European Structural Funds [print sheet]
Last updated: 14/08/08

The structural funds were set up to give financial support to under-developed and economically weak EU regions. They comprise the European Regional Development Fund (ERDF), European Social Fund (ESF), European Agricultural Guidance and Guarantee Fund, Pre-Accession Aid and the Cohesion Fund. Between them, they now make up a major part of the EU budget. Alongside their economic aims, the funds are also important in pursuing the EU's aim of solidarity between the regions of the EU. While many welcome their economic goals, the way in which they share out money has frequently been a source for argument, especially following the accession of poorer eastern European countries to the EU.

The idea of structural aid for deprived regions was first developed in the early 1970s. The first fund, the ERDF was established in 1975 and subsequently the idea of structural funding grew immensely. With the accession of poorer countries - Greece, Spain and Portugal - in the 1980s, regional funding became a key means of bringing these countries wealth up to the European average. In 1992 this idea was taken further with the creation of the Cohesion Fund, which was designed to encourage economic convergence in the lead-up to Economic and Monetary Union (EMU). The current model for distributing aid was developed in 1999 with the aim of preparing for the entry of eastern European countries into the EU in 2004. Upon joining the EU, these countries had only limited access to structural funds, however during the negotiation of the 2007-13 budget, they fought hard to get a better deal.

To qualify for structural funds, regions have to meet one of three objectives set by the EU. These are: to help under-developed regions (with a GDP less than 75% of the EU average); those adapting to major economic changes such as the loss of a big employer, and those with special educational or employment needs. The EU also provides specific pre-accession aid for countries due to join the EU and to support rural areas. The EU Commission sets its own priorities for how the money is distributed with a particular emphasis placed on programmes that can help more than one region and that forge direct links between local authorities and the Commission.

• The structural funds made up 35% of the 2000-2006 EU budget and is €347.4 billion for 2007-13.
• All the new accession countries, except Cyprus, are entitled to 'objective one' structural funds (available to regions where per capita income is below 75% of the EU average).
• £540m of European Structural Funds are to be distributed across South West England by 2013.

For

• Structural funds help less well off regions deal with changing economic conditions. In particular, they help to compensate for the effects of joining a single market.
• Solidarity is good for economic growth across the EU.
• Instead of simply giving money to national governments, structural funds focus on needy areas directly.

Against

• The structural funds are a bad way of allocating resources because by focusing on poor regions, structural funds ignore the poverty that exists within wealthier areas.
• The direct relationship between the Commission and the regions cuts out the legitimate role of national governments.
• In an enlarged EU with more poor regions, the distribution of funds will be unsustainable and will mean that poor regions in older member states will lose out.

‘'Since the Maastricht Treaty was signed in 1992, the European Union has… stood for a European Union of the Regions - a network of relations that is leading to ever closer integration.' - Ferenc Gyurcsány, Hungarian Prime Minister, 2004

'Only by mobilising all the resources... at national, regional and local levels, can Europe succeed to promote jobs, growth and solidarity'. - Danuta Hübner, EU Regional Policy Commissioner, 2006