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February 02 Issue

James Skinner

...who knows whether a project is legitimate or worse, whether the figures presented to complete the criteria, example number of new jobs created, is genuine or ‘pie in the sky’.

The Euro zone has a few days left before the original currencies of the respective countries are firmly and truly buried. Most, if not all of my Spanish neighbours, have completely forgotten about the peseta. The shop attendants are totally fluent in handling the currency, and price tags have now switched places. Values of goods are in large Euro numbers. The peseta has gone forever. Admittedly, a certain increase in pricing has taken place during the rounding up – rather than rounding down - period from one currency to the other. But apart from minor oddballs such as my local drugstore’s automatic weighing machine (which now costs 50 Euro cents a shot instead of 25 pesetas!) most housewives are happy with the Euro shopping basket pricing. So. What happens next? What will be the next major European Union shindig?

Britain’s future entry? Nah! Too insignificant. Common European taxation laws and other financial issues? Far too complicated. How about the future European expansion. Now that is a major issue! We’re talking about another ten* new countries representing an increase of more that 80 million inhabitants that are waiting at the gates. Not all are up to the standards of living of the present fifteen** yet are eager to become part of this great new venture nicknamed by some as the ‘Super Europe’. This may sound grand on paper, but what are or will be the major issues on entry and more important, how will they affect the ‘elder’ member states? No better place to start than to take a look at the present and future distribution of European funds for the less wealthy regions when this new lot join.

What the hell are the European funds anyway? What are they for? How are they structured and managed? By whom? How much money are we talking about? Who controls and audits the accounts? At first glance it seems like a big slush fund that sits in Brussels whereby money comes in from the rich members and is handed out to the poorer ones. Now and again the various European Finance ministers get together and argue about how they are distributed. They sign a few papers and back to business as usual. To be honest, I’m sure most European citizens, other than those directly affected haven’t a clue how the system works. Thanks to old faithful Internet, I decided to investigate how all this money is manipulated and what I discovered was amazing, to say the least! Hampton Court maze is a straight path compared to the EU Funding system. But lets get down to the basics.

Enter ERDF, better known as The European Regional Development Funds.
Many moons ago, the European Union agreed that any region below the average percentage of GDP per capita within the EU was eligible to funds from the ERDF. In other words, based on a European average of 100%, any area within the Union that was below this mean had access to European money. Pretty simple at face value, but Pandora’s box in practice. As bureaucrats would have it, and similar to the ten commandments whereby thousands of laws were developed, a myriad of European funding schemes were introduced. As a brief explanation, the ERDF is broken up into different ‘programs’ as follows:
a. Objective 1. Underdeveloped regions (Ireland, Spain, Greece and Portugal).
b. Objective 2. Re-conversion of backward sectors of industry. (Example: Fishing industry)
c. Interreg. This is an interesting one that deals with cross border development such as Spain and Portugal.
d. Urban. Assistance in the rebuilding of ‘Ye olde European towns’.

And finally we come to the Cohesion funds. These are the ERDF’s distant cousin that complements Objective 1 regions and are directly related to funds for environment and communications infrastructure. But who decides and subsequently keeps an eye on all this money flow?
To quote the gurus, ‘the financial management of the Structural Funds has been largely decentralised. Member States are required to set up Managing Authorities which have the responsibility of running the programmes agreed with the Commission’.

What this means in practice is that the responsibility for the ‘request’ for funding is handed down to the local authorities, such as town councils, who then submit their programs to a regional government (Spain is a classic example with its 17 autonomous regions) and after ‘blind’ approval from the central government, receive the go ahead from the EU Commission. Over the years, thousands of projects have been submitted from town councils throughout Europe, specially in Objective 1 regions such as Spain, ranging from the building of highways and cleansing of filthy rivers to the restoration of dilapidated old buildings into contemporary art museums. There is no doubt that tremendous progress has taken place to build up Europe economically speaking, but what about the underlying objective of the funds in the first place?

Galicia in Spain, for example has been receiving European funding ever since it was available. It belongs to Objective 1, is an Interrig area and yet, at this moment in time, is still at 65% of the EU mean of GDP per inhabitant. Ireland, at the other end of the spectrum, is also an Objective 1 region and has prospered way beyond expectations. Why the difference? Is the Commission not keeping a proper eye on investments? Is the answer in the Commission’s own words: ‘A very large number of bodies actually implement the thousands of individual projects financed under the different measures in each structural fund programme’? In other words, who knows whether a project is legitimate or worse, whether the figures presented to complete the criteria, example number of new jobs created, is genuine or ‘pie in the sky’. As stated previously, there are many cooks that may be spoiling the broth. No doubt that fiddling has taken place and is probably still going on and that the Commission’s auditing will improve as EU consolidates itself into a solid political and economic block. So what about the newcomers in a few years time?

They will all be seeking funds to raise their economic standards to the level of the present members so that they can compete on equal commercial footing. Will the rich countries have to increase their contribution? How about the regions that are still underdeveloped and considered Objective 1, will they continue to be subsidised? There is a row going on at the moment between the EU and the new applicants based on the immediate subsidies that will be made available to cover agricultural policies. This is but a mere entry stumbling block. The long term issue will always revert back to the age old evil – money, yours and mine as European taxpayers who have to subsidise all these new guys. No problem if it raises the standard of living of the underdeveloped regions, but thumbs down if it goes into the pockets of corrupt politicians!

* Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia.
** Britain, France, Spain, Netherlands, Germany, Denmark, Belgium, Sweden, Finland, Luxembourg, Portugal, Italy, Ireland, Greece and Austria.

© James Skinner. 2002.

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