Regional policy: expectations and reality

1. Regional policy: expectations and reality Dr. Iván Illés Senior scientific adviser, Centre for Regional Studies, Hungarian Academy of Sciences Professor, University of Budapest, ELTE illesi@rkk.hu

2. Economic development in Central and Southeast Europe 1989-2003

6. Specifics of EU structural policy in the new member countries 2004-2006 1. • The substantially larger share of Cohesion Fund (35%), than in the former „cohesion countries”, Spain, Greece, Portugal and Ireland (16,7%) → lightening of budgetary burden, but less freedom in allocation and decisionmaking; • No „regionalisation” of structural policies. One single regional operative program for the whole country (and more sectoral ones), one single Managing Authority in the capital city

7. Specifics of EU structural policy in the new member countries 2004-2006 2. Justifications (of the Commission) for this change: • managment capacities in the regions are weak and unprepared; • Experiences of pre-accession funds are mixed and not very promising; • The time left from present programming period is too short and the means are moderate • Simplicity • The main priority is now the highest possible spending

8. Absorption of the pre-accession funds in the candidate countries 2000-2003

9. Specifics of EU structural policy in the new member countries 2004-2006 3. Some possible adverse consequences: • disappointment and frustration in the regions; • political set-back for decentralisation, further delay in their preparation • It means emptying and divesting regional policy from its functions, since all mesures should be included in the relevant sectoral OPs • No guarantee for the priority of backward regions, threat of further increasing regional disparities.

10. Specifics of EU structural policy in the new member countries 2007-2013 1. New member states took part in the preparations as equal partners (substantially larger allocations). Serious challenges: • Lisbon-Gotheburg objectives • Constraints of total contributions (1,14% oftotal GNI versus 1,27% of former agreements) and of those for cohesion policy (0,41% versus former 0,46%) • Arguments of former main beneficiary countries with „statistical effects” • Debates on capping and absorption capacity

11. Specifics of EU structural policy in the new member countries 2007-2013 2. The capping of allocations over 4% of national GDP as consideration of absorption capacity • while eligibility and allocation is measured by „purchasing power standard”, absorption is measured by exchange rate. • Several „statistical phasing-out” regions of EU15 (which are in fact non-eligible any more) receive substantially higher support than regions in the new member states • Most new member countries rórecent record of public investment is sufficient for co-financing

13. Specifics of EU structural policy in the new member countries 2007-2013 3. • Hungary would receive substantially more support, if applying the „Berlin formula” used in the case of former member countries. • If the share of new member countries is regarded to be fix (about 50%) then Hungary is „benefitting” from the uce of the „4% of the GDP” method, having relatively higher GDP within the group. • Nevertheless, we regard this total reverse of allocation methods as abandoning the basic principles of cohesion policy of the EU which could affect the credibility and integrity of EU policies in the future.