Quality instead of quantity

22.02.2012 - Interview

Foreign Minister Guido Westerwelle calls for revamping of European regional development funding

Foreign Minister Guido Westerwelle calls for revamping of European regional development funding. Published in the Financial Times Deutschland, 22.02.2012

How can we help Europe’s troubled economies return to a growth path? Right now in Greece this is a question crying out for an answer. But it is a pressing issue also in all other countries struggling with the sovereign debt crisis. Coming up with a convincing answer to this question will decide more than whether or not Europe’s economies prosper. The cohesion of our societies, the stability of our democracies, the future of the European project – the risks if we fail to revive growth in Europe are immense.

Reviving growth requires budget consolidation and structural reforms, but these in themselves are not enough. Do we need in addition a new Marshall Plan or a gigantic fiscal stimulus package? Yet how is that kind of money to be raised? By yet more borrowing perhaps, despite the binding rules we have just agreed to strengthen budget discipline in Europe? That would be irresponsible.

We need not look far for the answer. The European Union has nearly 50 billion euro a year in its coffers destined for investment in regional development. Greece and Portugal alone are each entitled to withdraw 3 billion euro for this purpose every year. So clearly there is money available. In the current debt crisis, however, it is unfortunately not always spent on the most urgent priorities. That is the reason why even in Greece some people view European subsidies not as the answer but as one of the causes of the Greek economy’s problems. These have resulted, they feel, in too much being spent on consumption rather than invested in technologies that are competitive.

Long-term subsidies can certainly have unhealthy consequences. And in some parts of the EU, despite decades of intensive support, regional development funding has clearly failed to achieve its true purpose – namely, to reduce development disparities across Europe.

That such efforts can also bear fruit is evident from the success stories we have seen in Poland, for example, or regions that were once part of the GDR. Yet we Germans have no call to point fingers at others. In Germany, too, a fair number of exotic blooms have flourished thanks to sometimes overgenerous support from European funds. Or would anyone seriously claim that funding public gardens, wellness oases in romantic hotels or optimal signposting of cycle routes has anything to do with boosting competitiveness and growth?

We can simply not afford, in the light of the debt crisis, to carry on with business as usual. Regional development funding accounts for over a third of the EU budget. Everything possible must be done to ensure this taxpayers’ money is spent more responsibly than in the past.

Europe urgently needs to revamp its regional development funding. The leitmotiv of a new European structural policy must be “better spending”. What we need is the following:

Clear-cut criteria: Clear-cut criteria need to be agreed at European level to determine what is eligible for funding and what is not. The money must clearly be invested in boosting growth, employment and competitiveness.

When it comes to applying such criteria in practice, member states and the European Commission must cooperate more closely in order to identify each economy’s specific needs and ensure support is optimally tailored to match. This may mean one country concentrating on reducing youth unemployment, another on loans for small and medium-sized enterprises and yet another on infrastructure development. The important thing is to ensure that project funding is governed not by domestic interests, as was too often the case in the past, but by common European objectives. Decisions on how European taxpayers’ money should be spent must therefore not be left up to the recipient country alone.

Greater flexibility in implementation: Agreed funding priorities should not be viewed as immutable. Under current rules, member states define their funding priorities for seven years ahead. That is far too long. In future member states should therefore agree with the Commission at the start of a programming period a set of objective, quantifiable and binding indicators. Subsequently, regular and wherever possible independent evaluations should be carried out to determine whether the agreed targets need to be adjusted and/or whether they have actually been met. If the targets have not been met, it must also be possible to stop further payments and spend the money instead on new and more promising projects.

Assistance for crisis countries: Our top short-term goal, also where regional development is concerned, must be to give active assistance to countries hit by the debt crisis. In this connection important steps have already been taken. For such projects to qualify for European funding, only a small contribution is now required from member states benefiting from crisis assistance programmes. In Greece the Task Force is helping to ensure EU money is disbursed quickly and in a more targeted fashion. The Commission is working with Italy to gear funding priorities to the most pressing challenges. In future more such initiatives are needed. But most importantly, we need – especially in the crisis countries – greater flexibility when it comes to reprogramming funding with a view to boosting competitiveness.

This year we are negotiating on the European Union’s next seven-year financial cycle, the framework, namely, for EU spending over the period 2014‑2020. Here, too, our key demand is not more, but better spending. If we cannot make a real quantum leap here under the pressure of the debt crisis, when will we ever do so? So it is time now to make a start.

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