Objective 2

The main goal of regional policy in the European Union is economic and social cohesion. This is based on financial solidarity, whereby more than 35 % of the Union's budget is transferred to the less-favoured regions (EUR 213 billion in 2000-06 plus EUR 21.74 billion approved for the ten new Member States). Those regions in the Union lagging behind in their development, undergoing restructuring or facing specific geographical, economic or social problems are to be put in a better position to cope with their difficulties and to benefit fully from the opportunities offered by the single market.

The amount of support that regions receive through the EU's regional policy depends on their level of development and the type of difficulties they are facing. The Structural Fund regulations for 2000-06 provide, in particular, for three priority objectives:

• Objective 1 : to promote the development and structural adjustment of regions whose development is lagging behind;
• Objective 2: to support the economic and social conversion of areas experiencing structural difficulties;
• Objective 3 : to support the adaptation and modernisation of education, training and employment policies and systems in regions not eligible under Objective 1.

This information sheet concerns Objective 2 only. The other Objectives are the subject of separate sheets.

GEOGRAPHICAL ELIGIBILITY

The reform of the Structural Funds under Agenda 2000 recommends concentrating structural assistance on the most pressing development problems. The new Objective 2 of the Structural Funds for 2000-06 brings together the former Objectives 2 (conversion of declining industrial regions) and 5(b) (development of rural areas) from 1994-99.

Like Objective 1, Objective 2 is "regionalised", meaning that it applies to areas defined according to specific statistical and socio-economic criteria. Since the regions covered by this Objective are facing structural difficulties, the Community assistance they receive is intended to support their economic and social conversion. Eligibility depends on a population ceiling, and on criteria specific to each area. An exhaustive list is then drawn up of the eligible regions.

Population ceiling

The population of all the areas eligible for Objective 2 of the Structural Funds may not be more than 18 % of the total population of the Community, i.e. no less than two thirds of the population previously covered by Objectives 2 and 5(b). Following enlargement, for the ten new Member States the ceiling is 31 % of the population of all the NUTS II regions covered by Objective 2 in each of those countries. Decision 1999/503/EC [Official Journal L 194 of 27.7.1999] of 1 July 1999 requires the Commission to set a ceiling in each Member State on the population eligible for Objective 2 in 2000-06. These ceilings are as follows:

The Act concerning the conditions of accession to the European Union of the ten new Member States [OJ L 236, 23.9.2003] contains the ceilings for those countries for the period 1 May 2004 to 31 December 2006. Only three of those countries have population ceilings for obtaining aid under Objective 2. They are:

• the Czech Republic: 0.37 million inhabitants
• Slovakia: 0.19 million inhabitants
• Cyprus: 0.21 million inhabitants

Criteria specific to each type of area

The areas eligible under Objective 2 are those undergoing socio-economic change in the industrial and service sectors, declining rural areas, urban areas in difficulty and depressed areas dependent on fisheries. The criteria for defining them are as follows.

Areas undergoing socio-economic change in the industrial and service sectors:

• These areas must correspond to a NUTS level III territorial unit in the nomenclature developed by Eurostat.
• Their average unemployment rate recorded over the three years before 1999 must have been higher than the Community average.
• They must have a percentage share of industrial employment in total employment equal to or greater than the Community average in any reference year from 1985 onwards.
• Industrial employment must have been falling constantly for several years.

Geographical areas whose population or area is significant, which meet the above criteria and are adjacent to an industrial area are also eligible.

These areas undergoing socio-economic change in the industrial and service sectors continue to suffer job losses, not only in the traditional industries (textiles, cars, coal and steel) but also in services. The development of new activities and retraining of workers are strongly encouraged.

Declining rural areas:

• These areas must correspond to a NUTS level III territorial unit in the nomenclature developed by Eurostat.
• They must have either a population density of less than 100 people per km², or a percentage share of agricultural employment in total employment which is at least double the Community average in any reference year from 1985 onwards.
• They must have either an average unemployment rate recorded over the three years before 1999 that is above the Community average, or a decline in population since 1985.

Rural areas with serious socio-economic problems arising from the ageing of or decline in the agricultural working population may also be eligible.

Rural areas are undergoing radical change. Farming is no longer a major source of employment but continues to occupy most rural land. Revitalising these areas and maintaining the population there requires new competitive activities and closer links with urban centres.

Urban areas in difficulty are densely populated areas that meet at least one of the following criteria:

• a rate of long-term unemployment higher than the Community average;
• a high level of poverty, including poor housing conditions;
• a particularly damaged environment;
• a high rate of crime and antisocial behaviour;
• low educational standards among the population.

The urban issue is at the heart of economic, social and territorial change. Towns and cities have a high degree of development potential and cooperate among themselves in networks. But they are also home to many disparities in development, as witnessed by the existence of depressed districts where social exclusion and poverty are rife. However, although our towns and cities exert high pressure on the environment, they nevertheless play a role as vectors of development for surrounding rural areas.

Depressed areas dependent on fisheries are coastal areas with a significant number of jobs in the fisheries industry as a percentage of total employment. They are also facing structural socio-economic problems relating to the restructuring of the fisheries sector, which has resulted in a significant reduction in the number of jobs in that sector.

Objective 2, therefore, concerns four types of geographical area. Areas facing or threatened by serious structural problems or a high level of unemployment arising from an ongoing or planned restructuring in agriculture, industry or the services sector are also eligible. Where there is a serious crisis in a region, the Commission may act on a proposal from a Member State to amend the list of areas during 2003, provided this does not increase the population covered within each region.

List of eligible regions

As a first step, each Member State draws up its own indicative list of significant areas, which it submits to the Commission together with the statistics and other information, at the most appropriate geographical level, needed to evaluate the proposals. The Commission, in close consultation with the Member States, then draws up the definitive list of areas eligible under Objective 2 for 2000-06 for each Member State of the European Union. The decisions containing these lists are available on the Inforegio website of the Directorate-General for regional policy:

Greece, Ireland and Portugal are not concerned by Objective 2, since their entire territory is covered by Objective 1. Estonia, Latvia, Lithuania, Malta and Slovenia are in the same situation.

Transitional support is also available for EU 15 regions which were eligible for the former Objectives 2 and 5(b) in 1994-99 but which do not qualify for Objective 2 in 2000-06. This transitional support, which decreases over time, is granted to prevent a sudden interruption in financial assistance from the Structural Funds and consolidate the progress achieved during the previous programming period. It is granted for six years, from 1 January 2000 to 31 December 2005. The transitional support for these areas is provided by the ERDF. They may also receive assistance from the EAGGF Guarantee Section for rural development, from the FIFG under the common fisheries policy, or from the European Social Fund (ESF) under Objective 3 for structural conversion.

PROGRAMMING DOCUMENTS

Programming is an essential part of implementing EU regional policy. The first stage is for the Member States to present regional development plans. These include a precise description of the economic and social situation of the country by region, a description of the most appropriate strategy for achieving the stated development objectives and indications on the use and form of the financial contribution from the Structural Funds.

The Member States then submit programming documents to the Commission, following its general guidelines. In the case of Objective 2, these programming documents take the form of single programming documents (SPDs).

. The Objective 2 SPDs coordinate all Community structural assistance, including rural development measures but not including assistance for human resources granted under Objective 3. These documents describe the strategy and priorities selected and provide a short description of the proposed measures and an indicative financing plan showing the eligible public/private financing. They also lay down the arrangements for financial management, monitoring, evaluation and control. In all, 96 regional programmes are being implemented in the 12 Member States covered by Objective 2. You can consult summaries of the SPDs on the Inforegio website of the Directorate-General for regional policy.

FINANCIAL PROVISIONS

Funding

For 2000-06, the allocation to the Structural Funds is EUR 195 billion, to which must be added EUR 14.1559 billion for the ten new Member States for the period from accession to 31 December 2006. The allocation for Objective 2 is EUR 22.5 billion over seven years (11.5 % of the total) for the old Member States and EUR 0.12 billion over two and a half years for the new Member States (0.86 % of the total allocated to those countries), shared between the ERDF and the ESF, with EUR 2.721 billion earmarked for transitional support.

The Cohesion Fund grants assistance only to Greece, Portugal, Ireland and Spain, i.e. the countries whose gross domestic product (GDP) is less than 90 % of the Community average. It finances operations in the fields of environment and transport. Since the whole of Greece, Portugal and Ireland are eligible under Objective 1, only certain regions of Spain eligible under Objective 2 (Aragon, the Balearic Islands, Catalonia, Rioja, Madrid, Navarre and the Basque Country) also receive assistance from the Cohesion Fund.

Commission Decision 1999/504/EC of 1 July 1999 [Official Journal L 194 of 27.7.1999] fixes an indicative allocation by Member State of the commitment appropriations for Objective 2 of the Structural Funds for 2000-06 as shown below:

For the new Member States, the allocation for Objective 2 represents 0.86 % of the resources of the Structural Funds. The indicative allocation of commitment appropriations is the following:

• Czech Republic: EUR 63.3 million
• Slovakia: EUR 33 million
• Cyprus: EUR 24. billion

Contribution of the Funds

As a general rule, the contribution of the Structural Funds under Objective 2 is subject to the following ceilings: no more than 50 % of the total eligible volume and at least 25 % of eligible public expenditure.

In the case of investment in firms, the contribution of the Funds is subject to the ceilings on the rate of aid and on combinations of aid laid down in the field of state aids.

In cases where assistance involves financing investments that will generate income (such as bridges or toll motorways), the expected revenue is taken into account when determining the contribution of the Funds. Under Objective 2, the contribution of the Funds is subject to the following ceilings:

• In the case of investments in infrastructure generating substantial income, assistance may not exceed 25 % of the eligible total volume. These rates can be supplemented by forms of financing other than direct aid for up to 10 % of the total eligible total.
• Contributions to investments in businesses may not exceed 15 % of the total eligible volume. In the case of investments in small and medium-sized enterprises (SMEs), these rates can be increased by up to 10 % of the eligible total volume for indirect forms of financing.

Last updated: 16.06.2005