Regional policy of the European Union

Konstantin Cherkozov 12114169Stefan Atanasov 12114063

Table of content What is regional policy?3

History and achievements of the Regional policy4

Overview of the funds 5

Principles of the policy6

The investment process7

Preconditions for effective investment8

Targeting EU investment on smart, green growth for all9

Regional policy and the economic crisis10

The EU Regional policy in Bulgaria11Regional Development Programmes in Bulgariafor the budget period 2007-201313EU structural and investment funds in Bulgariafor the 2014-2020 budget period17

Conclusion18

References19

What is Regional policy?The Regional policy of the European Union (EU), is a policy with the aim of improving the economic well-being of regions in the EU and also avoiding regional disparities. As Johannes Hahn, the European Commissioner for regional policy, said:Regional policy is a strategic investment policy targeting all EU regions and cities in order to boost their economic growth and improve peoples quality of life. It is also an expression of solidarity, focusing support on the less developed regionsMore than one third of the EU's budget of the EU budget for 201420 (351.8 billion out of a total 1 082 trillion) is devoted to this policy making it the Union`s main investment tool. These fund are mainly used to finance strategic transport and communication infrastructures, to favour a transition to a more environmentally friendly economy, to support small and mediumsized enterprises (SMEs) in becoming more innovative and more competitive, to create new and lasting job opportunities, to reinforce and modernise education systems and to build a more inclusive society. The regional policy is also an expression of solidarity as it implies investments in the European Union`s least developed regions. It helps these regions to fulfil their economic potential, in the light of regional disparities both across the EU and within member countries.

History and achievements of the Regional policyHere are some of the most important historical events in the development of the regional policy: 1957 Regional policy was fist mentioned in the Treaty of Rome 1958 The European Social Fund (ESF) was created 1975 The European Regional Development Fund was created 1993 The Maastricht Treaty introduces the Cohesion Fund, the Committee of the Regions and the principle of subsidiarity 1994-99 Doubling of the resources for regional funds, now equal to a third of the EU budget. 2014-20 Budget: 351.8 billion, with a particular focus on four key investment priorities: research and innovation, the digital agenda, support for SMEs and the low-carbon economy. Around 100 billion will be dedicated to these sectors, of which 26.7 billion will support the shift to a lowcarbon economy (energy efficiency and renewable energies).Throughout the years the European funds` resources have been efficiently used and have improved the quality of life of EU`s citizens. For example, between 2007 and 2012 Regional policy has achieved many of its goals. They were created 594 000 jobs in different companies. The EU has subsidized directly 198 000 SMEs and supported more than 77 000 start-up companies. By its R&D policies 61 000 research projects have been funded.

The Regional policy accounts for financing the construction of 1 208 km of roads and 1495 km of rail to help establish an efficient trans-European transport network (TEN-T).

Overview of the fundsThe European Regional Development Fund (ERDF) and the European Social Fund (ESF) are known as the Structural Funds as they are designed to invest in economic and social restructuring across the EU and thereby reduce gaps in development between European regions, for example in terms of infrastructure and employment. Together with the Cohesion Fund, the European Agricultural Fund for Rural Development (EAFRD) and the European Maritime and Fisheries Fund (EMFF), they make up the European structural and investment funds (ESIFs). Each of the funds contributes to fulfilling the goals in its own way. For example -while the Cohesion fund invests mainly in transport networks, the EARDF aims at supporting the agriculture sector, the EMFF promotes sustainable fisheries and aquaculture. The European Union Solidarity Fund which was set up at 2002 is also an important investment arm with its budged if more than 500 million. When established, its main aim was to support the countries damaged severely by floods and other natural disasters. Some of its merits include the clean-up operations after the disasters, the renovation of the damaged infrastructure and providing accommodation to people whose homes were devastated.The Cohesion Fund invests in climate change adaptation and risk prevention, the water and waste sectors and the urban environment. It can also support projects related to energy efficiency and the use of renewable energy in companies and public infrastructures. Part of its program is to finance core transport and under the new Connecting Europe Facility, an investing in broadband infrastructure and online public services as well as infrastructure for roads, railways, electricity grids and gas pipelines. Better interconnections will enhance business opportunities and energy security whilst making work and travel easier, therefore benefiting businesses and citizens alike right across the EU.

Principles of the policyThe Regional policies are not chaotically applied by the EU. They have strict principles which describe the procedure, priorities, control and execution of the investment processes. The concentration principles Concentration of resources: the greater part of structural fund resources is concentrated on the poorest regions and countries. Concentration of effort: Targeting Investments on Key Growth Priorities: Research and Innovation, Information and Communication Technologies (ICT), enhancing the competitiveness of small and medium-sized enterprises (SMEs), supporting the shift towards a low-carbon economy. Concentration of spending: at the beginning of each programming period, annual funding is allocated to each programme. These funds must be spent by the end of the second year after their allocation The partnership principle implies that each programme is developed through a collective process involving authorities at European, regional and local level, social partners and organisations from civil society. This partnership applies to all stages of the programming process, from design, through management and implementation to monitoring and evaluation. This approach help ensure that action is adapted to local and regional needs and priorities. Additionality principles - Financing from the European structural funds may not replace national spending by a member country. The Commission agrees with each country upon the level of eligible public (or equivalent) spending to be maintained throughout the programming period. The objective is to set realistic but ambitious targets for structural public spending to ensure that contribution of the structural funds really does add value. As a rule, average annual spending in real terms should not be less than in the previous programming period. Programming - Cohesion policy does not fund individual projects. Instead, it funds multi-annual national programmes aligned on EU objectives and priorities.

The investment processEU regional policy is carried out by national and regional bodies in partnership with the European Commission, a system known as shared management. Unlike annual national budgets, the regional policy budget is set for seven years, making it inherently reliable and a valuable resource for private investment to draw upon. There are three main stages in the investment process: The budget and rules for its use are jointly decided by the European Parliament and the EU Council of Ministers (which brings together national ministers at the European level), on the basis of a Commission proposal. The Commission works with the EU countries as they draw up partnership agreements outlining their investment priorities and development needs. They also present draft operational programmes (OPs) breaking down the objectives into concrete areas for action. These can cover entire countries and/or regions and can include cooperation programmes involving more than one country. The Commission negotiates with the national authorities on the final content of these investment plans. All levels of governance, including civil society, should be consulted and involved in the programming and management of the OPs. The programmes are then carried out by the countries and their regions. That means selecting, monitoring and evaluating hundreds of thousands of projects. The work is organised by managing authorities in each country and/or region. An audit authority must be designated for each OP. This authority provides the Commission with an audit strategy and an annual audit opinion and annual control report, taking into account issues identified during audits carried out during the previous 12 months.The logo of the European commission

The Commission does not select or manage individual projects but approves the overall programmes covering a range of potential projects.Preconditions for effective investmentBefore funding can be channelled to regions and cities, potential beneficiaries need to fulfil certain preconditions to ensure that all EU investment is targeted and effective. These include, for example: The development of smart specialisation strategies: regions should specialise in the sectors providing them with the highest potential for growth and competitiveness and should promote partnerships between universities, research institutes, businesses and public administrations to develop innovative products and services Strategies to reduce youth unemployment and promote nondiscrimination Compliance with environmental laws Business-friendly reforms Measures to improve public procurement systemsStrategies must also be consistent with the national reform programmes agreed upon under the European semester, the EUs system of collective economic management. The European semester is an annual health-check of EU economies, bringing together all EU countries and institutions, where countries are given specific recommendations for economic reform on an individual basis.If the European Commission considers that a countrys investment plan is not consistent with national reform programmes or insufficient to address the relevant reforms identified in the European semester, it can ask it to modify its programme so as to support key structural reforms. As a last resort, it can suspend funds if economic recommendations are repeatedly and seriously breached (for example, if a an EU country has excessive economic imbalances or budget deficits). This is to guarantee that the impact of EU investment on growth and jobs is not undermined by unsound economic policies or by weak administrative capacity.

Targeting EU investment on smart,green growth for allERDF investment goes hand in hand with various EU policies to deliver growth and jobs across the EU. In order to ensure that every euro is invested wisely, ERDF actions are concentrated on four key priority areas: Research and innovation: Europe needs to invest more in research and innovation as it is a key driver of economic growth and jobs. Europe is trailing behind its global competitors in terms of investment, spending considerably less than the United States, Japan and South Korea, while China is rapidly catching up. One of the Europe 2020 objectives is to ensure that EU countries invest 3 % of the EUs overall GDP in research. ERDF funds invest in both basic and applied research, encouraging all actors in the innovation chain (research institutes, universities, technological centres, entrepreneurs, large and small companies, financial institutions, etc.) to work together to generate the innovative products and services which EU countries need to remain competitive internationally. Information and communication technologies (ICT): Effective use of ICT by companies is a prerequisite for productivity, competitiveness, higher revenue growth and job creation. The ERDF therefore invests in ICT infrastructure for access to high-speed connections in all regions, especially in remote, rural and less developed areas. It will continue to facilitate the shift towards innovative uses of ICT services by firms (for example, e-learning and e-business), citizens (digital literacy and e-skills) and public administrations (e-health and e-government) to improve productivity and the quality of life. Enhancing the competitiveness of SMEs: SMEs are the backbone of Europes economy: numbering around 20 million, they account for 99 % of EU businesses and are a key stimulus for growth and jobs. To ensure they remain competitive and can attract the talented people they need, the ERDF promotes and invests in entrepreneurship to boost business creation and makes it easier for them to access a variety of new financing instruments loans, microfinance and venture capital. The idea is to boost the leverage effect of EU investment at a time of limited budgetary resources, thus spurring supplementary investment from the private sector. Shift towards a low-carbon economy: The ERDF is investing almost 27 billion in decarbonising or greening the economy in 201420. That means increasing the use of renewable energy in both the public and private sectors and boosting energy efficiency, for example in housing and public buildings or by investing in smart grids for distributing electricity. ERDF investment also helps to reduce emissions from transport by investing in research into clean low-carbon technologies and by promoting sustainable public transport.

The resources allocated to these priorities depend on the category of region. At least 80 % of ERDF spending in more developed regions must focus on at least two of these priorities. This focus amounts to 60 % of ERDF spending in transition regions and 50 % in less developed regions. Furthermore, some ERDF resources must be channeled specifically towards lowcarbon economy projects as follows: more developed regions must channel 20 % of their allocation; transition regions must channel 15 % and less developed regions must channel 12 % of their allocation.

Regional policy and the economic crisisFrom 2008, regional policy responded quickly and effectively to the economic crisis with a high degree of flexibility, for instance through thematic reprogramming redirecting funding to where it was most needed and investing in key sectors for growth and jobs. More than 39.2 billion or 11 % of the total funds was redirected to ensure maximum impact by the end of May 2013, to support the most pressing regional economic and development needs and to ensure the effectiveness of EU investment despite the crisis. Moreover, targeted reductions in the national co-financing requirements and the frontloading of financial allocations to EU countries in crisis provided much needed liquidity at a time of significant national budgetary constraints. Increased co-financing was approved in 201112 for Spain, Greece, Ireland, Italy, Lithuania and Portugal in particular and, to a lesser extent, for Belgium, France and the United Kingdom.

The EU Regional policy in Bulgaria

Bulgaria joined the European Union in 2007 and the 2007-2013 period is thus the first one in which the country benefits from Structural Funds assistance. For the ongoing funding period, Bulgaria has been allocated some 6.9 billion.

The Bulgarian Government established six NUTS II regions (Severozapaden, Severen tsentralen, Severoiztochen, Yugozapaden, Yuzhen tsentralen and Yugoiztochen) to comply with the EU regional policy requirements. All of these regions have a per capita GDP of less than 75% of the EU average. They are therefore all eligible for funding from the Structural Funds under the Convergence objective.

The main problem here is that in Bulgaria there are no effective Regions and most regional policies are realised on the level of municipalities. This brings up some concerns. There are big differences in the capacity of separate municipalities and that leads to concentrating of activities mainly in the leading municipalities (Sofia), while there is not enough capacity in the smallest to apply regional structural measures.This leads to a situation of extreme monocentrism:

The most efficient and productive structure is moderate polycentrism:

Many cities and regions working together on many different levels and not all depending on the Level 1 municipality the capital city

Regional Development Programmes in Bulgaria for the budget period 2007-2013

1. Operational Programme 'Transport'The European Commission approved the Operational Programme (OP) for Transport in Bulgaria for the period 2007-2013 on 7 November 2007. The total budget of the programme is a little over EUR 2 billion, with the Community investment financing on average 81 % through the European Regional Development Fund (ERDF) and Cohesion Fund (CF) amounts to EUR 1.6 billion. The Programme focuses on transport infrastructure investments that contribute most to sustainable economic growth, and thus to more and better jobs. At the same time the programme wants to contribute to reducing congestion, noise and pollution, and promote the use of environment-friendly modes of transport.2. Operational Programme 'Environment'The Operational Programme Environment (OP Environment) is the main programme document of the implementation of the national environmental policy. The purpose of the support within this framework is to protect and preserve the natural resources of Bulgaria and to improve the state of environment throughout the country.Investments in environmental infrastructure are strongly connected to sustainable economic growth and job creation. They also contribute to promoting convergence and increasing the competitiveness of regions. The programme will also contribute to the preservation and restoration of Bulgarian rich biodiversity and will help to improve the implementation capacity of the local stakeholders. The total budget of the programme is around 1.8 billion and the Community assistance through the ERDF amounts to 439 million and through the Cohesion Fund, it amounts to 1.027 billion (approximately 22 % of the total EU money invested in Bulgaria under the Cohesion policy 2007-2013).3. Operational Programme 'Development of the Competitiveness of the Bulgarian Economy'The Operational Programme Development of the Competitiveness of the Bulgarian Economy (OP Competitiveness) is the main programming document aimed at improving the competitiveness of the Bulgarian economy. The purpose of the support is to develop a competitive and efficient production and to promote business sectors. It will contribute to increase the economic growth and to assist the necessary structural changes in the Bulgarian economy with a view to achieving a sustainable growth and cohesion during the programming period. In order to achieve these objectives, a support is envisaged for improving the productivity and growth potential of small and medium-sized enterprises, assisting the development of innovations; helping the transition to a knowledge-based economy and introduction of new technologies; and improving the business environment. The Operational programme is fully aligned with the Lisbon Agenda 2000 objectives as well as with the Community Strategic Guidelines on economic, social and territorial cohesion. In addition, the operational programme will also contribute to the achievement of the general EU horizontal objectives, namely environment protection, equal opportunities and development of the information society.The total budget of the programme is around EUR 1.16 billion and the Community assistance through the ERDF amounts to EUR 988 million (approximately 15 % of the total EU money to be invested in Bulgaria under the Cohesion policy 2007-2013).4. Operational Programme 'Technical Assistance'With respect to the principles of transparency and sound financial management, the "Technical Assistance Operational Programme aims to provide support for the efficient and effective implementation of the Structural and Cohesion Funds in Bulgaria. The specific objectives of the Technical Assistance Operational Programme are to: support the activities performed by the central implementation structures within the Ministry of Finance, notably the Central Coordination Unit, the Certifying Authority, the Audit Authority and the National Strategic Reference Framework (NSRF) Monitoring Committee; increase the administrative capacity of other actors involved in the implementation of the Structural and Cohesion Funds, in particular the Managing Authorities and Intermediate Bodies in the relevant ministries, as well as regional and local authorities; ensure the development of a reliable and well-functioning Unified Management Information System; provide reliable and transparent information on the opportunities and results of the Cohesion policy in Bulgaria.The programme has a total budget of around 57 million. Community investment through the European Regional Development Fund (ERDF) amounts to some 48 million, which represents approximately 0.7% of the total EU money to be invested in Bulgaria under the Cohesion Policy for 2007-13.5. Operational Programme 'Regional Development'Bulgaria significantly lags behind in respect of per capita GDP compared to the EU average (Bulgarian GDP is 28.3% of the EU-27 average). This shortfall places Bulgarian regions in one of the last positions among other EU regions. The main objectives of the Operational Programme are to: reduce the socio-economic differences between Bulgaria and other EU Member States; make living and working conditions in Bulgaria more attractive; develop tourism potential; stimulate investments in smaller municipalities.The Bulgaria Regional Development Operational Programme has been prepared in line with the Lisbon agenda for growth and jobs and the principles defined in the Gteborg strategy for sustainable development.The Programme falls within the framework laid out for Convergence and Regional Competitiveness and Employment Objectives and has a total budget of around 1.6 billion. Community investment through the European Regional Development Fund (ERDF) amounts to some 1.4 billion, which represents approximately 19.8% of the total EU investment earmarked for Bulgaria under the Cohesion Policy for 2007-13.

EU structural and investment funds in Bulgaria for the 2014-2020 budget period

The European Commission said on August 7 that it has adopted the partnership agreement with Bulgaria on the use of EU structural and investment funds in the country for the 2014-2020 budget period. The agreement envisions Bulgaria receiving 10 billion euro until the end of the decade, with the bulk of the money 7.6 billion euro allocated in cohesion policy funding.Cohesion policy funds would be delivered through seven operational programmes: regions in growth innovation and competitiveness environment transport and transport infrastructure science and education good governance human resource development.

Bulgaria will also receive a further 2.3 billion euro for rural development and 88 million euro for fisheries and the maritime sector.The EU investment is meant to help tackle unemployment and boost competitiveness and economic growth through support to innovation, training and education in cities, towns and rural areas, as well as promote entrepreneurship, fight social exclusion and help to develop an environmentally friendly and a resource-efficient economy.The draft Partnership Agreement the document setting the national priorities which will be funded under the European Structural and Investment Funds in the period 2014-2020, was sent to the European Commission for a second round of technical consultations. The document was elaborated by a working group with the participation of a wide range of partners representatives of local authorities, socio-economic partners, civil society organizations, the academic society and others.In this version the comments of the European Commission from the first round of technical consultations are covered. It also addresses the contributions received during the public consultation on the document, conducted in the period 23.07 - 07.08.2013. The final version of the Partnership Agreement will be officially submitted to the European Commission after the Regulations on the European Structural and Investment Funds enter into force and the EU Multiannual Financial Framework 2014 - 2020 is approved.

Conclusion

Effective and efficient use of the EU Regional Policy budget in Bulgaria will lead to greater complexity and integration, better geographical balance, bigger greater socio-economic impact (value added) and enhancement of public control and transparency in setting priorities. Achieving these goals will lead to overcoming of the gap with the EU regions on the one hand and reducing interregional disparities domestically on the other.

References

1) The European Union Explained Regional policy , April 2014 2) The European Commission Regional Policy website http://ec.europa.eu/regional_policy/index_en.cfm3) Website of the structural funds of the EU in Bulgaria http://www.eufunds.bg/bg/page/174) Cohesion Policy in Bulgaria for 2007-2013 http://ec.europa.eu/regional_policy/atlas2007/bulgaria/index_en.htm5) EU funds and regional cohesion, Prof. PhD in Economics Dimitar Hadjinikolov http://hadjinikolov.pro/wp-content/uploads/2010/02/%D0%95%D0%B2%D1%80%D0%BE%D0%BF%D0%B5%D0%B9%D1%81%D0%BA%D0%B8%D1%82%D0%B5-%D1%84%D0%BE%D0%BD%D0%B4%D0%BE%D0%B2%D0%B5-%D0%B8-%D1%80%D0%B5%D0%B3%D0%B8%D0%BE%D0%BD%D0%B0%D0%BB%D0%BD%D0%BE%D1%82%D0%BE-%D1%81%D0%B1%D0%BB%D0%B8%D0%B6%D0%B0%D0%B2%D0%B0%D0%BD%D0%B5.-%D0%91%D1%8A%D0%BB%D0%B3%D0%B0%D1%80%D1%81%D0%BA%D0%B8%D1%8F%D1%82-%D0%B2%D0%B0%D1%80%D0%B8%D0%B0%D0%BD%D1%82..ppt6) Regional Development Programmes in Bulgaria for 2007-2013 http://ec.europa.eu/regional_policy/country/prordn/search.cfm?gv_pay=BG&gv_reg=ALL&gv_obj=ALL&gv_the=ALL&LAN=EN&gv_theobj=ALL&gv_per=27) Bulgaria 2014-2020 http://insideurope.eu/taxonomy/term/2412