Objective 1

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). 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 1 only. The other Objectives are the subject of separate sheets.

GEOGRAPHICAL ELIGIBILITY

Objective 1 is "regionalised", meaning that it applies to designated NUTS level II areas in the Nomenclature of Territorial Units for Statistics developed by Eurostat. Of these geographical areas, only those with a per capita gross domestic product (GDP) lower than 75 % of the Community average are eligible under Objective 1.

Objective 1 also covers specific categories of regions:

• the seven "most remote regions", whose position is unique within the Union due to their remoteness from the European continent and their modest demographic and economic importance. These regions are the Canary Islands, Guadeloupe, Martinique, Reunion, French Guiana, the Azores and Madeira.
• the areas in Sweden and Finland eligible under the former Objective 6 during 1994-99, which specifically assisted regions with a very low population density. The areas concerned are in the regions of North-Central Sweden, Central Norrland and Upper Norrland in Sweden, and North, Central and East Finland.
• Northern Ireland receives special Community assistance to promote reconciliation between the communities and the emergence of a stable and peaceful society. First set up as a Community Initiative in 1994-99, the Peace II operational programme (2000-04) is now an integral part of Objective 1 and receives financial assistance worth EUR 500 million.

In all, some 60 regions in 13 Member States are eligible under Objective 1 for 2000-06. There is also transitional support for regions which were eligible under Objective 1 in 1994-99 but are no longer eligible in 2000-06. Commission Decision 1999/502/EC of 1 July 1999 [OJ L194, 27.07.1999] lays down the list of eligible regions, valid for seven years from 1 January 2000.

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 submit programming documents to the Commission, following its general guidelines. In the case of Objective 1, these programming documents generally take the form of:

• Community support frameworks (CSFs) translated into Operational Programmes (OPs). CSFs and OPs are the programming documents recommended for Objective 1. They describe the socio-economic context of the country or regions concerned and set out the development priorities and goals to be achieved. They also lay down the arrangements for financial management, monitoring, evaluation and control. The OPs detail the various priorities of the CSF for a given region or development priority, such as transport, training, business support, etc.For Objective 1, Germany, Spain, Greece, Ireland, Italy, Portugal and the United Kingdom (Northern Ireland) have all opted to draw up a CSF and OPs.You can consult the CSFs and OPs of the regions eligible under Objective 1 or receiving transitional support on the Inforegio site of the Directorate-General for Regional Policy.
• Single programming documents (SPDs). For the purposes of Objective 1, SPDs are used to programme spending of less than 1 billion. SPDs are single documents gathering together the data contained in a Community support framework and operational programme: the programme's priorities, a short description of the proposed measures and an indicative financing plan.Austria, Belgium, Finland, France, the Netherlands, the United Kingdom and Sweden have opted for this formula for Objective 1.You can consult the SPDs of the regions eligible under Objective 1 and receiving transitional support on the Inforegio site of the Directorate-General for Regional Policy.

FINANCIAL PROVISIONS

Funding

213 billion will be available to finance structural assistance in the European Union in 2000-06. Of that amount, 195 billion are allocated to the Structural Funds. Since assistance must be concentrated on the regions with the greatest difficulties, Objective 1 has the largest allocation, accounting for approximately 70 % of Structural Fund appropriations, i.e. 137 billion over seven years.

All the Structural Funds (the ERDF, the ESF, the EAGGF Guidance Section and the FIFG) contribute to financing Objective 1.

The allocation by Member State of the commitment appropriations for Objective 1 of the Structural Funds and transitional support is set out in Commission Decision 1999/501/EC [Official Journal L194 of 27.7.1999]. The allocation is as follows:

Contribution of the Funds

As a rule, the contribution of the Structural Funds under Objective 1 is subject to the following ceilings: no more than 75 % of the total eligible volume and, as a general rule, at least 50 % of eligible public expenditure. The rate can be increased to 80 % for regions situated in a Member State eligible for assistance from the Cohesion Fund (Greece, Spain, Ireland and Portugal). Council Regulation (EC) No 1447/2001 [OJ L198 of 21.7.2001] sets this ceiling even higher, at 85 %, for all the most remote regions and the smaller Greek islands in the Aegean.

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 set in the field of state aids.

In cases where assistance involves financing investments that will generate income (such as bridges or toll motorways), the contribution of the Funds is determined in the light of the expected revenue. Under Objective 1, 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 40 % of the eligible total volume, increased by a further 10 % in the Member States eligible for assistance from the Cohesion Fund. 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 35 % of the total eligible volume (50 % in the most remote regions and the smaller islands of the Aegean). 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.

Results of programming under Objective 1 for 2000-06

The results of programming under Objective 1 for 2000-06 are set out in the communication COM(2001) 378 final [not published in the Official Journal]. These results shed light on the following points:

• Disparities between the eligible regions and the rest of the European Union remain considerable despite the progress achieved over the previous period, as described in the Second Report on economic and social cohesion. Assistance should enable the economies concerned to continue to catch up.
• The indicative guidelines adopted by the Commission in July 1999 provided a useful basis on which to negotiate the plans and programmes with the Member States. There has been a greater effort to concentrate assistance on the four priority areas in the Objective 1 regions: infrastructure, research and innovation, the information society and the development of human resources.
• The effectiveness of assistance is closely dependent on compliance with the rules on implementing and managing the programmes. The Member States in partnership with the Commission have made considerable progress in setting up systems for more rigorous monitoring, surveillance and evaluation.
• The chief difficulties were: 1) the five-month period allowed for negotiating programming documents proved to be too short (average time taken estimated at eight months), and 2) the programming complement has sometimes been regarded as a separate phase of programming although its role is to clarify the content of the programme priorities.

Economic impact of assistance under Objective 1 in 2000-06

The Directorate-General for Regional Policy has produced a new study (pdf) on the economic impact of the Structural Funds in the main areas eligible under Objective 1 (Spain, Portugal, Ireland, Greece, the Mezzogiorno in Italy and the east German Länder) for 2000-06. The main results of this analysis are as follows:

• the Objective 1 programmes appear to have a significant impact on the level of GDP and fixed capital formation.Total GDP appears to be 3.5 % higher in Portugal and 2.4 % higher in Greece than it would be without EU assistance. This increase is 1.7 % in the Mezzogiorno and 1.6 % in the east German Länder.
• Over the whole period and for all the regions covered by the study, almost 700 000 jobs are benefiting from Community support.
• Community contributions should bring about additional annual growth in the GDP of just over 0.4 % in Portugal and just under 0.4 % in Greece.
• A large share of transfers would appear to leave the beneficiary areas (leakage effect) as equipment, goods and services are brought in from outside.On average, for every 4 spent under Objective 1, more than 1 is spent on imports from other Member States, and 9 % of such imports come from non-member countries.
• The Objective 1 programmes should help the economies of the six more backward regions covered by the study to catch up and restructure.Industrial production should increase in absolute terms, with the GDP share of agriculture and the processing of agricultural products falling and the share of services increasing.

RELATED ACTS

Proposal of 14 July 2004 for a Council Regulation establishing a Cohesion Fund [COM(2004) 494 final - Not published in the Official Journal] As part of the reform of regional policy, in July 2004 the Commission presented a package of proposals for the Structural Funds (ERDF and ESF) and the Cohesion Fund. The basic reference document containing the general provisions for these proposals sets a total budget of EUR 62.99 billion for the Cohesion Fund, accounting for 23.86 % of the total budget of EUR 264 billion for the "Convergence" objective, which replaces the former Objective 1. The Cohesion Fund will finance up to 85 % of public spending on projects under this new objective.

Last updated: 14.07.2005