This paper examines the European Union's regional policy, tracing its evolution from the establishment of the European Regional Development Fund in 1975 through the 2007–2013 Cohesion Policy framework. It analyzes the rationale for redistributing resources from wealthier to poorer member states and regions, discusses the three structural fund objectives—convergence, competitiveness, and cooperation—and considers the impact of EU enlargement on regional spending priorities. The paper also explores tensions between supranational policymaking and national implementation, the principle of additionality, and the role of sub-national governments in partnership governance. Ireland's economic transformation is highlighted as a model outcome of effective regional investment.
The European Union (EU), although among the most affluent regions of the world, is marked by significant income inequalities at the internal level and unequal opportunities between its different regions. The inclusion of 12 new member nations since 2004—whose incomes were far lower than the EU average—has widened these disparities. Establishing a regional policy therefore helps transfer resources from wealthier to poorer areas. It is not only a mechanism for financial cohesion but also a powerful force for economic integration. Forging a regional policy within the EU fosters solidarity, as the policy is targeted at benefiting citizens and areas that are economically and socially disadvantaged relative to EU averages. It also ensures cohesion, since narrowing income and wealth differences between poorer nations and regions generates positive benefits for everyone, including those who are better off.
There are significant differences in levels of affluence both between and within member states. The ten most dynamic areas of the EU recorded a level of prosperity, measured by GDP per capita, that was almost three times higher than that of the ten least developed areas. The most prosperous areas are all urban centers, including London, Brussels, and Hamburg (Overview of the European Union Activities Regional Policies, 2007).
The vibrant impact of EU membership, combined with an active regional policy, has produced tangible results. Ireland is a compelling case in point: its GDP, which stood at around 64% of the EU average when it joined in 1973, is now considered one of the highest in the entire Union. With regard to the post-2004 priorities, a central aim of regional policy has been to raise living standards in the new member states closer to the EU average as quickly as possible. The EU has maintained a regional development policy since 1975, redistributing funds from wealthier member states to poorer nations and regions through its structural funds. Spending from these funds accounted for nearly one third of the EU budget during the period 2000–2006. Among the larger beneficiaries were Greece, Spain, Portugal, Ireland, Southern Italy, and eastern Germany. The EU used the accession of these member states as an opportunity to reorganize its regional spending, with new rules applicable for the period 2007–2013 (Overview of the European Union Activities Regional Policies, 2007).
During this period, regional spending was projected to rise to 36% of EU budgetary provisions, which in cash terms amounted to more than 308 billion euros over seven years. The primary objective was to promote growth-enhancing conditions for the overall EU economy, with a focus on three objectives: convergence, competitiveness, and cooperation. The new approach became known as Cohesion Policy. The accession of comparatively poor new member nations meant that the principal concentration in the forthcoming period would be on them and on areas of other EU states with special needs. Based on prevailing estimates, the 12 newly admitted nations were set to receive 51% of net regional spending between 2007 and 2013, despite representing less than a quarter of the total population (Overview of the European Union Activities Regional Policies, 2007).
The requirement for a European regional policy evolved alongside the integration process and the successive enlargements of the Union. The Werner Report of 1971 supported the move toward economic and monetary union by 1980 and observed that persistent regional disparities within the EU would undermine the achievement of the European Monetary Union. There was also concern that deeper integration might itself generate wider disparities between central and peripheral areas. It was therefore considered necessary to implement a regional policy that would promote convergence among European regions and ensure that EU integration would not leave some regions behind. These concerns intensified with the accession of the Republic of Ireland and the United Kingdom in 1973, which was shortly followed by the establishment of the European Regional Development Fund (ERDF) in 1975. The European Community viewed its regional policy not as mere transfer payments but as a tool to strengthen the economic base of recipient areas and to foster regional convergence (Bouvet, 2006, pp. 3–4).
Regional policy—created in acknowledgment of the economic disparities between the EU's central and peripheral areas when the organization was known as the European Community—has grown in political and economic significance since 1975. From the outset, regional policy was designed not only to reduce regional economic variations but also to strengthen regional and national support for European integration more broadly and to foster cohesion both within the EU and among its regions. During the first decade of the Regional Policy, the EU provided funds directly to member-state governments, which retained considerable discretion over how to use the money within certain constraints. The Commission functioned essentially as a funding body.
Reforms introduced in 1988 established the principle of partnership in governance (Wilson, 2000, p. 34). These reforms created a strongly unified regulatory framework across very diverse national contexts by requiring the Commission, national governments, and sub-national authorities to cooperate in designing and implementing EU regional programs over both short and long terms. This restructuring was a comprehensive endeavor to bring regional authorities in as active—if not equal—partners alongside the EU and national governments, with the aim of reducing regional disparities throughout Europe. It also sought to make the Commission's actions more transparent in member states, responding to concerns about accountability and the EU's democratic deficit. Accordingly, the Commission moved to involve local actors in decision-making relevant to regional development. The reforms were also designed to ensure that national governments used EU money as a supplement to, rather than a replacement for, national development funding. In the later 1990s, this became known in EU terminology as the problem of "additionality"—EU regional funding must always add to national funds, never substitute for them (Wilson, 2000, p. 34).
Regional policy differs from other policy areas on the European Community's social agenda in several respects. For instance, it is the only policy that requires funds to be disbursed directly to beneficiaries, and the only one for which the EC created a new institution, the Committee of the Regions. In many ways, however, regional policy conforms to the profile of other social-agenda policy areas: it was built to meet social needs and connects the EC with its citizens. A successful regional policy therefore enhances the social legitimacy of the EC. The framing of EC regional policy serves multiple objectives—political, economic, and social. Its origins lie in the economic thinking of the 1950s and 1960s, as well as in the political bargains struck during negotiations for the EEC. National economic planning was widely accepted in postwar Europe, with French indicative planning providing an influential model of government and private-sector cooperation in modernizing the economy. Many European economists believed that public policy and public money could be combined to create a more rational and equitable economic system (Springer, 1994, p. 72).
The regional policy of the EU is founded on the principle of financial solidarity between member states, whose contributions to the Union budget are redistributed to less affluent regions and social groups. For the period 2000–2006, these transfers accounted for one third of the EU budget, amounting in absolute terms to 213 billion euros. Of this total, 195 billion euros were disbursed through the four Structural Funds and 18 billion euros through the Cohesion Fund. The significant contribution of the Structural Funds lies in their financing of multi-annual programs that constitute strategies developed in partnership among the regions, the member states, and the European Commission. The primary objectives of these programs are to: (i) develop infrastructure such as transport and energy networks; (ii) extend telecommunications services; (iii) provide assistance to firms and training to workers; and (iv) disseminate the tools and knowledge of the information society (EU Regional Policy after Enlargement, 2003).
The primary instrument of EU regional policy—the Structural Funds—is organized around three objectives. The first concerns extending progress and structural adjustment in areas where growth has been considered insufficient. The second supports the economic and social conversion of areas encountering structural problems. The third assists the adaptation and modernization of education, training, and employment policies and systems. NUTS 2 regions eligible for Objective 1 are those with a GDP per capita below 75% of the EU average. The Cohesion Fund was required to provide an additional 18 billion euros over the 2000–2006 period for countries such as Greece, Ireland, Portugal, and Spain.
"How enlargement shifted regional spending allocation"
"National implementation dynamics and consensus-building"
"State aid rules and legal-administrative diversity"
For effective functioning of regional policy, the need of the hour is a Director General who possesses a good understanding of cohesion policy and broad experience in financial, budgetary, and administrative management. Experience in project and program preparation and management would be an additional asset, as would superb communication and negotiation skills. An established capacity to manage, coordinate, and motivate a team is essential, and a good working knowledge of both English and French would be advantageous (DG Regional Policy, 2004, p. 31).
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