The Controversial EU Cohesion Policy Falls Short

February 14, 2015 | 14:01 GMT
The Controversial EU Cohesion Policy Falls Short
A tram passes the giant euro symbol outside the European Central Bank headquarters in Frankfurt. (Hannelore Foerster/Getty Images)
Summary

Funding will not be enough to halt the political fragmentation in the European Union. This is especially the case with the European Union's Cohesion Policy, a series of investment programs for the bloc's poorest regions and one of its most expensive policies. The idea behind these programs is that all members of the continental bloc would eventually rise to the same level of economic development. This equality would in turn solidify the legitimacy of the continental integration process. But Europe's economic and political crisis has shown that decades of integration and billions of euros' worth of EU investment have created only limited political and economic cohesion in Europe.

In many countries, corruption and domestic constraints prevent cohesion funds from going where they would be most useful. More important, the EU Cohesion Policy was designed for times of economic prosperity. Though the policy involves significant amounts of money, it is a fraction of what many Southern and Eastern European countries need to solve their financial problems and social crises. Brussels could threaten to withdraw cohesion funds as a means of pressuring rebellious countries, but such coercion is not the same thing as cohesion.

Analysis

The Cohesion Policy includes several funds of different sizes and goals that invest in areas as diverse as infrastructure and social policies, with the common objective of reducing economic and social disparities among EU members. EU member states and the EU Parliament define the size and rules of these funds at the beginning of each budgetary period (in the European Union, budgets are debated every seven years) and allocate to countries annually. The budget for the Cohesion Policy for 2014-2020 is 351.8 billion euros ($401 billion) — a third of the bloc's total budget, making the Cohesion Policy the European Union's second largest program after the Common Agricultural Policy.

Cohesion policy programs are relatively new to the European Union. They evolved progressively from a redistributive mechanism based on quotas for each member state to a regional policy based on global goals and priorities. These policies assume that economic liberalization and political integration need to be accompanied by policies aimed at achieving cohesion among member states.

As integration deepened in the 1960s, European leaders began to discuss policies to reduce development inequalities in the bloc. A decade later, at least two factors accelerated the debate. The first was the economic malaise of the early 1970s, which reignited the issue of unequal development in the European Community. The second was enlargement: The accession of the United Kingdom, Denmark and, particularly, Ireland (a country that was poorer than its community peers) accelerated the introduction of regional funding.

The enlargement of the European Community was a turning point for another reason: As the continental bloc grew bigger, European officials encountered the question of creating a "European identity" intimately linked to the legitimacy of the entire integration process. Consequently, cohesion policies contain an element of propaganda to communicate the virtues of continental integration.

Like the accession of Ireland in the early 1970s, the accession of Portugal, Greece and Spain in the 1980s brought about redesigns in the cohesion policy to assist the new (and relatively poorer) members of the bloc and to base the allocations on ranges of development rather than fixed quotas. These changes also had a political intention, as the European Community was interested in raising the quality of life in the countries where dictatorships had ended and social cohesion remained fragile. During these years, these programs became larger, and co-decision mechanisms between national governments and supranational institutions were introduced. The mid-2000s led to additional reforms, this time to face the challenges created by the new member states from the east, most of which were considerably less developed than EU members in the west.

The Main Beneficiaries

In order to qualify to receive funds, regions in each country are classified as "less developed" (areas where GDP per capita is less than 75 percent of the EU average), "in transition" (areas where the GDP per capita is 75-90 percent of the EU average) and "more developed" (areas where GDP per capita exceeds 90 percent of the EU average). Depending on an area's classification, the European Union can provide 50-85 percent of the total financing of a project (the poorest regions get the highest co-financing rates). The potential beneficiaries of these funds include public institutions, companies, universities and nongovernmental organizations.