Third progress report on cohesion - towards a new partnership for growth, jobs and cohesion

This report records the progress made and trends that have emerged in the regions of the EU since the third cohesion report in February 2004. Noting existing regional economic disparities in the enlarged EU, it sketches the future direction of cohesion policy after 2006, addresses the targets for growth and employment and describes the results of the 2004 mid-term assessment of the Structural Funds.

ACT

Commission Communication of 17 May 2005 - Third progress report on cohesion: Towards a new partnership for growth, jobs and cohesion [COM(2005) 192 final - Not published in the Official Journal].

SUMMARY

Shortly after the adoption of the third report on economic and social cohesion in February 2004, the EU expanded from 15 to 25 Member States. Two years later, in March 2005, the European Council launched an initiative for growth and employment, to revitalise the Lisbon strategy following its mid-term review. The third progress report on cohesion continues this process by picking up on a number of the subjects identified in the 2004 Structural Fund mid term review, which are important for regional and cohesion policy.

The report covers the following subjects:

• economic and social disparities in the enlarged EU;
• EU cohesion policy and the Lisbon agenda during the 2000-06 period;
• the future shape of cohesion policy and targets for growth and employment.

Economic and social disparities in the enlarged Union

Disparities in per-capita GDP (based on purchasing power parity) between the 25 EU Member States (EU-25) are considerable. In 2003, per capita GDP levels in the EU ranged between 41% of the EU average in Latvia and 215% in Luxembourg. In 2002, the most recent year for which regional data is available, regional per-capita GDP levels ranged from 189% of the EU-25 average in the ten richest regions to 36% in the ten poorest.

Over a quarter of the population of the EU-25 live in 64 regions whose per-capita GDP is less than 75% of the Community average. In the new Member States, this represents 90% of the total population (with the exception of the Prague, Bratislava and Budapest regions and all of Cyprus and Slovenia). In the pre-enlargement Member States (EU-15), 13% of the population lives in such regions (geographically concentrated in southern Greece, Portugal, Spain and Italy, and in Germany's new Länder).

The employment rate in the EU-25 averaged 62.9% in 2003. This is well below the Lisbon agenda target of 70% by 2010 (and 67% by 2005). To meet the 70% target, 22 million extra jobs are needed (7 million in the new Member States, a quarter more than at present). In total, 200 of the EU's 254 regions are below the 70% target, and almost 15% of the EU population live in regions where employment is under 55%. In general, employment rates remain low even in most well-off regions.

Differences among the EU-25 in terms of productivity are marked. In Poland and the three Baltic countries, for example, productivity levels are at 30% of the Community average, whereas Luxembourg and Ireland are at 150%. At one end of the scale there are 15 regions where productivity is under 25% of the Community average, while at the other end, regions with above-average per-capita GDP have productivity that is also above the Community average.

In the 1995-2002 period, the regions with the highest GDP growth were mainly in the countries with high growth (Ireland, the Baltic countries, Slovakia and Poland). In most Member States, regional growth rates vary considerably, for example the new Member States, the UK and Finland.

In the EU-25, 10% of the population live in the poorest regions, accounting for just 2.2% of total GDP in 2002 (as against 1.5% in 1995). By contrast, the 10% living in the richest regions accounted for 18.3% of GDP (compared with 18% in 1995). Internal disparities within Member States are most pronounced in Hungary, but remain significant in the Czech Republic, Slovakia, the UK and Belgium. The countries with the smallest disparities were Greece, Germany, the Netherlands, Finland and Sweden.

Overall, internal disparities in the EU are down since 1995. However, the drop has been faster between Member States than between regions, although regional disparities are also falling.

EU cohesion policy and the Lisbon agenda in 2000-06

The 3rd progress report clearly shows a link between the renewed Lisbon agenda and cohesion policy spending priorities. We are witnessing the increasing alignment of Structural Fund programmes with the Lisbon objectives, affecting more than half of spending under some programmes. This tendency seems most marked in the regions that are relatively richer and is weaker in less-developed regions.

In 2004, the mid-term review of the Structural Funds programmes, and the distribution of the performance reserve, enabled the different programmes for the EU-15 to be adapted in the current programming period. This provided the opportunity to target funding more towards the priorities of the European Employment Strategy and the Lisbon objectives.

The mid-term review showed that:

• many Member States had used the performance reserve to channel more funding to knowledge economy and enterprise initiatives;
• Objective 1 is still focussing on traditional projects (e.g. transport and other infrastructure development);
• some Member States with substantial Objective 1 areas were concentrating on research and innovation;
• measures to promote growth and competitiveness seem to have increased, especially under Objective 2;
• education and training continue to occupy an important place in most Objective 1 and 2 programmes.

The future direction of cohesion policy and targets for growth and employment

The third cohesion report established the basic principles for reforming regional and cohesion policy for the 2007-13 period. In July 2004, following this report, the Commission presented new legislative proposals for the Structural Funds and related instruments.

On 22 and 23 March 2005, the European Council launched a growth and employment initiative, designed to revitalise the Lisbon strategy after its mid-term review. The Council conclusions made clear how important cohesion policy was for the success of the Lisbon strategy. The Council recommended that:

Community resources, including cohesion policy, be mobilised to promote the three dimensions of the Lisbon strategy - economic, social and environmental;

• regional and local stakeholders engage more with the strategy and actively participate in its implementation;
• greater collaboration be established between the Community Funds and those of the European Investment Bank (EIB) on R&D projects;
• the general level of state aid be reduced;
• more infrastructure investment be made;
• more proactive employment policies be pursued to increase job creation;
• Member States draw up national reform programmes for growth and employment, in consultation with regional and national stakeholders.

To take account of the areas where cohesion policy and the Lisbon strategy can combine to good effect - and to make them stronger - the Commission has also proposed a more strategic approach for 2007-13, targeted on growth and employment. As part of the general legislative framework proposed for the next period, these "strategic guidelines" will serve as a basis for a national strategic reference framework laying down the priorities for Member States and regions. At the same time, they will improve consistency with the broad economic policy guidelines and the European Employment Strategy.

RELATED ACTS

Commission Communication of 18 February 2004 - Third report on economic and social cohesion [COM(2004) 107 final - Not published in the Official Journal].

Proposal for a Council Regulation of 14 July 2004 laying down general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund [COM(2004) 492 final - Not published in the Official Journal].

Commission Communication of 5 July 2005 - Cohesion policy in support of growth and jobs - Community Strategic Guidelines 2007-13 [COM(2005) 299 final - Not published in the Official Journal].

Last updated: 24.10.2005