Funding sources: European Structural Funds

Objectives and objective regions

For the period 2000 to 2006, the Commission has set three priority objectives for Structural Fund activities.

Objective 1 promotes the development and structural adjustment of regions whose development is lagging behind, ie whose average per capita GDP is less than 75 per cent of the European Union average. This Objective also covers the most remote regions as well as those areas with low population density in Austria, Finland and Sweden. All these areas are known as Objective 1 regions. (In the past, these regions have been known as Less Favoured Regions (LFRs).)
Objective 2 contributes to the economic and social conversion of regions in structural difficulties (other than those eligible for Objective 1 support). It includes the areas facing the need for economic diversification as well as areas undergoing economic change, declining rural areas, depressed areas dependent on fisheries and urban areas in difficulty. All these areas are known as Objective 2 regions.
Objective 3 covers all the measures for human resource development outside the regions eligible for Objective 1 funding. This is the framework for all the measures taken under the European Employment Strategy [ 1 ]. There are 4 pillars to this objective:
- Pillar 1: Employability
- Pillar 2: Entrepreneurship
- Pillar 3: Adaptability
- Pillar 4: Equal opportunities

Further information on the European Employment Strategy is available on the Europa website.

The Structural Funds Explained [1]

Structural funds are designed to reduce disparities in development, and to promote economic and social cohesion within the European Union. The total budget for the Structural Funds amounts to 195 billion Euro in 2000-06.

The Commission does not normally allocate the Structural Funds to individual projects. Instead it works through agencies established by National Governments. While the main priorities are defined in co-operation with the Commission, the choice of actual projects and their management are solely the responsibility of the national and regional authorities through the delivery of multi-annual action plans. The Union helps the States achieve more, and obtain better, results than they could by acting on their own. That is the real added value of the Structural Funds.

Once projects have been selected, they are financed from both national and Community funds. Budgets are always comprised of Union funds as well as national sources (public or private). These locally provided funds are often referred to as ‘match funding’. The actual proportion of Community to National funding varies depending upon certain priority objectives (see above) and geographic location.

There are four structural funds

The European Regional Development Fund (ERDF) which contributes mainly to assisting those regions whose development is lagging behind the rest of Europe. It also covers those undergoing economic conversion or experiencing structural difficulties through industrial decline.
The European Social Fund (ESF) which mainly provides assistance under the European Employment Strategy to improve equality of opportunity in employment and the quality of training.
The European Agricultural Guidance and Guarantee Fund (EAGGF) that helps rural areas whose development is lagging behind, by improving the efficiency of their structures for the production, processing and marketing of agricultural and forest products;
The Financial Instrument for Fisheries Guidance (FIFG) that provides finance for a variety of actions within the fisheries sector.

(See also ERDF and ESF Innovative measures.)

The Structural Fund Regulations also include four Community Initiatives. These are:

Interreg III, which aims to stimulate cross-border, transnational and inter-regional cooperation;
Leader+, which promotes rural development through the initiatives of local action groups;
Equal, which provides for the development of new ways of combating all forms of discrimination and inequality in access to the labour market;
Urban II, which encourages the economic and social regeneration of declining towns, cities and suburbs.

There are also limited funds for innovative and research measures that do not fall within the Member States priorities or action plans, but still comply with one, or more, of the Communities priority objectives. These are usually managed directly through the Commission but still require some form of local support.

In addition, there is a new measure called The Performance Reserve, designed to motivate the final beneficiaries. Four per cent of the appropriations allocated to each Member State are placed in reserve until 2003. This will be distributed to the best-performing programmes by 31 March 2004 at the latest. Each Member State has to make proposals to the Commission on the basis of monitoring indicators that it has introduced itself.

Most Structural Fund assistance is granted in the form of non-repayable grants or ‘direct aid’, and to a lesser degree refundable aid, interest-rate subsidies, guarantees, equity participation, and participation in venture capital.

Note:

[1] Source: Commission website www.europa.eu.int (various pages) October 2002. [back]

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