is that the benefits granted
to the low-population areas be extended to all the islands, that
is to say:

— comparable NGE (net grant equivalent) thresholds;

— entitlement to operating aid designed to cover additional

transport costs.

1.18.3.2 Moreover, in a best-case scenario, this very same
legislation tolerates operating aid only where such aid is
‘temporary and progressively reduced’. This restriction fails to
take account of the permanent nature of the constraints of the
island phenomenon and should, therefore, be eliminated in par-
ticular in the case of transport subsidies.

(1) State aid is considered as direct transfers to enterprises under the
form of grants, tax exemptions, equity participation, soft loans, tax
deferrals and guarantees calculated so as to harmonise the state aid
component data into a common comparable indicator across coun-
tries.

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1.18.3.3
The formal prohibition on direct aid to transport
in the case of trade between Member States of the Community
should be reconsidered in the case of the islands, because such
aid could help improve their economic integration in the Com-
munity space and enable them to take advantage of
their
geographic positioning in the maritime spaces around Europe.
This particularly concerns those islands closer to the coast of
another Member State than to that of their own mainland and
even more so — and on another scale — those whose trade
with the Community is carried on via trans-oceanic transport.

to reducing

contribute
and
improving the living conditions of the population. The same
applies, for obvious reasons, to transport related taxation of
user charges (e.g. airport taxes).

additional

structural

costs

1.18.3.4
The problem of aid to transport should also be
dealt with in the framework of the WTO so as to encourage
the development of direct trade with the nearest third coun-
tries.

2. Conclusions and recommendations

1.18.3.5
The system of competition which prevails in the
field of sea and air transport contains miscellaneous provisions
in relation to the islands which should be improved or supple-
mented. For example:

— the rule of the ‘lowest bidder’ should be amended to take
account of factors such as the economic and social impact
which the attribution of the contract can have on an island;

— the practice of breaking routes serving a region up into
several invitations to tender should be avoided where this
practice could jeopardise the quality and reliability of the
services;

— it should be possible to extend the term of service public
contracts in the field of shipping to take account of the
period of depreciation of the ships.

In the case of agricultural or fisheries aid, specific
1.18.3.6
support measures for local productions designed to limit the
effects of additional transport costs, or the effects of the limited
size of the market, should be envisaged. This could apply, for
example, to the operating aid intended for small transformation
units (abattoirs, creameries, etc.) where the modest volume of
the regions' productions, or the small size of the local market,
preclude their operation in conditions of economic viability.

1.18.3.7
The application of uniform indirect taxation rates
(VAT, excise, etc.) tends to aggravate the situation in the islands
where consumption prices are highest. The states should be
allowed to exercise a degree of flexibility in the application of
certain taxes in those regions where such an approach would

2.1
The state of vulnerability which characterises the regions
with permanent handicaps tends to make it more difficult for
them to develop, and in many cases to exacerbate their
economic and social difficulties. Faced with a similar context,
established populations in regions not experiencing such handi-
caps will enjoy greater prosperity or at least suffer fewer diffi-
culties.

inhabitants to endemic under-development.

It would both inaccurate and simplistic to claim that
2.2
there exists a sort of ‘fatality’ which condemns regions with
permanent handicaps to the role of second-class territories and
their
In many
cases, European regions with permanent handicaps boast
several assets or potentials capable of promoting development:
their proximity to relevant natural resources, their capacity to
produce renewable energies,
their attractiveness to tourists,
their geo-strategic position, the proximity of shipping lanes,
diversity of ecosystems, etc.

The problem facing these regions is that,

2.3
in order to
seize these opportunities, they will probably have to work
harder or take much greater risks than would be necessary to
successfully undertake a similar undertaking in other, more
advantaged parts of the EU. During times of recession, on the
other hand, they would be among the first affected owing to
the poorer profitability of their industries.

2.4
A European policy for regions with permanent handi-
caps should therefore consist of a set of measures designed to
minimise their vulnerability and to help create a real ‘equality
of opportunities’ between these territories and the rest of the
Union. As this policy constitutes a response to objective
natural constraints,
it be graduated
according to the intensity of these constraints. For the same
reason, it should constitute an addition to, rather than a repla-
cement for, the measures traditionally implemented as part of
the economic and social cohesion policy.

legitimate that

is

it

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2.5 What should such a policy entail?

2.6 Goals of a policy for regions with permanent handicaps

2.5.1
A European policy for regions with permanent handi-
caps should be based on three major principles and on several
goals:

— the first is the principle of

‘permanence’, because the
geographic constraints which affect these territories are of a
durable nature. This principle of permanence is in contrast
to the ‘catch-up’ concept which has heretofore served as a
basis for EU policies for dealing with economic and social
problems;

— the second principle is that of ‘positive discrimination’.
This consists in regarding the measures granted to certain
territories to enable them to offset permanent structural
constraints not as constituting unfair advantages but as
In this
measures designed to bring about
respect, positive differentiation is in contrast to discrimina-
tion which, according to the definition given by the Euro-
pean Court of Justice, ‘… consists in treating similar situa-
tions
similarly’
(Judgment of the Court of First Instance, Fourth Chamber,
of 26 October 1993. Joined cases T-6/92 and T-52/92);

real parity.

differently,

situations

different

and

— finally,

the third principle is that of

‘proportionality’,
because situations in regions with permanent handicaps are
synonymous with geographic and demographic diversity.
The implementation of positive differentiation with regard
to regions with permanent handicaps is only justified if it is
based on the realities of their geographic, demographic and
environmental characteristics, and on the constraints that
these entail. These realities are necessarily different from
region to region.

2.6.1
The three types of goal for policy for regions with
permanent handicaps are of a social, economic and environ-
mental order. These goals are intimately intertwined.

2.6.2
For the proper implementation of aid in underprivi-
leged areas, the term 'sustainability' should be considered to
have a dual meaning; firstly, from a socio-economic perspec-
tive,
it ensures the survival of viable family businesses and
productive systems, curbing the demographic exodus, and
secondly, it consolidates environmentally friendly practices.

2.6.2.1
Social goals: the ‘social goals’ are to enable the inha-
bitants of these regions who so wish to ‘be born, live and work
at home’.

The inhabitants of

2.6.2.2
these regions should have a
degree of choice and a quality of infrastructures and services as
close as possible to those generally available in the other parts
of the Union.

2.6.2.3
This concerns a multitude of sectors, especially
education, initial and lifelong vocational training, health, trans-
port and telecommunications. Parity with the other parts of the
Union cannot be defined in a purely statistical manner; it must
be assessed in qualitative terms. When infrastructures or
services are sophisticated,
the smaller the population of a
region, the more disproportionate their size and cost will be
with respect to the number of inhabitants. There is no uniform
response to this problem, apart from the application of a prin-
ciple: the need to aim for optimal quality services so as to at
least maintain the population.

2.6.2.4
The required resources are those of the Structural
Funds, targeted in particular on the fields of transport (fixed or
mobile infrastructures), waste management, water, education,
and health. In the field of transport, energy and telecommuni-
cations, the intervention of the Structural Funds should be
strengthened by the effective application of Article 154 of the
Treaty in relation to the trans-European networks, with appro-
priate financial resources.

2.5.2
The aim is not to come up with measures applied
systematically and uniformly to every territory, but, first and
foremost, to create a framework which would make it possible
to take account of these differences. Based sometimes on legal
provisions, sometimes on financial resources, sometimes on
modes of governance, such a permanent framework would
make it possible to design solutions adapted to each of these
regions in proportion to the nature and intensity of
the
problems encountered. In some cases, this will mean measures
common to all the regions with permanent handicaps, and in
others provisions specific to a given situation, not suitable for
general application.

2.6.2.5
The inhabitants of regions with permanent handi-
caps should be able to gain access to consumer goods or
services at socially acceptable prices.

This situation can, in certain cases, be remedied by
2.6.2.6
measures designed to reduce consumer prices, or encourage
certain service providers to set up in the most isolated and least
populated areas.

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2.6.2.7
of a social nature, such as:

The required resources are interventionist measures

— direct aid for certain commercial activities or services provi-

ders;

— special fares for residents on sea or air transport;

— the existence of high-quality public services.

The intensity of some of these measures may be proportional
to the isolation of the communities concerned and also inver-
sely proportional to the size of their market.

2.6.2.8
Extensive use of the provisions of Articles 73 (public
services in terms of transport), 86(2) (on undertakings entrusted
with the operation of services of general economic interest) and
87(2) (in relation to aid having a social character, granted to
individual consumers) of the TEC could, in certain cases, serve
as a basis for such provisions.

2.6.3
Economic goals: the economic goals of a European
policy for regions with permanent handicaps should contribute
to integrating the islands in the single market while taking
account of their social and environmental fragility. The princi-
ples of the free market must therefore be tempered by those of
economic, social and territorial cohesion.

2.6.3.1
the single market requires equitable conditions.

The integration of the economies of these regions in

2.6.3.2
costs via direct aid to the companies.

In general, a reduction in the additional transport

2.6.3.3
On a case-by-case basis, and depending on the situa-
tions, provisions designed to counterbalance the restricted
nature of the local market, and the limited nature of the natural
or human resources. These include incentives and support
measures for the private sector, modulated on the basis of the
nature of the activities, their profitability, and their social and
environmental impact.

2.6.4
Environmental goals: the ‘environmental goals’ of a
European policy for regions with permanent handicaps consist
in helping to preserve the environment of these regions,
in
harmony with the requirements of their economic and social
development. The ‘environment’ includes the natural resources,
landscapes and ecosystems of these regions, together with their
cultural heritage in its most diverse manifestations: architecture,
historic monuments, linguistic heritage, song, dance, literature,
arts, craftwork, etc.

The preservation of

2.6.4.1
the environmental heritage
should not be a static or passive approach, tending to turn the
regions with permanent handicaps into ‘Indian reservations’.

Brussels, 10 February 2005.

On the contrary, it should constitute an active and dynamic
approach designed,
in particular, to promote the sustainable
development necessary to keep resident populations at home,
and to guarantee them a good-quality living environment.

2.6.4.2
The environmental goals require interventions at
widely different levels, not only local, but also national, Euro-
pean, and even sometimes planetary. For example:

— the preservation of

the linguistic heritage requires the
implementation of educational policies drawn up on both
local and national level;

— protecting the coasts against maritime pollution requires
surveillance of navigation in national and international
waters, and restrictive measures (such as passage in the
straits) which are discussed, not only between the neigh-
bouring states but also on a global level (in the framework
of the IMO);

— management of

fish resources

involves, not only the
regions, the Member States, the Community, but also third
countries (for example in the Caribbean) or international
bodies (such as the North Atlantic fisheries);

— all the policies linked with the observation of the green-
house effect and the limitation of its consequences must be
dealt with at all the previous levels, but must also be dealt
with at world level, in the framework of the United Nations
and of the various conferences on the environment.

2.6.4.3
The environmental goals are, to a very large extent,
a question of governance. The island, northernmost, mountain
should be consulted, and if
and outermost communities
decisions
the
possible,
concerning them.

associated, with

environmental

2.6.4.4
The European Union should take account of the
special vulnerability of its islands when environmental ques-
tions are discussed on the international stage (for example for
fisheries accords with third countries, or in the field of the fight
against the greenhouse effect).

3. Final comment

3.1
In view of the importance and wide geographical spread
across the Union's territory of regions possessing the special
characteristics discussed in the present own-initiative opinion,
and of the comments and suggestions the EESC intends to
make in order to ensure that they are better integrated, the
European Economic and Social Committee will continue to
monitor events in this field, contributing to the assessment of
future policies designed to resolve their problems.

The President

of the European Economic and Social Committee

Anne-Marie SIGMUND