Fourth progress report on cohesion: The Growth and Jobs Strategy and the Reform of European cohesion policy

The fourth progress report on economic and social cohesion describes the situation after May 2005 with regard to social and economic trends and disparities in and between the Member States and regions of the European Union (EU). The report also describes recent developments in EU cohesion policy, including the guidelines, innovations and financial resources for the period 2007-2013, and the European Strategy for Growth and Jobs.

ACT

Communication from the Commission of 12 June 2006 - The Growth and Jobs Strategy and the Reform of European cohesion policy - Fourth progress report on cohesion [COM(2006) 281 - Not published in the Official Journal].

SUMMARY

This fourth progress report on economic and social cohesion follows on from the publication of the third progress report in May 2005. It concerns inter alia:

• the cohesion programmes implemented in the new EU Member States following the May 2004 enlargement;
• preparations for the 2007-2013 programming period, in particular the Interinstitutional Agreement signed in May 2006 by Parliament, the Council and the Commission on the Financial Perspectives for 2007-2013;
• the relaunch of the Lisbon Strategy in 2005.

ECONOMIC AND SOCIAL DISPARITIES

In 2005 the EU economy was characterised by continued moderate growth. In the period 2000-2004, the average growth of the gross domestic product (GDP) of the 25 EU Member States (EU-25) was little more than 1.5% per year. However, the Commission anticipates that growth will pick up and exceed 2% across the EU between 2005 and 2007.

Disparities

With regard to disparities between Member States in terms of GDP, the report notes that the new Member States are growing faster than most of the EU-15 countries. However, convergence is still a long-term perspective.

In 2004, the average overall employment rate reached 63.3% (64.7% in the EU-15 and 56.0% in the EU-10). In order to reach the Lisbon Strategy's employment rate target of 70% by 2010, 24 million new jobs would be needed in the EU-27 (EU-25 plus Romania and Bulgaria), which represents an increase of almost 12% on current employment levels.

Trends in disparities

This Communication gives an overview of the disparities between objectives and the disparities within each objective for the regions to be targeted by cohesion policy for the period 2007-2013 .

Disparities between objectives

The 100 Convergence regions (regions where GDP per capita is less than 75% of the EU average, 2000-2002) are characterised by low levels of GDP and employment, as well as high unemployment. Their total share in EU-27 GDP in 2002 was only 12.5%, although they account for 35% of the population.

Disparities within each objective

Under the Convergence objective, there are several regions with GDP per capita below 25% of the EU average in 2002, all of which are in Romania and Bulgaria.

The employment rate in the 155 regions covered by the new Regional Competitiveness and Employment (RCE) objective is 10 percentage points higher than in the Convergence regions.

In 2002, 10% of the EU-27 population living in the most prosperous regions accounted for over 19% of total GDP for the EU-27, compared with only 1.5% for the 10% of the population living in the least wealthy regions.

Research and development (R&D) and Information and communication technologies (ICT)

R&D is a key factor in determining a region's innovative capacity. 35 regions, which account for 46% of total R&D expenditure in the EU-27, have R&D intensities exceeding the Lisbon target for an EU-wide average of 3% of GDP. In 47 regions (3.5% of GDP in the EU-27) R&D expenditure is below 0.5% of GDP.

Across the EU as a whole, almost half of all households had Internet access in 2005. There are marked differences between Member States, with penetration rates exceeding 70% in the Netherlands, Denmark and Sweden, whereas they are around 20% in Lithuania, the Czech Republic, Hungary, Slovakia and Greece. In today's Objective 1 regions, only around one third of all households have Internet access.

POLITICAL BACKGROUND

Financial resources

With regard to the execution of the budget in 2005, a total of 27.1 billion was committed under the European Regional Development Fund (ERDF), the Cohesion Fund and the pre-accession fund designated for candidate countries (ISPA), and 11.2 billion for the European Social Fund (ESF). For the four Structural Funds, Cohesion Fund and ISPA taken together, payments made in 2005 reached more than 33 billion.

Based on the conclusions of the European Council in December 2005 and the adoption of the Interinstitutional Agreement of May 2006, the cohesion policy budget for the period 2007-2013 will amount to 308 billion (0.37% of the gross national investment (GNI) of the EU-27). The new Member States would receive 51.3% of total cohesion policy resources (an increase of almost 165% compared with the period 2004-2006).

Cohesion Policy 2007-2013 and the Growth and Jobs Strategy

In July 2005 the Commission published a Communication on the Community Strategic Guidelines for cohesion policy in 2007-2013, which:

• provide a framework for the new programmes to be supported by the ERDF, the ESF and the Cohesion Fund;
• reflect the role of cohesion policy as the principal instrument for contributing to growth and employment, in accordance with the renewed Lisbon agenda.

Cohesion policy is a key instrument in contributing to the Growth and Jobs Strategy, as:

• cohesion policy represents one third of the Community budget;
• strategies designed at local and regional levels must also form an integral part of the effort to promote growth and jobs;
• the December 2005 European Council proposed that quantitative expenditure targets should be set for the new cohesion policy programmes for 2007-2013 so that a certain percentage of the funds will be used for purposes clearly linked to the Growth and Jobs Strategy ("earmarking" - 60% for the Convergence objective and 75% for the RCE objective).

Innovations in the new programmes

For the new programmes, specific initiatives have been launched to promote financial engineering for start-ups and micro-enterprises, combining technical assistance and grants with other instruments. There are three such initiatives:

JASPERS (Joint Assistance in Supporting Projects in European Regions), a new technical assistance partnership between the Commission, the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD);

JEREMIE (Joint European Resources for Micro to Medium Enterprises), a new initiative in partnership with the European Investment Fund (EIF) in order to improve access to finance for business development;

JESSICA (Joint European Support for Sustainable Investment in City Areas), enhanced cooperation between the Commission, the EIB, the CEDB (Council of Europe Development Bank) and other International Financial Institutions (IFIs) on financial engineering for sustainable urban development.

As a complement to the Strategic Guidelines, the Commission will present a Communication on the contribution of urban areas to growth and jobs in the regions.

RELATED ACTS

Council Decision 2006/702/EC of 6 October 2006 on Community strategic guidelines on cohesion [Official Journal L 291 of 21.10.2006].

Communication from the Commission of 25 January 2006 to the Spring European Council - Time to move up a gear: The new partnership for growth and jobs [COM(2006) 30 final - Not published in the Official Journal].

This annual activity report (AAR) contains several recommendations regarding cohesion policy.

Council Regulation (EC) No 1698/2005 of 20 September 2005 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) [Official Journal L 277 of 21.10.2005].

Last updated: 09.08.2006