Opinion of the European Economic and Social Committee on the Impact and consequences of structural policies on EU cohesion
Date: 2007-01-18
Institutions: European Economic and Social Committee
Subjects: Structural Funds, economic and social cohesion, economic consequence, economic infrastructure, impact study, structural policy

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Opinion of the European Economic and Social Committee on the Impact and consequences of
structural policies on EU cohesion

(2007/C 93/02)

On 20 July 2006 the European Parliament decided to consult
the European Economic and Social
Committee, under Article 262 of the Treaty establishing the European Economic Community, on the Impact
and consequences of structural policies on EU cohesion.

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 7 December 2006. The rappor-
teur was Mr Derruine.

At its 432nd plenary session, held on 17 and 18 January 2007 (meeting of 18 January 2007), the European
Economic and Social Committee adopted the following opinion by 164 votes to two, with one abstention.

1. Conclusions and recommendations

1.1
This exploratory opinion is in response to the letter from
the European Parliament President of 20 July 2006, requesting
the EESC's input into the EP's report on the impact and conse-
quences of structural policies on EU cohesion.

1.2
The EESC points out that, as laid down in the Treaty
(Articles 2, 158 and 159), all policies are required to contribute
to the objective of cohesion, which must not be solely depen-
dant on structural policies. This message was underlined by the
European Council of March 2006.

In the Committee's view, cohesion should not be under-
1.3
stood solely in terms of GDP. It therefore calls for a ‘more repre-
sentative indication of cohesion [which should include] in addition to
GDP, parameters such as employment and unemployment levels, the
extent of social protection, the level of access to general interest services
etc.’

1.4 Measures taken to strengthen cohesion,
including its
territorial dimension, should be given more prominence in the
Lisbon Agenda national reform programmes and the Com-
munity Lisbon Programme, as well as in the Commission's
impact analyses and proposed integrated guidelines.

The Structural and Cohesion Funds effectively amounted
1.5
to an early incarnation of the Lisbon Strategy,
in all of its
dimensions: growth, cohesion, more and better jobs, environ-
mental sustainability, etc. They helped consolidate the European
social model.

1.6
The Funds have had an undoubted impact, helping the
least favoured countries/regions to catch up in terms of employ-
ment, growth and infrastructure; they created a leverage effect,
established the (still developing) principle of grassroots partner-
ship, helped to impose discipline on local authorities and to
raise the EU's profile.

1.7
Structural policy also bolsters the internal market by
means of the trade and jobs generated from the conception and
implementation of Structural Fund-based projects which, more-
over, would often never have come about without the catalyst
effect of EU intervention.

Despite this,

the EESC points out

1.8
the general
consensus that previously existed to develop structural policy
(instruments, appropriations, etc.) in tandem with the internal
market and EMU has broken down in recent years.

that

1.9
Over time, a zone known as the pentagon, taking in
London, Hamburg, Munich, Milan and Paris, has emerged,
comprising 20 % of the EU's surface area, 40 % of its popula-
tion and 50 % of its wealth, and has acted as a driving force for
the other EU regions. In light of recent and planned enlarge-
ments, we should consider developing other dynamic regional
hubs throughout the whole EU area.

1.10
Infrastructure would be needed to interconnect these
hubs and link up their urban centres and outlying rural areas.
However, budget cuts agreed under the financial perspectives
and the constraints imposed by the Stability and Growth Pact
make such modernisation more difficult.

The EESC believes that consideration should be given to
1.11
the budgetary criteria laid down by the Stability and Growth
Pact, and to their impact on the funding of trans-European
networks, and specifically on the missing sections, in view of
the fact that projects eligible for EU funding need to be co-
funded by national governments.

The Committee reiterates its proposal for the financial
1.12
engineering of the Structural Funds to be improved and calls for
an end to the practice of refunding unused EU budget appro-
priations to the Member States, thereby reducing their contribu-
tion.

1.13
The EESC repeats its call to the Commission to draw up
(1) proposals for organising ways of involving socio-occupa-
tional actors in structural policy, which would be binding on
the Member States and (2)
indicators on the consultation
process in the Member States. It believes that the Member States
should explain, in any case, how they organise feedback on how
the partnership principle is implemented in the context of the
monitoring committees.

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The EESC asks for the support of the European Parlia-
1.14
ment to ensure that this opinion is duly taken into account
when the Commission presents its EU budget reform document
in 2008/9 and in future reflection on the EU's future and the
contribution of regional policy.

In line with the conclusions of

the informal Council
2.6
meeting on territorial cohesion (3),
the territorial dimension
should therefore be incorporated in the Lisbon Agenda national
reform programmes as well as in the Community Lisbon
Programme. It should also be given greater consideration by the
Commission in both its integrated guidelines and its impact
analyses, which have so far focused primarily on competitive-
ness, to the detriment of other issues.

2. Cohesion in the Treaties

2.1
Back in 1957, the Treaty of Rome set the objective of
‘reducing the differences existing between the various regions and the
backwardness of
the less-favoured regions’. Amsterdam specified
‘balanced and sustainable development as one of the basic principles of
the European Community’. This is also laid down in Article 158:
‘In order to promote its overall harmonious development, the Com-
munity shall develop and pursue its actions leading to the strength-
ening of
its economic and social cohesion. In particular, the Com-
munity shall aim at reducing disparities between the levels of develop-
ment of the various regions and the backwardness of the least favoured
regions or islands, including rural areas’.

2.2
Article 159 stipulates that ‘Member States shall conduct
their economic policies and shall coordinate them in such a way as, in
addition, to attain the objectives set out in Article 158. The formula-
tion and implementation of the Community's policies and actions and
the implementation of the internal market shall take into account the
objectives set out in Article 158 and shall contribute to their achieve-
ment. The Community shall also support the achievement of these
objectives by the action it takes through the Structural Funds (European
Agricultural Guidance and Guarantee Fund, Guidance Section; Euro-
pean Social Fund; European Regional Development Fund), the Euro-
pean Investment Bank and the other existing financial instruments’.

2.3
At this point, it is important to emphasise that, as laid
down in the Treaty, all policies are required to contribute to the
objective of cohesion, which must not be solely dependant on
structural policies. This message was underlined by the Euro-
pean Council of March 2006 (1).

Before proceeding, it may be helpful to establish what is
2.4
meant by cohesion. This term is often understood in terms of per
capita GDP. However, in its opinion on The contribution of other
Community policies
the
Committee called for a‘more representative indication of cohesion
[which should include] in addition to GDP, parameters
such as
employment and unemployment levels, the extent of social protection,
the level of access to general interest services etc.’.

cohesion (2),

economic

social

and

to

2.5
The draft Constitutional Treaty broke new ground by
enshrining the territorial dimension of cohesion policy. This
aspect of cohesion has been neglected to date, despite the adop-
tion of a European Spatial Development Perspective (ESDP),
whose experience is,
it should be
updated under the German Presidency to take account of recent
and planned enlargements.

in fact, very instructive;

3. The purpose and nature of structural policies

3.1 When they drew up the Treaty of Rome in 1957, the six
founding members were aware that to achieve economic inte-
gration, the strategic coal and steel industries would have to be
restructured. This led them to establish the European Social
Fund (ESF) which aimed to mitigate the effects of such industrial
change by funding recruitment and training schemes.

3.2
The European Regional Development Fund (ERDF) was
set up in 1975, following the first wave of enlargement, which
saw the accession of a group of countries that were poorer than
the founding members, and following the oil crises and the
ensuing economic fallout. It was founded following a specific
request from the UK, which was then in the throes of major
industrial restructuring. Revised in 1988 (and further developed
in 1994), the ERDF was intended to supplement the ESF and
the EAGGF — Guidance section by providing financial aid to
less-developed regions through productive investment to create
and safeguard sustainable jobs, investment in infrastructure, aid
financing
for SMEs,
instruments, direct aid to investment and aid for local services.

technology, development of

transfer of

3.3
The mid 1980s were marked by the accession of young
democracies in need of strengthening. The EUs' political leaders
were keen for those countries to attain the same level of devel-
opment as the existing Member States and were prepared to
step up their financial solidarity accordingly by doubling appro-
priations for the Structural Funds (as well as for the EAGGF —
Guidance section, former Objective 5b). Economic and social
cohesion became a new Treaty objective and regional policy
expenditure was doubled in order to facilitate their convergence.
The idea that such catching-up would be achieved without
social dumping but by adhering to the Community acquis and
implementing regional development programmes involving the
social partners was central to their vision. It was also recognised
that the laissez-faire approach to market forces would not by
itself create the cohesion sought by the founding fathers and
that achieving such cohesion would necessitate public interven-
tion aimed at redressing the balance between the regions. From
1988 on, cohesion policy came into effect, with the aim of
reducing disparities between the levels of development of the
EU's regions.
It aimed to offset the tensions and disparities
arising from efforts at national level to comply with the rules of
EMU.

(1) Paragraph 70.
(2) OJ C 10 of 14.1.2004, p. 92.

(3) Presidency conclusions, EU Informal Ministerial Meeting on Territorial

Cohesion, 20/21.05.2005 (cf. §2.3 et seq).

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It should be clear from the previous paragraphs that the
3.4
Structural and Cohesion Funds effectively amounted to an early
incarnation of
its dimensions:
growth, cohesion, more and better jobs, environmental sustain-
ability, etc.

the Lisbon Strategy,

in all of

3.5
The Cohesion Fund was set up in 1994. Unlike the
ERDF, this fund is directed at countries rather than regions. It is
specifically aimed at countries whose GNP per capita is less than
90 % of the EU average and funds environment and transport
infrastructure projects.

3.6 When the European Commission was drawing up its
proposals on the 2007-2013 financial perspective, Commis-
sioner Barnier warned that given the increased disparities
following the 2004 enlargement, resources allocated to struc-
tural policy would need to amount to at least 0.45 % of EU
GDP, or cohesion would be jeopardised. In the end, expenditure
was fixed at 0.37 % of GDP (4) — a decision deemed unaccep-
table by the EESC. The governments were not willing to step up
their solidarity towards the new Member States.

3.7
This brief review of the past has shown that up until a
few years ago there was a general consensus to develop the
in
Structural Funds (in terms of their remit and their scale)
response to the challenges facing the EU (deepening of
the
internal market, single currency, enlargement). The EESC points
out that this consensus traversed all political groupings involved
in decision-making across the EU institutions. The breakdown
of
this implicit agreement puts in perspective all pompous
rhetoric on the importance of the ‘European social model’.

‘In Spain, GDP in 1999 is estimated to have been some
4.3
1½ % higher than it would have been without intervention, in Greece,
over 2 % higher, in Ireland, almost 3 % higher and in Portugal, over
4½ % higher. In addition, GDP in the new German Länder is esti-
mated to have been increased by around 4 % as a result of interven-
tion.’ (6)

It would be easy to play down the real impact of the
4.4
Structural Funds by attributing this success to economic condi-
tions, national policy direction, other EU sectoral policies etc.
However, the following findings support the theory that struc-
tural policy brings real added value in terms of cohesion and
convergence.

— ‘Each euro spent at the EU level by cohesion policy leads to further
expenditure, averaging 0.9 euros, in less developed regions (current
Objective 1) and 3 euros in regions undergoing restructuring
(current Objective 2).’ (7)

— With regard to Structural Funds overall, ‘The evidence suggests
that, on average, around a quarter of structural expenditure returns
to the rest of the Union in the form of increased imports, especially
of machinery and equipment. This 'leakage' is particularly large in
the case of Greece (42 % of expenditure) and Portugal (35 %).’ (8)

Despite this evidence, pointing to a gradual convergence
4.5
in the socio-economic performance of Member States, these
comments must be qualified by the fact that this trend is occur-
ring much more slowly at regional level.

4. Impact of the Structural Funds and cohesion

4.1
It is difficult to assess the impact of structural policies on
cohesion because of a gap in the Eurostat statistics on GDP and
on employment at NUTS-2 and NUTS-3 levels. However, there
is generally an interval, possibly of several years or even up to a
decade, between the point of investment co-financed by the EU
and the point when projects become operational and profitable.
This timescale issue does not mean, however, that the Structural
Funds are ineffective in the short term.

‘Between 1994 and 2001, growth of GDP per head in the
4.2
cohesion countries, even excluding Ireland, was 1 % a year above the
EU average [3 % as against 2 %], and the proportion of working-age
population in employment in all apart from Greece increased by much
more than the average. In Greece, on the other hand, as in Ireland,
growth of labour productivity was over twice the EU average over this
period and it was also well above average in Portugal.’ (5)

(4) Fourth Progress Report on Cohesion, COM(2006) 281, p.10.
(5) Third report on economic and social cohesion: A new partnership for
cohesion: convergence, competitiveness, cooperation (February 2004),
p. VIII.

4.5.1
‘FDI (Foreign Direct Investment) tends to go disproportio-
nately to the stronger rather than the weaker parts of the Union.
Within countries, FDI is generally concentrated in and around large
cities, especially national capitals, with very little going to lagging
regions’. (9)

4.6
Between 2000 and 2004, approximately 3 600 large-
scale projects were approved within the framework of cohesion
policy, including almost 1 600 involving the European Invest-
ment Bank (EIB). With a view to promoting cohesion and the
Lisbon/Gothenburg strategy the EIB intervenes in five specific
areas: economic and social cohesion, i2i (Innovation 2010 initia-
tive), trans-European networks, protection and improvement of
the environment, and support for SMEs. Its input is particularly
effective in large-scale high-risk projects (major infrastructure
projects, R&D, etc.). The EIB's method of funding innovative
programmes also generates a leverage ratio of between 1:3 and
1:6.

(6) Ibid, p. XIX.
(7) Community Strategic Guidelines, 2007-2013, COM(2005) 299, p. 8.
(8) Third report on economic and social cohesion: A new partnership for
cohesion: convergence, competitiveness, cooperation (February 2004),
p. XIX.
(9) Ibid, p. XIV.

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Another important point that should be made is that
4.7
structural policy is not merely limited to helping the EU's
regions and countries exploit their development potential by
investing in physical and human capital and technologies,
in
order to mitigate any negative effects of close economic or
monetary integration (common interest and exchange rates,
increased competition, etc. and the ensuing
liberalisation,
restructuring and redundancies);
it also bolsters the internal
market by means of the trade and jobs generated from the
conception and implementation of Structural
Fund-based
projects which, moreover, would often never have come about
without the catalyst effect of EU intervention.

As well as examining the financial element of structural

4.8
policy, we must also consider other effects of cohesion policy:

— a seven-year

financial

framework is established, which

provides a certain stability and enables planning;

— the grassroots partnerships that arise from Structural Fund

projects (though these need further development) (10);

— the discipline cultivated within local authorities when mana-

ging projects partially funded by the EU;

— projects carried out help raise the EU's public profile (even
though governments sometimes stand in the way of this by
‘forgetting’ to mention the source of (at least part of) their
funding).

5. A model ill-suited to an expanding Europe?

5.1 While over the last fifty years the European project has
seen only minor adjustments, today's Europe now bears little
resemblance to the Europe of 1957.

5.2
In the course of fifty years, more than twenty countries
have shown an interest in the EU project — often unappreciated
and discredited by its existing members — to the extent of
requesting membership. Following several waves of enlargement,
the EU's surface area has more than tripled and its population
has doubled. Its original uniformity (in terms of levels and terri-
torial distribution of socio-economic development) has been
diluted and its social, economic and territorial cohesion has
been eroded by the accession of generally poorer countries.

EU surface area

Year of enlargement

in km2 (000s)

% change from
previous enlargement

Average population
density of new
Member States

% difference in per
capita GDP in PPS
between the existing
and new Member
States

where per capita GDP
in PPS=100 before
the enlargement, the
new Member States
bring a change of …
%

1957

1 284

—

241,3

–

1973

1 641

+ 27,7

143,7

1980

1 773

+ 8,0

1986

2 371

+33,7

1995

3 243

+36,8

84,0

99,5

53,8

17,2

25,0

37,4

2,5

–

5,72

2,50

6,23

0,50

2004

4 297

+ 32,5

204,8

49,2

19,68

2007

4 646

+ 8,1

80,5

65,5

4,85

???

5 486

+ 18,1

87,0

??? (depends on date of accession)

EU-6

EU-9

EU-10

EU-12

EU-15

EU-25

EU-27

EU-29

NB. EU-29 = EU-27 + Turkey + Croatia

Sources:

— Economic data: Ameco (re per capita GDP in PPS )
— Geographic and demographic data: United Nations World Population Prospects, 2004
— Own calculations

(10) EESC opinion on The role of civil society organisations and cohesion policy,
OJ C 309 of 16.12.2006, p.126, and EESC opinion on Strategic guide-
lines for cohesion policy (2007-2013), OJ C 185 of 8.8.2006, p.52.

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As a result of various factors including its ‘historical heritage’, a pentagon of economic growth taking
5.3
in London, Hamburg, Munich, Milan and Paris has emerged as an economic hub comprising 20 % of the
EU-15 surface area, 40 % of the total population and generating 50 % of wealth. This backbone of Europe
incorporates 7/10 of the EU's decision-making power and over 85 % of its cities have good transport
links (11). This backbone is referred to as a pentagon.

Europe: the pentagon

United States: the 4 economic integration zones

Maps from European Spatial Planning, edited by Andreas Faludi, 2002 and available at:

http://www.planum.net/showspace/bookreview-esp_images.htm

(11) G. Baudelle, B. Castagnède, Le Polycentrisme en Europe, 2002, pp. 160-161.

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5.4 While their economic strength is only 5 % of the EU
total, the countries that joined the EU in 2004 have increased
the EU's surface area by 33 %. In this new context, the pentagon
alone cannot act as a driving force for the peripheral regions.
‘The concentration of economic activity in relatively strong regions can,
in the short term, bolster the EU's economic production. But in the
long term,
it may damage the production potential of the weakest
regions and reduce their ability to exploit their comparative advantages.
An excessive concentration of enterprise and population in certain
regions also goes against the objective of sustainable development. In
some of these regions this concentration can create congestion and put
great pressure on the environment, while in others, it can cause decline
and depopulation’ (12) (see also 4.5). Following the example of the
USA, where several economic hubs have developed, we should
promote the emergence of similar zones, spread evenly across
the EU, adopting what specialists refer to as polycentrism.

Furthermore,

across Europe outside

5.5
technological progress, globalisation and
mobility give rise to an increasing number of city-regions and
metropolitan areas
traditional
pentagon but comparable to it, such as Copenhagen-Malmö,
Dublin, Madrid, Vienna-Bratislava, Katowice and others. This
change of the European landscape also fosters new ambitions
and new challenges among regions. These ambitions and chal-
lenges will also (hopefully) progressively affect EU views and
policies (13).

the

5.6 While regional planning is not within the EU's remit —
given the subsidiarity principle — there is no doubt that mana-
ging the EU's territory is a shared responsibility. On this basis,
the EU-15 and the Commission drew up the European Spatial
Development Perspective (ESDP) which was adopted at
the
Potsdam Council of Ministers of 11 May 1999 and followed up
that same year
twelve
measures (14).

in Tampere with a programme of

duty to stress the importance of seriously tackling this problem,
failing which Europe is destined to slow down and fragment.

6. The key to success: modern infrastructure throughout

the whole of Europe (15)

6.1
Of course, this polycentric structuring of the EU (emer-
gence of major regional hubs that boost surrounding areas,
strengthened links between rural and urban areas), ensuring
renewed and stronger cohesion, is dependant on the upgrading
of infrastructure: transport, energy, telecommunications, etc.

6.2
Delays in the implementation of the 14 priority projects
identified in Essen (1994), particularly regarding the cross-
border sections and the drastic reduction in the TEN heading in
the 2007-2013 financial perspective (16) do not bode well for
the sustainable development and territorial cohesion of the EU.

However, the effectiveness of the Structural Funds in the
6.3
upgrading and interconnecting of infrastructure in the cohesion
countries and poorest regions, aimed at opening up the full
benefits and opportunities of the internal market,
is beyond
doubt.

6.3.1
The density of the motorway network in the four cohe-
sion countries increased from 20 % below the EU-15 average in
1991 to 10 % above in 2001. In the other Objective 1 regions,
progress (on a more modest scale) has also been made.

5.7
In line with Article 159 of the Treaty, the ESDP is aimed
at increasing the coordination of EU policies that have a spatial
impact, such as regional policy or certain sectoral policies (agri-
culture, transport, etc.).

Some modernisation of

6.3.2
the rail network across the
Union has occurred over the past decade, but the rate of electri-
fication of lines and conversion to double track has occurred at
much the same pace in the lagging parts of the EU as elsewhere,
so the gap remains large.

Identifying areas where the links between cities and
5.8
between the centre and the periphery need to be reinforced falls
outside the scope of this opinion. However, it is the Committee's

(12) DATAR (the French state secretariat for spatial planning), ‘European

Spatial Development Perspective’, 2002 (Unofficial translation).

(13) See also EESC Opinion on European Metropolitan Areas: Socio-
economic implications for Europe's future, July 2004, OJ C 302 of
7.12.2004, p. 101.

(14) It should be pointed out that some of these measures — including
some major ones — have never materialised, such as spatial impact
studies, and others have not been sufficiently followed through, such
as support for cross-border, interregional and transnational coopera-
tion (Interreg, whose budget allocation was revised downwards in the
course of agreement on the financial perspectives). Fortunately
though, others, such as setting up a European Spatial Planning Obser-
vatory Network (ESPON) have been implemented, although such work
remains undervalued.

6.4
In order to consolidate the 2004 and 2007 enlarge-
ments, it will be crucial to ensure that sufficient resources are
allocated to infrastructure linking the old and new Member
States, for four specific reasons:

— while EUR 21 billion was provided in loans by the EIB, the
World Bank and the EBRD (European Bank for Reconstruc-
tion and Development) for upgrading infrastructure to EU-
15 standards between 1990 and 2001, there is still a great

(15) For the sake of simplicity, we shall, where necessary, consider the
Cohesion Fund as part of the Structural Funds, though this is not tech-
nically correct.

(16) The EUR 20 billion proposed by the Commission was whittled down
to just over EUR 8 billion while the total cost of completing the 30
priority projects by 2020 was estimated in 2004 to be EUR 225
billion..

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need for investment in communications infrastructures (road
and rail). The investment needed was estimated at no less
than EUR 90 billion (at 1999 prices) (17);

criteria should be built into assessments of Structural Fund elig-
ibility and ex-post evaluations. It also reaffirms its support (20)
for
(Bristol
Accord (21)).

the goal of creating sustainable communities

— the new Member States are experiencing faster economic
growth than the majority of old Member States and with
increasing trade, their growth gives a knock-on boost to the
more stagnant old Member State economies;

— in return,

the new Member States will benefit

from

improved access to the internal market;

Investment

6.8
in infrastructure is complicated by the
budgetary constraints imposed by the Stability and Growth Pact
as well as by the ongoing effort necessitated by EMU member-
ship. The majority of these investments emanate from national
governments, with a smaller proportion coming from Structural
Funds and the EIB.

— ‘In the least developed regions and countries [particularly the new
Member States], international and interregional connections may
offer higher returns over the longer term in the form of increased
business competitiveness and also facilitate labour mobility (18).’

6.9 While 78 % of the EU's population now lives in cities
and towns, it is important not to lose sight of the specific needs
of rural areas and ensure that they do not lag behind.

The redeployment and upgrading of this infrastructure is
6.5
in the
a key issue for the new Member States given that
COMECON era,
infrastructure converged
towards Moscow; between 1993 and 2003, trade with the EU-
15 increased threefold to the extent that it now represents the
majority of their trade, and their infrastructure is below EU-15
standards.

the bulk of

their

6.6 With regard to energy (19), there is a clear need to deal
with ‘insufficient
investments in relation to increased transmission
demand and distances. The interconnection of both electricity and gas
grids throughout Europe has advanced, but important structural bottle-
necks exist between Member States.’ To this end, the European
energy markets observatory which will be set up in 2007 could
provide useful pointers for the way forward.

In the case of electricity,

6.6.1
‘the period of overcapacity is
ending and investments of 600-750 GW of power generation capacity
are needed until 2030 in order to meet rising electricity demand and
replace ageing plants. The need for investment in additional generation
capacity, in particular for peak load, could be partly counteracted by
fully interconnected grids’.

6.7
Generally, the upgrading of infrastructure poses a chal-
lenge in terms of environmental sustainability. The EESC reiter-
ates its view that fully comprehensive sustainable development

6.10
The EU endeavours to support such areas through ad
hoc programmes. It has allocated more than EUR 60 billion to
rural development between 2000 and 2006. However, as the
Court of Auditors has reported (22), the use made of these funds
is far from ideal. It has pointed out that programmes do not
sufficiently take into account the characteristics of the geogra-
phical area supported. The Court also pointed out shortcomings
regarding the selection and targeting of projects, as well as insuf-
ficient evaluation of their results.

7. Strengthening the links between rural and urban areas

7.1
Remote areas are particularly prone to an ageing popula-
tion, as their remoteness from centres of activity leads young
people and skilled workers to move away to cities. This rural
exodus risks accelerating the decline of such areas. Furthermore,
large cities in which the bulk of resources are concentrated
encounter particular difficulties and show disparities within the
cities themselves, between neighbourhoods and/or social groups.
‘Almost all cities where unemployment is at a level of 10 % or higher,
have certain areas within which unemployment rates are at least double
the city average’ (23). The Commission rightly identifies four key
issues requiring attention: transport, accessibility and mobility;
access to services and amenities; the natural and physical envir-
onment; and the cultural sector (24).

(17) The investment required over the coming years to complete the TEN-
Ts will amount to approximately 1.5 % of the region's expected GDP.
Current levels of investment, which are running at EUR 2 to 3 billion
per annum, will have to be raised to some EUR 10 billion by 2005-
2010 in order to cope with demand pressures and to provide services
within the EU commensurate with economic growth. In the longer
term, the Commission has estimated the total cost of upgrading trans-
port networks to an acceptable level at EUR 258 billion. (EIB, ‘The
development of TENs: perspectives’, 2001).

(18) Cohesion Policy in Support of Growth and Jobs: Community Strategic

Guidelines, 2007-2013, COM(2005) 299, p. 15.

(19) EESC opinion on The energy supply of the EU: a strategy for an optimal
energy mix (exploratory opinion), OJ C 318 of 23.12.2006, p. 185.

(20) EESC opinion on a Thematic Strategy on the Urban Environment, OJ C

318 of 23.12.2006, p.86.

(21) Bristol Accord, December 2005 (http://www.communities.gov.uk/
pub/523/PolicyPapersUKPresidencyEUMinisterialInformalonSustaina-
bleCommunities_id1162523.pdf).The Bristol Accord defines eight
characteristics of a sustainable community: 1) active, inclusive and
safe; 2) well run; 3) well connected; 4) well served; 5) environmentally
sensitive; 6) thriving; 7) well designed and built and 8) fair for
everyone.

(22) See press release ECA/06/20.
(23) COM(2006) 385 final, p.11.
(24) European Commission, Cohesion Policy and cities — The urban contribu-

tion to growth and jobs in the regions, COM(2006) 385 final.

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The EESC would also stress here the key role of general
7.2
interest services, and particularly general interest social services,
in ensuring economic, social, territorial and inter-generational
cohesion. It reiterates its call for a framework directive on the
organisation of
in addition to sector-specific
directives (25).

these services,

the budgetary allocation and the growing influence of globalisa-
tion, we must come up with more effective and modern ways of
funding our economic and social model and restore the public's
confidence (entrepreneurs, workers, the unemployed, etc.) in the
EU's ability to regain control of its destiny. To this end, the
recent JASPERS, JESSICA and JEREMIE initiatives are a step in
the right direction.

8. The crucial need for civil society to get behind the

projects

8.1 While the Commission acknowledges the need to involve
socio-occupational actors in structural policy, emphasising that
this plays a decisive role in ensuring better adoption of this
policy at local level, the EESC regrets that it does not present
any proposals for organising ways of doing this, which would
be binding on the Member States.

In a previous opinion (26),

The Structural Funds are currently limited to the granting
9.2
of subsidies.
the EESC proposed
revising their financial engineering to create a multiplier effect
through the involvement of the European Investment Fund and
the EIB. It proposed transforming these subsidies into financial
products to create a leverage effect. For example, one euro set
aside to guarantee a risk capital loan would make it possible to
finance five to ten euro of a SME's investment. This system has
three advantages:

— it encourages public/private sharing of

the financing of
investments regarded as risky by the traditional financial
partners;

8.2
The Committee calls for guidelines to be drawn up in
future for the conduct of consultations on Member States' stra-
tegic and programming documents.

— it gives beneficiaries more responsibility than would granting

non-refundable subsidies;

The Committee feels that

8.3
the Member States should
explain how they organise feedback on how the partnership
principle is implemented in the context of
the monitoring
committees.

The Committee believes that

8.4
the Member States and
regional authorities should make greater use of the potential
existing within civil society organisations by involving them in
the preparation of promotion plans. Grass-roots
initiatives
should also be supported by allocating adequate financial
resources for this purpose from the funds available for the
promotion of and information about the Structural Funds.

8.5
In the case of cross-border or interregional programmes,
it would also be worth promoting joint consultations and socio-
occupational partnerships which are also cross-border or inter-
regional.

9. Future funding innovations

9.1
Given, on the one hand, the challenges facing a larger
EU, with widened external borders and increasingly diverse
regions in terms of characteristics and economic performance
and, on the other hand, the entirely unjustified meagreness of

(25) See EESC opinion on Services in the internal market, OJ C 221 of
8.9.2005, p.113, opinion on The future of services of general interest, OJ C
309 of 16.12.2006, p.135, and more specificially in the opinion being
drawn up on Social services of general interest in the European Union.

— it increases the number of beneficiaries, despite the limited

budget.

9.3
It would also be worth considering the possibility of
utilising unused appropriations of an already meagre EU budget
rather than refunding the Member States. These appropriations
represent only a very small percentage of the annual budget.
However, in this way, an additional EUR 45 billion could be
allocated during the first half of
the Lisbon timeframe to
common interest projects.

EU budget surpluses (in million EUR)

2000

2001

2002

2003

2004

2005

Total for 2000-2005

11 613

15 003

7 413

5 470

2 737

2 410

44 646

Note: surpluses include both unused appropriations (including special reserves)
and additional revenue.
Source: European Commission, IP/06/494

(26) EESC opinion on Strategic guidelines for cohesion policy 2007-2013, OJ C

185 of 8.8.2006.

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It should be clear from the previous paragraphs that
9.3.1
even a fraction of these appropriations could speed up comple-
tion of the missing links — the Achilles heel of the trans-Euro-
pean networks — thereby interconnecting the Member States,
eliminating bottlenecks, accelerating European integration and
promoting increased intermodality.

9.3.2
Another tranche could serve to swell the coffers of the
European Globalisation Adjustment Fund (EGF). This instru-
ment, which does not have its own budget, helps workers who
have been made redundant and who are ‘victims of globalisa-
tion’, and complements the Structural Funds. Unlike those
instruments that necessitate long programming periods for simi-
larly long-term projects, the EGF is a short-term instrument.
Although the Council did approve it, it halved the initial budget
allocation proposed by the Commission (the EGF receives

EUR 500 million). Given this, it is hard to have confidence in
the effectiveness of this scheme which many see as a marketing
tool. The eligibility threshold should be revised downwards by
reducing the number of workers made redundant required to
trigger the fund.
(Basing this calculation on the US Trade
Adjustment Assistance Programme, dating back to 1962, the
fund's initiators failed to realise that unlike the US economy
which is based around large-scale corporations, the EU is a
SME-based economy (27).)

9.3.3
These changes are all the more important given that
closer spatial integration of the EU risks intensifying competi-
tion between regions leading to restructuring and therefore to
job losses, which could create a public perception that the EU is
bad for employment.

Brussels, 18 January 2007.

The President

of the European Economic and Social Committee

Dimitris DIMITRIADIS

(27) Thus, in the USA, the 100 biggest companies generate 74 % of GDP,
while in Europe they generate only 34 %. In the non-financial business
economy, SMEs (which employ fewer than 250 people) represent
99.8 % of companies (of which 91.5 % are micro-enterprises with
fewer than 9 employees!) and 67.1 % of total employment.