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Johannes HAHN

Commissioner for Regional Policy

Building a common future as incentive for economic growth

Nicosia, 21 July 2011

Distinguished guests, Ladies and Gentlemen,

It is a pleasure for me to address you today. I know that my visit to the island is saddened by the tragic event that happened last week. This morning I have visited the devastated area, and please allow me to tell you that in my capacity as Commissioner for Regional Policy, I have seen quite a few tragic sites after catastrophes, but none as heavily hit as this one. I would therefore like to use this occasion to express my sincere condolences to the families of the thirteen people who have died such an untimely death. And to the many persons injured, of whom one is in a critical and some are in serious condition – let me send my most heartfelt wishes for their recovery.

I realise this is a difficult moment for Cyprus. But this is a moment as well where Cyprus will realise that it is member of the European family. And if one member of the family is in trouble, we should and will stand ready to help. That is what is exactly happening right now. This morning I have met with the experts from the EU Civil Protection Mechanism, coming from various EU Member States, who are here to make their first assessments and see how Cyprus can best helped in the short and medium term. I want to thank them, but also the Cypriot emergency services, who have done a great job under very difficult circumstances.

But the European family is showing its great spirit as well, as some of the help comes from members which themselves find they are going through difficult times, but still stand ready to offer support. This the case for Greece, which is shipping over emergency power generators today. Let me express my gratitude for this, on behalf of the European Commission. I think this is a sign solidarity in the EU exists.

From the recent tragedy, let me now move to the longer-standing Cyprus issue. During his visit to Cyprus in 2009 President Barroso recalled the underlying rationale for the founding of the European Economic Community more than 50 years ago. It was not just the wish to achieve more economic prosperity; it was the deep desire to achieve reconciliation and lasting peace on the continent. The European Union is built on reconciliation, both human and political reconciliation. What has been achieved in Europe after the Second World War can be achieved in Cyprus now provided there is a clear political will and a spirit of reconciliation in both communities on the island. Seven years after Cyprus' accession to the European Union, a settlement is overdue. It is time for reconciliation; it is time to put an end to one of the oldest conflicts on European soil.

There is no conflict that cannot be ended, when people believe in a common future. It is essential to build trust between Greek Cypriots and Turkish Cypriots in every day life, to reach out the hand of reconciliation between people and thus jointly overcoming the shadows of the past.

Europe needs a united Cyprus. The EU will continue to support strongly a settlement and to foster reconciliation and confidence building measures on the island.

The meeting of the UN Secretary-General on 7 July in Geneva with the leaders of the two communities has opened the perspective of a successful conclusion of the long lasting negotiations on a comprehensive Cyprus settlement. Earlier this week the two leaders have agreed on a series of 19 meetings until 21 October before they will meet again UNSG Ban Ki-moon in New York.

I strongly believe that the cost of 'no solution' is much higher than the cost of a solution, higher than the cost of the compromise. The window of opportunity is here; I hope the leaders will find the necessary strength and courage to agree to compromise.

I have no doubt that the EU will mobilise all resources available to make reunification sustainable for both communities.

Cyprus will then be in a position to fully enjoy all benefits of EU Membership throughout the entire island. Turkish Cypriots will enjoy the full rights of EU citizens; they have this status, in principle, already now, but they will only fully benefit from it after a settlement.

In this period of economic turmoil across Europe, a Cyprus settlement will give a very welcome boost to the economy to help recover from the global financial crisis. The whole island will be part of the EU's internal market which is an important incentive for economic growth. The importance of reunified Cyprus as a whole in the EU will increase.

As Commissioner for Regional Policy, I am responsible to ensure cohesion and solidarity with the poorest regions in the Union. My duty is to make sure that no regions in the EU lag behind. EU funding lays foundations for self-sustained growth, also in the poorer regions, and will thus help bridge welfare gaps within the island.

And let me tell you this: a Cyprus settlement will also bring substantial financial benefits from the EU budget. This is thanks to how EU-funds are allocated – favouring poorer regions through much higher aid-intensity. A settlement would imply that the overall GDP of a united Cyprus would remain under the magic threshold of 90 percent in relation to the EU average, making it eligible for support from the EU Cohesion Fund. A 'no solution' by contrast would place the Republic of Cyprus among the more developed regions of Europe. With a GDP per head of the population of 93.5% of the EU average it would stand to lose its allocation from the cohesion fund. This would henceforth represent a considerable drop in EU allocations after 2013.

Let me now move on to speak about the main features of the future cohesion policy, that is cohesion policy as of 2014. As you might know, the Commission has tabled three weeks ago its proposal on the next multiannual financial framework – that is framework for the EU budget for seven years from 2014 to 2020.

This is now the starting point for negotiations with the Member States and the European Parliament. These debates will not be easy and will most likely be concluded during the first Cypriot EU Presidency, in the second half of next year. This will be a big challenge and is going to be a top priority for your Presidency.

Let me, in this context, also plead for the Cypriot government's support on the own resources proposal. With own resources for the EU budget much pressure will be taken out of national debates, regarding a Member State's status as a net contributor or net recipient of EU funding. In particular Small Member States could benefit from a greater independency of the EU budget.

I am pleased to say that the new Cohesion policy comes out reinforced from the Commission's proposal for the 2014-2020 budget. Its main features are the following:

  • The Commission confirms that cohesion policy is a policy for all the regions [regional policy - investment] of the EU.

  • It is a policy with a budget worth 336 billion EUR or a third of the overall EU budget. The marginal reduction (-4%) on the current budget is due to the success of the policy: more than 35 million people are better off.

  • The focus of the policy remains clearly on the poorest regions and Member States.

  • A fair system for transition regions (75-90) replaces the current phasing out and phasing in. This is a crucial part of the proposal since it defines what kind of policy we are running. This is a modern investment policy, not a charity policy.

  • The proposal consolidates regional policy for the more developed regions.

The Commission announces – and I have very much pushed for this - that the resources available need to be spent paying increasing attention to performance and results. That is why we propose:

  • A clear focus on few priorities of EU interest, and in particular on (1) energy efficiency and renewable; (2) innovation in SMEs; and (3) employment, education, and poverty alleviation;

  • More coherence and coordination with other policies through a Common Strategic Framework;

  • A more transparent agreement with the MS and the regions with the establishment of the Partnership Contract;

  • Conditionality to ensure the effective use of the available resources;

  • More attention to results by setting targets and indicators.

For Cyprus, this increased focus on performance and results is extremely good news. Cyprus has performed very well in the pas programming period from 2004 until 2006 and used all available funds with very good results. Investment in the current period from 2007 until 2013 are advancing very well, too. We want to focus our future investments on the priorities of the Europe 2020 Strategy, to get us out of the crisis. These priorities include innovation, combating poverty and energy efficiency. In light of the dramatic situation of last week, we can already now start to think of new, smaller scale smart and low energy electricity grids and how to invest in those. The increased use of solar energy is an option to be explored as well.

Ladies and Gentlemen, at the beginning of October the Commission will table its concrete and detailed proposals for cohesion policy, long awaited by many. This will be the starting point for negotiations in the Council and with the European Parliament. You can imagine that I am impatiently looking forward to that moment.

To conclude, let me recall that the European Union is a humongous and hugely successful project to bring about peace in Europe. The roots of the European Union are a reconciliation project. And Cyprus is part of the European Union. A settlement in Cyprus would more than anything reflect the Union's spirit. Europe needs a united Cyprus. And the EU will continue to support strongly a settlement and foster reconciliation and confidence building on the island.

Coming back to the catastrophe that has struck Cyprus last week, we have discussed this morning already about what the EU and regional funding can do. We will explore possibilities under the EU Solidarity Fund, which can cover direct damage in the public domain after disasters caused by nature. We need to carefully assess the cause together with the Cypriot authorities. But I have confidence that the people of Cyprus will remain showing the great spirit they have shown over the last days and weeks and will work together, towards reconstruction of the devastated plant and a sound economic and social development.

Thank you for your attention.

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