Europe and Local Authorities: Labour-market and Employment Policy

Bernd Reissert

Europe and Local Authorities: Labour-market and Employment Policy

Abstract
The European Structural Funds
    Principles of Structural Fund Support
    Structural Fund Support and National Policy
    Structural Fund Support and Local Government Labour-Market and Employment Policy
European Employment Strategy
    The Luxembourg Process and the Method of Open Coordination
    Importance for Local Labour-Market and Employment Policy
Prospects

Notes
References

 

Abstract:
Two European Union policy instruments are particularly important for local labour-market and employment policy: the European Structural Funds and the European Employment Strategy. This article describes them and how they relate to national policy - especially to local government labour-market and employment policy. A brief survey of future developments follows.

 

The European Structural Funds

 

Principles of Structural Fund Support

About one third of the European Community budget is devoted to promoting regional and labour-market policy in member states in the context of the European Structural Funds. The aim of the funds is to strengthen the "economic and social cohesion" of the European Union (Article 158-162 EC Treaty) (1). As the Community has expanded, five funds have come into being since the 1960s to serve this purpose:

• the European Social Fund (ESF) to promote labour-market policy,
• the European Regional Development Fund (ERDF; "Regional Fund") to support regional policy,
• the European Agricultural Guidance and Guarantee Fund (EAGGF),
• the Financial Instrument for Fisheries Guidance (FIFG), and
• the Cohesion Fund for the promotion of major transport and environmental projects in the peripheral member states Spain, Portugal, Greece, and Ireland.

These European support programmes developed primarily to provide individual member states (or groups of member states) with compensation in the course of Community enlargement (Malek 2002, Müller et al. 2002; 15 f.). With the exception of the Cohesion Fund (which provides support for individual projects directly from Brussels and is not strictly a structural fund), they have become a specific model of common European structural policy since the reform of 1988, despite their original compensatory function. This model sets the basic parameters of support (goals, extent of funding, matters worthy of support, essentials of the implementation system) in regulation form for a stated support period (currently 2000-2006) at the European level. Member states implement the parameters in concrete support programmes and provide concrete support. Structural Fund support is based essentially on five principles (Ziegler 2003: 20-32):

• Programme planning: decisions on support for individual projects are made not in Brussels but in the member states and their regions. However, projects must fit in with medium-term support programmes decided at the start of a support period between the European Commission and the administrative authorities of the member state.
• Partnership: administrative authorities at the European, national, and regional levels are jointly responsible for support. Also involved are "economic and social partners" (including trade unions and employers' associations) - especially in the context of monitoring committees, which meet regularly to discuss and monitor programme implementation.
• Additionality: European support has to be granted over and above national structural spending, it is not merely to replace national support. Structural fund resources also cover only part of the support provided, being supplemented from national (i.e., central government, regional, or local government) co-financing sources.
• Efficiency: the employment of funds from support programmes is subject to ongoing monitoring and evaluation. Monitoring systems with indicators for the implementation of support programmes, evaluation for goal-attainment control and effect analysis as well as financial control are designed to ensure the effectiveness and efficiency of resource utilisation.
• Concentration: support is to be concentrated regionally and substantively. It is granted only in pursuit of specific categories of objective and for specific support regions. In the support period 2000-2006 support is limited to three categories of objective:
  • Objective 1: to promote the development and structural adjustment of regions whose development is lagging behind. 69.7 per cent of structural fund support (from all four funds) is allocated to this end. Regions are eligible for support if their per capita gross domestic product (on a PPP basis) is less than 75 per cent of the Community average. European funding may constitute a maximum of 75 per cent, and in exceptional cases, 85 per cent of total support.
  • Objective 2: to support the economic and social conversion of areas experiencing structural difficulties. They include primarily old industrial areas, disadvantaged rural areas, and deprived urban areas. 11.5 per cent of structural fund allocations (only from ERDF and ESF) are available for this purpose. The share of European funding in total support is limited to 50 per cent.
  • Objective 3: to support the adaptation and modernisation of education, training, and employment policies and systems. This labour-market promotion applies in regions not eligible under Objective 1. In contrast to regional support under Objectives 1 and 2, it is not specific to a region but, in EU terminology, "horizontal." 12.3 per cent of structural fund resources (only from the ESF) is dedicated to this end. The share of European funding in total support is limited to 50 per cent.
  Apart from the three categories of objective, support can be provided in the context of four Community Initiatives (INTERREG, EQUAL, LEADER, URBAN). They are allocated 5.4 per cent of structural fund resources. In addition, 0.5 per cent of structural funds resources is spent on innovative measures.

In the support period 2000-2006, € 195 billion are available from structural funds for the entire European Union.(2) € 29.8 billion (15 per cent) are earmarked for Germany. Most of this money - as table 1 shows - goes to the new federal states (including Berlin), which are all Objective 1 regions.(3) Objective 3 support and funding for Objective 2 regions represent 15 per cent and 12 per cent of the total amount respectively. With Objective 1 and Objective 2 support, some 80 per cent of the structural fund resources allocated to Germany are concentrated in support regions. Some 70 per cent of support goes to East Germany (Objective 1 and parts of Community Initiatives). The European Regional Fund (ERDF) provides a good 50 per cent of funding in Germany, and the European Social Fund (ESF) just under 40 per cent (European Commission 2002a).

 

Structural Fund Support and National Policy

Within the various member states of the European Union, structural fund support differs widely in the contribution it makes to overall structural and labour-market policy. Especially in peripheral member states, structural fund financing far exceeds corresponding national government spending, in Greece and Ireland more than five-fold and in Spain no less than twenty-five-fold. Structural fund principles and arrangements for support accordingly dominate national policy in these countries (Heinelt et al. 2003; Lang 2003b; European Commission 2001: Tab. A33). In Germany, by contrast, structural fund allocations are far lower than national funding, as table 2 shows.

Average annual expenditure for 2001/2002, partly estimated or projected from earlier periods.

Sources: For (1) (2) (3): Table 1; European Commission (2002a); Priewe (2002: 223). for (4): Bundesregierung (2003: 21f., 29); not including investment tax allowances. for (5): BA (2002: 178 f.) (Bundesanstalt für Arbeit expenditure 2001 without payroll, administration, wage compensation benefits). for (6): Reissert (1999: 38) (net expenditure); Schmid/Blancke (2001: 13). for (7): Kommission zur Reform der Gemeindefinanzen (2003: 27).

Given these dimensions, it is not surprising that national support strategies, principles, and arrangements determined the use of European structural funding in Germany for a long period. This is particularly true for Regional Fund allocations: in West Germany from 1975 to 1988, ERDF funding was completely tied to the predominant national regional development instrument, the federal-state joint programme "Improvement of Regional Economic Structure" (GRW). European regional policy thus had no independent profile in Germany, merely supplementing the national budget (determined by the federal and state governments) (Lang 2003a). In East Germany, too, support from the European Regional Development Fund in the first support phase from 1991 to 1993 was initially used entirely to reinforce the GRW joint programme which the Unification Treaty (Article 28) had raised to the level of an (area-wide) regional development instrument in the new federal states. In the hectic phase of German unification, there was neither time nor administrative capacity to establish a separate set of development instruments adapted to the specific problems and demands of East Germany (Voelzkow/Hoppe 1996: 117 f.; Tetsch 1994; Fritsch et al. 1991: 627). In East Germany, too, "the dominance of national over European regional policy" was thus assured for the meanwhile (Lang 2003a).

However, simply using the European Regional Fund to top up funding for the national joint programme met with considerable criticism as long ago as the 1980s and early 1990s. Criticism from academe, professional associations, the European Commission, sections of state government, and from local government stressed that a broad use of the European support spectrum was hindered by close coupling of the Regional Fund to the joint programme. The support strategy of the "Improvement of Regional Economic Structures" programme was (and is) largely investment and mobility oriented, i.e., it concentrates on the relocation and establishment of industrial investment in disadvantaged areas in order to create income and jobs there; support - in keeping with export base theory - is limited to companies serving supraregional markets with their goods and services. The support strategy of the European Regional Fund, in contrast, takes a much broader approach: it is directed not only towards promoting investment but also towards eliminating bottle-necks in regional development through policy instruments in the technology, environmental, urban-development, labour-market, and vocational training fields. It does not identify deficient investment as the main bottleneck in regional development from the outset, leaving it to regional development programmes themselves to define the obstacles to development in the given region, whereupon it reacts with a regionally adapted bundle of structural policy instruments. It relies more strongly on developing the endogenous potential of a region than the national joint programme, and does not make support primarily conditional on the potential for attracting investment from outside the region. It thus avoids some of the counterproductive side effects attributed to the joint programme: the tendency to favour large enterprises and the danger of creating "extended workbenches" (Voelzkow/Hoppe 1996: 111-121; Lang 2003a; Malek 2002; Müller et al. 2002: 18, 23; Schrumpf 2002: 183). Coupling the European Regional Fund with the joint programme had prevented the possible breadth and flexibility of the European support spectrum from being exploited in German regional policy.

After lengthy conflicts between the Federal Ministry of Economics and the economics ministries of certain states, on the one hand, and the European Commission and other state ministries, on the other, the coupling of European Regional Fund allocations with the GRW programme was discontinued in West Germany in 1989 and in East Germany in 1995 (Lang 2003a; Tetsch 1994; Meding/Reissert 1995; Voelzkow/Hoppe 1996: 120). States were given the option of using Regional Fund allocations independently from the joint programme, and proceeded to do so - not only because this made the spectrum of support broader and more flexible but also because they now had to negotiate support conditions only with the European Commission. Under the GRW, in contrast, further negotiations had been required with the federal government and all other state governments (Lang 2003a).

Decoupling from the joint programme diversified ERDF support in the states. State governments now employ European funds for purposes over and above classical investment assistance, above all for technology, environmental, transport, and urban development projects with the aim of promoting regional development. They are utilised primarily in the framework of state development programmes and initiatives, expanded and stabilised by ERDF funds. The implementation of European regional support is therefore no longer the sole responsibility of state economics ministries but also of other state ministries whose areas of responsibility are relevant for regional development (Lang 2003a).

The substantive and institutional conflicts about the linking of European regional support to the joint programme led, however, not only to decoupling of the two instruments but also to a reform of the "Improvement of Regional Economic Structures" programme (Voelzkow/Hoppe 1996: 123-126). The conflicts had demonstrated the shortcomings of an almost exclusively investment and mobility-oriented national regional policy, thus creating a climate for somewhat broadening GRW support strategy. In 1995, the eligibility list for support was extended to include environmental protection, remediation of toxic waste sites in developing industrial land, vocational training and further training facilities, supportive urban development measures, and non-investment measures in small and medium-sized enterprises (e.g., consulting and R&D). Even if this did not fundamentally change the overall programme support strategy, this extended eligibility catalogue can be seen as a "concession to Brussels" and an "opening of the joint programme towards European regional policy" (Voelzkow/Hoppe 1996: 123 f.). The European Regional Fund thus helped open up and flexibilise national regional policy.

As in regional policy, moves towards decoupling, diversifying, and flexibilising labour-market policy are also apparent in relations between the European Social Fund (ESF) and national employment promotion. Until 1989, ESF funds were used exclusively to refinance Federal Institute for Employment (BA) labour-market measures. The European labour-market policy of the ESF thus also had no independent profile in Germany, merely supplementing the national, central-government budget. In 1989 decoupling, diversification, and decentralisation occurred. State governments were included in ESF support and the resources that continued to be expended by the BA were given their own profile.

State governments received 49 per cent of Objective 3 funds, 74 per cent of ESF funds under Objective 1, and all ESF funds under Objective 2 for their own development programmes.(4) They used this money to set up and develop far-reaching state labour-market programmes (especially in East Germany) (Schmid/Blancke 2001: 239-241; Reissert 1999: 49-51). These state labour-market programmes are still relatively modest compared with the BA budget (amounting to only about one tenth of BA spending on active labour-market policy; cf. table 2), but they are markedly innovative, distinguishing them clearly from the labour-market policy pursued by the Federal Institute. Much more strongly than the traditional policy of the Federal Institute (although with substantial differences from state to state), they are preventive (e.g., precautionary training of people still in work), intent on linking labour-market policy with regional structural policy, and on supporting the jobless without sufficient unemployment benefit entitlement - especially social assistance recipients (Schmid/Blancke 2001: 209-241; Reissert 1999; Lang 2003a).

For the portion of ESF funding that continues to be allocated by the Federal Institute for Employment, an independent support programme was created ("AFG plus," later "ESF-BA Programme"), designed to supplement traditional BA employment promotion pursuant to the Labour Promotion Act (AFG) and, since 1998, the Social Code III (SGB III), and to remedy some of the shortcomings and deficiencies of this system. It permits, firstly, support for unemployed persons who, because they lack unemployment insurance entitlement, have no access to certain BA support (especially the "ESF maintenance allowance" for further vocational training), and, secondly, participation in support modules lacking among the tools of established BA support (including seminars and coaching for unemployed people setting up in business, training measures for people on short time (Deeke et al. 2002; Deeke/Schuler 2003).

Support from the European Social Fund has thus also been freed from the strong ties with established national labour promotion. Above all, it has broken through the limits set by national, central government employment promotion through its specific financing system. Federal Institute for Employment support is financed by unemployment insurance contributions. It is therefore financially, legally, and organisationally part of social security and obeys the logic of social security, which offers protection against social risks to individuals who have become members of a community of insured persons through gainful employment liable to social insurance and by paying contributions, and - in keeping with the equivalence principle - have acquired a property-like entitlement to benefits on occurrence of the insured contingency. This insurance logic means that national employment promotion concentrates on contribution payers who have become unemployed, making it more difficult for risk groups without prior stable working careers to access labour-market benefits. It is also in keeping with the insurance logic that national employment promotion is conceived as strictly individual support, making it difficult or impossible to take preventive or primarily structural policy approaches such as company support, group or project support, or joint ventures through regional structural policy measures (Schmid et al. 1987). Via both state government labour-market programmes and the "ESF-BA Programme," the European Social Fund has overcome the limits set by insurance logic. It has made a decisive contribution to extended labour-market policy to include unemployed individuals without insurance entitlements (not least of all unemployed recipients of social assistance), to preventive measures, and to dovetailing with regional labour-market policy, and has thus diversified and flexibilised labour-market policy overall (Schmid/Blancke 2001: 240).

As in regional policy, the innovations triggered by structural fund support and implemented mainly at the state level have ultimately led to reforms at the national level. Since 1998, various amendments to SGB III (especially the Job-AQTIV Act in late 2001) have included innovations first introduced at the state level with ESF support, thus transferring them to regular national support. Noteworthy are access to further educational support for older employees still in work, and job rotation models under which employees in further education are replaced by unemployed substitutes (Sections 235c, 229-233 SGB III), the promotion of transfer social plans to avoid unemployment in the event of dismissal (Sections 254-259 SGB III), the placement-oriented hiring-out of labour (Section 37c SGB III: personal service agencies), and the inclusion of the unemployed without insurance entitlements in national employment promotion in the process of merging unemployment assistance and social assistance (Kommission zur Reform der Gemeindefinanzen 2003). European structural support has thus stimulated innovation in national labour-market policy.

 

Structural Fund Support and Local Government Labour-Market and Employment Policy

Complete information is hard to come by on how much money from European structural funds actually arrives at the local level and is used by local authorities for labour-market and employment policy purposes. Although the utilisation of structural funds resources is subject to far-reaching monitoring and assessment, monitoring and evaluation generally concentrate on individual development programmes; overarching assessments are rare. Despite the unsatisfactory data situation, however, the importance of the structural funds for local labour-market and employment policy is evident. Institutional and substantive effects can be distinguished.

From an institutional point of view, structural fund support has without doubt helped strengthen local labour-market and employment policy. In the course of decoupling from the prevailing central-government instruments - the "Improvement of Regional Economic Structures" joint programme and Federal Institute for Employment job promotion - the utilisation of structural fund support has been considerably decentralised since the beginning of the 1990s. Structural funding is now allocated primarily through state government programmes directed at the labour market, technology, the environment, transport, and urban development, whose addressees and recipients are very often local authorities. The structural funds have thus substantially broadened the range of resources available to local government for policy areas relevant to employment, and have brought these resources closer to local authorities. State governments have been the prime beneficiaries of decentralised structural fund support, which had been pursued by the European Commission as a conscious strategy for strengthening regional and local policy (Hooghe/Marks 2001), but local government has benefited indirectly, as well. In other countries, however, the reinforcement of the local level by the decentralised allocation of structural funding has gone much farther than in Germany. In some other EU member states, structural funding is allocated to local government not only - as in Germany - under various, closely ring-fenced government development programmes, but also in the form of broad, earmarked funding permitting the flexible and integrated promotion of regional and local development concepts on the spot - for example, under the British local action plans, the Irish partnership companies, and the Swedish regional growth agreements. This broad earmarking of structural funding naturally strengthens the role of local authorities (Heinelt et al. 2003; Lang 2003b).

In Germany the substantive significance of structural fund support appears to be more important for local authorities than the effects of formal decentralisation. Dissociation from the dominant central-government instruments of regional and labour-market policy has diversified structural fund support and extended it to policy areas of considerably greater importance for local labour-market and employment policy than traditional regional policy and traditional employment promotion. Local employment policy cannot depend primarily on attracting outside investment. It must, above all, develop a region's endogenous potential and conserve assets, as well as coordinating a wide range of departmental policies and actors (cf. Schulze-Böing in this issue). Since decoupling and diversification, structural funding has fostered this approach through broad support for technology, environmental, urban-development, labour-market, and educational projects and through the demand for regional and local development concepts that define obstacles to development and react with a regionally appropriate bundle of structural policy instruments. Owing to its responsibility for existing jobs and for social assistance recipients, local labour-market policy cannot (unlike the Federal Institute for Employment) concentrate on supporting the jobless with unemployment insurance entitlements. It must work to avoid unemployment through preventive measures and to help the unentitled jobless. Structural funding also supports these approaches by fostering preventive labour-market policy and aiding the unentitled. The largely ESF-financed programmes pursued in all federal states for training and employing jobless recipients of social assistance at the local level are only one example (Schmid/Blancke 2001: 209-241).

 

European Employment Strategy

 

The Luxembourg Process and the Method of Open Coordination

Until well into the 1990s, the structural funds were the only important policy instrument with which the European Union could intervene in the labour-market policy of member states and their regions. On the initiative of the French government under Socialist prime minister Jospin, who had advocated a European employment policy to counterbalance the convergence criteria for monetary union, the heads of state and government of the member states decided in 1997 to add a chapter to the EC Treaty requiring the Union to develop a common, coordinated employment strategy and to improve the labour-market and employment policies of member states through benchmarking (Articles 125-130 TEC). The core of the new chapter is Article 128 TEC, which prescribes the following process:

• The Council and Commission are to prepare an annual common report on the employment situation and employment policy in the Union.
• The European Council is to examine the report and draw conclusions on the basis of their examination.
• On the basis of the conclusions and on the proposal of the Commission, the Council of Ministers is to lay down annual guidelines for the labour-market and employment policy of member states each year.
• Each member state submits an annual report (National Action Plan, NAP) to the Council and the Commission "on the most important measures that it has taken to implement its employment policy in the light of the employment policy guidelines."
• On the basis of the reports, the Council of Ministers (with the preparatory aid of an employment committee comprising top civil servants from all member states and the Commission) "examines the implementation of the employment policy of the Member States in the light of the employment policy guidelines;" on the recommendation of the Commission, acting by a qualified majority, it addresses "recommendations to the Member States if it considers this to be appropriate on the basis of the results of this examination."
• On the basis of the results of this examination, the Council and the Commission prepare the next annual joint report on the employment situation and on "implementation of the employment policy guidelines," which initiates a new round in the process.

At first glance, this annual process of monitoring and assessing labour-market and employment policy in the member states through EU benchmarking seemed to many critics to be a bureaucratic monster producing Europe-wide action for its own sake, which, given the lack of sanctions, would change nothing in the policy of the member states (Dinan 1999: 404). Initially, this process did, indeed, produce mostly paper. In November 1997, still prior to ratification of the amendment to the EC Treaty, the heads of state and government meeting in Council at Luxembourg, launched the process (since known as the Luxembourg Process) by setting the first goals and guidelines for labour-market and employment policy in member states against which it was to be measured European Commission 2002b: 6). The guidelines were grouped in four pillars:

• Employability: development and maintenance of qualifications and competences
• Entrepreneurship: promotion of business start-ups and employment in the service sector
• Adaptability: Flexible jobs and working-time arrangements with social security protection
• Equality (of women and men in the labour market).

These core elements laid down in Luxembourg were retained in the guidelines of following years. The process having gone through five rounds since 1997, certain material political consequences became apparent. At the European level, experts and the Commission judged that in some areas the Luxembourg Process had brought opposing sides closer together in problem perception, goal definition, and solution strategies, thus setting off a process of policy learning (Trubek/Trubek 2003; Radelli 2003; Scharpf 2002; European Commission 2002b). The public exchange of information, the measurement of policy outcomes against common goal criteria and indicators (benchmarking), the evaluation of national policies by experts from other member states in the Employment Committee (peer review), and the risk that failure to attain goals and the recommendations of the Commission could be used by the opposition against the government in the national political discourse have, at least in some areas of labour-market policy, generated "stress of convergence" (European Commission 2002b) to which national governments cannot remain entirely indifferent. This pressure for convergence has been fostered by the fact that key elements in the guidelines have also been taken as allocation criteria for ESF funding, thus obliging the allocating institutions and final beneficiaries to take them into account. At the Lisbon summit in 2000, the European Council judged the Luxembourg Process to be so successful despite the lack of sanctions that it extended its method of comparative monitoring and evaluation of national policies - now termed "method of open coordination" - without a basis in the treaty to other policy areas in which the EU has no "hard" control competencies (including poverty reduction, innovation, pensions, and tax policy) (Radaelli 2003; Trubek/Trubek 2003).

In Germany, first studies indicate that, although the Luxembourg Process has not triggered reform in labour-market policy, it has substantially encouraged it (Büchs/Friedrich 2003). This is particularly true for the reform of employment promotion, which in the context of the Job-AQTIV Act in late 2001 greatly strengthened preventive elements of employment promotion (see above), including the provision of access to further education support for older employees still in work and the timely avoidance of chronic unemployment through profiling and integration agreements (Büchs/Friedrich 2003: 17-20; European Commission 2002b: 28).

 

Importance for Local Labour-Market and Employment Policy

Although the policy learning intrinsic to the Luxembourg Process requires a high degree of openness and broad participation, local authorities have so far been only marginally involved (through the associations of local governments) in the discussions about national action plans and the compatibility of national labour-market policy with European guidelines (Büchs/Friedrich 2003: 7, 10 f.). Nevertheless, the Luxembourg Process - like and in conjunction with the European Social Fund - has, by strengthening preventive elements, fostered the diversification and broadening of overall German labour-market policy, very much in the interest of local authorities (see above). For local authorities, the avoidance of unemployment and long-term joblessness is particularly important owing to their responsibility for asset conservation and social assistance. The European Employment Strategy has thus proved an ally in local labour-market and employment policy even without noteworthy local government participation.

 

Prospects

At least three European developments are likely to influence the framework conditions for local labour-market and employment policy: the revision of the European structural funds planned for 2006, the eastward enlargement of the European Union in May 2004, and the adoption of a European constitution.(5) Of these, the European constitution, which will supersede the founding treaties, is likely to have least impact. The current draft does not provide for any essential changes in the constitutional basis for structural funds or for the benchmarking process in labour-market and employment policy (European Convention 2003).

More important will be the revision of the structural funds and the enlargement of the Union. In contrast to most national policies, European structural fund rules apply only for a given programme period. Every six or seven years the goals, funding, purposes, support areas, and implementation modalities of the structural funds have to be decided anew at the European level. The current support period runs out at the end of 2006; by then the rules for the next programme period have to be drawn up. Structural funds arrangements also have to take account of EU enlargement to include ten new member states (Eltges 2003). In view of the prosperity gap at the old eastern border of the Union, it will lead to a considerable increase in national and regional prosperity disparities within the EU while lowering mean per capita gross domestic product in the Union. The European Commission (2003: Tab. 4, 6) puts the ratio of per capita gross domestic product (GDP) between the "wealthiest" and the "poorest" decile of regions (6) in the old Union (EU 15) at 2.6, in the enlarged Union of 2004 (EU 25) at 4.4, and in a still further enlarged Union in 2007 (including Bulgaria and Romania) (EU 27), at 6.0. According to the same calculations, the number of regions whose per capita GDP is under 75 per cent of the Union mean (the Objective 1 criterion) will grow from 48 (EU 15) to 67 (EU 25); of the 48 regions within the old member states that are currently below the stated threshold value, the number would be only 30 after enlargement because the Union mean will have been reduced ("statistical effect"); 18 regions will then be over the threshold value even if there are no changes in their economic situation, since a per capita GDP of 75 per cent of the Union mean in the EU 15 corresponds after enlargement to 83 per cent of the Union mean in EU 25 (Eltges 2003: 14).

These data show how problematic the changes will be for structural support in Germany, too. According to these Commission calculations, almost all East German Objective 1 regions would be ineligible for standard support from 2007 onwards because of the statistical effect alone (and could at best receive transitional support) if the current 75 per cent criterion for Objective 1 areas is retained in the EU of the 25 (European Commission 2003: Tab. 12) (7). It is uncertain whether the results of these calculations will still be valid in 2006/2007 on an updated basis, since the development of the East Germany economy has persistently lagged behind the national and Union average since 1997 (Priewe 2002: 27-34) (8). In any case Germany will lose a considerable proportion of its European support, since there is far-reaching consensus that European cohesion policy will have to concentrate on the central and eastern European accession countries owing to the prosperity gap.

Given the function of European structural funding as an innovation motor for national labour-market policy, which is of particular benefit for local authorities, and the foreseeable, considerable cuts in Objective 1 support in East Germany, it is in the interest of local authorities to preserve the current EU-wide, labour-market policy Objective 3 support when structural funding is revised. In the light of foreign models (see above), they should also insist on European and national arrangements that permit the flexible and integrated promotion of regional and local development concepts more easily than before - on the model, for example, of the British local action plans, the Irish partnership companies, or the Swedish regional growth agreements (Heinelt et al. 2003; Lang 2003b; Ziegler 2003: 18, 38 f.).

 

Notes

(1) Treaty Establishing the European Community (TEC) (back)

(2) In 1999 prices. (back)

(3) East Berlin is to be supported as an Objective 1 area only for a transitional period up to 2006. (back)

(4) In addition, state governments received all ESF funds under the since abolished Objective 5b. (back)

(5) At the national level, the effects of combining unemployment assistance with social assistance should be added, which cannot, however, be dealt with here (cf. Kommission zur Reform der Gemeindefinanzen 2003). (back)

(6) Figures as per 2000. (back)

(7) Only the administrative districts Dessau (Saxony-Anhalt)and Chemnitz (Saxony) will still be under the 75 per cent mark according to these calculations. (back)

(8) Cf. the estimates by Eltges (2003: 14): "Because of the unfavourable development in the regions of the new federal states compared with the rest of Europe, there is much to suggest that many regions there will retain their Objective 1 status. Massive cut-backs in support would tend not to occur. Moreover, transitional arrangements are likely to cushion a loss of the highest support priority." (back)

 

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