Absorption capacity

Drawing a lesson from EU experience? A boat patrolling the border between Ukraine and Moldova. © OSCE

EU cohesion policy: lessons for wider Europe?

The European Union’s cohesion policy has become one of the premier policies managed at the European level along with the Single Market, competition policy, and agricultural policy. The policy is currently financed to the tune of €345 billion. In the past the policy has provided the resources necessary to kick-start the process of socio-economic development and convergence of the less-developed countries and regions towards levels of well-being enjoyed by other EU Member States.

Ever since 1981 when Greece joined the then European Economic Community (EEC), most of the new Member States (aside from the 1996 accession that brought in Sweden, Finland, and Austria) have come from southern Europe (Portugal, Spain, Malta and Cyprus) or Central and Eastern Europe (Bulgaria, Czech Republic, Estonia, Hungary, Lithuania, Latvia, Poland, Romania, Slovakia and Slovenia). All 14 of these countries entered the EU with per-capita income levels below the European average. They had centralized national decision-making and implementation structures, and had little or no experience with regional development policies. The new Member States therefore needed significant financial resources to upgrade their infrastructure networks, skill base and productive capacity in order to take advantage of the single European market.

The lessons that can be learned from the experience of the new member states in dealing with cohesion policy can be useful for the countries along the EU’s southern and eastern borders who are involved in the EU’s European Neighbourhood Policy or accession processes. The first lesson to be learned is the need to be able to effectively engage in collective decision-making. The EU does not project a single executive but rather many types of executive structures, from the European Commission to the European Council. This is true for countries dealing with the decision-making structures within the EU as well as for those interacting with the EU from the outside. For the last 12 countries that entered the EU during the last six years, accession brought with it the need to establish a working relationship with other Member States in order to fully participate in collective decision-making at the European level. In addition, they had to become comfortable with implementation mechanisms where the management of policies was predicated on the role of the Commission as policy initiator and implementer.

The second lesson is that, in addition to engaging in collective decision-making procedures at European levels, member states have to be able to engage in or feel comfortable with the use of multi-level systems of governance in the coordination of implementation of EU policies. In relation to cohesion policy, the rules and financial provisions are determined at the European level while the responsibility for day-to-day implementation, monitoring of expenditures and evaluation of programmes remains at the national and regional levels. In other words, the policy for regional development is not a national but rather a European policy. Therefore, the policy cannot be based only on a ‘two-level game’ bringing together the national and European levels in the management of the policy. Instead, cohesion policy from its beginning in 1989 has been based on a system of multi-level governance involving European, national and sub-national governments and administrative structures. Participation in the policy process is also foreseen for representatives of socio-economic groups drawn from civil society.

The third lesson is that development programmes financed by the European Commmission represent legally binding contracts between the managing authorities at the national and regional levels responsible for the delivery of the programme, and the European Commission, within the foreseen time parameter established by the policy. The rules are strict and homogenous for all countries participating in the policy. In cases of non-compliance, a system of financial sanctions may be invoked. This system of sanctions has been very effective in raising the level of compliance and reducing the graft and corruption in the use of the funds below what is present in other national policies.

The fourth lesson to be learned from the experience of Central and Eastern Europe is that large member states need to divide their country into regions for the purpose of creating planning institutions at the sub-national level to administer the regional operational programmes. In the case of Bulgaria that requirement had not been met by the beginning of 2007, and therefore the amount of money allocated to the country was reduced and the control mechanisms set up by the Commission were more stringent than was the case in other countries. In many of the new Member States the need to create institutions with the necessary planning and implementation capacity at the sub-national level was quite a challenge. So was the need to restructure national administrative systems to engage in a system of multi-level governance and carry out economic programming over the seven-year EU budgetary cycle.

A fifth lesson is the need to carry out programme evaluations. The administration of cohesion policy introduces the necessity to engage in policy evaluation as an integral part of programme implementation. During the policy cycle—that is, at the beginning, at midterm and at the end—the programme has to be evaluated in terms of its ability to reach its defined goals and to learn how the policy can be improved during the next budget/programming cycle.

A sixth lesson that can be derived from cohesion policy is that cross-border cooperation programmes involve not only national governments, but also local and regional authorities. It is the cohesion policy that introduced the experimentation of cross-border programmes, bringing together regions and local authorities in different Member States to implement a common development programme capable of taking advantage of existing local resources and promoting greater socio-economic interactions. Such programmes have been very useful in preparing the accession of new members into the EU, and have helped to eliminate impediments to the flow of goods, services, capital and people across-borders. The smooth transition to the elimination of the borders between Western and Central Europe in May 2004 was to a great extent prepared by the numerous cross-border programmes financed by INTERREG, the inter-regional cooperation programme first introduced in 1989 and extended through 2006. Cross-border cooperation is now an integral part of cohesion policy programmes, representing the third objective of cohesion policy (in addition to the competitiveness and convergence objectives for, respectively, more and less developed regions).

A final lesson to be learned is that cohesion policy has an integral part to play in developing a response to the economic and financial crisis that began in 2008. A considerable amount of the cohesion policy fund (60 percent) has been targeted toward the triple objectives of sustainable growth, increased competitiveness and job creation outlined in the Europe 2020 programme launched in March 2010. This new programme represents the continuation of the Lisbon Strategy initiated with the Lisbon Agenda in 2000 and renewed by the Lisbon II programme reformulated in 2005. As a consequence, the Lisbon Strategy and cohesion policy have come together to focus on the three objectives outlined above, and this will be even more the case in future policy cycles.

The dual examples of the cohesion policy and Lisbon Strategy, along with the Single Market and the Single Currency programmes, point to an increasing level of ‘Europeanization’ in a variety of policy fields. In order to operate effectively in the Europeanized policy making system, countries need to develop the ability to participate in collective decision-making given that in at least some aspects of economic policy EU decisions are already based on majority voting. Future member states will also find that the Growth and Stability Pact limiting budget deficits and overall debt will be more strictly adhered to than has been the case in the past. But in compensation the European Union is in a much better position to shield the countries from the risks of financial default and currency crises. These are the lessons we have learned from the Greek sovereign debt crisis within the Euro and the speculative attacks against the Hungarian forint.

Robert Leonardi is Director of the Economic and Social Cohesion Laboratory at the London School of Economics.

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