Bringing Europe together

More than a third of the EU’s total budget in 2007 to 2013 has been set aside for structural investments to improve Europe’s infrastructure and competitiveness.

The sums in question aren’t small – with hundreds of billions of euros to be spent in the next six years, EUI tracked down EC Commissioner for Regional Policy, Danuta Hübner, to find out more.

Last year the European Parliament gave the green light to a Structural Funds Package of around €308billion between 2007 and 2013, with the aim of increasing solidarity and reducing disparity between regions of the EU. This budget makes up over a third – 35.7 percent to be precise – of the total EU budget, and will be used in no small part for investment in Europe’s infrastructure.
Of this overall package the European Commission has earmarked €63billion to its Cohesion Fund. This is described as a ‘structural instrument’ to aid the reduction of social and economic disparities between Member States, and according to the Commission, the fund finances up to 85 percent of expenditure on major projects involving the environment and transport infrastructure.

Between 2004 and 2006 the fund was restricted to member states whose per capita GNP was 90 percent or less of the the EU average. In practice this meant that Greece, Portugal, Spain, Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia exclusively were eligible for funding. And in that period more than half of the funding (€8.49 billion in that period) was reserved for the new Member States.

Responsibility for allocation of the funds sits with the Cohesion Fund managing authorities, with Commission approval required only in the case of major projects (€25 million for environmental and €50 million for transport projects). The assistance will not only cover major transport and environmental protection infrastructures, but also projects in the fields of energy efficiency, renewable energy and intermodal, urban or collective transport.? We grabbed twenty minutes with Commissioner Hübner and asked her to outline the Commission’s plans for the fund.

EUI. To get started, could you briefly outline the core directions of the cohesion policy, and how these are being channelled?
DH. Well, for the 2007-2013 period we’ve reformed the policy. We have made all European regions eligible for the policy, and we are focusing on two issues. The first is the reduction in disparity between the regions of Europe. As you know Europe is very diversified in terms of regional disparities, so reducing this is one big objective. And of course we want to make the European regions more competitive, with faster and stronger growth producing a higher number of sustainable jobs.

Another big issue in the reform is that we have proposed a more strategic approach that allows us to integrate better the local, regional, national and European development strategies. We have also simplified the entire delivery system of the policy. One of the areas of simplification has been to introduce provisions that increase the leverage effect of the policy, meaning the policy can attract more private capital – we have worked with the European Investment Bank and also the European Investment Fund to make the policy more attractive from this point of view, and to increase the level of investment capital from private markets.

We have also improved the co-operation between the regions at national and at trans-national cross border dimensions. So we’ll be having networks of regions to better explore the value add of sharing best practices, and co-operating between regions.

And the last thing I’d like to stress, which I feel is very important, is that we have increased the importance of the partnership principle – this is a policy built on partnership between all the stakeholders at national, regional, and local level, and this is a very important feature of the new cohesion policy.

EUI. And how does the Commission decide how best to direct structural funds? Do you focus on regions that are most lacking in investment?
DH. What I’d like to say is that all regions are eligible, but in terms of finance we are concentrating on less advanced regions. Eighty-two percent of the funds will go to these less advance regions, and these are regions that are below 75 percent of EU per capita GDP. Surprisingly over half these regions are in the EU15

We also see that in these regions that are less advanced and need to catch up, they need to invest more and more in innovation and competitiveness capacity, so the investment is not traditional at all. We took a decision that we want to direct investment towards innovation, entrepreneurship and research and development.

For the richer regions, above the threshold of 75 percent, for them participation in EU regional policy is targeted for them to overcome the still existing barriers to technology transfer, to innovation, to creation and research and development – so through the structural funds they can improve their global and European competitiveness. So it’s less a question of catching up, but improving the capacity to compete.

EUI. And to what extent will this investment go into improving the regions transport infrastructure?
DH. Indeed transport plays, and will continue to play, a very important role I think in shaping Europe’s competitiveness, and also in promoting this ‘catching up’ for those regions that are less developed. We will continue to invest European funds in the transport infrastructure. Currently in the period 2000-2006 more than a quarter of the regional fund goes towards European infrastructure. Of course, among the EU 15 we have big differences between countries like Spain, Greece and Ireland that have a very high share of transport investment – between one third and more than a half in the case of Ireland – and countries like the UK, Belgium and Finland where the share of transport investment is rather low.

So we have different approaches and, what I think is important, in the years to come we will need to continue the investment in transport for various reasons. We need better quality of traffic flows, we have to have higher safety, and we also need to achieve sustainability of the infrastructure. We already see that when we can have an impact on reducing travelling times this brings a lot of savings to economies. And we have are also investing more in safe urban travelling systems and clean transport. I also hope in the years to come that the share of roads and motorways – even though it will remain predominant – will reduce, and the representation of rail investment will increase, and that there will be a shift towards rail capacity in Europe. Though of course this shift will be very gradual.

EUI. What are the specific objectives of the investment in transport funding?
DH. In general we think that investing in transport will reduce the territorial disparities, but we also hope that the investment will also improve the accessibility and connectivity of the regions. More precisely we hope that the investment will fill the missing links in the network, which is very important in the expanded Europe. We also hope we will enhance cross-border connections – we think we need to do this to facilitate co-operation between the regions and member states.

I also hope we will invest more in connections between different modes of transports. The inter-modal approach to transport is now of increasing importance in Europe. For example there is a serious lack of inter-modal freight terminals. I just saw two days ago in France an excellent investment with structural funds in an inter-modal platform. You can really see in this type of project the positive impact on the efficiency and environmental impact of transport projects, so we hope this will continue.

Also I think we have to invest more to improve the utilisation of transport infrastructure through, for example, investment in intelligent transport systems and improved traffic management. We also want to invest in using the Galileo system in urban transport logistics. So overall I would say it’s a multi-purpose investment, but we want to really address efficiency and accessibility.

EUI. There have been various grand transport schemes in the UK that have failed, and former BA CEO Rod Eddington has recently stated its better to concentrate on smaller schemes to improve infrastructure. Would you support this kind of view?
DH. I think to answer this question you have to consider the UK context a little. The UK will be receiving less support from the European budgets in 2007-13 period – the allocation is going down from more than €17 billion to around €10 billion – and the UK needs to use the support coming from the EU budget to enhance the innovation and competitiveness, with less investment in large scale infrastructure. The large-scale infrastructure projects need to be supported by national resources. So the UK needs to find the right balance between the smaller schemes and the large-scale investments. With the EU funds I hope that the smaller schemes such as clean transport, urban transport, and the multi-modal interconnections will be included.

EUI. Are there any long-term problems with focusing on smaller scale schemes – could this damage Europe’s ability to raise its competitiveness for example?
DH. Frankly I believe that what we need is this right balance between the small-scale local projects, and the improvement of the large-scale infrastructure. And I don’t think we’ve been involved enough in small-scale projects so far. We will continue to have both types of investment, but I think that when investing in smaller local projects we have to be very innovative and take into account environmental concerns, the morality of transport, the safety of transport, the local savings in time. So I think we need to avoid going to the extremes and look for a balance between the two approaches.

EUI. Why do you view an efficient transport network as so important for Europe’s economic and competitiveness success?
DH. I think iit is very important for many reasons. Certainly infrastructure that is clean, flexible and efficient is a pre-condition for regional competitiveness. I also think that it is a necessary element for increasing the development potential of the regions – both in terms of making them more attractive for investors, but also more human friendly for people who want to move to and live in these regions. But these are pre-conditions – this is not a sufficient condition for success.

I’d also like to say that with the investment in better transport systems we can improve the functioning of the European internal market – we will not have a truly common European market unless we have this investment in the transport system. Also with an enlarging Europe, and the increase in the territory of Europe we need to improve the connectivity and accessibility of the regions – to have a truly integrated Europe this investment is essential.

I also think that for Europe increasingly the sustainability of the transport system is important. So it’s for sustainable, inter-modal transport, efficient traffic management and efficient public transport – these are the reasons we need to invest in transport.

EUI. How optimistic are you about the success of the cohesion policy to date? Is investment being used constructively, and what is the long-term ultimate goal?
DH. I am convinced that this policy – which is thirty years old – has proved its value in several different fields. It has been a major instrument in reducing social, economic and territorial disparities at Euopean level. We see it in statistics when we look at regional GDP per capita – we see there has been a convergence at EU level. We clearly see that the regions and countries with the lowest GDP per capita, and with the highest investment from the cohesion policy have been among those that grow fastest in Europe.

I also think the cohesion policy has been an efficient lever of economic integration. It has stimulated trade and investment flows, and has been positive in influencing the location of economic activity. When we look at trade between the cohesion countries and the rest of the European Union it has more than doubled in the last ten years, and I think a large part of this is down to the cohesion policy.

I also think the policy has played an important role in providing a European value add through the multi-annual strategic programming. I think it has improved the quality of the administration, it has facilitated the strategic planning at regional level, and I think it has also produced stability in availability of funds for local and regional communities.

And finally the policy has been a key tool to improve governance through partnership – through this policy we have really managed to involve the economic and social partners and the self-government authorities at local and regional level. I think this partnership working method has activated some really very dynamic processes in Europe, which I believe are very important to the success of Europe as a whole.

Hübner also currently holds posts on the boards on various economic and policy foundations and journals, as well as several educational establishments. She also has a long history of serving as a policy advisor and writer.