Structural and cohesion funds : background and some issues

The European Regional Development Fund (ERDF), the European Social Fund (ESF), and the guidance element of the European Guidance and Guarantee Fund (EAGGF) associated with the Common Agricultural Policy (CAP) constitute the Structural Funds of the European Community. Each of these Funds was begun separately and was designed to meet particular needs. For example, the Regional Fund was originally designed to mitigate the effect on regions of the Community of existing inequalities by region, adverse effects resulting from the operation of the Rome Treaty, and a natural tendency to centralisation and the effects this has on the periphery, while the Guidance section of the European Guidance and Guarantee Fund was focused on structural improvement in farming. The Act establishing the Single Market (the Single European Act) required that these funds be reorganised to become more effective. The 1988 Community budget settlement agreed that the ERDF and the ESF should increase, with the level of spending in 1993 double that of 1987, and with a concentration of spending in poorer regions. This was taken further in 1989 when Heads of State and Government, taking not only the ERDF and ESF but the EAGGF (Guidance Section) and the European Investment Bank (EIB), established the Community Support Framework (CSF) - namely the set of reorganised Structural Funds, designed, as the name implies, to support development in areas whose own resources were inadequate to reduce inequalities between regions within the EC. The issue of inequalities between regions and countries within the EC has been the subject of much theoretical debate - Krugman's annexe in the Padoa-Schioppa report remains the clearest statement of the issues. There has been much less discussion of the numbers and what lies behind them.