Regional funding at stake as EU states battle over budget

So far, so very EU long-term budget. But the current economic crisis means talks on the next budget (2014-2020) are tougher than usual.

There is less money to go around and richer states are feeling the pinch.

"This is going to be an extremely important budget because Europe desperately needs growth and jobs," says Danuta Huebner, head of the parliament's regional affairs committee.

"In the current reality, when the national budgets will continue to suffer cuts, it is the EU budget that can really be the catalyzer for investment and growth," she adds.

But it is just in the policy that is meant to boost growth – Cohesion Policy – where the hardest battle is being fought.

The European Commission last year suggested a total seven-year EU budget of €1.025 trillion, €336bn was to be for Cohesion Policy.

The policy, which includes the European Development Fund, the European Social Fund and the Cohesion Fund, took a hit of €18 billion compared to the current 2007-2013 budget. A further €5.5 billion was chopped this year. And bickering among member states means a third cut is likely.

This is short-sighted, believes Huebner.

"This is really the investment policy and the growth policy," she notes.

"One of the values of regional policy is that it takes into the specificities of European territory. We have places in Europe where to become competitive and to grow you still need the basic investment in infrastructure.

"No investor would go to a city or a region that has no connection with the rest of Europe. There is still a huge part of Europe that require investment infrastructure."

At the budget negotiation level, member states are divided into two broad camps.

The first camp – including Germany, Finland and the Netherlands – say their own citizens are feeling the effects of budget cuts and a large EU budget is not justifiable.

The second – broadly poorer eastern European states – say that argument does not take into account the leverage effect of EU aid money and that the cuts already made are enough. The two sides are about €100 billion apart.

"It is the first group for sure that have the better argument," said Marco Lopriore, a regional policy expert at the European Institute of Public Administration

"We are in a time of economic recession. We need to bring results to the European parliament and European citizens."

The backdrop to the rich states' argument is not only the austerity cuts sweeping Europe but also poor past records of spending EU money. Millions of euros flowed to Greece, Italy and Spain over past decades with little of use to show for them.

Meanwhile, academics note that the entire debate is based on fuzzy grounds.

"The problem regarding cohesion policy is that there are very few instruments to measure the impact of the investment," said Claire Dheret of the European Policy Centre, a Brussels-based thinktank.

The European Commission has conducted "a lot of studies on the achievements of cohesion policy but there are many economists who don't agree with the model used to assess its impact."

But, says Huebner, it is all too easy just to criticise.

Referring to her native Poland, an EU member since 2004, she said: "It is a different country now. That's all thanks to European contributions, the transfer of funds."

"I often hear criticism - well there was a pizzeria financed in one of the regions - but this pizzeria is a small enterprise which gives jobs, creating the first ever restaurant in the village. This gives a lot of value."

And the parliament may turn out to be the regions' ally in the budget negotiations.

Last year MEPs suggested a five percent increase for 2014-2020 budget.

"There is a risk that if the budget is below the expectations of the European Parliament, then we will veto it," says the Polish deputy.

This story was originally published in EUobserver's 2012 Regions & Cities Magazine.

Click here to read previous editions of our Regions & Cities Magazine.