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Financing EU cohesion policy in Central and Eastern Europe

A budgetary timebomb?

  • Eastern Enlargement
  • Published:
Intereconomics

Abstract

Following publication of Agenda 2000 the EU Commission has been criticised as overly optimistic on the budgetary consequences of the envisaged accession of a number of Central and East European Countries. This article briefly reviews the evolution of regional disparities within the EU and the impact of the Structural and Cohesion Funds on the present recipient regions. It then investigates whether it is financially feasible to extend EU regional policy to the five likely new CEEC member states without a major reform of the present system.

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References

  1. T. Courchene et al.: Stable Money—Sound Finances, in: European Economy, No. 53, 1993.

  2. C. Weise: Der EU-Beitritt ostmitteleuropäischer Staaten: Ökonomische Chancen und Reformbedarf für die EU, in: Integration, No. 20, 1997, pp. 175–179.

  3. R. Baldwin, J. Francois, R. Portes: The Costs and Benefits of Eastern Enlargement: The Impact on the EU and Central Europe, in: Economic Policy, No. 24, 1997, pp. 125–170.

  4. Commission of the European Communities (CEC): Agenda 2000— For a Stronger and Wider Union, Brussels 1997.

  5. Relevant empirical studies are for example D. Neven, C. Gouyette: Regional Convergence in the European Community, CEPR Discussion Paper No. 914, London 1994; I. Thomas: Ein Finanzausgleich für die Europäische Union, Kieler Studien 285, Tübingen 1997 and R. Martin: Regional Convergence in the EU—The Importance of Macro-Economic Policies and Regional Policy Variables, HWWA-Discussion Paper No. 43, 1997.

  6. CEC: First Report on Economic and Social Cohesion, Luxembourg 1996.

  7. See CEC, op. cit. First Report on Economic and Social Cohesion, Luxembourg 1996. It is frequently argued that Community policies such as the Common Agricultural Policy and the R&D programmes also favour high-income regions (European Parliament: The Regional Impact of Community Policies, Regional Policy and Transport Series Vol. 17, Luxembourg 1991; J. Grote: Diseconomies in Space: Traditional Sectoral Policies of the EC, the European Technology Community and its Effects on Regional Disparities, in: R. Leonardi (ed.): The Regions and the European Community, London 1993, pp. 14–46). While this bias is clearly discernible for the CAP it is debatable with respect to R&D policy. More detailed investigations show that the relative involvement of peripheral regions in EU R&D programmes actually exceeds their R&D potential, expressed for example as a share of total R&D personnel in the Union (R. Martin: The Regional Dimension in European Public Policy—Convergence or Divergence?, Chapter 7, Houndsmill 1998 [forthcoming]).

  8. D. Yuill et al.: European Regional Incentives, London 1995.

  9. For details see CEC, op. cit. First Report on Economic and Social Cohesion, Luxembourg 1996.

  10. See J. Beutel: The Economic Impacts of the Community Support Frameworks for the Objective 1 Regions 1989–93, Report prepared for the European Commission, DG XVI, 1993.

  11. For details of evaluations based on QUEST II see W. Roeger: Macroeconomic Evaluation of the Effects of Community Structural Funds (CSF) with Quest Il, Paper presented at the European Conference on Evaluation Methods for Structural Funds Intervention, Berlin, 2/3 December 1996.

  12. J. Bradley et al.: Regional Aid and Convergence, Avebury 1996.

  13. On endogenous growth theory see, for example, R. Barro, X. Sala-l-Martin: Economic Growth, New York 1995; on the economic impact of infrastructure investments D. Aschauer: Is Public Expenditure Productive?, in: Journal of Monetary Economics, Vol. 23, 1989, pp. 177–200.

  14. Vector autoregressive models (VAR) that try to identify the links between public investments, private investments and labour market variables are supplemented by computable general equilibrium (CGE) models and models of distribution dynamics which try to capture changes in relative regional income (LSE: Study of the Socio-economic Impact of Projects Financed by the Cohesion Fund —Modelling Report for the European Commission DG XVI, London 1997).

  15. See for example G. Alogoskoufis: The two faces of Janus: institutions, policy regimes and macroeconomic performance in Greece, in: Economic Policy, April 1995, pp. 147–192.

  16. This is argued by M. Hallett: National and Regional Development in Central and Eastern Europe: Implications for EU Structural Assistance, Economic Papers No. 120, Brussels 1997.

  17. See the data reported in M. Hallett, op. cit. National and Regional Development in Central and Eastern Europe: Implications for EU Structural Assistance, Economic Papers No. 120, Brussels 1997.

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Authors and Affiliations

  1. Hamburg Institute for Economic Research (HWWA), Hamburg, Germany

    Reiner Martin

  2. Centre for European Policy Studies (CEPS), Brussels, Belgium

    Reiner Martin

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  1. Reiner Martin
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Additional information

This paper is partly based on research jointly undertaken with Jørgen Mortensen, Senior Research Fellow at CEPS.

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Martin, R. Financing EU cohesion policy in Central and Eastern Europe. Intereconomics 33, 103–111 (1998). https://doi.org/10.1007/BF02926817

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