Regional Policy (Spicers European Policy Reports)

Regional Policy

SPICERS EUROPEAN POLICY REPORTS European Internal Market Policy Kevin Featherstone The Food Sector Stephen Fallows Youth Policy Gordon Blakely Transport Policy Kerry Hamilton Employment Policy Margareta Holmstedt Small and Medium Sized Enterprises Kenneth Dyson

Regional Policy Compiled by

Colin Mellors and Nigel Copperthwaite

Published by Routledge in association with the University of Bradford and Spicers Centre for Europe Ltd

First published 1990 by Routledge in association with the University of Bradford and Spicers Centre for Europe Ltd Routledge 11 New Fetter Lane, London EC4P 4EE This edition published in the Taylor & Francis e-Library, 2005. “To purchase your own copy of this or any of Taylor & Francis or Routledge’s collection of thousands of eBooks please go to www.eBookstore.tandf.co.uk.” Simultaneously published in the USA and Canada by Routledge a division of Routledge, Chapman and Hall, Inc. 29 West 35th Street, New York 10001 © 1990 University of Bradford/Spicers Centre for Europe Ltd All rights reserved. No part of this book may be reprinted or reproduced or utilized in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publication Data Regional policy.—(Spicers European policy reports) 1. European Community countries. Regional economic development I. Mellors, Colin. II. Copperthwaite, Nigel III. Series 330.94 0-415-03828-6 (Print Edition) Library of Congress Cataloging in Publication Data has been applied for ISBN 0-203-99113-3 Master e-book ISBN

ISBN 0-415-03828-6

CONTENTS

Acknowledgements

SECTION I

vii

Foreword

1

The European Community: Its Role, Institutions, and Legislation

6

EC POLICY TOWARDS THE REGIONS

11

A Community of Contrasts

14

Regional Policy: Early Steps

19

Defining the Regions of the European Community

23

Regional Disparities within the Community

26

Types of Region within the EC

34

European Regional Development Fund

39

ERDF and the Reform of the Structural Funds 44 Sectoral Policies and their Regional Impact

53

The Regions and ‘1992’

59

Further Reading

65

SECTION II

KEY DOCUMENTS ON REGIONAL POLICY

66

SECTION III

OFFICIAL PUBLICATIONS AND RELATED DOCUMENTS

112

A.

European Regional Development Fund

113

B.

Declining Industrial Areas

118

C.

Less-favoured Areas

121

D.

Other Regional Policy and Programmes

124

E.

General

128

vi

APPENDIX 1:

COUNCIL REGULATIONS

130

APPENDIX 2:

INITIAL LIST OF AREAS ELIGIBLE FOR OBJECTIVE 2

190

APPENDIX 3:

GLOSSARY

227

ACKNOWLEDGEMENTS

We are indebted to Grace Hudson, the European Documentation Centre librarian at the University of Bradford who, as ever, proved to be an invaluable source of help and advice during the preparation of this volume. We should also like to express our thanks to Susan O’Brien who helped to copy-edit the text, and to Amanda Deaville and Anne Campbell of Spicers who patiently helped to turn the typescript into print. Nigel Copperthwaite Colin Mellors

FOREWORD

This volume is one of a series offering an informed guide to particular policies and programmes of the European Community. They are intended for the intelligent reader as well as for the specialist. They assume no prior knowledge of the European Community, but they each offer a comprehensive and up-to-date guide to what the Community is doing, or proposes to do, in important areas of economic, social and political life. The volumes should appeal especially to those involved in business and commerce, public administration, and education. The volumes guide the reader through the maze of European Community legislation and policy proposals. Their main concern is with the official documents of the European Community institutions: helping the reader to understand Community policies and proposals. By doing so, each volume offers the reader a single reference source, collating all the essential information the reader needs to understand what is going on. Each volume is structured so as to offer easy access to the specific information needed. A preliminary note explains what the European Community is and how it operates. Each volume focuses on a distinctive policy area, and SECTION I introduces the reader to European Community action in that sphere. It explains how Community policy has evolved, the problems currently being confronted, and what is proposed for the future. SECTION II highlights the key documents and proposals in the policy area, giving extensive summaries of each of them. Finally, SECTION III provides a comprehensive listing of all the relevant Community

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documents in this policy sphere, with full bibliographical details and a brief note as to their content. As the reader progresses through each volume, he or she will have been guided from the general to the very specific, and from little or no knowledge to an informed picture of developments in the policy sphere concerned. Moreover, the information has been structured so as to allow the more specialist reader to pursue particular inquiries yet further: the volumes guide the reader to the policy documents specific to his/her interest. With the drive to complete the single internal European Community market by the end of 1992, more and more attention will be focused on Community policies and actions. By the end of this century, the European Community will be playing a more prominent part in the lives of its citizens and in a way which will have ramifications in other parts of the world also. The European Community is already an important actor on the world stage, and it will be even less possible to ignore it in the 1990s. This series of policy guides is designed to provide the information that is and will be needed to respond to this changing world. Highquality information is the key to effective action. This series has been produced by the European Briefing Unit at the University of Bradford (UK) together with Spicers Centre for Europe Limited, a member of Spicer and Oppenheim International. The collaboration between these two bodies has brought together a team of specialist writers expert in the various policy spheres covered by the volumes. Each writer is actively engaged in the study and research of these policy areas, and each has long experience in communicating their skills to the lay audience. The series has been co-ordinated by Amanda Deaville (Spicers) and Kevin Featherstone (Bradford). Both the European Briefing Unit (EBU) at the University of Bradford and Spicers Centre for Europe have an active interest in promoting knowledge and awareness of the European Community. The EBU is located in the Department of European Studies at the University of Bradford: the Department is the largest of its kind in the UK, and is actively involved in both teaching and research at all levels. The EBU was created in 1988 as a public resource, operating on a non-profit and open access basis. It acts as a

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neutral forum for the purpose of disseminating and advancing relevant knowledge about the Single European Market; new trading and business opportunities in Europe; the European Community’s Structural Funds and technology programmes; the external trade, business and political relations of the EC; and the social, cultural and educational implications of European integration. The EBU exists to serve the needs of industry, commerce and public authorities as well as those of the University itself and other educational bodies. The EBU has established close collaborative links with a number of relevant bodies across different sectors so as to promote its activities. Spicers Centre for Europe Ltd is a privately based organization serving the needs of its commercial clients. It offers expert EC advice and information to both private and public sector organizations and enterprises. It assists its clients in obtaining funding from EC sources, and it keeps them informed as to the changes in EC policy which might affect their interests. It advises organizations on how they might respond to the opportunities and challenges of the EC, by reviewing corporate strategies. It also offers a business information service based on its own and EC data bases, involving the Tenders Electronic Daily data base (TED) and the Business Co-operation Network data base (BC-NET). As a member of Spicer and Oppenheim International it is linked to an organization which has 250 offices in more than fifty countries throughout the world. The collaboration between the EBU and Spicers is intended to produce a continuing series of publications to inform both specialist and lay audiences about the role and impact of the European Community. Readers of these volumes are invited to contact either body directly if they have any comments to make on the volumes, or if they would like to know more about the activities of either organization. Both the EBU and Spicers would like to record their gratitude to Alan Jarvis (Routledge) for his support and patience in dealing with this publishing venture. Moreover, progress would have been more difficult had it not been for the efficient typing, by Christine Pratt of Spicers. More generally, thanks go to the full team of writers and

4 REGIONAL POLICY

assistants involved in this project for their willingness to see it succeed. Kevin Featherstone General Editor

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Contact addresses: The European Briefing Unit University of Bradford Bradford BD7 1DP United Kingdom Telephone: 0274–7334 66 Telex: 51309 UNIBFD G Fax Number: 0274 305340 Spicers Centre for Europe Limited Ground Floor 10–12 East Parade Leeds LS1 2AJ United Kingdom Telephone: 0532 442629 Telex: 557890 EUROPE G Fax Number: 0532 449909

THE EUROPEAN COMMUNITY: ITS ROLE, INSTITUTIONS, AND LEGISLATION

The European Community (EC) represents a unique development in the world: a new structure of relations between states. It has often been referred to as ‘the Common Market’ because it is a single trading entity: goods moving between the member countries are not subject to tariffs, while imports from the rest of the world enter under uniform conditions. But it is much more than that: it plays an important political and social role, in addition to its economic purposes. Moreover, the EC is set to develop much further in the 1990s. In the 1958 Treaty of Rome, a commitment was made to seeking in the long-term ‘an ever closer union among the peoples of Europe’, an ambitious objective which it has found difficult to realize. However, the Single European Act which came into force in July 1987 provides for an expansion of the EC’s political role and for the completion by the end of 1992 of a fully integrated, barrier-free internal market. The ‘European Community’ actually stems from three Communities: the European Coal and Steel Community (ECSC) established in 1952; the European Economic Community (EEC) which came into being in 1958; and, the European Atomic Energy Community (Euratom) which also began in 1958. The original Member States of each of these three Communities were Belgium, France, the Federal Republic of Germany, Italy, Luxembourg and the Netherlands. Successive enlargements of the Communities have increased their membership from six to twelve: Denmark, Ireland and the United Kingdom joined as of 1 January 1973; Greece on

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1 January 1981; and Portugal and Spain on 1 January 1986. The population of the EC is now 320 million, greater than that of the USA (234 million), the Soviet Union (269 million), or Japan (119 million). Its Gross Domestic Product per head is significantly lower than that of either the USA or Japan. However, the Community today is the world’s largest trading power, accounting for almost 20% of world trade. Economically and politically, the EC dominates Western Europe, and it has established important relations with countries across the world. Policy making in the EC involves the Commission, the Council of Ministers, the European Parliament, and the Economic and Social Committee, with the adjudication of the Court of Justice and the Court of Auditors. In addition, the European Investment Bank (EIB) was established by the Treaty of Rome as the bank for financing capital investment promoting the balanced development of the Community. Until 1967, the three original Communities had separate Councils of Ministers and executive Commissions (known as the ‘High Authority’ in the ECSC). By contrast, the European Parliament and the Court of Justice have been common to the ECSC, EEC and Euratom since 1958. From 1967 onwards there has been a single Commission and a single Council, simplifying the overall structure. The three most important policy-making institutions of the EC today are the Council of Ministers, the Commission and the European Parliament. Since 1974, they have been joined by the ‘European Council’, a body given formal status by the Single European Act. The European Council is the term given to the summit meetings of the heads of government (and of state in the case of France) of the EC countries. It has no legislative power, rather its purpose is to place current issues in a more general perspective and to give impetus to those initiatives that it regards as priorities for action. Until 1985, it met three times a year, but this has since been cut back to twice a year. The Presidency of the European Council and of the Council of Ministers rotates between the member governments at six-monthly intervals. The European Council meetings are usually held in the country holding the presidency. The Council of Ministers’ headquarters is in Brussels, where the Commission is also based. The European

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Parliament, by contrast, currently holds its plenary sessions in Strasbourg, most of its committee meetings in Brussels, whilst its permanent staff are based in Luxembourg. This rather awkward compromise remains a source of controversy. EC legislation is determined by the three main institutions —the Council of Ministers, the Commission, and the European Parliament—with the Economic and Social Committee offering its advisory opinion. The Commission acts as the initiator of legislation and as the executive authority responsible for implementing it. Legislation is finally enacted after it has been approved by the Council of Ministers, either acting unanimously or by a qualified majority. It has been estimated that, as a result of the Single European Act, two-thirds of the internal market proposals will be covered by majority voting. The Council’s legislative role has been further amended by a new ‘Co-operation Procedure’ established by the Single European Act, which gives increased powers to the European Parliament. This provides, inter alia, for the Parliament to be able to reject the Council’s initial response to a Commission proposal, and the Council can then only pass the proposal into law if it acts unanimously (Art. 149: 2c of the EEC Treaty as amended) . Prior to the Single European Act, the Parliament already had the final say over the annual EC budget, though its scope for manoeuvre on expenditure is set within limits. Some description of each institution is necessary. The Council of Ministers is made up of representatives of the governments of the twelve Member States. Each government normally sends one of its ministers. Its membership thus varies with the subjects down for discussion. The Foreign Minister is regarded as his country’s ‘main’ representative in the Council, but Ministers for Agriculture, Transport, Economic and Financial Affairs, Social Affairs, Industry, the Environment and so on also meet frequently for specialized Council meetings and sometimes sit alongside the Foreign Ministers. The Council is supported by a large number of working parties and by a Committee of Permanent Representatives (COREPER). COREPER is composed of the various national ‘ambassadors’ to the EC. The Commission consists of seventeen members, appointed by agreement between the member governments.

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Throughout their four-year term of office, Commissioners are required to remain independent of national governments. An individual Commissioner cannot be sacked: the Parliament can pass a motion of censure compelling the Commission to resign en bloc. The European Parliament is the world’s first directly elected international assembly. It was first directly elected in 1979: it was previously composed of nominated national parliamentarians. The Parliament serves five-year terms and currently has 518 members (MEPs). The Court of Justice, based in Luxembourg, acts as the supreme court of the EC. It should not be confused with the European Court of Human Rights in Strasbourg, which is not an EC body. The Court of Auditors began operating in 1977 and, as its name suggests, it audits the EC accounts. The Economic and Social Committee is an advisory body of 189 members, representing various sectors of economic and social life, offering opinions on EC policies and proposals. EC Law

The nomenclature of EC legislation can be confusing. The essential point to bear in mind is that the Commission brings forward proposals for legislation, the outcome of which will be variously determined by the Council and the Parliament. ‘Primary legislation’ of the EC is embodied in the treaties; ‘Secondary legislation’ is derived from the treaties in the form of ‘Regulations’, ‘Directives’ etc. The EC represents a distinct legal system, and its strongest form of legislation is superior to national law. When acting under the Treaty of Paris (ECSC), the Commission can take decisions, make recommendations or issue opinions. Decisions are binding in their entirety; recommendations are binding as to the ends but not as to the means; opinions are not binding. The Council acts in ECSC affairs mainly at the request of the Commission, either stating its opinion on particular issues or giving the assent without which, in certain matters, the Commission cannot proceed. The Commission’s ECSC decisions are mostly addressed to individual persons, firms or governments but they may also lay down general rules, since the Commission does also have general rulemaking powers.

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When acting under the Rome Treaties (EEC and Euratom), the Council and the Commission issue regulations, directives, decisions, recommendations and opinions. Regulations are of general application: they are binding in their entirety and applicable in all Member States. Directives are binding on the Member States to which they are addressed as regards the results to be achieved, but leave the form and methods of achieving it to the discretion of the national authorities. Decisions may be addressed to a government, an enterprise or a private individual; they are binding in their entirety on those to whom they are addressed. Recommendations and opinions are not binding. The discrepancy in terminology between the Paris Treaty and the two Rome Treaties is confusing. An ECSC ‘recommendation’ is a binding enactment corresponding to the EEC and Euratom ‘directive’, whereas an EEC ‘recommendation’ is not binding and is not stronger than an ‘opinion’. When examining the current progress of EC legislation in non-ECSC policy areas, the reader typically focuses on Commission proposals (e.g. for a directive) to be agreed by the Council of Ministers (subject to the differential powers of the European Parliament). It is clear from the above that the EC today is an important actor in international relations, enjoying both political and economic significance not only for its domestic citizens but also for those in other countries.

SECTION I EC POLICY TOWARDS THE REGIONS

1 January 1989 marked a landmark in European Community regional policy. On that date, significant new arrangements for the European Regional Development Fund (ERDF) came into force as part of a major reform of the Community’s Structural Funds. The wide-ranging changes, which will involve a doubling of the Funds in real terms by 1993 and which are intended to achieve greater complementarity between the three main Funds (ERDF, the European Social Fund and the European Agricultural Guidance and Guarantee Fund), reflect a commitment to reduce the disparities between the rich and poor parts of the Community. Each successive enlargement of the EC has widened the gulf between the stronger and weaker regions and disparities would inevitably grow still further with the removal of barriers, consequent upon the creation of the single European market, by 1992. To counter this trend, and to attempt to bring the poorer areas up to the level of the richer areas, the Single European Act, which took effect on 1 July 1987, commits the Community to a policy designed to promote cohesion and convergence. By this Act, regional policy became formally incorporated into the EEC Treaty for the first time and is recognized as a means of achieving economic and social cohesion. Although the preamble to the Treaty of Rome, which established the European Community, refers to the need for ‘harmonious development by reducing the differences existing between the various regions’, the Treaty itself has no separate article or clause setting out the EC’s policy for the regions nor the mechanism for achieving such harmony. By contrast, the Social Fund (ESF) is included within the provisions of the founding Treaty as is the principle of agricultural subsidies. Indeed, by the mid-1980s, the latter consumed two-thirds of the Community’s budget. The ERDF is much more recent, only dating from 1975 and, having undergone some reorganization in 1985, is now entering an important new phase. The divide between the wealthier and poorer parts of the Community has become steadily more evident. Its enlargement to include Spain, Portugal and Greece has brought the North-South divide into sharper focus although, as some of the more industrialized Member States have not been slow to point out, the areas in need of

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Community support are not limited to the less-developed areas in the South of the Community. Structural changes, such as the decline of traditional industries like coal and steel, have brought economic depression even to parts of the more prosperous Member States. The goal of cohesion and convergence is to be achieved by reducing these disparities by giving effective support to the problem areas of the Community. Article 130A of the Treaty, as amended by the Single Act, calls upon the Community to strengthen its economic and social cohesion and to increase its efforts to reduce disparities between regions, paying special regard to the needs of the least-favoured areas. The task is formidable: 70 million people (over 20 per cent of the Community’s population) live in areas where the per capita GDP is less than 75 per cent of the EC average. Other indicators, such as unemployment rates and economic growth patterns reveal equally sharp contrasts. Without positive action, the divisions would become even more marked as a consequence of the natural flow of investment, the pace and location of technological change, the decline of traditional industries, inadequate vocational training and decaying or out-dated infrastructures. It is against this backcloth that the Community’s regional policy will be tested over the next few years. An indication of the importance now attached to regional policy, apart from its formal incorporation into the Treaty and the personal backing of EC President Jacques Delors, is the commitment to double the size of the Fund allocation. Alongside this, the co-ordination of EC financial support and the concentration of effort towards specific objectives is intended to achieve a visible and lasting impact on the problem regions. The new ERDF regulations, therefore, should be seen in the context of a wider and more active regional policy for the EC, not just on its own but in conjunction with other policy areas (notably employment, training, SMEs, environment, energy, competition and technology) and also in collaboration with Member States themselves. ‘Cohesion’ has become a crucial determinant of EC policy in the drive towards 1992, although the commitment to cohesion pre-dates the package of 1992 measures. What the latter have done is to give new urgency to the need to harmonize an increasingly heterogeneous Community. The

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1985 White Paper Completing the Internal Market warned that, whilst offering the prospect of increasing the overall prosperity of the Community, the single market posed the risk that ‘by increasing the possibilities for human, national and financial services to move without obstacle to the areas of greatest economic advantage, existing discrepancies between regions could be exacerbated and…the object of convergence be jeopardized. This means that full and imaginative use will need to be made of the resources available through the Structural Funds. The importance of these Funds will be enhanced’. The new approach to regional policy and, in particular, the revised ERDF Regulations that came into effect in 1989, reflect the importance now attached to economic and social cohesion and to the attempt to ensure that all areas of the EC benefit from the economic growth afforded by the single European market. A Community of Contrasts

The European continental area, and the twelve countries of the European Community that form a part of it, comprises a patchwork of interlocking elements. Although small by continental standards, Europe boasts a variety that is manifest in characteristics ranging from the geological bases (and the economic potential which they offer) through relief and topography, to climate, soils, and to what may be described as ‘natural environments’. Superimposed on this variegated physical background is a cultural landscape which mirrors that variety. Whilst migration has always been important in peopling the landscape and mixing population groups, Europe has retained within its area a bewildering array of cultural groups. Emerging from widely varying agrarian economies and settlement patterns, the peoples of Europe have lost few of their ancient cultural artefacts. Many different languages are spoken; there are vastly differing interpretations of Judeo-Christian religious philosophy, and a strong Arab influence in some parts, all of which are reflected in distinctive approaches to the organization of economic and political life. However, there are also major unifying elements in the European culture which are shared by most of the countries, if not all of the peoples, belonging to the European Community. Not least of

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these are the common experiences of industrialization (and its aftermath) in some areas, and the common problems of semi-arid agriculture in others. Thus, whilst it is the small scale and variety of the landscape and people that best identifies the regional perspective, it is the shared experience and common need that most clearly justifies a Community-led and Community-wide regional policy. It has been argued that Europe should not be regarded as a separate continent because it is simply a peninsula of the Asian land mass. A glance at the world map will go some way to confirm this view. As a physical entity, clearly it is linked substantially to Asia at its eastern perimeter, whilst western, southern and northern boundaries are surrounded by sea. Indeed, arms of the global oceans penetrate deeply into the heart of the continent in the Baltic, North Sea and Mediterranean. The impact of the sea has been particularly strong for those Western European countries that together comprise the European Community. Most have been involved with sea-dependent overseas territories and, at various times in their history, much of their attention has been directed towards economic, political and cultural interests outside Europe. Thus the influence of the sea (and related trade and industry) provides one of those elements of common experience which has united the peoples of Western Europe. At the same time the sea has served as a physical barrier, both creating and reinforcing cultural differences between Europeans. The sea can only be seen as an influence in the context of the configuration of the land, and it is possible to explain some of the variety of character within Europe with the fact that a large part of the continent comprises a number of peninsulas. One of the newest members of the Community, Greece, has an exceptionally long coastline compared to its area because it comprises a large Peninsula, with many subpeninsulas, and a very considerable number of islands. Spain and Portugal together form the Iberian Peninsula which has only a relatively narrow link with France. Britain and Ireland are completely insular, whilst Italy largely comprises the classic peninsula form found in school textbooks. Perhaps nowhere is the influence of the sea more directly felt than in the Netherlands where the threat of inundation is never far away; while Denmark and Schleswig-

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Holstein are almost severed from Europe by the Elbe. Thus, with the exception of France, Germany and the Low Countries, which have all had strong overseas territorial interests, the physical configuration of the Community has contributed to fragmentation and separate development. The geological structure of the Community further enhances its variegated character because of the rapid changes in rock-type, age and lithology across the area. In many zones—northern Scotland, Brittany, the French Massif Central—old hard rocks predominate, occasionally offering some economic potential where they are mineralized, but more usually forming elevated areas of poor, thin soil with limited potential. Limestones and chalk are important locally in parts of England, the Mediterranean Basin and the Paris basin, each offering a different local environment suitable, in combination with relief and climate, for various land uses: from the great wine-producing regions of France to the elevated Mediterranean fringing hills and mountains producing figs, olives and nuts. The industrial wealth of the Community is based in the mineral ore and fossil fuel deposits of the continent. Variety is again the watch-word for, whilst many ‘modern’ mineral ores are in short supply (e.g. copper) and must be substantially imported, there are large reserves of coal and important iron deposits which together provided the foundation for European industrialization. By global standards many of these deposits are of small scale or poor quality and are frequently severely faulted which makes exploitation difficult and costly. However, the corollary is that almost all countries of the Community have enjoyed workable deposits of iron and especially coal. Latterly, however, these mineral deposits are proving to be uneconomic and of declining importance. The related decline in manufacturing industry means that many local communities that were once prosperous are now suffering from the demise of their primary economic base and are facing a period of painful readjustment. The principal coalfields of the Community are in northern England, south Wales, central Scotland, north-east France, south Belgium, the Franco-German border area, Massif Central, the German Ruhrgebiet and northern Spain. Iron ores are usually to be found in close proximity, and the most significant

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Community resources are located around the FrancoGerman border. Although there are substantial fertile agricultural regions, many of the richer agricultural lands are man-made— formed by the drainage of low-lying river basins such as that of the Po in northern Italy, the Vale of York in northern England, and large parts of the Netherlands. In Denmark, northern Germany and the northern Netherlands much of the surface has been overlain by superficial deposits. The deposits are mainly glacial in origin, giving Denmark a unique character, and imposing a variety of landscapes and opportunities in northern Germany. Here improvement through drainage and other measures is essential to provide a tolerably fertile soil. However, this form of superficial deposit is highly localized, so that agricultural potential varies quite rapidly across the surface. Topographically, there are also wide variations within the Community, from the Alpine heights of south-eastern France to the low plain of northern Germany, the rugged and bleak uplands of Scotland and the elevated plain of the Spanish Meseta. Italy has widely varying landscapes, with its Alpine fringe, flat northern valleys, central Apennine mountain chain, and richly varying lowland coastal zones. This diverse relief has a profound influence through its effect on climate. The major climatic influence for the whole of the Community is the proximity of the sea, together with the global weather patterns which bring a consistent flow of maritime influences westward across the continent. This produces a weather pattern in northern and western Europe characterized by its changeability and its moderation. Further inland, continental influences begin to take effect, and central Spain and eastern Germany experience more extreme temperatures and precipitation regimes through the year. The Mediterranean countries and zones are somewhat different—enjoying a more southerly latitude, they are generally warmer, less variable in daily weather patterns, and influenced strongly in their coastal areas by proximity to the sea. These natural differences between the parts of Europe have produced a variety of local regions, and lend themselves to the development of strong local patriotism and cultural traditions. The development of the early classical

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world was strongly influenced by the proximity of the sea and, whilst many of the Greek city states established strong naval power to protect their vital sea-based trading and commercial interests, many northern Europeans lived by exploiting the food which coastal lands and waters could provide. Later the richer agricultural lowlands provided sufficient wealth to encourage the development of large towns. Their large-scale economic hinterlands brought a wider population into the single regional cultural unit, in which individuals could specialize in highly-skilled and technologically-advanced commercial and technical roles. Eventually, economic specialization and the variety of agricultural and other economic resources in the continent resulted in the development of considerable trading links between the local regions, so that great benefit could result from the sharing of the bounty offered by the natural environment. However, such links did not materially affect the strength of local character, but merely added a cosmopolitan flavour to its variety at the points of commercial exchange, notably the seaports. Colonial and imperial adventures both underlined the diversity of European culture and served to divert attention from it. This bonding of the European peoples into larger, territorial and political units corresponded with the rise of the unitary state, so that nationality and state became interwoven. European nationalism—channelling Europeans’ energies towards the rest of the world and leading to conflict within Europe—has been one of the most potent forces in modern world history. It coincided with industrialization but, whilst the process of industrialization—which was initially localized in or near the coalfields of Europe—created a further set of new regions, nationalism served to mask the differences that were developing as a result of this process. The rapid spread of nationalism could only be possible in an era of improving communications, the first step of which was the improvement of literacy levels. However, improving literacy is also a precursor of the destruction of local cultures which are rooted in local language. Mass literacy usually imposes the language and the culture of the dominant group, and nationalism therefore posed a threat to the diversity of local culture and regionalism. Better communications also offered faster travel, both for goods

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and for people and, therefore, served to threaten the integrity of local regions as people migrated and mixed and economic opportunities were extended. Regional Policy: Early Steps

Although it took the European Community nearly two decades to establish a distinct regional policy backed up by appropriate funding mechanisms, the need for selective intervention to deal with regional economic imbalances had been recognized by most of the would-be Member States even before the Second World War. Economic decline had been regionally selective in the inter-war years and the genesis of regional policy to combat regional decline emerged before 1939. In Britain, for example, the regions of predominantly basic industry (heavy engineering, shipbuilding and coal mining) were severely depressed and legislation was enacted which enabled specific assistance to be given to those areas. By the 1950s and 1960s, regional economic planning came to be used increasingly in other West European countries as the problems of economic decline, unemployment and low growth assumed a distinctly regional dimension. In some areas these were problems of very poor agricultural development; in others, they were problems of industrial decline. In West Germany, the federal structure served to underline the special problems of some areas, such as Berlin, the border with the East, traditional industrial areas which were lagging behind, or those that required special assistance. In Italy the regional problem was predominantly seen in terms of a north/south split. The south, with fewer industrial resources, less favourable agricultural conditions and a legacy of neglect found itself increasingly left behind by the north which enjoyed affluent twentieth century industry, strong agriculture in a rich fertile zone, and the concentration of political power. As a consequence, Italian governments adopted many measures in the late 1950s and 1960s to counter this imbalance and the ‘Cassa Per il Mezzogiorno’, for example, was at least partly successful in providing investment resources for the south. In France, the main problem was one of imbalance between Paris and the Paris Basin and the rest of the country. French recognition

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of the problem is usually reckoned to date from the publication of Graviers’ Paris et le Desert Français in 1947. Measures such as the establishment of the ‘métropoles d’équilibre’, and DATAR (a special unit for regional policy reporting directly to the prime minister’s office) attempted to remedy the situation, but regional problems were exacerbated by the chronic underdevelopment of the agricultural base. French farms were uneconomic in size, suffered from under-capitalization and farmers lacked the technical skills of their counterparts in West Germany and Britain. Britain too faced regional problems. Viewed from Westminster they were: the ‘national’ problems of Scotland, Wales and Ireland and the decline of the historic centres of industrialization, the coalfields, shipbuilding and heavy engineering and textiles. The declining regions were also generally peripheral to the centre of political and economic power. Structural economic readjustment was obviously necessary in these areas, but in the meantime large-scale and long-term unemployment appeared to be inevitable. Throughout the late 1950s and 1960s successive governments took measures designed to assist this readjustment, and to protect the affected populations. The Labour Governments of 1964–70, for example, instituted a regional planning machinery which resulted in ‘Assisted Area’ status being afforded to large parts of the country, which offered retraining assistance, grants for buildings and capital equipment, and help with infrastructure costs, including housing and road schemes. Particularly acute were the problems faced by peripheral areas in some countries, most notably in the border zone of France, Belgium and Luxembourg, where there was a longestablished industrial area based upon coal mining. The transnational location of this region revealed a common need to rationalize in order to meet competition from other parts of Europe (especially the Ruhr) and the formation of the European Coal and Steel Community (ECSC) in 1952 was significant in that it was the first supranational attempt to grapple with regional problems where they crossed national boundaries. The formation of the ECSC recognized that the Community of interest which the regions shared was greater than the differences suggested by their

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belonging to different political units. The ECSC was a natural precursor of the EEC which followed in 1958. In view of the recognition afforded at national level to regional problems in their own countries, it is perhaps a little surprising that the founding Member States of the Community paid such scant attention to regional perspectives at EC level. Although the Treaty of Rome recognized the existence of uneven development in Article 130, it contains no reference to the means of creating more harmonious development. The founder states were initially more concerned with supranational identity and problems than with a regional perspective and, consequently, no distinctly European regional policy was formulated for several years. In fact, there are several possible motivations for the institution of an EC regional policy; Coppellin and Molle distinguish three approaches which may lie behind such a policy—the compensational approach, the redistributive approach and the endogenous growth approach. All three have contributed to the development of regional policy within the European Community. The compensational or neo-classical approach suggests that regional policy is primarily motivated by the requirement to compensate a Member State for the ‘costs’ or disadvantages of membership, for example its loss of control over the instruments of economic policy such as customs duties, currency, subsidies and other measures which could otherwise be used to protect or develop the interests of its own national regions. Membership of the European Community involves an opportunity cost; Community regional policy which recognizes and compensates for that cost could be a condition of membership. The relevance of this approach is perhaps seen most clearly in those policies —such as STAR and PEDIP—which are aimed at meeting the particular problems of the less-favoured regions in the newer Member States. The compensational approach, as its name suggests, is mainly aimed at meeting the claims of individual Member States and offers no suggestion of contributing to the general good of the Community. By contrast, the redistributive approach is more consistent with the lofty ideals of cooperative benefit that were behind the founding Treaty. The rationale of this approach is that of achieving a more equal

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distribution of Community resources through growth from which all parts will benefit. Such an approach is to be found in the European Social Fund where the intended redistributive effect is essentially among people as individuals. The notion of redistribution (or convergence) is also an important factor in the revised arrangements for the Structural Funds. Where the ESF focuses on people, regional policy seeks to achieve a more equal distribution of resources, measured by income and welfare, among regions and among people in regional groups. The motivation is clear. First, there is the notion of social justice and that it is unjust that some groups, because of their location, are worse off than others. Second, there is the desire to achieve greater cohesion in the Community which will enhance common loyalty and decrease tension between areas, but which can only be possible if the physical conditions of life within each region do not give grounds for such tensions. Naturally a similarity in standards of living and quality of life is necessary if these goals are to be achieved. However, problems arise in making comparisons between regions, as they do between people, since overall well-being is a sublime mix of many characteristics, and the ease with which regions can be separated and their position as beneficiaries be measured, will be dependent upon the indicators used. To redistribute wealth, it is first necessary to generate wealth, and measures to achieve that goal more efficiently may result in a worsening of the disparity which already exists. It is for this reason, above all others, that the removal of barriers with the creation of the single European market are being accompanied by a strengthening of Community structural intervention. The former is intended to lead to growth but, without the latter, that growth would lead to even greater imbalances than already exist. A third approach to the regional problem may be characterized as essentially self-help—the endogenous growth approach. This approach recognizes that some of the resources suitable for economic growth are fixed in the local environment and that growth may be assisted only if the most appropriate of these are selected for development and exploited at their optimum productive levels. This may be achieved with the introduction of more mobile factors of production, such as capital and technological innovation.

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This will have the effect of raising levels of production and productivity, and thus facilitating the full exploitation of development potential. Such a process is neither redistributive nor compensatory, but can be viewed as offering the most substantial and beneficial rewards if it can be made to work efficiently. Again elements of this approach can be found in aspects of Commmunity policy. It is illustrated, for example, in the attempts to encourage better use of national energy resources (VALOREN) and in the emphasis that is being placed on ‘productive investment’ by the new ERDF guidelines. Defining the Regions of the European Community

In most European countries, the region is well established at an operational level for many public and private sector bodies. Regions are commonplace as administrative, economic and political units. However, this should not be taken to imply that the same territorial unit is used for all purposes, nor that there is ease in identifying and delimiting such subnational units. It is therefore appropriate to consider the various ways in which regions might be defined and described. In many cases, the idea of a region carries with it an implicit assumption of appropriate size, whether of territory, population or economic power. In the UK, for example, it can be argued that, whilst Wales and Scotland are too large to be regarded as regions, most English administrative counties are too small. In addition to size, there is the element of homogeneity. Regions suggest homogeneity in some or all of the characteristics sufficient to unify them and, at the same time, to distinguish them from adjacent areas which comprise other regions. In other words, there is an implicit optimization of internal homogeneity and external heterogeneity. It is with the defining of scale, and the characteristics determining heterogeneity and homogeneity that much regional work is concerned. A third major consideration is the notion of a natural region. These are regions in which, having regard to both scale and homogeneity, natural physical conditions are combined with characteristics of the cultural landscape (e.g. people and

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language, economy and way of life), all of which may be measured in a wide variety of ways. Such regions are often regarded as being defined physically by topographical boundaries and culturally through such characteristics as a common spirit, or temperament, often expressed by strong local loyalty and patriotism. Not surprisingly, the notion of a ‘natural region’ defies clearly-defined boundaries and may be best expressed through the feelings of the people. For political and administrative purposes, therefore, rather more readily measurable criteria are used in determining regional boundaries. At the simplest level, the region is a mere sub-division of the territorial unit of the state, identified by lines drawn upon a map and used as a convenient way of reducing an otherwise cumbersome and unwieldy structure of administration to a workable spatial scale. Such lines, and the regions they define, may be wholly artificial, in that they bear no sensible relationship to the variance of the surface and populations which they divide, but nevertheless may be appropriate for the particular administrative purpose for which they are devised. Completely arbitrary divisions of territory such as equal area squares or rectangles may be used to form a basis for the collection of information such as population statistics or land-use surveys. It can be argued that such regions are essential, at a very small scale, in order that the characteristics which may be used to determine regions at a larger scale can be described and aggregated. An alternative approach is to use existing territorial subdivisions of a nation. Historic regions may be considered the legacy of natural regions, although they are often simply a consequence of the political ambition of a strong ruler. Frequently such regions form the basis of the administrative and statistical units which, adopted by national governments, have of necessity also been used by the Community. Less complex, in that they are sometimes defined by a single and easily-measured variable, is the functional region. In this case, an area is delineated by reference to one or more specific functions, usually linking together a central place (large town) and its hinterland or service area. For example, regions may be defined as the zone around a town

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from which most people come to shop. These might be termed retail service regions. Larger towns naturally offer more specialized services and thus attract shoppers from a wider area so that the question of scale may again be relevant and the region re-defined at a smaller or larger level. The intimate connection between workplace and residential location is another commonly-used measure defining a functional region. It has the advantage of enabling a clear line to be drawn differentiating the region and its neighbours and results in a series of travel-to-work zones. Together with other service measures, functional zones based upon people’s daily patterns of life are often the most useful when considering measures designed to assist development in a local area, or defining zones in which particular measures are to be taken, or funds disbursed. The European Community has two principal classes of territorial unit: both statistical and functional definitions are used. The statistical framework is provided under an agreement on the Nomenclature of Territorial Units for Statistics (NUTS) which distinguishes three levels of regional disaggregation: Level I: 64 European Community Regions Level II: 167 basic Administrative Regions Level III: 824 sub-divisions of Level II Regions

In the UK, the Level I regions are the eleven Standard Regions used as a basis for economic planning. These are disaggregated into 35 Level II regions based upon county boundaries but used only for statistical purposes. As in the UK, the Level II regions defined by NUTS in the rest of the Community are generally based upon aggregates of historic administrative, sub-divisions of the territory that are convenient as a statistical base. It is important to note that such statistical units do themselves have a bearing upon the description and definition of the regional policy, because statistical indicators derived for these regions are not independent of them. This is significant at both Community and national level because, for example, there is considerable difference in size and structure between regions within Member States as well as among the States themselves. This is exemplified by the fact that, whilst

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Ireland comprises a single Level II region, France is divided into 22 Level II regions and Germany into 31 such regions. Level II regions vary in area between 94,100 sq. kms for Castilla-Léon in Spain and 404 sq. kms for the Bremen region of West Germany. In terms of both population size and population density there is similar variation. Belgium averages about 323 persons per sq. km. and Brussels 6080 per sq. km., whilst Ireland with 51 per sq. km. is the same as that of Auvergne. These differences need to be recognized when making comparisons between regions. Functional definitions of regions have also been used from time to time to identify the border in specific problem areas, and for the further development of zones to which policy might be applied. This allows a more flexible approach so that, for example, whilst a complete region defined statistically may not qualify for aid, a smaller area contained within it and defined functionally might do so. Regional Disparities within the Community

Regional development policies are generally linked to the notion of ‘cohesion’ and in the context of the European Community this means that Member States should share a common interest and pursue a unity of purpose. It implies the generation of a new European perspective based upon each country being bound with the rest in social, political, defence, economic and cultural matters. Cohesion is difficult to achieve if partners are in some way unequal because common interests are more difficult to identify. This is particularly relevant in the economic sphere where the degree of imbalance is not only a matter of individual perception, but is clearly measurable. It may be observed most readily in the national border regions where, it can be argued, ‘spatial’ cohesion is at its most critical and the lack of it likely to be most obvious. A necessary condition of cohesion, and the basis of a policy for encouraging cohesion, is ‘convergence’. Convergence is usually defined in economic terms and implies a closing of the gap in levels of economic well-being, a process which should bring the weaker economies into line with the stronger. Convergence would minimise the inequalities and imbalances between states and thus

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increase their potential for cohesion because national interest would be best served through the common interest of the Community and competition between states would be on an equal footing. In its first twenty years the process of convergence in the EC, and thus also of cohesion, was quite vigorous. The six founding states moved from a position of great inequality in which Italy occupied the weakest position and West Germany the strongest to one in which, though relative positions did not change, the improvement in the weaker states was greater than that in the stronger, thus reducing the difference between them. France in particular enjoyed a sustained period of growth. This process of convergence, although not smooth, continued until the United Kingdom, Ireland, and Denmark joined the Community. None of the new entrants were as strong as West Germany, and Ireland and the UK posed particular problems. Their accession exacerbated the degree of inequality and shifted the balance toward the weaker economies. In that sense, the process of convergence was set back with a resulting loss of cohesion. In 1981 the Community was further enlarged by the accession of Greece, with Spain and Portugal following in 1986. The area was now increased by 47 per cent from 1. 524 million sq. kms to 2.253 million sq. kms with a corresponding rise in population from 264 millions to 322 millions. The Community also became more heterogeneous in its composition. Economic convergence suffered a further setback because, like the UK and Ireland at the time of their joining, the new Member States suffered higher than average unemployment rates, higher than average inflation, and were running current account deficits. Each enlargement of the Community has replaced the weakest states in terms of per capita income. The most recent enlargement, whilst adding 18 per cent to the population, has added only about 12 or 13 per cent to gross domestic product and to the labour force in employment. At the same time, the accession of Spain and Portugal has increased the overall numbers unemployed by some 30 per cent and those unemployed in the agricultural workforce by 36 per cent. Inequalities have grown still wider. Whilst there are very wide regional variations within Spain and Portugal, no region has an income level as high

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as that of the Community average. Income disparity within the EC is twice as great, and the range of rates of unemployment three times as great, as is the case between the states of USA. The accession of new Member States which are below average in key economic indicators has not only accentuated the regional problem, but has also changed the status of other regions to the extent that some which fell below average in the EUR9 have now been shifted to an above average position. Clearly the difficulties of converging under these circumstances is made more acute. A measure of the magnitude of the task facing the EC can be seen by reference to a few basic statistics. Migration and natural increase are indicated by the rate of population change. Between 1971 and 1981, the EUR12 average was an increase of 0.5 per cent, but Hamburg had a decrease of 0.9 per cent whilst Madrid’s population grew by 2.2 per cent during the same period. From 1981 to 1985, the rate of increase in EUR12 was 0.2 per cent with the highest increase reported in the Greek Aegean Islands region (1.8 per cent) and the lowest (−1.6 per cent) in the Eastern Macedonia region of northern Greece. Here the problem of convergence, not simply between Community regions but also at a national level, is very well illustrated. Differences in the age structure of regional populations are also significant. In 1984, 36.3 per cent of the EUR12 population was under 25 years of age, but this varied considerably from a high of 48.2 per cent in the Madrid region to only 27.7 per cent in Hamburg. At the other end of the age range, however, whilst only 8.7 per cent of the people of Canarias were aged over 65 years, 20 per cent of the population of Dorset and Somerset fell into that category. These two regions represent the lowest and highest respectively of a range around the EUR12 mean of 13.4 per cent. The birth rate in EUR12 in 1984 was an average of 1.2 per cent and infant mortality 1.0 per cent, but again there were wide regional variations. The highest birth rate at 1.9 per cent was in Acores (Portugal) and the lowest, 0.7 per cent, in Toscana (Italy). The infant mortality high of 2.2 per cent was in Thrace (Northern Greece) and the low of 0.5 per cent in Zeeland, Groningen, Cantabria and Namur. These features of the population structure give some indication of the different demands that must be met

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in respect of educational provision, training places and health care services, etc. Levels of economic activity are revealed in a variety of ways. Activity rate is the proportion of the population engaged in work and it is significantly different for males and females. In 1985 in EUR12, 69.1 per cent of males and 39.5 per cent of females were at work, but at regional level the figure for males was highest in the UK regions of Bedfordshire and Hertfordshire and Berkshire, Buckinghamshire and Oxfordshire at 78 per cent and lowest in the Dutch region of Groningen, with 60.7 per cent. The highest of female activity rates was in the Greater London region, 58.4 per cent, with Castilla-La Mancha lowest at 20. 1 per cent. Dependency ratio measures the number of people —such as the young, students, housepersons, the chronically sick and the retired—who are supported by those who are working. It is influenced by the overall number of people in work, the birth rate, and the longevity of the population. This statistic is not available for all regions at NUTS III level, so an average for the Community cannot be calculated. Of those for which data are available, the highest levels are recorded for Calabria, at 1.84 and the lowest in south-east England, 0.94. The workforce, therefore, supports almost twice as many dependants in Calabria as it does in south-east England. Unemployment was about 50 per cent higher amongst women than men in EUR12 in 1986, but again there are large regional variations. Luxembourg had the lowest rates for men (2.0 per cent) and women (3.5 per cent) whilst Andalucia was highest for men with a rate of 29.9 per cent, and Canarias for women (35.5 per cent). Two useful general economic indicators are Gross Value Added (calculated from VAT returns) and Gross Domestic Product per capita. GVA in EUR12 derives from agriculture about 5.2 per cent, industry 38.3 per cent and services 56.5 per cent, and these proportions clearly show the relative importance of these sectors in the Community as a whole. The regional variability indicates the relative balance of both national and local economies. In a large number of Greek regions, agriculture contributes more than 30 per cent of GVA; the highest in EUR12 is Thrace at 39.4 per cent (nearly eight times the Community average). Agriculture

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makes no contribution to GVA in the Brussels region, but the service sector, as might be expected, compensates by providing 77.1 per cent of GVA, the highest in EUR12. Groningen at 25 per cent has the lowest service sector contribution, but its industrial base is almost twice as important as in EUR12 at 72.5 per cent. In Ceuta y Melilla, industry makes up only 14.7 per cent. GDP figures are perhaps the most telling of all, since they indicate much about the general standard of living and economic well-being. Measured in ECU and compared with a EUR12 value of 100, Groningen recorded 257 ECUs per inhabitant in 1983, whilst Portugal, for which a regional breakdown was not available, produced only 28 ECUs per inhabitant. If the influence of the dependent population is removed from the calculation then the variation is even more extreme. Groningen’s GDP per employed person was 341, whilst that of Portugal reached only 25. These extreme cases reveal the extent of diversity within the Community and indicate the magnitude of the task of economic convergence. The frequency of references to Spanish, Greek and Portuguese regions at the extremes of these coarse indicators emphasizes how the accession of these countries has tended to widen the range of inequality. In their periodic reports on the economic and social situation of the Community’s regions, the Commission produces a Synthetic Index that classifies regions by the intensity of their economic and social problems. The index is an aggregate of the following factors weighted as indicated: GDP per head in PPS (25 per cent), GDP per person employed in ECU (25 per cent), unemployment adjusted for under-employment (40 per cent), prospective labour force change until 1990 (10 per cent). The resultant Index reveals that the most intense problems are in Spain, Portugal, Greece and southern Italy: of the thirty-six regions that score less than two-thirds the EC average on this Index, only two (Ireland and Northern Ireland) are outside these four southern European countries. Conversely, of the sixteen regions that score over one-third above the EC average, ten are within West Germany.

SYNTHETIC INDEX OF THE INTENSITY OF REGIONAL PROBLEMS IN THE EUROPEAN COMMUNITY (1981–85)

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Source The Regions of the Enlarged Community: Third Periodic Report on the Social and Economic Situation and Development of the Regions of the Community (CB-49–87–381-EN-C), (Luxembourg, 1987)

* The lower the index value, the greater the intensity of regional problem. (EUR 12=100)

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Such contrasts in the performance of the Community’s regions draw attention to the inequalities that exist and help identify the particular problems that they face. Care should be exercised, however, in making crude comparisons as the regions are obviously dissimilar and there will always be considerable variation. Cohesion and convergence do not necessarily imply complete homogeneity. The problem for regional policy in the EC is not how to make all the same, but how to ensure that there is an equitable distribution of the overall range of resources, so that location does not condemn a people to an unacceptable standard of living. The task of bringing about greater convergence is made more difficult by other factors apart from existing inequalities. The process of enlargement of the Community has not stopped and, if there are to be new Member States in the future, there is little prospect that they will significantly lessen disparities. In addition, the establishment of the single market in 1992 also poses problems. Whilst permitting fresh momentum and growth, it also poses considerable new problems for the disadvantaged areas. First, there is the fact that the stronger regions are likely to be able to respond more readily and quickly to the requirements of the single market, thus increasing their lead over the rest. In general, the weaker states and regions which usually have higher labour costs, lower productivity, poor infrastructure, reliance upon agriculture, and isolation will be at a particular disadvantage. It is also likely that the free movement of labour will contribute to a widening of the gap between regions as skilled labour drifts to the wealthier parts of the Community. Inward technology and capital transfer might be alternatives to population out-migration for the less developed areas, but in general these resources are also likely to be more attracted to the better developed areas of the Community so that special measures and funding aimed at facilitating flows toward the least well-off must be priorities for Community regional policy. Such flows would also be expedited by stronger infrastructures, so infrastructure investment is thus a pre-condition for further development. Large-scale capital investment in industrial capacity lies beyond the scope of the ERDF, but support for small and medium-sized enterprises is important. Here again convergence can only be achieved

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where such support is directed primarily at areas lagging behind in development, or those facing the need for a change of direction, such as the declining industrial regions. In the latter, there are additional problems associated with the unattractiveness of the physical environment, often the legacy of past development, which have a de-multiplying influence. In these circumstances, regional policy needs to be directed at improving the landscape of both towns and countryside so that SMEs, new technology and people are attracted to those areas as pleasant places to live and to work. The combined effect of all these factors in the run up to 1992 has been to widen the Commission’s perception of regional policy. There is a new stress upon the integration of sectoral policies with that of regional policy, multi-faceted and integrated regional aid, longer scale financing, direct local and Community involvement and the more careful analysis of problems and monitoring of the effectiveness of policy. Types of Region Within the EC

The Commission periodically reviews the nature of disparities between parts of the Community. The latest of these reviews—The Regions of the Enlarged Community; The Third Periodic Report on the Social and Economic Situation and Development of the Regions of the Community —was published in 1987 and research for the next periodic report is due to be completed by the end of 1990. These reports offer the most comprehensive and useful guides to the nature and intensity of regional problems within the EC. In Community terms, regions may be classified as part of a group of regions having particular problems or characteristics. The third periodic report distinguishes four categories: (1) development-related types (poor and rich, regions lagging behind); (2) sector-related types (industrial, agricultural); (3) settlement pattern-related types (urban, rural); (4) situation- and location-related types (peripheral and central, islands, borders, mountain regions).

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This typology allows the possibility of overlap and, of course, a single region may well belong to a number of types. Moving from this basic categorization, the report considers the particular kinds of problems that groups of regions are currently facing—problems that are firmly on the Commission’s agenda. As already noted, two particular problems are those resulting from under-development and those occurring as a consequence of decline of traditional industries. Article 130C of the Treaty as amended by the Single Act refers expressly to ‘regions whose development is lagging behind’ and ‘declining industrial regions’. The report discusses the nature of the difficulties encountered by these areas and goes on to distinguish six types of region within the EC. (A) Regions lagging behind the rest of the Community These are characterized by low income, low productivity and high unemployment. They are regions in which agriculture is dominant, with poorly developed industry and services, and which are often to be found in peripheral geographical locations. Measured by GDP per head in Community-wide terms, much of Greece, Spain and Portugal would be included in this category. (B) Declining Industrial Regions The process of industrialization has reached different levels in the various parts of the Community. Some of the earliest to industrialize are now in the process of shifting the balance of employment toward the service sector because their aged industry often faces competition from imported goods (textiles), changes in home demand (coal), or shifts in location either within the EC or outside it (steel and shipbuilding). Thus sectoral, locational and demand changes combine to create economic depression, worsening infrastructure and unemployment. These characteristics may be considered to be temporary problems of imbalance which will be resolved as new employment possibilities are created. Regions such as northern England, Scotland, north-west France and southern Belgium fall into this category. (C) Agricultural Regions Only about 9 per cent of the EC labour force works in agriculture. Using a definition of an agricultural region as one in which agricultural employment is 50 per cent higher than the EC average will identify about 30 per cent of the EC’s regions as agricultural. They include all of Greece

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except Athens, the Italian regions of the Mezzogiorno, Trentino and Alto Adige, Portugal, Spain (except Pais Vasco, Cataluna, Madrid, Baleares), south-west France, Ireland and lower Bavaria. In these areas a number of other characteristics can be identified: (i) agricultural productivity measured against farming unit, and by area is low, and the size of holdings is also generally small; (ii) the general socio-economic situation measured by any indicator is worse than that of other regions; (iii) in agricultural regions the situation worsens as the dependency upon agriculture increases; (iv) agricultural regions tend to correspond to regions which are also typified as less developed, when measured by income, although not all less-developed areas are agricultural. Special categories of agricultural region can also be identified. Low productivity and reduced capacity, together with declining population, are characteristics of many mountain and hill areas which are less-favoured partly because of their difficult and sometimes peripheral locations. About 40 per cent of Community agricultural land lies in such areas where sheep farming and extensive dairy farming are the principal activities. Approximately half of agricultural regions specialize mainly in Mediterranean produce, salad crops, vegetables, fruit, wine, olive oil and meat and milk from goats and sheep. Although similar to other agricultural regions, they are highly specialized in production and have relatively high levels of productivity—also often with alternative employment possibilities in tourism. (D) Urban Problem Areas About 50 per cent of the Community population lives in an urban functional region with a large town of over 200,000 at its core, and there are 122 such regions. Problems in the urban region are, because of their location, multi-faceted, and may be regarded as either those of rapid growth or those of urban decay and decline. On the whole, the most serious difficulties arise from rapid growth. These are manifest in rapid population growth, migration of young people from predominantly rural backgrounds, high unemployment and below Community average income. Conversely, declining urban regions face problems of sectoral adjustment in mining, steel, shipbuilding and textile

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industries accompanied by falling industrial employment, outmigration, an ageing population and high unemployment. The problems of both kinds of area are considered in some detail in a study produced for the Commission, Urban Problems and Regional Policy in the European Community, in 1988. Problems of growth are associated mainly with the towns and related agricultural areas of southern Europe. Here, improvements in agricultural efficiency and the shedding of labour, together with the expectation of a better life leads to migration into the cities. The resultant problems are unemployment, extreme pressure, particularly on housing but also on transport, high levels of congestion, and thus increased costs for those already there. Towns such as Cordoba, Malaga, Napoli, Sevilla, and Athens demonstrate all of these characteristics. Problems of decline are essentially those created by the geographic shift of historic or traditional industry that was often pre-eminent in its region, and consequent sectoral readjustment. In many cases, the sector itself has experienced an overall or general decline (e.g. shipbuilding) but in some cases production levels may have remained constant or even increased whilst employing progressively fewer workers. The relative decline of these sectors results in loss of confidence, lack of investment, declining infrastructural investment, decaying physical fabric and the decline of the city. Such conditions can be seen in places like Belfast, Charleroi, Liverpool, Glasgow, Liege, Etonville, and Messina. Urban decline is essentially, though not exclusively, a north-west European phenomenon. Economic adaptation and infrastructural re-vitalisation are key changes needed in both kinds of urban area. Whilst the required changes are primarily economic, social aspects cannot be overlooked. Clearly, therefore, there is pressing need to incorporate all the funds and instruments of the Community in order to achieve these objectives. This has led to the concept of ‘Integrated Operations’ and to ‘Integrated Development’ as the spearhead of the attack on urban problems. Within this approach, regional funds are mainly devoted to projects concerned with economic redevelopment, particularly investment in productive activities, the funding of research that will assist in the development of growth sectors of the economy, and spending on infrastructural improvements. At the same time, Social Funds are being

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directed towards alleviating social problems such as urban poverty, skill shortage, poor housing and unemployment. (E) Peripheral Regions High levels of accessibility are essential for rapid economic development yet many peripheral parts of the Community remain relatively isolated and distant from markets and supplies. This imposes burdens of increased transport cost, greater travel time and difficulties in obtaining access to information. Infrastructural costs also tend to be higher because the infrastructure is less efficient as populations tend to be low and markets small and dispersed. The enlargement of the Community has significantly added to the number of peripheral regions, and a combined measure of economic activity and distance which can objectively assess peripherality places Ireland, Greece, Spain, Portugal, Northern Ireland, the extreme south-west of Britain, Denmark (except Copenhagen), Corsica, south-west France, Friuli-Venezia Giulia and the Mezzogiorno in this category. No German, Dutch, or Belgian region falls within it. Peripheral regions account for 33 per cent of the Community’s population but more than 55 per cent of its area, 29 per cent of its employment and less than 25 per cent of its GDP. Peripheral regions experience a wide range of problems such as high unemployment, low income and poor productivity. Islands are clearly a sub-group of the peripheral category and suffer the problems of access and isolation even more intensely. There are more than 300 islands and they are occupied by about 5.5 per cent of the Community population, excluding those with fewer than ten inhabitants or where a national capital is located. Their size varies markedly, the largest being Sicily and Sardinia, and, although their income and employment levels tend to be lower than average, there are some notable exceptions, such as the Balearic Islands where tourism and industry are significant contributors, and some Scottish islands benefiting from North Sea oil development. On the whole, however, this varied sub-group has a special dependence upon agriculture, strong servicesector bias, low level of industrialization and the transport and communications disadvantages inherent in island status. (F) Frontier Regions There are two sub-classes of frontier region: (i) those which lie within the Community between Member States, and (ii) those between Member States and countries outside the Community. Frontiers at sea are generally ignored although they have been significant in assigning rights to the resources of the sea or sea bed. Frontier regions should

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perhaps be viewed as a characteristic essence of the nature of the Community as a whole since it is in these areas that the unification of the Community in social, economic and political terms ought to be best expressed. However, because they are by definition at the periphery of national states they have often tended to suffer the general problems of peripheral areas, exacerbated in some cases by political insecurity. Today they are varied in composition and structure. Some may not be regarded as problem areas, for example, the Franco-German boundary along the Upper Rhine and the Franco-Italian border region; others have problems representative of other regional categories, such as declining industrial types, agriculturally-dependent types, or less-developed regions. Whilst they may require assistance because of their status as a DIR (Declining Industry) or ADR (Agriculturally Dependent) for example, the problems posed by the continuity of different legal, administrative, tax, and planning systems across the border are not sufficient to assign them special status for that reason. European Regional Development Fund

The principal direct instrument of Community regional policy is the European Regional Development Fund (ERDF), one of the EC’s three Structural Funds; the other two are the European Social Fund and the EAGGF Guidance Section. The ERDF was created in March 1975 (Regulation (EEC) No 724/75) following the first enlargement of the Community in 1973, and was partly a result of that enlargement. The accession of the UK, which already had a well-developed regional policy, and of Ireland with its relatively backward agricultural economy, provided an additional impetus. The main purpose of the ERDF was ‘to correct the principal imbalances within the Community resulting in particular from agricultural preponderance, industrial change and structural unemployment’. Initially, the ERDF was financed at 258 million ECUs, approximately 4.8 per cent of the Community’s budget. This sum has increased substantially to 4.5 billion ECUs by the late 1980s, in part reflecting the further enlargement of the Community with the accession of Spain, Portugal and Greece, and also the increased emphasis now put upon regional issues and problems in the Community.

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At first, all of the budget was allocated to Member States through a quota system in order to support existing regional policy and development initiatives in the form of Regional Development Programmes (RDP) and finance was restricted to individual investment projects in infrastructure or firms situated in areas that were already designated as eligible areas under national regional assistance schemes. ERDF Fund Level Year 1975 1976 1977 1978

Amount (mECU) 257.6 393.4 378.5 581.0

Budget Percentage 4.8 5.6 4.9 4.6

Year 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989

Amount (mECU) 945.0 1165.0 1540.0 1759.5 2010.0 2140.0 2290.0 3098.0 3341.9 3684.0 4495.0

Budget Percentage 6.1 6.7 7.3 7.6 7.6 7.3 7.5 8.6 8.9 8.2 9.7

A major reform in the operation of ERDF came about in 1979 when a ‘non-quota’ element of the budget was included. Amounting initially to 5 per cent of the budget, the ‘non-quota’ section was earmarked for specific Community regional development measures measures intended to supplement other Community policy. These measures had three essential characteristics: (i) they were to be multiannual in implementation, (ii) assistance would be extended to ‘non-physical’ investment so as to assist small and medium-sized businesses, (iii) the spatial extent of their coverage would be determined at Community level by Community criteria, so that they need not necessarily be the

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same as national assisted areas. Additionally, Community regional policy came to be regarded as an integral part of economic policy rather than simply a financial transfer mechanism. This heralded a change in outlook towards a more positive and direct role for the Community in regional affairs. A further revision of the ERDF was undertaken in 1985 with a widening of the scope of its activities. The ERDF was given the extended remit ‘to contribute to the correction of the principal regional imbalances within the Community by participating in the development and structural adjustment of regions whose development is lagging behind and in the conversion of declining industrial regions’ (Regulation (EEC) No 1787/84 of 19 June 1984). The revision further strengthened the Community-orientated role in regional policy, by highlighting the need to co-ordinate Community policies with each other and with national policies so as to ‘achieve a higher degree of convergence of the economies of the Member States and a more balanced distribution of economic activities within Community territory’. The guota system was replaced by a series of ranges which set upper and lower limits to the funding available to each Member State over a three-year period. The share each might expect was determined by reference to the intensity of the regional problem existing in each Member State, so that a greater share went to those countries with the worst problems. The initial allocation provided for a range of between 21.42 per cent and 28.56 per cent of the Fund to the UK, as compared, for example, with between 0.9 per cent and 1.2 per cent to Belgium. Ranges were modified in 1985 to take account of the accession of Spain and Portugal (see table). Countries could only be allocated aid above the lower limit to the extent that their grant applications satisfied the priorities and criteria laid down by the Regulations. ERDF Ranges (1986 Percentages) Country Belgium Denmark Germany

Lower limit 0.61 0.34 2.55

Upper limit 0.82 0.46 3.40

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Country Greece France Ireland Italy Luxembourg Netherlands Portugal Spain United Kingdom TOTAL

Lower limit 8.36 7.40 3.82 21.62 0.04 0.68 10.66 17.97 14.50 88.63

Upper limit 10.64 9.96 4.61 0.06 0.06 0.91 14.20 23.93 19.31 117.09

Whilst most of the Fund was available for national projects and studies, there was also provision for an increasing proportion (up to 20 per cent) to be used for financing programmes, either Community programmes involving regions in more than one Member State or ‘national programmes of Community interest’ submitted by Member States. The first category comprises a series of multi-annual measures that are intended to help solve serious socioeconomic problems affecting a number of regions and states. They are proposed by the Commission and agreed by the Council through a majority decision. The first two Community programmes were introduced in 1986. STAR was aimed at improving access to advanced telecommunications services in less-favoured regions, whilst VALOREN was concerned with the exploitation of indigenous energy potential in similarly less-favoured areas. In 1988, two other Community programmes were introduced to deal with the restructuring of the steel industry (RESIDER) and the decline in shipbuilding (RENAVAL). The most recent proposal for a Community programme came in August 1989 when the Commission announced its intention to establish a programme to support the conversion of the Community’s coalfields. Like RESIDER and RENAVAL, the new programme—named RECHAR—would complement efforts already made by the Structural Funds to provide alternative employment to compensate for the job losses caused by the decline of a primary industry. Over the last three decades, coal production has fallen by 50 per cent, from 450 million tonnes in 1960 to 210 million tonnes in

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1988. Faced with declining demand because of increased use of alternative energy sources, over one million jobs have been lost, and the rate of loss accelerated in recent years. The programme, which is expected to be focused on lessfavoured or declining areas, will help generate alternative employment (especially through aid to SMEs) and give particular attention to improving the environment of decayed mining areas. The second category of programme adopted under the 1985 reforms was National Programmes of Community Interest (NPCI). These were initiated and defined at national level, but identified and developed measures which would serve both national and Community interest through the reduction of regional disparities. They were particularly aimed at infrastructure investment, and industrial, craft and service aid to exploit the potential for internallygenerated development. In assessing programmes, the Commission takes account of: the severity of regional economic imbalance, the potential effect of the programme on employment, the potential to strengthen the region’s economic base, the yield on investment, the location of the regions concerned, the effects on natural resources, the compatibility with other Community policy. NPCIs could benefit from a combination of measures including: provision of industrial sites, land clearance, improved communication facilities, training, business development, enhanced tourist facilities and environmental improvement. The 1985 changes also involved provision relating to ERDF support for Integrated Development Operations (IDOs), especially Integrated Mediterranean Programmes (IMPs). The first IMP to be launched, for Crete, followed in 1986. The integrated approach had by this time become a favoured strategy for structural intervention, especially in the most severely disadvantaged regions. In 1980 the integrated approach had been adopted in respect of Naples and Belfast. Similar programmes followed for the Western Isles (Scotland), Lozère (France) and south-east Belgium. The advantages of the integrated approach were spelled out by the Commission in a note to the Council and Parliament in 1986 (COM (86) 401/2/final). In 1987, IDOs were adopted for Oost-Groningen/Oost-Drenthe (Netherlands), Ariège, Auvergne, central Brittany, the island of Réunion,

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Limousin and east Tarn/south Aveyron (France). In 1988, seven further IDOs were launched: Birmingham, Bradford, Strathclyde and Yorkshire/ Humberside (UK), Nord/Pas-deCalais (France), Limburg (Belgium) and Norte Alentejo (Portugal). The integrated approach has also been adopted to deal with the problems of Portuguese industry (PEDIP). By 1987 a large part of the European Community was eligible, in whole or part, for ERDF assistance. It amounted to 45 per cent by area of EUR10 and 65.7 per cent of EUR12, and included 38.5 per cent and 41.0 per cent respectively of the European population. Throughout this period, in addition to the main instrument of regional policy (ERDF), regional development has also been assisted by ECSC and EIB loans and by grants from the European Social Fund and EAGGF Guidance Section. Although none of these latter bodies are specifically charged with a regional responsibility, there has been an ever closer relationship between them and the main regional Fund. It is clear that ‘regional’ problems are multi-faceted, having social, industrial and infrastructural elements. Since the problems of regional under-development or decline are interlinked, if they are to be effective, the solutions applied by the Community must be similarly interlinked. It is against this background that the most recent, and the most significant, reform of the Structural Funds has taken place. ERDF and the Reform of the Structural Funds

The Single European Act brought a new perspective to regional policy as it was apparent that a single unified market would place a heavy burden upon the weaker states and on those areas seriously affected by industrial decline. The Act reasserted the need (expressed in broad terms in the Treaty of Rome) for the strengthening of economic and social cohesion by reducing the disparities between the various regions, and the backwardness of the less-favoured regions. If this was to be achieved, then it was essential that a more integrated and coherent approach be taken towards regional problems. This, in turn, implied the need for better co-ordination between the various funds and financial instruments available to help problem areas and for an approach based more upon ‘programmes’ than on a large

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number of discrete ‘projects’. The Single European Act provided the impetus for reform, but the changes themselves are the culmination of experiences learned during recent years. In particular the Commission has been anxious to build upon good practice and to move away from the less successful approaches of the past. The positive experiences include: the virtues of an integrated approach to regional and sectoral problems, the advantages of collaboration and dialogue with national governments and with local and regional authorities, and the value of Community-wide programmes to deal with Community-wide problems. The practices to be avoided include: piecemeal action through support for a large number of unrelated projects, inadequate monitoring of schemes and assessment of their actual impact upon completion, and failing to ensure that aid really was additional to national financial support. The political breakthrough for the creation of a single market was finally achieved at the Brussels summit in February 1988 when a decision was reached that ensured that the Community would have sufficient and secure resources until 1992. The call of the Single European Act for economic and social cohesion depended upon other changes that were only agreed at the Brussels summit after much negotiation. The more important changes were: an overall increase in the Community budget from 45 billion ECU in 1988 to 53 billion ECU in 1992, legally binding limits on farm support so that this element in the annual budget should decline from around two-thirds of the total budget in 1988 to 56 per cent by 1992, and a doubling of the Structural Funds from 7.8 billion ECU per year in 1988 to 13.5 billion ECU by 1992—representing an increase from 17 per cent of the budget to over 25 per cent. Under the Single European Act, the Commission was authorized to prepare ‘a comprehensive proposal to the Council, the purpose of which will be to make such amendments to the structure and operational rules of the existing Structural Funds as are necessary to clarify and rationalize their tasks in order to contribute to the achievement of these objectives…[Article [30c]…and to increase their efficiency’. The Commission’s response, Reform of the Structural Funds (COM(87) 376/2/revision

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final), sets out the main principles underlying the reform of all three Structural Funds. They are: concentration of the Funds on specific objectives, providing the Funds with adequate resources to deal with the Community’s problems, establishing a new approach based on complementarity, partnership and programming, and simplifying procedures and improving co-ordination. The changes were fleshed out during 1988 and are embodied in three main Regulations: a Framework Regulation (2052/88) setting out the overall tasks of the Structural Funds, a Horizontal Regulation (4253/88) laying down the provisions for the co-ordination of the Structural Funds with each other and with the European Investment Bank and other financial instruments, and an Implementing Regulation (4254/88) laying down provisions for implementing the Framework Regulation with respect to the European Regional Development Fund. The instruments of Community financial support had developed over time—some were set out in the founding Treaty whilst others were the result of derived law. As a consequence, they reflected changing objectives and procedures and varied considerably. The one thing that tended to be a common factor was the shared aim of attempting to create a common structural policy that would improve EC working and living conditions and so meet the objective of harmonization as referred to in the Treaty of Rome. Even before the reform, the magnitude of spending in pursuit of structural policy was not insignificant. In 1987 the Structural Funds accounted for 7.3 billion ECU and loan instruments contributed a further 8,000 million ECU. These are significant figures, especially if it is recognized that EC aid is intended to be co-financing and, therefore, should be matched by the contributions of Member States. However, the level of funding was clearly inadequate to meet the needs of the Community if regional imbalances were not to widen still further. Moreover, in order to obtain better results, it was necessary not only to increase the Funds but also to spend the money more effectively. This implied flexibility, concentrating schemes where the best results were likely to accrue, and more effective monitoring. The virtues of the integrated approach and of the Community programmes were especially relevant.

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As already noted, the Single European Act underpins the reform of the Structural Funds by committing the Community to a policy of economic and social cohesion and, in particular, to meeting the problems of the less developed areas and those areas affected by industrial decline. The new Regulations were influenced by four distinct principles: that there should be clearly-defined objectives for each Community action; that the means must be increased and, therefore, the funds be adequate to meet objectives; that there should be new methods of expenditure and financial control; and that there should be greater complementarity between Community and national programmes. At the same time there was a desire to simplify management rules in order to make them less obscure and more effective. The Framework Regulation sets out the five Objectives and tasks of the Structural Funds. These are: Objective 1 promoting the development and structural adjustment of the regions whose development is lagging behind; Objective 2 converting the regions seriously affected by industrial decline; Objective 3 combating long-term unemployment; Objective 4 facilitating the occupational integration of young people; Objective 5 with regard to the Common Agricultural Policy: (a) speeding up the adjustment of agricultural structures (b) promoting the development of rural areas.

With regard to the means of support, each of the Structural Funds was to contribute according to the specific provisions governing its operations. Funds will be directed towards the five Objectives in the following way: Objective Objective Objective Objective Objective

1 2 3 4 5 (a)

ERDF, ESF, EAGGF Guidance Section ERDF, ESF ESF ESF EAGGF Guidance Section

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5 (b)

EAGGF Guidance Section, ESF, ERDF.

The European Regional Development Fund is primarily concerned with Objectives 1 and 2. Under the new Regulations, the territorial boundaries for eligible regions will not be defined by the Member States themselves, as in the past, but by criteria used throughout the Community, and fixed in the Regulation. The criteria used will be related to the Objectives so that for regions defined under Objective 1 (those lagging behind) the criterion for determination is that they should have a GDP more than 25 per cent below the Community average. The Framework Regulation itself lists the areas that meet this condition and these areas will remain eligible for five years at which point a new list may be published. Thus all of Greece, Portugal, Ireland, Northern Ireland, and a large part of Spain as well as parts of Italy and the French overseas departments and Corsica are included. In the case of Objective 2 regions, the principal criterion is level of unemployment. This has had the effect of removing from eligibility large areas of France and Germany which will no longer be supported. The Regulation itself does not list the eligible NUTS level III areas—these were subsequently defined by the Commission in April 1989 (see Appendix). The criteria for eligibility will be reviewed after three years. Under the new Regulations, the majority of ERDF aid— approximately 80 per cent—is earmarked for Objective 1 regions. Of the remainder, 18 per cent will be devoted to declining industrial regions (Objective 2) and 2 per cent to rural areas (Objective 5(b)). This means that of the 4.5 billion ECU per year to be spent by the ERDF over the next five years, 3.6 billion ECU will go to help less-favoured areas covered by Objective 1. Although Member States will no longer have a quota, the Commission is required to allocate indicatively up to 85 per cent of ERDF support between countries in order to facilitate the planning of assistance. This indicative allocation, which is a guide and not an entitlement, takes account of the criteria used for defining Objectives 1, 2 and 5(b) and the Commission is also asked to ensure that all Member States feel the benefit of the doubling of Fund aid in the period up to 1992. The allocations for Objective 1 areas are:

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Spain: 32.6%

Andalusia, Asturias, Castilla y Leon, CastillaLa Mancha, Ceuta-Melilla, Valencia, Extremadura, Galicia, Canary Islands, Murcia France: 2.1% French overseas departments, Corsica Greece: 16.2% the entire country Ireland: 5.4% the entire country Italy: 24.5% Abruzzi, Basilicata, Calabria, Campania, Molise, Apulia, Sardinia, Sicily Portugal: 17.5% the entire country UK: 1.7% Northern Ireland

The indicative allocations of 85 per cent of the credits designated for declining industrial regions were announced in March 1989. They were: UK Spain France Germany Italy Belgium Netherlands Denmark Luxembourg

38.3% 20.7% 18.3% 8.9% 6.3% 4.3% 2.6% 0.4% 0.2%.

In all cases Community operations are intended to be strictly complementary to national measures and Fund aid should be additional to national aid. There is no single rate of intervention; the level of support, and the mix of grants and loans, will depend upon the severity of the problem and the ability of the Member State to contribute. In the case of Objective 1 and 2 regions, it is intended that ERDF aid should be in support of: (i) productive investment, (ii) the creation or modernization of infrastructures that contribute to the development or conversion of regions, and (iii) measures that exploit the internally-generated development potential of regions. There is also provision for studies and pilot schemes. The forms of assistance can be one of the following: (i) part-financing of operational programmes, (ii) part-financing of national aid schemes, (iii) global grants, usually managed by an authorized regional body, (iv) part-

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financing of relevant projects, and (v) support for technical assistance and studies. The procedure for applying is similar in both cases. In regard to Objective 1 regions, Member States are required to submit five-year regional development programmes that include an outline of development priorities and an indication of the use that would be made of Community financial support. In the case of Objective 2 areas, Member States are required to submit three-year development and conversion plans and in assessing these the Commission will place particular emphasis on productive investment that will create new employment opportunities. Support for infrastructure will mainly be given to schemes that replace decaying infrastructures, introduce environmental improvements and encourage the launch and development of new businesses, especially through SMEs. Emphasis is given to the creation of a direct dialogue with appropriate local and regional authorities as a reflection of the spirit of partnership. The response of the Commission to applications for aid will come in the form of a Community support framework that will draw up a financing plan. Given the new emphasis on co-ordination at Community level, applications for aid will involve discussions inside the Commission with a number of Directorate Generals. Although DG XVI has prime responsibility for the ERDF, since schemes are likely to involve more than one Fund, other DGs will be involved. DG XXII is charged with overall responsibility for ensuring the co-ordination of Structural Instruments; DG II (Economic and Financial Affairs) will evaluate applications from the perspective of their macroeconomic aspects; and DG XX (Financial Control), will take on responsibility for monitoring expenditure in conjunction with the specific DG controlling the Fund in question. The issue of financial control and probity has especially concerned the UK Government and a tightening of budgetary discipline and audit was a condition of agreeing to the increase in the level of the Structural Funds. The reform of the ERDF, and the other Structural Funds, is based on a number of key ideas. Many of these are discussed in the Guidelines produced by the Commission in February 1989 (see Section 2). First, there is the clear indication that the Commission is seeking better value for

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the money that it spends and an increased impact from the enhanced ERDF resources. This leads the Commission to opt for concentration in its activities, both geographical and functional. Geographical and functional concentration is expressed through the criteria used in identifying eligible Objective 1 and 2 regions. It is the Commission’s view, not necessarily shared by some Member governments, that henceforth most money should go towards productive investments rather than infrastructure projects. In the past, Member States have enjoyed most support for the latter schemes. The second key idea is the emphasis on programmes rather than projects. In the past the Commission often found itself ‘rubber-stamping’ a large number of projects and making little direct input into such schemes. In future, the Commission is seeking a more positive role, via the Community support framework, in the formulation of integrated programmes. In the main, this reflects a desire to adopt a more co-ordinated and coherent approach to help solve regional problems. However, it also indicates a move by the Commission to shift the balance of power within the Community’s institutional structure towards itself and the Parliament. The third idea is that of co-ordination. One of the lessons learned over the last few years has been the effectiveness of Community programmes and Integrated Development Operations that involve co-ordination both horizontally at Community and regional levels, and vertically between the Community and recipient areas. The fourth idea, the stress on partnership, stems from the previous theme. The Commission has long attempted to establish a more direct dialogue between itself and authorities in the regions concerned rather than always going through national governments as intermediaries. In this context it is appropriate to refer to a Joint Declaration made by the Council, the Commission and the Parliament of the European Community in June 1984. It reads: ‘The three Institutions agree on the advantages, with due regard for the internal competence of the Member States and the provisions of Community law, of more efficient relations between the Commission of the Communities and regional or, where applicable, local authorities. This will enable

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regional interests to be better taken into account when regional development programmes and assistance programmes are drawn up.’ The desire for a closer relationship between the Community and its component regional and local authorities is reflected in the procedures contained in the Regulations. Also, in a spirit of partnership, the Commission decided in June 1988 to establish a Consultative Council of Local and Regional Authorities attached to the Commission. The 42 members are drawn from the main European organizations of local and regional authorities and may be consulted on any matter relating to regional development and the regional implications of Community policies. Partnership is also expressed in the intention to collaborate with national governments in helping tackle problem areas. To be effective, EC aid must be applied in conjunction with national schemes. The fifth key idea concerns the sensitive issue of additionality. It has always been the Commission’s intention that Community aid should be additional to, and not a substitute for, national aid. However, Member governments have not always shared this view and the new Regulations make explicit the Commission’s requirement that EC support is additional, or has an additional impact, to national aid. Mechanisms of financial control are intended to strengthen this objective. The sixth idea concerns monitoring and assessment. Given the additional resources, it is regarded as even more important that the support offered by the Community should be put to proper and effective use. This has not always been the case and, whilst ERDF aid has not attracted the same suspicion of misuse as some of the money under EAGGF, it is clear that there is room for the tightening of budgetary discipline and better financial management. Monitoring will take place throughout the duration of schemes and, on their completion, there will be an assessment of their effectiveness in meeting their original aims. Overall, the reform of the ERDF and other Structural Funds marks a major departure in the attempt to achieve economic and social cohesion. The level of ERDF resources will increase considerably and be accompanied by a more

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integrated and programme-based approach. There is greater flexibility in the level and mix of aid and, consequently, the direct influence of the Commission will increase. The schemes that receive most support will clearly be those that most closely accord with the Commission’s own objectives. In terms of priority, most help will go to less-favoured areas of southern Europe as indicated by the 80 per cent of the ERDF budget devoted to Objective 1 regions. Less than 16 per cent of the Community is eligible for Objective 2 aid and this fact, combined with the new emphasis on productive investment rather than infrastructure aid, means that many schemes allowed in the past will no longer enjoy Community support. Money will be concentrated much more clearly on those programmes that are most likely to make a real contribution to the goal of convergence. Sectoral Policies and their Regional Impact

The influence of EC policies upon the regions is not simply felt through the ERDF; all sectoral policies have regional implications although it is sometimes difficult to measure their impact precisely. The principal areas concerned are agriculture, industry, the service sector, trade, labour and social policies, energy, and transport and communications. Large regional variations can be observed in almost every aspect of agricultural activity in the Community. They include: variation in land-use (which itself has created identifiable farming regions in which, for example, arable, horticulture, or intensive animal rearing are dominant subsectors of the economy); large variations in labour inputs, variable labour and land productivity; differential change and innovation and concentration of agriculture all of which culminate in major income differentials. The differences relate to: spatial and physical conditions (soil fertility, transport cost in relation to market); economies of scale and economic linkages; size of farming unit and structural factors (specialization, co-operation). In terms of space and territory, agricultural policy is highly significant because the potential effects are so widespread. It could, therefore, play a key role in removing or reducing imbalances. However, the institution of a common agricultural market for the Community, and the

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pricing policies pursued, have not contributed to a more even distribution of agricultural wealth across the regions nor to a reduction in the tendency for them to diverge from Community averages. This is partly because some of the producers of the main temperate zone products are the more advanced and better developed regions and, therefore, enjoy the benefits of a strictly regulated market which limits the severity of regional competition. The access to a large Community-wide market, and national policies applied at both national and regional level, have encouraged investment in farm development and local infrastructures and in research and development. This has had the effect of concentrating production in economically developed and prosperous countries and regions which lie at, or near, the core of the Community. The problem may be exacerbated by the likely diminishing market for agricultural goods in peripheral regions where opportunities for growth and development are limited. The proportion of the EC budget devoted to agricultural support as part of the Common Agricultural Policy has, of course, been a controversial issue and the agreement made at the Brussels summit in February 1988 to reduce the level of farm subsidies was an important pre-condition that allowed an increased share of the budget to be allocated to the Structural Funds. However, the relationship between agricultural policy and regional policy extends beyond this and the EAGGF Guidance Section has a significant role to play in meeting the new objectives of the Commission, in particular with regard to Objective 1 areas (under-developed areas) and Objectives 5 (a) and (b) concerning the adjustment of agricultural structures and promotion of the development of rural areas respectively. Regulation (EEC) No 4252/88 sets out various measures that will be used to facilitate the adjustment of agricultural structures, to help the structural adjustment of less-developed regions and to promote the general development of the Community’s rural areas. The latter was the subject of a separate Commission document The Future of Rural Society (COM(88) 501 final) earlier in 1988. Overall, these measures are highly regional in their perspective—they promote the development of rural and less-developed regions by helping job creation and the

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establishment of new infrastructures in disadvantaged parts of the Community. Industrial development and regeneration are critical to the process of convergence. A common trend within the Member States, especially in northern areas, has been the decline of traditional manufacturing industries and the concurrent growth of the service sector. Policies have been directed at containing the adverse consequences of this trend, by offering assistance to regions experiencing industrial decline in the restructuring of their older industries. At the same time, there has been an attempt to encourage the development of new sectors, especially via the mechanism of SMEs, so that together the problems of high unemployment can be tackled. This approach aims at compensating regions for losses arising from the restructuring of declining industrial sectors, and giving assistance for reconversion measures, especially those involving the establishment of new businesses. RESIDER (steel), RENAVAL (shipbuilding) and RECHAR (coal mining) are examples of this approach. Encouraging new industrial growth itself has a major spatial dimension, because particular regional characteristics (e.g. accessibility, communications, availability of skilled labour, regional agglomeration) are desirable. These conditions apply to all sectors but they are unlikely to be brought about as a consequence of measures introduced in support of a single sector. One particular sector that is regarded with some importance by the Commission is the information services market which is seen as a crucial Community resource. It is the Commission’s view that ‘information is seen more and more as a motor for the industrial development of the Community within a highly competitive market’ (Guidelines for Improving the Synergy Between the Public and Private Sectors in the Information Market). One benefit of exploiting the full potential of this market—the Commission estimates that in its broadest sense information handling accounts for 55 per cent of jobs and 65 per cent of GNP in Europe—is that the Commission can thereby make some contribution to the reduction of regional disparities. Tradeable information services, in an internal market of 320 million people offer huge potential. Moreover, unlike some sectors, location need not be critical since advanced

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telecommunications offer, in theory at least, a much freer choice about where businesses are established. The information sector, therefore, brings together a number of crucial factors: a commodity that is in increased demand, an activity that is appropriate for SMEs and a business where location, provided telecommunication links are good, need not be critical. The development of information services, therefore, is relevant to both the declining industrial areas and the less-developed regions. Measures to encourage more activity in the fields of both data processing and telecommunications (sometimes termed ‘telematics’) are seen as appropriate responses to help reduce regional imbalances. The STAR programme is aimed at improving access to advanced telecommunications in the less-favoured areas. More generally, in July 1988, Council agreed to an action plan for the information services market (IMPACT). The plan, to run initially for two years at a cost of 36 million ECU, will consider the prospects for the information market in general but the sector offers particular potential for those regions suffering from under-development or the decline of other industries. The availability of advanced telecommunication facilities raises more general issues of communication, location and accessibility. If convergence is to be achieved then there is a need for higher levels of accessibility through improved transport and communication links with disadvantaged areas. When development is considered to be best served by a change from an agricultural to an industrial base, the function of transport policy is to set in train changes that will reduce the cost and friction of distance. However, as economies become more service-orientated, and industry is dominated increasingly by multi-national corporations, a hierarchy of regions evolves in which the poorer areas become dependent upon branch plants, sub-contracted work and government help. In these circumstances, good communications with financial and government centres are required and, therefore telecommunications and rapid passenger transport are as vital as freight facilities as agents of regional policy. Without intervention to improve accessibility, it seems inevitable that existing gaps between those regions possessing, or able to obtain the links, and those which do not or cannot will widen. Some predict, for

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example, that the opening of the Channel Tunnel will simply exacerbate the gap in affluence between the south-east and the rest of Britain. Even where national governments aim at universal provision of communication facilities the first regions to be supplied are generally those that offer the heaviest use, and best return on investment. These are invariably the richer regions, and they then enjoy a lead in time over poorer areas. In some cases, where investment may be market-led, facilities will always remain poorer in the weaker regions. On the whole, slow and piecemeal development, national preference and long lead-time have made it difficult both to develop and to integrate Community transport and communications policy with the needs of the region. Until recently, Community telecommunication funding has been so small as to have had little detectable regional impact. The recent emphasis on new technologies in general, and on information and telecommunications sectors in particular, is intended to provide a fillip in this field. Again it is worth noting that small and medium-sized businesses are seen as dynamic vehicles of development in this area. The problems of accessibility and ease of communication are, of course, not limited to the less-favoured areas. Communication and transport policies also have to take account of the problems of congestion. However, such policies are unlikely to produce much change in regional imbalance and are mainly directed at assisting the core area of the Community. The impact of Community policy is also likely to be affected by the nature of national transport arrangements. It is reasonable to assume, for example, that Community policy will have a reduced impact where transport and communications are deregulated and privatized since market forces are expected to be much stronger. The availability and cost of energy resources is another ingredient of the regional economy. EC energy policy has been principally affected by two factors: the large changes in oil prices and the accession of the states of southern Europe which were more dependent on imported oil than those of the north. The increase in oil prices in 1973 prompted countries to reassess their energy consumption and supply patterns, and to undertake conversion measures so that

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they became less dependent upon imported supplies of oil. The countries and regions of the south were unable to convert so quickly as those in the north, because their weaker economies, technological backwardness, and small populations at lower densities, made the task more difficult. This has served to further exacerbate regional imbalance. The main focus of energy policy, therefore, has been the development of ‘indigenous energy potential’ as in the VALOREN programme. This programme has the aim of making disadvantaged regions less sensitive to the disturbing influences of fluctuations in the oil market, but it is also intended to strengthen the economic base by providing opportunities through the development of solar, wind and biomass energy sources, small-scale water power, and geothermal energy. Of all other areas of Community policy, perhaps the most intimate link is with social policy. In the main, the social policies of the Community have been directed at the problems associated with unemployment, offering support for training and re-training, and employment programmes (for the long-term unemployed, disadvantaged groups and those affected by structural change). The regional impact of such measures has been mainly a function of the way that national governments have chosen to use this support and, therefore, hitherto these measures have had relatively limited effect on regional imbalances. Clearly, however, support under the ERDF for new infrastructure and industry is wasted if not accompanied by social measures designed to provide the skilled manpower for such initiatives. The EC directorate responsible for social matters, DG V, is charged with oversight of employment, education and social policy—all issues that are closely connected with regional disparities. If there is to be convergence within the Community then economic and social matters are inseparable—ERDF support can help provide the infrastructure and economic conditions appropriate for development or conversion, but without matching human resources little will be achieved. Indeed, because the regional problem is one which is characterized by a concentration and build-up of many interlocking problems, any policy directed at only one of them in isolation is bound to have little impact. The declining industrial region or backward

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agricultural zone, for example, will enjoy little positive value from training or re-training programmes, unless they are part of an overall policy to improve employment possibilities in new or revived industry in the locality. Recognition that economic and social cohesion must accompany each other has grown over the last few years and, to some extent, there has been a converging of the activities of the two relevant Funds. Under the new regulations this relationship is clearly formalized. The Regions and ‘1992’

The challenge of creating a single European market by 1992 is set out by the Single European Act and the rationale for this Act is clear. The Treaty of Rome is introduced with the following commitments: ‘Determined to lay the foundations of an ever-closer union among the peoples of Europe, Resolved to ensure the economic and social progress of their countries by common action to eliminate the barriers which divide Europe’. These ideas formed the guiding ideology for many postwar integrationists. They also implied practical economic measures, and their effects were evident in the early progress made by the economies of the six founding states. However, progress slowed in the early 1970s, partly due to the accession of slower growth economies and partly due to world-wide recession, while the larger economies of the USA and Japan and the Far East began to outstrip those of Western Europe. For both ideological and practical reasons, therefore, there was a need to give a further impetus to European growth. The goal of a ‘common’ market was a long way from fruition. Although co-ordination and co-operation have been achieved to some extent, Member States still operate as distinct economic units, and there continue to be real barriers to a free market, including tariff barriers and limits to labour movement, health and safety regulations, quality controls, and differences in indirect taxation. These barriers make it difficult for the twelve Member States to realize the huge potential offered by an integrated internal market of 320 million people; and without that ‘home’ market no single European country can compete effectively

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against Japan (where the home market is for example, twice that of Germany) or the USA with a home market of around 230 million people. Inefficient use of resources is one consequence. Together, the twelve Member States spend as much money as Japan on research, but much of the effort is duplicated, and large projects are inadequately funded. Any new product faces the problem of meeting a number of different standards within Europe, which adds to its cost, and helps to make it uncompetitive in a world market. Similarly, in structural terms it is difficult for companies to rationalize their production process, since they need to produce different products for a variety of markets at a European level. This also makes for greater production costs, higher consumer prices, and a lack of competitiveness at world level. Aside from any ideological considerations, therefore, the lack of a single European market imposes economic costs and these in turn militate against European unity. Creating a homogeneous internal market has consequently become a major priority, and through the Single European Act is now embodied in European law. The achievement of a single market by 1992 will require approximately three hundred separate pieces of Community legislation and, as a policy, it must be pursued in several different directions. First, it will require the removal of physical barriers to the free movement of people, currently restricted by two factors. The first of these is a security factor since borders between states are usually where nations exercise their security function and ensure rights of entry only to eligible individuals. The removal of such checks will require that the Community states institute other common measures, for example, to prevent drug-trafficking. The second factor relates to the need to ensure that appropriate taxes are paid on goods which travellers carry with them and although harmonization of tax rates will bring this need to an end, other measures may be required. Physical controls on the movement of goods are also to be lifted. These are currently instituted in order to meet administrative, fiscal and health requirements etc. Such checks are time-consuming, frustrating because of the inevitable delays that occur and ultimately expensive. The transport medium itself has to be checked to enforce the separate national haulage and safety

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regulations which apply, and the intra-Community journey ‘quota’ system. Technical barriers are also substantial limits to free movement—although often they are not visible. These barriers are fundamental impediments to the free movement of goods, and are caused by the fact that different product regulations and standards operate from one state to another. These standards apply to safety, environmental influence, consumer protection and so on. They increase production costs, and stockpiling costs, and distort production patterns. They may also serve as a protectionist device. To overcome these problems harmonization of many product specifications has been undertaken although consumer choice is to be protected and national regulation of general specification accepted. Free movement of people in the Community is currently limited by a number of technical barriers. Different educational standards and approaches mean that qualifications are not always mutually recognized, limiting freedom of movement. Similarly vocational training standards vary so that craft-workers, for example, may not be accepted outside their country of qualification. The problem is especially acute for the professions and is of great significance for the Community. Much effort was required to achieve a harmonization such that individuals have a right to practise in any country of the Community. This process has been effective in medicine, where harmonization of basic training has made the right of establishment—the right to practise in all Community countries—a reality. The principle has been accepted that a person fit to practise a vocation in one member state should, in general, be fit to practise in another. In peripheral parts of the Community, educational provision has always been less satisfactory than in the richer states of the north. One likely impact of a freer internal market, therefore, will be an outflow of skilled and trained personnel from these regions. Such a flow will simply exacerbate the existing problems of those states and regions on the one hand or perhaps ameliorate the unemployment problem by allowing freer movement on the other. Although considerable freedom of movement for capital already exists, by 1992 the Commission’s objective is the complete liberalization of all financial transactions,

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including cash, credit transfers etc. This objective is necessary if competition is to be fair between institutions in a free Community-wide market, but it also extends to include harmonization of movement of capital to and from non-Member States. One of the problems of less welldeveloped regions has been their undercapitalization and a single internal market may adversely affect some regions’ ability to attract and retain investment. At a personal level it may serve to increase personnel mobility by simplifying the transfer of personal funds and capital further exacerbating the problems of the under-populated areas. Alternatively, capital mobility might substitute for labour mobility. The service sector accounts for about 60 per cent Value Added in the EC economy and is as important as the manufacturing sector. It is thus central to the continued growth of the European economy. Freedom of Communitywide movement implies harmonization of regulations for those services like banking and insurance where the function is government-controlled, and freedom to choose from services offered in any country in the knowledge that minimum standards are applied across the Community. Other commercial activities must be allowed to operate throughout the Community without restriction, and a major area of development here is transport where the level of regulation and protection is very high. This is widely recognized in the case of air travel, but the Commission is also concerned to deregulate road, rail and sea transport. One major problem in cross-boundary business enterprise is the lack of a common legal framework for joint activities. The Commission proposes harmonization of national company laws and common rules on company taxation and liquidation. These proposals also enter the field of intellectual property law with a proposed Community trademark system. Fiscal barriers perhaps represent the most ubiquitous of the barriers to cross-national movement in trade and have been used extensively in the past. In the European context the harmonization of indirect taxation, particularly the introduction of VAT as the common turnover tax, has been important although the rates levied vary considerably. Other excise duties are based on widely different premises and will require adjustment but, at the border, control serves two purposes—ensuring the tax

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accrues to the right state and checking fraud and evasion. The Commission proposes alternatives to eliminate the need for fiscal barriers. If the export trade is treated on the same basis as domestic trade, then taxes may be raised in a similar way, and a clearing system could ensure that balances are paid from time to time between states so that tax revenue accrues in the appropriate country. Such a system will operate best where rates of tax (e.g. VAT) in Member States are close to each other, although experience elsewhere suggests that they do not need to be completely uniform. Simplification would considerably lighten the administrative burden for exporters who would prepare VAT returns as if for domestic consumption. Protective fiscal barriers have also been used to help less well-developed regions and regions with industrial sectors in the throes of transformation. Removal or harmonization could throw these areas further into distress and reduce their competitiveness in the wider market. The completion of the single European market will have effects upon all regions of the Community but the effects will be ill-balanced. Some regions are likely to become more attractive because they offer greater economic advantages and, as a result, resources (human, material and financial) will tend to move towards them. Other regions are likely to be disadvantaged both by comparison with the former and because any protection they enjoyed in their national market is likely to be lost. Removing barriers and freeing the movement of labour and capital will, in the absence of intervention, almost inevitably lead to a process of industrial relocation and agricultural concentration near to the centre of that market. Existing regional imbalances between core and periphal regions will intensify and without remedial measures it is likely that the richer will become richer and the poor, poorer. It might be anticipated, therefore, that the internal market will be more easily exploited by regions in Benelux, the Ruhr, north-east France and south-east England. Weaker areas such as the peripheral states, declining industrial areas and disadvantaged urban or rural locations are more likely to suffer. For this reason, the implementation of some harmonization measures, notably in the financial sphere, is being relaxed for southern states in

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order to allow them longer to catch up. However, the concession is a temporary one and it assumes that within a decade the southern states should be able to compete with the other countries on an equal footing. There are dangers for regions that fail to respond sufficiently quickly to the new challenges, or for those that face a time-lag as benefits will accrue first to the stronger areas. Alongside the regional impact of ‘1992’, it is also appropriate to consider the effect on regions of sectoral changes which might ensue as a result of 1992. The Commission has suggested that a number of sectors (including the motor industry, telecommunications, building materials, pharmaceuticals, financial and transport services, and public-sector supplies and services) may come under pressure in the initial phases; other sectors will face the challenge later as increased market opportunity is matched by increased competition. The market will become Europe-wide, but so too will the competition. This implies further pressure upon those regions in which there is a preponderance of employment based upon those manufactures, particularly if these regions also have other characteristics which make them vulnerable. It is essential, for example, that productive capacity is large enough to meet demand from a wide market, a condition sometimes not met in the older under-capitalized industrial regions. Similarly, new members of the Community and those in peripheral regions are unlikely to have generated a well-established Europe-wide trading network in the past and therefore will be disadvantaged compared to their competitors in the European core areas. ‘1992’ will bring both opportunities and challenges, and for the regions that are already lagging behind and those that are undergoing a period of conversion the challenges will be especially strong. It is no accident that the creation of a single market coincides with the doubling of the Community’s Structural Funds. Without the latter, the former would have been politically unacceptable to many members of the Community. Given the existing imbalances, and the new conditions implied by the single market, even the increased level of funding—14 billion ECU per year divided between the three Funds—seems small when compared with the magnitude of the task of convergence.

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This is why enhanced funding has been accompanied by other mechanisms intended to achieve more effective and concentrated Community financial support. It remains to be seen what progress will have been made towards the goal of economic and social cohesion by 1992 when the barriers come down.

FURTHER READING The Regions of the Enlarged Community: Third Periodic Report on the Social and Economic Situation and Development of the Regions of the Community, Commission of the European Communities, 1987 (CB-49–87–381-EN-C) Urban Problems and Regional Policy in the European Community, Commission of the European Communities, 1988 (CB-52–88–097-EN-C) A.J.Brown and E.M.Burrows, Regional Economic Problems, Allen and Unwin, 1987 M.Keating and Barry Jones (ed.), Regions in the European Community, Clarendon, 1985 Willen Molle and Riccardo Capellin, Regional Impact of Community Policies in Europe, Avebury, 1988 Louis Albrechts, et al. (ed.), Regional Policy at the Crossroads: European Perspectives, Kingsley, 1989 Frank E.Joyce and Gunther Schneider (ed.), Environment and Economic Development in the Regions of the European Community, Avebury, 1988 D.Yuill and K.Allen (ed.), European Regional Incentives, European Regional Policy Monitoring Unit, University of Strathclyde, 1986 D.A.Pinder, Regional Economic Development and Policy; Theory and Practice in the European Community, Studies in Contemporary Europe No. 5, Allen & Unwin, 1983

SECTION II KEY DOCUMENTS ON REGIONAL POLICY

This section reviews major recent Commission documents in the field of European Community regional policy. Among the more important are those dealing with the reform of the Structural Funds. The new arrangements, which came into effect on 1 January 1989, mark a major change in the operation of the ERDF and related Funds and financial instruments. At the same time, a decision was taken to double the amount of money in real terms allocated to these funds by 1993. The effective and concentrated use of the Structural Funds is regarded as a crucial means of achieving economic and social cohesion within the Community against a background of widening disparity within and between Member States. In addition to the main Commission documents that outline the principles behind the new funding arrangements, the selection also includes a Guidance Paper produced by the Commission in February 1989. This sets out the approach that the Commission intends to take when identifying priorities and implementing the new ERDF arrangements. It is especially significant in terms of the shifting balance that is foreseen between aid for infrastructure and that for productive investment—a change that has not found favour with all member governments. The three main regulations: the Framework Regulation (2052/88), the Horizontal Regulation (4253/88) and the Implementing Regulation in respect of the ERDF (4254/88) are reproduced in full as an appendix to this volume. Given the intended co-ordination between the various Funds, the reader is also referred to a related volume in this series, Employment Policy, which considers related aspects of the European Social Fund. Documents concerning the ESF may be found in that volume. Making a Success of the Single Act—A New Frontier for Europe—COM(87) 100 Report to the Council and Parliament on the Financing of the Community Budget COM(87) 101 Own Resources Decision COM(87) 420 final

Article 130D of the Treaty of Rome as provided by the Single European Act requires the Commission to ‘submit a comprehensive proposal to the Council, the purpose of which will be to make such amendments to the structure and operational rules of the existing Structural Funds (ESF, ERDF, EAGGF Guidance Section) as are necessary to clarify

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and rationalize their tasks in order to contribute to the strengthening of the Community’s economic and social cohesion and, in particular, to reduce the gap between its different regions and the backwardness of the least-favoured regions…[It] is invited, in the process, to see how the efficiency of the Funds can be increased and their activities co-ordinated, both among themselves and with the operations of the existing financial instruments’. The reform, which represents the most significant revision of the Structural Funds since their inception, was a consequence of the desire to reduce regional inequalities within the Community and to promote policies of economic and social cohesion which are a foundation of the Single European Act. The background to these various measures is discussed in a range of Commission proposals. In COM(87) 100 and COM(87) 101, the Commission put forward a number of proposals for the future financing of the Community. These include strengthening budgetary discipline and improving budgetary management practices. These have implications for the nature of the Community’s Own Resources, in particular they involve (i) setting a ceiling in terms of Community GNP, (ii) modifying the composition of these resources so that they more closely reflect the relative prosperity of Member States and (iii) introducing greater flexibility. The overall objective is to provide a period of greater budgetary security and to allow the financing of those common policies envisaged in the Single Act. The nature of these changes are spelled out in COM(87) 420 final and include modifications to customs duties and VAT. In June 1988, the Council endorsed most of the proposals in COM(87) 100 (OJL 185, 15.7.88). In particular, they set overall ceilings for the EC’s own resources for each year 1988 to 1992 (1.15%, 1.17%, 1.18%, 1.19% and 1.2% respectively). The Decision also provides for an additional own resource based on the sum of Member States’ GNP. The result is to provide the Community with sufficient and secure resources until 1992. The tackling of the perennial budgetary problem is an important backcloth to the reform of the Structural Funds.

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Reform of the Structural Funds COM(87) 376/2/ Revision final

COM(87) 376/2/Revision final represents the response of the Commission to the call for the comprehensive reform of the Structural Funds. It sets out priority objectives for Community action through the Structural Funds and determines the contributions that these Funds will make to the furtherance of those objectives. It also explains the general method of implementing structural assistance and sketches what the Community is doing to achieve each of the priority objectives. In so doing, it builds upon the guidelines outlined in COM(87) 100. In particular, it describes the key concepts underlying reform. These are: (i) concentrating the activities of the Funds on specific objectives; (ii) providing the funds with adequate resources to deal with the Community’s problems; (iii) establishing a new method of operation based upon complementarity, partnership and programming; (iv) simplifying procedures and improving co-ordination. Concentrating on Specific Objectives

On the basis of guidelines published in 1987 on the financing of the Community budget (COM(87) 101), five priority objectives are identified as the targets for the Structural Funds, the EIB and other financial instruments. By pursuing these, Articles 130A and 130C of the Treaty would be satisfied and these would help exploit the Community’s economic potential, in particular its human resources. The objectives are: (i) helping less-developed regions to catch up through boosting productive investments and raising productivity growth to the EC average. It is recognized that enlargement of the Community, and changing economic factors, have made the Community more heterogeneous and that the gradual opening up of peripheral economies has highlighted structural weaknesses in the less-favoured areas which will become even more vulnerable in the single market; (ii) converting declining industrial regions. This involves a large number of regions, employment areas and urban communities

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throughout the EC that have been hit by crises in traditional industries. The effect has been to destroy the economic base of these areas and, if they are to recover, it is necessary to exploit sources of alternative employment. Industries such as coal, steel, shipbuilding and textiles are particularly affected; (iii) combating long-term unemployment and facilitating the occupational integration of young people are related objectives. Both involve focusing on vulnerable sections of the population and the preferred way of tackling these objectives is to adopt a Community-wide perspective in these matters. In this way, the adoption of good practices is likely to utilize human potential to the full; (iv) adjusting agricultural structures and the development of rural areas. These objectives are closely linked to the reform of the common agricultural policy. Among other things, the aim is to help those living in rural areas to convert to alternative activities and, more generally, to contribute to the stimulation of economic activity in rural areas.

To achieve best effect in meeting these objectives, the Commission advocates concentration of structural action, both geographical and functional. In geographical terms, the Commission singles out those regions (administrative level NUTS II) whose per capita GDP and purchasing power parities are below 75 per cent of the Community average. Because of its special situation, Northern Ireland is added to this category of problem areas. The areas defined in this way cover 28 per cent of the Community population. Turning to the declining industrial regions likely to benefit from aid for conversion, the Commission refers to those suffering from high unemployment and serious industrial problems. On this basis, Community aid would apply to between 12 and 15 per cent of the EC population if areas requiring preventative action are also included. (This figure compares with the 21 per cent of the Community population that benefitted from ERDF assistance outside the less-developed regions.) Areas to benefit from EAGGF Guidance Section assistance should also be concentrated geographically. Other objectives apply potentially to all twelve Member States and, if these are to be met effectively, the Commission argues that functional concentration is required. This means identifying precise criteria that best reflect the functional priorities of the proposed aims. Measures to

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combat long-term unemployment and to place young people in employment, for example, must be rigorously selected. They argue that objective socio-economic data should be used and that specific priorities need to be established in implementing provisions. Adequate Financial Resources

In itself concentration of funding, while crucial, is not sufficient to achieve stronger economic and social cohesion. It needs to be accompanied by an increase in financial resources and the spending of money in a more effective way. To this end, the Commission proposes the doubling of funds from approximately 7 billion ECU in 1987 to 14 billion ECU in 1992. This doubling takes account of the needs arising from enlargement of the Community and is set alongside the tightening of budgetary discipline and management. In making the case for additional resources, reference is made to the increase in Community disparities since the early 1970s. In addition, it is noted that the EC’s labour force will have grown by 6.7 million by 1995, of which more than half will come from less-favoured regions. If there is to be any real prospect of improving the economies of the poorer areas, then structural aid should represent at least 2 per cent of regional GDP. The case for extra funding is also made by reference to the needs of declining industrial regions—an area where the Community and national governments ought to be working hand-in-hand. Restructuring is costly, not least because of the inevitable shedding of labour. The Community response must involve considerable extra resources to meet redeployment costs, unenvironmental improvement and the creation of a new economic infrastructure. Reacting to longterm unemployment and helping young people find work will also involve considerable costs. It is estimated that there are between 5 and 6 million long-term unemployed (i.e. unemployed over one year) in the Community and 5.5 million unemployed among under 25-year-olds, many of whom have had no proper work experience since leaving school. Few have vocational skills to offer. It is very expensive to put people back into work and is similarly costly to provide skill-training for the young. Finally,

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reference is also made in the document to the considerable costs involved in the conversion and economic stimulation of rural areas. Alongside the need for increased resources there is the need to put ‘each ECU to best effect’. The rules governing funds should be sufficiently flexible to ensure that assistance is used judiciously and economically. One way of increasing the cost-effectiveness of assistance is by varying the level of Community aid according to the seriousness of the problems being tackled. Another is by seeking the most efficient combination of loans and grants appropriate to the operation and project concerned. There is also the issue of how the increased funds should be allocated: between objectives, between Member States and between the Funds themselves. The share-out between objectives reflects the political choice between the priority objectives listed above. It is proposed that an increase should be given to structural measures to assist backward regions—the central issue of cohesion. It is proposed that the rate of increase in this area should be at least as great as the overall rate of increase in total structural funding. As regards Member States, there is objection in principle to prior allocations, but the Commission accepts that, in respect of Objective 1 areas, some indicative allocations could be made representing 75 per cent of the monies allocated to these areas. This would give them some certainty about the level of Community support. The remaining 25 per cent should be used for measures of a Community nature. (Under all priority objectives, the Commission is anxious to promote policies which have Community-wide relevance.) Finally, the share-out between funds should take account of three factors: complementarity between Community and national efforts, the political choice between the five Objectives, and the measures selected under the Community support framework (see below) in response to the needs expressed by Member States. Overall, a strong claim in favour of the Objective 1 (backward) regions is made with the recommendation that up to 80 per cent of ERDF appropriations should go to such regions in the period to 1992. In respect of declining industrial regions, it is suggested that a prime task is to harness the productive potential of human resources and,

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therefore, that this will require a substantial contribution from the ESF. The bulk of assistance in respect of the conversion of rural areas will fall to the EAGGF Guidance Section, although both the ESF and ERDF will have contributions to make. In helping the Commission settle these issues, it is proposed that appropriate advisory committees be established. Complementarity, Partnership and Programming

Having argued for clearer objectives and greater resources, the Commission turns to the question of how best to operate the revised funds. This should be based on three related concepts: complementarity, partnership and programming. The first, in accordance with the ‘subsidiarity’ principle, means that Community effort should complement national measures. Partnership implies co-operation at all levels, from the planning of operations through the various stages of implementation to the assessment of results. For their part, the Commission must make efforts to ensure simplification and ‘transparency’ (providing technical assistance where needed), whilst the recipient partners on their part must make good use of the framework of preparation, monitoring and assessment. Programming means that Community action is given appropriate depth and width and, through multi-annual operations, will be able to respond to changing problems. It is envisaged that aid to programmes will gradually replace assistance to small projects and allow the Community to take a coherent overall medium-term view of economic and social needs. There will be a three-stage process: (i) Member States will submit plans setting out their policies and intentions; (ii) the Commission will assess these plans and, in consultation with Member States and where appropriate regional and local authorities, will determine the broad lines of technical and financial assistance. The latter will take the form of a Community support framework which will reflect the priority attached to the proposed development schemes or conversion measures in the light of overall Community priorities. The Commission will be especially concerned to ensure that

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measures and schemes comprise a coherent whole and are not inconsistent with general EC policies. Support will be spread over several years and will handle each measure to be financed in a way appropriate to each of the objectives. In some cases they may also suggest the appropriateness of the adoption of an integrated programme; (iii) regarding the assistance itself, emphasis will be given to operational programmes although other forms of assistance (global grants, part-financing of aid schemes or major projects) are not excluded. There will also be an intensification of monitoring and evaluation in order to maximise the effectiveness of Community aid. Simplification of Procedures and Improved Coordination

Another means of ensuring that aid is put to most effective use is the simplification of rules and procedures. This should not be taken to imply the relaxation of rules since, at the same time, the Commission is intent upon a more rigorous approach to financial management. Hitherto, each Fund tended to have its own arrangements for making commitments and payments. From now on these are to be harmonized, with greater flexibility in terms of the submission of grant applications in order to avoid the bunching of commitments towards the end of the financial year. There is also to be better co-ordination of advances, instalments and the payment of balances. As well as rules and procedures, measures themselves need to be better coordinated. By making use of Community support frameworks, the Commission will seek every opportunity of ensuring complementarity between the measures taken and of ensuring synergy. One way of achieving this co-ordination is through the greater involvement of regional and local authorities and local businesses in the management of Community measures. Amended proposal on the tasks of the structural funds and their effectiveness and on co-ordination of their activities between themselves and with the operations of the European Investment Bank and the other existing financial instruments COM (88) 144 final

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COM (88) 144 final is the Commission proposal for a Council Regulation on the tasks of the Structural Funds and their effectiveness and on co-ordination of their activities between themselves and with the operations of the European Investment Bank and the other existing financial instruments. The Regulation was adopted unanimously by the Council on 24 June 1988 (Regulation (EEC) No 2052/88; OJL 185; 15.7.88) and is usually referred to as the Framework Regulation. It came into operation on 1 January 1989. This Regulation sets out the five major objectives of the Structural Funds, the EIB and other existing financial instruments. These are: Objective 1. promoting the development and structural adjustment of the less-developed regions; Objective 2. converting the regions seriously affected by industrial decline; Objective 3. combating long-term unemployment; Objective 4. facilitating the integration of young people into employment; Objective 5. a. speeding up the adjustment of agricultural structures b. promoting the development of rural areas.

Article 2 indicates the focus of each of the three Structural Funds on the five Objectives: Objective Objective Objective Objective Objective

1: 2: 3: 4: 5(a): 5(b):

ERDF, ESF, EAGGF Guidance Section ERDF, ESF ESF ESF EAGGF Guidance Section EAGGF Guidance Section, ESF, ERDF.

In addressing these Objectives stress is given to ERDF support for productive investment, the modernization of infrastructures and those measures aimed at exploiting the internally-generated development of the areas concerned. Regarding ESF, the focus is to be: long-term unemployed and young people through measures aimed at improved vocational training and the creation of self-employed activities. In all cases, assistance is designed to complement that of Member States in pursuit of a common goal. The

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forms of assistance from the Structural Funds shall be in one of the following: part-financing of operational programmes; part-financing of national aid schemes; partfinancing of projects; global grants; or support for studies or technical assistance. There is provision for close monitoring of schemes. The Framework Regulation sets out provisions relating to the five specific objectives. Up to 80 per cent of appropriations are earmarked for Objective 1 regions. These are the less-favoured regions where GDP is less than 75 per cent of the EC average (including Northern Ireland and the French overseas departments). The Regulation lists the regions concerned (this list is to apply for five years, and a qualified majority decision of the Council will then be able to revise it): Spain (Andalusia, Asturias, Castilla y Léon, Castilla-La Mancha, Ceuta-Melilla, Valencia, Extremadura, Galicia, Canary Islands, Murcia), France (overseas departments, Corsica), Greece, Ireland, Italy (Abruzzi, Basilicata, Calabria, Campania, Molise, Apulia, Sardinia, Sicily), Portugal, United Kingdom (Northern Ireland). The list of regions covered by Objective 2 (industrial decline) is not given in the Regulation. These are to be defined by the Commission, in consultation with Member States, according to indicated criteria: areas where the rate of unemployment is in excess of the EC average for the last three years; those where the share of industrial employment equals or exceeds the EC average; areas having a fall in industrial employment. (A list of Objective 2 regions, valid to the end of 1991, was agreed in March 1989 (OJL 112, 25.4.89) and is reproduced as an appendix to this volume.) In requesting Community aid for each of the five Objectives, Member States are required to submit plans covering operational programmes where appropriate. The Commission will subsequently establish for each Member State, and for the individual plans in respect of each Objective, a Community support framework. These will cover the priorities adopted for Community support, the forms of assistance, an indicative financing plan and the duration of assistance. The Regulation provides for the doubling of the Structural Funds in real terms by 1993. To facilitate the planning of Member States, for a period of five years the Commission will establish indicative allocations of

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85 per cent of the commitment appropriations of the ERDF. (An agreed list was published on 8 March 1989.) The rates of assistance are variable, according to the priority given to the measure (Article 13.1) between 25 per cent and 75 per cent of total cost, although 100 per cent support is available in exceptional cases in respect of preparatory studies and technical assistance measures. Back-up policies; Reform of the structural funds laying down franchises for implementing Council Regulation 2052/88 COM(88) 500/2/Revision final

COM(88) 500/2/Revision final lays down provisions for implementing the Framework Regulation. It covers all three Structural Funds, but begins with a Horizontal Regulation which makes provision for the co-ordination of the Funds with each other and with the EIB and other financial instruments. The Horizontal Regulation (Regulation EEC No 4253/88 of 19 December 1988; OJL 374, 31.12.88) obliges the Commission to ensure effective co-ordination between the funds, the EIB and other financial instruments, in particular through: community support frameworks, multi-annual budget forecasts, integrated operational programmes (where appropriate) and the monitoring and assessment of operations carried out. It also sets out the criteria for selecting areas eligible for assistance under Objective 5(b) (Article 4). Most of the Regulation is concerned with the procedures and arrangements for the revised operation of the funds. Member States are called upon to submit plans (usually covering three to five years, although they may be revised annually to reflect changing circumstances) linked to the priority Objectives. For areas defined before 31 January 1989, the deadline for submission of plans was 31 March 1989; for other objectives, the deadline was four months after the official publication of appropriate guidelines. The Community support frameworks will reflect the priorities attached at Community level to the schemes proposed by Member States and those from Community initiatives. Community support frameworks will be planned over three to five years and will outline the programmes to be undertaken, the funds and other instruments to be used, and the technical and financial assistance needed. Each

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Community support framework will be published in the Official Journal. A potentially significant feature of the Regulation is Article 9 which notes the Commission’s concern that measures should have ‘a genuine additional economic impact on the regions concerned and results in at least an equivalent increase in the total volume of official or similar (Community and national) structural aid’. The issue of ‘additionality’ has been a controversial aspect of EC aid in the past and this Article reflects the concern that EC aid should be additional to, and not a substitute for, other aid. The schedule for payments is laid down in Article 21. Advances of up to 50 per cent are possible following each commitment made by the Commission. A second advance (up to 80 per cent including first advance) is allowed once at least half of the first advance has been used and the balance is payable within six months of the successful completion of the operation concerned. In general, procedures for application and assistance are simplified and decentralized. The Regulation makes common provisions on budgetary management, and stress is put on aspects of financial control (Article 23), monitoring (Article 25) and assessment (Article 26). Article 33 covers transitional arrangements for operations received after the adoption of the revised arrangements but before their entry into force. COM(88) 500/2/Revision final then turns to the implementing provisions in respect of the three Funds themselves. The Vertical Regulations cover the ERDF (Regulation (EEC) No 4254/88 of 19 December 1988; OJL 374, 31.12.88), ESF (Regulation (EEC) No 4255/88) and EAGGF Guidance Section (Regulation (EEC) No 4256/88). With regard to the ERDF, the Regulation sets out the tasks of the Funds as being: — productive investment to facilitate the creation and maintenance of permanent jobs; — investment in infrastructure in less-favoured and declining areas (Objectives 1, 2 and 5b); — development of indigenous potential; — Community-level operations.

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The Regulation sets out the detailed provisions for ERDF operations. It introduces a new measure of flexibility by allowing the fund to make use of all the forms of assistance provided for by the Framework Regulation: part-financing of operational programmes, of and national aid schemes and of suitable projects, provision of global grants and support for technical assistance, and studies in preparation for regional policy operations. Guidance Paper for operations in the regions whose development is lagging behind (Objective 1) and in the areas of industrial decline (Objective 2)—C(89) 287 final

In this guidance paper, the Commission outlines its approach to ERDF funding of Objectives 1 and 2 operations. It is intended to help local and regional authorities to prepare regional development and reconversion plans. The paper reflects the Commission’s initial approach to meeting the new Objectives and it is their intention to present more detailed guidelines at a later date. These will take account of experience gained from the first phase of Community support frameworks and the evidence from the next [fourth] periodic report on the social and economic situation and development of the regions of the Community, which is due by 31 December 1990. Whilst it is stressed that the guidelines are not intended to dictate to Member States and regions what should be in their development plans—these must reflect their own intentions and priorities—the Commission considers it helpful to make it known what principles and priorities will guide the Commission during the various stages of planning. The notes begin by setting out the major principles which underlie the reform of the Structural Funds and which are expected to lead to an improvement in the efficiency of Community operations: (i) concentration of assistance in order to ensure a real economic impact. 80 per cent of ERDF aid will go to Objective 1 regions and assistance will be doubled by 1992. There will also be concentration in respect of the declining industrial regions under Objective 2; (ii) ‘programme’ approach will largely replace the ‘project’ approach. Programmes and integrated operations will enable the Commission to place development measures in a better

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overall perspective and, at the same time, will simplify administrative procedures for applications. (The Commission currently funds thousands of projects but only a few dozen programmes.) This approach will also allow the Commission to negotiate real priorities for regional policy rather than simply focusing on the choice between a large number of isolated projects; (iii) partnership with national, regional and local authorities, at both decision-making and operational levels. Once Member States, acting on behalf of regions, have submitted regional development plans, these will be analysed and discussed in the partnership framework with ‘greater flexibility on the precise measures to be financed provided there is agreement on the development priorities’. Bodies such as regional development agencies in the eligible regions will be allowed to manage certain forms of Community assistance; (iv) increased co-ordination between Community financial instruments in order to enable the Community to offer financial support in a more cost-effective combination of loans and grants. A new financing technique of global grants to fund low-cost individual projects meeting local needs has been introduced; (v) evaluation and control will be improved. Evaluation will take place before Community support frameworks are agreed in order to clarify objectives and, subsequently, after the completion of operations in order to verify whether these objectives have been met.

The guidelines note that regional disparities (in productivity, employment and income) will only be reduced if output and jobs grow faster in the less-favoured areas than the Community average. The doubling of the Structural Funds and the concentration of Community effort must be matched by the efforts of Member States and regions if such disparities are to be reduced. The notes ‘underline the importance of regional policies conducted at national level and the complementarity between them and Community regional policy’. Labour and physical capital are regarded as the two key elements in growth and the main contribution of regional policy will be the stimulation of additional productive investment (industry, crafts, services) and investment in development-related infrastructures, and complementary measures to encourage the development of

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human resources. The guidelines also make very explicit that EC money is not a substitute for national financing of operations. Such funding must have a ‘genuine additional economic impact…and result in at least an equivalent increase in the total volume of public or similar structural aid…[EC money] cannot be used simply to refinance national operations’. Balance between Infrastructure and Productive Investment

Previously, EC support has been heavily biased towards infrastructure: approximately 90 per cent of ERDF funds went to infrastructure support (transport, water and sewage treatment, industrial estates etc) in 1987 and 1988. The share was even higher in less-favoured parts of the Community. Henceforth, it is the intention to give higher priority to productive investment since this affords the best prospects for convergence, especially when combined with the development of integrated actions to realize the potential of human resources. As set out in Regulation (EEC) No 4253/88, Article 13, therefore, integrated approaches will be encouraged wherever appropriate. The balance between investment in infrastructure and investment in firms will be evaluated on a region by region basis, and this assessment will be aided by the establishment of regional development plans. In general, it is suggested that the need to improve basic infrastructures will be greatest in the least prosperous regions. In Objective 1 regions, poor infrastructures are accompanied by inadequate employment and underinvestment in job creation. In these areas, therefore, it is argued that investment in infrastructure and productive investment must operate alongside each other. In contrast, the Commission expects that a large part of ERDF operations in Objective 2 regions will focus on the creation of jobs to replace those lost by declining industries. In order to encourage investment in the regions, particularly by SMEs, the Commission will take into account the following factors: — the impact of the investment in terms of job creation or the maintenance of lasting employment;

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— accessibility of assistance to SMEs; — existence of assistance for services to SMEs, especially market analysis and management advice; — operating procedures and types of aid, including rates, which can be varied to meet different needs (capital subsidy, preferential loans, staggered payments, eguity participation etc); — combination of grants and loans; — additional effect of Community contribution. Combination of Grants and Loans

The Commission intends to look for the best combination of grants and loans for both infrastructure and productive investment aid in order to maximize the impact and effectiveness of budgetary resources. Community support frameworks will therefore be formulated in the light of economic goals and likely outcomes. Where investments are likely to result in substantial receipts, for example, loans may be more appropriate. In contrast, for infrastructures without receipts, then grants are the more appropriate option. Development of Local Initiatives

Local initiatives are seen as important mechanisms for job creation and recognition is given to the importance of appropriate consultancy and support measures in the local development process. The Commission therefore plans to give intermediaries in eligible regions (e.g. regional development agencies) responsibility for granting and managing Community aid for local development initiatives. Such bodies will receive a global grant for this purpose which can be given to low-cost single operations in the local area. Appropriate schemes might include, among others, studies of local development potential, business advice, supply of services to existing firms and small-scale infrastructure.

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Diversification of Economic Activity

One of the causes of regional weakness is the over-reliance on a limited number of vulnerable sectors. Particular problems arise when a region’s economy is dominated by activities with a low technological base, with out-dated equipment and a declining demand for the products. One of the priorities of ERDF funding, therefore, will be contributing to the diversification and broadening of the economic base of less-favoured regions. Stress will be given to investment (and related training) in the use of advanced production techniques (in traditional and newer sectors) and to high technology sectors. Community Initiatives

Up to 15 per cent of ERDF resources can be reserved for Community initiatives and the Commission is giving further thought to the kind of actions that could be undertaken. At this stage, the types of action being considered are: — actions which are most effectively planned and implemented at EC level; — actions that promote sectoral mobility, especially in declining industrial areas; — actions that require a consistent strategy covering several Member States; — actions that are particularly relevant to the correcting of regional imbalances. Guidance by Objective (i) Objective 1 Areas These regions suffer from a range of problems: low income and productivity levels, high unemployment and a rapidly expanding labour force, frequently an overdependence on agriculture, deficient infrastructure and inadequate vocational training. These problems often stem from the peripheral location of the region and the small size of local markets, both of which make it difficult for firms to achieve economies of scale. For those regions which have problems of overall development, the eligibility rules for infrastructure (i.e. those

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contributing to the increase of economic potential, to development and structural adjustment) are deemed sufficiently flexible to cover a series of appropriate measures. Emphasis will be given to the development of economic infrastructure (including, where appropriate, the development of tourist potential) but, exceptionally, aid may be available to general educational establishments and hospitals where a region is seriously under-equipped in these provisions. In making decisions, the Commission will assess the likely contribution of infrastructures to the growth of economic potential and to the structural adjustment of the regions concerned. The guidance notes give the following examples of infrastructure that might be financed: — Transport: In order to overcome the problems associated with a region’s peripheral location, a high priority should be their integration into the Community network of road, rail and air facilities. Airports are regarded as particularly significant in the context of tourist potential. — Telecommunications: Peripheral location need not inhibit data transmission and the development of a modern telecommunications network is regarded as a key aid to growth (see also STAR programme). — Vocational training: The completion of the internal market could accentuate training deficiencies in these regions and the Commission is interested in schemes that complement those eligible under ESF. — Research and technological development: Like telecommunications, improving the science and technology base is also to be encouraged. — Environment: Basic services, such as sewage treatment and water supply, which are directly related to regional development can be financed. — Energy: The Commission will encourage the exploitation of local energy resources and alternative and renewable energies. Assistance will also be available for energy saving and oil substitution schemes (see also VALOREN programme). — Rural areas: Most Objective 1 areas are rural in character and it is the Commission’s intention to balance the distribution of economic activity between conurbations and rural areas. The Future of Rural Society (COM(88) 501 final) addresses this problem in greater detail and emphasizes the importance of infrastructures and job creation in rural

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areas. Such areas have particular need of roads, electricity and water supply, and telecommunications. (ii) Objective 2 Areas These are areas that have declined as a result of structural changes and now suffer unemployment and insufficient rates of job creation in new industries. Their revival is often made difficult because of an overdependence on a few declining industries combined with a poor quality environment, decaying infrastructure and a poor climate for new enterprise. The Commission considers the needs of Objective 2 areas to be more specific than is the case with Objective 1 areas. They place particular emphasis on the development of productive investment that will create new jobs to replace those lost in declining industries and importance is attached to close coordination between ERDF and ESF operations. Note is made of the relatively high research and development potential of many of these areas given their easy access to R & D facilities in universities and similar centres. Measures to improve the application of R & D activities and technology transfer towards local firms will be encouraged. In terms of infrastructure, support will be directed towards the regeneration of declining areas (including inner cities) and modernization schemes that provide the basis for the development of economic activity. In addition, it is recognized that ‘an agreeable environment’ can contribute to an area’s attractiveness to new economic activities and that the restoration of declining industrial areas is one way of stimulating the local economy. Regional Development at Community Level

In addition to its support for eligible regions and areas, the ERDF will also finance: — studies related to the development and planning of Community territory, especially the effects of the completion of the internal market on regional development; — pilot projects in frontier areas related to both infrastructure and productive investment; — the pooling of experience in the development field between Community regions.

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Since 1985, the Community has been increasingly concerned to tackle EC-wide problems in a coherent way. The concept of Community programmes, looking for common solutions to common problems, remains important in current Commission thinking. The first two Community programmes deal with improving telecommunication services (STAR) and exploiting indigenous energy potential (VALOREN). Besides pioneering this new Community-wide approach, the two programmes also illustrate another feature of current EC policy—the importance attached to the contribution of SMEs to less-favoured areas. This is equally true in respect of the two most recent programmes dealing with the declining steel sector (RESIDER) and the conversion of shipbuilding areas (RENAVAL). SMEs are regarded as a dynamic force in regenerating declining areas and forming the basis of growth and development in the less-favoured parts of the Community. In 1988, the Commission completed preparatory studies for Community programmes involving regional measures in respect of research and technological development (STRIDE) and environmental policy. Most recently, in August 1989, the Commission announced its intention to instigate a programme to deal with problems associated with the decline of the coal industry (RECHAR). Community programme for the development of certain lessfavoured regions of the community by improving access to advanced telecommunications services (STAR programme) COM(85) 836 final

This programme is set against the backcloth of the strengthening of EC regional policy in 1985. As part of this, there is provision for the concept of ‘Community programmes’ as distinct from national programmes supported by Community funding. The purpose of the former is to provide a better and more direct link between the Community’s regional development objectives and the objectives of other EC policies. Whereas specific measures under the former non-quota sector of ERDF were aimed at mitigating the adverse effects of other EC policies, Community programmes concentrate on enhancing in the less-favoured regions the benefits that accrue from the implementation of those policies.

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The aim of the STAR programme is to foster the economic development of the least-favoured regions by improving advanced telecommunications services in line with the Community’s overall objectives in this field (see COM(84) 277 final). In this field, some regions lag well behind more advanced regions and the likely effect of the rapid developments in technology is that the discrepancies between regions will increase. Since the location of new equipment and services is determined by the pattern of demand, the tendency is for them to be concentrated in the central, dynamic regions of the Community. By contrast, peripheral regions are poorly served with the consequence that individuals and businesses—especially SMEs that form the economic base of many such regions—are not only deprived of the benefits of modern telecommunications but may also see their economic prospects blighted as advanced telecommunication services become an ever more important factor in the location of productive investment. The regions identified as being particularly at risk are: Greece, Ireland, the Mezzogiorno, Northern Ireland, Corsica and the French overseas departments, and regions in Spain and Portugal. It is the Community’s view that new technological developments should be the key to the advancement of lessdeveloped regions rather than the cause of their further deterioration. In the case of telecommunications, they point to the fact that the cost of operations is not necessarily a function of distance and that the economic benefits often outweigh official schedules of charges. For these reasons, telecommunications, is a potentially fruitful area of development in the search for greater economic harmonization in the Community. The role of regional policy in this context is to initiate appropriate measures aimed at fostering the exploitation of this new potential and, during a transitional period, to meet the extra costs of providing infrastructures and services earlier than would otherwise be the case. The STAR programme is directed at financing advanced telecommunications; more conventional equipment necessary for structural purposes is seen as remaining the responsibility of other ERDF financing operations. The definition of advanced telecommunications is the one given by the Commission in its Communication to the Council,

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notably Action Line V. Accordingly, the types of basic equipment proposed in the programme relate first to the establishment of major telecommunications links in the least-favoured regions to the new advanced telecommunications network, including, where appropriate, the broadband transnational digital network. Investment projects assisted under that heading may include landbased (or submarine) systems, notably those using optic fibres, and satellite systems. The programme then focuses on digitalization with a view to more rapid introduction of integrated digital networks. Pending the introduction of such networks, the programme will also be able to finance superimposed networks permitting among other things highspeed data transmission. Lastly, the programme provides for the establishment of cellular radio infrastructures. In order to ensure that these infrastructure measures are put to effective use, a range of corresponding back-up measures is included to ensure that advanced services are accessible to the productive sector and to stimulate demand for them. Finance is therefore made available for the establishment and development of telecommunication services centres, notably for SMEs. By such means, there will be economies of scale since several users will share sophisticated telecommunications equipment. Aid is also available to develop ‘specialized information’ services which will allow the transmission to these local networks of information from centrally-located Community data banks. This links directly with the Community’s stated objective of contributing to a specialized information market. The measures to stimulate demand include aid to SMEs for the purchase of equipment (terminals, modems etc.) required for the use of advanced telecommunications, where studies have shown the economic value of such equipment. The programme also provides for technical and economic feasibility studies of a more general nature as well as preparatory work in respect of facilitating the coordinated use of advanced telecommunications systems. Last, there is provision for part-financing of demonstration measures to identify new solutions to specific local conditions. Overall, the STAR programme is designed to link with the Community’s regional policy and its guidelines in the field of telecommunications. It is intended that it should receive

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priority within the management of ERDF resources. Joint financing is provided not on a project basis but in annual instalments—an approach which facilitates multi-annual programming. On the basis of preliminary studies, it is estimated that the cost of Community participation should be set at 450m ECU (excluding Spain and Portugal). In fact, in 1987 the Commission approved a series of assistance programmes for the Member States concerned amounting to 777m ECU. The STAR programme was approved by the Council on 27 October 1986 (Regulation (EEC) No 3300/86; OJL 305, 3.10. 86). Community Programme for the Development of Certain Lessfavoured Regions of the Community by Exploiting Indigenous Energy Potential (VALOREN Programme) COM(85) 838 final

Like the STAR programme, this programme is also set against the backcloth of the strengthening of EC regional policy in 1985 and, in particular, the decision to institute Community programmes. STAR and VALOREN are the first two such programmes. The primary objective of the VALOREN programme is the economic development of certain less-favoured regions through the exploitation of their indigenous energy potential, in line with the Community’s energy objectives. Studies undertaken for the Commission show that: — the most under-developed of the Community’s regions are also those affected by an unfavourable energy situation. This is reflected in the heavy dependence of the Member States concerned on imports (especially oil) for their energy needs, a large share of hydrocarbons in the generation of electricity and a decline in the energy content of a gross domestic product that is less pronounced than the Community average; the same problems are also encountered on certain islands and peripheral regions. Regions characterized by these economic and energy problems are the regions of Greece, Ireland, the Mezzogiorno, Northern Ireland, Corsica and the French overseas departments, as well as certain Spanish and Portuguese regions; — these same regions possess unexploited energy potential and could make better use of the available local energy sources; — the regions concerned have been less able to exploit this potential than developed regions.

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Existing ERDF measures have supported national energy projects and the justification for a specific Community programme lies in the particularity of the measures for developing indigenous potential. In overall terms, the energy resources to be exploited may be small, but their potential local and regional impact is significant: the energy produced is for the most part used locally; its exploitation involves a high local labour factor; finally, the technological spin-offs of this exploitation would improve the basic economic fabric. These elements are distinct from the exploitation of certain energy sources of national importance whose regional economic impact is sometimes limited as regards the means of implementation. The measures included in the VALOREN programme concern first the economic exploitation of local energy resources, such as alternative and renewable energies which had already been, in certain regions, the subject of a specific measure under Regulation 2618/80, amended by Regulation 218/84, as well as small deposits of peat and lignite. The programme also concerns the rational use of energy, notably energy saving and oil substitution; these measures are primarily directed at SMEs. These two categories of measures are complemented by a promotion measure concerning the following operations: analysis and programming at the regional and local level (this is particularly useful if the objective of integrated use of the whole range of energy resources is pursued); advisory services and technical assistance to SMEs; dissemination of information. The approach of the VALOREN programme reflects the wider objectives of the Community in the field of energy policy, notably the continuous improvement of the return on energy input in all the sectors, the reduction of the proportion of oil in the gross consumption of primary energy in the Community, the provision by means of solid fuels and nuclear energy of the essential primary energy requirements for the generation of electricity, and encouraging the use of renewable energy sources. By linking energy and regional policy objectives in this way, the programme enjoys the highest rate of support provided for in the ERDF Regulation. It is also consistent with the multi-annual approach.

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The programme, covering the period 1986–90, was costed at 230m ECU (excluding Spain and Portugal). In fact, in 1987, the Commission approved a series of assistance programmes for the Member States concerned totalling 393m ECU. The VALOREN programme was adopted by the Council on 27 October 1986 (Regulation (EEC) No 3301/86; OJL 305, 31.10.86). Steel Policy (RESIDER) COM(87) 388/2/Revision Final

This proposal reflects the Commission’s undertaking at the Council meeting of 1 June 1987 to present comprehensive proposals covering all aspects of steel industry restructuring. In doing so, the Commission stresses the indivisibility of its approach in which the industrial aspects (restructuring and market controls) are inseparable from the consequent social and regional aspects. The main objective is to restore the industry to competitiveness after this period of readjustment; this will require significant funding. The background is an excess capacity in the steel industry, estimated at 30 million tonnes p.a. by 1990. As a result, firms have reduced workforces and, at a conservative estimate, 80,000 jobs are likely to be lost in the three years up to 1991. These losses, combined with the knock-on impact on related sectors, are likely to have severe effects in the declining industrial regions which are the focus of priority action under the reformed Structural Funds. Since there is likely to be some delay before the structural funds take effect, RESIDER is intended to make a more immediate impact as well as encouraging the continued restructuring of the steel industry in order to eliminate excess capacity (especially in respect of flat products and the heavy steel sector). The view is taken that it is unlikely that industry itself will be able to achieve the appropriate closures without specific encouragement and appropriate social and regional back-up measures, i.e. financial incentives to firms for plant closures and measures to soften their social and regional impact. To this end the Commission proposes a fund of 600m ECU for closure incentives linked to a production quota system.

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This would comprise a premium paid against the permanent closure of heavy sector plants (70 per cent would be earmarked for this purpose) and payment of part of the expenditure incurred by firms required to shed a large proportion (about 10 per cent) of jobs in these areas. In order to speed the restructuring, the closure premium would be higher at the beginning of the quota system than at a later stage. So as to prevent the reduced capacity being taken over by foreign imports, the Commission proposed to reinforce anti-dumping measures. Allied to the industrial aspect of the strategy, there are social and regional aspects. It is recognized that the anticipated 80,000 job losses will have significant social and regional impacts, not least in those areas that have already suffered from industrial decline in recent years. The decline in employment in the steel industry—down by a third since 1980—has resulted in significant levels of structural unemployment and, in some cases, out-migration of young people. Further reductions will mean the permanent loss in some areas of what was the central core of the economic base of these regions. Moreover, the demise of the steel industry is likely to be matched by the decay of related industries which will further discourage attempts at regeneration. Steel industry job losses account for about 19 per cent of unemployment in the Community and the scale of the problem reinforces the EC’s urgent need to tackle the problems of declining industrial regions under Objective 2 of the reformed Structural Funds (see COM(87) 100). That being so, it is assumed that in due course the problem of these areas will become the focus of the Structural Funds and RESIDER is therefore an interim measure designed for immediate impact. The social measures involved fall into three parts: — conventional redeployment aids. These are income support grants, vocational training grants and mobility grants. They are estimated at 212m ECU in the five years to 1990; — additional social aid programmes. These are exceptional measures financed with ECSC resources. The Commission proposes two additional types of measure: aid to early retirement and aid to genuine re-employment. This will double the Community’s direct payment of the social cost per job lost

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(estimated at 30,000 ECU). Facilitating early retirement has been shown to be the most effective measure to enable a rapid reduction of the workforce. The minimum age for such measures will generally remain at 55 years. It is estimated that 17,000 workers will benefit from re-employment premiums. The total cost of this part of the programme is estimated at 99m ECU to facilitate early retirement and 33m ECU to encourage reemployment; — social aids under Article 58(2) ECSC Treaty. These aim at maintaining the level of social protection for workers affected by closure or other employment-reducing schemes and to ease the cost of these measures for the firms involved. They are intended to apply even where Article 56 of the ECSC Treaty conditions are not met, i.e. where there is no government contribution or a firm is reducing its workforce without necessarily reducing its activity. This would enable such measures as redundancy payments, part-time working allowances and suspension allowances to be made which are not usually allowed under Article 56. The appropriations available under Article 58(2) are put at 180m ECU for the period 1988–90. Provision is also made to facilitate training measures in respect of internal reemployment.

The regional measures proposed have a specific objective. It is argued that direct aid to those facing unemployment as a result of restructuring is the concern of the social measures. Regional measures should be directed at making an overall contribution to the redeployment and revitalization of the affected areas. The aim is to generate alternative employment for all the jobs lost in the region and, therefore, the job target is ‘all-embracing’. It is also recognized that there will be a time element in the creation of alternative employment and that preparatory schemes for the ‘physical and intangible environment’ will be required. The measures proposed are: — ECSC conversion loans. Article 56 (2) (a) of the ECSC Treaty allows interest rate subsidies for conversion loans and the Commission proposed an allocation of 60m ECU for 1988 to continue the conversion measures; — Community programme RESIDER. The principal regional measure proposed is a new programme known as RESIDER under Article 7 of the ERDF Regulation, the aim of which is to

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develop indigenous resources outside the sector in crisis. Given their adaptability and potential for development, small and medium-sized enterprises (SMEs) are the main target of the business stimulation measures. In addition to investment incentives for SMEs, the programme provides for a range of back-up measures: economic enterprise encouragement, expansion of management and organization advisory services, encouragement of the sharing of services, the promotion of product and technology innovation, easier access to risk capital and to market intelligence surveys covering national, Community and non-Community markets. There is also a measure to reserve a given amount for interest rate subsidies under Article 56. Apart from direct aid for SMEs, the RESIDER programme recognizes the need for improving infrastructure, especially industrial sites that have fallen into disrepair. Many of these sites are in inner city locations. The RESIDER programme was formulated in the context of the impending reform of the structural funds and the initial contribution from the Community budget (300m ECU, 55 per cent of the total cost) only covers the first three years of the scheme. The initial 300m ECU is split: 215m ECU in respect of job losses; 60m ECU for ECSC interest rate subsidies and 25m ECU for the launch of regional conversion in the new Member States. With the doubling of the Structural Funds by 1993, it is calculated that the ERDF share should rise to 7,000m ECU annually, with the sum earmarked for declining industrial areas reaching 1,400m ECU. Since eligible areas for RESIDER will be based upon similar criteria to those listed for Objective 2 aid under the new ERDF Regulation, there will be reinforcement between restructuring activities and regional conversion measures. Technical assistance in the drawing-up of action programmes is offered under the scheme, and Member States are required to establish Co-ordination Committees to monitor and evaluate action programmes and to change them if necessary. Special transitional arrangements are offered for Spain and Portugal.

Council adopted the new Regulation in respect of RESIDER on 2 February 1988, (Regulation (EEC) No 328/88, OJL 33, 5.2.88). On 27 July 1988, the Commission adopted assistance programmes for South Yorkshire and Scunthorpe (UK) and Saarland (West Germany), and the labour market areas in North Rhine-Westphalia and Rhineland-Palatinate

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(West Germany) were added on 30 November 1988. Earlier that month the French departments of Moselle, Meurthe-etMoselle and Nord (excluding Lille) and, on 21 December, the Upper Palatinate in West Germany were added to the list of areas eligible for assistance under RESIDER. Community Programme to Assist the Conversion of Shipbuilding Areas (RENAVAL) COM(88) 205 final (Amendment to COM(87) 275 final)

On 7 August 1987, the Commission submitted to the Council, a proposal for a Regulation instituting a Community programme to assist regions affected by a decline in the shipbuilding industry (COM(87) 275 final). With the decision to reform the Structural Funds, and to assure coherence with the new objectives of those funds, the proposal was amended and resubmitted on 6 May 1988. (COM(88) 205 final). Between 1976 and 1986, employment in EC shipyards fell by 50 per cent, with a drop of 60 per cent in the building of new merchant vessels and a reduction of 30 per cent in repairs. (See COM(86) 553, Shipbuilding: industrial, social and regional aspects). The pattern was apparent elsewhere, world productive capacity having fallen by 20 per cent since 1976 (22 million gross tonnes to 18 million gross tonnes). By the mid-1990s it has been estimated that the world production capacity will be around 12 million tonnes. Against this background of overcapacity, further job losses are inevitable. An indication of the rate of decline (and the significant variations between Member States) can be seen in the table below. Overall, there has been an average decline of about 10 per cent each year.

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While virtually every sector of the shipping market was affected by the economic crisis in the late 1970s, the recent upturn in the world economy has not been accompanied by an equivalent increase in seabound cargo volumes. World sea-borne trade decreased by some 12 per cent between 1979 and 1984, whilst over the same period the tonne-miles performance of the world fleet dropped by 25 per cent. New technical and economic developments have resulted in smaller bulk cargoes of oil, iron-ore and other minerals. The growing percentage of nuclear energy for electricity generating, more efficient use of raw materials and substitution of man-made products for natural raw materials, have all resulted in fewer and smaller bulk cargoes. Added to these factors is the declining dependence of industrialized nations on manufactured goods. The economies of these countries are now more dependent on new information technology, data transmission systems and electronics. Against this background the EC has resolved to reduce by one-third the Community 1985 capacity and, rather than spreading reduction over all yards, closures should apply to those with little prospect of success in the new competitive markets. In March 1987 the Council adopted the Sixth Directive on Aid to Shipbuilding (OJL 69, 12.3.87). This supports and intensifies changes in the shipyards which aim at a healthy and competitive industry. The reorganization is linked also with social and business investment and training schemes in deprived regions. The strategy is intended to encourage a new small business culture. Motivated by the further decline in the shipyards, the Commission is now seeking a reduction of one-third of the 1985 capacity and has produced a strategy (RENAVAL) to reorganize and up-date the shipbuilding industry. The programme is designed to run from 1988 to 1993 and provides for an anticipated Community commitment during the first three years of 200m ECU (Regulation (EEC) No 2506/88 of 26 July 1988, OJL 225, 15.8.88). In formulating its strategy, the Commission argues that not only are many of the shipyards already defunct; they also act as a blight on their surrounding regions. Regeneration requires new ideas and new economic

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activity. RENAVAL is intended to supply the financial support for that strategy. RENAVAL concerns the following areas: — areas that have experienced substantial job losses in shipbuilding over the last three years; — areas threatened with substantial losses under a restructuring plan for the shipbuilding sector with those losses resulting in a serious aggravation of unemployment.

Other areas included are those satisfying all the following criteria: — the average rate of unemployment must have been at least 15 per cent above the EC average in the last three years; — the percentage share of industrial employment in total employment must have exceeded the EC average in any of the last ten years; — there must have been an observable fall in industrial employment as well as satisfaction of the two criteria noted above.

In defining eligible areas, the Commission is concerned that such areas are consistent with those eligible under the reformed Structural Funds. The measures allowed by the Regulation include improving the efficiency of equipment, promoting innovation, venture capital schemes, specialized studies and other aids to investment. Shipyards in Cleveland, Tyne and Wear, Strathclyde, Belfast, Hamburg, Kiel, Departement du Nord, Naples and Athens are expected to receive first attention. In Spain, the Murcia region and Setubal in Portugal, are also early priorities. Applications for assistance are required before 30 April 1990 and the programme is scheduled to run until 31 December 1993. ‘RENAVAL’ has a social element covering three categories of workers (estimated to involve up to 22,000 workers): — early retirement (5,000 ECU maximum for each worker); — new types of work (2,500 ECU per worker); — geographical mobility (1,000 ECU per worker).

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These categories should help shipyard workers to establish their own small businesses or co-operatives. In addition, the scheme will encourage vocational training of 45,000 shipyard workers (63m ECU from the Social Fund), plus special programmes (71m ECU). The co-ordination of structural instruments has been a developing theme within EC regional policy. Some of the earliest examples are the Integrated Mediterranean Programmes established in 1985. In 1986, the Commission sent the Council and Parliament a communication on the integrated approach. This approach, which brings together relevant structural instruments, is reflected in the integrated development operations which have recently been launched in several member countries. Another recent example is the special programme to deal with the modernization of Portuguese industry. Integrated Mediterranean Programmes—COM(85) 180/2

Measures to aid the Mediterranean regions of France, Greece and Italy were approved in June 1985, (Regulation (EEC) No 2088/85, 23 July 1985; OJL 197, 27.7.85). Integrated Mediterranean Programmes (IMPs) aim at developing these poorer areas and meeting the situation created by the enlargement of the Community to include Spain and Portugal. IMPs focus on improving the social and economic conditions of the area and it is intended that Community contributions to the IMPs will total 4,100m ECU from funds over seven years. This figure includes 2,000m ECU allocated to Greece for special assistance. These multi-annual operations are concerned with development and adaptation, and seek to improve conditions in agriculture and fisheries; to aid transport, and small and medium-sized manufacturing; to create commercial and service enterprises, and to utilize new techniques for reducing unemployment. They are concerned with standards of living, a variety of economic weaknesses (including agricultural and industrial structures), high unemployment and, sometimes, problems connected with ageing populations. The eligible regions are defined under the Regulation with specified major conurbations being excluded: France. The regions of Languedoc-Roussillon, Corsica, Provence-Alpes-Côte d’Azur, Aquitaine and Midi-Pyrénées

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and the departments of Drôme and Ardèche. Excluded: the conurbations of Marseille, Bordeaux and Toulouse, and the built-up coastal strip with all-year round tourist activity. Greece. The whole of Greece. Italy. The whole of the Mezzogiorno, the regions of Liguria, Tuscany, Umbria and Marche, the Apennines in Emilia-Romagna and the lagoons of the northern Adriatic between the Comacchio and Marano Lagunera complexes. Excluded: Rome, Naples, Palermo, Florence and Genoa and the built-up coastal strip with all-year round tourist activity. The programmes have three major objectives: development, adaptation and support: Development covers projects such as the improvement of conditions in agriculture and fisheries; the strengthening of existing energy, communications, and transport infrastructures; training facilities; and protection for the environment. It is envisaged that small and medium-sized manufacturing, commercial enterprises and growing service industries aided by modern technologies, will help solve the problems of unemployment. Adaptation and support emerge from regional and specific operational policies aided by IMPs. The management and executive functions are delegated to the Commission with a clear set of guidelines. The guidelines also provide for the stringent evaluation and monitoring of results. The Regulation suggests a number of positive commitments linked to new development in the Mediterranean coast area, not least that of enhancing the value of human resources in the regions. Such objectives include: — converting holdings to special types of land-use, such as those involving forestry, and operations for protecting and improving the environment. — stepping up certain measures intended to: (i) provide farmers with a fair income by increasing compensatory allowances; (ii) make it easier for young people to take up farming; (iii) speed up the modernization of local products and their marketing;

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— modernizing living and working conditions; including marketing, storage and processing of agricultural products, and the expansion of vocational training; — improving fisheries by modernizing part of the fleet, expanding aquaculture, improving storage and processing facilities, etc; — encouraging manufacturing and the services sector through expanding small and medium-sized enterprises and craft firms, promoting tourism, and strengthening measures aimed at expanding job creation.

Community financial instruments involved in supporting IMPs are: grants from ERDF, ESF and the EAGGF Guidance Section, loans from the European Investment Bank from its own resources and from the NCI (New Community Instrument), plus specific additional resources allocated by the Community. The assistance from EC budgetary funds amounts to 4,100m ECU over seven years. Of this sum, 2, 500m ECU comes from the funds and 1,600m ECU in the form of specific additional resources from the contributions of more prosperous Community countries. The seven-year period can also include loans totalling 2,500m ECU possibly at subsidized rates. Under the Regulation, Greece qualifies for 2,000m ECU as part of its programme. The Regulation normally limits assistance under the IMPs to 70 per cent of the total cost of the project or operation, whether the assistance is in the form of grants or loans. By the end of 1988, the Commission had formally approved seven French IMPs (Aquitaine, Corsica, LangedocRoussillon, Provence-Alps-Côte d’Azur, Midi-Pyrénées, Ardèche and Drôme), seven Greek IMPs (western Greece and Peloponnese, northern Greece, Attica, Aegean Islands, eastern and central Greece, Crete) and fifteen Italian IMPs (Molise, Abruzzi, Marche, Liguria, Sardinia, Northern Adriatic Lagoons, Basilicata, Emilia-Romagna, Umbria, Lazio, Tuscany, Calabria, Sicily, Campania, Apulia). In accordance with the Regulation, the Commission also adopted in 1988 its first detailed report on the implementation of the programmes in 1986 and 1987 (Bull. EC 3–1988, point 2.1.114). The report highlights the difficulties in assessing the programmes and the main experiences of the earliest programmes in Crete and France.

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Procedures and content for the implementation of an integrated approach: Information note from the Commission to the Council and the European Parliament COM(86) 401/2/ final

The integrated approach was first outlined by the Commission in 1978 as a way to meet the widely felt need to increase the impact of Community and national interventions, particularly in less-favoured regions. In 1979 the Commission adopted internal arrangements to promote integrated initiatives and, subsequently, two Integrated Development Operations were launched in Belfast and Naples within the framework of regional policy. Within the framework of agricultural policy, the Commission proposed Integrated Development Programmes for the Western Isles (Scotland), Lozère (France) and the South-East of Belgium. These were adopted by the Council in 1981. In 1981 the Commission introduced priority treatment for operations jointly financed by two or more Community funds in the Guidelines for the Management of the European Social Fund. A series of Integrated Operations Feasibility Studies was initiated in 1982 and the concept of the Integrated Approach figured prominently in the Communication from the Commission to the Council of July 1983, Report and proposals on ways of increasing the effectiveness of the Community’s Structural Funds The Council Regulation of June 1984 on the European Regional Development Fund introduced priority for ‘investments and measures.. which form part of an integrated development approach’. In 1985 a decisive step to promote the integrated approach was taken when the Council adopted a Regulation to implement Integrated Mediterranean Programmes. Also in 1985 the Commission decided to adopt the integrated approach as part of its proposals for stronger structural assistance for steel-making areas in 1985. More recently, the reform of the Structural Funds has placed an emphasis on the co-ordination of Community support (COM(87) 376/ 2/Revision final and COM(88) 144 final). The diversity of developments inevitably led to different approaches in procedure and content and the purpose of the 1986 Communication was to respond to a Council invitation (19 June 1984) to ‘present proposals for the

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procedural provisions necessary for the implementation of integrated operations’ (see also Economic and Social Committee, ‘Opinion on the criteria and efficiency of integrated operations’, CES(86) 1062). COM(86) 401/2/ final is intended to clarify and set out the objectives and scope of the integrated approach, the criteria for deciding on Community support, and the procedures which will be followed in assessing applications for an integrated action. This should facilitate the use and interpretation of existing regulations which concentrate Community expenditure on the integrated approach as follows: — in the Social Fund the Guidelines give priority (without any geographical limitation) to operations forming part of an integrated programme; — in the Regional Fund, investment measures which form part of an integrated development approach may be accorded a priority treatment; — in EAGGF-Guidance, under Regulation 355/77, a priority is foreseen for projects arising out of approved programmes and which form part of an integrated approach; — through studies and pilot actions related to the Integrated Approach which can be financed up to 75 per cent out of specific budget provisions.

The general objectives of the integrated approach are to bring out the potential for endogenous development and to concentrate financial flows in favour of a region or sector. These are achieved by: providing or reinforcing the basis for partnership between EC, national, regional and local authorities; reinforcing the complementarity of EC structural interventions with other levels thereby increasing their efficiency and impact and developing multi-annual programmes so as to reduce financial and administrative bottlenecks and accelerate development. It is intended to produce coherence between different aims (i.e. integration on the ground between investments and activities to create and exploit maximum synergies and multiplier effects), actors (EC, national, regional and local authorities) and policies. To be successful, the integrated approach should be characterized by:

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— an overall programme of public and private measures and investments over a number of years coherent with each other and with Community policies and responding to the specific problems of the area or sector concerned; — integrated financial planning—a schedule for the co-ordinated use of the financial resources of the actors concerned; — implementation—the setting-up of an organized co-ordination and partnership at all levels in the implementation of the programme of measures, in particular the establishment of an organized co-ordination between the agencies (national, regional and local) responsible for the management of financial measures; the setting up of a local monitoring committee (including EC representatives) with the mandate of following the implementation of the integrated action and assuring evaluation and feedback.

Where appropriate, the integrated approach is the favoured Commission formula for structural interventions, offering the prospect of an improvement in the quality, relevance and impact of such measures. In principle, the approach can apply to both regional and sectoral situations, although in practice it has been mainly applied to declining regions where the concentration of resources is likely to have greatest impact. Given the nature of the targets concerned, it is difficult to produce a list of comprehensive criteria. However, three broad criteria are highlighted: (i) economic and social: The size of the population to be covered, the seriousness of the economic and social situation, the pertinence of the proposed development strategy, the perspectives of synergy between the different measures proposed, the estimated impact on employment, incomes, productivity and standards of living, the coherence of the strategy with the different relevant Community policies; its estimated environmental impact; (ii) the quality of the co-ordination: whether the area or sector concerned has an adequate administrative structure and whether suitable arrangements for monitoring and evaluation can be established; the degree of co-ordination and involvement of local, regional, national and Community measures and agencies;

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(iii) the suitability and scope of the proposed structural intervention: normally, projects should involve at least two of the major Structural Funds: ERDF, ESF and EAGGF Guidance Section together with at least one Community financial instrument; Community loans and grants should be combined in a cost-effective manner; assessment is also made of the importance of the financial commitments made by national, regional and local authorities.

In many cases, the initial stage is a preparatory feasibility study which may be financed under budget line 5410. These may be initiated either by the Commission or competent authorities in Member States. Although not an application in themselves for an integrated approach, the results of such studies may form the basis for the formulation of an application. Applications themselves may be initiated either by the Commission or competent authorities in Member States. Successful schemes will result in the agreeing of a multi-annual outline of action covering: a list of operations to be financed; an indicative schedule of national, regional and local supporting financial measures; an indicative schedule of Community support; conditions for financial support; administrative measures; monitoring and adaptation procedures. Declarations of Intent will be published in the Official Journal. In March 1987, the Commission approved an integrated action programme for the Oost-Groningen/Oost-Drenthe region of the Netherlands. The following December it approved a number of Integrated Development Operations (IDOs) covering Ariège, Auvergne, Central Brittany, the island of Reunion, Limousin and east Tarn/south Aveyron in France. In 1988, the Commission agreed a further seven IDOs: Birmingham, Bradford, Strathclyde and Yorkshire/ Humberside (UK), Nord/Pas-de-Calais (France), Limburg (Belgium) and Norte Alentejo (Portugal). In addition, other Community-led schemes (PEDIP, RENAVAL and RESIDER) have adopted the integrated approach. In 1989, the reform of the Structural Funds brought about a more systematic review of Community financial aid. Experience of the integrated approach during the previous five years was an important component of the reform and attempts to achieve coordinated and concentrated action is

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a crucial feature of the revised arrangements. Further integrated operations will therefore be applied under the rules and procedures of the revised Regulations. Financial support for Portugal for a specific industrial development programme (PEDIP)—COM(88) 141 final

With the accession of Portugal, the Community recognized the special problems facing that country’s economy. A tenyear programme for the development of Portuguese agriculture was drawn up, and it was agreed that a parallel effort to deal with the industrial and manufacturing sector was necessary. In February 1986, the Portuguese Government submitted a blueprint for an industrial development programme (PEDIP). In October that year, the Commission sent the Council a Communication on the subject (COM(86) 552 final) and in 1987 a group of experts were sent to Portugal to identify priorities for Community aid for the period 1988–92. In February 1988, Council agreed in principle the allocation of 500m ECU, over and above support for Structural Funds and Community loans, for the PEDIP programme. The difficulties experienced by Portuguese industry arise from structural deficiencies: low overall productivity, the disproportionate number of traditional sectors, inadequate basic infrastructure and training for workers, outdated production, management and marketing methods, dependency in fields of energy and technology, undercapitalization, limited internationalism etc. By contrast, the rest of the Community has undergone a process of modernization and restructuring, making it harder for Portugal, with a GDP of only 0.8 per cent of Community’s total GDP and a per capita income of about a quarter of the EC average, to integrate. Moveover, the effects of the creation of a single European market will be to widen disparities between rich and poor. To overcome this, measures are required that concentrate on changing procedures, training those in positions of responsibility and making structures more flexible. Alongside specific measures, there needs to be a climate that encourages private and co-operative economic initiative. The programme, funded by additional resources in the annual budget, is intended to contribute to four priority areas:

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1. improvement of basic industrial infrastructure; 2. stronger foundations for basic and further vocational training facilities for careers in industry; 3. financing of productive investment; 4. productivity tasks.

These are to be supported either separately, or by supplementing Structural Funds. Priority is given to areas 3 and 4. Area 1 is a response to shortcomings of transport networks, the business environment and technological infrastructure. Access to energy supply networks, better telecommunications facilities (especially through the STAR programme), water supply and waste disposal facilities are essential elements for an appropriate environment. Area 2 reflects the agreed need for initial training for workers and technicians and for training in the use of new technologies. Area 3 is directed at overcoming the obstacles of technological backwardness and poor industrial quality. Appropriate targets include: financing research and development, the development of new processes to replace the transfer of technology, investment in production and the acquisition of various types of technology, products or software. Finally, the aim of Area 4 is to mobilize human resources, possibly by means of surveys and the use of consultants. A major purpose is to provide SMEs with access to: market surveys and feasibility studies, to management, organization and innovation consultants, and specialist assistance. Establishing Business and Innovation Centres is one effective approach to this objective. However other, more substantial measures are required: testing and measuring laboratories, bodies dealing with standardization, programmes to develop information technologies, to exploit natural resources, to strengthen the capital equipment industry, to strengthen manufacturing processes etc. The rate of total Community assistance is not to exceed 75 per cent of the full cost, except for preparatory studies, pilot measures and technical measures carried out at the EC’s initiative which are eligible for 100 per cent funding. PEDIP was formally adopted by Council on 24 June 1988 (Regulation (EEC) No 2503/88, OJL 185, 15.7.88) and

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allows for the spending of 500m ECU over the period 1988– 92 in respect of the modernization of Portuguese industry. Integrated approach procedures are being applied and the programme is additional to the finances from Structural Funds (ERDF, 400m ECU; ESF 100m ECU; EIB loans 1 billion ECU). In November 1988, the Commission adopted financial decisions in respect of the first four operational programmes and in December published guidelines for implementing PEDIP in 1988 and 1989 (OJC 336, 31.12. 88). One way of boosting ailing economies is facilitating the development of new businesses and entrepreneurs especially in the SME sector. European Business and Innovation Centres are, therefore, an arm of Community regional policy. Community programme to create and develop business and innovation centres and their network (EBICs)—COM(86) 785 final

In order to foster renewed economic growth and better employment prospects, Community regional policy is increasingly aimed at encouraging industrial development. Traditional approaches to regional development— investment aid and infrastructure support—are increasingly being complemented by practical assistance to SMEs. Small and medium sized businesses are regarded as the crucial core of national economies. They are expected to be flexible in research and development, in innovation, in production and in marketing, and are regaining the three functions they had during the first Industrial Revolution—employment, production and innovation. They are dynamic creators of new jobs, and with their capacity for growth, some will become future major employers. In order to create the kind of entrepreneurial economy in which small innovative companies can flourish, the birth and growth of innovative SMEs has to be stimulated and their failure rate greatly reduced. Their access to risk capital must be improved. It is argued that the principal needs of potential entrepreneurs and existing SMEs at local level are the improvement of the environment which conditions the process of business creation: ready access to support services and a better use of the potential for the internallygenerated development of an area. European Business and

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Innovation Centres (EBICs) are designed to improve and exploit the potential for the internal generation of stagnant areas. In such areas there is need for mechanisms to bring together factors and resources conducive to business creation: potential and existing entrepreneurs, firms, local techniques and know-how, finance, consultative support. Business and Innovation Centres are seen as the best way forward and this approach is consistent with the objectives of strengthening economic and social cohesion and of modernizing the industrial base which are part of the Single European Act (Article 130D). Business and Innovation Centres are locally based, and professionally-managed organizations for the creation of innovative new activities with growth potential. They can undertake a comprehensive system of detection and selection of entrepreneurs, search, assessment and development of technologies, management training, rigorous business planning and management training and the supply of common premises. It is assumed that EBICs will become financially self-sufficient in the medium term. They represent a comprehensive approach to the detection, stimulation and combination of entrepreneurs and projects. Whilst mainly geared towards generating new innovative companies, they also assist existing SMEs to expand and diversify their activities. Centres are expected to concentrate on innovative manufacturing projects and allied services. It is intended that innovation should be involved in the technologies used, in the products or in marketing, in traditional as well as new manufacturing sectors. This approach involves linking with and complementing the efforts of existing business development organizations, both local and regional, as well as universities and research centres, companies and banks, professional organizations (industry, cooperatives, craftsmen), advisory bodies. Indeed, it is this category of body that usually takes the initiative to set up an EBIC. For best effect, small firms should be linked into a wider system of innovation flows and of markets. In this context, earlier experience has pointed to the advantages of a decentralized network system, geared to local circumstances but linked at a European level. In November 1984, a number of centres joined in a voluntary European network,

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promoted by the Commission, the European Business and Innovation Centre Network (EBN). EBN is a grassroots organization that helps new centres organize themselves effectively and quickly on the basis of accumulated experience, develops and improves the skills necessary to generate and develop innovative new firms, supports client firms of member centres in trading internationally and mobilizes the support of the European business Community. The EC has encouraged the network of EBICs since 1983 and has co-financed a number of operations. By the end of 1988 support had been provided for nearly fifty measures to prepare for such centres, of which thirty-five had been established. Twelve new centres were launched during 1988. The full impact of EBICs is unlikely to be seen in the short term. However, even in their early stages, their influence has been felt. It is estimated that, when fully operational, centres can be expected to produce an average of fifteen SMEs annually. Moreover, the rigorous planning process is designed to ensure a high survival rate. A high priority has been attached to strengthening the European network. The EBN comprises EBICs and associated members: industrial and financial companies, professional associations, experts, banks and development agencies. Expertise and skills in the creation and operation of EBICs has been accumulated, formalized and delivered on a professional basis to EBN members. The support of the business community at European as well as national level has been mobilized, by recruiting over fifty major firms in all Community countries as associate members and by providing support to actual Business and Innovation Centres. Cooperative projects between EBN members have been stimulated. The Commission has supported the launching of the EBN, by contributing to its operating expenses in 1985 (185,000 ECU), 1986 (170,000 ECU) and 1987 (100,000 ECU). Initially the distribution of EBICs was imbalanced, with Greece, Portugal and Spain left outside the network of centres, but steps have been taken to remedy the situation since 1987. Within the context of the Community’s regional policy, EBICs make contributions to several aspects of EC programmes for SMEs in the fields of industrial

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development, innovation, advanced training and financial instruments: — they participate in the programmes for the exploitation of the local development potential under the ERDF, the IMP or the Social Fund and support Local Employment Initiatives (LEI); — they inform and assist SMEs in establishing cooperation projects in the field of innovation: ESPRIT, BRITE, BC-NET; — they encourage co-operation between university, industry and research centres, thus serving the objectives of the COMETT programme; — they stimulate the creation of sources of risk capital, to complement their activities; — they create the conditions for implementing some of the actions developed under the strategic programme for innovation and technology transfer; — they facilitate access of SMEs to Community loans.

In short, EBICs are highly complementary with a variety of Community programmes directed towards SMEs and the Commission is anxious to build upon this synergy between associated programmes. Against this background the Commission intends to prolong the programme for a further four years and to direct it at the industrial redevelopment of stagnant or declining areas, falling within Community regional policy, and in IMP and ECSC areas that possess appropriate elements of an industrial environment, in terms of population, labour force, technical education and related services. The budget for such an extension is costed at 17.5m ECU, of which 16m ECU would help to fund approximately 70 new EBICs (especially in the more deprived industrial areas) , 1m ECU would go to the development of methods, models and procedures for improving the operation of EBICs (e.g. computerized planning methods, ideas banks, technology search and assessment), and 0.15m ECU to be earmarked for the promotion of EBICs in specified areas through conferences and seminars. In all these areas, EC finance would be limited to 50 per cent of the total outlay. Finally, limited provision is made for the operating shortfall of the European Business and Innovation Network, should the EBN fail to attain financial autonomy.

SECTION III OFFICIAL PUBLICATIONS AND RELATED DOCUMENTS

A. EUROPEAN REGIONAL DEVELOPMENT FUND

COM(87) 100: Making a success of the single act. COM(87) 101: Financing of the Community budget. COM(87) 236 final: Exchange of views between the Commission, the Council and the European Parliament on the appraisal and implementation of the principles contained in the new ERDF Regulation. COM(87) 376 final: Reform of the Structural Funds— — Commission communication; — Comprehensive proposal pursuant to Article 130D of the EEC Treaty;

Amended by COM(87) 376/2/Revision final. COM(87) 521 final: Twelfth (annual report) from the Commission on the European Regional Development Fund. The report gives details of the Fund’s operations in 1986, including the financing of projects, programmes and special Community measures, and of the distribution of assistance by location and sector of activity. COM(88) 144 final: Amended proposal for a Council Regulation on the tasks of the Structural Funds and their effectiveness and on co-ordination of their activities between themselves and with the operations of the EIB and the other existing financial instruments. COM(86) 401 final: Procedures and content for the implementation of an integrated approach to the European Regional Development Fund. COM(87) 420 final: Own resources decision. COM(88) 244 final: Communication from the Commission: the EIB, the other financial instruments and strengthening economic and social cohesion. This considers present levels of contribution to cohesion including finance for regional development, resource allocation and various operating procedures within the Community. COM(88) 500 final: Back-up policies: Reform of the Structural Funds. Proposals for Council Regulations—

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— on the co-ordination of the activities of the different Structural Funds, between themselves and with the operations of the EIB and the other existing financial instruments; — on the activities of the European Regional Development Fund; — laying down provisions for implementing Regulation No 2052/ 88 as regards the European Social Fund; — laying down provisions for implementing Regulation No 2052/ 88 as regards the EAGGF Guidance Section;

Amended by COM(88) 500/2/Revision final. COM(88) 728 final: European Regional Development FundThirteenth annual report (1987). C(89) 287 final: Guidance paper for operations in the regions whose development is lagging behind (Objective 1) and in the areas of industrial decline (Objective 2) February 1989. PE DOC A 2–41/87: Report drawn up on behalf of the Committee on Regional Policies and Regional Planning on the 11th report from the Commission to the Council on the activities of the European Regional Development Fund (ERDF) in 1985. PE DOC A 2–58/88: Report drawn up on behalf of — the — the — the — the

Committee Committee Committee Committee

on on on on

Regional Policy and Regional Planning? Agriculture, Fisheries and Food; Budgets; Social Affairs and Employment;

on the amended proposal from the Commission to the Council for a Regulation on the tasks of the Structural Funds and their effectiveness and on co-ordination of their activities between themselves and with the operations of the European Investment Bank and the other existing financial instruments. Proposal for a Council Regulation on the tasks of the Structural Funds and their effectiveness and on the coordination of their activities between themselves and with the operation of the European Investment Bank and the other financial instruments. Official Journal of the European Communities Information and Notices, 12 September 1987, 87/C245/04.

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Opinion of the Economic and Social Committee on the reform of the Structural Funds. Official Journal of the European Communities Information and Notices, 31 December 1987, 87/C356/06. Amended proposal for a Council Regulation on the tasks of the Structural Funds and their effectiveness and on coordination of their activities between themselves and with the operations of the EIB and the other existing financial instruments. Official Journal of the European Communities Information and Notices, 9 June 1988, 88/C151/05. Opinion of the Economic and Social Committee on the twelfth annual report of the European Regional Development Fund. Official Journal of the European Communities Information and Notices, 4 July 1988, 88/ C175/08. Council Regulation of 24 June 1988 on the tasks of the Structural Funds and their effectiveness, and on coordination of their activities between themselves and with the operations of the European Investment Bank and the other existing financial instruments. Official Journal of the European Communities Legislation, 15 July 1988, 2052/ 88. Opinion of the Economic and Social Committee on the proposal for a Council Regulation laying down provisions for implementing Regulation No 5052/88 as regards coordination of the activities of the different Structural Funds between themselves and with the operations of the European Investment Bank and the other existing financial instruments. The Committee criticizes various aspects and calls for amendments. Official Journal of the European Communities Information and Notices, 31 December 1988, 88/C337/13. Item 554: in order to strengthen the co-ordination and improve the consistency of regional and social development operations under the EC’s Structural Funds (ERDF, ESF and EAGGF Guidance Section), plans and frameworks for Community support are to be prepared to determine over several years the types and amounts of assistance needed. There will also be preparatory and experimental measures for implementing the operations. The Community will therefore finance the required studies, consultants’ reports,

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analyses and assessments. Official Journal of the European Communities Legislation, 31 January 1989, Page 576. Item 500: aid from the Fund aims to promote the development of less-favoured areas, regions suffering from industrial decline and rural areas. Community aid, together with national public sector funds, goes to support development programmes, aid schemes and major projects as well as general grants to be managed by intermediaries such as regional development organizations. It is granted in particular to productive investment which creates jobs, infrastructure projects and studies or pilot schemes on planning at Community level. Official Journal of the European Communities Legislation, 31 January 1989, Page 554. Commission communication on the method of application of Article 93 (2) (C) of the EEC Treaty to national regional aid. This updates the threshold indices for income per capita and structural unemployment for each Member state, which are used to assess the socio-economic situation of a region. Official Journal of the European Communities Information and Notices, 29 March 1989, 89/C78/04. Commission Decision of 25 January 1989 fixing an indicative allocation between Member States of 85% of the commitment appropriations of the European Regional Development Fund (ERDF) under Objective 1 as defined by Regulation No 2052/88. Official Journal of the European Communities Legislation, 13 April 1989, 89/250/EEC. Commission Decision of 8 March 1989 fixing an indicative allocation between Member States of 85% of the commitment appropriations of the European Regional Development Fund under Objective 2 as defined by Regulation No 2052/88. These appropriations are to assist areas suffering from industrial decline. Official Journal of the European Communities Legislation, 26 April 1989, 89/289/EEC. CES(87) 932: Opinion of the Economic and Social Committee on the proposal for a Council Decision on the financing of major community infrastructure projects, 22 October 1987. CES(87) 485: Opinion of the Economic and Social Committee on the eleventh Annual Report (1985) to the Council by the Commission on the European Regional Development Fund.

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European Regional Development Fund—Twelfth annual report (1986) from the Commission, to the Council, the European Parliament and the Economic and Social Committee. Commission of the European Communities EN-1988—CB-52–88–057-EN-C. Commission of the European Community—ERDF in figures 1987/1975–1987, EC, Brussels, 1988. The Principle of ‘Additionality’ in regard to the European Regional Development Fund (ERDF) and its application in some Member States. European Parliament Research and Documentation Paper: Regional Policy and Transport Series No 15, 1987, 5–1987. European Regional Development Fund—Eleventh annual report (1985)—Commission of the European Communities EN-1987 CB-48–87–0800-EN-C. PE DOC A 2–115/87: Report on behalf of the Committee on Regional Policy and Regional Planning on the revision of the present regulation governing the European Regional Development Fund (ERDF). PE DOC A 2–122/87: Report on the behalf of the Committee on Regional Policy and Planning on co-ordination between the activities of the European Community’s Structural Funds and its lending instruments. PE DOC A 2–205/87/A: Report drawn up on behalf of the Committee on Regional Policy and Regional Planning on the Commission proposal on the tasks of the Structural Funds and on the co-ordination of their activities between themselves and with the operations of the European Investment Bank and the other financial instruments. Part A: Amendments tabled and a draft legislative resolution. PE DOC A 2–200/87/B: Second report drawn up on behalf of the Committee on Budgets on the proposals from the Commission on the future financing of the Communities. Part B: explanatory statement and opinions of other committees. PE DOC A 2–250/88/A: Report drawn up on behalf of the Committee on Regional Policy and Regional Planning on the proposal for a Regulation laying down provisions for implementing Regulation No 2052/88 as regards the coordination of the activities of the different structural Funds between themselves and with the operations of the EIB and

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other existing financial instruments. Part A: listing the amendments and draft legislative resolution. PE DOC A 2–250/B/B: Report drawn up on behalf of the Committee on Regional Policy and Regional Planning on the proposal for a Regulation laying down provisions for implementing Regulation No 2052/88 as regards the coordination of the activities of the different Structural Funds between themselves and with the operations of the EIB and other existing financial instruments. Part B: giving the explanatory statement and opinions. PE DOC A 2–205/87/B: Report drawn up on behalf of the Committee on Regional Policy and Regional Planning on the Commission proposal on the tasks of the Structural Funds and on the co-ordination of their activities between themselves and with the operations of the European Investment Bank and the other financial instruments. Part B: explanatory statement and the opinions of three of the committees. PE DOC A 2–284/87: Report drawn up on behalf of the Committee on Regional Policy and Regional Planning on methods of financing under the Community’s Structural Funds.

B. DECLINING INDUSTRIAL AREAS

COM(87) 388/2/Revision final: Steel policy (RESIDER). COM(87) 722 final: Amendments to the proposal for a Council Regulation instituting a Community programme to assist the conversion of steel areas (RESIDER programme). COM(88) 369 final: Amendment to the proposal for a Council Regulation instituting a Community programme to assist the conversion of shipbuilding areas (RENAVAL programme). The Community programme shall concern areas which have experienced substantial job losses in shipbuilding in the past three years. CES(87) 1075: Opinion of the Economic and Social Committee on the proposal for a Council Regulation instituting a Community programme to assist the conversion of steel areas (RESIDER programme).

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Programme for the conversion of shipbuilding areasProposal for a Council Regulation instituting a Community programme to assist the conversion of shipbuilding areas (RENAVAL programme) . Official Journal of the European Communities Information and Notices, 31 October 1987, 87/ C291/08. Opinion of the Economic and Social Committee on the proposal for a Council Regulation instituting a Community programme to assist the conversion of steel areas (RESIDER programme). Official Journal of the European Communities Information and Notices, 31 December 1987, 87/C356/14. Council Regulation of 2 February 1988 instituting a Community programme to assist the conversion of steel areas (RESIDER programme). Official Journal of the European Communities Legislation, 5 February 1988, 328/ 88. Amendment to the proposal for a Council Regulation instituting a Community programme to assist the conversion of shipbuilding areas (RENAVAL) programme. Official Journal of the European Communities Information and Notices, 2 August 1988, 88/C201/05. Council Regulation of 26 July 1988 instituting a Community programme to assist the conversion of shipbuilding areas (RENAVAL programme). Official Journal of the European Communities Legislation, 15 August 1988, 2506/88. Commission Decision of 9 November 1988 concerning the areas in France referred to in Article 3(2) of Regulation No 328/88 instituting a Community programme to assist the conversion of steel areas (the RESIDER programme). Official Journal of the European Communities Legislation, 23 November 1988, 88/588/ EEC. Commission Decision of 21 December 1988 concerning the areas referred to in Article 3(2) of Council Regulation No 328/88 instituting a Community programme to assist the conversion of steel areas (RESIDER programme). Official Journal of the European Communities Legislation, 18 January 1989, 89/30/EEC.

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Study of the European Communities’ re-adaptation aids in the coal and steel industries. Commission of the European Communities, 1988. Report drawn up on behalf of the Committee on Regional Policy and Regional Planning on the traditional industrial regions of the European Community. European Parliament Working Documents, 8 July 1986, A 2–77/86. PE DOC A 2–227/87: Report drawn up on behalf of the Community on Economic and Monetary Affairs and Industrial Policy on the Commission proposal for a Regulation instituting a Community programme to assist the conversion of steel areas (RESIDER programme), for a Decision concerning a contribution to the ECSC from the general budget of the European Communities to finance measures connected with the restructuring of the steel industry and for the conditional introduction of a new, three-year quota system, incorporating plant closure incentives, in respect of certain products. PE DOC A 2–227/87/Annex: Annex to the report drawn up on behalf of the Committee on Economic and Monetary Affairs and Industrial Policy on the Commission proposals for a Regulation instituting a Community programme to assist the conversion of steel areas (RESIDER programme) and related matters, giving the opinion of the Committee on Budgets. PE DOC A 2–227/87/B/Corrigendum: Report drawn up on behalf of the Committee on Economic and Monetary Affairs and Industrial Policy on the Commission proposal for a Regulation instituting a Community programme to assist the conversion of steel areas (RESIDER programme), for a Decision concerning a contribution to the ECSC from the general budget to finance measures connected with the restructuring of the steel industry and for the conditional introduction of a new, three-year quota system, incorporating plant closure incentives, in respect of certain products. Part B: Explanatory statement. PE DOC A 2–76/88: Report drawn up on behalf of the Committee on Regional Policy and Regional Planning on the proposal from the Commission to the Council for a Regulation instituting a Community programme to assist the conversion of shipbuilding areas (RENAVAL).

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C. LESS-FAVOURED AREAS

COM(85) 836 final: Advanced telecommunications etc (STAR). COM(85) 838 final: Indigenous energy potential etc (VALOREN). COM(87) 126 final: Proposal for a Council Directive amending Directive No 81/527/EEC on the development of agriculture in the French overseas departments. COM(87) 218 final: Proposal for a Council Regulation amending Regulation No 1938/81 on a common measure to improve public amenities in certain less-favoured agricultural areas of Germany. COM(87) 218 final: Proposal for a Council Regulation amending Regulation No 1940/81 on an integrated development programme for the Department of Lozere. COM(87) 363 final: Proposal for a Council Regulation amending Regulation No 1975/82 on the acceleration of agricultural development in certain regions of Greece. COM(87) 367 final: Proposal for a Council Regulation amending Regulation No 2195/81 on a special programme concerning drainage operations in the less-favoured areas of the west of Ireland. COM(87) 371 final: Proposal for a Council Regulation amending Regulation No 1942/81 for the stimulation of agricultural development in the less-favoured areas of Northern Ireland. COM(87) 429 final: Proposal for a Council Regulation amending Regulation No 1820/80 for the stimulation of agricultural development in the less-favoured areas of the west of Ireland. COM(88) 141 final: Proposal for a Council Regulation for financial support for Portugal for a specific industrial development programme (PEDIP). COM(88) 533 final: Proposal for a Council Regulation No 1975/82 on the acceleration of agricultural development in certain regions of Greece. PE DOC A 2–62/86: Report drawn up on behalf of the Committee on Regional Policy and Regional Planning on the proposal from the Commission to the Council for a Regulation instituting a Community programme for the

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development of certain less-favoured regions of the Community by exploiting indigenous energy potential (VALOREN programme). PE DOC A 2–60/86: Report drawn up on behalf of the Committee on Regional Policy and Regional Planning on the proposal from the Commission to the Council for a Regulation instituting a Community programme for the development of certain less-favoured regions of the Community by improving access to advanced telecommunications services (STAR programme). Opinion of the Economic and Social Committee on disadvantaged island regions. Official Journal of the European Communities Information and Notices, 31 August 1987, 87/C232/25. Proposal for a Council Regulation on financial support for Portugal for a specific industrial development programme (PEDIP). Official Journal of the European Communities Information and Notices, 7 May 1988, 88/C120/11. Own-initiative Opinion of the Economic and Social Committee on ‘A policy for upland areas’. Official Journal of the European Communities Information and Notices, 4 July 1988, 88/C175/16. Notice concerning the new general regional aid scheme planned by the Spanish government and notified to the Commission in January 1987. The plan distinguishes between four classes of assisted area, corresponding to four ceilings of regional aid intensity, 75%, 45%, 30% and 20%, covering a total of 65% of the national population. Details of the areas covered by the scheme, which the Commission approved on 26 May 1987, are given. As no detail is given of the type of aid planned, judgement is reserved on this matter. Official Journal of the European Communities Information and Notices, 27 September 1988, 88/C251/04. General Commission guidelines for the implementation of a specific industrial development programme (PEDIP) in 1988 and 1989. Official Journal of the European Communities Information and Notices, 31 December 1988, 88/C336/05. Proposal for a Council Regulation instituting an exceptional emergency measure for less-favoured areas in Portugal. Official Journal of the European Communities Information and Notices, 7 January 1989, 89/C6/05.

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Draft Joint Decision of the Council and the Commission setting up a programme of options specific to the remote and insular nature of the French Overseas Departments (FODs). Entitled POSIDOM, the programme is aimed at facilitating the FODs into the integration of the internal market. POSIDOM will concentrate on three major areas: establishing an appropriate framework for the application of common policies in these departments, helping them catch up economically with Member States and promoting regional co-operation. This shall take effect from 1 July 1989 to 31 December 1992. Official Journal of the European Communities Information and Notices, 2 March 1989, 89/ C53/10. CES(84) 435: Information Report of the Section for Regulation Development of the Economic and Social Committee on a policy for upland areas. CES(87) 651: Opinion of the Economic and Social Committee on disadvantaged island regions. Keeble D., Offord, J. and Walker S.—Peripheral regions in a Community of twelve Member States, EC, Brussels, 1988. Agriculture and the regions: the situation and developments in the enlarged Community and the regional impact of the common agricultural policy in Spain and Portugal. European Commission 1988. STRIDE—Science and Technology for Regional Innovation and Development in Europe. Final Report by National Board for Science and Technology, Dublin, November 1987. Commission of the European Communities Research and Technology developments in the less-favoured regions of the Community (STRIDE). Final report April 1987. PE DOC A 2–82/87: Report drawn up on behalf of the Committee on Regional Policy and Regional Planning on the mountain regions. Also included is an opinion of the Committee on Agriculture, Fisheries and Food. PE DOC A 2–113/87: Report drawn up on behalf of the Committee on Regional Policy and Regional Planning on the peripheral maritime regions and islands of the Community. Also included is the opinion of the Committee on Transport. PE DOC A 2–109/87: Report drawn up on behalf of the Committee on Regional Policy and Regional Planning on the regional problems of Ireland.

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PE DOC A 2–214/87: Report drawn up on behalf of the Committee on Regional Policy and Regional Planning on an integrated development programme for Portugal. PE DOC A 2–142/88: Report drawn up on behalf of the Committee on Regional Policy and Regional Planning on a development programme of European integration for the frontier regions between Portugal and Spain. Report drawn up on behalf of the Committee on Regional Policy and Regional Planning on the promotion of regional development agencies as an essential part of regional policy. This recognizes the contribution of RDAs to the support provided for the establishment and development of enterprises in the least-developed areas of the Community. It calls for the setting up of such agencies in areas where they do not yet exist, the extension of the services offered by existing agencies and increased co-operation between RDAs. European Communities European Parliament Reports, 30 January 1989, PE DOC A 2–373/88. Report drawn up on behalf of the Committee on Regional Policy and Regional Planning on the impact of infrastructure and the tertiary (services) sector on regional development— prospects for a new regional policy. This calls for the creation of a minimum level of basic infrastructure in the Community’s least-developed regions, the updating of infrastructure and for measures to improve and promote the services sector in these regions. European Communities European Parliament Reports, 7 December 1988, PE DOC A 2–292/88.

D. OTHER REGIONAL POLICY AND PROGRAMMES

COM(85) 180/2: Integrated Mediterranean programmes (IMP). COM(86) 401/2/final: Integrated approach; etc. COM(86) 785 final: Proposal for a Council Decision concerning a Community programme to create and develop business and innovation centres and their network. COM(88) 501/2 final: Communication from the Commission on the future of rural society.

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Opinion of the Economic and Social Committee on the action programme for SMEs. Official Journal of the European Communities Information and Notices, 31 August 1987, 87/C232/20. Opinion of the Economic and Social Committee on the proposal for a Council Decision concerning a Community programme to create and develop Business and Innovation Centres and their network. Official Journal of the European Communities Information and Notices, 30 November 1987, 87/C319/16. Commission Decision of 24 June 1988 setting up a Consultative Council of Regional and Local Authorities. Official Journal of the European Communities Legislation, 6 September 1988, 88/487/EEC. Notice concerning the action guidelines of CEDEFOP, the European Centre for the Development of Vocational Training, for 1989–92. These include research and development activities concerning the main actors in vocational training, of the role of vocational training in the achievement of the objectives of the EC’s Structural Funds and its contribution to realizing the free movement of people within the Community. There are also activities concerning the Centre’s information networks and to promote the transnational exchange of innovation in vocational training. Official Journal of the European Communities Information and Notices, 9 December 1988, 88/C314/03. Appointment of the members and alternate members of the Consultative Council of Regional and Local Authorities, set up by the Commission on 24 June 1988. This list, which names those appointed for three years commencing 9 December 1988, cancels and replaces that published on 22 December 1988. Official Journal of the European Communities Information and Notices, 1 February 1989, 89/ C26/04. Programme of Research and Actions on the Development of the Labour Market: Job Creation in Small and MediumSized Enterprises. A summary report of issues for research and policy in three volumes: Volume I gives an introduction and covers the United Kingdom and Italy, Volume II Germany, France, the Netherlands, Belgium and Luxembourg and Volume III Spain, Ireland, Denmark,

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Greece and Portugal. Commission of the European Communities, 1987, 92–825–7164–5. Report drawn up on behalf of the Committee on Regional Policy and Regional Planning on an integrated rural development programme for the less-favoured areas in Northern Ireland. European Parliament Working Documents, 25 September 1986, A 2–105/86. Commission of the European Communities—Regional development and vocational training. Development of human resources in regions of economic reconversion benefiting from Community financial support. Synthesis report, EC, Brussels, 1987. Commission of the European Communities—Regional Development and vocational training. Development of human resources in regions of economic reconversion benefiting from Community financial support Regional Monographs (Lorraine, northern England, Province of Hamburg, south-west of Ireland, Liguria, Andalusia) EC, Brussels, 1987. Commission of the European Communities—European Regional Development Fund: UK regional development programme 1986–90 Sections 1–6 – United Kingdom Section 7A – England Section 7B – England Section 7C – England Section 7D – England Section 7E – England Section 7F – England Section 7G – England Section 7H – England Section 8 – Wales Section 9 – Scotland Section 10 – Northern Ireland EC, Brussels, 1987.

– – – – – – – – –

General North East Whitby Bradford Humberside South Yorkshire Workingham Greater Manchester Greater Merseyside

Regional development programmes for Denmark 1986–1990 third generation—Commission of the European Communities—EN-1987 CB-48–87–517-EN-C.

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Programme de développement régional pour la Belgique 1986–1990—troisième génération Commission des Communautés Européenes CB-52–88–986-FR-C. Regional development programmes for the Netherlands 1986–1990 Commission of the European Communities— EN-1988 CB-53–88–083-EN-C. PE DOC A 2–174/87: Report drawn up on behalf of the Committee on Regional Policy and Regional Planning on regional problems and migratory movements. PE DOC A 2–182/87: Report drawn up on behalf of the Committee on Economic and Monetary Affairs and Industrial Policy on the Commission proposal for a Council Decision adopting the annual report on the economic situation in the Community and laying down economic policy guidelines for 1988. PE DOC A 2–292/87: Report drawn up on behalf of the Committee on Economic and Monetary Affairs and Industrial Policy on the economic consequences of the new technologies. Also included is the opinion of the Committee on Regional Policy and Regional Planning. PE DOC A 2–227/88: Report drawn up on behalf of the Committee on Social Affairs and Employment on the problems of frontier workers in the Community. This covers freedom of movement, social security, employment, working conditions and taxation. Report drawn up on behalf of the Committee on Regional Policy and Regional Planning on Community regional policy and the role of the regions. Part A: motion for a resolution. This points out the failure of Community policy so far to reduce regional disparities and the need for fresh progress towards economic and social cohesion. It then proposes changes to regional policy, including greater regionalization. European Communities European Parliament Reports, 21 October 1988, PE DOC A 2–218/88/A. Report drawn up on behalf of the Committee on Regional Policy and Regional Planning on a Community regional policy and the role of the regions: Part B-explanatory statement. This comprises six reports which cover various issues on the regionalization of policy in this area, the role of the Community, and its relations with regional and local authorities. Also included is a Community Charter for Regionalization. European Communities European

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Parliament Reports, 21 October 1988, PE DOC A 2–218/88/ B.

E. GENERAL

Commission of the European Communities—The regions of the enlarged Community: Third periodic report on the social and economic situation and development of the regions of the Community—Summary and conclusions, EC, Brussels, 1987. Cheshire P., Hay D., Carbonaro G. and Beran N., Urban problems and regional policy in the European Community, EC, Brussels, 1988. CES(87) 1164: Opinion of the Economic and Social Committee on the third periodic report on the report on the social and economic situation and development of the regions of the Community. Completing the Internal Market: White Paper from the Commission to the Council, outlining the measures to be taken to remove the physical, technical and fiscal barriers to trade within the European Community, in order to achieve the single European market by 1992. Commission of the European Communities, June 1985, 92–825–5436–8. CES(87) 481: Opinion of the Economic and Social Committee on ‘Making a success of the Single Act: a new frontier for Europe’, prepared by the ‘New Frontier’ subcommittee. Information Report of the Section for Regional Development and Town and Country Planning on assessment and follow-up of the IMPs. This examines the background to the IMPs, Commission methods of assessing programme eligibility and the allocation of budgetary resources, the preparation, presentation and implementation of the IMPs and their general content. The report concludes that although seriously underfunded, the IMPs have a favourable track record and should be continued, even enlarged. European Communities Economic and Social Committee Opinions and Reports, 17 February 1989, CES(88) 498. Regions—Statistical Yearbook 1987.

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COM(88) 696 final: Draft Council Resolution on the implementation of a plan of priority actions in the field of statistical information: Statistical programme of the European Communities 1989–92 and a draft Council Decision establishing a Committee to administer this programme. This aims to provide statistics to enhance the efficiency of Community programmes and a means of evaluating their impact on European society.

APPENDIX 1: COUNCIL REGULATIONS

Revised Arrangements for ERDF and its Relationship with other Structural Funds. The following Regulations are reprinted, with the kind permission of the European Commission, from the Official Journal of the European Communities: ‘Framework’ Regulation: Regulation (EEC) No 2052/88 (1) ‘Horizontal’ Regulation: Regulation (EEC) No 4253/88 (2) ‘Implementing’ Regulation: Regulation (EEC) No 4254/88 (3)

COUNCIL REGULATION (EEC) No 2052/88 of 24 June 1988 on the tasks of the Structural Funds and their effectiveness and on coordination of their activities between themselves and with the operations of the European Investment Bank and the other existing financial instruments THE COUNCIL OF THE EUROPEAN COMMUNITIES, Having regard to the Treaty establishing the European Economic Community, and in particular Article 130d thereof, Having regard to the proposal from the Commission (1), Having regard to the opinion of the European Parliament (2), Having regard to the opinion of the Economic and Social Committee (3), Whereas Article 130a of the Treaty provides for the Community to develop and pursue its actions leading to the strengthening of

(1) OJ No L185, 24.6.88, pp.9–20 (2) OJ No L374, 19.12.88, pp.1–14 (3) OJ No L374, 19.12.88, pp.15–20

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its economic and social cohesion and in particular for it to aim at reducing disparities between the various regions and the backwardness of the least-favoured regions; Whereas Article 130c states that the European Regional Development Fund (ERDF) is intended to help redress the principal regional imbalances in the Community through participating in the development and structural adjustment of regions whose development is lagging behind and in the conversion of declining industrial regions; Whereas, to that end, Article 130d of the Treaty provides for a comprehensive proposal the purpose of which will be to make such amendments to the structure and operational rules of the European Agricultural Guidance and Guarantee Fund, Guidance Section (EAGGF Guidance Section), the European Social Fund (ESF) and the ERDF as are necessary to clarify and rationalize their tasks in order to contribute to the achievement of the objectives set out in Articles 130a and 130c of the Treaty, to increase their efficiency and to coordinate their activities between themselves and with the operations of the existing financial instruments; Whereas Community action through the Structural Funds, the European Investment Bank (EIB) and the other existing financial instruments must be in support of the objectives set out in Articles 130a and 130c; Whereas the action taken through the Structural Funds, the EIB and the other existing financial instruments, the coordination of Member States’ economic and social policies, the coordination of national regional policies, the coordination of national schemes of assistance and other measures taken with a view to implementing the common policies and the internal market form, in accordance with Article 130b of the Treaty, part of a series of policies and measures aimed at strengthening economic and social cohesion, and whereas the Commission is called upon to make appropriate proposals in this regard; Whereas it is necessary, in order to achieve the aim set by Article 130d of the Treaty, to direct all Community activity in this field towards the attainment of priority objectives which are clearly defined in the light of that aim; Whereas on 11 and 12 February 1988 the European Council, with a view to strengthening the impact of Community structural measures, agreed to double in real terms commitment appropriations for the Structural Funds by 1993 as compared with the 1987 level; whereas at the same time it fixed the increases to be made up to 1992; whereas, within this context the Structural Fund contributions for regions coming under Objective 1 (see Article 1 below) are to be doubled in real terms by 1992; whereas in so doing the Commission is to ensure that, in the framework of the additional funds for the regions falling within

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Objective 1, a particular effort is made to assist the leastprosperous regions; Whereas it is necessary to specify which Funds are to contribute —and to what extent and under what conditions they are to do so —to the achievement of each of the priority objectives and to determine the conditions under which the EIB and other existing Community financial instruments can make their contributions, particularly in conjunction with operations of the Funds; Whereas, of the three Structural Funds, the ERDF is the main instrument for achieving the objective of ensuring the development and structural adjustment of regions whose development is lagging behind; whereas it plays a central role in the conversion of regions, frontier regions and parts of regions (including employment areas and urban communities) seriously affected by industrial decline; Whereas the essential tasks of the ESF are combating long-term unemployment and the occupational integration of young people; whereas it helps to support economic and social cohesion; whereas it is also an instrument of decisive importance in the promotion of consistent employment policies in the Member States and in the Community; (1) OJ No C 151, 9.6.1988, p. 4. (2) OJ No C 167, 27.6.1988. (3) OJ No C 175, 4.7.1988. Whereas the Guidance Section of the EAGGF is, within (the context of support for economic and social cohesion, the main instrument for financing the adjustment of agricultural structures and the development of rural areas with a view to reform of the common agricultural policy; Whereas action by the Funds, the EIB and the other financial instruments must inter alia underpin implementation of a policy of rural development; Whereas the tasks of the Funds must be defined so as to specify the broad categories of tasks assigned to each of them respectively for the purpose of achieving the priority objectives; whereas Fund operations must be consistent with Community policies, inter alia as regards rules of competition, the award of public contract and environmental protection; Whereas achievement of the priority objective of ensuring the structural adjustment of the regions whose development is lagging behind necessitates a significant concentration of the resources of the Community’s Structural Funds on that objective; Whereas provisions on the indicative allocation of commitment appropriations between Member States are laid down under the ERDF so as to make it easier for the Member States to programme the measures which come within the ERDF framework;

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Whereas the regions, areas and individuals in the Community eligible for Community structural assistance in connection with the various priority objectives should be determined; Whereas a list should be drawn up of the regions whose development is lagging behind; whereas this list should comprise administrative level NUTS II (1) regions where per capita GDP measured in terms of purchasing power parity is less than 75% of the Community average, and other regions whose per capita GDP is close to that of regions under 75% and whose inclusion is justified by special circumstances; Whereas it is necessary to drawn up criteria for defining declining industrial areas; whereas, moreover, Community action could, in order to ensure effective concentration of assistance, cover up to 15% of the Community population living outside the regions whose development is lagging behind; Whereas criteria must be laid down for the selection of rural areas; Whereas Community action is intended to be complementary to action by the Member States or to back up national measures; whereas, in order to impart added value to their own initiatives at the appropriate territorial level, close consultations should be instituted between the Commission, the Member State concerned at the competent authorities designated by the latter at national, regional, local or other level, with each party acting as a partner, within the framework of its responsibilities and powers, in the pursuit of a common goal; Whereas it is necessary to specify the principal forms of structural assistance to be provided by the Community for the purposes of the objectives set out in Articles 130a and 130c of the Treaty; whereas those forms of assistance must enhance the effectiveness of the measures taken by it and at the same time, account being taken of the proportionality principle, satisfy the needs of the different situations that may arise; Whereas the main emphasis must be placed on assistance in the form of multiannual operational programmes; Whereas, in order to secure joint action between one or more funds, the EIB and one or more of the other existing financial instruments, those programmes may be drawn up and implemented on the basis of an integrated approach to the measures involved; Whereas mechanisms should be established for varying Community assistance in line with the particular features of the measures to be supported and in the light of the context in which they are to be carried out and the financing capacity of the Member State concerned, having regard in particular to its relative prosperity; Whereas, in implementing this Regulation, it is necessary to establish procedures for ensuring close association between the

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Commission and the Member States as well as, where appropriate, national, regional and local authorities designated by them; Whereas it is necessary to establish effective methods of monitoring, assessing and carrying out checks in respect of Community structural operations, based on objective criteria, and to ensure that those methods are adapted to the tasks of the different Funds as specified in this Regulation; Whereas the principles for the necessary transitional provisions as well as for the combining and overlapping of Community operations or measures must be laid down; Whereas it is advisable to include a review clause; Whereas it is necessary to lay down in subsequent implementing legislation the detailed rules governing the individual Funds, together with the arrangements for the coordination and joint deployment of the Community’s various Structural Funds and instruments; Whereas, while performing the tasks assigned to it by Articles 129 and 130 of the Treaty, the EIB is to cooperate in achieving, the objectives set out in this Regulation in accordance with the procedures laid down in its Statute, (1) Nomenclature of territorial units for statistical purposes (NUTS). Sec Eurostat ‘Statistiques rapides des régions’ of 25 Aupust 1986. HAS ADOPTED THIS REGULATION: I. OBJECTIVES AND TASKS OF THE STRUCTURAL FUNDS Article 1 Objectives Community action through the Structural Funds, the EIB other existing financial instruments shall support achievement of the general objectives set out in Articles 130a 130c of the Treaty by contributing to the attainment of following five priority objectives:

and the and the

1. promoting the development and structural adjustment of the regions whose development is lagging behind (hereinafter referred to as ‘Objective 1’); 2. converting the regions, frontier regions or parts of regions (including employment areas and urban communities) seriously affected by industrial decline (hereinafter referred to as ‘Objective 2’); 3. combating long-term unemployment (hereinafter referred to as ‘Objective 3’);

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4. facilitating the occupational integration of young people (hereinafter referred to as ‘Objective 4’); 5. with a view to reform of the common agricultural policy: (a) speeding up the adjustment of agricultural structures, and (b) promoting the development of rural areas (hereinafter referred to as ‘Objective 5 (a) and 5 (b)’).

Article 2 Means 1. The Structural Funds, the ‘EAGGF Guidance Section’, the ‘ESF’ and the ‘ERDF’ shall contribute, each according to the specific provisions governing its operations, to the attainment of Objectives 1 to 5 on the basis of the breakdown given below:

—Objective

1:

—Objective —Objective —Objective —Objective

2: 3: 4: 5 (a): 5 (b):

ERDF, ESF, EAGGF Guidance Section; ERDF, ESF; ESF; ESF; EAGGF Guidance Section; EAGGF Guidance Section, ESF, ERDF.

2. The EIB, while performing the tasks assigned to it by Articles 129 and 130 of the Treaty, shall cooperate in achieving the objectives set out in Article 1 of this Regulation in accordance with the procedures laid down in its Statute. 3. The other existing financial instruments may contribute, each according to the specific provisions governing its operations, to any measure supported by one or more of the Structural Funds in connection with one of the abovementioned five objectives. Where appropriate, the Commission shall take measures to enable these instruments to make a better contribution to the objectives set out in Article 1. Article 3 Tasks of the Funds 1. In accordance with Article 130c of the Treaty, the ERDF:

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— shall have the essential task of providing support for Objectives 1 and 2 in the regions concerned; — in addition, shall participate in the operations of Objective 5 (b).

It shall in particular provide support for: (a) productive investment; (b) the creation or modernization of infrastructures which contribute to the development or conversion of the regions concerned; (c) measures to exploit the potential for internally generated development of the regions concerned.

The ERDF shall also provide support for studies or pilot schemes concerning regional development at Community level, especially where frontier regions of Member States are involved. 2. In the framework of Article 123 of the Treaty and having regard to the Decisions adopted pursuant to Article 126 of the Treaty, the Treaty, the ESF shall:

— have as priority missions to provide support throughout the Community for vocational-training measures and aids for employment and for the creation of self-employed activities, in order to combat long-term unemployment (Objective 3) and integrate young people into working life (Objective 4); — also support measures for Objectives 1, 2 and 5 (b).

The following categories of persons shall qualify for ESP support: (a) the long-term unemployed (Objective 3); (b) young people who have completed the compulsory fulltime education period (Objective 4); (c) in addition to the categories of persons referred to in (a) and (b), where the ESF helps to finance measures necessary to achieve Objectives 1, 2 or 5 (b), unemployed people or persons at risk of unemployment in particular shall qualify for vocational-training measures or aid for employment or for the creation of self-employed activities with the aim of providing them

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with the occupational qualifications required either to promote the stability of their employment or to develop new employment opportunities for them. Categories of persons other than unemployed people or people at risk of unemployment may be included in these measures in accordance with Article 3 (4).

In this respect, support shall take into account the requirements of the labour markets and the priorities laid down in employment policies within the Community. 3. In line with the priorities set out in Article 39 of the Treaty, assistance from the EAGGF Guidance Section shall be geared in particular to the following tasks:

(a) strengthening and re-organizing agricultural structures, including those for the marketing and processing of agricultural and fishery products, including forestry products, especially with a view to reform of the common agricultural policy; (b) ensuring the conversion of agricultural production and fostering the development of supplementary activities for farmers; (c) ensuring a fair standard of living for farmers; (d) helping to develop the social fabric of rural areas, to safeguard the environment, to preserve the countryside (inter alia by securing the conservation of natural agricultural resources) and to offset the effects of natural handicaps on agriculture.

4. The specific provisions governing operations under each Structural Fund shall be laid down in the implementing Decisions adopted pursuant to Article 130e of the Treaty. They shall establish in particular the procedures for providing assistance in one of the forms defined in Article 5 (2), the conditions of eligibility and the rates of assistance. Without prejudice to paragraph 5 of this Article they shall also establish the arrangements for the monitoring, assessment, financial management and checking of measures and any transitional provisions necesssary in relation to existing rules.

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5. The Council, acting on the basis of Article 130e of the Treaty, shall adopt the provisions necesary for ensuring coordination between the different Funds, on the one hand, and between them and the EIB and the other existing financial instruments, on the other. The Commission and the EIB shall establish by mutual agreement the practical arrangements for coordinating the operations. The implementing Decisions referred to in this Article shall also lay down the transitional provisions concerning the integrated approaches adopted under existing rules. II. ARRANGEMENTS FOR STRUCTURAL OPERATIONS Article 4 Complementarity, partnership, technical assistance 1. Community operations shall be such as to complement or contribute to corresponding national operations. They shall be established through close consultations between the Commission, the Member State concerned and the competent authorities designated by the latter at national, regional, local or other level, with each party acting as a partner in pursuit of a common goal. These consultations are hereinafter referred to as the ‘partnership’. The partnership shall cover the preparation, financing, monitoring and assessment of operations. 2. Acting in accordance with the provisions of this Regulation and with the provisions referred to in Article 3 (4) and (5), the Commission shall take the steps and measures necessary to ensure that Community operations are in support of the objectives set out in Article 1 and impart to national initiatives an added value. 3. Within the framework of the partnership, the Commission may, in accordance with procedures laid down in the provisions referred to in Article 3 (4), contribute to the preparation, implementation and adjustment of operations by financing preparatory studies and technical assistance operations locally, in agreement with the Member State concerned and, where appropriate, with the authorities referred to in paragraph 1. 4. For each objective, tasks shall be shared between the Commission and the Member State during the preparation of operations in accordance with Articles 8 to 11. Article 5 Forms of assistance 1. Financial assistance under the Structural Funds, the EIB and the other existing Community financial instruments shall be

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provided in a variety of forms that reflect the nature of the operation to be carried out. 2. In the case of the Structural Funds, financial assistance shall be provided in one of the following forms:

(a) part-financing of operational programmes; (b) part-financing of a national aid scheme including repayments; (c) provision of global grants, as a general rule, managed by an intermediary designated by the Member State in agreement with the Commission and allocated by the intermediary in the form of individual grants to final beneficiaries; (d) part-financing of suitable projects including repayments; (e) support for technical assistance and studies in preparation for operations.

Acting by a qualified majority on a proposal from the Commission and in cooperation with the European Parliament, the Council may introduce other forms of assistance of the same type. 3. In the case of the EIB and the other existing financial instruments, each observing its own specific rules, financial assistance shall be provided in one of the following forms:

— loans or other forms of part-financing specific investment projects; — global loans; — part-financing of technical assistance or of studies in preparation for operations; — guarantees.

4. Community assistance shall combine in an appropriate way assistance in the form of grants and loans referred to in paragraphes 2 and 3 in order to maximize the stimulus provided by the budgetary resources deployed, making use of existing financial engineering techniques. 5. An operational programme within the meaning of paragraph 2 (a) shall comprise a series of consistent multiannual measures which may be implemented through recourse to one or more Funds, to one or more of the other existing financial instruments, and to the EIB.

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Where an operational programme involves operations under more than one Fund and/or more than one other financial instrument, it may be implemented in the form of an integrated approach, the details of which shall be determined by the provisions referred to in Article 3 (5). Operational programmes shall be undertaken on the initiative of the Member States or of the Commission in agreement with the Member State concerned. Article 6 Monitoring and assessment 1. Community operations shall be constantly monitored to ensure that the commitments entered into as part of the objectives set out in Articles 130a and 130c of the Treaty are effectively honoured. Such monitoring shall, where necessary, make it possible to adjust operations in line with requirements arising during implementation. The Commission shall periodically submit reports on the implementation of operations to the Committees referred to in Article 17. 2. In order to gauge their effectiveness, Community structural operations shall be the subject of an ex-ante and an ex-post assessment designed to highlight their impact with respect to the objectives set out in Article 1 and to analyse their effects on specific structural problems. 3. The procedures for monitoring and assessing Community operations shall be established by the provisions referred to in Article 3 (4) and (5) and, in the case of the EIB, in the manner provided for in its Statute. Article 7 Compatibility and checks 1. Measures financed by the Structural Funds or receiving assistance from the EIB or from another existing financial instrument shall be in keeping with the provisions of the Treaties, with the instruments adopted pursuant thereto and with Community policies, including those concerning the rules on competition, the award of public contracts and environmental protection. 2. Without prejudice to the Financial Regulation, the provisions referred to in Article 3 (4) and (5) shall lay down harmonized rules for strengthening checks on structural operations. They shall be adjusted to reflect the special nature of the financial operations concerned. The procedures for carrying out checks on operations undertaken by the EIB shall be as set out in its Statute.

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III. PROVISIONS RELATING TO THE SPECIFIC OBJECTIVES Article 8 Objective 1 1. The regions concerned by Objective 1 shall be regions at NUTS level II whose per capita GDP, on the basis of the figures for the last three years, is less than 75% of the Community average. They shall also include Northern Ireland, the French overseas departments and other regions whose per capita GDP is close to that of the regions referred to in the first subparagraph and which have to be included within the scope of Objective 1 for special reasons. 2. The list of regions concerned by Objective 1 is given in the Annex. 3. The list of regions shall be applicable for five years from the entry into force of this Regulation. The Commission shall review the list in good time before the five years have elapsed in order for the Council, acting by a qualified majority on a proposal from the Commission and after consulting the European Parliament, to establish a new list to apply for the period after the five years have elapsed. 4. The Member States shall submit to the Commission their regional development plans. Those plans shall include in particular:

— a description of the regional development priorities selected and of the corresponding operations; — an indication of the use to be made of assistance available under the Funds, the EIB and the other financial instruments in implementing the plans.

The Member States may submit overall regional development plans for all their regions included in the list referred to in paragraph 2, provided that such plans comprise the features listed in the first subparagraph. Member States shall also submit the plans referred to in Article 10 (2) and the operations referred to in Article 11 (1) for the regions concerned, including the data relating to the operations under Article 11 (1), which under Community rules constitute rights for the beneficiaries. In order to expedite the examination of applications and the implementation of action, the Member States may include with their plans applications for operational programmes that they cover.

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5. The Commission shall examine the proposed plans and operations and the other information referred to in paragraph 4 to determine whether they are consistent with the objectives of this Regulation and with the provisions and policies referred to in Articles 6 and 7. On the basis of all the plans and operations referred to in paragraph 4, it shall establish, through the partnership referred to in Article 4 (1) and in agreement with the Member State concerned, the Community support framework for Community structural operations, in accordance with the procedures referred to in Article 17. The Community support framework shall cover in particular:

— the priorities adopted for Community assistance; — the forms of assistance; — the indicative financing plan, with details of the amount of assistance and its source; — the duration of the assistance.

The Community support framework shall provide coordination of Community structural assistance towards those of the objectives referred to in Article 1 which may be pursued in a particular region. The Community support framework may, if necessary, be revised and adjusted, on the initiative of the Member State or of the Commission in agreement with the Member State, in the light of relevant new information and of the results obtained during implementation of the operations concerned. At the duly substantiated request of the Member State concerned, the Commission shall adopt the distinct Community support frameworks for one or more of the plans referred to in paragraph 4. 6. Assistance in respect of Objective 1 shall be predominantly in the form of operational programmes. 7. The provisions for implementation of this Article shall be specified in the provisions referred to in Article 3 (4) and (5). Article 9 Objective 2 1. The declining industrial areas concerned by Objective 2 shall comprise regions, frontier regions or parts of regions (including employment areas and urban communities). 2. The areas referred to in paragraph 1 must represent or belong to a NUTS level III territorial unit which satisfies all the following criteria:

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(a) the average rate of unemployment recorded over the last three years must have been above the Community average; (b) the percentage share of industrial employment in total employment must have equalled or exceeded the Community average in any reference year from 1975 onwards; (c) there must have been an observable fall in industrial employment compared with the reference year chosen in accordance with point (b).

Community assistance may, subject to the provisions of paragraph 4 below, also extend to: — adjacent areas satisfying criteria (a) to (c) above; — urban communities with an unemployment rate at least 50% above the Community average which have recorded a substantial fall in industrial employment; — other areas which have recorded substantial job losses over the last three years or are experiencing or are threatened with such losses in industrial sectors which are vital to their economic development, with a consequent serious worsening of unemployment in those areas.

3. As soon as this Regulation has entered into force, the Commission shall, in accordance with the procedure laid down in Article 17 and on the basis of paragraph 2 above, establish an initial list of the areas referred to in paragraph 1. 4. In establishing the list and in defining the Community support framework referred to in paragraph 9 below, the Commission shall seek to ensure that assistance is genuinely concentrated on the areas most seriously affected, at the most appropriate geographical level, taking into account the particular situation of the areas concerned. Member States shall supply to the Commission all information which might be of assistance to it in this task. 5. Berlin shall be eligible for aid under this objective. 6. The list of areas shall be reviewed by the Commission periodically. However, the assistance granted by the Community in respect of Objective 2 in the various areas listed shall be planned and implemented on a three-yearly basis.

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7. Three years after this Regulation enters into force, the criteria laid down in paragraph 2 may be altered by the Council, acting by a qualified majority on a proposal from the Commission and after consulting the European Parliament. 8. The Member States shall submit their regional and social conversion plans to the Commission. Those plans shall include in particular:

— a description of the conversion priorities selected for the areas concerned and of the corresponding operations; — an indication of the use to be made of assistance available under the Funds, the EIB and the other financial instruments in implementing the plans.

In order to expedite the examination of applications and the implementation of action, the Member States may include with their plans applications for operational programmes that they cover. 9. The Commission shall examine the proposed plans to determine whether they are consistent with the objectives of this Regulation and with the provisions and policies referred to in Articles 6 and 7. It shall establish, through the partnership defined in Article 4 (1), in agreement with the Member State concerned and in accordance with the procedures referred to in Article 17, the Community conversion support framework for Community structural operations. The Community support framework shall cover in particular:

— the priorities adopted for Community assistance; — the forms of assistance; — the indicative financing plan, with details of the amount of assistance and its source; — the duration of the assistance.

The Community support framework may, if necessary, be revised and adjusted, on the initiative of the Member State or of the Commission and in agreement with the Member State in the light of relevant new information and of the results obtained during implementation of the operations concerned. 10. Assistance in respect of Objective 2 shall be predominantly in the form of operational programmes. 11. The arrangements for implementation of this Article shall be specified in the provisions referred to in Article 3 (4) and (5).

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Article 10 Objectives 3 and 4 1. In accordance with the procedure laid down in Article 17, on the basis of this Regulation and the provisions implementing this Regulation, the Commission shall establish for a period covering a number of years general guidelines that set out and clarify the Community choices and criteria concerning action to combat longterm unemployment (Objective 3) and to facilitate the occupational integration of young people (Objective 4). 2. The Member States concerned shall submit to the Commission plans for operations to combat long-term unemployment (Objective 3) and to facilitate the occupational integration of young people (Objective 4) for which they are applying for Community support. Those plans shall include in particular:

— information on the employment and labour market policy implemented at national level; — an indication of the priority operations for which Community support is sought, planned in principle for a specific number of years to help those sections of the population concerned by Objectives 3 and 4, and coherent with the general guidelines laid down by the Commission; — an indication of the use to be made of assistance available under the ESF—where appropriate, in conjunction with assistance from the EIB or other existing Community financial instruments—in implementing the plans. In order to expedite the examination of applications and the implementation of action, the Member States may include with their plans applications for operational programmes that they cover.

3. The Commission shall examine the proposed plans to determine whether they are consistent with the objectives of this Regulation, with the general guidelines laid down by it and with the provisions and policies referrred to in Articles 6 and 7. It shall establish for each Member State and for the individual plans submitted to it through the partnership referred to in Article 4 (1), in agreement with the Member State concerned and in accordance with the procedures

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referred to in Article 17, the Community support framework for the attainment of Objectives 3 and 4. The Community support framework shall cover in particular:

— the specific priorities adopted for Community assistance in respect of the persons concerned by Objectives 3 and 4; — the forms of assistance; — the indicative financing plan, with details of the amount of assistance and its source; — the duration of the assistance.

The Community support framework may, if necessary, be revised and adjusted on the initiative of the Member State in the light of relevant new information and of the results obtained during implementation of the operations concerned. 4. Assistance in respect of Objectives 3 and 4 shall be predominantly in the form of operational programmes. 5. The arrangements for implementation of this Article shall be specified in the provisions referred to in Article 3 (4) and (5). Article 11 Objective 5 1. The arrangements for implementation of operations connected with the accelerated adaptation of agricultural structures (Objective 5 (a)) shall be determined in the provisions referred to in Article 3 (4) and (5). 2. Areas eligible under Objective 5 (b) shall be selected in accordance with the procedure referred to in Article 17, taking into account in particular the degree to which they are rural in nature, the number of persons occupied in agriculture, their level of economic and agricultural development, the extent to which they are peripheral and their sensitivity to changes in the agricultural sector, especially in the context of reform of the common agricultural policy. These criteria shall be specified in the provisions adopted pursuant to Article 3 (4) and (5). 3. The Member States shall submit their development plans for rural areas to the Commission. Those plans shall include in particular:

— a description of the rural development priorities and of the corresponding measures;

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— an indication of the use to be made of assistance available under the different Funds, the EIB and the other financial instruments in implementing the plans; — any link with the consequences of reform of the common agricultural policy.

To expedite the examination of applications and impelementation of assistance, Member States may attach to their plans applications for operational programmes covered by the latter. The Commission shall examine the proposed plans to determine whether they are consistent with the objectives of this Regulation and with the provisions and policies referred to in Articles 6 and 7. It shall establish, through the partnership referred to in Articles 6 and 7. It shall establish, through the partnership referred to in Article 4 (1), in agreement with the Member State concerned and in accordance with the procedures referred to in Article 17, the Community support framework for rural development. The Community support framework shall cover in particular:

— the rural development priorities adopted for Community assistance; — the forms of assistance; — the indicative financing plan, with details of the amount of assistance and its source; — the duration of the assistance.

The Community support framework may, if necessary, be revised and adjusted on the initiative of the Member State concerned or of the Commission in agreement with the Member State in the light of relevant new information and of the results obtained during implementation of the operations concerned. The arrangements for implementation of this paragraph shall be specified in the provisions referred to in Article 3 (4) and (5). 4. The part-financing of national aids and of operational programmes shall be the predominant form of assistance. 5. Operations eligible for assistance under the different Funds in respect of Objective 5 shall be specified in the provision referred to in Article 3 (4) and (5). In the case of the EAGGF Guidance Section, those provisions shall distinguish between operations to be financed in connection with the adaptation of agricultural structures (Objective 5 (a)) and operations to be financed in connection with rural development (Objective 5 (b)).

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IV. FINANCIAL PROVISIONS Article 12 Fund resources and concentration 1. Within the framework of the multiannual budget forecasts, the Commission shall present each year a five-year projection of the appropriations needed for the three Structural Funds taken together. The projection shall be accompanied by an indicative breakdown of the commitment appropriations to be assigned to each objective. In drawing up each preliminary draft budget, the Commission shall, where the allocation for the Structural Funds is concerned, take account of the indicative breakdown by objective. 2. Commitment appropriations for the Structural Funds shall be doubled in real terms in 1993 by comparison with 1987. In addition to the resources earmarked for 1988 (7 700 million ECU), the amounts of annual increase in commitment appropriations for this purpose shall be 1 300 million ECU each year from 1989 to 1992, resulting in 1992 in a figure of 12 900 million ECU (1988 prices). The effort shall be continued in 1993 to achieve doubling. To these amounts shall be added those required for aid to farm incomes and the set-aside scheme up to a maximum of 300 million ECU and 150 million ECU respectively in 1992 (1988 prices). 3. A considerable proportion of budgetary resources shall be concentrated on the less-developed regions covered by Objective 1. The contributions of the Structural Funds (commitment appropriations) to these regions shall be doubled in real terms between now and 1992. All operations under Objectives 1 to 5 to assist the regions covered by Objective 1 shall be taken into account for that purpose. 4. The Commission shall ensure that, in the framework of the additional resources for the regions covered by Objective 1, a special effort is undertaken for the least prosperous regions. 5. The ERDF may devote approximately 80% of its appropriations to Objective 1. 6. To facilitate the planning of assistance in the regions concerned, the Commission shall, for a period of five years and as a guide, establish the allocation per Member State of 85 % of the commitment appropriations of the ERDF. This allocation shall be based on the socio-economic criteria determining the eligibility of regions and areas for ERDF assistance under Objectives 1, 2 and 5 (b), while ensuring that the objective of doubling appropriations for the regions covered by Objective 1 takes the form of a substantial increase in assistance in those regions, particularly in the least prosperous regions. Article 13

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Differentiation of rates of assistance 1. The Community contributions to the financing of operations shall be differentiated in the light of the following:

— the seriousness of the specific, notably regional or social, problems to be tackled; — the financial capacity of the Member State concerned, taking into account in particular the relative prospertiy of that State; — the special importance attaching to measures from a Community viewpoint; — the special importance attaching to measures from a regional viewpoint; — the particular characteristics of the types of measure proposed.

2. Such differentiation shall take account of the planned link between grants and loans, as referred to in Article 5 (4). 3. The rates of Community assistance granted by the Funds in respect of the various objectives listed in Article 1 shall be subject to the following ceilings:

— a maximum of 75 % of the total cost and, as a general rule, at least 50% of public expenditure in the case of measures carried out in the regions eligible for assistance under Objective 1; — a maximum of 50% of the total cost and, as a general rule, at least 25 % of public expenditure in the case of measures carried out in the other regions.

The minimum rates of assistance laid down in the first indent shall not apply to revenue-bearing investment. 4. Preparatory studies and technical assistance measures undertaken on the initiative of the Commission may be financed at 100% of total cost in exceptional cases. 5. The arrangements for implementation of this Article, including those concerning public funding of the operations concerned, and the rates applied to investment generating revenue, shall be laid down in the provisions referred to in Article 3 (4) and (5). V. OTHER PROVISIONS

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Article 14 Combination and overlapping of assistance 1. For any given period, an individual measure or operation may benefit from assistance from only one Fund at a time. 2. An individual measure or operation may benefit from assistance from a Fund or other financial instrument in respect of only one of the objectives set out in Article 1 at a time. 3. The arrangements governing the combination and overlapping of assistance shall be laid down in the provisions referred to in Article 3 (4) and (5). Article 15 Transitional provisions 1. This Regulation shall not affect multiannual operations approved by the Council or by the Commission on the basis of the existing rules governing the Funds before adoption of this Regulation. 2. Applications for assistance from the Funds towards a multiannual operation which are submitted before this Regulation is adopted shall be considered and approved by the Commission on the basis of the rules governing the Funds before the adoption of this Regulation. 3. New applications for assistance from the Funds for a multiannual operation, submitted after the adoption of this Regulation and before the entry into force of the provisions referred to in Article 3 (4) and (5) shall be examined in the light of the provisions of this Regulation. Approval for Community assistance, if given shall be in accordance with the forms and procedures laid down by the rules in force at the time of the approval of the application. 4. Applications for aid for assistance for non-multiannual operations which are submitted before the entry into force of the provisions referred to in Article 3 (4) and (5) of this Regulation shall be examined and approved on the basis of the rules governing the Funds in force before the entry into force of this Regulation. 5. The provisions in this Regulation which require the Member States to draw up plans and operational programmes shall be implemented progressively as laid down in the transitional provisions referred to in Article 3 (4) and (5), in accordance with rules applied without discrimination to all the Member States. The Commission shall help with implementation in particular by means of the technical assistance measures referred to in Article 4 (3). 6. The provisions referred to in Article 3 (4) and (5) shall, where appropriate lay down specific transitional provisions relating to the implementation of this Article, including provisions to ensure

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that aid to Member States is not interrupted pending the establishment of the plans and operational programmes in accordance with the new system and that the higher rates of assistance can apply to all forms of assistance as from 1 January 1989. Article 16 Reports Within the framework of Articles 130a and 130b of the Treaty before 1 November of each year, the Commission shall submit to the European Parliament, to the Council and to the Economic and Social Committee a report on the implementation of this Regulation during the preceding year. In this report, the Commission shall in particular indicate what progress has been made towards achieving the objectives set out in Article 1 and in concentrating assistance as required by Article 12. Article 17 Committees 1. In implementing this Regulation, the Commission shall be assisted by three Committees dealing respectively with:

— Objectives 1 and 2 — Advisory Committee composed of representatives of the Member States; — Objectives 3 and 4 — Committee under Article 124 of the Treaty; — Objective 5 (a) and 5 (b) — Management Committee composed of representatives of the Member States.

2. Provisions setting out the arrangements for the operation of the Committees referred to in paragraph 1 and measures concerning the tasks of those Committees in the framework of management of the Funds shall be adopted in accordance with Article 3 (4) and (5).

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VI. FINAL PROVISIONS Article 18 Implementation The Commission shall be responsible for the implementation of this Regulation. Article 19 Review clause On a proposal from the Commission, the Council shall reexamine this Regulation five years after its entry into force. It shall act on the proposal in accordance with the procedure laid down in Article 130d of the Treaty. Article 20 Entry into force This Regulation shall enter into force on 1 January 1989. Subject to the transitional provisions laid down in Article 15 (2) and (3), it shall be applicable as from that date. The date of entry into force may be deferred by the Council, acting by a qualified majority on a proposal from the Commission, to allow for the entry into force of the provisions referred to in Article 3 (4) and (5). This Regulation shall be binding in its entirety and directly applicable in all Member States. Done at Luxembourg, 24 June 1988. For the Council The President M.BANGEMANN

ANNEX REGIONS CONCERNED BY OBJECTIVE 1

SPAIN:

Andalusia, Asturias, Castilla y Léon, Castilla-La Mancha, Ceuta-Melilla, Valencia, Extremadura, Galicia,

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Canary Islands, Murcia French overseas departments, Corsica the entire country the entire country Abruzzi, Basilicata, Calabria, Campania, Molise, Apulia, Sardinia, Sicily the entire country Northern Ireland

FRANCE: GREECE: IRELAND: ITALY:

PORTUGAL: UNITED KINGDOM:

I (Acts whose publication is obligatory) COUNCIL REGULATION (EEC) No 4253/88 of 19 December 1988 laying down provisions for implementing Regulation (EEC) No 2052/88 as regards coordination of the activities of the different Structural Funds between themselves and with the operations of the European Investment Bank and the other existing financial instruments THE COUNCIL OF THE EUROPEAN COMMUNITIES, Having regard to the Treaty establishing the European Economic Community, and in particular Articles 130e and 153 thereof, Having regard to the proposal from the Commission (1), In cooperation with the European Parliament (2), Having regard to the opinion of the Economic and Social Committee (3), Whereas the Council adopted Regulation (EEC) No 2052/88 of 24 June 1988 on the tasks of the Structural Funds and their effectiveness and on the coordination of their activities between themselves and with the operations of the European Investment Bank and the other existing financial instruments (4); Whereas the doubling of the Structural Funds between 1987 and 1993 is covered by the Interinstitutional Agreement of 29 June 1988; whereas provisions for the implementation of Regulation (EEC) No 2052/88 should be laid down so that the new financial means allocated to the Funds are used in compliance

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with the new rules laid down in that Regulation and in accordance with the guidelines of the European Council; Whereas Article 3 (5) of Regulation (EEC) No 2052/88 provides that the Council, acting on the basis of Article 130e of the Treaty, shall adopt the provisions necessary for ensuring coordination between the different Structural Funds, on the one hand, and between them and the European Investment Bank (EIB) and the other existing financial instruments, on the other; Whereas it is necessary to ensure and strengthen, in a manner consistent with the partnership, the coordination between the Structural Funds and between these Funds, the EIB and the Community’s other existing financial instruments, in order to enhance the effectiveness of their contributions to the attainment of the objectives set out in Article 1 of Regulation (EEC) No 2052/ 88; whereas the Commission has an important role to play in this respect; Whereas, to this end, the Commission must, where necessary, associate the EIB with the preparation of its decisions; whereas the EIB is prepared to cooperate in the implementation of this Regulation, in keeping with its own powers and responsibilities; Whereas Articles 8 to 11 of the said Regulation provide for measures relating to their implementation to be laid down in the implementing decisions referred to in Article 130e of the Treaty; whereas it is necessary to determine the criteria which the Commission should use to select those rural areas outside the regions designated for assistance from the Funds under objective 1 which may receive assistance under objective 5 (b) as defined in Article 1 of Regulation (EEC) No 2052/88; whereas these criteria must ensure that there is effective concentration on those areas suffering from the most serious problems of development, while account is taken of difficulties in other rural areas, in the regions of Member States with socio-economic imbalances such as would threaten their development; (1) OJ No C 256, 3.10.1988, p. 1. (2) OJ No C 326, 19.12.1988 and decision of 14 December 1988 (not yet published in the Official Journal). (3) OJ No C 337, 31.12.1988. (4) OJ No L 185, 15.7.1988, p. 9. Whereas it is necessary to specify the scope, content and duration of the plans to be submitted by the Member States and the time limits for their submission; Whereas, with a view to helping Member States in the preparation of plans, the Commission should be in a position to supply the necessary technical assistance; Whereas it is necessary to give guidelines on the content and duration of the Community support frameworks to be established by the Commission in agreement with the Member State concerned and on the time limit for their establishment;

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Whereas, when the Community support frameworks are being worked out and implemented, care should be taken to see that any increase in appropriations from the Funds has a genuine additional economic impact in the regions concerned; Whereas the Commission should be able to adapt, in agreement with the Member State concerned, Community support frameworks to take account of measures not provided for in the plans submitted by the Member States, including measures resulting from new Community initiatives; Whereas assistance from the Funds envisaged in the Community support frameworks should be provided mainly in the form of part-financing of operational programmes; Whereas it is necessary to specify the conditions for the implementation of operational programmes under the integrated approach; Whereas it is necessary to specify the general conditions governing the processing of applications for financial assistance from the Structural Funds; Whereas financial assistance from the Structural Funds objectives 1 to 4 and 5 (b) should normally be provided only for measures indicated in the Community support frameworks and for expenditure incurred after presentation of an application for assistance from the structural Funds; whereas it is, however, necessary to provide that expenditure incurred before that date for the part-financing of projects and aid systems should be eligible; Whereas it is necessary to define the conditions under which the Structural Funds may provide global grants and part-finance projects; Whereas provision should be made for the conditions under which studies and technical assistance linked to the joint or coordinated use of the Structural Funds, the EIB and the other financial instruments may be financed; Whereas care must be taken to ensure that the technical and administrative difficulties which might hinder implementation of the reform of the Funds, particularly in regions whose development is lagging behind, do not result in inadequate take-up of the budgetary resources nor in the effective doubling of those resources being called into question; Whereas, in order to ensure a measure of flexibility in the implementation of the reform of the Funds, it is appropriate that the rates of assistance from the Funds be fixed, on the basis of Article 13 of Regulation (EEC) No 2052/88 and under the conditions laid down in this Regulation, in the framework of the partnership, for objectives 1 to 4 and 5 (b), on the one hand, and by subsequent decisions taken by the Council for objective 5 (a), on the other; Whereas, to promote efficient and coordinated management of the Funds’ financial resources, it is necessary to lay down

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common rules and procedures on commitments, payments and controls; Whereas, in the interests of the wider use of the ecu in financial transactions in the Community and, in particular, in the implementation of the Community budget, it is important that the Community’s financial entitlements and obligations with respect to the Structural Funds should also be expressed in ecus, in keeping with the Financial Regulation; Whereas it is necessary to specify the arrangements for the monitoring and assessment of Community structural action in order to strengthen the effectiveness of assistance methods in achieving the objectives and to assess the impact of assistance; Whereas, it is necessary to determine the arrangements for the working of the committees called upon to assist the Commission in the implementation of Regulation (EEC) No 2052/88; Whereas there is a need to specify the content of the report referred to in Article 16 of the said Regulation; Whereas provision should be made to give adequate publicity to Community assistance provided towards specific schemes; Whereas it is necessary to determine more specifically the transitional arrangements for assistance from the Funds which was approved or applied for before the entry into force of the implementing decisions referred to in Article 130e of the Treaty and whereas it may also prove necessary, with a view to ensuring continuity in the operations of the Funds, to provide for approval of certain measures before the Commission has decided the relevant Community support frameworks, HAS ADOPTED THIS REGULATION: TITLE I COORDINATION Article 1 General provisions Pursuant to Regulation (EEC) No 2052/88, the Commission shall, in a manner consistent with partnership, ensure coordination of the activities of the different Funds as between themselves and with the operations of the EIB and the other existing financial instruments. Article 2 Coordination between the Funds Coordination between the activities of the various Funds shall be carried out in particular through:

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— Community support frameworks, — multiannual budget forecasts, — where advisable, the implementation of integrated operational programmes, — monitoring and assessment of operations under the Funds carried out in connection with a single objective and of those carried out in connection with a number of objectives in the same territory.

Article 3 Coordination between the Funds, the EIB and the other existing financial instruments 1. In implementing the objectives referred to in Article 1 of Regulation (EEC) No 2052/88, the Commission shall ensure, within the framework of the partnership, coordination and consistency between assistance from the funds and assistance provided:

— by the European Coal and Steel Community in the form of re-adaptation aids, loans, interest subsidies or guarantees, — by the EIB, the New Community Instrument and Euratom in the form of loans and guarantees, — from resources from the Community budget allocated to other action for structural purposes, — from the resources of the Community research budget.

Such coordination shall be carried out in keeping with the EIB’s own powers and responsibilities and with the objectives of the other instruments concerned. 2. The Commission shall associate the EIB in the use of the Funds or the other existing financial instruments with a view to the part-financing of investments that are eligible for financing by the EIB in accordance with its Statute. Article 4 Selection of rural areas outside the regions in objective 1 (objective 5 (b)) 1. In accordance with Article 11 (2) of Regulation (EEC) No 2052/ 88, the rural areas that may receive Community assistance under objective 5 (b) shall meet each of the following criteria:

(a) high share of employment;

agricultural

employment

in

total

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(b) low level of agricultural income, notably as expressed in terms of agricultural value added by agricultural work unit (AWU); (c) low level of socio-economic development assessed on the basis of gross domestic product per inhabitant.

Assessment of the eligibility of areas according to the above three criteria shall take into account socioeconomic parameters which indicate the seriousness of the general situation in the areas concerned, and how it is developing. 2. In addition, on receipt of a reasoned request from a Member State, Community assistance may also be extended to other rural areas with a low level of socio-economic development, if they meet one or more of the following critera:

— low population density and/or a significant depopulation trend in the areas concerned, — the peripheral nature of areas or islands in relation to major centres of economic and commercial activity in the Community, — the sensitivity of the area to developments in agriculture, especially in the context of reform of the common agricultural policy, assessed on the basis of the trend in agricultural incomes and the size of the agricultural labour force, — the structure of agricultural holdings and the age structure of the agricultural labour force, — the pressures exerted on the environment and on the countryside, — the situation of areas within mountain or less-favoured areas classified pursuant to Article 3 of Directive 75/268/ EEC (1), as last amended by Regulation (EEC) No 797/85 (2).

3. Member States shall, in respect of the areas which in their view should benefit from assistance under objective 5 (b), provide the Commission with such information as may help it to determine which areas are eligible. On the basis of that information and of its overall assessment of the proposals submitted, the Commission shall determine which areas are eligible by following the procedures set out in Title VIII and

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shall invite the Member States to forward the necessary plans to it. 4. In selecting rural areas and in defining the Community support frameworks referred to in Article 11 (3) of Regulation (EEC) No 2052/88, the Commission, in the context of reform of the common agricultural policy, shall take care to ensure that assistance is effectively concentrated on areas suffering from the most serious problems of rural development. TITLE II PLANS Article 5 Scope and content 1. Subject to the guidelines laid down in this Article, plans submitted in connection with objectives 1 to 4 and 5 (b) shall be drawn up at the geographical level deemed to be most appropriate. They shall be prepared by the competent national, regional or other authorities designated by the Member State and shall be submitted by the Member State to the Commission. Plans submitted in connection with objective 1 shall, as a general rule, cover one region at NUTS level II. However, in implementation of the second subparagraph of Article 8 (4) of Regulation (EEC) No 2052/88, Member States may submit a plan for more than one of their regions included in the list referred to in paragraph 2 of that Article, provided that such plans comprise the features listed in the first subparagraph of the said paragraph 4. Plans submitted in connection with objectives 2 and 5 (b) shall normally cover one or more regions at NUTS level III. Member States may submit plans covering a wider territory than that of eligible regions or areas, provided they distinguish between operations in eligible regions or areas and operations elsewhere. 2. For regions concerned by objective 1, the regional development plans shall include measures relating to the conversion of declining industrial areas and the development of rural areas, together with employment and vocational training measures other than those covered by plans submitted in connection with objectives 3 and 4. Regional and social conversion plans submitted in connection with objective 2 and rural development plans submitted in connection with objective 5 (b) shall also include employment and vocational training measures other than those covered by plans submitted in connection with objectives 3 and 4. Plans submitted in connection with objectives 3 and 4 shall distinguish between expenditure in respect of the regions covered

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by objectives 1, 2 and 5 (b) and expenditure in respect of other regions. Data concerning the operations carried out under objective 5 (a) will be indicated, as appropriate, in the plans in connection with objectives 1 and 5 (b). In the plans, Member States shall indicate the particulars relating to each Fund, including the volumes of assistance requested. In accordance with Articles 8, 9, 10 and 11 of Regulation (EEC) No 2052/88, in order to expedite the examination of applications and the implementation of action, they may include in their plans applications for assistance for operational programmes. 3. Member States shall ensure, when the plans are drawn up, that plans relating to the same objective within a Member State and plans relating to different objectives in the same geographical area are mutually consistent. 4. Member States shall ensure that the plans take full account of Community policies. (1) OJ No L 128, 19.5.1975, p. 1. (2) OJ No L 93, 30.3.1985, p. 1. Article 6 Duration and timetable Each plan shall cover a period of between three and five years. As a general rule, the plans may be revised on an annual basis and in the event of significant changes in the socio-economic situation and the labour market. For regions and areas defined before 31 January 1989, the first relating to objectives 1, 2 and 5 (b) shall cover a period which shall commence on 1 January 1989 and shall be submitted not later than 31 March 1989. Plans relating to objectives 3 and 4 shall be submitted not later than four months after the Commission has published the guidelines referred to in Article 4 (1) of Regulation (EEC) No 4255/88 of 19 December 1988 laying down provisions for implementing Regulation (EEC) No 2052/88 as regards the European Social Fund (1). The dates relating to the submission of subsequent plans will be fixed by the Commission in cooperation with the Member State concerned. Article 7 Preparation 1. The Commission may provide Member States at their request with any technical assistance necessary in the preparation of plans.

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2. The plans shall contain information making it possible to assess the link between structural action and the Member State’s economic and social policies. TITLE III COMMUNITY SUPPORT FRAMEWORKS Article 8 Preparation, scope and content 1. The Community support frameworks relating to objectives 1 to 4 and 5 (b) shall be drawn up at the appropriate geographical level in agreement with the Member State concerned within the framework of the partnership and shall be established by decision of the Commission in accordance with the procedures laid down in Title VIII. The EIB shall also be involved in the preparation of the Community support frameworks. Without prejudice to the first subparagraph of Article 8 (5) of Regulation (EEC) No 2052/88, the Commission shall, if appropriate, in drawing up Community support frameworks for objectives 1 and 5 (b), take account of information regarding the impact of the measures taken under objective 5 (a) which contribute to the development of the regions or areas concerned. 2. A Community support framework may cover a period of three to five years. 3. Each Community support framework shall include:

— a statement of the priorities for joint Community and national action in relation to the objectives set out in Article 1 of Regulation (EEC) No 2052/88, together with information on their consistency with the economic and social policies of the Member State concerned, — an outline of the forms of assistance to be provided including, for operational programmes, their specific objectives and the main types of measure involved, — an indicative financing plan specifying the financial allocations envisaged for the various forms of assistance and the duration thereof, including those of the Funds, the EIB and the other existing financial instruments provided for in Article 3 (1), where they contribute directly to the financing plan concerned, — where appropriate, information on the means available for any studies or technical assistance operations relating to the preparation, implementation or adaptation of the measures concerned.

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Article 9 Impact of measures In establishing and implementing the Community support frameworks, the Commission and the Member States shall ensure that the increase in the appropriations for the Funds provided for in Article 12 (2) of Regulation (EEC) No 2052/88 has a genuine additional economic impact in the regions concerned and results in at least an equivalent increase in the total volume of official or similar (Community and national) structural aid in the Member State concerned, taking into account the macro-economic circumstances in which the funding takes place. Article 10 Approval and implementation 1. Unless otherwise agreed between the Commission and the Member State concerned, the Commission shall (1) See page 21 of this Official Journal. take a decision approving the Community support framework not later than six months after receiving the relevant plan or plans. In order to expedite implementation of the measures provided for in a Community support framework, Member States may submit applications for assistance in good time for the Commission to approve them at the same time as it takes its decision on the Community support framework. In this case, the operational programmes may be implemented immediately. 2. The Commission decision on the Community support framework shall be sent as a declaration of intent to the Member State. The declaration shall be published in the Official journal of the European Communities. The Commission and the Member States shall ensure that measures accounting for at least two-thirds of assistance from the funds during the first year of the Community support framework are approved by the Commission within two months of adoption of its decision on the Community support framework. Article 11 Community initiatives In accordance with Article 5 (5) of Regulation (EEC) 2052/88, the Commission may, on its own initiative and in accordance with the procedures provided for in Title VIII, decide to propose to the Member States that they submit applications for assistance in respect of measures of significant interest to the Community not covered by the plans referred to in Title II. Any assistance approved pursuant to this provision shall be reflected in the

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establishment or revision of the relevant Community support framework. Article 12 Forms of assistance Assistance covered by a Community support framework shall be provided predominantly in the form of operational programmes which may be implemented in the form of an integrated approach if the conditions laid down in Article 13 are met. Article 13 Integrated approach 1. At the initiative of a Member State or of the Commission pursuant to Article 11, in agreement with the Member State concerned, an operational programme may be implemented in the form of an integrated approach

(a) the programme involves financing by more than one Fund or at least one Fund and one financial instrument other than a loan instrument; (b) the measures to be financed by different Funds or financial instruments are mutually reinforcing and significant benefits are likely to accrue from close coordination between all the parties involved; (c) the appropriate administrative structures are provided at national, regional and local level in the interests of integrated implementation of the programme.

2. The desirability of implementing measures on the basis of an integrated approach shall be considered when establishing or revising a Community support framework. 3. In the implementation of integrated approaches the Commission shall ensure that Community assistance is provided in the most effective manner, taking into account the special coordination effort required. TITLE IV ASSISTANCE FROM THE FUNDS Article 14 Processing of applications

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1. Applications for assistance from the Structural Funds shall be prepared by the competent national, regional, local or other authorities designated by the Member States and shall be submitted to the Commission by the Member State or by any body it may designate to do so. Each application shall relate to one of the forms of assistance provided for in Article 5 of Regulation (EEC) No 2052/88. 2. Applications shall contain the information the Commission needs in order to assess them, including a description of the operation proposed, its scope, including geographical coverage, and specific objectives, the bodies responsible for implementation, the proposed beneficiaries and the proposed limitable and financing plan, together with any other information necessary to verify that the operation concerned is compatible with Community legislation and policies. 3. The Commission shall examine applications with a view in particular:

— to assessing the conformity of the proposed operations and measures with the relevant Community legislation and, where appropriate, with the relevant Community support framework, — to assessing the contribution of the proposed operation to the achievement of its specific objectives and, in the case of an operational programme, the consistency of the constituant measures, — to checking that the administrative and financial mechanisms are adequate to ensure effective implementation, — to determining the precise arrangements for providing assistance from the Fund or Funds concerned on the basis, where appropriate, of the information already given in any relevant Community support framework.

The Commission shall decide on assistance from the Funds, provided the requirements of the Article are fulfilled, as a general rule within six months of receipt of the application. A single Commission decision shall be taken in respect of assistance from all the Funds and other existing financial instruments contributing to the financing of an operational programme, including operational programmes in the form of an integrated approach. This provision does not preclude the possible application of shorter time limits pursuant

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to Article 7 of Regulation (EEC) No 4255/88 (ESF Regulation). 4. The respective commitments of the partners, in the framework of an agreement within the partnership, shall be reflected in the Commission’s decisions to grant assistance. Article 15 Eligibility 1. Subject to Article 33, expenditure in respect of measures covered by objectives 1 to 4 and 5 (b) shall be eligible for financial assistance from the Structural Funds only if the measures in question come within the relevant Community support framework. 2. Except as provided for in Article 33 of this Regulation, in Article 9 of Regulation (EEC) No 4255/88 and in Article 2 (1) of Council Regulation (EEC) No 4256/88 of 19 December 1988 laying down provisions for implementing Regulation (EEC) No 2052/88 as regards the EAGGF Guidance Section (1), expenditure may not be considered eligible for assistance from the Funds if incurred before the date on which the corresponding application reaches the Commission. However, for the part-financing of projects and aid schemes, expenditure may be deemed to be eligible for assistance from the Funds if incurred during the six months preceding the date on which the Commission received the corresponding application. Article 16 Specific provisions 1. In the case of global grants, the intermediaries who shall be designated by the Member State concerned in agreement with the Commission must provide appropriate guarantees of solvency and have the necessary administrative capability to manage the operations envisaged by the Commission. The intermediaries shall also be selected in the light of the particular situation in the Member States or areas concerned. Without prejudice to Article 23, the management of global grants shall be subject to control by the competent authorities designated by the Member States. 2. The Funds may provide financial assistance towards expenditure in respect of major projects if the total cost taken into account in determining the amount of Community assistance is, as a general rule, greater than ECU 15 million for infrastructure investments or greater than ECU 10 million for productive investments. However, projects costing less than this in the fisheries sector may be financed if they are covered by a multiannual guidance

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programme approved by the Commission under Regulation (EEC) No 4028/86 (2). 3. In addition to similar assistance connected with the operations of the various Funds, the Commission may, for up to 0, 3 % of the Funds’ total allocation, finance studies and technical assistance linked to the joint or coordinated deployment of the Structural Funds, the EIB and the other financial instruments:

— in preparation for the establishment of plans, — with a view to assessing the impact and effectiveness of assistance provided under the relevant Community support frameworks, — in relation to integrated operational programmes.

4. For the regions designated under objective 1, the total cost of an operational programme to which the ERDF is contributing must, as a general rule, reach ECU 100 million, with the proviso that the average annual cost of the programme may not be less than ECU 15 million.

(1) See page 25 of this Official Journal. (2) OJ No L 376, 31.12.1986, p. 7. 3. For operations to be carried out over a period of less than two years, the total amount of Community assistance shall be committed when the Commission adopts the decision approving the operation. Article 21 Payments

1. Payments of financial assistance shall be made in accordance with the corresponding budgetary commitments to the authority designated for the purpose in the application submitted through the Member State concerned. They may take the form either of advances or of final payments in respect of expenditure actually incurred. For operations to be carried out over a period of two or more years payments shall relate to the annual instalments of commitments referred to in Article 20 (2). 2. The advance made following each commitment may be up to 50 % of the amount committed, taking into account the nature of the operation concerned. 3. A second advance such that the sum of the two advances does not exceed 80 % of the commitment shall be made after the responsible body has certified that at least half of the first advance has been used up and that the operation is progressing at a satisfactory rate and in accordance with the objectives laid down.

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4. Payment of the balance in respect of each commitment shall be conditional on:

— submission to the Commission by the designated authority referred to in paragraph 1 of a request for payment within six months of the end of the year concerned or of completion in practice of the operation concerned, — submission to the Commission of the relevant reports referred to in Article 25 (4), — transmission by the Member State to the Commission of a certificate confirming the information contained in the request for payment and the reports.

5. Member States shall designate the authorities empowered to issue the certificates referred to in paragraphs 3 and 4 and shall ensure that the beneficiaries receive the advances and payments as soon as possible. 6. In the case of measures that are designed to support agricultural incomes, such as compensation for natural handicaps in less-favoured or mountain areas, and that are governed by the provisions referred to in Article 11 (1) of Regulation (EEC) No 2052/88, the conditions and procedures applicable in respect of advances or final payments shall be laid down in the corresponding Commission decisions, due regard being had to the specific nature of those measures. 7. In the case of studies and innovation schemes, the Commission shall determine the appropriate payment procedures. Article 22 Use of the ecu Commission decisions, commitments and payments shall be denominated and carried out in ecus. In compliance with the provisions of the Financial Regulation and in accordance with the arrangements to be drawn up by the Commission pursuant to the procedures referred to in Title VIII hereof. This Article shall be applicable as soon as the Commission decision referred to in the first subparagraph has been adopted. Article 23 Financial control

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1. In order to guarantee successful completion of operations carried out by public or private promoters, Member States shall take the necessary measures:

— to verify on a regular basis that operations financed by the Community have been properly carried out, — to prevent and to take action against irregularities, — to recover any amounts lost as a result of an irregularity or negligence. Except where the Member State and/or the intermediary and/or the promoter provide proof that they were not responsible for the irregularity or negligence, the Member State shall be liable in the alternative for reimbursement of any sums unduly paid.

Member States shall inform the Commission of the measures taken for those purposes and, in particular, of the progress of administrative and judicial proceedings. When submitting requests for payment, Member States shall make available to the Commission any appropriate national control reports on the measures included in the programmes or other operations concerned. TITLE V DIFFERENTIATION OF COMMUNITY ASSISTANCE Article 17 Financial contribution from the Funds 1. Pursuant to Article 13 (5) of Regulation (EEC) No 2052/88, the rate of contribution by the Funds to the financing of measures covered by objectives 1 to 4 and 5 (b) shall be laid down by the Commission, within the framework of the partnership, on the basis of Article 13 (1) of Regulation (EEC) No 2052/88, within the limits laid down by Article 13 (3) of the said Regulation and in accordance with the procedures provided for in that Article. The rates applicable under objective 5 (a) shall be laid down pursuant to the procedure provided for by Article 1 (3) of Regulation (EEC) No 4256/88. 2. The financial contribution from the Funds shall be fixed as a percentage and shall be calculated in relation to either the total eligible cost of, or the total public or similar expenditure (national, regional or local, and Community) on, each measure (operational programme, aid scheme, global grant, project, technical assistance, study).

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3. Where the measure concerned entails the financing of revenue-generating investments, the Commission shall determine, within the framework of the partnership, the rate of contribution from the Funds for these investments, in compliance with the provisions of Article 13 (3) of Regulation (EEC) No 2052/88 and on the basis of the criteria referred to in paragraph 1 of that Article, taking account, amongst their intrinsic characteristics of the size of the gross self-financing margin which would normally be expected for the class of investments concerned in the light of the macro-economic circumstances in which the investments are to be implemented, and without there being any increase in the national budget effort as a result of contribution by the Fund. In any event, in connection with the development effort in the regions concerned, the contribution from the Funds to investments in firms may not exceed 50 % of the total cost in the regions covered by objective 1 and 30 % of the total cost in the other regions. 4. The rates of contribution for individual measures forming part of operational programmes may be differentiated in accordance with agreements to be concluded within the framework of the partnership. Article 18 Combination of grants and loans The combination of loans and grants referred to in Article 5 (4) of Regulation (EEC) No 2052/88 shall be determined in conjunction with the EIB when the Community support framework is being established. It shall take account of the balance in the proposed financing plan, the rates of contribution from the Funds established in accordance with Article 17 and the development objectives pursued. TITLE VI FINANCIAL PROVISIONS Article 19 General provisions 1. Financial assistance from the Structural Funds shall be subject to the relevant rules applicable to the Funds under the Financial Regulation. 2. The financial assistance to be granted in respect of specific measures undertaken in implementing a Community support framework shall be consistent with the financing plan laid down in that support framework.

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3. In order to avoid administrative delays at the end of the year, Member States shall ensure that requests for payments are, as far as possible, submitted in accordance with a balanced, schedule throughout the year. Article 20 Commitments 1. Budgetary commitments shall be made on the basis of the Commission decisions approving the operations concerned. They shall be valid for a period, depending on the nature of the operations and on the specific conditions for their implementation. 2. Commitments in respect of operations to be carried out over a period of two or more years shall, as a general rule, be effected in annual instalments. The commitments in connection with the first annual instalment shall be made when the decision approving the operation is adopted by the Commission. Commitments in connection with subsequent annual instalments shall be based on the financing plan for the operation concerned and on the progress made in implementing it. 2. Without prejudice to checks carried out by Member States, in accordance with national laws, regulations and administrative provisions and without prejudice to the provisions of Article 206 of the Treaty or to any inspection arranged on the basis of Article 209 (c) of the Treaty, Commission officials may carry out on-thespot checks, including sample checks, in respect of operations financed by the Structural Funds. Before carrying out an on-the-spot check, the Commission shall give notice to the Member State concerned with a view to obtaining all the assistance necessary. If the Commission carries out on-thespot checks without giving notice, it shall be subject to agreements reached in accordance with the provisions of the Financial Regulation within the framework of the partnership. Officials of the Member State concerned may take part in such checks. The Commission may require the Member State concerned to carry out an on-the-spot check to verify the regularity of payment requests. Commission officials may take part in such checks and must do so if the Member State concerned so requests. The Commission shall ensure that any checks that it carries out are performed in a coordinated manner so as to avoid repeating checks in respect of the same subject matter during the same period. The Member State concerned and the Commission shall immediately exchange any relevant information concerning the results of the checks carried out.

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3. For a period of three years following the last payment in respect of any operation, the responsible body and authorities shall keep available for the Commission all the supporting documents regarding expenditure on the operation. Article 24 Reduction, suspension and cancellation of assistance 1. If an operation or measure appears to justify only part of the assistance allocated, the Commission shall conduct a suitable examination of the case in the framework of the partnership, in particular requesting that the Member State or other authorities designated by it to implement the operation submit their comments within a specified period of time. 2. Following this examination, the Commission may reduce or suspend assistance in respect of the operation or measure concerned if the examinaiton reveals an irregularity and in particular a significant change affecting the nature or conditions of the operation or measure for which the Commission’s approval has not been sought. 3. Any sum received unduly and to be recovered shall be repaid to the Commission. Interest on account of late payment may be charged on sums not repaid in compliance with the provisions of the Financial Regulation and in accordance with the arrangements to be drawn up by the Commission pursuant to the procedures referred to in Title VIII hereof. TITLE VII MONITORING AND ASSESSMENT Article 25 Monitoring 1. Within the framework of the partnership, the Commission and the Member States shall ensure effective monitoring of implementation of assistance from the Funds, geared to the Community support framework and specific operations (programmes, etc.). Such monitoring shall be carried out by way of jointly agreed reporting procedures, sample checks and the establishment of monitoring committees. The Commission shall report each year to the committees referred to in Title VIII on the progress made in implementing assistance operations under the Funds, including the use made of appropriations in relation to the particulars given in the Community support frameworks. The findings of this report and the opinions of the Committee shall be forwarded to the European Parliament for information.

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2. Monitoring shall be carried out by reference to physcial and financial indicators specified in the Commission decision approving the operation concerned. The indicators shall relate to the specific character of the operation, its objectives and the form of assistance provided, and to the structural and socio-economic situation in the countries in which the assistance is to be provided. They shall be arranged in such a way as to show, for the operations in question:

— the stage reached in the operation, — the progress achieved on the management side and any related problems.

3. Monitoring Committees shall be set up, within the framework of the partnership, by agreement between the Member State concerned and the Commission. The Commission and, where appropriate, the EIB may delegate representatives to those Committees. 4. For each multiannual operation, the authority designated for the purpose by the Member State shall submit progress reports to the Commission within six months of the end of each full year of implementation. A final report shall be submitted to the Commission within six months of completion of the operation. For each operation to be implemented over a period of less than two years, the authority designated for the purpose by the Member State shall submit a report to the Commission within six months of completion of the operation. 5. After the Monitoring Committee has delivered its opinion, the Commission shall, in cooperation with the Member State, make any necessary adjustments to the volume or conditions of assistance as initially approved and to the schedule of payments envisaged. 6. For the greater effectiveness of the Funds, the Commission shall ensure that particular attention is paid to transparency of management in its administration of them. 7. Wherever this Regulation or Regulations (EEC) No 4254/88 of 19 December 1988 laying down provisions for implementing Regulation (EEC) No 2052/88 as regards the European Regional Development Fund (1), (EEC) No 4255/88 and (EEC) No 4256/88 provide for the Commission to determine detailed arrangements for implementation, the precise details which are adopted shall be notified to the Member States and published in the Official Journal of the European Communities. Article 26 Assessment

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1. Assessment shall be carried out within the framework of the partnership. The competent authorities in the Member States shall, where appropriate, contribute in such a way as to ensure that assessment can be carried out in the most effective manner. In this connection, assessment shall make use of the various particulars that the monitoring arrangements can yield in order to gauge the socio-economic impact of the operations, where appropriate in close association with the monitoring committees. 2. Ex ante and ex post assessment of operations undertaken for structural purposes by the Community shall be concerned with their effectiveness at three levels:

— their overall impact on the objectives set out in Article 130a of the Treaty, and in particular the strengthening of the economic and social cohesion of the Community, — the impact of operations under each Community support framework, — the impact of individual operations (programmes, etc.).

Assessment shall, according to the circumstances, be carried out by reference to macroeconomic indicators based on regional or national statistics, to information yielded by descriptive and analytical studies and to qualitative analyses. 3. In drawing up Community support frameworks and in vetting individual applications for assistance, the Commission shall take into account the findings of assessments made in accordance with this Article. 4. The assessment principle and procedures shall be laid down in the Community support frameworks. 5. The results of the assessments shall be submitted to the European Parliament and the Economic and Social Committee within the framework of the annual report pursuant to Article 16 of Regulation (EEC) No 2052/88. TITLE VIII COMMITTEES Article 27 Advisory Committee on the Development and Conversion of Regions In accordance with Article 17 of Regulation (EEC) No 2052/88, an Advisory Committee on the Development and Conversion of Regions, made up of Member States’ representatives and chaired

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by the Commission representative, is hereby set up under the auspices of the Commission. The EIB shall appoint a non-voting representative. The European Parliament shall receive regular information on the outcome of the preceedings of this Committee. The Commission representative shall submit to the Committee a draft of the measures to be taken. The Committee shall deliver its opinion on the draft within a time limit which the chairman may lay down according to the urgency of the matter, where appropriate by taking a vote. (1) See page 15 of this Official Journal. The opinion shall be recorded in the minutes. In addition, each Member State shall have the right to request that its position be recorded in those minutes. The Commission shall take the utmost account of the opinion delivered by the Committee. It shall inform the Committee of the manner in which it took account of the opinion. The Committee shall deliver opinions on draft Commission decisions concerning the Community support frameworks as provided for in Articles 8 (5) and 9 (9) of Regulation (EEC) No 2052/88, on the regular reports provided for in Article 8 of Council Regulation (EEC) No 4254/88 and on the drawing-up and revision of the list of areas eligible in connection with objective 2. The matters referred to in Article 10 of Regulation (EEC) No 4254/ 88 may also be referred to it by the Commission. The Committees referred to in Articles 28 and 29 shall be informed of the Committee’s opinions. The Committee shall draw up its rules of procedure. Article 28 Committee referred to in Article 124 of the Treaty In accordance with Article 17 of Regulation (EEC) No 2052/88, the Committee referred to in Article 124 of the Treaty shall be composed of two government representatives, two representatives of the workers’ organizations and two representatives of the employers’ organizations from each Member State. The member of the Commission responsible for chairing the Committee may delegate that responsibility to a senior Commission official. For each Member State, an alternate shall be appointed for each category of representative mentioned above. In the absence of one or both members, the alternate shall be automatically entitled to take part in the proceedings. The members and alternates shall be appointed by the Council, acting on a proposal from the Commission, for a period of three years. They may be re-appointed. The Council shall, as regards the composition of the Committee, endeavour to ensure fair representation of the different groups concerned. For the items on

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the agenda affecting it, the EIB shall apoint a non-voting representative. The Committee shall deliver opinions on the draft Commission decisions relating to the guidelines for action in connection with objectives 3 and 4, on the Community support frameworks relating to those objectives and, in the case of support from the European Social Fund, on the Community support frameworks relating to objectives 1, 2 and 5 (b). For their adoption, the opinions of the Committee shall require an absolute majority of the votes validly cast. The Commission shall inform the Committee of the manner in which it took account of those opinions. The Committees referred to in Articles 27 and 29 shall be informed of the Committee’s opinions. The Committee shall draw up its rules of procedure. Article 29 Committee on Agricultural Structures and Rural Development In accordance with Article 17 of Regulation (EEC) No 2052/88, a Committee on Agricultural Structures and Rural Development, made up of Member States’ representatives and chaired by the Commission representative, is hereby set up under the auspices of the Commission. The EIB shall appoint a non-voting representative. The Commission representative shall submit to the Committee a draft of the measures to be taken. The Committee shall deliver an opinion on the draft within a time limit which the chairman may lay down according to the urgency of the matter under consideration. The opinion shall be delivered by the majority stipulated in Article 148 (2) of the Treaty in the case of decisions which the Council is requested to adopt on a proposal from the Commission; when a matter is put to the vote within the Committee, the votes of the Member States’ representatives shall be weighted as provided for in the aforementioned Article. The chairman shall not vote. The Commission shall adopt measures which shall apply immediately. However, if they are not in accordance with the opinion delivered by the Committee, they shall be communicated forthwith by the Commission to the Council. In that event, the Commission may defer application of the measures which it has decided for a period of not more than one month from the date of such communication. The Council, acting by a qualified majority, may take a different decision within the period provided for in the third subparagraph. The Committee shall deliver opinions on draft Commission decisions:

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— relating to common measures in connection with objective 5 (a), — relating to Community support frameworks in connection with objective 5 (b).

The Committee provided for in this Article shall replace the Standing Committee on Agricultural Structures, set up by Article 1 of the Council Decision of 4 December 1962 (1), in respect of all the functions assigned to it under that Decision or under Article 6 of Regulation (EEC) No 729/70 (2), as last amended by Regulatoin (EEC) No 2048/88 (3). The Committees referred to in Articles 27 and 28 shall be informed of the Committee’s opinions. The Committee shall draw up its rules of procedure. Article 30 Other provisions 1. The Commission shall periodically refer to the Committees provided for in Articles 27, 28 and 29 the reports referred to in Article 16 of Regulation (EEC) No 2052/88. It may seek the opinion of those Committees on any matter relating to assistance operations under the Funds, other than those provided for in this Title, notably in connection with its power of initiative referred to in Article 5 (5) of Regulation (EEC) No 2052/88. Moreover, all the specific cases laid down in Regulation (EEC) No 2052/88 and by all the implementing Regulations referred to in Article 130 e of the Treaty shall be referred to the Committees. 2. Decision 75/185/EEC (4) and Decision 83/517/ EEC (5) shall be repealed and, as regards the EAGGF, Guidance Section, the provisions of Articles 11 to 15 of Regulation (EEC) No 729/70 concerning the EAGGF Committee shall no longer apply. TITLE IX REPORTS AND PUBLICITY Article 31 Reports 1. The annual reports referred to in Article 16 of Regulation (EEC) No 2052/88 shall review, inter alia:

— the efforts deployed under all the Funds, the EIB and the other existing financial instruments in support of the

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priority objectives referred to in Article 1 of the aforementioned Regulation, — the activities of each Fund, the utilization of their budgetary resources and the concentration of assistance within the meaning of Article 12 of Regulation (EEC) No 2052/88, the deployment of the other financial instruments for which the Commission has responsibility and where their resources have been concentrated, — the coordination of assistance provided by the Funds between themselves and with the assistance granted by the EIB and the other existing financial instruments, — the results of the assessment referred to in Article 26, — the results of analysis of the impact of Community assistance and policies as compared with the objectives listed in Article 1 of Regulation (EEC) No 2052/88 and in particular their impact on the socio-economic development of the regions.

2. Each year, the Commission shall consult the social partners organized at European level on the structural policy of the Community. 3. In the annual report of the year preceding completion of the internal market, the Commission shall consider the extent to which the Community has become cohesive and the impact of the implementation of Community policies. Article 32 Information and publicity 1. The body responsible for implementing an operation carried out with financial assistance from the Community shall ensure that adequate publicity is given to the operation with a view to:

— making potential beneficiaries and trade organizations aware of the opportunities afforded by the operation, — making the general public aware of the role played by the Community in relation to the operation.

Member States shall consult the Commission on, and inform it about, the initiatives taken for these purposes. TITLE X FINAL PROVISIONS

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Article 33 Transitional provisions 1. In accordance with Article 15 (3) of Regulation (EEC) No 2052/ 88, applications in respect of multiannual (1) OJ No 136, 17.12.1962, p. 2892/62. (2) OJ No L 94, 28.4.1970, p. 13. (3) OJ No L 185, 15.7.1988, p. 1. (4) OJ No L 73, 21.3.1975, p. 47. (5) OJ No L 289, 22.10.1983, p. 42. operations received after adoption of that Regulation but before the entry into force of the implementing decisions referred to in Article 130e of the Treaty must be in keeping with the objectives set out in Article 1 of that Regulation and involve one of the forms of assistance provided for in Article 5 of that Regulation. 2. In drawing up Community support frameworks, the Commission shall take account of any multiannual operation already approved by the Council or by the Commission before the entry into force of the implementing decisions referred to in Article 130e of the Treaty and having financial repercussions during the period covered by those support frameworks. 3. The Commission may propose that the Member State concerned apply the provisions set out in the Funds’ rules which enter into force on 1 January 1989 to operations decided on before that date. 4. In order to guarantee continuity of the activities of the Funds in the period between 1 January and 1 October 1989, approval by the Commission of any new applications submitted during that period shall not be subject to compliance with Article 15. Such operations shall be indicated in the subsequent decision on the relevant Community support framework. 5. In accordance with Article 15 (4) of Regulation (EEC) No 2052/ 88, any applications in respect of non-multiannual operations submitted before entry into force of this Regulation may be approved after that date on the basis of the rules in force at the time of submission of such applications. Article 34 Entry into force This Regulation shall enter into force 1 January 1989. This Regulation shall be binding in its entirety and directly applicable in all Member States. Done at Brussels, 19 December 1988. For the Council

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The President Th. PANGALOS

COUNCIL REGULATION (EEC) No 4254/88 of 19 December 1988 laying down provisions for implementing Regulation (EEC) No 2052/88 as regards the European Regional Development Fund THE COUNCIL OF THE EUROPEAN COMMUNITIES, Having regard to the Treaty establishing the European Economic Community, and in particular Article 130e thereof, Having regard to the proposal from the Commission (1) In cooperation with the European Parliament (2) Having regard to the opinion of the Economic and Social Committee (3), Whereas Article 130c of the Treaty states that the European Regional Development Fund is intended to help redress the principal regional imbalances in the Community through participating in the development and structural adjustment of regions whose development is lagging behind and in the conversion of declining industrial regions; Whereas Council Regulation (EEC) No 2052/88 of 24 June 1988 on the tasks of the Structural Funds and their effectiveness and on coordination of their activities between themselves and with the operations of the European Investment Bank and the other existing financial instruments (4) states in Article 3(1) that the European Regional Development Fund shall have the essential task of providing support for objectives 1 and 2 specified in Article 1 of the same Regulation, that it shall participate in the operations of objective 5 (b) and, in addition, shall provide support for studies or pilot schemes concerning regional development at Community level; Whereas provisions common to the Community’s Structural Funds have been established by Council Regulation (EEC) No 4253/88 of 19 December 1988 laying down provisions implementing Regulation (EEC) No 2052/88 as regards coordination of the activities of the different Structural Funds as between themselves and with the operations of the European Investment Bank and the other existing instruments (5), together with other provisions common to the activities of the Funds; Whereas these common provisions must be supplemented, in accordance with Article 3 (4) of Regulation (EEC) No 2052/88, by specific provisions concerning the activities of the European Regional Development Fund (ERDF); whereas the nature of the measures which may be financed by the ERDF, the information to

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be included in the plans of Member States under objectives 1 and 2 and the types of activities which will have a privileged place in ERDF assistance must be clarified; Whereas, as part of the reform of the Funds, the Commission should lay down the regional policy guidelines to be applied in the various stages of planning, notably in establishing the Community support frameworks and in the activities of the European Regional Development Fund, HAS ADOPTED THIS REGULATION: TITLE I SCOPE AND FORMS OF ASSISTANCE Article 1 Scope Within the framework of the task entrusted to it by Article 130c of the Treaty the ERDF shall, in accordance with Article 3 (1) of Regulation (EEC) No 2052/88, participate in the financing of:

(a) productive investment to enable the creation or maintenance of permanent jobs; (1) OJ No C 256, 3.10.1988, p. 12. (2) OJ No C 326, 19.12.1988 and decision of 14 December 1988 (not yet published in the Official Journal). (3) OJ No C 337, 31.12.1988. (4) OJ No L 185, 15.7.1988, p. 9. (5) See page 1 of this Official Journal. (b) investment in infrastructure, namely: — in the regions designated under objective 1, investment contributing to increasing economic potential, development, structural adjustment of these regions; financing may also be provided, in areas where the need is demonstrated, for certain facilities contributing to the structural adjustment of these areas, particularly health and educational facilities; — in the regions or areas designated under objective 2, investment relating to the regeneration of areas suffering from industrial decline, including inner cities, and those whose modernization or laying out provides the basis for the creation or development of economic activity,

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— in the areas designated under objective 5 (b), investment directly linked to economic activity which creates jobs other than in agriculture, including communication infrastructure links and others on which the development of such activities depends; (c) the development of indigenous potential in the regions by measures which encourage and support local development initiatives and the activities of small and medium-sized enterprises, involving in particular: — assistance towards services for firms, in particular in the fields of management, study and research of markets and services common to several firms, — financing the transfer of technology, including in particular the collection and dissemination of information and financing the introduction of innovation in firms, — improvement of access for firms to the capital market, particularly by the provision of guarantees and equity participation, — direct aid to investment, where no aid scheme exists, — the provision of small-scale infrastructure; (d) operations planned in the context of regional development at Community level, in particular in the case of frontier regions of the Member States, in accordance with Article 3 (1), last subparagraph, of Regulation (EEC) No 2052/88; (e) the preparatory, accompanying and assessment measures referred to in Article 7; (f) productive investment and investment in infrastructure aimed at environmental protection where such investment is linked regional development.

Article 2 Regional plans 1. Apart from the general provisions laid down in Title II of Regulation (EEC) 4253/88, the following specific provisions shall apply to the regional plans referred to in Articles 8 (4) and 9 (8) of Regulation (EEC) No 2052/88. 2. The plans relating to the regions designated under objective 1 shall, as a general rule, cover one region at NUTS level II. However, pursuant to the second subparagraph of Article 8 (4) of

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Regulation (EEC) No 2052/88, Member States may submit a plan for more than one of their regions included in the list referred to in paragraph 2 of that Article, provided that the plan comprises the features listed in the first subparagraph of the said paragraph 4. These plans shall contain the following information:

(a) a succinct analysis of the socio-economic situation of the region, indicating, inter alia, the demographic outlook thereof, (b) a description of the development strategy envisaged by the Member State, with an indication of the national and regional financial resources proposed; (c) the Member State’s priorities for action and the regional development measures for which it plans to request Community financial participation, together with the estimated sums involved in these requests for the various forms of Community assistance.

When submitting the plans, the Member States shall supply information on the national, regional, local or other authorities which are to be responsible for implementing the measures. As a general rule, these plans shall be for a period of five years and may be up-dated annually. Data for the fourth and fifth years may be given as a guide. 3. The plans relating to the regions designated under objective 2 shall normally cover one or more areas at NUTS level III. These plans shall contain the following information:

(a) a description of the conversion strategy envisaged by the Member State, with an indication of the national or regional financial resources proposed; (b) the Member State’s priorities for action and the regional conversion measures for which it plans to request Community financial participation, together with the estimated sums involved in these requests for the various forms of Community assistance; (c) information allowing an assessment to be made of the overall regional economic situation.

When submitting the plans, the Member States shall supply information on the national, regional, local or other authorities which are to be responsible for implementing the measures.

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As a general rule, these plans shall be for a period of three years and may be up-dated annually. 4. The plans relating to the regions designated under objective 5 (b) shall be drawn up in accordance with the procedure laid down in Article 7 of Council Regulation (EEC) No 4256 of 19 December 1988 laying down provisions for implementing Regulation (EEC) No 2052/88 as regards the EAGGF Guidance Section (1). 5. When submitting applications to the ERDF, Member States shall ensure that a sufficient proportion is allocated to investment in industry, craft industry and services, particularly through partfinancing of aid schemes. Article 3 Regional operational programmes 1. For the regions designated under objective 1, regional operational programmes shall in principle cover one region at NUTS level II or, in specific cases, one area at NUTS level III or more than one region at NUTS level II. For regions and areas designated under objectives 2 and 5 (b), and for frontier regions, they shall in general cover one or more areas at NUTS level III. 2. The programmes may be undertaken on the initiative of the Member States or of the Commission in agreement with the Member State concerned, in accordance with the last subparagraph of Article 5 (5) of Regulation (EEC) No 2052/88. When they are undertaken on the initiative of a Member State, they shall be drawn up by the authorities designated by the Member State, in consultation with the Commission. When they are undertaken on the initiative of the Commission, the Commission, after consulting the Committee referred to in Article 27 of Regulation (EEC) No 4253/88, shall lay down the guidelines and invite the Member States concerned to establish operational programmes. It shall order their publication in the Official journal of the European Communities. The Commission’s initiative shall be designed, within the framework of the tasks entrusted to the ERDF by Article 3 (1) of Regulation (EEC) No 2052/88:

— to help resolve serious problems directly associated with the implementation of other Community policies and affecting the socio-economic situation of one or more regions, or — to promote the application of Community policies at regional level, or — to help resolve problems common to certain categories of region.

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The Commission’s initiatives shall normally be financed from that part of ERDF commitment appropriations which is not the subject of the indicative allocation provided for in Article 12 (6) of Regulation (EEC) No 2052/88. Article 4 Part-financing of aid schemes 1. The grant of Community assistance to regional aid schemes shall constitute one of the main forms of incentive to investment in firms. 2. With a view to deciding the Community’s financial participation, the Commission shall examine, with the competent authorities designated by the Member State, the characteristics of the aid scheme concerned. It shall take account of the following:

— the rate of assistance to be tailored to the socio-economic situation of the regions concerned and the consequent locational disadvantages for firms, — operating procedures and the types of aid, including rates, to be varied to meet the needs, — priority to be given to small and medium-sized enterprises and to the encouragement of services supplied to them such as management advice and market surveys, (1) See page 25 of this Official Journal. — the economic repercussions of the aid scheme on the region. — the characteristics and impact of any other regional aid scheme in the same region.

Article 5 Projects in addition to the information specified in Article 16 of Regulation (EEC) No 4253/88, applications for ERDF assistance for the projects referred to in Article 5 (2) (d) of Regulation (EEC) to 2052/88 submitted individually or within the framework of an operational programme shall provide the following details:

(a) for investment in infrastructures:

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— analysis of the costs and socio-economic benefits of the project, including an indication of the excepted rate of use, — the expected impact on the development or conversion of the region concerned, — an indication of the consequences that Community participation will have on the completion of the project; (b) for productive investment: — an indication of the market outlook for the sector concerned, — the effects on employment, — an analysis of the excepted profitability of the project.

Article 6 Global grants 1. In accordance with Article 5 (2) (c) of Regulation (EEC) No 2052/88, the Commission may entrust to appropriate intermediaries, including regional development organizations, designated by the Member State in agreement with the Commission, the management of global grants, which it shall use primarily to assist local development initiatives. These intermediaries must be present or represented in the regions concerned and must operate in the public interest and shall associate adequately the socio-economic interests directly concerned by the implementation of the measures planned. 2. The procedures for the use of global grants, shall be the subject of an agreement concluded, in agreement with the Member State concerned, between the Commission and the intermediary concerned. These procedures shall detail in particular:

— the — the — the — the

types of measure to be carried out, criteria for choosing beneficiaries, conditions and rates of ERDF assistance, arrangements for monitoring use of the global grants.

Article 7 Preparatory, accompanying and assessment measures 1. The ERDF may finance, up to a limit of 0,5% of its annual allocation, the preparatory, accompanying and assessment

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measures necessary for the implementation of this Regulation carried out by the Commission or by outside experts. They shall include studies, among them studies of a general nature concerning Community regional action, and technical assistance or information measures, including, in particular, measures to provide information for local and regional development agents. 2. Measures carried out on the Commission’s initiative may, in exceptional circumstances, be financed by the ERDF at a rate of 100%, it being understood that those carried out by the Commission itself are financed at a rate of 100%. For other measures the rates laid down in Article 17 of Regulation (EEC) No 4253/88 shall apply. TITLE II GUIDELINES AND PARTNERSHIP Article 8 Periodic report and guidelines 1. A periodic report on the social and economic situation and development of the regions of the Community, which also indicates the macro-economic effects of the Community’s regional action, shall be prepared by the Commission at three-yearly intervals in accordance with the procedures laid down in Title VIII of Regulation (EEC) No 4253/88 Member States shall provide the Commission with the relevant information enabling it to make an analysis of all the regions of the Community on the basis of statistics which are as comparable and as up to date as possible. The report must also make it possible to assess the regional impact of other Community policies. The first periodic report shall be prepared by 31 December 1990 at the latest. 2. This report shall constitute a basis for the establishment of guidelines for Community regional policy. These shall be applied by the Commission in the various stages of planning, notably in establishing Community support frameworks and in the activities of the ERDF. These guidelines shall be forwarded to the Council and the European Parliament and shall be published for information in the Official Journal of the European Communities. Article 9 Regional partnership The Community’s regional action shall be carried out in close consultation between the Commission, the Member State concerned and the competent authorities designated by the latter,

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in accordance with Article 4 (1) of Regulation (EEC) No 2052/88, for the implementation of measures at regional level. TITLE III REGIONAL DEVELOPMENT AT COMMUNITY LEVEL Article 10 Definition of assistance 1. In accordance with the last subparagraph of Article 3 (1) of Regulation (EEC) No 2052/88, the ERDF may also contribute to the financing at Community level of:

(a) studies at the Commission’s initiative aiming to identify: — the spatial consequences of measures planned by the national authorities, particularly major infrastructures, when their effects go beyond national boundaries, — measures aiming to correct specific problems of the border regionas within and outside the Community, — the elements necessary to establish a prospective outline of the utilization of Community territory. (b) pilot schemes which: — constitute incentives to the creation of infrastructure, investment in firms and other specific measures having a marked Community interest, in particular in the border regions within and outside the Community, — encourage the pooling of experience and development cooperation between different Community regions, and innovative measures.

2. On the Commission’s initiative, matters relating to regional development at Community level, coordination of national regional policies or any other problem connected with implementation of Community regional action may be referred to the Committee specified in Article 27 of Regulation (EEC) No 4253/88. The Committee may arrive at common conclusions on the basis of which the Commission shall, where appropriate, address recommendation to the Member States.

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TITLE IV GENERAL AND FINAL, PROVISIONS Article 11 Monitoring of compatibility Where appropriate and through procedures suitable to each policy, Member States shall supply the Commission with information concerning compliance with Article 7 (1) of Regulation (EEC) No 2052/88. Article 12 Information and publicity The provisions on information and publicity referred to in Article 32 of Regulation (EEC) No 4253/88 concerning ERDF assistance shall be adopted by the Commission and published in the Official Journal of the European Communities. Article 13 Indicative allocation of ERDF resources In accordance with Article 12 (6) of Regulation (EEC) No 2052/ 88, the Commission shall, before 1 January 1989, decide for a period of five years and as a guide, on the allocation per Member State of 85 % of the commitment appropriations of the ERDF. Article 14 Final provisions Regulation (EEC) No 1787/84 (1) is hereby repealed, subject to the application of Article 15 of Regulation (EEC) No 2052/88 and of Article 33 of Regulation (EEC) No 4253/88 (coordinating Regulation). Article 15 Entry into force This Regulation shall enter into force on 1 January 1989. However, Article 14 shall apply with effect from the date of adoption of this Regulation. This Regulation shall be binding in its entirety and directly applicable in all Member States. Done at Brussels, 19 December 1988.

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For the Council The Pesident Th. PANGALOS

APPENDIX 2: INITIAL LIST OF AREAS ELIGIBLE FOR OBJECTIVE 2 Commission Decision of 21 March 1989 (89/288/ EC) (OJL 112, 25.4.89)

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APPENDIX 3: GLOSSARY

BRITE CAP COMETT DG

Basic Research in Industrial Technologies for Europe Common Agricultural Policy Community Programme in Education and Training for Technology Directorate General, the principal ones quoted are: DG II

DG V

DG VI DG XVI DG XX DG XXII

EAGGF ECSC ECU EIB

European Fund European European European

Economic and Financial Affairs Employmen t, Social Affairs, Education Agriculture Regional Policy Financial Control Coordination of Structural Instrument s

Agricultural Guidance and Guarantee Coal and Steel Community Currency Unit Investment Bank

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ERDF ESF EUR10/ EUR12 EUROSTAT IDO IMP IMPACT NPCI OJL (OJC) PEDIP RECHAR RENAVAL RESIDER SEA SMEs STAR

STRIDE VALOREN

European Regional Development Fund European Social Fund European Community of Ten/ Twelve Member States EC’s Statistical Office Integrated Development Operation Integrated Mediterranean Programme Information Market Policy Actions National Programme of Community Interest Official Journal of the EC, L series (C series) Programme to modernize Portuguese industry Proposed programme to assist the conversion of coal mining areas Programme to assist the conversion of shipbuilding areas Programme to assist the conversion of steel areas Single European Act Small and Medium Sized Enterprises Programme for the development of certain lessfavoured regions of the Community by improving access to advanced telecommunications services Science and Technology for Regional Innovation and Development in Europe Programme for the development of certain lessfavoured regions of the Community by exploiting endogenous energy potential