2006/702/EC: Council Decision of 6 October 2006 on Community strategic guidelines on cohesion
Date: 2006-10-06
Institutions: Council of the European Union
Subjects: EU policy - national policy, economic and social cohesion, economic growth, employment policy, operational programme, regional cooperation

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II

(Acts whose publication is not obligatory)

COUNCIL

COUNCIL DECISION

of 6 October 2006

on Community strategic guidelines on cohesion

(2006/702/EC)

THE COUNCIL OF THE EUROPEAN UNION,

backwardness of the least favoured regions or islands,
including rural areas.

Having regard to the Treaty
Community,

establishing the European

Having regard to Council Regulation (EC) No 1083/2006 of 11
July 2006 laying down general provisions on the European
Regional Development Fund, the European Social Fund and
the Cohesion Fund and repealing Regulation (EC) No
1260/1999 (1), and in particular
the first subparagraph of
Article 25 thereof,

Having regard to the proposal from the Commission,

Having regard to the assent of the European Parliament,

Having regard to the opinion of the European Economic and
Social Committee,

Having regard to the opinion of the Committee of the Regions,

Whereas:

(1)

to Article 158 of

to
Pursuant
strengthen its
the
Community aims at reducing disparities between the
levels of development of the various regions and the

the Treaty,

and social

economic

cohesion,

in order

(1) OJ L 210, 31.7.2006, p. 25.

(2)

(3)

(4)

(5)

strategic guidelines on economic,

to Article 25 of Regulation (EC) No
Pursuant
1083/2006,
social
and territorial cohesion should be established to define
an indicative framework for
the
the European
European Regional Development Fund,
Social Fund and the Cohesion Fund (hereinafter ‘the
Funds’),
taking account of other relevant Community
policies, with a view to promoting the harmonious,
balanced
the
Community.

the intervention of

development

sustainable

and

of

Enlargement results in a substantial widening of regional
the
disparities in the Community, although some of
poorest parts of the new Member States have some of
the highest growth rates. Enlargement therefore presents
an unprecedented opportunity for improved growth and
competitiveness in the Community as a whole which
should be reflected in these strategic guidelines.

The 2005 Spring European Council confirmed that the
Community should mobilise all appropriate national and
Community resources — including the cohesion policy
— in pursuit of the objectives of the renewed Lisbon
agenda, which
guidelines,
including the broad economic policy guidelines and the
employment guidelines adopted by the Council.

integrated

consists

of

actions

supported with the

In meeting the objectives set out in the Treaty, and in
particular that of fostering real economic convergence,
the
limited resources
available to cohesion policy should be concentrated on
promoting
and
growth,
sustainable
employment having regard to the
renewed Lisbon
agenda.

competitiveness

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(6)

(7)

(8)

(9)

The purpose of these strategic guidelines should therefore
be to foster an increase in the strategic content of
cohesion policy with a view to strengthening synergies
with, and helping to deliver,
the
renewed Lisbon agenda.

the objectives of

The Spring European Council of 2005 concluded that
greater ownership of the objectives of the new Lisbon
agenda on the ground was necessary, involving regional
and local actors and social partners, in particular, in areas
where greater proximity is essential, such as in inno-
vation, the knowledge economy and the new information
and communication technologies, employment, human
and
capital,
entrepreneurship,
medium-sized enterprises
to risk
financing. These strategic guidelines recognise
capital
the importance of this involvement.

(SMEs) and access

support

small

for

(12)

(13)

The territorial dimension of cohesion policy is important
and all areas of the Community should have the possi-
bility to contribute to growth and jobs. Accordingly the
strategic guidelines should take account of investment
needs in both urban and rural areas in view of their
respective roles in regional development and in order
to promote balanced development, sustainable commu-
nities and social inclusion.

the

territory

development

The European territorial cooperation objective has an
important role to play in ensuring the balanced and
sustainable
the
of
Community. The strategic guidelines should contribute
to the success of
the European territorial objective
which depends on shared development strategies of the
territories concerned at national, regional, and local level
and on networking especially to ensure the transfer of
ideas to mainstream national and regional cohesion
programmes.

of

stability

These strategic guidelines should also recognise that the
successful implementation of cohesion policy depends on
macroeconomic
at
national level together with a range of other conditions
which favour investment,
including effective implemen-
tation of
the internal market, administrative reforms,
good governance, a business-friendly climate, and the
availability of a highly skilled workforce.

and structural

reforms

have

States

national

developed

reform
Member
programmes to improve the conditions for growth and
employment taking account of the integrated guidelines.
These strategic guidelines should give priority,
for all
Member States and regions, to those areas of investment
that help to deliver the national reform programmes
taking account of national and regional needs and
situations:
the knowledge
economy, the new information and communication tech-
nologies, employment, human capital, entrepreneurship,
support for SMEs or access to risk capital financing.

in innovation,

investment

(10)

The strategic guidelines should take account of the role
of cohesion policy in delivering other Community
policies consistent with the renewed Lisbon agenda.

(14) With a view to promoting sustainable development, the
strategic guidelines should reflect the need to take envi-
ronmental protection and improvement into account in
preparing national strategies.

(15)

Equality between men and women and the prevention of
discrimination on the basis of gender, race or ethnic
origin, religion or belief, disability, age or sexual orien-
tation are basic principles of cohesion policy and should
be incorporated into all levels of the strategic approach
to cohesion.

(16) Good governance is essential at all

for

levels

the
implementation of cohesion policy. These
successful
strategic guidelines should take account of the role of a
broadly drawn partnership in the elaboration and imple-
mentation of development strategies which is necessary
in order to ensure that complex cohesion strategies can
be managed successfully and of the need for quality and
efficiency in the public sector.

(11)

In the case of regions and Member States eligible for
the aim
the Convergence objective,
support under
so as
should be to stimulate growth potential,
to
achieve and maintain high growth rates,
including
addressing the deficits in basic infrastructure networks
and
administrative
institutional
capacity.

strengthening

and

(17)

and regions

These strategic guidelines represent a single indicative
framework which Member States
are
invited to use when developing national and regional
in particular with a view to assessing
programmes,
their contribution to the Community's objectives
in
terms of cohesion, growth and jobs. Taking account of
these strategic guidelines, each Member State should
prepare its national strategic reference framework and
the resulting operational programmes,

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HAS ADOPTED THIS DECISION:

Article 2

Article 1

The Community strategic guidelines on economic, social and
territorial cohesion (hereinafter ‘the strategic guidelines’) as set
out
in the Annex are hereby adopted as an indicative
framework for the Member States for the preparation of the
national
and operational
frameworks
programmes for the period 2007 to 2013.

reference

strategic

This Decision is addressed to the Member States.

Done at Luxembourg, 6 October 2006.

For the Council
The President

K. RAJAMÄKI

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ANNEX

Community strategic guidelines on economic, social and territorial cohesion, 2007-2013

1.

INTRODUCTION: GUIDELINES FOR COHESION POLICY, 2007-2013

In accordance with the integrated guidelines for growth and jobs of the renewed Lisbon agenda, the programmes
supported by cohesion policy should seek to target resources on the following three priorities (1):

— improving the attractiveness of Member States, regions and cities by improving accessibility, ensuring adequate

quality and level of services, and preserving the environment,

— encouraging innovation, entrepreneurship and the growth of the knowledge economy by research and inno-

vation capacities, including new information and communication technologies, and

— creating more and better jobs by attracting more people into employment or entrepreneurial activity,

improving adaptability of workers and enterprises and increasing investment in human capital.

In taking on board the renewed Lisbon agenda in the new programmes, attention is drawn to the following
principles:

First, in line with the re-launch of the Lisbon agenda itself, cohesion policy should focus to a greater extent on
knowledge, research and innovation, and human capital. Accordingly, the overall financial effort in support of
these fields of action should be significantly increased, as required by the new earmarking provisions (2). In
addition, Member States and regions should be inspired by best practice where this has delivered visibly
positive results in terms of growth and jobs.

Second, Member States and regions should pursue the objective of sustainable development and boost synergies
between the economic, social and environmental dimensions. The renewed Lisbon strategy for Growth and Jobs
and the National Reform Programmes emphasise the role of environment
in growth, competitiveness and
employment. Environmental protection needs to be taken into account in preparing programmes and projects
with a view to promoting sustainable development.

Third, Member States and regions should pursue the objective of equality between men and women at all stages of
the preparation and implementation of programmes and projects. This may be done through specific actions to
promote equality, as well as by taking careful account of how other projects and the management of the Funds
may affect men and women.

Fourth, Member States should take appropriate steps to prevent any discrimination on the basis of gender, race or
ethnic origin, religion or belief, disability, age or sexual orientation during the various stages of implementing the
Funds. In particular, accessibility for disabled persons is one of the criteria to respect in defining operations
cofinanced by the Funds and to take into account during the various stages of implementation.

In the following sections, key aspects of each of these broad areas are examined with specific guidelines under each
heading. Not all of these more detailed guidelines will be relevant to all regions. The most appropriate mix of
investments ultimately depends on the analysis of the strengths and weaknesses of each Member State and region
and specific national and regional circumstances. The guidelines rather represent a single framework which
Member States and regions are invited to use when developing national, regional, and local programmes,
in
particular with a view to assessing their contribution to the Community's objectives in terms of cohesion,
growth and jobs.

(1) Communication to the Spring European Council ‘Working Together for growth and jobs — a new start for the Lisbon Strategy’,

COM(2005) 24, 2.2.2005.

(2) Article 9 of Council Regulation (EC) No 1083/2006 of 11 July 2006 laying down general provisions on the European Regional
Development Fund, the European Social Fund and the Cohesion Fund and repealing Regulation (EC) No 1260/1999. OJ L 210,
31.7.2006, p. 25.

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1.1. Guideline: Making Europe and its regions more attractive places in which to invest and work

One of the preconditions for growth and jobs is to ensure that the necessary infrastructure (e.g. transport,
environment, energy) is available to businesses. A modern and secure infrastructure is an important factor in
the performance of many enterprises, affecting the economic and social attractiveness of regions and cities.
in regions that are lagging behind, especially in the new Member States, will
Infrastructure investment
encourage growth and thus reinforce convergence with the rest of the Union as well as improving quality of
life. Resources should come not just from grants but also, where possible, from the private sector and from loans,
for example from the European Investment Bank (EIB). For the next period, programme authorities in the Member
States will have an opportunity to make greater use of EIB expertise to prepare suitable projects for European
funding under the JASPERS initiative.

1.1.1. Expand and improve transport infrastructures

The provision of efficient, flexible, safe and clean transport infrastructure may be regarded as a necessary precon-
dition for economic development as it boosts productivity and, thus, the development prospects of the regions
concerned by facilitating the movement of people and goods. Transport networks boost opportunities for trade,
while increasing efficiency. Furthermore, the development of Europe-wide transport infrastructures (notably the
‘TEN-T projects’), with a
relevant parts of the thirty priority projects for Trans-European Transport Networks,
particular focus on cross-border projects, is essential to achieving greater integration of national markets, especially
within the context of an expanded Union.

Infrastructure investment needs to be adapted to the specific needs and level of economic development of the
regions and countries concerned. These needs are generally highest in the Convergence regions and in countries
covered by the Cohesion Fund. Typically, infrastructure investments (as with other investments) show diminishing
rates of return above a certain level of funding. The economic returns on such investments are high when
infrastructure is scarce and basic networks have not been completed, but they are likely to decrease once a
certain level has been reached.

The level of regional economic development and the existence of large infrastructure endowments should thus be
taken into account. In the least developed regions and countries, international and interregional connections may
offer higher returns over the longer term in the form of increased business competitiveness and also facilitate
labour mobility. On the other hand, for regions with a dispersed, small-scale economic base and a settlement
pattern based on small towns, the construction of a regional transport infrastructure may be more appropriate. In
regions with inadequate road networks, funding should also be available to build economically vital road links. The
challenges of mobility and accessibility in urban areas should also be tackled, supporting integrated management
systems and clean transport solutions.

In order to maximise the benefits deriving from transport investments, assistance from the Funds should be based
on a number of principles.

First, objective criteria should be used to determine the level and nature of the infrastructure investment to be
undertaken. For instance, potential rates of return should be measured by the level of economic development and
the nature of economic activities of the regions concerned, the prevailing density and quality of infrastructures or
the degree of congestion. When determining the social rates of return, due account should also be taken of
environmental and social implications of prospective infrastructure projects.

in
Second, the principle of environmental sustainability should be respected to the greatest possible extent,
accordance with the White Paper (1). Shifts to the more environmental
friendly modes should be pursued.
However, the environmental and general performance of each mode of transport should be optimised, in particular
concerning the use of infrastructure within and across the different modes (2).

Third, particular attention should be paid in the Convergence regions and in countries covered by the Cohesion
Fund to modernising the railway system by carefully selecting the priority sections, ensuring their interoperability
within the framework of the European Rail Transport Management System (ERTMS).

(1) ‘European transport policy for 2010: time to decide’, COM(2001) 370.
(2) ‘Keep Europe moving. Sustainable mobility for the European continent’, COM(2006) 314, 22.6.2006.

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investments in transport

infrastructure should be accompanied by proper traffic management, with
Fourth,
particular attention to safety, in accordance with national and Community standards. National or regional stra-
tegies should take into account the need to achieve a balanced (and clean) modal split that serves both economic
and environmental needs. Strategies should include,
transport systems, multi-modal
platforms and, in particular, technology used for the ERTMS and for the Single European Sky ATM Research
Programme (SESAR — for a more uniform air traffic management system in Europe).

for example,

intelligent

Based on the abovementioned principles, the guidelines for action are as follows:

— Member States and regions eligible for funding under the Convergence objective (1) or the Cohesion Fund,
should give appropriate priority to those of the 30 projects of European interest where they fall within
their territory. Within this group of projects, cross-border links merit special attention. Other TEN-T
projects, and strategic transport links, should be supported where this presents a strong case in terms
of their contribution to growth and competitiveness.

— Complementary investment in secondary connections will also be important in the context of an inte-
grated regional transport and communications strategy covering urban and rural areas, in order to ensure
that the regions benefit from the opportunities created by the major networks.

— Support for rail infrastructure should seek to ensure greater access. Track fees should facilitate access for
independent operators. They should also enhance the creation of an EU-wide interoperable network.
Compliance and applications of the interoperability and the fitting of ERTMS on board and on track
should be part of all projects financed where appropriate.

— Promoting environmentally sustainable transport networks, particularly in urban areas. This includes public
transport facilities (including park-and-ride infrastructures), mobility plans, ring roads, increasing safety at
road junctions and soft traffic (cycle lanes, pedestrian tracks).
It also includes actions providing for
accessibility to common public transport services for certain target groups (the elderly, disabled
persons) and providing distribution networks for alternative vehicle fuels. Inland navigation routes can
also contribute to the sustainability of networks.

— In order to guarantee the optimum efficiency of transport infrastructures for promoting regional devel-
opment, attention should be paid to improving the connectivity of landlocked,
insular or outermost
territories to the TEN-T projects. In this respect, the development of secondary links, with a focus on
inter-modality and sustainable transport, will help. In particular, harbours and airports should be connected
to their hinterland.

— More attention should be paid to developing the ‘motorways of the sea’ and to short-sea shipping as a

viable alternative to long-distance road and rail transport.

Where Member States receive support at the same time from both the Cohesion Fund and the Structural Funds, a
distinction should be made in the programmes between the types of actions funded by each of the Funds, with the
Cohesion Fund playing the key role in support of Trans-European transport networks.

In turn, the Structural Funds should generally focus on the development of infrastructure linked to measures to
stimulate economic growth (such as tourism development and improvements to increase the attractiveness of
investments shall also fit the overall goal of road safety.
industrial sites). With regard to road infrastructure,

Co-financing from the Funds should complement grants from the budget for Trans-European Networks while
avoiding duplication in terms of Community assistance. Member States can make use of the coordinators as a
means of shortening the time that elapses between designation of the planning of the network and the physical
construction. Member States individually will need to determine in advance the instrument most suited to the
planned projects. Cohesion policy funding can be combined with the loan guarantee part of
the TEN-T
instruments.

(1) OJ L 167, 30.4.2004, p. 1.

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1.1.2. Strengthen the synergies between environmental protection and growth

Environmental investments can contribute to the economy in three ways: they can ensure the long-term sustain-
ability of economic growth, they decrease external environmental costs to the economy (e.g. health costs, clean-up
costs or damage recovery) and they stimulate innovation and job creation. Future cohesion programmes should
seek to strengthen potential synergies between environmental protection and growth. The provision of environ-
mental services such as clean water supplies, waste and waste-water treatment infrastructures, management of
natural resources, the decontamination of land to prepare it for new economic activities, and protection against
certain environmental risks (e.g. desertification, droughts, fires and floods), should all have high priority in this
context.

In order to maximise economic benefits and minimise costs, priority should be given to tackling environmental
pollution at its sources. In the waste management sector, this implies focusing on waste prevention, recycling and
biodegradation of waste which are cost-effective and help to create jobs.

Development strategies should be based on a prior evaluation of needs and specific issues faced by regions, where
possible using appropriate indicators. Efforts should be made to promote the internalisation of external environ-
mental costs, with support for the setting up and development of market-based instruments (see, for example,
instruments proposed in the Environmental Technologies Action Plan). Attention is drawn in this context to the
initiative Global Monitoring for Environment and Security, which from 2008 will provide Europe-wide, up-to-date
information on land-cover/land-use and ocean properties as well as incident maps in case of disasters and
accidents.

Accordingly, the recommended guidelines for action are the following:

— Addressing the significant needs for investment in infrastructure, particularly in the Convergence regions
and especially in the new Member States, to comply with environmental legislation in the fields of water,
waste, air, nature and species protection and bio-diversity.

— Ensuring that attractive conditions exist for businesses and their highly skilled staff. This can be ensured by
promoting land-use planning which reduces urban sprawl, and by rehabilitating the physical environment,
including the development of natural and cultural assets. Investments in this area should be clearly linked
to the development of innovative and job-creating businesses on the sites concerned.

— Promoting,

in addition to the investments in sustainable energy and transport covered elsewhere,

investments that contribute to the EU-Kyoto commitments.

— Undertaking risk prevention measures through improved management of natural resources, more targeted
research and better use of ICTs, and more innovative public management policies including, for example,
preventive monitoring.

Where Member States receive support from both the Cohesion Fund and the Structural Funds, a clear distinction
should be made in the programmes between the types of actions funded by each of the Funds, respectively.

1.1.3. Address Europe's intensive use of traditional energy sources

A related priority is the need to reduce traditional energy dependency through improvements in energy efficiency
and renewable energies. Investments in these fields contribute to the security of energy supply for long-term
growth, while acting as a source of innovation and providing opportunities for exports, and are cost effective
especially if energy prices remain high.

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Investment in traditional sources of energy is also needed, so as to ensure security of supply. In particular, the
Funds should concentrate — where there is evidence of market failure and where it does not go against the
liberalisation of the market — on the completion of interconnections, with special emphasis on the Trans-
European networks, the improvement of electricity grids and the completion and improvement of gas transmission
and distribution networks including, where appropriate, in insular and outermost regions.

Guidelines for action under this heading are the following:

— Supporting projects to improve energy efficiency, for example in buildings, and dissemination of low

energy intensity development models.

— Supporting the development and use of renewable and alternative technologies (such as wind, solar,
biomass), including for heating and cooling, which can give the EU a leading edge and thus strengthen
its competitive position. Such investments also contribute to the Lisbon objective of ensuring that, by
2010, 21 % of electricity is generated from renewable sources.

— Concentrating investment in traditional energy sources to develop the networks where there is evidence of

market failure. These investments mostly concern the Convergence regions.

1.2. Guideline: Improving knowledge and innovation for growth

The Community's aims of growth and job creation will require a structural shift in the economy towards
knowledge-based activities. This calls for action on a number of fronts: to address low levels of Research and
Technological Development (RTD), especially in the private sector; to promote innovation through new or
improved products, processes and services which can withstand international competition; to increase regional
and local capacities to generate and absorb new technologies (ICTs in particular); and to provide more support for
risk-taking.

RTD expenditure as a percentage of GDP has been increasing, but only marginally and, at 1,9 % of GDP, remains
well short of the Lisbon target of 3 % (1). While the shortfall in business investment in RTD remains significant,
there are signs that public investment in this field is also coming under pressure. The RTD and innovation gap
within and between countries, particularly in relation to business expenditure on RTD, is much bigger than the
income gap. While a combination of national and Community initiatives has been undertaken, more action is
needed to match business needs with RTD supply from public and private RTD institutions. Europe's innovation
gap with other leading economies is widening. Also within Europe, the innovation gap persists, as the Union too
often fails to transform knowledge and technological development into commercial products and processes.
Cohesion policy can help to address the main problems behind Europe's underperformance in innovation,
including ineffective innovation systems, insufficient entrepreneurial dynamism or slow business adoption of ICT.

In this context, it is necessary to enhance national and regional RTD capacities, to support investment in ICT
infrastructure, and to disseminate technology and knowledge through appropriate technology transfer and
knowledge exchange mechanisms. Awareness-raising to promote a better use of existing RTD potential could
be encouraged through regional ‘foresight’ and other regional strategic planning methods, involving regular and
systematic dialogue with key stakeholders. It is also important to enhance the RTD absorption capacity of firms,
particularly SMEs, through actions to develop skills and competencies; to encourage the creation and exploitation
of a larger pool of high-quality research talent in Europe; to increase private and public investment in RTD and
innovation; and to encourage RTD partnerships across the different regions of the Union. European Technology
Platforms, for example, offer the potential to better tailor research programmes to business needs; cohesion policy
can play an important role in supporting implementation of their Strategic Research Agendas across the Union
including in less developed regions.

(1) ‘Investing in research: an action plan for Europe’. COM(2003) 226, 30.4.2003.

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While direct grants remain important, notably in Convergence regions, there is a need to focus on the provision of
collective business and technology services to groups of firms, in order to help them improve their innovative
activity. Direct grants to individual firms should be targeted at improving the RTD and innovation capacity of the
firm, rather than at a temporary reduction of its production costs generating high deadweight effects. This is
particularly important in traditional sectors, particularly those exposed to global competition, which need addi-
tional efforts in order to remain competitive, as well as in SMEs which often represent the highest source of
employment at the regional level. Most importantly, these policies need to be adapted to the particular conditions
of each region, and in particular to the needs of SMEs. National, regional, and local strategies should be based on a
comprehensive analysis of RTD investment opportunities.

Knowledge and innovation are at the centre of the Community's efforts to promote faster growth and more jobs.
Two related framework programmes are proposed at Community level: the Seventh Framework programme for
RTD and the Competitiveness and Innovation Framework Programme (CIP). Synergy between cohesion policy and
these instruments is vital so that research and cohesion policies reinforce each other at regional level with national
and regional development strategies showing how this will be achieved. Cohesion policy can help all regions to
build up research and innovation capacity, thus contributing to the effective participation of those regions in the
European Research Area and research and innovation activities of the Community in general. In particular, it has
two important roles to play. The first is in helping regions to implement regional innovation strategies and action
plans which potentially can have a significant impact on competitiveness, both at regional level and in the Union
as a whole; the second is in contributing to raising the research and innovation capacity in the region up to a level
where it can participate in transnational projects for research.

Regional strategies should thus concentrate on investing in RTD, innovation, human capital and entrepreneurship;
ensuring that these investments respond to the economic development needs of the region and that the capacity
exists to transform research into marketable product, process and service innovation; enhancing technology
transfer and knowledge exchange; promoting the development, dissemination and uptake of ICTs within firms,
and ensuring that enterprises willing to invest in high added value goods and services have access to finance. Such
strategies should make specific provision for experimentation, with a view to increasing the capacity of policy
interventions and intermediary organisations to stimulate regional and local actors, in particular SMEs, to innovate.

1.2.1. Increase and better target investment in RTD

The competitiveness of European enterprises crucially depends on their ability to bring new knowledge to the
market as quickly as possible. Public support for RTD is justified because market failures exist and can also be
justified by the public character of certain RTD investments. In addition, issues of ownership of research results
and the need to achieve critical mass in certain research sectors provide justification for government support for
RTD.

The specific nature of RTD should be considered when implementing regional policy. In particular, RTD requires
close interaction between the players to encourage the formation of poles of excellence which are needed to reach
critical mass. Geographical proximity through the existence of clusters of SMEs and innovation poles around public
research institutions, for instance, can play a key role. As a result, RTD activities necessarily have to be spatially
concentrated while the absorptive capacity of low RTD-intensive areas is fostered.

RTD in the less developed Member States and regions should be developed around existing poles of excellence and
avoid the excessive spatial dispersion of resources. Here also, European Technology Platforms can help focus
investments on priority areas for research. Investments should also complement European priorities set out in
the Seventh Framework Programme and support the objectives of the renewed Lisbon agenda. Priority should be
given to the development of new and marketable products, services and skills.

Actions in RTD should be aligned with Community RTD policy and the needs of regions in question. In terms of
method, these need to be based on a sound analytical approach, such as foresight; as well as use of indicators, such
as patents; human resources in RTD; location of private and public research institutions; and on the existence of
clusters of innovative businesses.

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The guidelines for action in the field of RTD can be identified as follows:

— Strengthening cooperation among businesses and between businesses and public research/tertiary
education institutions, for example, by supporting the creation of regional and trans-regional clusters of
excellence.

— Supporting RTD activities in SMEs and technology transfer (enabling SMEs to access RTD services in

publicly funded research institutions).

— Support for regional cross-border and transnational

initiatives aimed at strengthening research colla-

boration and capacity building in priority areas of Community research policy.

— Strengthening R&D capacity building, including ICT, research infrastructure and human capital in areas

with significant growth potential.

Programmes — particularly for regions eligible under the Convergence objective — can contribute to developing
RTD infrastructure (including regional high-speed data networks between and within research establishments),
education infrastructure, equipment and instrumentation in both publicly funded research institutions and busi-
nesses, provided that these investments are directly linked to regional economic development objectives. This may
include research infrastructure for which the feasibility studies have been financed from earlier Framework
Programmes. Support for Seventh Framework Programme priorities should seek to develop the full potential of
emerging and existing centres of excellence and to step up investment in human capital, particularly by training
researchers at national level and by creating conditions to attract researchers trained abroad.

1.2.2. Facilitate innovation and promote entrepreneurship

Innovation is the result of complex and interactive processes, including the ability of enterprises to connect to
complementary knowledge from other market players, organisations and institutions.

Investments in innovation represent an overarching priority for cohesion policy under both the Convergence and
Regional competitiveness and employment programmes. Their co-financing should be a major priority in the
regions covered under the latter, where limited financial resources need to be concentrated so as to reach critical
mass and generate a leverage effect.

The main objective should be to foster a business climate which promotes the production, dissemination and use
of new knowledge by firms. In order to create efficient regional innovation systems, economic, social and political
actors need to be brought into contact with the leading edge of technology and business practice in the world,
beyond the national or local levels. In this respect, cooperation should also be sought with the Innovation Relay
centres and the Euro-Info-Centres which are financed under the CIP, especially in the field of trans-national
technology and diffusion of information.

Start-up companies, particularly those linked to RTD, need to be supported with the aim of developing part-
nerships with research institutions based on a longer-term vision and clear market orientation. Cohesion policy
should seek to compensate for market failure that hampers innovation and entrepreneurship. Actions should seek
to build on existing poles of activity in order to exploit regional potential for RTD and to foster networking and
technological cooperation within and between regions.

Public authorities should ensure that research institutions, the private sector and the public sector exploit to the full
the potential synergies between them.

In terms of method, economic development strategies would be improved by the collection of data on existing
innovative activities in the regions concerned, for example, on private patenting or on the nature, scope and
development potential of existing clusters of innovative activities, including those which involve both private and
public research institutions. The Community Innovation Surveys and the European Innovation Scoreboard are also
helpful in this regard.

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The guidelines for action under this heading are the following:

— Making regional RTD innovation and education supply more efficient and accessible to firms, in particular
SMEs, for example by establishing poles of excellence, bringing together high technology SMEs around
research and technological
institutions, or by developing and creating regional clusters around large
companies.

— Providing business support services to enable enterprises, and in particular SMEs, to increase competi-
tiveness and to internationalise, in particular by seizing the opportunities created by the internal market.
Business services should prioritise the exploitation of synergies (for example, technology transfer, science
parks, ICT communication centres, incubators and related services, cooperation with clusters) and give
more traditional support in the areas of management, marketing, technical support, recruitment, and other
professional and commercial services.

— Ensuring full exploitation of European strengths in the area of eco-innovations. Eco-innovations should be
promoted, together with the improvement of SME practices through the introduction of environmental
management systems. By investing in this area now, EU businesses will be in a strong position in the near
future when other regions appreciate the need for such technologies. This is an area with a clear link to the
Competitiveness and Innovation Framework Programme.

— Promoting entrepreneurship and facilitating the creation and development of new firms. Emphasis should
also be placed on promoting spin-out and spin-off companies from research institutions or firms using a
variety of
tutoring and the provision of
managerial and technological support to potential entrepreneurs).

techniques (for example, awareness raising; prototyping;

It is important to ensure that companies, including SMEs, can make commercial use of research results.

Business services should preferably be delivered by the private sector or by mixed public-private organisations. The
services should be top-class, readily available, easy to access and responsive to the needs of SMEs. The quality of
the services should be defined and monitored and there should be coherence between service providers, e.g. by
establishing public-private partnerships and one-stop shops.

Administrative procedures are often too complex. Information and initial support should be available from a
network of one-stop shops, which could provide the interface between the public sector and the grant applicant;
this should include the various actions cofinanced by cohesion policy. These providers should have competence for
the full range of State aids — independently of national or regional responsibilities — and targets for the efficiency
of their operation which are monitored regularly.

Whenever the circumstances are appropriate, tailored support should be made available to specific categories of
business (e.g. start-ups or recently transferred companies) or entrepreneurs (e.g. young people, women, older
workers or those from ethnic minority communities). Entrepreneurship education should also be encouraged in
schools.

1.2.3. Promote the information society for all

The dissemination of ICT across the Union's economy represents a major lever for improving both productivity
levels and the competitiveness of regions. The dissemination of
ICT also encourages the re-organisation of
production methods and the emergence of new business and private services. The efficient and effective
delivery of public services — in particular e-government and e-health — has a significant potential
for
economic growth and for enabling new services. Technology dissemination can contribute to regional development
by favouring the creation and growth of poles of excellence in ICT activities and developing connectivity and
networking among enterprises and SMEs in particular. Measures should encourage the development of products
and services with a view to facilitating and stimulating private investment in ICT while guaranteeing competition in
the ICT sector.

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Policy measures should therefore focus on connectivity. This includes improving innovation support services for
SMEs with the particular objective of boosting technology transfer between research institutions and enterprises. It
also requires the development of the skills needed in the knowledge economy and to develop content through the
delivery of applications and services (such as e-government, e-business, e-learning and e-health), which provide
interesting alternatives to other, often more costly, service delivery models. This is particularly relevant for remote
and sparsely populated areas, as well as for the outermost regions, islands or areas with natural handicaps. Clearly
the use and development of products and content-based services can work only if the appropriate infrastructure is
available and capable of supporting broadband services. It is therefore important that an appropriate broadband
communication infrastructure be available across the Union at an accessible cost.

As a general rule, investment in ICT infrastructure should take into account rapid technological development,
respect for the principles of technological neutrality and open access. Compliance with competition rules and with
the implementation of the regulatory framework for electronic communications is essential.

Actions need to be based on context indicators related to the existing economic structure (including industrial
specialisation; level of economic development; quality of connectivity to ICTs and potential synergies between
regional poles of economic activity). The identification of regional needs should take into account existing
Community initiatives in favour of ICTs, in particular the i2010 — a European Information Society for growth
and employment (1).

Given that ICTs cut across all sectors of economy and society, it is imperative that Member States and regions
develop compatible information society strategies which ensure coherence and integration among sectors, by
balancing supply and demand measures on the basis of
local requirements, stakeholders' participation, and
strong public political support.

The guidelines for action are as follow:

— Ensuring uptake of ICTs by firms and households and promoting development through balanced support
for the supply and demand of ICT products and both public and private services, as well as through
increased investment in human capital. These actions should increase productivity, promote an open and
competitive digital economy and an inclusive society (for example, improving accessibility for disabled and
elderly people), and thus boost growth and jobs.

— Ensuring availability of ICT infrastructure and related services where the market fails to provide it at an
affordable cost and to an adequate level to support the required services, especially in remote and rural
areas and in new Member States.

1.2.4. Improve access to finance

Another key ingredient for the promotion of knowledge and innovation is to facilitate access to finance. For the
purpose of fostering growth and job creation, it must be sufficiently rewarding for entrepreneurs and enterprises to
invest in the development and production of goods and services rather than to focus efforts, for example, on rent-
seeking activities.

Access to finance in this context is often difficult, thus creating an obstacle to growth and job-creation. Improving
access to capital both for RTD activities and for start-ups is important. Risk capital markets related to innovation
activities need to be developed in conjunction with a better regulatory environment that makes entrepreneurship
easier.

These programmes could be undertaken in close cooperation with the European Investment Fund (EIF) under the
JEREMIE initiative in order to develop financial resources in areas where entrepreneurship is hampered by market
failures owing to the high risks associated with RTD activities. Due account must also be taken of the impact of
government support for business creation, in order to avoid the crowding-out of private investment and measures
that are damaging to competition. Coordination between funds should also be enhanced.

(1) COM(2005) 229.

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Private equity and venture capital and rotating funds for innovative start-ups should play the essential role as an
engine for entrepreneurship, innovation and job creation; public sector institutions are not always best suited to
risk-taking. The priority should be to create or expand specialised providers of risk capital and bank guarantees,
where there is market failure. Typically, they will be more effective if they provide an integrated package of
support, starting with training before the business start-up or expansion.

Based on these principles, the guidelines for action are:

— Supporting non-grant instruments such as loans, secured debt financing for subordinate debt, convertible
instruments (mezzanine debt) and risk capital (e.g. seed capital and venture capital). Grants should be used
to build and maintain infrastructures that facilitate access to finance (e.g. technology transfer offices,
incubators,
readiness programmes). Guarantee and mutual
guarantee mechanisms could also be supported to facilitate access to micro-credit by SMEs. The EIB
and the EIF could provide valuable input in this regard.

‘business angels’ networks,

investment

— Developing an integrated approach that simultaneously supports innovation,

its transfer into new

commercial activity and the availability of risk capital.

— Outreaching to certain specific groups, for example, young or female entrepreneurs or disadvantaged

groups.

It is particularly important to work closely with the EIF in view of the expertise it has developed over a number of
years, in order to give SMEs the required support, while developing the European risk capital market at the same
time. This could involve participation in the JEREMIE initiative.

1.3. Guideline: More and better jobs

In relaunching the Lisbon strategy, the European Council endorsed a single set of Guidelines bringing together the
Broad Economic Policy Guidelines (1) and the Guidelines of the European Employment Strategy, thereby integrating
macro-economic, micro-economic and employment policies for growth and jobs. In accordance with the Fund
regulations (2),
in the sphere of employment and human resources the priorities of the Community strategic
guidelines on cohesion are those of the European Employment Strategy (3) supplemented by the EU Employment
Recommendations which provide country-specific priorities.

The drive for full employment and higher productivity depends on a wide variety of actions,
including those
already discussed above. Investment in infrastructure, business development and research improve job opportu-
nities, both in the short run as a result of first round effects and in the longer run as a result of their positive effect
on productivity and competitiveness. To maximise employment and create high quality permanent jobs from these
investments, human capital should be further developed and enhanced.

In terms of human capital development, the Employment Guidelines highlight three priorities for action for
Member States' policies:

— attract and retain more people in employment and modernise social protection systems,

— improve adaptability of workers and enterprises and the flexibility of the labour markets,

— increase investment in human capital through better education and skills.

In addition to these priorities, appropriate attention should be given to investments to improve efficiency in public
administration, as well as to education, social, health and cultural infrastructures.

(1) OJ L 205, 6.8.2005, p. 21.
(2) Article 2 of Regulation (EC) No 1081/2006 of the European Parliament and of the Council of 5 July 2006 on the European Social

Fund and repealing Regulation (EC) No 1784/1999. OJ L 210, 31.7.2006, p. 12.

(3) COM(2005) 141, 12.4.2005.

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Cohesion policy should focus on addressing the specific challenges of the European Employment Strategy in each
Member State, by supporting actions under the convergence and the regional competitiveness and employment
objectives, taking into account the scope of activities defined in the legislative framework. The range of eligible
actions and financial resources is greater for the former objective. For the latter, Community resources will need to
be much more focused to achieve a significant impact.

Employment and human resource development programmes should take into account the country specific chal-
lenges and priorities as highlighted in Employment Recommendations and in National Reform Programmes. The
programmes, whether managed at national or regional level, should effectively address territorial disparities and be
adapted to needs in different areas.

Finally, one of the most visible aspects of European value added in the 2000-2006 period of the Structural Funds
was the support to Member States and regions to exchange experiences, and build up networks, thus promoting
innovation. In this context, the experience gained through the EQUAL Community initiative should be capitalised
through the mainstreaming of the principles upon which it was built — innovation; transnationality; partnership;
gender mainstreaming.

1.3.1. Attract and retain more people in employment and modernise social protection systems

Widening the base of economic activity, raising employment levels and reducing unemployment are vital to sustain
economic growth, promote socially inclusive societies and combat poverty. Increasing participation in employment
is all the more necessary because of the expected decline in the working age population. In the framework of the
Employment Guidelines, Guidelines for action under this heading are the following:

— Implement employment policies aimed at achieving full employment, improving quality and productivity

at work, and strengthening social and territorial cohesion.

— Promote a life-cycle approach to work.

— Ensure inclusive labour markets, enhance work attractiveness, and make work pay for job-seekers,

including disadvantaged people, and the inactive.

— Improve matching of labour market needs.

Actions should be based on prior identification of needs by, for instance, using relevant national and/or regional
indicators such as unemployment and participation rates, long-term unemployment rates, population at risk of
poverty rates and level of income. Attention should be paid to the local level, where acute disparities may fail to be
picked up by regional level statistics.

The presence of efficient and effective labour market institutions, notably employment services that can respond to
the challenges of rapid economic and social restructuring and demographic ageing, is essential in order to support
service delivery to job seekers, the unemployed and disadvantaged people and could be supported by the Structural
Funds. These institutions have a pivotal role to play in implementing active labour market policies and providing
services on a personalised basis with a view to promoting occupational and geographical mobility and matching
labour supply and demand, including at local level. They should help to anticipate shortages and bottlenecks in the
labour market and occupational and skills requirements. Positive management of economic migration would also
be assisted as a result. Easy access to, and transparency of, the services on offer are crucial. The EURES network is
central to increasing occupational and geographic mobility, both at European level and nationally (1).

An important priority should be to strengthen active and preventive labour market measures to overcome
obstacles to entering, or remaining in, the labour market and to promote mobility for job seekers, the unemployed
and inactive, older workers as well as those at risk of becoming unemployed, with particular attention to low-
skilled workers. Action should focus on the provision of personalised services, including job search assistance, job
placement and training to adjust the skills of job-seekers and employees to the needs of local labour markets. The
potential for self-employment and business creation, ICT skills and digital
literacy should be fully taken into
account. Special attention should be paid to:

(1) Set up in 1993, EURES is a cooperation network between the European Commission and the Public Employment Services of the EEA

Member States (EU Member States plus Norway, Iceland and Liechtenstein) and other partner organisations.

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— implementing the European Youth Pact, by facilitating access to employment for young people, by easing the
including through career guidance, assistance in completing education,

transition from education to work,
access to appropriate training and apprenticeships,

— implementing the European Pact for gender equality by mainstreaming and by specific actions to increase
women's participation in employment, to reduce occupational segregation and address gender pay gaps and
gender stereotyping and to promote more family-friendly working environments, and the reconciliation of
professional and private life. Facilitating access to childcare and care services for dependent persons is crucial,
alongside gender mainstreaming in policies and measures, awareness raising and dialogue among stakeholders,

— specific action to strengthen access of migrants to the labour market and facilitate their social integration,
through training and validation of competences acquired abroad, personalised guidance,
language training,
appropriate support for entrepreneurship and raising awareness among employers and migrant workers of their
rights and obligations, and strengthening the enforcement of anti-discrimination rules.

Another important priority should be to ensure inclusive labour markets for people at a disadvantage or at risk of
social exclusion, such as early school-leavers, the long-term unemployed, minorities and people with disabilities.
This calls for an even broader range of support to build pathways to integration and combat discrimination. The
aim should be to:

— improve their employability by enhancing participation in vocational education and training, rehabilitation and
appropriate incentives and working arrangements, as well as the necessary social support and care services,
including through the development of the social economy,

— combat discrimination and promote the acceptance of diversity in the workplace through diversity training and

awareness-raising campaigns, in which local communities and enterprises would be fully involved.

1.3.2. Improve adaptability of workers and enterprises and the flexibility of the labour market

In the light of increasing pressures from globalisation, including sudden and unexpected trade shocks, and the
continual introduction of new technologies, Europe must increase its capacity to anticipate, trigger and absorb
economic and social change. In the framework of the Employment Guidelines, Guidelines for action under this
heading are the following:

— Promote flexibility combined with employment security, and reduce labour market segmentation, having

due regard to the role of the social partners.

— Ensure employment-friendly labour cost developments and wage-setting mechanisms.

The main focus should be on actions to promote investment in human resources by enterprises, especially SMEs,
and workers through the provision of
in
particular low-skilled and older workers, with the necessary skills to adapt to the knowledge economy and to
prolong their working life. Attention should be given in particular to:

lifelong learning strategies and systems which equips employees,

— the development of lifelong learning strategies and systems including mechanisms such as regional and sector

funds, with the aim of increasing investment by enterprises and participation of workers in training,

— implementation of such strategies by contributing to the funding of schemes and training activities. Priority
should be given to entrepreneurship and SMEs,
including facilitating their access to external sources of
competence, financial engineering, such as the JEREMIE instrument and training solutions — with emphasis
being placed on ICT and management skills. Particular attention should be paid to increasing the participation
of the low-skilled and older workers in training and re-training.

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Better anticipation and positive management of economic restructuring, especially as a result of changes linked to
the opening-up of trade, are particularly important. Consideration should be given to creating monitoring systems
involving the social partners, enterprises and local communities,
to scrutinising socio-economic changes at
national, regional and local
level, and assessing future economic and labour market trends. Support for the
programmes aimed at modernisation of labour markets and anticipation of gradual changes throughout the
Union particularly in sectors such as agriculture, textiles, automobiles and mining, needs to be put in place,
alongside active measures to reinforce the economic well-being of regions. There is also a role for specific
employment, training and support services for workers in the context of company and sector restructuring,
such as rapid response schemes in the case of collective lay-offs.

Attention should also be given to developing and disseminating knowledge on innovative and adaptable forms of
work organisation to take advantage of new technologies — including teleworking, improving health and safety at
work (e.g. industrial safety), increasing productivity and promoting better reconciliation of work and family life.
This may also include raising awareness of corporate social responsibility, developing consciousness as regards
employment rights, initiatives for respecting the labour code, reducing the grey economy and ways to transform
undeclared work into regular employment.

Social partners have an important role to play in setting up mechanisms that ensure the flexibility of the labour
market. Therefore Member States should encourage the participation of social partners in activities under this
priority. Further, under the Convergence objective, an appropriate amount of the European Social Fund (ESF)
resources shall be allocated to capacity-building, which shall include training, networking measures, strengthening
the social dialogue and activities jointly undertaken by the social partners.

1.3.3. Increase investment in human capital through better education and skills

Europe needs to invest more in human capital. Too many people do not enter, or remain in, the labour market,
because of lack of skills including in basic literacy and numeracy, or due to skills mismatches. To enhance access
to employment for all ages and to raise productivity levels and quality at work, there is a need to step up
investment in human capital and to develop and implement effective national
lifelong learning strategies for
the benefit of individuals, enterprises, the economy and society. In the framework of the Employment Guidelines,
Guidelines for action under this heading are the following:

— Expand and improve investment in human capital.

— Adapt education and training systems in response to new competence requirements.

Reforms in labour market training to attract more people into employment and increase adaptability of workers
and enterprises need to be coupled with reforms in education and training systems. In previous programming
In the next
periods,
programming period, the investment in human capital should be reinforced by focusing on the Lisbon objectives
in line with the integrated guidelines for growth and employment. The following general priorities should be
addressed:

the Structural Funds have invested substantially in education and training systems.

— expanding and improving investment in human capital including the development of appropriate incentives

and cost-sharing mechanisms for enterprises, public authorities and individuals,

— supporting coherent and comprehensive lifelong learning strategies, with particular attention given to
addressing the skill needs of the knowledge economy, including support to cooperation and the establishment
of partnerships between Member States, regions and cities in terms of education and training to facilitate the
exchange of experience and good practice, including innovative projects. Particular attention should be given to
addressing the needs of disadvantaged groups,

— supporting the design and introduction of reforms in education and training systems using, where relevant,
common European references and principles, in particular to raise the labour-market relevance of education
and training,

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— strengthening the links between universities, research and technological centres and enterprises, in particular

through networking activities and joint actions.

Under the Convergence objective, many Member States and regions are faced with very significant education and
training challenges. Financial resources should be used for the implementation of reforms, which should address
the following specific priorities:

— ensuring an adequate supply of attractive, accessible and high quality education and training provision at all
levels, including the improvement of staff competences and qualification, promoting flexible learning pathways
and new options starting as early as the school and preschool stage, actions to achieve a significant decline in
early school-leaving and higher completion rates of upper secondary education and improved access to pre-
school and school education,

— supporting the modernisation of tertiary education and the development of human potential in research and
innovation, through post-graduate studies, further training of researchers, and attracting more young people
into scientific and technical studies,

— promoting the quality and attractiveness of vocational education and training, including apprenticeships and

entrepreneurship education,

— ensuring, where appropriate, greater mobility at regional, national or transnational

level, and promoting
frameworks and systems to support the transparency and recognition of qualifications and the validation of
non-formal and informal learning,

— investment in education and training infrastructure including ICTs, where such investments are necessary for
the implementation of reform and/or where they can significantly contribute to increasing the quality and
effectiveness of the education and training system.

1.3.4. Administrative Capacity

In previous programming periods, the Funds have, through technical assistance, reinforced the management
capacity of Member States and managing authorities in implementing the regulations. This will also apply for
the period 2007-2013.

Above and beyond the management of the Funds, effective administrative capacity of public administrations and
public services, i.e. smart administration, is a fundamental requirement for economic growth and jobs. Thus, in line
with the revised Lisbon Strategy which calls for better legislation, policy design and delivery to create the
conditions for economic growth and job creation, the Funds will support investment in the human capital and
related ICT facilities of administrative and public services at all territorial levels.

For Cohesion countries and regions under the Convergence objective, increasing productivity and quality at work
in the public sector — especially in the economic, employment, social, educational, health, environmental and
judicial areas — is essential to pursue and accelerate reforms, to raise productivity and growth in the wider
economy and to promote social and territorial cohesion and sustainable development. The Structural Funds can
play an important role in supporting effective policy design and implementation, which involves all relevant
stakeholders, in a broad range of fields.

Therefore, Cohesion countries and regions falling under the Convergence Objective are called upon to build up
public administrations and public services at national, regional and local level. Actions in this field should take into
account the specific situation of each Member State. Thus, in line with the principle of concentration, Member
States are invited to conduct a comprehensive analysis to identify the policy areas requiring the most support for
administrative capacity. Investment should concentrate on those policy areas where there are the greatest obstacles
to socio-economic development and on the key elements of administrative reforms.

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Member States should ensure that the need to increase efficiency and transparency in public administrations and to
modernise public services is adequately addressed. Guidelines for action under this heading are the following:

— Support good policy and programme design, monitoring, evaluation and impact assessment, through
for interdepartmental coordination and dialogue

studies, statistics, expertise, and foresight, support
between relevant public and private bodies;

— Enhance capacity building in the delivery of policies and programmes, including with regard to the crime
proofing and enforcement of legislation, especially through mapping of training needs, career development
review, evaluation, social audit procedures, implementation of open government principles, managerial and
staff training and specific support to key services, inspectorates and socio-economic actors.

1.3.5. Help maintain a healthy labour force

In the light of the EU's demographic structure, ageing population and a likely decline in the labour force in years
to come, it is essential that the Union take steps to increase the number of healthy years of work for members of
its workforce. Investment in health promotion and disease prevention will help to maintain active participation in
society for as many workers as possible, thus maintaining their economic contribution and reducing dependency
levels. This has a direct effect on productivity and competitiveness, as well as having important positive spin-offs
for quality of life in general.

There are major differences in health status and access to health care between European regions. It is therefore
important for cohesion policy to contribute to health care facilities, thereby helping to increase the number of
healthy years of work in particular in the less prosperous Member States and regions. Community-based health
improvement and preventive action have an important role to play in reducing health inequalities. Good health
care translates into greater participation in the labour market, longer working life, higher productivity and lower
healthcare and social costs.

It is important for cohesion policy, especially in regions lagging behind, to contribute to the improvement of long-
term care facilities and invest in the improvement of health infrastructure, in particular when their absence or
insufficient development represents a major barrier to economic development. Member States should ensure that
the need to increase efficiency in health care systems is addressed through investment in ICT, knowledge and
innovation. Guidelines for action under this heading are the following:

— Preventing health risks to help raise productivity levels by means of health information campaigns and by
ensuring a transfer of knowledge and technology and ensure that health services have the necessary skills,
products and equipment to prevent risks and minimise their potential damage.

— Filling the gaps in health infrastructure and promoting efficient provision of services where the economic
development of the less prosperous Member States and regions is being affected. This action should be
based on a thorough analysis of the optimal level of services provision and appropriate technology, such as
telemedicine and the cost-saving potential of e-health services.

2.

THE TERRITORIAL DIMENSION OF COHESION POLICY
One of the features of cohesion policy — in contrast to sectoral policies — lies in its capacity to adapt to the
particular needs and characteristics of specific geographical challenges and opportunities. Under cohesion policy,
geography matters. Accordingly, when developing their programmes and concentrating resources on key priorities,
Member States and regions should pay particular attention to these specific geographical circumstances.

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Taking on board the territorial dimension will help to develop sustainable communities and to prevent uneven
regional development from reducing overall growth potential. Such an approach also requires that the specific
problems and opportunities of urban and rural areas may need to be addressed as well as those of particular
territories such as cross-border and broader transnational areas, or regions suffering from other handicaps due to
their insularity, remoteness (such as the outermost or Arctic regions), sparse population or mountainous character.
The environmental and demographic constraints faced by coastal areas may also need to be addressed. The
successful
implementation of actions to promote territorial cohesion requires implementing mechanisms that
can help to guarantee fair treatment for all territories based on their individual capacities as a factor of competi-
tiveness. Thus, good governance is important to successfully addressing the territorial dimension.

In fact, for the next generation of programmes, promoting territorial cohesion should be part of the effort to
ensure that all of Europe's territory has the opportunity to contribute to the growth and jobs agenda. More
specifically, this means that a different meaning should be given to territorial cohesion, linked to each Member
State's history, culture or institutional situation.

levels, national,
The development of high-quality partnerships is also essential, bringing aboard actors at all
regional, urban, rural and local. Success in the area of territorial cohesion depends on a comprehensive strategy
which sets the framework within which specific objectives and actions are pursued.

Under the new legislative framework, Member States have the possibility to delegate to cities, funds addressing
urban issues within the new programmes. To reap the full benefits of partnership, cities should be involved
throughout
the sub-
the process. This could include responsibility for the design and implementation of
delegated portion of the programme.

The new legislative framework also provides for special assistance to outermost regions in order to address the
high costs of distance that they face. A particular challenge will be to ensure that this assistance contributes to the
realisation of the strategy of the programme as whole in terms of helping to generate sustainable growth and jobs.

2.1.

The contribution of cities to growth and jobs

As outlined in the Commission Communication on cohesion policy and cities, over 60 % of the population in the
European Union lives in urban areas of over 50 000 inhabitants (1). Cities, and urban areas in general, are the
home of most jobs, businesses and higher education institutions and are key to achieving social cohesion.
European cities and metropolitan areas tend to attract the highly skilled, often creating a virtuous circle that
stimulates innovation and business adding to their attractiveness to new talent.

Cities and urban areas concentrate not only opportunities but also challenges, and account should be taken of the
specific problems facing urban areas, such as unemployment and social exclusion (including the problem of the
‘working poor’), high and rising crime rates,
increased congestion and the existence of pockets of deprivation
within city boundaries.

Programmes with a focus on urban areas can take several different forms. First, there are actions to promote cities
as motors of regional development. Such actions should target improvements in competitiveness, for example,
through clustering. Actions supported include measures to promote entrepreneurship, innovation and the devel-
is also
opment of services,
important (with measures relating to accessibility, the supply of cultural services, etc).

including producer services. Attracting and retaining very highly skilled personnel

Second, there are actions to promote internal cohesion inside the urban areas that seek to improve the situation of
crisis districts. Not only does this bring direct benefit to the districts themselves, it helps to relieve some of the
pressure towards excessive suburban sprawl in pursuit of a better quality of life.

(1) Communication to the Council and Parliament ‘Cohesion Policy and cities: the urban contribution to growth and jobs in the regions’.

COM(2006) 385 final, 12.7.2006.

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In this context, measures are important that seek to rehabilitate the physical environment, redevelop brownfield
sites especially in old industrial cities, and preserve and develop the historical and cultural heritage with potential
spin-offs for tourism development in order to create more attractive cities in which people want to live. The
regeneration of existing public spaces and industrial sites can play an important role in avoiding suburbanisation
and urban sprawl, thereby helping to create the conditions necessary for sustainable economic development. More
generally, by improving the planning, design and maintenance of public spaces, cities can ‘plan out’ crime, helping
to create attractive streets, parks and open spaces which are safe and feel safe. In urban areas, the environmental,
economic and social dimensions are strongly interlinked. A high quality urban environment contributes to the
live and invest (1).
priority of the renewed Lisbon Strategy to make Europe a more attractive place to work,

Third, there are actions to promote a more balanced, polycentric development by developing the urban network at
national and Community level including links between the economically strongest cities and other urban areas
including small and medium-sized cities. This will require the making of strategic choices in identifying and
strengthening growth poles and,
link them in both
physical (infrastructure, information technologies, etc.) and human (actions to promote cooperation, etc.) terms.
Since these poles serve wider territories, including the immediate rural hinterland, they contribute to a sustainable
and balanced development of the Member State and the Community as a whole. In a similar way, rural areas
provide services to the wider society, for example, in the form of recreational opportunities and highly valued
landscapes. Focus should therefore also be put on the urban rural interface.

just as important, putting in place the networks that

Based on previous experience, there are a number of key principles in urban actions. First, the key partners in the
cities and local authorities have an important role to play in achieving these objectives. As mentioned above,
Member States may delegate responsibility to cities for urban development. This is particularly important where
proximity matters, for example, in order to respond to the challenges of a mostly local nature such as social
exclusion or lack of access to key services.

Second, the preparation of a medium- to long-term development plan for sustainable urban development is
generally a precondition for success as it ensures the coherence of investments and of their environmental
quality. This will also help to secure the commitment and participation of the private sector in urban renewal.
In general, a multi-disciplinary or integrated approach is needed. For area-based actions, for example, to promote
social inclusion, this requires that actions seeking to improve the quality of life (including the environment and
housing) or the level of services to citizens are combined with actions to promote the development of new
activities and job creation in order to secure the long-term future of the areas concerned. The new JESSICA
initiative is designed to promote and facilitate the development of financial engineering products to support
projects included in integrated urban development plans.

In general, integrated support services and programmes should have a focus on those groups which are most in
need, such as immigrants, young people and women. All citizens should be encouraged to participate in both the
planning and delivery of services.

2.2.

Support the economic diversification of rural areas, fisheries areas and areas with natural handicaps

Cohesion policy can also play a key role in support of the economic regeneration of rural areas, complementing
the actions supported by the new rural development fund (European Agricultural Fund for Rural Development —
EAFRD) (2). This complementary approach should seek to support the restructuring and diversification of the
economy in Europe's rural areas.

The synergy between structural, employment and rural development policies needs to be encouraged. In this
context, Member States should ensure synergy and consistency between actions to be financed by the ERDF,
Cohesion Fund, ESF, European Fisheries Fund (EFF) and EAFRD on a given territory and in a given field of activity.
The main guiding principles as regards the demarcation line and the coordination mechanisms between actions
supported by the different Funds should be defined at the level of national strategic reference framework/national
strategy plan.

(1) Thematic Strategy on the Urban Environment. COM(2005) 718 final.
(2) Council Regulation (EC) No 1685/2005. OJ L 277, 21.10.2005, p. 1.

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For cohesion policy, action in favour of rural areas or for areas with natural handicaps, including many island
regions, should contribute to the creation of new opportunities through the diversification of the rural economy.
This includes efforts to support the provision of a minimum level of access to services of general economic interest
in order to attract firms and qualified personnel and to limit out-migration. In this context, connectivity to the
main national and European networks is necessary. In addition, cohesion policy should support the endogenous
level, and
capacity of rural territories by promoting, for example, product marketing at national and global
favouring process and product innovation in existing economic activities.

Achieving the necessary critical mass to deliver services efficiently — including services for a healthy workforce
referred to above — is a particular challenge. Ensuring universal access to all services, particularly in very sparsely
populated areas, may be achieved by investing in development poles in rural areas (for example in small and
medium-sized towns) and by developing economic clusters based on local assets combined with the use of new
information technologies.

Many rural regions depend heavily on tourism. These regions require an integrated approach dedicated to quality,
focusing on consumer satisfaction and based on the economic, social and environmental dimensions of sustainable
development. Actions should take advantage of, and seek to preserve and develop natural and cultural assets which
can have important positive spin-offs by protecting habitats and supporting investment in biodiversity. The
integrated approach should aim to have a positive impact on the tourism sector,
the
people working in the tourism sector, visitors and the local population, as well as the natural and cultural heritage.

the local economy,

With regard to the fisheries sector, the economic restructuring of fisheries-dependent coastal areas and the smaller
islands is often a particular challenge for geographic reasons, and cohesion policy can play an important role as a
complement to the actions supported by the EFF.

2.3. Cooperation

Measures to promote cross-border, transnational, and interregional cooperation, including maritime cooperation
where appropriate, should complement the three priorities indicated above. As a consequence, closer cooperation
across EU regions should help speed up economic development and the achievement of higher growth. National
borders are often an obstacle to the development of European territory as a whole, and can restrict its potential for
full competitiveness. In the cross-border and transnational context, transport, water management and environment
protection are clear examples of challenges requiring a focused and integrated approach that goes beyond national
boundaries.
In terms of implementation, Member States may wish to examine the possibility of creating a
European Grouping of Territorial Cooperation to take on the role of managing authority for certain cooperation
programmes.

2.4. Cross-border cooperation

The aim of cross-border cooperation in Europe is to integrate areas divided by national borders that face common
problems requiring common solutions. Such challenges are faced by all border regions in the Union as a result of
infrastructure networks, fiscal capacity, and institutions.
the fragmentation of markets for labour and capital,

Though cooperation programmes should be tailored according to the particular situation faced by each border
region, it is important that an effort be made to concentrate the assistance on the main priorities in support of
growth and job creation.

Generally applicable recommendations for future cross-border cooperation are not always relevant owing to the
large diversity of situations. At the same time, in view of the obstacles created by borders, a useful starting point is
the improvement of existing transport and communication infrastructure and the development, where necessary, of
new links. These are pre-conditions for establishing or developing cross-border contacts.

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Cross-border cooperation should focus on strengthening the competitiveness of the border regions. In addition, it
should contribute to economic and social integration, especially where there are wide economic disparities on
either side. Actions include promoting knowledge and know-how transfer, the development of cross-border
business activities, cross-border education/training and healthcare potential and integrating the cross-border
labour market; and joint management of the environment and common threats. Where the basic conditions for
cross-border cooperation are already in place, cohesion policy should focus assistance on actions that bring added
value to cross-border activities: for example,
increasing cross-border competitiveness through innovation and
research and development; connecting intangible networks (services) or physical networks (transport) to strengthen
cross-border identity as a feature of European citizenship; the promotion of cross-border labour market integration;
cross-border water management and flood control; joint management of natural and technological risks.

Particular attention needs to be paid to the challenges and opportunities presented by the changing external
borders of the Union following enlargement. Here, there is a need to promote coherent cross-border actions
that encourage economic activity on both sides, and remove obstacles to development. To this end, cohesion
policy and the new European Neighbourhood and Partnership Instrument and, where appropriate, the new
Instrument for Pre-Accession, need to create a coherent framework for such actions.

2.5.

Transnational cooperation

In transnational areas there is a need to increase economic and social integration and cohesion. Transnational
cooperation programmes seek to increase cooperation across Member States on matters of strategic importance.

Support should therefore be given to actions which seek to improve the physical interconnection of territories (e.g.
investments in sustainable transport) as well as intangible connections (networks, exchanges between regions and
between the parties involved).

The actions envisaged include the creation of European transport corridors (particularly cross-border sections) and
actions for the prevention of natural risks (e.g. fire, drought and flood), water management at river basin level,
integrated maritime cooperation, promotion of sustainable urban development and R&D/innovation networks.

The map of the current zones for transnational cooperation has been modified to ensure that they create the
conditions for implementing basic structural actions. They have been drawn up taking account of territorial
coherence and functional criteria of a geographical nature, for example, sharing the same river basin or coastal
zone, belonging to the same mountainous area or being crossed by a major transport corridor. Other criteria, such
as history or institutional structures, or existing cooperation or Conventions, are also pertinent.

2.6.

Interregional cooperation

Interregional cooperation programmes should focus on the renewed Lisbon strategy: strengthening innovation,
SMEs and entrepreneurship, the environment and risk prevention. In addition, exchange of experiences and best
practices regarding urban development, modernisation of public sector services (such as health and government
using ICT) and the implementation of cooperation programmes as well as studies and data collection will be
encouraged. Interregional cooperation may also be supported within programmes for Convergence and Regional
competitiveness and employment. In addition, exchange of experiences and best practices regarding urban devel-
inclusion, relationship between cities and rural areas, and the implementation of cooperation
opment, social
programmes will be encouraged.