The challenge of enlargement

Since the European Council summit in Helsinki in December 1999, the group of candidate countries has had 13 members:

ten countries in Central and Eastern Europe (CEECs)
Cyprus, Malta and Turkey.

All these countries except Turkey have been engaged in accession negotiations since 1998 (Cyprus, Estonia, Poland, the Czech Republic, Hungary and Slovenia) or 2000 (Malta, Latvia, Lithuania, Slovakia, Romania and Bulgaria). Accession is conditional on compliance with the so-called ' Copenhagen criteria ' set out in 1993.Other than Romania and Bulgaria, the candidate countries finished accession negotiations in December 2002 at the Copenhagen European Council. In May 2004, the enlarged European Union will have 25 Member States. The new Member States will participate in the next elections to the European Parliament, in June 2004.

There can be no doubt that enlargement is a major event in the building of Europe and one which will have an enormous impact on the continent's politics over the next few decades. To avoid this change causing paralysis, it must be preceded by a reform of the way the Community currently operates.

NEW OPPORTUNITIES AND GREAT NEEDS

Opportunities

The Commission's first interim report on the impact on the policies of the European Union of the accession of the associated central and eastern European countries dates back to December 1995. That Council asked the Commission to deepen its analysis of the effects of enlargement on Community policies, especially the agricultural and structural policies. Agenda 2000 is an initial answer to that request. The aim of the financial perspective which it describes is to meet the first challenge raised by the reform of Community policies.

Enlargement offers a major political and economic opportunity to a Union which will have almost 30 members. Taking into account its overall economic impact, the first consequence will be the expansion of the single market from 370 million to about 455 million consumers. Moreover, the Union's position on the international political scene and world markets will be strengthened.

At the same time, the variety of interests within the European Union will generate substantial pressure for sectoral and regional adjustments which will require the adoption, before enlargement, of appropriate measures such as:

reform of the way Europe's institutions and bodies operate. The Treaty of Nice, which came into force in February 2003, defines how the enlarged European Union will function;
the need for candidate countries to adopt the Community acquis and prepare to operate within the internal market.

Great needs

The second progress report on economic and social cohesion shows that the average wealth of the CEECs, expressed as the Gross Domestic Product (GDP), is still well below that of the present Member States. The area and population of the Union will increase by one third but its GDP by only 5%. Of the 105 million people living in these countries, over 98 million live in regions where per capita GDP is less than 75% of the average in the enlarged Community.

The needs of these countries are enormous in all sectors of the economy and society: industry, services, transport, the environment, agriculture and skills for their human resources. Substantial efforts will have to be made to expand national transport networks and integrate them into trans-European networks. The most acute environmental problems concern water and air pollution and waste management. Great changes are already taking place on the labour market in preparation for accession and these will speed up. Industry and agriculture account for a very large proportion of jobs while the services sector is weak outside the major conurbations and labour productivity is below the EU average.

WHAT ARE THE IMPLICATIONS FOR REGIONAL POLICY?

The accession of the candidate countries is a major challenge for the Union's policy for economic and social cohesion. Enlargement will in fact create within the Community a new group of countries with an income of less than 40% of the EU average. The principles of solidarity require European structural policies to concentrate on the less developed regions of those countries, i.e. virtually the whole of the areas concerned. However, existing disparities in the 15 will not have vanished and regional policy will have to continue to take them into account.

Implementation of a regional development policy is something new for the authorities of the candidate countries. The management of the Structural Funds, to which they will soon be entitled, implies far-reaching changes in the practices and operations of all levels of the administration to comply with the legal framework of regulations on which structural assistance is based. Considerable efforts have already been made in the following areas:

the establishment of an appropriate legal framework;
definition of an administrative breakdown of the territory on the lines of the NUTS;
definition of integrated multiannual regional development programmes;
definition of the responsibilities of all parties involved in the implementation of the future regional policy in the candidate countries;
compliance with the general principles of structural assistance: programming, partnership, additionality, management, monitoring, evaluation, payments and financial checks.

THE PRE-ACCESSION STRATEGY

The pre-accession strategy set specific priorities based principally on the candidate countries accepting the Community acquis. That has been done in stages, as bilateral negotiations between the Commission and the country in question on the 31 chapters covering Union responsibilities have been opened and concluded.

Under the Commission's enlargement strategy approved by the Nice European Council in December 2000, Chapter 21 "Regional policy and the coordination of the structural instruments" is a priority because of its financial implications. Negotiations with Cyprus and the Czech Republic were provisionally closed in April 2002 and with Estonia, Latvia and Lithuania in June 2002. At the end of July, Malta, Slovakia, Slovenia and Hungary too reached agreement with the Commission on this Chapter. Poland is still in negotiations. In December 2003, the Brussels European Council once again acknowledged the efforts made by Bulgaria and Romania and encouraged both countries to continue with reforms. Bulgaria and Romania will join the European Union in 2007.

The accession strategy also implies increasing the institutional and administrative capacity of these countries so that they can apply the acquis and bring their firms into line with Community standards. Regular reports are made to the Council on the progress made by these countries on their progress in coming into line with the acquis. To meet the requirements of the pre-accession strategy for the applicant countries in Central and Eastern Europe, the Commission has developed accession partnerships and opened Community programmes to these countries. It has doubled assistance from January 2000 and is continuing to ensure implementation of the Europe Agreements.

Pre-accession instruments

The Europe Agreements are the basic legal instruments defining relations between the Union and the candidate countries. They cover matters of trade, political dialogue and other areas of cooperation. They permit monitoring of the progress made by the candidate countries in adopting and implementing the Community acquis and adhering to the priorities of the Accession Partnerships.

The Accession Partnerships are the key feature of the strategy. They cover all forms of assistance to the candidate countries within a single framework for the implementation of those countries' own accession preparation programmes. They use multi-annual programming to fix short and medium-term priorities for each candidate country (particularly in the fields of democracy, macroeconomic stabilisation, nuclear safety and adoption of the acquis) and specify resources which they can draw on for the purposes of their preparations.

The future Member States participate in Community programmes. As these programmes cover most of the Community's policies (education, training, the environment, transport, research), they constitute useful preparation for accession by making the associated countries and their populations familiar with the Union's policies and working methods.

Approximation of legislation is also a priority objective. The Technical Assistance Information Exchange Office (TAIEX) provides information on all aspects of the Community acquis. It acts within the candidate countries by assisting government bodies and businesses, particularly through the organisation of specific seminars and study visits.

The approximation of legislation alone is not enough: the institutions responsible for implementing and applying the Community acquis also need to be strengthened. An essential tool in this respect is twinning, which involves the secondment of advisers from the Union to the candidate countries. This process has begun with the secondment of "Pre-accession Advisers", who may be officials from the Member States or independent advisers. Their expertise helps train their opposite numbers in the candidate countries in the adoption, implementation and strengthening of the key sectors of the acquis.

Financial instruments

The aims of the pre-accession strategy cannot be achieved without recourse to the instruments providing support and financial aid. To meet the needs of the candidate countries, the Berlin European Council decided in 1999 to double pre-accession aid from the year 2000 and to create two specific instruments:

the pre-accession structural instrument (ISPA), with a budget of 1 040 million a year from 2000;
the pre-accession agricultural instrument (SAPARD) with a budget of 520 million a year.

These two instruments complement the assistance financed under the Phare programme since 1989, which is still the main source of assistance to the candidate countries.

Phare

The aim of the Phare programme has changed over time, as have the needs which have emerged from the process of absorbing the acquis. Phare now concentrates on two key priorities:

The strengthening of the administrative and institutional capacity of applicant countries or 'institution building' has helped to establish, at all administrative levels, structures which have the responsibility for and the capacity to define multi-annual development plans in the shape of the special preparatory programme for management of the Structural Funds.

The financing of investment or 'investment support' helps to bring firms and infrastructure into line with European standards. This accounts for 70% of the Phare budget of 1 560 million.

Pre-accession agricultural aid

Since 2000, pre-accession aid to agriculture (SAPARD) has amounted to 520 million a year. It has been deployed in priority fields such as the improvement of processing structures, marketing channels and food quality control. These measures have been implemented on the basis of national programmes and have also made it possible to fund specific integrated development projects designed to provide support for local initiatives.

Pre-accession structural assistance

Since 2000, the pre-accession structural instrument (ISPA) has had a budget of 1040 million, mainly to support infrastructure investments in the environment and transport sectors.

MANAGING THE STRUCTURAL AND COHESION FUNDS BETWEEN 2004 and 2006

The Copenhagen European Council has concluded the accession negotiations, opening the way for the accession of ten new Member States on 1 May 2004. For 2004-06, the Council granted the new Member States 21.7 billion of additional resources. This sum is less than the ceiling fixed in 1999 within the Agenda 2000 framework at the Berlin European Council.

Following the Commission's guidelines, the future Member States have finalised the 2004-06 regional programmes, which have been receiving support from the Structural Funds since January 2004. They are also participating in two Community Initiatives: Interreg III and Equal.

The new Member States will receive 5.76 billion for rural development during the 2004-06 period. As Poland is a largely agricultural country, it will receive nearly half of this aid. These funds will help farms in these countries to modernise, restructure and comply with Community production standards. They will also contribute to sustainable development in rural areas through the following measures: support for disadvantaged areas, quality of foodstuffs, agri-environment and animal welfare, afforestation and the creation of producer groups.

Within the context of the debate on the future of regional policy in the enlarged European Union, the Commission is drawing up proposals for a post-2006 cohesion policy. The Commission published the third report on cohesion at the beginning of 2004. Although it seems likely that this policy can be maintained, the question of its overall financing remains unanswered. According to current forecasts, the outlines for future regional policy are as follows:

A new Objective 1 will group together structural measures for underdeveloped areas. This concerns current regions of the EU which have not achieved economic convergence and almost all the regions of the new Member States. Only Cyprus and the regions of Prague (Czech Republic) and Bratislava (Slovakia) are not concerned. From now on, transitional support will be given to current EU regions that will, because of enlargement, no longer be eligible for support due to the statistical effect. Objective 1 will concentrate 75% of allocated funds on future Regional Policy.
A reformed Objective 2, using 20% of funds, will support projects to promote regional competition, employment and training in regions which are not eligible for Objective 1. Each Member State will receive a national envelope that must be concentrated on specific areas, budgets and time scales.
Interregional cooperation will continue in 5% of funds. It will apply to both the internal and external borders of the EU.

See also