Improving the Synergies between the Structural Funds and the ...

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Improving the Synergies between the Structural Funds and the ...

Improving the Synergies between the Structural

Funds and the Lisbon Strategy

Speech at the UK EU Presidency Conference on Regional and Rural Development

Programmes “Delivering the Lisbon and Göteborg Agendas”, Newcastle 7 - 8

November 2005

Jens Henrik Haahr

Senior Consultant, Ph.D.

Danish Technological Institute

jens.henrik.haahr@teknologisk.dk

www.jens-henrik-haahr.dk

In the year 2000, the heads of state and government of the European Union proposed a bold

new strategy for re-invigorating economic and social development in Europe.

The Lisbon Strategy was greeted with reluctance at the time. The experiences with previous

attempts at ambitous reform agendas in the Union did not encourage too much optimism.

Many would claim that the sceptics have been proven right. The European Union has not

managed to reverse trends and increase growth during the past 5 years. Employment rates

and indicators on innovation and entrepreneurship remain stuck at less than encouraging

levels.

Yet the Lisbon Strategy, with all its flaws, continue to be the most coherent and comprehensive

statement of a European political consensus that we have witnessed.

The objectives are broad and there are tensions within them. Can we promote growth and

environmental sustainability at the same time Will structural reform endanger social

inclusion Nevertheless, the strategy defines a number of priority areas for investment and

economic development, and it specifies the areas in which significant reforms are required. It

also establishes a system of voluntary co-operation, the Open Method of Coordination, in

which the Member States can co-operate in a systematic way in a large number of new

policy areas.

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18 months ago, the Danish Technological Institute was contracted by the European

Commission to investigate the process of implementing the Lisbon Strategy, and to shed

light on the ways in which the Union’s Structural Funds have contributed and can contribute

to achieving the Lisbon Goals. Our objective was to formulate recommendations on ways in

which complementarities between the Funds and the Strategy can be better exploited.

Our approach to this task had several elements.

• We investigated the status and significance of the Lisbon Strategy in 11 Member States.

• We analysed the activities and results of the Structural Funds in these states, and the

interaction with the Lisbon Strategy and its objectives.

• Finally, we analysed the economic and political rationales of the Strategy and the

Structural Funds, highlighting potentials for synergy as well as conflicts and tensions

between the two approaches.

Our findings remain valid today, I believe.

Let us first be clear about the Lisbon Strategy: If anyone had believed that the strategy serves

as a very salient and direct policy guideline in the Member States, our analysis proves them

wrong.

This does not mean that the Strategy is insigificant, but its influence is indirect. As one high

level civil servant put it “Lisbon is like a road that everyone wants to be on. You may want

to be on the left or the right side of the road, but no one wants to leave it altogether. It

defines good manners for European policy making”.

Second, the relation between the Lisbon Strategy and the Structural Funds today reflects that

the overall objectives of the two approaches are in many ways congruent. Both the Lisbon

Strategy and the Structural Funds aim for higher growth and lower unemployment on the

basis of a concern environmental sustainability, to mention the most important areas of

congruence.

Having analysed Structural Fund expenditure patterns, we concluded that in many regions,

more than 50% of the Structural Funds’ expenditure can be said to be aimed directly at

important objectives in the Lisbon Strategy, with expenditure in Objective 2 regions being

more in line with the Lisbon Strategy than expenditure in Objective 1 regions. We conclude

that the differences in the degree to which Structural Fund expenditure is in line with the

Lisbon objectives reflects different investment needs in Objective 1 and Objective 2 regions.

The Lisbon Strategy is primarily a strategy for increased economic growth. The question on

how to improve the complementarities between the Strategy and the Funds is therefore at the

core a question of how to strengthen the growth contribution of the Structural Funds.

At the same time, it must be recognized that the cohesion principle remains a firm foundation

for the Structural Funds also in the future: The Funds must continue to seek to reduce the

regional disparities within the EU.

I want to address two overall ways in which the Structural Funds may, in the coming

programming period, increase their contribution to the Lisbon objectives and economic

growth.

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• First is the strategy of promoting the implementation of the Lisbon Agenda with a

specific Structural Fund programme.

• Second is the strategy of increasing the focus on aggregate growth effects in Structural

Fund support.

In our analysis, several other relevant options are considered, but I will not go into these

here. The entire report is still available on the web-site of the European Commission’s DG

Regio, should you be interested.

First the strategy of devoting a Structural Fund programme specifically to the main priorities

of the Lisbon Strategy. This is what appears to have happened with the proposal for the new

Competetiveness and Employment Objective, which is to be launched in 2007, replacing the

present Objective 2 programme.

We highlight a number of important pre-conditions which must be fulfilled, if this approach

is to succeed.

• Our analysis concludes, that if it is the intention of the Competitiveness Objective to

enhance the competitiveness of supported regions, a clear concentration of financial

resources on selected regions is necessary. Otherwise, the impact on competitiveness is

likely to be of limited relevance in the regional and national contexts, considering the

relatively modest resources which are likely to be available for the Objective.

• Second, if the goal of the programme is to stimulate a stronger strategic orientation in the

Member States in relation to the overall Lisbon Agenda, considerable efforts are

necessary to make this happen. We recommend that a direct linkage to national policies

and programmes should be included in the Competitiveness Objective in each Member

State, that the financial resources of the Competitiveness Objective should be

concentrated in selected regions and/ or on a few set of clearly identified themes. Finally,

we recommend that the Member States should make clear commitments to ensure

multiplication and mainstreaming of results and experiences from the Programme.

To sum up, if the Member States want to make efficient use of the new Competitiveness and

Employment Objective, they should concentrate the use of its resources, and they should

integrate the programme with national policy making and national efforts at reform and

development.

The second overall option that I want to address is the strategy of increasing the focus on

aggregate growth effects in Structural Fund support.

The recommendations we put forward in this respect pertain to all three future Objectives in

the Structural Funds, i.e. the Competitiveness and Employment programme, the

Convergence programme and the Territorial Co-operation programme.

• First of all, if the Lisbon Strategy is to be taken seriously in future Structural Fund

programmes, more emphasis should be placed on the growth objectives of Structural

Fund support in the programming process. We need to be clear about the most pressing

problem that Europe is currently facing, and this problem is the problem of too low

economic growth. This should be emphasised more strongly when operational

programmes are being developed in the Member States.

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• Second, a stronger emphasis needs to be placed on R&D and Innovation in the coming

programming period. There is solid empirical evidence that the social rates of return on

these types of investment are generally very high. Attention should be increased to these

fields, on a flexible basis and taking local and regional circumstances into account.

• Third, stricter limits should be introduced for support to individual enterprises above the

SME threshold. Support of this kind generally leads to distortion of competition rather

than to higher aggregate growth. Support to individual enterprises should be limited.

• Fourth, we recommend more solid assessments of costs and benefits of Structural Fund

investment. Clearer guidelines should be introduced for ensuring that projects with the

highest social rate of return or the lowest cost/benefit ratio are prioritised.

• Where relevant, the Structural Fund programmes should furthermore increase their

systematic support for the development of basic institutions that are a necessary for

economic growth. Such measures may frequently be measures for improving the

efficiency and reliability of public administration at central and regional levels, in

particular as regards business-related public administration services and business

regulation.

• The final recommendation I want to highlight is the need to facilitate risk taking and

innovation in Structural Fund measures. Our analysis found evidence of tensions between

innovation and existing financial control routines. New ways of operation need to be

found which allow entrepreneurs and other relevant actors to be innovative and take

risks, even when operating on the basis of Structural Fund support.

I wish to conclude by stating my hope that the Structural Funds will be used efficiently in the

coming years to further the objectives of the Lisbon Strategy.

Policy makers in the Member States should take up the opportunities offered by the

instruments of the Structural Funds and the vision of the Lisbon Strategy.

Making the two play together could inspire confidence that Europe is alive and kicking. But

making the two play together also requires determination and courage. The Structural Funds

offer pleasant possibilities of doing popular things. Why not also use it as a lever for reforms

that may hurt in the short term but benefit our societies in the long term

Thank you for your attention.

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