The objective of economic and social cohesion was introduced in 1986 with the adoption of the Single European Act. The policy was finally incorporated into the EC Treaty itself (Articles 158 to 162) with the Maastricht Treaty (1992).
Development of regional policy in the European Union
Since the creation of European Economic Community (EEC) in 1958, regional policy went through several stages. The first one lasted from 1958 until 1975 and its prime characteristic was the insufficiently focused access towards the regional policy of the Community.
The important characteristics of the second stage (1975 – 1986) were the creation of new instruments and reinforcement of the existing ones, as well as low but constant growth of available funds. The third stage marks the period from 1986 to the year of 1999. The main characteristic of this stage is the reformation and increase in available funds, as well as the efficiency improvement of used instruments and spent resources. The fourth stage covers the period from 2000 to 2006. In the second half of the nineties the Agenda 2000 was being prepared, which provided for the greatest enlargement of the European Union (May 2004), within which ten countries become the members of the EU. This enlargement has increased the population of the European Union for 20%, and the GDP for only 5%. The fifth stage covers the current budget period from 2007 to 2013. It is characterized by the greatest amount of the financial resources, intended for the poorest of the member states and regions, and by priority focused on faster economy development, jobs creations, and innovation.
First stage (1958 – 1986)
France, Belgium, West Germany, Italy, Luxembourg, and the Netherlands, the founding countries of the EEC, were in 1958 at the approximately equal level of development, apart from southern Italy. This imbalance between the south of Italy and the rest of the community was recognized in the Mezzogiorno Protocol that was added to the initial EEC Treaty in Rome, in 1957 (The Treaty of Rome), which was ratified in 1958. The Article 2 of the Treaty of Rome states the principles that EEC is based on, and one of them is that ‘through the Community, the equal, balanced and sustainable development of economy is improved…’ The Preamble to the Treaty goes further, because ‘reduction of existing regional disproportionalities’ is required in it. Apart from these assertions in the Treaty, not much is said about the instruments necessary for the achievement of harmonious and balanced development.
European Investment Bank (EIB) was established in 1958 in order to provide the funds at low interest rates for the less developed regions. The first two structural funds were created in 1958: European Social Fund – ESF and European Agricultural Guidance and Guarantees Fund – EAGGF, with the aim of assistance in pursuing the common policies. Beside these instruments, The Treaty of Rome has allowed certain exceptions from the general principle of free competition and from prohibition of the state subventions out of specific areas. The best example of these exceptions is the Article 87 (3), (former Article 92 (3)), which allows state assistance to the less developed regions, if, of course, the plan is approved by the European commission.
In the period of initial development of the EEC (the sixties and seventies of the past century), regional differences did not stand for a serious problem at communitarian level. At the same time, the member countries were trying to equally share between themselves both the profit and losses, but only at the level of member countries, not considering the process at the regional level. Even though the funds were granted for this purpose during the sixties, very little was done at the level of Community. EIB did grant credits for the development of the poorer regions, but the granted funds were insignificant when compared to the funds that governments were spending. The other two available funds, ESF and EAGGF, also had a minor role in this period. Such situation was, among the rest, caused by the fact that the sixties were ‘golden age’ of the west-European economy, especially Italian which was a real ‘economic miracle’. This paved the way for these countries to grant considerable funds for development of their regions, so they did not feel in need of communitarian action (to the extent that they will need in future). However, regional policies of the member countries, because of differences in the type of local problems and different approaches, have used very often completely different instruments which usually produced different effects.
As far as regional policy is concerned, the first communication was adopted by the European commission in 1965, followed by formation of Directorate General for Regional Policy (DG Regio) in 1968. In 1972, in Paris, Heads of states and Governments adopted the conclusion in which regional policy is described as the ‘key factor of the Community enforcement’.
The Second stage (1975 – 1986)
The regional policy at the level of the Community started to strengthen at the beginning of sixties. That was a response of the Community to the aggravation of global economic situation caused by the first oil crisis in 1973, which ended the ‘golden age’ of European economy. That was also a response to the first enlargement which occurred the same year. The new members (Great Britain, Ireland and Denmark) bring structural problems but also the experience in solving the problems of regional development (especially in the case of Ireland and Great Britain, which, by the way, is the first European country that adopted its own regional policy in 1928). Beside that, when Great Britain joined the common agricultural policy, a big problem has been appeared known as British Budgetary Question – BBQ. One of the responses to this problem was the foundation of the European Regional Development Fund – ERDF in 1975, through which the Community has to a certain extent compensated Britain for the loss. The aim of the ERDF is the improvement of economic and social cohesion within EU, through assistance in equalization of differences among regions and social groups.
The accession of Greece in 1981, and that of Spain and Portugal in 1986, has increased the need for joint regional policy. A new approach towards the regional differences appeared in 1985, when the Integrated Mediterranean Programs were started. The creation of these programs was settled in 1982, at the request of a new member, Greece, for a greater financial help. The aim of the Integrated Mediterranean programs was to aid Mediterranean regions of France, south of Italy, and above all to entire Greece, in order to support the development of tourism, agriculture, and small and medium enterprises in these regions.
In this stage, the Council of European Municipalities founded in 1951 in Geneva, and in 1984 it changed its name to the Council of municipalities and regions of Europe.
The Assembly of European regions was founded in 1985, with its headquarters in Strasbourg. Today, the Assembly represents more than 300 of European regions, including those outside the European Union. The main task of the Assembly is the construction and enforcement of political authorities which represent regional institutions in the joint institutions of European Union, as well as improve interregional cooperation.
The third stage (1986 – 1999)
The Single European Act, which was adopted in 1986 for the purpose of adaptation to changes in the European union after the enlargement and which prepares the basis for the completion of the process of a single market creation, has determined the foundation of cohesion policy. The new title (now XVII title, Articles 158-162) Economic and Social cohesion represents the first attempt to connect the goals of the Article 2 of the Treaty of European community ‘equal, balanced and sustainable development’ with the instruments of regional policy.
This period is also characterized by the first reformations of structural funds (Delors’ I package from 1989 to 1993). Real values of structural funds are doubled and reached 25% of the European community budget in 1992, and also the principles of structural operation management are determined, and standards and criteria for users are defined. In 1992, the Cohesion Fund was also founded.
The Committee of the Regions was founded by the Treaty of Maastricht in 1992 and it consists of the local and regional government representatives. The headquarters of the Committee of the Regions is in Brussels. Certain countries have the quota from 5 to 24 members, depending on the size. The European Union candidate countries have observer status in the Committee of the Regions. It is an advisory board consisting of the representatives of European local and regional authorities. This Committee has to be consulted before making the decisions in the European Union in the field of regional policy, environment, culture, education and transport, and which are of interest to regional and local authorities. Besides, the Commission, the Council and the European parliament can consult the Region Committee for other matters, too. The members of the Committee are nominated by their national Governments and appointed by the Council of the European Union for the period of four years.
The fourth stage (2000 – 2006)
This stage was marked by the second reformation of structural funds within which the principles and rules of Cohesion policy and the EU enlargement preparations were simplified. The great enlargement in 2004, when the ten countries became the members of the EU, has increased the population of the European Union for 20% and gross domestic product for only 5%. The enlargement has increased the differences in the amount of per capita income and unemployment rate. During the process of accession, the new member countries had at their disposal the pre-accession instruments which prepared them for the cohesion policy pursuit, and by entering the European Union, they started using the structural funds and the Cohesion fund.
In the period from 2000 to 2006, the countries in the process of accession to the EU had at their disposal four financial instruments:
PHARE (Pologne et Hongrie – Aide a Restructuration Economique)
ISPA (Instrument for Structural Policies for pre Accession)
SAPARD (Special pre Accession Assistane for Agriculture and Rural Development)
CARDS (Community Assistance for Reconstruction, Development and Stabilization)
The Republic of Serbia has used the CARDS instrument in the period from 2000 to 2006, in the amount of around 1,3 million euros.
According to the European Council resolution from 1999, the budget intended for the cohesion policy implementation for the financial period of 2000-2006 was 213 billion euros for fifteen member countries. The additional financial resources in the amount of 22 billion euros were intended for the new member countries in the period from 2004 to 2006.
Along with the mentioned chagnes, the fourth stage was also marked by the launch of the Lisbon Strategy in 2000, the istitutional foundations of which are agricultural development, employment and innovations.
The fifth stage (2007 – 2013)
In this stage the Cohesion policy of the European Union has the strategic approach, that is, it contributes to a large extent to the acomplishment of goals of the Lisbon and Getebourg Strategy. By means of decrease in economic and social differences, the European Union makes possible for all regions and social groups to contribute and at the same time have benefits from the general economic development of the union. The Cohesion policy, that is, the policy of regional development of the EU is a structural part of these strategies, and through national and regional development programs it enables the acomplishment of the strategic goals. The fifth stage is also characterized by the reduction of the number of funds to three ( European fund for regional development, European social fund and Cohesion fund); three goals are set, the Community initiatives abolished, and the emphasis is put on the less developed regions.
The Cohesion policy and its instruments in the period of 2007-2013 are directed towards greater growth and employment in all regions and cities of the European Union. The regional Cohesion policy in this period is based on three key goals: convergence, regional competitiveness and employment, and European territorial cooperation.
Convergence implies the tendency to promote the conditions for the rise in growth, and factors that lead towards actual convergence of the least developed member countries and regions. Among the 27 member countries of the European Union, this goal refers to 84 regions in the 18 member countries. The total number of population in these regions is 154 million people (31% of EU27), and the GDP per capita is lower than 75% of the Community average (when compared to the period of 2000-2002). This goal also includes, in the phase of gradual withdrawal, 16 more regions 16,4 inhabitants alltogether, and with GDP a little over than the defined amount, because of the statistic effect caused by the enlargement of the European Union. The available sum for the implementation of convergence goal is 282,8 billion euros, which is 81,5% of the total funds intended for regional policy.