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The politics behind the eu cohesion policy Teixeira, Nelson 2003

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THE POLITICS BEHIND THE EU COHESION POLICY: 1974-2000 \ By NELSON TEIXEIRA BA, The University of British Columbia, 2001 A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF ARTS in THE FACULTY OF GRADUATE STUDIES (Department of Political Science) We accept this thesis as conforming to the required standard Yves Tiberghien, Ph. MarkZacher,Ph.D. THE UNIVERSITY OF BRITISH COLUMBIA May 2003 © Nelson Humberto Dos Santos Teixeira, 2003 In presenting this thesis in partial fulfilment of the requirements for an advanced degree at the University of British Columbia, I agree that the Library shall make it freely available for reference and study. I further agree that permission for extensive copying of this thesis for scholarly purposes may be granted by the head of my department or by his or her representatives. It is understood that copying or publication of this thesis for financial gain shall not be allowed without my written permission. Department The University of British Columbia Vancouver, Canada DE-6 (2/88) Abstract This study explores the importance of cohesion policy to the present and future of the European Union. The goal of cohesion policy is to reduce the economic and social disparities between the richer and poorer member states of the European Union. Cohesion policy provides the 'smaller powers' with hundreds of millions of euros worth of regional aid annually despite constant opposition from the suppliers or donors of this 'string-less cash', the larger and/or wealthier members of the European Union. Given such controversy, the central question of this thesis asks: why do the 'smaller powers' receive so much regional aid and financial redistribution in the form of cohesion policy from the larger and/or wealthier members of the E U ? Traditional International Relations theory as well as Theories on European integration has thus far been insufficient in accounting for this central question. This thesis seeks to move beyond current theoretical literature pertaining to European integration and the role of cohesion policy within it. This paper has two major findings. The first argument contends that cohesion policy acts as a 'mechanism of solidarity' thereby promoting the long-term health and growth of the E U . The second argument posits that cohesion policy guarantees a greater role for the Commission, the driving force behind cohesion policy. It is only through the mechanism of solidarity principle and the role of the Commission that one can understand why the coalition of smaller receives so much regional aid in the form of cohesion policy from the larger and/or wealthier members of the E U without seemingly providing anything directly in return. This conclusion is arrived at through an examination of three major case studies: Delors I (1987), Delors U (1992), and Agenda 2000. These 3 cases represent the most significant steps in the process of building the cohesion policy in general and the structural funds in particular Acknowledgments Achieving a Masters Degree has been a long, painful, but nevertheless, rewarding process. In looking back at my university career throughout the last six years my first day is still the freshest. That day is obviously the freshest in the sense that it marked the beginning of my post-secondary travels through the often not so wonderful world known as Academia. Furthermore, it is the freshest in the sense that it is the day that I most recollect of all the days that I have spent at U B C . Moreover, it is the freshest it the sense that it saw a fresh looking short haired little boy named Nelson salivate countless times over the large number of good looking girls walking around campus as this fine young chap repeatedly got lost on his way to the Buchanan building. Incidentally, in the days thereafter, the pieces steadily began to fall in place taking to me to where am I today- a smooth scruffy longhaired fellow with a Masters Degree. I would like to thank my thesis supervisor Professor Yves Tiberghien for his patience and priceless input. Yves, you must be the nicest professor in the world. Lucky for me that you were the only professor in the political science department with expertise on European affairs. I would also like to thank Professors Kathleen H i l l and Gerald H i l l , as it was a pleasure to T A their class for two years in a row. They treated me like a son! Another special thanks to Jennifer, Shotgun Marty, Ante, Katie, and Steffer for believing in me! Thanks to Poe for his efficiency. Moreover, thanks to my cousin M i l a i for tutoring me in my early teenage years as well as to Clara and Ben for their input on post secondary and post graduate study matters. Finally, a big thanks to my parents, not for their constant nagging and old school totalitarian Portuguese ways, but for giving me life and good looks as well as for providing me with fine meals in particular and a comfortable upbringing in general. I think it was those family beach days back in the day that have caused me to fall in love with the beach- a place that provides serenity as the ocean winds blow my long luscious curly locks from side to side. No thanks to my legion of friends (Delano, Fab, Amber, Robyn and Armando especially) for constantly distracting me with phone calls as well as enticing me to organize social events—"Nels, you are the greatest organizer around, pwa pwa pwa" (Armando Cerra, 2000). No thanks to Victor for hogging the computer and for his constant crankiness. No thanks to Serita for slowing me down with the 'circle of trust'. No thanks to the Carpenter for never being around to build me that much-coveted tree house. A n d a big no thanks to Richy Fisher for his incessant 6:00am phone calls thereby disrupting my much-valued R E M sleep! People have asked me, "Nelson Humberto Dos Santos Teixeira, now that you have achieved a Masters in Political Science, what w i l l you do next?" To them, I respond: I am going to Disneyland! Table of Contents Abstract i i Acknowledgments i i i Table of Contents iv Tables and Figures v Abbreviations vi Chapter 1 Introduction 1-7 Chapter 2 The Politics behind Cohesion Policy 8-16 Chapter 3 The Argument for Cohesion Policy 17-54 Chapter 4 Application Cases: 55-91 Delors I, Delors II, and Agenda 2000 Chapter 5 Conclusion 92-96 Bibliography 97-100 iv Tables and Figures T A B L E S 3.1 Gross domestic product1 per head: E U comparison: 1991-2000 F I G U R E S 2.1 Breakdown of budget expenditure, 2002 2.2 Cohesion Policy Spending from 1988 to 2006 4.1 Regional A i d Map, 2000 v Abbreviations C A P Common Agricultural Policy E A G G F European Agricultural Guidance and Fund E C European Community E C U European Currency (euros) E M U Economic Monetary Union E R D F European Regional and Development Fund E S F European Social Fund E U European Union FTFG Financial Instrument for Fisheries Guidance G D P Gross Domestic Product Q M V Qualified Majority Voting S E A Single European Act T E U Treaty on European Union Chapter 1 Introduction In the past twenty-five years, the European Union's regional aid platform has become known as cohesion policy and it has attempted to deal with the problems associated with the North-South divide. Cohesion policy currently accounts for approximately one-third of the E U budget, estimated at 32.8 bill ion euros annually. Cohesion policy came to fruition following the second and third enlargement of the European Community which saw the poorer South-Western European states of Greece (1981), Spain (1986), and Portugal (1986) join the community. Subsequently, the entry of these countries exacerbated the north-south divide thereby instantly placing the issue of regional disparities within the Community at the front and center of the policy-making Agenda. Incidentally, cohesion policy and the structural regional fund in particular have resulted in the granting of large sums of regional aid to the smaller powers of the E U at essentially no cost. Why do the 'smaller powers' receive so much regional aid and financial redistribution in the form of cohesion policy from the larger and/or wealthier members of the E U ? This central question is an important one to look at because its answer greatly adds to our understanding of the motives behind European integration and the European Union. David M c Kay among others asserts that the "literature on European Union has yet to generate a theoretical framework which adequately explains the events of European integration up until the current day" (McKay, 1999, p. 3). Accordingly, with respect to the central question of this paper, traditional International Relations theory as well as 1 theories directly related to European integration has thus far been insufficient in explaining why the coalition of smaller powers receives so much regional aid. Traditional International Relations theory would suggest that within a regime, greater powers would not be inclined to grant large amounts of aid and financial redistribution unless it serves the real interests of the great powers to do so. A s it stands now, tremendous uncertainty exists towards cohesion policy among the larger and/or wealthier members of the E U . Like any other policy that requires huge financial backing, cohesion policy inevitably becomes controversial; in fact, cohesion policy has perhaps been the most highly contested issue within E U spheres over the last two decades. There has been much debate on whether the structural regional funds or cohesion policy should be reduced or whether they should exist at all . A s the net contributors or cash donors of cohesion policy, the richer member states of the E U are in support of a reduction or abolishment of the funds whereas the smaller members, namely, Spain, Portugal, Greece, and Ireland favour an increase (or the maintenance at least) in regional aid. Despite the uncertainty and unpopularity surrounding cohesion policy, cohesion policy remains as one of the three major pillars of European integration and traditional international relations theories remains dumbfounded as to why this is the case. Moreover, even the European integration theories of intergovernmentalism and supranationalism are not able to fully account for the large amounts of funds granted to the coalition of smaller powers. In its response to the central question, this thesis seeks to move beyond current theoretical literature pertaining to European integration and the role of cohesion policy within it. This thesis presents two major arguments as to why the coalition of smaller powers receives so much aid and financial redistribution in the form of cohesion policy 2 from the larger and/or wealthier members of the E U at essentially no direct or immediate cost to the smaller powers. I refer to the first reason as the 'mechanism of solidarity principle' whereas the second central reason pertains to cohesion policy acting as a greater role for the Commission. The mechanism of solidarity principle asserts that cohesion policy exists despite the mass criticism and unpopularity surrounding it because it is designed to promote a healthier and stronger union of European states in the long run. The existence of disparities between member states threatens "the integrity of the single market and E M U as well as being incompatible with the sense of community and solidarity that supposedly infuses the movement for European integration" (Dinan, 1999, p. 430). Accordingly, cohesion policy and the structural funds in particular are tools "intended to reduce economic disparities by contributing to the development of the poorest regions, but in general 'Community interest' " (Peterson and Bomberg, 1999, p. 149). Therefore, in terms of the larger picture, the mechanism of solidarity principle argues that cohesion policy is intended to be in the best interests of everyone but this is not always so openly apparent and hence the controversy and questions surrounding it. This argument is about rational mutual interests and thus looks beyond the surface in presenting cohesion policy as a mechanism of solidarity. The second major argument contends that cohesion policy exists despite its uncertainty and unpopularity because it guarantees a greater role for the Commission. Cohesion policy is the birth-child of the Commission and the Commission has remained one of its largest proponents amidst all the controversy surrounding it. Cohesion policy is essentially a top priority of the E U Commission because as cohesion policy grows, so 3 does the role of the Commission. The Commission is dedicated to the principle of solidarity in the European Union and subsequently views cohesion policy as a major mechanism of solidarity. Incidentally, a strengthened cohesion policy further legitimizes the Commission's role as defender of the Community interest. Hence, my two arguments on the 'mechanism of solidarity principle' and the central role of the Commission are directly related. The strengthening of cohesion policy in turn increases its capabilities as a mechanism of solidarity as well as increasing the position of the Commission. This thesis uses the terms 'small powers' and the 'coalition of small powers' to distinguish Spain, Portugal, Greece, and Ireland from the rest of the member states of the European Union. Portugal, Greece, and Ireland are indeed relatively small countries in the context of the E U but by grouping Spain with the coalition of small powers I do not intend to suggest that Spain as well is a small country with relatively little influence in the affairs of the E U . On the contrary, Spain is one of the largest, most populous, and most influential member states but at the same time Spain is in fact, one of the poorest E U countries as well . Spain receives the largest amounts, in overall terms, of structural funds in particular and the most regional aid in general of any country in the E U . Therefore, by 'small power' I do not refer to the geographical size or the size of the population of the countries involved or else Austria, Finland, Sweden, Luxembourg and so forth would certainly have to be included on that list. Instead, Spain, Portugal, Greece, and Ireland are all 'small powers' in the sense that these four countries contain the vast majority of the poorest and most underdeveloped regions in the entire community. Moreover, it is important to distinguish between the structural funds and cohesion policy. Structural funds comprise a part, albeit a very large part of cohesion policy 4 spending. Nevertheless, cohesion policy funds are often simply referred to as structural funds due to the fact that the structural regional fund makes up the largest component of cohesion policy spending by far. In technical terms, the structural funds deal specifically with alleviating disparities between regions and not between member states. However, since Spain, Portugal, Greece, and Ireland contain nearly all of the poorest regions in the E U , the structural funds and cohesion policy in generally spoken of with reference to member states. A s a result, the four poorest member states are the net beneficiaries of the structural funds specifically and cohesion policy in general. Other regions such as southern Italy, the five eastern German Lander, the Highlands and islands of Scotland and so forth are also comparatively poor regions and thus receive large amounts of structural fund aid; however, these regions of course belong to member states that, in total, are net contributors to cohesion policy and the structural funds. The principle focus of this study occurs begins in 1986, following the addition of Spain and Portugal into the European Community, and continues to the present day. Although the first official steps towards the development of a cohesion policy were initiated in 1974 with the introduction of the European Regional Development Fund (ERDF) , cohesion policy, as we know it today essentially came into fruition in the years immediately following Spain and Portugal's entry into the Community. Their addition followed the entry of Greece thereby introducing three countries in the span of five years that, on the whole, were and are substantially poorer than rest of the E C ' s member states aside from perhaps Ireland (Ireland is considered a poorer member state but it has made remarkable economic strides). Subsequently, the addition of these poorer southern states suddenly placed regional disparities at the front and center of the European Community's 5 political agenda. A s a result, European decision-makers could no longer avoid the question of regional differences within the E U . The major case studies to be explored with regards to cohesion policy are a series of reform packages referred to as Delors I, Delors II, and Agenda 2000. Delors I emerged in 1987 just one year following Spain and Portugal's entry into the European Community while Delors U and Agenda 2000 first appeared in 1992 and 1998 respectively. To understand cohesion policy one needs to be familiar with these reform packages and an understanding of cohesion policy and the logistics behind it is essential towards answering the central question of this thesis. M y concluding chapter takes a closer look at Portugal, one of the members of the coalition of smaller powers. Here, I take the case of Portugal to illustrate the limits and tensions of cohesion policy. For instance, the Portuguese strongly support the entry of new members from East Europe provided the E U maintains the flow of regional funds to Portugal. The remainder of this thesis is divided into three chapters followed by the concluding chapter. Chapter 2 is a short chapter looking at the dynamics behind cohesion policy. It presents cohesion policy as the dependant variable in this thesis and emphasizes the role of cohesion policy with regards to the central question of this thesis. The overall purpose of this chapter is to define and explain the idea and purpose behind cohesion policy thereby acting as a segway to the next chapter. Chapter 3 then concentrates on developing the theoretical models and the main arguments. Accordingly, the chapter is divided into three sub-sections. The first sub-section explores the relevant theoretical literature pertaining to European integration and the role of cohesion policy within it focusing on the limits of existing explanations both from traditional international 6 relations theory and European Union theories. This theoretical discussion sets the framework for the final two sub-sections of chapter 3 dealing with the overall answer to the central question. Sub-section 2 develops the 'mechanism of solidarity principle' argument and sub-section 3 turns to the argument on the role of the Commission. Chapter 4 sets out to support the two major arguments laid out in chapter 3 by diving into the politics of cohesion policy. It explores the aforementioned cases of Delors I, Delors TJ, and Agenda 2000 with a particular emphasis on what exactly took place and what each country or blocs of countries wanted in comparison to what the Commission wanted. Empirical examination of these case studies w i l l prove that the coalition of smaller powers receives so much aid and financial redistribution in the form of cohesion policy and structural funds from the larger and/ or wealthier members of the E U because cohesion policy jointly acts as a mechanism of solidarity and it guarantees a greater role for the Commission. The concluding chapter 5 summarizes the arguments and applies them to Portugal while providing suggestions for future research. 7 Chapter 2 The Politics behind Cohesion Policy This chapter presents an analysis of cohesion policy with an emphasis on how cohesion policy builds up the puzzle that constitutes the central question of this thesis. Incidentally, cohesion policy is the dependant variable of this thesis and thus this chapter analyses the dynamics behind cohesion policy and the tensions associated with it. Subsequently, an understanding of cohesion policy and its problems is necessary before attempting to explain or argue why the coalition of smaller powers receives so much aid and financial redistribution in the form of cohesion policy and structural funds from the larger and/ or wealthier members of the E U given the unpopularity of or uncertainty towards cohesion policy among many of the wealthier countries of the E U ? B y examining the ideas and origins behind cohesion policy and its relationship with regards to the central question, this chapter is preparation for the development of the model and major arguments of this thesis presented in the following chapter. T H E D E P E N D A N T V A R I A B L E Cohesion policy is recognized as the attempt to reduce economic and social disparities between the richest and the poorest regions of the European Union. Cohesion policy "stems from fears in member states with weaker economies that they would lose in free competition within the Community. When the customs union, the single market, and the single currency were established, funds were provided to assist [in the economic development of weaker and/or smaller member states] so that they would 8 cooperate in these new ventures and become prosperous partners: hence the word 'cohesion' " (Pinder, 2001, p. 83). Incidentally, the commitment of member states to economic and social cohesion has become a core element of the E U alongside the S E M and the E M U [Borras and Johansen, 2001, p52]. The importance of this commitment is demonstrated by the amount of money spent on cohesion policy and more specifically on the structural funds; approximately one-third of the E U budget, estimated at 32.8 bil l ion euros annually, is dedicated to alleviating regional disparities within the E U ( B B C news, Internet). Figure 2.1 below illustrates the breakdown of budget expenditure for 2000. Figure 2.1: Breakdown of budget expenditure, 2002 Regional Source: B B C News online The existence of countries with "widely diverging levels of development " renders economic and social cohesion necessary according to Graham Avery and Fraser Cameron (Avery and Cameron, 1998, p. 105). Cohesion policy is pre-occupied with 9 eliminating regional disparities and concern about regional disparities can be traced all the way back to the preamble of the first treaty of the E C and it reads: The member states are anxious to strengthen the unity of their economies and to ensure their harmonious development by reducing the differences existing between the various regions and the backwardsness of the less favoured regions (Borras and Johansen, 2001, p. 41). Accordingly, concern about regional disparities and the effect that the common market has on increasing these disparities is not a recent phenomenon. For example, in the early days of integration, Italy requested some form of cohesion as its "economy was the weakest among the six founding states and [as such] Italians feared they would suffer from the liberalization of trade" (Pinder, 2001, pp. 83-84). Cohesion was definitely not a major issue in those days but it was an issue nevertheless. From the mid 1980s onwards however, 'cohesion' or cohesion policy has exponentially grown in importance and much of this growth is attributed to the inception of the single market and Economic Monetary Union ( E M U ) . Cohesion has grown at such high rates because E U decision-makers have become well aware of the fears associated with the single market and Economic Monetary Union. These fears are grounded in the fact that the single market and the E M U have the economic effect of augmenting the gap between the rich and the poor thereby increasing regional disparities and subsequently increasing the desire for cohesion among the smaller and less wealthier members of the E U . Consequently, the S E M and E M U carry immense implications for E U regional policy. A s aforementioned, southern enlargement was the political instigator or fuel for the major restructuring of regional policy; subsequently, this lead to the first major initiatives towards the construction of a 10 prominent cohesion policy marked by the 1988 reforms (Borras and Johansen, 2001, p.41). Figure 2.2 below illustrates the amount of cohesion policy spending across time from 1988 to the projected amount in 2006. The graph shows a steady increase in cohesion policy spending with its peak in 1999 due to a higher E U G N P rating that year in the E U . The years following 1999 see structural fund more or less leveling off (at slightly below 1999 levels) as cohesion policy spending is capped at 0.46% of E U G N P and as E U G N P levels are expected to remain constant. Figure 2.2: Cohesion Policy Spending from 1988 to 1999 M68 \m 1SS0 1M1 19M 19M 1M1 ISM 1S9S 1997 19M 1M9 M M 2C01 242 20Q3 2004 20M 2004 September 20, 2001 Christian Tuschhoff BGP 406 10 Source: Harvard University's School of Government 11 The structural funds in particular are designed to help the smaller powers compete with the larger and/or wealthier powers in the E U amidst the single market and European Monetary Union. In other words, cohesion policy in general is put in place to counteract the effects of the single market and E M U . According to Desmond Dinan, cohesion -"the reduction of economic and social disparities between richer and poorer regions - is a fundamental objective of the E U " (Dinan, 1999, p. 430). The structural funds have certainly helped poorer regions fund development but donor states have become increasingly unwillingly to fund cohesion policy projects. However, to abandon the structural funds and cohesion policy is politically unwise. A s wi l l be discussed later in chapter 4, Agenda 2000 proceedings demonstrated that to suggest a reduction in cohesion policy funds is grounds for much turmoil within the E U . The coalition of smaller powers, led by Spain and backed by the Commission wi l l not stand for such measures. Even as the E U prepares for eastern enlargement, the members, of the coalition of smaller powers constantly argue for the preservation of their individual share of the structural funds. This sentiment is illustrated in interview with Foreign Minister for Portugal Antonio Martins Da Cruz in which he asserts that "the principle of economic and social cohesion between member states must be upheld as the community expands from 15 to 25 countries" ("Keeping the E U . . . " , 2002, p. III). In other words, Da Cruz fully and strongly supports the entry of new members from East Europe but at the same time he posits that "the E U has to do everything possible to maintain the flow of funds to Portugal [as they] are essential for [the countries'] development (Ibid, p. HI). Given the continuous increases in their economic development, the members comprising the coalition of smaller powers vigorously continue to seek more cohesion 12 policy funding. The desire on the part of the smaller powers for increased funding has prompted criticism from larger and/or wealthier members of the community. Accordingly, cohesion policy involves a tremendous amount of controversy and the following section looks at the criticism that forms the basis of the central question of this thesis. T H E T E N S I O N S W I T H C O H E S I O N P O L I C Y Cohesion policy and particularly the structural funds are responsible for the so-called 'free money' that is donated to the smaller and/or less wealthy members of the E U . According to John Pinder, "the Union wi l l suffer i f there is too much disparity among the states; and the structural funds [and/or cohesion policy] may have to take at least part of the strain" (Pinder, 2001, p. 88). Despite cohesion policies intention of regional disparities, it has been often and continuously criticized as being ineffective and misguided. Accordingly, the coalition of smaller powers is repeatedly criticized for consisting of self-interested actors who hope to continue receiving 'free money' while not directly or substantially contributing anything to the European Union in return. Incidentally, the coalition of smaller powers is accused of being oblivious to European-wide initiatives. Donor states resent granting aid to seemingly self-interested states smaller powers such as Spain and Portugal. Ireland and Greece are particularly resented due to Ireland's high rate of growth and Greece's constant corruption and mismanagement of funds. Up until the current day, the revenue contributions of Spain, Portugal, Greece, and Ireland have been far outweighed by their receipts from cohesion policies (Pinder, 2001, p. 90). 13 Donor states have been weary of cohesion policy dating all the way back to the Delors I reform initiatives in the late 1980s. For instance, according to Peterson and Bomberg, in late 1998, "the Dutch government slammed the Commission's proposed spending on cohesion policy as 'unnecessary and undesirable' " and the Dutch have traditionally supported such moves in the name of integration (Peterson and Bomberg, 1999, p. 170). From Delors I onwards, the questions and the accusations surrounding cohesion policy have continually increased in conjunction with the increased reluctance of the larger and/or wealthier members to grant financial assistance to the coalition of smaller powers. Therefore, as the net contributors or cash donors of cohesion policy, the richer member states of the E U are in support of a reduction of the funds whereas the smaller members, namely, Spain, Portugal, Greece, and Ireland favour an increase or at minimum, a maintenance of the current levels of regional aid. Eastern enlargement further adds to the controversy surrounding cohesion policy. Prospective new members from Eastern Europe are poorer than the current structural fund beneficiaries and upon entry w i l l be in the running for the greatest share of the regional aid pie. With eastern enlargement looming in the near future, the current coalition of smaller powers clearly wi l l fight against cuts to their aid package upon the accession of newer as well as poorer members to the European Union. For their part, current donor states w i l l clearly fight against an increase to cohesion policy funding upon the advent of Eastern enlargement Furthermore, serious doubts exist concerning the efficiency of cohesion policy. In 1997, the Commissioner for Regional Policy, Monika W u l f Mathies and social affairs Commissioner Padraig Flynn "complained that the regional aid budget was already over-14 complex, inefficient and spread over too many E U initiatives" (Peterson and Bomberg, 1999, p. 163). In other words, too many parties have attempted to benefit from cohesion policy - a policy field that lacks direction and substance. A s a result, an overflow of parties is vying for a piece of the distribution pie and thus much bargaining and debate must occur to prevent the mismanagement of funds. It has often been suggested that certain regions have been receiving financial payments when they otherwise shouldn't be. Accordingly, "the political process of redistributing money has been more important than the actual effect on economic convergence" (Peterson and Bomberg, 1999, p, 171). Moreover, H . W . Armstrong suggests that cohesion policy or "regional policy penalizes successful business in prosperous regions while simultaneously encouraging unsuitable economic activities in the depressed regions" (Armstrong, 1998, p. 364). For instance, as aforementioned, Greece has repeatedly been accused of corrupt business practices and mismanagement of the structural funds. Structural funds are primarily given to the poorer member states (as they contain the most poor regions) but these member states do not directly contribute much to the E U in return. Certainly, a poorer member like Portugal offers a relatively expensive, skilled, and hard-working labour force but such positive attributes do not compensate for the hundreds of millions of euros that Portugal has received in financial aid and that it w i l l continue to receive. Accordingly, this lack of a direct and substantial contribution from the coalition of small powers is the main reason behind the negative press that cohesion policy receives from the larger and/or wealthier members of the E U . As Chapter 4 wi l l demonstrate, the Agenda 2000 proceedings showcased a great deal of opposition to cohesion policy funds. Given this opposition, member states are 15 unlikely to commit themselves to a larger budget for cohesion (Peterson and Bomberg, 1999, p. 170). Incidentally, cohesion policy has often been portrayed as a misuse of financial resources and an unnecessary strain on the E U budget as such resources would be better used to directly fund European wide initiatives. Many economists disagree on the efficiency of cohesion policy because "empirical evidence is difficult to distill [due to] the multifaceted nature of economic growth and decline" (Dinan, 1999, p. 438). Despite the controversy and criticism surrounding it, E U decision-makers have invested large amounts of funding into cohesion policy and as a result, cohesion policy has become one of the 3 major pillars of European integration behind only the single market and E M U . Given the controversy and criticism, why does the coalition of smaller powers receive such large amounts of funding in the form of regional aid when it is not openly apparent as to why this is the case considering that the smaller powers do not substantially and directly contribute anything to the E U in return to compensate for what they get from cohesion policy? The following chapter looks at developing theoretical models attempting to answer the central question and following those theories dives into my main arguments. 16 Chapter 3 The Argument for Cohesion Policy If cohesion policy faces such considerable criticism, then why does it continue to exist as one of the major pillars of the European Union? The previous chapter presented an analysis of cohesion policy and the tensions or criticisms associated with it. This chapter opens the black box and offers a model as to why the coalition of smaller powers receives so much in the form of financial redistribution from the rest of the European Union. A s aforementioned, I make a two-fold argument. First, cohesion policy acts as a mechanism of solidarity thereby promoting a healthier and stronger union in the long run. Secondly, the coalition of smaller powers receives such large amounts of regional aid because cohesion policy is a political tool of the Commission. Cohesion policy thus guarantees a larger and stronger role for the Commission within E U decision-making procedures. This chapter is organized into three parts. Section I presents a review of the theoretical literature pertaining to the 'cohesion' of international regimes. This section serves to illustrate the limits of existing explanations, both from traditional international relations theory and from European Union theories, as to why the coalition of smaller powers receives so much from cohesion policy. Section II presents my overall answer to the central question of this thesis through the development of the 'mechanism of solidarity argument'. Section HI concludes by developing my argument on the role of the Commission in relation to cohesion policy. In essence, this chapter presents a general model and/or argument for the continued existence of cohesion policy as one of the main 17 pillars of European integration and/or the European Union. The next chapter dives into the politics of cohesion policy by using empirical cases to support my model thereby completing the argument presented in this chapter. I: T H E O R E T I C A L E X P L A N A T I O N S F O R ' C O H E S I O N ' I N I N T E R N A T I O N A L R E G I M E S 'Cohesion' is an integral force in the maintenance and growth of International economic and political regimes. 'Cohesion' is especially important to European integration, as the European Union from the onset has developed governmental institutions that go far beyond that of any other international regime. European integration began in earnest following the Second Wor ld War- a war that left Europe politically and economically in shambles. Given the continent's history of war and conflict, many felt the need for an integrated Europe in order to remove the threat of future war (Serfaty, 2000, p. 15). Consequently, French and German "leaders initiated measures to resolve future conflicts through peaceful means by establishing a system of economic interdependence intended to render armed conflict more inconceivable and unattractive" (Smith, 1995, p. 16). This idea of collective unity established the foundation for an integrated European community. From 1945 to the present day, European states have been involved in an integration process like no other before it on the continent or the world for that matter. The European Union fosters intergovernmental cooperation; "intergovernmental cooperation takes place when the policies actually followed by one government are regarded by its partners as facilitating realization of their own objectives, as the result of 18 a process of policy coordination" (Keohane, 1984, pp. 51-52). Hence, the European Union exists because different states or actors share the same interests and goals and realize that they can advance their interests through collective or cooperative action. Subsequently, the promotion of each individual states interests is best achieved through collective efforts. Policies actively "followed by governments come to be regarded by their partners as facilitating realization of their own objectives" (Ibid, p. 63). Therefore, various governments are compelled to deal with these issue areas and their associated problems together as a unit. Members of the European Union for the most part realize that sustained economic growth can best be achieved through further economic and political integration. European integration has been possible despite the importance of state sovereignty to individual member states because Western European countries realize that they share many of the same objectives and interests and thus could maximize their returns through joint or collective efforts (Harrop, 1989, p. 50). Accordingly, through cooperation within the E U framework, "states have come to increasingly define their interests in terms of common European solutions to the challenges posed by economic transformations" (Borras and Johansen, 2001, p. 53). Members of the European Union continue to grow closer to one another and according to Ben Rosamond, "closer cooperation in relatively narrow, technical, economic spheres of life [generates] wider political integration among countries" (Rosamond, 2000, p. 1). In other words, as members of the European Union continue to grow closer to one and another, wider economic and political integration occurs, resulting in the strengthening of the regime. This process is known as functionalism or more recently as neofunctionalism; these theories w i l l be covered in the following sub-section. 19 U p to the current day, European integration has resulted in the successful creation of the world's largest market as well as in the introduction of a single European currency, a currency that currently rivals that of the United States. Meanwhile, predictors into the future say the member states of the European Union wi l l experience increasing amounts of, 'wider' as well as 'deeper', economic and political integration within the next ten years (Serfaty, 2000, p. 15). More cooperation or integration equals an increased clash of needs, desires, and interests amongst the different member states. Therefore, with 'wider' and 'deeper' integration, comes a greater need to ensure 'cohesion' in the European Union. E U decision-makers rely on cohesion policy to ensure the continued growth and stability of the European Union. However, despite the importance of 'cohesion' to further European integration, the European Union's current cohesion policy has, as aforementioned, received large amounts of criticism. Both traditional international relations theory and theories on European Union insufficiently account for cohesion policies continued exist given the controversy and criticism surrounding it. Traditional International Relations Theory Traditional International relations theory is greatly influenced by the paradigm of realism. Realism posits, "rational self-interest and conflicting national objectives lead states to protect their interests relative to those of other states (McCormick, 1999, p 10). However, realism fails to account for the depth and scope of the institutions of European integration and in particular, the redistributive nature of the European Union. For instance, the existence of cohesion policy throws the realist 20 assumption - that the E U exists because it is in the best interests of the member states -into question. Traditional International Relations theory or realism posits that the greater and/or wealthier powers within an international regime such as the European Union would not be inclined to grant large amounts of aid or financial redistribution unless it serves the real interests of the greater powers to do so. For instance, according to realism, the greater and/or wealthier powers of the E U such as Britain, France, and Germany would simply just not grant direct cash to the smaller and/or less wealthier members of the E U collectively known as the coalition of smaller powers unless real British, French, and German interests are directly served. Nevertheless, as aforementioned, through the European Union's cohesion policy, the larger and/or wealthier powers have certainly been granting direct aid and financial redistribution to the likes of Spain, Portugal, Greece, and Ireland. Subsequently, how cohesion policy benefits and has benefited the greater powers is not and has not been openly apparent to realists and/ or traditional IR theorists. Incidentally, the large amounts of criticism and controversy surrounding cohesion policy come as no surprise to traditional IR theorists. According to realists, the larger and/or wealthier powers can most certainly achieve their so-called self-interested objectives without having to grant large amounts of cash in the form of the structural funds and cohesion policy. Hence, being able to account for the European Union's current cohesion policy is beyond the understanding of traditional International Relations theory. Incidentally, by being unable to account for the existence of cohesion policy among other things, realism has long fallen out of favour as a prominent theory to describe European integration. Therefore, realist or Traditional 21 International Relations theory cannot fully account for the dynamics driving European integration and more specifically for the dynamics behind the European Union's cohesion policy and as such, this theoretical discussion now turns to the European Union theories of intergovernmentalism and supranationalism. European Union Theories: Intergovernmentalism and Supranationalism Scholars or historians of European integration contend that cooperation has been difficult within the European Union because two opposing forces have been at work: "one towards the 'rebuilding' or, at least, the 'maintenance' of the separate identity of the associate nation-state and the other towards the 'transcending' of the nation-state or 'supranationality' " (Kinnas, 1979, p. 11). The latter force is known as supranationalism whereas the former is recognized as intergovernmentalism. Intergovernmentalism is a theory designed to describe the E U as an organisation "controlled by governments working with each other as partners" whereas supranationalism depicts the E U as an organization with its own authority and autonomy. Incidentally, intergovernmentalism and supranationalism are the two theories best suited to address the dynamics of European Integration. Therefore, intergovernmentalists emphasize the centrality of national executives as opposed to supranationalists who point to the importance of supranational institutions such as the Commission as well as national and transnational interest groups. Although intergovernmentalism and supranationalism are the most prominent European Union theories, they fail to address the central question of this thesis. L ike traditional International Relations theory, the European Union theories have alternate 22 reasons as to why a cohesion policy is necessary; yet, they offer insufficient explanations as to why the coalition of smaller powers receives so much aid and financial redistribution from cohesion policy considering that it does not directly contribute anything to the rest of the European Union in return. Intergovernmentalism and supranationalism are especially limited in explaining the European Union's current cohesion policy given the large amount of criticism and controversy surrounding it. Intergovernmentalism Intergovernmentalism asserts that each member state attempts to ensure that European policy outcomes are as close as possible to the national interest (Hanf and Soetendorp, 1997, p. 2). Increased European integration requires increased cooperation thereby requiring member state governments to give up more and more of their own national sovereignty, something that some Western European governments are and have been reluctant to do (Smith, 1995, p. 12). Intergovernmentalist logic argues that cooperation has been possible and is possible only when mutual interests are sufficient enough to overcome state differences as well as national rules and principles (Keohane, 1984, p. 62). Such an assertion implies that members of the European Union wi l l cooperate only i f the benefits resulting from cooperation are worth suffering a loss in their individual national or state sovereignty. In other words, the benefits from cooperation have to be substantial enough to compel member states to incur a loss of their national decision-making authority. Likewise, Andrew Moravcsik asserts that integration involves the convergence of material interests and the wi l l of political actors (Moravcsik, 1991). Accordingly, intergovernmentalists suggest that is possible for 23 cooperation to be achieved on issues such as cohesion policy regardless of whether or not member states having to incur a loss in national sovereignty. Proponents of intergovernmentalism see 'cohesion' as a policy tool designed to enhance the self-interests of individual member states within the European Union. However, cohesion policy is designed to alleviate regional disparities and as such it does not directly maximize the national self-interests of all the member states. Instead, on the surface, cohesion policy seemingly satisfies only the national self-interests of the member states comprising the coalition of smaller powers. In addition, cohesion policy does not maximize national self-interests as it promotes supranational decision-making due to the Commission's closer relationship with regional authorities. Hence, since the intergovernmentalist approach places such a high priority on national interests, it fails to account for why cohesion policy grants the member states comprising the coalition of smaller powers so much aid and financial redistribution when they these four poorer members seemingly do not directly contribute anything to the eleven larger and/or wealthier members of the European Union in return. A d d to this the large amount of criticism and controversy surrounding the European Union's current regional aid system, and the intergovernmentalist approach can only be further characterized as not being able to account for the existence of cohesion policy. Suzana Borras and Helle Johansen criticize intergovernmentalism on the basis of not being able to explain changes in international politics such as socioeconomic transformations related to trends of economic globalization and welfare state reorganization such as cohesion policy (Borras and Johansen, 2001, p. 40). Intergovernmental!sts would counter-argue against these criticisms by suggesting that 24 cohesion policy indirectly promotes the national self-interest of the member states. According to Borras and Johansen, intergovernmental approaches depict cohesion policy "as a sequence of side payments related to grand bargains among member states" (Ibid, p 53). In other words, the larger powers and/or wealthier members fund cohesion policy because regional aid is one way of appeasing the coalition of smaller powers to support policies related to larger integration schemes such as the single market and economic monetary union. These larger schemes, in turn, serve to benefit the larger and/or wealthier members the most as they carry the greatest potential to benefit from further integration. Now, I turn to a discussion of the other European Union theory, supranationalism and how it fails to fully address the central question of this thesis. Supranationalism Suprantionalism best encapsulates the surrender of sovereignty and the resulting strengthening of supranational institutions. Supranationalism is based on neofunctionalism; and thus, according to neofunctionalist principles, all the member states should be working together to strengthen decision-making at the European level at the expense of national sovereignty. Neofunctionalists set about the task of describing how the deliberate merge of economic activity in particular economic sectors across borders could generate wider economic integration" (Rosamond, 2000, p. 2). In a classic statement of the neofunctionalist approach, Ernst Haas, outlines the way in which "converging individual interests lead to a decision to cooperate in one functional task and the process whereby this limited integration spills over into other fields as it becomes necessary to solve new problems arising from that initial decision (Rosamond, 2000, p. 25 90). Hence, neofucntionalists argue that member states are inclined through a sort of invisible hand to seek further supranational decision-making. Suprantionalism is very much a European idea; it essentially arose out of the context of the European Union. Ernst Haas is recognized as the father of supranationalism and he contends "supranationalism does not mean the exercise of authority over national governments by E U institutions, but rather it is a process or a style of decision-making in which participants refrain from unconditionally vetoing proposals and instead seek to attain agreements by means of compromises upgrading common interests (Haas, 1964, p. 66). Notwithstanding, the Commission epitomizes supranationalism; although the Commission's members are appointed by national governments they are pledged to act in E U interests and the Commission (aside from a corruption scandal in the late 1990s) has indeed done so (Dinan, 1999, p. 205) as w i l l be demonstrated in the third and final section of this chapter. Supranationalism essentially means cooperation between different players or actors leading to the surrender of sovereignty. Accordingly, supranationalism involves the loss of sovereignty among each individual member state of the European Union in return for the strengthening of pan-European governing institutions. In other words, according to Ernst Haas, suprantionalism results in the creation of a new political community, one superimposed over the pre-existing ones. Subsequently, proponents of supranationalism view 'cohesion' as a tool designed to further consolidate the development and strengthening of these European institutions. On the one hand, cohesion policy appears to advocate supranational decision-making in the European Union as mentioned above but on the other hand 26 supranationalism fails to account for the controversy surrounding the European Union's cohesion policy. Unlike intergovernmentalism, supranationalism is sufficiently able to account for why cohesion policy is responsible for granting the coalition of smaller powers with such large sums of cash without any strings attached. The coalition of smaller powers offers nothing directly in return to the larger and/or wealthier members but what they do offer is adherence to the larger integration projects such as the S E A and TEU-projects that places the poorer members of the E U at a further competitive disadvantage. Hence, increased cohesion policy funding is needed to alleviate increases in regional disparities prompted by the S E A and E M U . However, the herds of controversy and criticism surrounding cohesion policy are contrary to supranationalist logic. The controversy goes against the supranationalist and/or neofunctionalist concept of European member states working together to produce a stronger, more unified and thus more supranational Europe. In other words, the large amount of criticism and controversy surrounding cohesion policy is counter-productive to the building of a more integrated supranational Europe. Therefore, instead of being a cornerstone of cooperation and supranational decision-making, the European Union's cohesion policy is constantly a source of internal strife. Consequently, supranationalism like intergovernmentalism and traditional International Relations theory fails to address the central question of this thesis. Theoretical Shortcomings The theoretical discussion has demonstrated that traditional International Relations theory and European Union theories are insufficient in explaining why the 27 coalition of smaller powers receives so much aid and financial redistribution in the form of cohesion from the larger and/ or wealthier members of the E U given the unpopularity of or uncertainty towards cohesion policy among many of the wealthier countries of the E U ? In fact, no single theoretical framework has been able encapsulate the totality of European integration and particularly the role of cohesion policy within it (Richardson, 2001, p. 29). Regardless of the theoretical shortcomings over initiatives such as cohesion policy, it is apparent that "what happens now at the level of the European Union (EU) penetrates more and more areas of national policy-making" and this is attributed to Europeanization (Hanf and Soetendorp, 1997, p. 1). This idea sparked the creation of the European Community whose origins, as aforementioned, can be traced to political and economic arguments developed in the context of post-War reconstruction. Existing theories provide little in the "way of guidance as to whether the E U wi l l be able to successfully to accommodate federal political arrangements" (McKay, 1999, p.3). It has often been said that Europeanists dream of or foresee a Europe of regions without nations (Keating, 1985, p. 5). Hence, from the Second Wor ld War onwards, Europeanization or Europeanism and regionalism have been twin challenges to the validity of the nation-state in Europe (Ibid, p. 1). Such is the case according to Michael Keating because the political logic of the European movement and its political expression in the Community call into question the nation-state as the basis of political and economic organization (Ibid, 1985, p. 5). Likewise, according to Kenneth Hanf and Ben Soetendorp, Europeanization can be "understood as a process in which Europe, and especially the E U , become an increasingly more relevant and important point of political reference for the 28 actors at the level of the member states" (Hanf and Soetendorp, 1997, p. 1). In keeping with this principle, decision-makers have strived to maintain the solidarity and cohesion of the European Union. The principle of 'cohesion' is associated with the idea of regionalism within the European Community. Regionalism is a complex and nebulous concept but for the purposes of this paper regionalism can be seen as the division of groups of people into regions and the regions have "often been seen both as the appropriate physical, social, and economic unit for planning and as an intermediate level at which intergovernmental differences can be negotiated and accommodated" (Keating, 1985, p. 2). To date the only mechanism that has attempted to provide cohesion in the E U thereby attempting to reduce regional disparities has been a set of policies and objectives commonly known as cohesion policy and particularly the structural regional fund. However, as aforementioned, cohesion policy has been surrounded by controversy and criticism and thus no theoretical explanation has adequately or fully accounted for it. Despite the theoretical shortcomings, I assert that cohesion policy exists for two main reasons: the first reason argues that cohesion policy acts as a 'mechanism of solidarity' while the second reason suggests that cohesion policy guarantees a greater role for the Commission. The following two sections wi l l take a closer look at these two main arguments. IT. M E C H A N I S M O F S O L I D A R I T Y P R I N I C I P L E The central theme or idea behind my 'mechanism of solidarity principle' is that cohesion policy is necessary to protect the solidarity and cohesion of the community of 29 Western European states thereby ensuring the continued growth and prosperity of the European Union. As aforementioned, the intended purpose of cohesion policy is to reduce economic and social disparities between the richer and poorer regions as reducing disparities is a fundamental objective of the European Union. The mechanism of solidarity principle states that, with its goal of reducing regional disparities, cohesion policy acts as a mechanism of solidarity for the entire European Union. Therefore, the desire to reduce regional disparities goes hand in hand with the desire to maintain European-wide solidarity. B y reducing disparities between regions and countries, the European Union on the whole wi l l be on an equal playing field and an equal Europe means a happier and more productive Europe. John Pinder indicates that the "Union wi l l suffer i f there is too much disparity among the states; and the structural funds may have to take at least part of the strain" (Pinder, 2001, p. 88). Accordingly, "by concentrating resources in areas disadvantaged by the single market [and E M U ] the E U aims to underpin the economic growth of the E U and thereby maintain its competitiveness" (Rumford, 2000, p. 34). In other words, Chris Rumford argues, "over the past decade or so, the E U has progressively and systematically redefined competitiveness as a tool of cohesion, and linked cohesion objectives to strategies for economic growth" (Rumford, 2000, p. 3). Therefore, the most fundamental idea behind cohesion policy is to produce a stronger more unified Europe. According to Avery and Cameron, "European-wide solidarity w i l l be needed more than ever i f [the European Community is] to achieve the major objectives of reducing disparities in development, as set out explicitly in Article 130a of the Treaty" on European Union (TEU) (Avery and Cameron, 1998, p. 103). This Article is similar to the 30 preamble of the First Treaty (listed above) but it differs in that it adds 'cohesion' as a key element in the Union's strategy to reduce regional disparities. Article 130a reads: In order to promote its overall harmonious development, the Community shall develop and pursue its actions leading to the strengthening of its economic and social cohesion. In particular, the Community shall aim at reducing disparities between the various regions and the backwardness of the least favoured regions, including rural areas (Article 130a, Single European Act , 1986; reaffirmed as Article 130a of the Maastricht Treaty, 1992). The existence of disparities between member states threatens "the integrity of the single market and E M U as well as being incompatible with the sense of community and solidarity that supposedly infuses the movement for European integration" (Dinan, 1999, p. 430). Subsequently, this thesis contends that cohesion policy is 'a mechanism of solidarity' that in the long run wi l l promote a healthier and stronger union. In short, according to Peterson and Bomberg, structural funds "are a tool to intended to reduce economic disparities by contributing to the development of the poorest regions, but in general 'Community interest' " (Peterson and Bomberg, 1999, p. 149). Therefore, in terms of the larger picture, cohesion policy is intended to be in the best interests of everyone and that being the case, it maintains the solidarity of the community of European states. However, this general Community interest is not always so openly apparent given the aforementioned large amounts of controversy and questions surrounding cohesion policy. Furthermore, the mechanism of solidarity posits that in attempting to reduce or eliminate regional disparities, cohesion policy strives to strengthen the E U because a more powerful E U benefits all the member states involved. The larger and/or wealthier members of the E U wi l l benefit the most because they, after all , hold most of the 31 decision-making power and therefore stand to benefit the most of all from a stronger E U entity. In addition, the larger and/ or wealthier members are structurally best suited to reap the rewards and benefits of further European integration. Accordingly, further integration means that the member states of the European Union are increasingly economically and politically tied to each other through projects such as the S E A and E M U . Therefore, given such interdependence in the E U , it is disadvantageous for the larger members to be politically and economically interconnected with economically less developed countries such as Spain, Portugal, Ireland and Greece. Most of the regions contained within the member states comprising the coalition of smaller powers are underdeveloped and thus the entire economic enterprise of the E U is weakened as a result. Larger and wealthier countries such as Germany, Britain, and France reap the biggest rewards from a stronger E U entity and as such it is more beneficial to them to belong a healthier and stronger union as opposed to a weaker one. As a result, self-interest prompts members of the E U to remain committed to the goal of reducing disparities through cohesion policy and at the same time to maintain the solidarity of the union. Controversial or not, cohesion policy is necessary to maintain the solidarity of the entire European Union thereby ensuring its long-term health. The continual growth of the coalition of smaller power wi l l promote a stronger and healthier union - a union that benefits the entire E U in the long run. Every member wi l l receive greater rewards and benefits from the ideal Europe - a society that is stronger, more unified and highly integrated. In this ideal Europe, every member greatly contributes and benefit from such large- scale integration projects as the single market and Economic Monetary Union. However, for now the coalition of smaller powers is not 32 expected to directly contribute much to the E U as Spain, Portugal, Greece, and Ireland are still considered underdeveloped relative to the rest of the E U . Subsequently, the current goal is not for the members compromising the coalition of smaller powers to directly and substantially contribute funding to the E U but for them to modernize and further their own development in order to 'catch up' to the rest of the E U . A European Union with politically and economically strong participants is a stronger and more unified organization. A s aforementioned, the coalition of smaller powers are not structurally ready to reap the benefits from integration and likewise, they are also not ready to directly contribute anything to the E U . Therefore, compliance or adherence to integration projects such as the single market and E M U is more demanding for the coalition of smaller powers given their structural underdevelopment. Accordingly, cohesion policy acts as the mechanism of solidarity ensuring that the coalition of smaller powers comply with E U policies thereby preserving the harmonious growth of the European Union. A s a result of the need to ensure solidarity, the coalition of smaller powers receives so much aid and financial redistribution in the form of the structural funds or cohesion policy from the larger and/or wealthier members of the European Union. Moreover, the mechanism of solidarity principle asserts that cohesion policy spending is as large as it is because the member states of the E U are individually unable to deal with regional disparities as efficiently or as adequately as the entire European Union. The members comprising the coalition of smaller powers in particular have a much more difficult time alleviating the inadequacies of regions within their boundaries. The E U as a whole has a higher pool of financial resources and is thus better equipped to 33 deal with regional disparities. For instance, H . W . Armstrong argues that each member state has had difficulty at effectively coordinating regional policy due to a different array of organizations; however, by acting as a supranational coordinating agency, the E U can remove these inefficiencies (Armstrong, 1998, p. 366). ' Increased European integration has made it more difficult for the members comprising the coalition of smaller powers to individually compete with the rest of the E U . A s a result, the decision-making bodies of the European Union have needed and continue to need to provide solidarity and the 'mechanism of solidarity' that it has relied on and w i l l continue to rely on is cohesion policy. Like any argument concerning cohesion policy in the European Union, the 'mechanism of solidarity' principle is inevitably subject to criticism. Subsequently, the following sub-section expands the discussion on the 'mechanism of solidarity principle' by simultaneously examining its possible counter-arguments and criticisms. Hypothetical Criticism to the Mechanism of Solidarity Principle Critics would argue against the 'mechanism of solidarity principle' by questioning it on the basis of the vigorous attempts by the national governments of the larger and/or wealthier member states to reduce i f not pull the plug on cohesion policy. After all , it is this same criticism that contributed to the failure of the theoretical literature of realism, intergovernmentalism, and supranationalism in fully account for the existence of cohesion policy. Accordingly, the critics would suggest that cohesion policy is not fulfilling its intended function as a mechanism of solidarity considering that the larger and/or wealthier members of the E U are increasingly in favour of drastically reducing i f 34 not eliminating it entirely. Hence, critics immediately downplay the 'mechanism of solidarity principle' by pointing to all the aforementioned controversy surrounding cohesion policy. Reference to the criticism and controversy surrounding cohesion policy has been made several times and particularly in chapter 2. Notwithstanding, the controversy and criticism wi l l be again be re-examined in the next chapter. Furthermore, critics would claim that cohesion policy is merely a by-product of intergovernmentalism. Accordingly, critics see cohesion policy as promoting intergovermentalist politics rather than enhancing supranational decision-making and further integration. In other words, critics best see cohesion policy as "a series of side payments designed to facilitate intergovernmental package deals related to the advancement of European integration" and that decision-making related to the formulation of cohesion policy remains dominated by high politics and is not indicative of new patterns of multi-level governance" (Peterson and Bomberg, 1999, p. 148). According to the critics, the intergovernmentalist nature of cohesion policy prohibits it from acting as a mechanism of solidarity for the entire European Union. Incidentally, the review of the theoretical literature in the previous section of this chapter already highlighted the failure of intergovernmentalism in accounting for the existence of the European Union's cohesion policy. Yet, the theoretical review also stated that cohesion policy is not entirely a supranational initiative. Subsequently, the mechanism of solidarity principle addresses the critics and at the same time makes up for the limits of theoretical explanations regarding cohesion policy in suggesting that cohesion policy contains both intergovernmentalist and supranationalist elements. The intergovernmentalist and supranationalist elements of the mechanism of solidarity 35 principle w i l l be highlighted as the subsequent sub-section denounces the possible limits associated with the mechanism of solidarity principle. Counter-arguing the Critics There has indeed been a large amount of controversy surrounding cohesion policy but the criticism of that sort should not have any barring on the mechanism of solidarity principle. The 'mechanism of solidarity principle' overcomes its hypothetical criticisms by taking into account the pitfalls associated with cohesion policy. For instance, my mechanism of solidarity principle does not deny that the larger and/or wealthier member states have attempted to curb cohesion policy funding yet it does deny the desire on the part of the larger and/or wealthier members to completely abolish cohesion policy. According to the mechanism of solidarity principle, the larger and/or wealthier members would have already completely pulled the plug on cohesion policy i f that were their intended desire. The largest and/or wealthiest members essentially hold most of the decision-making power in the E U ; therefore, i f they collectively desired to reduce cohesion policy they could technically do so. This is not to say that the larger and/or wealthier countries govern themselves in a dictatorial manner for every decision in the E U is thoroughly debated and negotiated in a democratic fashion. Notwithstanding, the national heads of all the member states of the European Union comprise the Council of Ministers and it is through the Council of Ministers that the largest and/ or wealthiest members have and continue to exert their influence and control over the rest of the E U . Members of the Council of Ministers are "primarily concerned with the impact of policy within their own 36 countries or with the impact of policy on other member states in so far as their own necessary parochial concerns are affected" (Wallace and Wallace, 1996, p. 59). Accordingly, the Council of Ministers is the most powerful institution and those who lead the Council , namely the national heads of the largest and wealthiest member states, ultimately hold the most power within the realm of E U decision-making. John Pinder confirms this in saying that the Council of Ministers is still the most powerful institution (Pinder, 2001, p. 34). Hence, the leaders of the Council of Ministers hold the power to ultimately alter the course of E U initiatives such as cohesion policy. B y collectively choosing not to abolish cohesion policy, the larger and/or wealthier members are actively promoting the health and most importantly the solidarity of the Europe Union. Cohesion policy is a multifaceted initiative that acts as a mechanism of solidarity thereby serving an idealistic and supranational purpose. In other words, cohesion policy ensures solidarity throughout the community of European states. Subsequently, on the whole, economic conditions in poorer E U members such as Ireland, Spain, and Portugal have improved tremendously under cohesion policy. Greece as well has achieved considerable economic growth on the whole thanks in large part to cohesion policy funds. According to the Commission Cohesion Report published at the end 1996, "the four poorest Member States in the mid-1980s—Greece, Spain, Ireland and Portugal—had seen their average income per head grow from two-thirds to three-quarters of the E U average over the following 10 years" (Hall and Rosenstock, 1998, p.636). Table 3.1 illustrates G D P per head in the E U from 1991-2000. The chart displays the steadily increasing growth rates experienced in Ireland, Spain, Portugal, and Greece over that period. 37 Table 3.1 Gross domestic product 1 per head: EU comparison: 1991-2000 Index (EU=100) 1991 1996 2000 Luxembourg 2 161 169 197 Denmark 110 121 119 Irish Republic 77 94 116 Austria 109 112 114 Netherlands 2 104 109 113 Belgium 107 111 107 Germany 107 108 105 Italy 106 104 105 Finland 94 97 104 Sweden 2 106 102 101 France 110 101 101 United Kingdom 97 100 100 Spa in 2 81 79 82 Portugal 2 65 71 73 Greece 61 67 68 7 Gross domestic product at current market prices using current purchasing power standard and compiled on the basis of the European System of Accounts 1995. 2 Figure for 1991 is an estimate. Source: Eurostat Members of the E U want to be committed to reducing regional disparities in the name of promoting a healthier and stronger union, and cohesion policy is best means for doing so. A s a result, cohesion policy w i l l continue to exist as one of the major pillars of European integration. The larger and/or wealthier members w i l l continue to fund cohesion policy because it above all else it acts as a mechanism of solidarity thereby providing the E U with a strong foundation. Subsequently, the European Union w i l l continue to grow and prosper thereby benefiting all its members in the long run. Such an 38 attitude is illustrative of the supranationalist nature of the mechanism of solidarity principle. Given their impressive economic growth rates over the last two decades, the countries comprising the coalition of smaller powers have become avid supporters of cohesion policy. A s wi l l be discussed in greater detail in chapter 4, from the Delors I reform package onwards, the coalition of smaller powers have become dependent on the structural funds. Therefore, the coalition of smaller powers would perceive a sudden removal or reduction of cohesion policy funding as disastrous. Incidentally, such an act may precipitate backlash from the coalition of smaller powers thereby leading to major problems for European Union solidarity and cohesion on the whole. H . W . Armstrong emphasizes the importance of achieving greater social and political 'cohesion' in Europe. Armstrong contends that the member states that feel 'left out' of the benefits of integration resulting from the common market and E M U , namely Spain, Portugal, Ireland, and Greece "are unlikely to cooperate or to embrace the concept of a more united Europe fully" (Armstrong, 1998, p. 366). Maintaining the cooperation of the members comprising the coalition of smaller powers towards furthering European integration is important because dedication to the greater pan European ideal is less strongly perceived in these poorer countries as some kind of a higher normative goal (Hanf and Soetendorp, 1997, p. 190). Instead, aside from perhaps Ireland, the approach to European integration in Spain, Portugal, and Greece is much more pragmatic and thus is, as aforementioned, generated out of intergovernmental self-interest. Cohesion policy compensates the coalition of smaller powers for their structural inability to benefit from the common market and E M U . The money received from 39 cohesion policy funding, as aforementioned, has aided in the improvement of economic conditions in each of the member states comprising the coalition of smaller powers. A s a result, cohesion policy funding has appeased the coalition of smaller powers thereby ensuring their dedication to the greater pan-European ideal and thus preserving the harmonious development of the union. More specifically, cohesion policy has ensured the compliance of the poorer members to upholding the conditions of the single market and E M U . Incidentally, the popularity of cohesion policy among the coalition of smaller powers suggests that cohesion policy acts as the glue holding together the entire Community thereby maintaining the solidarity of the European Union as a whole. In other words, cohesion policy is a mechanism of solidarity. The compensatory nature of cohesion policy testifies to its intergovernmenalist elements as cohesion policy is seen as a series of side payments from the rich to the poor aimed at inducing the poor to go along with the larger and/or wealthier power agenda. Domestic pressures as well as the financial mismanagement of funds and/or corruption have prompted the larger and/or wealthier member states to openly question the validity of the structural funds; nevertheless, this has not been enough to get rid of them entirely. Cohesion policy may be controversial but as aforementioned, it appeases the coalition of smaller powers thus keeping its members focused on the goal of economic modernization thereby promoting a healthier and stronger union of European states. Withdrawal of the funds may induce backlash from the coalition of smaller powers thus harming the integration process. So much aid and financial redistribution in the form of cohesion policy is granted to the coalition of smaller powers in return for the successful fulfillment of E U obligations and E U standards thereby preserving the 40 solidarity and harmonious development of the community. In this regard, Peterson and Bomberg put it best in saying that "cohesion policy is a political tool: without it, package deals would be harder to broker and poorer member states less wil l ing to bear the harsh economic sacrifices that certain economic policies (such as E M U ) may require" (Peterson and Bomberg, 1999, p. 149). In sum, cohesion policy is set by a broad and diverse set of actors motivated by the desire to maintain solidarity within the European Union. Accordingly, the mechanism of solidarity principle asserts that cohesion policy is more like a series of intricate political cards than anything else. The larger and/ or wealther member states play these political cards as a means of achiever greater political, economic, and social ends. Incidentally, Liesbet Hooghe argues that cohesion policy is the flagship in what is known as the European model of regulated capitalism (Borras and Johansen, 2001, p. 45). For instance, as aforementioned, cohesion policy compensates the coalition of smaller powers for their structural inability to benefit from European integration. Therefore, cohesion policy is also an important corrective to the policies of S E U or the single market and E M U as the structural funds work to support the market (Ibid, p. 45). Subsequently, cohesion policy acts as a mechanism of solidarity thereby preserving the commitment of every member state for further integration and sustained economic growth. A s a result, in the name of solidarity, the coalition of smaller powers has received and continues to receive so aid and financial redistribution from cohesion policy. Ever since the Delors I reform proposal in 1988, it has been the Commission who has ensured that cohesion policy has acted as a mechanism of solidarity and for its part, cohesion policy has guaranteed a greater role for the Commission within the decision-making realm of the 41 European Union. The following section examines the Commission's role in chartering the course of cohesion policy. JH: T H E R O L E O F T H E C O M M I S S I O N The Commission led by Jacques Delors introduced cohesion policy (the history and development of 'cohesion' in the E U wi l l be discussed in greater detail in chapter 4) as the driving force behind the European Union's attempt to eliminate or at the least reduce regional disparities. For these efforts, the Commission has often been referred to as the 'motor of the Community' or the 'motor of integration'. A s the case studies from Delors I to Agenda 2000 wi l l demonstrate in the following chapter, the Commission together with the coalition of small powers has transformed economic and social cohesion into one of the primary objectives of the European Union (Rumford, 2000, p. 1-2). For instance, as aforementioned, cohesion policy or regional aid represent a third of community spending (Keane, 1999, pp. 116-117). Hence, aside from being a mechanism of solidarity, cohesion policy has generated so much aid and financial redistribution for the coalition of smaller powers due to the Commission's influence behind the initiative. Subsequently, in return, cohesion policy guarantees a greater role for the Commission within the political realm of the European Union. The Commission is a major E U governing institution but cohesion policy nonetheless serves to strengthen the role and influence of the Commission within the policy and decision-making circles of the European Union. In his book titled Ever Closer Union: An Introduction to European Integration, Desmond Dinan, asserts that the Commission is "often described as the E U ' s executive 42 body, yet it has only limited authority and autonomy to execute E U policy" (Dinan, 1999, p. 223). Similarity, in his book titled The Government and Politics of the European Union, Ne i l l Nugent posits: "Frequently portrayed as the c iv i l service of the E U , in reality the Commission is rather more and rather less than that: rather more in a sense that the treaties and political practice have assigned to it much greater policy-initiating and decision-making powers than those enjoyed, in theory at least, by national c iv i l services; rather less in that its role in policy implementation is greatly limited by the fact that agencies in the member states are charged with most of the E U ' s day-to-day administrative responsibilities" (Nugent, 1999, p. 101). The aforementioned quotes depict the Commission as an inferior or lesser player in terms of the decision makers of the E U . In a traditional or theoretical sense, the Commission lacks real decision-making power because anything it initiates may technically be overturned by the Council of Ministers. According to John Pinder, the Treaty of Rome gives the Commission the sole right of legislative initiative, that is, to propose the texts for laws to the Parliament and the Council . The aim was to ensure that the laws would be based "more on a view of the general interests of the Community and its citizens than could result from initiatives of the member state governments and that there would be more coherence in the legislative program than they or the Councils with their various functional responsibilities could provide" (Pinder, 2001, p. 48). A n addition to this traditional definition is the intergovernmentalist suggestion that the Commission is nothing more than a pawn of the national executives of the member states. Accordingly, intergovernmentalism posits that the success and influence of the Commission is dependant on the good graces of the national heads. Correspondingly, by this logic, any success that the Commission may have is complimentary to serving the best interests of 43 the individual member states. However, it has become increasingly apparent that this is not the case. The role and the structure of the Commission have steadily changed over the last fifty plus years of integration. Today, the Commission is responsible for initiating and drafting proposals for new laws and policies upon which the final decisions are taken by the Council of Ministers in a complex interaction with the European Parliament (Jones, 1985, p. 8). Another key role of the Commission is to act a brain trust or think tank in order to prepare future tasks and constitutional changes for the E U . The Commission is also the chief trade negotiator of the European Union. In addition, the Commission has been the decision-taker in competition policy and has been the policy-manager in determining pre-accession assistance to the countries of central and Eastern Europe. The creation and growth of cohesion policy thus highlights one of the Commission's several successes. Notwithstanding, cohesion policy is a major cornerstone of the Commission; it continually strengthens the role of the Commission, as this section wi l l proceed to demonstrate. Thomas Christiansen contends that cohesion policy has clearly been the Commission's hallmark or its claim to success (Christiansen, 2001, p. 96). Many argue against this statement suggesting that the Commission is responsible for several tasks that are more important than cohesion policy such as the initiating and drafting of new laws and regulations. Nevertheless, most wi l l contend that cohesion policy is important to the Commission and I agree as I argue that it guarantees a role for the Commission in the face of its declining powers relative to the European Parliament and the European Council . Cohesion policy is the brainchild of Commission President Jacques Delors and 44 the Commission has vigorously defended it ever since the arrival of Jacque Delors in 1980 and particularly since the successful introduction of the Delors I package in 1988. A s wi l l be demonstrated in the next chapter, Delors I is the first true initiative that established and molded cohesion policy into one of the major pillars of the European Union. Meanwhile, the growth and expansion of cohesion policy has led to a subsequent growth in the importance of the role of the Commission within E U circles. For instance, the Delors I reforms "enhanced the position of the Commission, which now had the power to designate the regions that would be eligible for assistance under the different objectives" (Peterson and Bomberg, 1999, p. 151). Cohesion policy is the birth-child of the Commission and the Commission has remained its defender amidst all the controversy surrounding it. Cohesion policy is "now characterized by complex patterns of interaction between local, regional, national, and supranational levels of government and between private and public actors at each of these levels" and the Commission is in charge of overseeing all of this interaction (Borras and Johansen, 2001, p. 42). Incidentally, the Commission has had to "possess technical expertise in almost every area of government activity as well as an astute awareness of the politics of these issues" (Christiansen, 2001, p. 96). Subsequently, the Commission has enjoyed a "monopoly of initiative on the institutional design of cohesion policy" (Borras and Johansen, 2001, p. 162). Cohesion policy lacks a regular council and thus the Commission has naturally stepped in and has taken a prominent role in that regard. Accordingly, the Commission has familiarized itself with the 'ins and outs' of cohesion policy and has thus fulfilled a leadership capacity in this policy field. As cohesion policy lacks a regular council, the 45 councils examining it under any given time play a "primarily reactive role, responding to the institutional designs drawn up by [above all], the Commission" (Peterson and Bomberg, 1999, p. 158). These councils often lack the information or knowledge concerning cohesion policy and thus must rely on the guidance of the Commission. For example, Peterson and Bomberg indicate that a "member of the Regional Commissioner's cabinet complained that ministers on the various councils 'know very little about cohesion' and about Objective 1 (Ibid, p. 158). Likewise, it is the Commission who is responsible for bargaining with the member states to decide which regions within Europe are eligible to receive cohesion policy funding. Problems arise as many regions apply regardless of whether or not they are in fact poor by E U standards (Ibid, p. 162). Accordingly, the Commission is responsible for deciding which regions are eligible and which are not. The Maastricht Treaty, or the treaty on European Union (TEU) in February 1992 incorporated both European Political Union (EPU) and Economic Monetary Union and in doing so, the profile of cohesion policy and the profile of the Commission immediately rose. B y bringing the European Community ever closer together, T E U "elevated the political preoccupation with economic disparities into a 'cohesion and solidarity principle' of the Union (Borras and Johansen, 2001, p. 42). Accordingly, T E U established cohesion policy as one of the three main pillars of the European Union alongside the two most significant integration projects, the single market and the E M U . A s a result, as cohesion policy grew in importance as it further became embedded with the Commission and further raised its profile. Subsequently, cohesion policy has essentially become a top priority of the E U Commission because as the cohesion policy 46 grows, so does the role of the Commission. Therefore, I posit that in addition to the mechanism of solidarity principle, the coalition of smaller powers receives so much aid and financial redistribution in the form of cohesion policy despite the vast criticism surrounding it because it guarantees a greater role for the Commission. A s aforementioned, the Commission plays a large role in shaping cohesion policy. Accordingly, since it continually benefits from cohesion policy, the Commission continually works to maintain cohesion policy's role as a mechanism of solidarity thereby ensuring that the coalition of smaller powers wi l l continue to receive large amounts of funding. Despite its impressive growth in importance over the years, the powers of the European Commission have declined in relative terms as those of the European Parliament and the European Council have grown (McCormick, 1999, p. 17). Crit icism surrounding the Commission's role within the E U further jeopardizes its position. This criticism became apparent during the debates building up to the Maastricht and Amsterdam treaties. These debates were centered upon the alleged 'excessive' policy-making role of the E U in general and of the Commission in particular" (Richardson, 2001, p. 4). Accordingly, Agenda 2000 "implies a reduction in the scope of E U cohesion policy and the Commission's role within it" (Peterson and Bomberg, 1999, p. 171). Hence, given such threats to its position, the Commission w i l l in part rely on cohesion policy to help it maintain its importance in E U decision-making circles. Cohesion policy is able to ensure that the Commission remains an important force because the two are closely linked. Solidarity is increasingly important to the European integration and as an important mechanism of solidarity, cohesion policy wi l l continue to 47 exist as a major pillar of the European Union. Subsequently, the continued importance of cohesion policy to the long-term health and growth of the European Union means that the Commission wi l l continue to play a large role within E U decision-making circles. Hence, cohesion policy guarantees a greater role for the Commission. For its part the Commission continually promotes the long-term viability of cohesion policy as a mechanism of solidarity by working to ensure that the coalition of smaller powers continues to receive such large amounts of direct regional aid and financial redistribution from cohesion policy. The most forceful Commission President Jacque Delors himself even once exclaimed that "the Commission itself cannot achieve much but it can generate ideas" (Dinan, 1999, p. 235). However, as the defender of cohesion policy, the Commission has been rather influential. Ever since all that controversy surrounding the Commission as well as the controversy surrounding cohesion policy has emerged, the Commission has felt threatened and has safeguarded itself behind its defense of cohesion policy. Through Agenda 2000, the Commission strives for cohesion policy to be more important than ever as a mechanism of solidarity within the political, economic, and social framework of the E U . Particularly with the impending enlargement from Eastern Europe, the Commission asserts, "economic and social cohesion should be taken into account more than ever in the formulation and implementation of every Community policy" (Avery and Cameron, 1998, p. 152). The impact of Eastern enlargement on cohesion policy w i l l be discussed further in chapter 4. The preservation and the strengthening of the structural regional fund or cohesion policy guarantees a greater role for the Commission despite the rest of the pan-European 48 institutions becoming more powerful and significant and as their evolution slowly builds a confederal Europe (McCormick, 1999, p. 87). In a wider and deeper Europe, the Commission's "role as defender of the Community interest w i l l be even more decisive than in the past [and to] succeed, it must reorganize and modernize" (Avery and Cameron, 1998, p. 106). This recommendation is made more apparent as the Commission is often and increasingly criticized or portrayed as an illegitimate institution as its officials are not elected and hence lack accountability. After all, member states clearly still dominate the decision-making over E U initiatives but "decision-making concerning the management of cohesion policy guarantees a strong role for the Commission and sub-national authorities ( S N A ' s ) " (Peterson and Bomberg, 1999, p. 148). Cohesion policy works towards building a bridge between multi-level governance and state-centric governance for it has involved S N A ' s in the E U decision-making process like never before seen (Peterson and Bomberg, 1999, p. 170). In addition, the creation of the "Committee of the Regions by the Maastricht Treaty as a new European institution has also contributed to the establishment of a multi-level European polity and to a widening of the debates about cohesion politics" and subsequently the role of the Commission (Borras and Johansen, p. 52). Moreover, the Commission has an important ally in the form of the coalition of smaller powers. Wi th the coalition of smaller powers as an ally on the issue of cohesion policy, the Commission definitely plays a prominent role in E U decision-making. In fact, the Commission plays a big role as a mediator between both sides (the larger or wealthier members versus the smaller or poorer members) with regards to the issue of cohesion policy. A s mediator, the Commission attempts to find a comparable solution with which 49 both sides are wil l ing to accept. Even though the Commission ultimately favours the strengthening of cohesion policy, it nonetheless has acted as mediator. Likewise, Thomas Christiansen agrees with this statement in asserting that beyond initiating E U legislation, "the Commission functions also include the mediation - even manipulation -of member state positions during the decision-taking phase of the policy process" (Christiansen, 2001, p. 96). The Commission is manipulative in the sense that it has always been bias as it pursues the strengthening of cohesion policy thereby guaranteeing a stronger role for itself with the realm of decision-making in the European Union. Its role as mediator with regards to cohesion policy is yet another key duty in the repertoire of the Commission as it seeks to maintain and expand its role or importance in terms of E U decision-making. The desire to guarantee a role for itself on the part of the Commission is very significant because in the process of constructing a fully integrated Europe in a federal or confederal sense, the different E U institutions are found competing with one and other. This is the case because " E U institutions are caught in a web of competing national interests [coupled with the] conflicting forces of intergovernmentalism and supranationalism"; in short, the E U institutions are being pulled in different directions (McCormick, 1999, p. 88). In an arena of such competition, the Commission, like its counterparts (i.e. the Council of Minister and the European Parliament), looks to protect and enhance itself. Cohesion policy gives the Commission a major role because of its perceived importance to European integration as a mechanism of solidarity. The Commission and cohesion policy may be seen as major tools of further European integration. E U institutions do not amount to a government in the conventional 50 sense of the word because member states still hold most of the decision-making powers and are still responsible for implementing E U policies. The Commission works in the general interest of the European Community and must take an oath to this (Pinder, 2001, p. 49). Members of the Commission are required to "become custodians of the 'European interest', curtailing their ties of loyalty to their own national governments" (Jones, 1985, p. 7). The idea is, that once one becomes a part of the Commission, his or her nationalist interests or national identity is to be put aside in favour of a pan European ideal. Accordingly, the Commission hopes to change the intergovernmentalist tendencies surrounding the E U , and cohesion policy is one of its principle vehicles of change. Subsequently, it has been suggested that cohesion policy is a "political rather than economic exercise" (Peterson and Bomberg, 1999, p. 148). In other words, cohesion policies' political implications are much more significant than its economic ones. Cohesion policy has great economic applications but even greater political underpinnings. Accordingly, the structural funds "have had the political effect of binding together the union, even though they are far too small to have their desired economic effect" (Peterson and Bomberg, 1999, p. 149). Economically, cohesion policy aims to satisfy the coalition of smaller powers by redistributing regional aid without any string attached their way. A s aforementioned, cohesion policy has helped reduce the income gap between the poorer and richer members of the E U . Aside from its economic ambitions, cohesion policy is perhaps more significant in terms of its political implications. Accordingly, Peterson and Bomberg contend, "cohesion policy means have been more important than policy ends" (Peterson and Bomberg, 1999, p. 149). In other words, the economic ends 51 of cohesion policy are less significant than are its political implications. Politically, through the vision of the Commission, cohesion policy acts a mechanism of solidarity thereby continually working to unite and integrate Europe. Simultaneously, through its continuous support of cohesion policy, the Commission aims to grow and expand its reach and guarantee a greater role for itself. The Commission is constitutionally limited but it has expanded itself and hopes to further continue expanding itself; its support of cohesion policy is an important step in that direction (Christiansen, 2001, p. 96). The principles of concentration and partnership associated with cohesion policy have allowed the Commission to work closely with regional authorities, often bypassing national governments. The Commission uses these contacts to "act as a lever for regions that are not yet traditionally recognized" and to promote the emergence of new 'Euroregions' that straddle national frontiers" (Dinan, 1999, p. 233). "Advocates of multi-level governing have argued that the way the structural funds are managed has led to a situation in which the autonomy of central governments is challenged by the Commission and by sub-national authorities" (Peterson and Bomberg, 1999, p. 165). Accordingly, a growing Commission ultimately means or results in a more politically and economically integrated Europe because of its pan European outlook. The Commission 'epitomizes supranationalism'; according to McCormick , the Commission is clearly the "most supranational of the E U institutions, and has long been at the heart of the process of European integration" (McCormick, 1999, p. 88). Likewise, Avery and Cameron posit that the priority goal of the Commission is the pursuit of economic and social cohesion (Avery and Cameron, 1998, p. 106). However, even though the Commission has often been described as the E U ' s executive body, it has only 52 limited authority and autonomy to execute E U policy (Dinan, 1999, p. 223). According to Pinder, the "Commission has performed its legislative role quite well [but] its performance as an executive has been heavily criticized" (Pinder, 2001, p. 51). Hence, cohesion policy guarantees a role for the Commission even though it faces such criticism. The Commission is an anomaly unique only to the governing structure of the European Union (Dinan, 1999, p. 205). Its members are appointed by national governments but they are pledged to serve E U interests as opposed to the interests of individual member states. A s such, the Commission can best be accurately and informally described as the 'motor' of European integration, "not only because of its almost exclusive rights to initiate policy in the first pillar but also because of its history, composition, culture, and European rather than national outlook" (Dinan, 1999, p. 224). The primary function of the Commission is synonymous with the primary objective of the structural regional fund or cohesion policy. The Commission encourages member states to harmonize their laws, regulations and standards in the interests of removing barriers to trade and unifying Europe (McCormick, 1999, p.88). Accordingly, cohesion policy is a mechanism of solidarity for the long- term health and growth of the union thereby promoting the harmonization of laws, regulations, and standards across all the member states. In its support of cohesion policy, the Commission guarantees a role for itself while simultaneously working towards increasing its position vis-a-vis the rest of the European institutions. Notwithstanding, for now, cohesion policy represents a large source of the Commission's executive muscle. As aforementioned, the Commission and the coalition of smaller powers have allied in their defense of cohesion policy. Accordingly, large 'donor' member states 53 often complain about how "smaller member states have a tendency to latch on to the Commission" (Peterson and Bomberg, 1999, p. 158). Without the Commissions support, the coalition of smaller powers alone would be hard pressed to defend the virtues of cohesion policy and vice versa. In other words, without the support of the Commission, cohesion policy may not have become one the main pillars of European integration. A t the same time, cohesion policy has provided the Commission with the opportunity to expand its profile. The Commission and cohesion policy grew up together and seemingly are dependant upon one for their continued growth. Incidentally, since the structural funds are continually sought after by the coalition of smaller powers and are defended by a determined Commission, it is should come as no surprise as to why the coalition of smaller powers receives so much aid in the form of the structural regional fund. Therefore, aside from acting as a mechanism of solidarity, cohesion policy guarantees a greater role for the Commission and its supranational decision-making thereby promoting the long-term health of the process of European integration. 54 Chapter 4 Application Cases: Delors I, Delors II, and Agenda 2000 The previous chapter presents the general model and main arguments as to why the coalition of smaller powers receives so much aid and financial redistribution in the form of the structural regional fund from the larger and/ or wealthier members of the E U given the large amounts of unpopularity and criticism facing cohesion policy. It focuses on two core hypothesizes: the first is referred to as the mechanism of solidarity principle while the second hypothesis argues that cohesion policy guarantees a greater role for the Commission. This chapter sets out to prove through empirical cases the model and arguments presented in chapter 3. Accordingly, this chapter dives into the history, development and politics of cohesion policy by exploring three case studies. In exploring the cohesion policy reform packages known as Delors I, Delors II, and Agenda 2000, this chapter wi l l examine what each member state wanted, what the Commission wanted, and what actually happened. Hence, the case study analysis w i l l open the black box and study how the actors fought indicating who gained and who lost from the reforms in particular and from cohesion policy in general. The examination of the case studies proceeds in the following five steps: the first step provides an overview pertaining to the roots of 'cohesion' in the European Union. This section wi l l outline the steps leading up to Delors I and the subsequent establishment of cohesion policy. The next three steps wi l l present each of the case studies respectively. A s the case studies from Delors I to Agenda 2000 wi l l demonstrate, the Commission with the assistance of the coalition of small powers has transformed 55 economic and social cohesion into one of the primary objectives of the European Union (Rumford, 2000, p. 1-2). The fourth step and final section wi l l analyze the collective effects of three case studies examined in the previous sections. In total this chapter traces the development of cohesion policy from its premature birth in 1975 to the present day. T H E P R E C U R S O R T O C O H E S I O N P O L I C Y Regional disparities have been a feature of the European Community immediately from the start. The issue rose to prominence with the second and third enlargements, which saw the poorer Southern or Mediterranean states, namely Greece, Spain, and Portugal, join the European Community. The entry of these poorer countries greatly exacerbated regional disparities within the Community. Incidentally, cohesion policy emerged as the means by which regional disparities would be reduced. This section explores the roots of 'cohesion' in the European Union. The first official steps towards the development of a policy on 'cohesion' were initiated in 1974 with the introduction of the European Regional Development Fund (ERDF) . Although the E R D F did not have a drastic and immediate impact on the European Community, it is significant nonetheless. The E R D F introduced an "integral part of the E U ' s policy for dealing with the effects of structural changes which inevitably accompany integration" (Armstrong, 1998, p. 378). Consequently, the E R D F laid the foundation for cohesion policy; it forms part of the structural funds and the E A G G F (European Agricultural Guidance and Fund) along with the E S F (European Social Fund) and the F I F G (Financial Instrument for Fisheries Guidance) (Borras and Johansen, 2001, p. 41). The E R D F thus established the necessary groundwork paving the way for the 56 emergence of the Godfather of cohesion - Jacques Delors - and his groundbreaking Delors I package. The E R D F set up a fund for the reduction of regional disparities, determined a budget for 1975-1978, and established a set of national quotas to determine the division of funds among the member states (Peterson and Bomberg, 1999, p. 150). In principle, the E R D F "awards grants to public or private organizations in depressed or underdeveloped regions for industrial or infrastructure investment (Keating, 1985, p. 14). Incidentally, the E R D F itself appeared to be a groundbreaking project with regards to cohesion but the European Community and the process of European integration did not yet demand a major cohesion policy. In 1974, regional disparities certainly existed but they were definitely not an issue of pressing and immediate concern. I have deduced three main reasons as to why this was the case. The first factor suggests that regional disparities on the whole at that time were not substantial enough to quantify a major or substantial effort at really reducing or alleviating the problem. Aside from Ireland, the nine member states at the time were fiscally able to compete within the economic context of that European Community. Notwithstanding, certain regions within existing member states were much poorer than others. The Italian south for instance, featuring Calabria and Sicily, as well other regions such as the Hainaut region in Wallonia, Belgium were definitely uncompetitive and well below the G D P average of other regions belonging to the European Community. The European Community recognized the existence of these poorer regions; nevertheless, the regional disparity gap was not high enough to attract serious attention from European decision-makers. Hence, the E R D F was not a major policy on 'cohesion'. 57 Desmond Dinan indicates that "protocol 30 of Ireland's accession treaty (1972) emphasized the need to end regional disparities in the E C , but the European Regional Development Fund (ERDF) was established only in 1975, largely to compensate Britain for its poor return from the C A P " (Dinan, 1999, p. 431). Such an assertion demonstrates that eliminating regional disparities was nowhere near the top of the European Community's political agenda and thus was not yet an uncompromising problem. Hence, the motives behind the E R D F were in part due to a desire for 'cohesion' but were primarily the result of Britain getting a raw deal from the Common Agricultural Policy (CAP) . Britain is a big N E T contributor of the C A P and as such, rather than acting as a significant policy on 'cohesion', the E R D F was seen as an attempt to appease Britain by assisting it in the development of its poorer regions (Pinder, 2001, p. 84). Furthermore, the second reason or factor for the relative ineffectiveness of the E R D F pertains to its timing. The E R D F was introduced at a low point in the history of European integration and it inevitably suffered as a consequence of that. The 1970s can be characterized as the slow period of European integration as the entire process appeared to come to grinding halt. Member states were unwilling to surrender state sovereignty in favour of further integration and as a result the European Community failed to grow and expand as a unit. Under such adverse conditions, the E R D F was doomed before it even got off the ground. The third and final factor deals with the role of the Commission. A s aforementioned, with regards to the institutions of the E U , the Commission is by and large the main proponent of cohesion policy. Cohesion policy has developed into one of the main pillars of European integration largely due to the efforts of the Commission. In 58 the face of opposition from the authorities representing the larger and/or wealthier members, the Commission was the driving force behind cohesion policy. Inversely, as previously mentioned, cohesion policy guarantees a greater role for the Commission. However, prior to the 1980s and the emergence of Jacques Delors as Commission President, the Commission played a less significant role in E U decision-making. Hence, without a proactive and influential Commission on its side, the E R D F did not amount to much. Current cohesion policy goes as the Commission goes; this relationship simply did not exist upon the introduction of the E R D F , as the Commission had not yet established itself as an influential European institution. A s a result of all these factors, the E R D F existed but did not have any weight or authority behind it. In theory, the E R D F was designed to alleviate regional disparities but in practice, it accomplished very little in that regard. Conditions with the European Community began to change towards the 1980s thereby leading to a drastic increase in demand for regional aid; two main factors are responsible for this increase. The first factor pertains to the emergence of Jacques Delors as Commission president whereas the other factor pertains to the second and third enlargements of the European Community. Upon taking office, Jacques Delors immediately "signaled the enhanced importance of structural policy during his administration" (Dinan, 1999, p. 432). With his guidance and tutelage, the Commission gained a more prominent role in E C decision-making. Delors was an idealist who deeply believed in the idea of solidarity. He was dedicated to the idea of solidarity and demonstrated this ambition by traveling to the capital of every member state of the European Community in efforts to sell what 59 eventually became known as the Delors I reform package. Under Delors' leadership, the Commission developed an immediate political mandate to reduce regional disparities. Meanwhile, the second and third enlargements eventually and subsequently gave the Commission the political cause or political raison d'etre (means) to act. The addition of the poorer southern states, Greece in 1981, and Spain and Portugal in 1986, suddenly placed regional disparities at the front and center of the European Community's political agenda. European decision-makers could no longer avoid the question of regional differences because the accession of Greece, Spain, and Portugal introduced three countries that on the whole were substantially poorer than rest of the E C ' s member states aside from perhaps Ireland (Ireland is considered a poorer member state but it has made remarkable economic strides). Subsequently, the second and third enlargements significantly increased the regional disparity gap as the European Community now consisted of many more regions falling far below the average G D P per capita of the entire Community. The Commission's program for 1985 "cautioned that regional disparities could become a permanent source of political confrontation and urged that the south be given a fairer share of the benefits of economic development" (Dinan, 1999, p. 423). When Spain, Portugal, and Greece joined the Community "their average incomes were far below those of the other member states save Ireland, which before its phenomenal growth in the 1990s contained similar G D P per capita levels as the southern members. Incidentally, the coalition of smaller powers led by Spain demanded a major increase in regional assistance from the levels established by the E R D F (Pinder, 2001, p. 85). Hence, southern enlargement became the political instigator or the fuel for the major 60 restructuring of regional aid policy and the new Commission under Jacque Delors ignited this fuel. The combination of these two forces or factors culminated in the first of three major initiatives that have molded cohesion policy into what it is today. The first initiative is marked by the 1988 reforms otherwise known as Delors I. Prior to Delors I, the main precursor towards the establishment of a significant cohesion policy occurred with the introduction of the Single European Act (SEA) in 1986. A s aforementioned, European integration lost its momentum during the 1970s and "al l the governments [of the member states] accepted the single market project as a way to break out of what was then called eurosclerosis" (Pinder, 2001, p. 22). Hence, the S E A marked a decisive turning point in the history of the Community as it committed the twelve members (including the new southern states) to the single market and extended qualified majority voting ( Q M V ) in the Council of Ministers (Richardson, 2001, p. 40). When the Community was enlarged in 1981 to include Greece and, in 1986 Portugal and Spain (all three of which had been ruled by authoritarian regimes), these three poorer Southern European countries regarded the Community as a great support base for their democratic development as well as for their economic modernization. In return, the rest of the Community sought the support of these new members for larger integration projects, such as the single market (Pinder, 2001, p. 25). Accordingly, Sir Wi l l i am and Trevor C . Salmon validly assert that "cohesion was a euphemism for side payments to the less well-off Member-States, including the new members, Spain and Portugal, who could not expect to do as well as the others from the opening-up of the big Single Market" (McKay, 1999, p, 279). Incidentally, the creation of a single market had the affect of exacerbating regional disparities. 61 The single market immediately placed the poorer southern member states along with Ireland as well at a competitive disadvantage thus widening the gap between the richer and poorer member states as well as the richer and poorer regions. Such a trend prompted the European Community to act against the problem of regional disparities. Therefore, the complications caused by the S E A pertaining to regional disparities greatly prompted an increase in initiatives designed towards developing a significant policy on cohesion. Notwithstanding, the S E A recognized that economic and social cohesion was an essential part of the completion of the single market (Bachtler, 1998, p. 647). A completed single market translated into a healthy and continually growing European Community in the long run. The objective of economic and social cohesion, "the desire to reduce disparities between the various regions of the Community, was introduced by the Single European Act as an essential compliment to the single market" (Keane, 1999, p. 116). A s such, "it was to this end that cohesion policy, based on a doubling of the structural funds for assisting the development of economically weaker regions, was included in the Single A c t " (Pinder, 2001, p. 25). The S E A mentions cohesion as one of its goals and it officially introduced to the Community lexicon the expression 'Economic and Social Cohesion', inscribed in a new Title V (now XVII ) (Nicoll and Salmon, 2001, p. 278). Subsequently, with the S E A , a constitutional base had been formed thereby paving the way for the creation of a significant policy with regards to 'cohesion' in the European Community. Hence, the S E A did not directly increase cohesion funds but it nonetheless laid the foundation for the first of three major policy packages that shaped cohesion policy into what it is today. The structural funds established by the E R D F and extended 62 on to the S E A were rather insignificant. However, they laid the groundwork for a major expansion in regional aid spending as the European Community expanded southwards throughout the 1980s thus setting the framework for the emergence of the Delors I reform package. D E L O R S I The Delors I reform package was finalized in February of 1988 and it would dramatically alter and shape the future of 'cohesion' in the European Community. In other words, the 1988 reform of the Structural Funds heralded a revolution in European Communities regional policy (Bachtler, 1998, p. 647). As a result, cohesion policy was officially introduced in 1988 with the adoption and implementation of the Delors I reform package named after then Commission President Jacques Delors. The 1988 reforms sprung from increasing pressures within the European Community to alleviate regional disparities in the second half of the 1980s in the wake of the second and third enlargements as well as in the wake of the introduction of the single market under S E A . Such pressures prompted the Commission and its leader Jacques Delors to take on the responsibility of devising a solution towards reducing regional disparities thereby protecting or promoting the cohesiveness and solidarity of the Community. Subsequently, the Commission felt that the development of a coherent and forceful cohesion policy would be the best means of reducing regional disparities thereby providing the Community with cohesion and solidarity. The proposed Delors I reform packages intended to do just that as it sought to establish a competent cohesion policy 63 and solidify it over the next five years until which time it would be renewed through updated reforms. The Delors I package was adopted as policy at the 1988 Brussels summit and upon implementation of the reforms, cohesion policy immediately became the dominant regional policy for all the members of the European Community. Incidentally, the political priority attached to the reforms was to improve socio-economic cohesiveness and this is underpinned through the support of weaker regions and/or weaker members (Hall and Roenstock, 1998, p. 636). Hence, by supporting weaker regions cohesion policy intended to act as a mechanism of solidarity whereby the cohesion of the entire European Community would be protected thereby promoting long-term growth and stability. Therefore, in order to provide this solidarity and cohesion and subsequent long-term growth and stability, John Pinder among others asserts that firm financial measures and firm financial control had to be established. The European Council agreed in 1988 on a package of measures proposed by Delors, which introduced a 'financial perspective' setting limits for the main headings of the Community's expenditure during the five years 1988- 1992" (Pinder, 2001, p. 81). The financial perspective was subject to reforms and renewal in 1992 as changes in the European socioeconomic environment dictate. The discussion and impact of these socioeconomic changes wi l l be highlighted in the following section as this paper explores the Delors II reform package. The Commission took the lead role in drafting financial measures and thus initiating the 'financial perspective' for cohesion policy. Despite the Commissions lead role in initiating financial terms, the ultimate say belonged to the European Council with regards to cohesion policy or any other policy that involved the 64 allocation of funds from the E U budget for that matter. Accordingly, during Delors I, the Commission was repeatedly criticized for "its inconsistent and opaque approach to financial allocation, program approvals and management, and its use of Community initiatives" (Bachtler, 1998, p. 648). Notwithstanding this criticism, the Commission has been the main proponent of cohesion policy from Delors I onwards and as cohesion policy continually grows in importance as a mechanism of solidarity, a greater role for the Commission is guaranteed. Prior to Delors I, there was no substantial European-wide financial aid package aimed at reducing poverty levels in certain regions as the member states themselves were responsible for dealing with regional inequalities within their own borders. A s aforementioned, Delors I created cohesion policy thereby altering the nature of regional aid in Europe. Thenceforward, the European Community would be responsible for reducing European-wide regional disparities thereby infusing the Community with a new sense of solidarity and cohesion through direct financial action. The 1988 reforms doubled the allocation of regional aid funds established by the E R D F and strengthened the redistributive nature of the European Community (Borras and Johansen, 2001, p. 42). The aim of the Community, however, was not just to redistribute money but also, to improve economic performance in the weaker parts of the Community's economy (Pinder, 2001, p. 84). These increased funds were to be distributed to the poorer regions of the Community; these regions are primarily concentrated within the four poorer member states of the Community namely, Spain, Portugal, Greece, and Ireland. The primary component of cohesion policy is the structural regional funds "aimed largely at helping regions suffering from low gross domestic product (GDP), high 65 unemployment, or industrial, or agricultural decline" (Peterson and Bomberg, 1999, p. 146). The structural funds already existed prior to Delors I but they did have strong financial and political backing. However, the structural funds established under the E R D F were adopted into cohesion policy and subsequently strengthened by the Delors I reforms. Incidentally, the structural funds under Delors I became the driving force or financial instrument behind cohesion policy. They are essentially direct cash with 'no strings attached' given to the least prosperous regions in order to directly and immediately assist them with their economic development. Delors I established cohesion policy as a credible aspect of the European Community by revamping cohesion policy's formulation and implementation (Peterson and Bomberg, 1999, p. 150). In addition, as aforementioned, Delors I "enhanced the position of the Commission, which now had the power to designate the regions that would be eligible for assistance under the different objectives" of the reform package. Therefore, beginning at Delors I and thereon afterwards until the present day, the Commission became the driving force behind cohesion policy amidst tremendous opposition from the larger and/or wealthier member states. Delors I is characterized as a five year budgetary package beginning in 1988 and in addition to the strengthening of the structural funds it intended to "control agricultural spending, increase the E C ' s own resources, and impose budgetary discipline" (Dinan, 1999, p. 433). Therefore, cohesion policy encompasses regional policy (to reduce spatial disparities, regenerate old industrial areas, and assist rural development), aspects of social policy (to combat long-term unemployment and foster vocational education and training), and a small part of the Common Agricultural Policy (to assist rural development) (Dinan, 66 1999, pp. 430-431). In terms of the strengthening of the structural funds, Delors I resulted in a doubling in real terms of the financial resources to be granted to poorer regions amounting to a total of what was approximately 60 billion E C U over the 1989 to 1993 period (Dinan, 1999, p. 433). Poorer regions were considered regions with a per capita income below 75 percent of the E C average ( B B C news, Internet). Delors I was a large and complex package of reforms but to simplify matters, Delors I is outlined in terms of five main or specific objectives. Objective 1 is the main objective and it deals with the structural funds; as aforementioned, the structural funds are considered to be the financial impetus behind cohesion policy. Under Objective 1 it is stated that regions whose development is lagging and whose per capita income is less than 75 percent of the E U average are to be granted direct financial assistance (Dinan, 1999, p. 444). The E U has "deliberately concentrated the bulk of its financial assistance on the very poorest areas and these areas in practice have become known as the Objective 1 regions" (Armstrong, 1998, p. 379). This includes, among others, the regions belonging to all of Greece and Portugal, most of Spain, southern Italy, Corsica, the Highlands and Islands of Scotland, the five Eastern Lander of Germany, and Ireland. Objective 1 clearly takes the bulk of the E U ' s cohesion financing; in 1989, the E U drew up, for the first time, a comprehensive map of regions for Objective 1 assistance (Ibid, p. 379). Refer to Figure 4.1 on the following page to view this map of eligible regions as per statistical criteria in the year. The map displays how the vast amounts of regions eligible for structural fund assistance are located within the countries that comprise the coalition of smaller powers. The red and the blue indicate the regions with the lowest income levels. 67 Figure.4.1: Regional Aid Map, 2000 Collectively, Objectives 2 to 5 are much less of a 'cash cow 'than is Objective 1 but they are significant nonetheless due to the European Communities' commitment to improve conditions in the areas covered by all of its objectives. Objectives 2 and 5 68 specifically cover Britain other than the South East, France other than the Paris and Lyon regions and most of Austria and South East Germany (Nicoll and Salmon, 2001, p. 279). Objective 2 deals with declining industrial areas, Objective 3 strives to combat unemployment, Objective 4 asserts that young people should be integrated anywhere in the E U into the workforce, and finally, Objective 5 deals with agricultural restructuring. A l l five objectives collectively form what is known as cohesion policy but the structural funds are definitely the most significant and most controversial aspect of cohesion policy and subsequently the structural funds are the main focus of this thesis. To ensure the ongoing success of the 1988 reforms and the strengthening of cohesion policy, the Commission introduced Delors I alongside a new set of principles and procedures: Additionality, Parternership, Programming, and Concentration. The rationale behind these principles "is to try and extract greater efficiency, impact, and effectiveness from structural fund expenditures" (Keane, 1999, p. 134). Likewise, these principles and procedures were set in place to ensure that Delors I would have a solid foundation and commitment structure. Whereas the European Regional Development Fund (ERDF) of 1975 did not accomplish much the Delors I reforms marked a significant revolution in E U regional policy. Accroding to John Bachtler, many of the reforms were widely greeted throughout the European Community as being positive (Bachtler, 1998, p. 647). A s aforementioned in the previous section, following the second and third enlargements of the European Community, the coalition of smaller powers was formed to include Spain, Portugal, Greece, and Ireland. This coalition naturally demanded an increase in regional aid (the structural funds) given the large regional disparities existing between richer and poorer 69 member states of the E U . These demands ultimately culminated in the doubling of the structural funds under Objective 1 in addition to the formation of several other objects. On the whole, there was no major opposition from the larger and/or wealthier members of the E C to the Delors I reforms established during the debates and implemented thereafter. Many of the reforms were widely greeted as being positive (Bachtler, 1998, p. 647). France actually initiated the beginning of the Delors I reform procedures and thus adopted a lead role in the emergence of cohesion policy as a mechanism of solidarity for the Community at large. In the context of intergovernmentalist negotiations, France used the Delors I reforms to integrate "the structural funds as one of the levers of its policy of regional planning" (Jouve and Negrier, 1998, p. 555). Therefore, the cohesiveness and solidarity factors associated with cohesion policy masked self-interested French intergovermentalist objectives. Incidentally, the self-interested and intergovernmentalist nature (particularly on the part of the French) of the Delors I reform process was nothing new. Nevertheless, regardless of the intergovernmentalist natures of the reform process, Delors I revolutionized regional aid and in the process introduced cohesion policy as a mechanism of solidarity. In sum, the Delors I reforms "shifted spending from individual project support to program financing, doubled the budget and introduced five specific objectives for the Funds, it also enabled a second form of financing through the Community Initiatives" (Bachtler, 1998, p. 647). Accordingly, Delors I was designed with the intention and conviction of establishing cohesion policy as a core feature of the European Community. Delors I was the first of three major set of reform package proposals that placed cohesion policy at the front and center of E U decision-making. 70 D E L O R S H The previous section examined the emergence of the Delors I reform package. Delors I successfully revolutionized regional aid in the European Community through the introduction of cohesion policy and this financial impetus was set for a period a five years from 1988 to 1992. Subsequently, as aforementioned, Delors I was subject to reform and renewal in 1992; this next reform process culminated in the 1992 Edinburgh summit in what became known as the Delors II reform debates, named again after Commission President Jacques Delors. Therefore, Delors II w i l l be explored in this section as the second case study pertaining to the development of cohesion policy, as it is known today. Delors II, l ike Delors I, was another five-year reform package and its financial impetus was set to run from 1993 to 1997. The Delors II reform debates coincided with the Treaty on European Union (TEU) and the launching of European Monetary Union ( E M U ) . E M U , like the S E A was another huge policy program that promoted further European integration; yet, at the same time, E M U threatened to alleviate regional disparities as it further placed the coalition of smaller powers at a competitive disadvantage. Therefore, given the probable increase in regional disparities resulting from E M U , the Commission, under the second five-year reform package, yet again sought to strengthen cohesion policy in the name of solidarity. In the process, the Commission strengthened its role as the driving force behind cohesion policy. The desire to strengthen cohesion policy was synonymous with the desire to increase economic 71 equality throughout the Community thereby promoting the cohesiveness and solidarity of the European Union. The main goal of the Commission with the new of reform proposals was to increase the financial aid already granted to the poorer regions under Delors I. Specifically in this regard, the Commission sought a 66 percent increase to Objective 1 in order to boost financial support for those member states containing the greatest amount of poorer regions, namely Spain, Portugal, Greece, and Ireland. Subsequently, the major objective of Delors II was to improve structural funds operations "(through, say, closer monitoring) and increased spending for Objective 1 regions" (Peterson and Bomberg, 1999, p. 151) thus further strengthening cohesion policy within the realm of the politics of the European Union as a mechanism of solidarity. The Completed Delors II reform package yet again resulted in a doubling of the structural funds aimed at alleviating regional disparities and compensating the coalition of smaller powers for their competitive disadvantage pertaining to the single market and E M U . Statistically, Delors 13 resulted in a rise in structural funds spending from " E C U 18 bil l ion in 1992 to 31 bil l ion euros in 1999 (at 1992 prices)" (Dinan, 1999, p. 438). Furthermore, Delors U also made amendments to Objectives 5 of cohesion policy and added a sixth objective. Objective 5 of the original Delors I was broken into two parts: Objective 5a and Objective 5b. Objective 5a covered the granting of assistance to regions dependant on fishing whereas Objective 5b was designed to help certain rural areas (Dinan, 1999, p. 437). Objective 6 was created and implemented on January 1, 1995 for the development of regions in those countries with low population densities (Dinan, 1999, p. 437). This was created in 1992 with the intention of safeguarding and 72 assisting the eventually entry of E F T A countries (Austria, Sweden, and Finland) into the E U in 1995. Moreover, Delors II increased the spatial coverage of cohesion policy funding from 43% to 51% of the E U population (Bachtler, 1998, p. 649). Finally, Delors II created a new and entirely separate cohesion policy objective known as the cohesion fund and cohesion fund spending cost 14.5 bil l ion euros between 1994 and 1999 (Ibid, p. 438). The cohesion fund was specified and proposed under the terms of the T E U and came into effect as a result of Delors n. The T E U reinforces the importance of cohesion and the idea of a cohesion fund to go along with cohesion policy thereby further ensuring the solidarity and thus long-term health and growth of the European Union. Accordingly, the protocol agreed at Maastricht "restated the E U ' s cohesion objectives, linked them to E M U , and specified that a Cohesion Fund be established which would benefit member states with a per capita G D P less than 90 percent of the Community average" (Peterson and Bomberg, 1999, p. 152). Therefore, according to Sir Wi l l i am Nico l l and Trevor C . Salmon, " i f the doubling (or more) of the structural funds was kind of side-payments to compensate for the differential economic outfall of the Single Market, the Cohesion Fund is an offset to the Single Currency" (Nicoll and Salmon, 2001, p. 281). In other words, the cohesion fund was created by Delors II as added protection against further disparities induced by the introduction of the E M U . Hence, the addition of the cohesion fund compliments cohesion policy in efforts to offset the collective aforementioned negative effects of the single currency and E M U . Delors II added the cohesion fund as a new feature of cohesion policy but when compared to the structural funds the cohesion fund plays a far less important and less controversial role. 73 The cohesion fund is limited specifically to the four poorest countries in terms of overall GDP-Greece, Ireland, Portugal, and Spain- and it reserves funds for infrastructure and environmental projects (Peterson and Bomberg, 1999, p. 146). Accordingly, the cohesion fund is much smaller than the structural funds and it does not have regional objectives. Hence, the cohesion fund is solely directed at reducing disparities between member states and not between regions whereas cohesion policy in general applies at both levels. A s a result, cohesion fund projects are agreed on between the member states and the Commission, without the involvement of regional authorities (Nicoll and Salmon, 2001, p. 282). Incidentally, the involvement of the Commission did not end there. The relationship between the Commission and the member states is again a major point of reference throughout the Delors II reforms debate as it was during the debates evolving around Delors I. The Commission again took a lead role in the reform proceedings thus further expanding its profile among the prominent decision-makers of the E U and thus (as aforementioned) further expanding its role as the driving force behind cohesion policy. Subsequently, the Commission was yet again a source of tension with member state authorities as the larger and/or member states questioned its authority and ambition. This tension is perhaps largely derived from the 'soft' alliance formed between the Commission and the coalition of smaller powers. The formation of the alliance resulted from a common desire among the Commission and the coalition of smaller powers to strengthen cohesion policy thereby increasing its funding in light of European Monetary Union. A s aforementioned, the emergence of E M U placed the coalition of smaller powers at a further economic disadvantage thereby prompting them to seek an expansion in 74 cohesion policy funding. Accordingly, the coalition of smaller powers sought an increase in the structural funds similar to the expansion that was achieved by Delors I when it responded to the S E A or single market. The coalition of smaller powers and the Commission were, as mentioned earlier, once again rewarded for their efforts with a doubling in structural funding upon implementation of the Delots II reforms. With Delors n, "regional policy has become a privileged field of intervention in the European Community that is reflected in the budgetary doubling of the structural funds" (Jouve and Negrier, 1998, p. 558). Hence, the coalition of smaller powers and the Commission indeed achieved their main objectives with regards to cohesion policy at the Delors II reform conferences but their success was far from easy. The coalition of smaller powers backed by the Commission under Jacque Delors faced sturdy opposition from the national heads of the larger and/or wealthier member states of the E U . Spanish Prime Minister Felipe Gonzalez adopted the role of leader of the coalition of smaller powers and subsequently fought tenaciously to ensure that cohesion policy would continually play a greater part in the E U . Although small in the scheme of things, "the structural funds can have great local significance [(ie. in the building of roads and facilities)] and are accordingly lobbied for vigorously" by the coalition of smaller powers (Nicoll and Salmon, 2001, p. 278). Alternatively, in the run-up to the Maastricht treaty and the adoption of the Delors II reform package, German Prime Ministers, first K o h l and then Schroeder, assumed the responsibility of attempting to reduce the demands of the Commission and particularly the demands of the coalition of smaller powers. 75 According to John Bachtler, every member state welcomed the Delors II declared objectives of greater openness, simplified procedures and stricter controls on cost effective (Bachtler, 1998, p. 648). Likewise, cohesion and solidarity are widely regarded as worthwhile goals throughout the E U . However, Delors II saw the emergence of major opposition among the larger and/or wealthier members to increases in cohesion policy funding. For instance, "the Dutch government slammed the Commission's proposed spending on cohesion policy as 'unnecessary and undesirable' " and the Dutch have traditionally supported such moves in the name of integration (Peterson and Bomberg, 1999, p. 170). The unwillingness of some of the net donors to continue increasing contributions to cohesion policy funding "is influenced by their objection to the way in which E U regional policy is conducted" (Bachtler, 1998, p. 650). This unwillingness stems from three major objections. Firstly, structural funds are considered inefficient; they involve a circular flow of money where donor states make contributions to the E U budget only to have the money returned 'with strings attached' in the form of a bureaucratic and administratively expensive procedure (Ibid, p. 650). The second objection asserts that cohesion policy exhibits too much spatial coverage and thus it is overly complex and outstretched. Accordingly, cohesion policy involves a "plethora of funds and objectives with different institutional arrangements, regulations, and eligibility conditions" (Ibid, p. 650). Thirdly, cohesion policy interferes with the regional policies of individual member states. Incidentally, as aforementioned, there exists "resentment towards the Commission's perceived interference with the design and implementation of programs" (Ibid, p. 650). 76 The rest of the unwillingness of donor states to continue supporting increases in cohesion policy funding stems from the difficulty among the larger and/or wealthier members to fulfill or meet the E M U criteria themselves. Under such circumstances, cohesion policy donor states become even less generous in their desire to donate money to the poorer member states. Nevertheless, after heavy debates and negotiations during the Delors JJ reform debates, K o h l conceded on most issues and thus it was decided that financial assistance for the least prosperous countries would be more than doubled for 1993 to 1997 period. Hence, as was the case of the single market and Delors I, Delors II responded to the long-term asymmetry between stronger and weaker economies that would result from E M U . A s a result, it "increased the budget for the structural funds and established a Cohesion Fund for trans-European transport infrastructure and environmental projects (Pinder, 2001, pp. 75-76). In a comparative context, Delors II has definitely superseded Delors I thus spearheading the progressive development of cohesion policy. In sum, under Delors I, the resources for the structural funds were once again increased, the Cohesion Fund was introduced, additional regions became eligible for aid, and the 'Objectives' were redefined. In the years following the implemetation of Delors II until the present day, cohesion policy spending has accounted for roughly one third than one of the E U ' s annual budget of nearly 100 bill ion euros ( B B C news online). Therefore, from Delors II onwards, given the numbers involved, cohesion policy has evolved as one of the major pillars of the European Union or of European integration behind only two larger projects of the single market and Economic Monetary Union ( E M U ) . However, the objections and criticisms experienced during Delors II were deep rooted and they would re-surface 77 with a vengeance in years to come. Therefore, in addition to contributing the tremendous growth and scope of cohesion policy, Delors II left behind a legacy of controversy and criticism with regards to regional policy. The controversy surrounding cohesion policy further pins the alliance of the Commission and coalition of smaller powers against the larger and/or wealthier members of the E U thereby reinforcing my hypotheses. The coalition of smaller powers receives so much aid and financial redistribution from cohesion policy despite the large amounts of controversy and criticism because cohesion policy acts as mechanism of solidarity and it guarantees a greater role for the Commission. A G E N D A 2000 Delors II molded and solidified cohesion policy into one of the major pillars of European integration. However, as indicated in the previous section, Delors U was ratified in 1992 despite a great degree of controversy and opposition from the likes of German chancellor Helmut K o h l along with support from many other prominent members of the larger and/or wealthier member states of the E U . Incidentally, from 1992 onwards, the controversy and criticism surrounding cohesion policy has only increased. Tremendous doubt concerning whether or not the money allocated to cohesion policy is being well spent has surfaced. Perhaps even more significantly is the fact that a general unwillingness emerged among the larger or wealthier members to continue funding cohesion policy has increased. A s a result, the next set of reforms, the Agenda 2000 reform proceedings were undertaken amidst a huge tide of controversy concerning the future of cohesion policy. In many ways, given the controversy, the Agenda 2000 78 reforms debates are still ongoing. More specifically, Agenda 2000 is set against the backdrop of a decade of far-reaching changes in Europe - a decade that included two enlargements, two major reviews of the treaties, and two significant financial packages -stretching from the 1986 Single Act to the Treaty of Amsterdam in June 1997 (Avery and Cameron, 1998, p. 104). The Agenda 2000 reform package (intended for the 2000 to 2006 period) is sometimes referred to as the Santer package or Jacques 3 (named after then Commission President Jacques Santer). During the Agenda 2000 reforms debates, the Commission did its best to evade the controversy surrounding cohesion policy and in particular the structural funds. Amongst the policy proposals made in Agenda 2000 were "a range of measures to make agriculture more competitive in world markets (to be attained primarily by lowering domestic prices), more consumer-friendly, and more environmentally sensitive; reforms to the Structural Funds to make them more efficient and visible; and the completion, refining, and in a few cases more vigorous development, of a number of internal policies concerned with growth, employment, and quality of life" (Nugent, 2001, p. 53). According to the Monika W u l f Mathies, the Commissioner for Regional Policy, the key to maximizing the impact of structural fund interventions is to better target the priorities of "job creation, competitiveness especially of S M E s , research and development, training and qualification, sustainable development, equal opportunities... There is further need to address technological change and deprivation and there is scope for more efficiency, better financial management and controls and constant evaluation of performance" (Bachtler, 1998, p. 648). 79 Under Agenda 2000, the Commission sought to achieve three major objectives. First, the Commission sought to achieve "the most fundamental overhaul of structural funding ever" (Peterson and Bomberg, 1999, p. 153). Accordingly, Agenda 2000 "suggested a tighter concentration of resources, a simplification of monitoring procedures and a greater role for member states in the day to day administration and monitoring of the funds" (Ibid, p. 153). Secondly, the Commission pursued reform of the C A P . Realizing its unpopularity in many E U countries, the Commission proposed reforming the C A P perhaps as a means of diverting some of the attention away from the debate over the structural funds. Thirdly, the Commission sought to restructure the cohesion policy 'Objectives'. Accordingly, the Commission proposed to reduce the 'Objectives' from six to three: a strengthened Objective 1, a redefined Objective 2 and a new Objective 3 with an emphasis on human resources (Dinan, 1999, p. 438). Finally, the Commission sought pre-accession agreements with East European countries. Pre-accession agreements with East European countries are a significant and recent source of controversy within E U decision-making circles. Surrounding this controversy is the central question of what the influx of new members w i l l mean for the distribution of structural and cohesion funds among current recipients and the eventual new recipients. The enlargement of the E U into Eastern Europe wi l l undoubtedly have an overwhelming effect on the distribution of structural and cohesion funds among current recipients and the eventual new recipients. However, despite the controversy, enlargement should be economically beneficial for the entire E U "because it is likely to lead to better performances (economies of scale, higher growth and investment, more technological innovations, stronger global corporate players) than 80 those achieved at present by the existing E U and applicant states" (Avery and Cameron, 1998, p. 141). Nevertheless, in the meantime enlargement can be nonetheless damaging to current smaller powers of the E U because of the existing possibility that much of the cohesion policy spending wi l l be redistributed to new members leaving the current coalition of smaller powers to struggle without regional aid. Wi th eastern enlargement looming in the near future, the coalition of smaller powers clearly do not want cuts to their aid package upon the accession of newer as well as poorer members to the European Union. In fact, the members of the coalition of smaller powers constantly argue for the preservation of their individual share of the structural funds, as the E U prepares for eastern enlargement. Poorer member states express much concern at the likely cost of enlargement, "particularly its impact on the big spending policies such as agriculture and the structural funds" (Avery and Cameron, 1998, p. 140). Incidentally, during the Agenda 2000 reforms debates, the Commission suggested that the structural funds for new members should be comparable to those attributed to current European Union members lagging behind in their development (Avery and Cameron, 1998, p. 109). In addition, the Commission suggested that the current members of the coalition of smaller powers should continue receiving their same levels of regional aid upon enlargement (Ibid, p. 109). In the upcoming years, the coalition of smaller powers seemingly may have much to lose from enlargement. Therefore, according to John Pinder, the European Union " w i l l need to maintain solidarity, and in particular to be ready to allocate resources to assist the integration of Central and East Europeans, i f it is to continue to provide a framework for peace and prosperity" in the future (Pinder, 2001, p. 92). Subsequently, 81 with such a formidable enlargement ahead of the E U coupled with the controversy associated with it, a good deal of reform is necessary. Eastern enlargement potentially threatens the unity of the European Community and thus cohesion policy is going to be needed to step in and act as a mechanism of solidarity. Likewise, the Commission, more so than ever, w i l l inherently have to ensure that cohesion does indeed continue to act as a mechanism of solidarity with the impending enlargement. Aware of the general unwillingness among the larger and/or wealthier members of the E U to continue providing increased funding for cohesion policy, the Commission, for the 2000 to 2006 period proposed "keeping E U funding for economic and social cohesion at 0.46 percent of the E U ' s G D P , amounting to 275 bill ion euros" 45 bil l ion of which would be directed towards new states (Dinan, 1999, p 438). Hence, this would allow the European Union to "maintain levels of resources for intervention within the current 15 members, while progressively extending the policy to prospective new states from the East" (Hall and Rosenstock, 1998, p. 635). In addition, the Commission yet again attempted to reduce controversy surrounding cohesion policy by proposing to reduce the spatial coverage of the structural funds from 51 percent to between 35 to 40 percent of the E U population and hence below pre-Delors II levels (Dinan, 1999, p. 439). Such a reduction would legitimize cohesion policy, as only the up-most impoverished regions would receive regional aid. In light of the two reform proposals just mentioned, the following sub-section exam examines the controversy surrounding Agenda 2000. 82 The Controversy surrounding Agenda 2000 Reforms Debates It has been well highlighted that the Agenda 2000 reforms debates have been surrounded with tremendous controversy given the criticism facing cohesion policy specifically. This sub-section examines the sources of the controversy concerning the current Agenda 2000 era. Controversy stemming directly from the Agenda 2000 negotiations themselves is directed primarily at the Commission. L ike in the Delors I and Delors II reforms debates, the Commission adopted a lead role in Agenda 2000 and again Commission officials have been very unpopular among many member state authorities. The Commission's unpopularity stems from its avid support for the continuation i f not increase in cohesion policy funding. In other words, as aforementioned, the Commission was the driving force of cohesion in the face of opposition from the larger and/or wealthier members of the E U . Notwithstanding, as was the case with regards to Delors I and Delors n, the Commission found an ally in the form of the coalition of smaller powers. Both the Commission and coalition of smaller powers advocate increased cohesion policy spending by suggesting that cohesion policy is essential to reducing economic disparities between the regions and member states and reducing the gap is a fundamental principle of European integration. In addition, with reference back to the question of enlargement, the coalition of smaller powers does not accept the notion that "the current levels of regional and agricultural expenditure can accommodate the need of the new members" (Bachtler, 1998, p. 652). Therefore, during the Agenda 2000 reforms debates, the coalition of smaller powers sought to increase the structural funds at levels previously established by Delors II (Borras and Johansen, 2001, p. 43). Incidentally, the 83 coalition of smaller powers led by Spain absolutely would not stand for any reduction at all in their own receipts of structural receipts (Pinder, 2001, p. 87). Furthermore, in order to qualify for the single market established in 1986 and the European Monetary Union established by Maastricht treaty in 1992, every member state must live up to certain political, economic, and social standards. Incidentally, the poorer member states have a much more difficult time in meeting this criteria. In addition, as aforementioned, the single market and E M U place the poorer members at a competitive disadvantage. A s a result of these two major factors, from the perspective of the recipients, cohesion policy funding is absolutely crucial in allowing for the economic development of the individual member states comprising the coalition of smaller powers and therefore must be maintained. The "structural funds have achieved a great deal as the volume of transfers to the cohesion countries has made a major contribution to their economic growth and development, most obviously in the cases of Ireland and Portugal" (Bachtler, 1998, p. 649). Accordingly, cohesion policy is seen as compensation for the inability of the poorer members of the E U to compete in and reap the benefits from the process of European integration. A s a member of the E U , the coalition of smaller powers is obliged to support more general integrative moves, such as the single market and Economic Monetary Union despite the domestic current hardships resulting from these policies. According to Hanf and Soetendorp, Greece, Portugal, and Spain in particular are poorer E U members that entered into an already "advanced form of cooperation and integration and had to swallow the whole ball of wax in one gulp" (Hanf and Soetendorp, 1997, p. 8). Incidentally, the requirements of the S E A and E M U pose a much greater problem for the 84 coalition of smaller powers as its members are not yet ready to engage in such activity at the same pace or level of the larger and/or wealthier members of the European Union. Subsequently, they avidly seek compensation for their cooperation as the larger and/or wealthier members reap the trade and investment benefits arising from European integration. Alternatively, for their avid support of cohesion policy, the coalition of smaller powers has essentially become tagged as 'free-loaders' by the larger and/ or wealthier members of the E U . Similarly, the coalition of smaller powers is criticized for consisting of self-interested actors who hope to continue receiving 'free money' while not directly or substantially contributing anything to the European Union in return. Incidentally, the coalition of smaller powers is accused of being oblivious to European-wide initiatives. Subsequently, whereas recipient states favour increased cohesion policy funding, the cohesion policy donor states (larger and/ or wealthier members) favour a reduction in the structural funds and/or cohesion policy. During the Agenda 2000 reforms debates, many donor states were simply unwilling to make an increased contribution to the E U budget while several others pressed for a reduction in cohesion policy funding (Bachtler, 1998, p.647). Like was the case with the Delors II reforms, tight budgetary restrictions influenced by the need to meet Maastricht criteria for E M U prompted opposition from the larger and/or wealthier members to the expansion of financial resources with regards to cohesion policy (Hall and Rosenstock, 1998, p. 638). Again, under such circumstances, cohesion policy donor states become even less generous in their desire to donate money that goes towards helping other poorer member states in their respective push for economic development 85 and modernization. Likewise, donor states resent granting aid to self-interested states such as Spain, Portugal, Ireland, and Greece and particularly to Ireland with its high rate of growth and Greece who has been accused of corruption and mismanagement of funds. Critics of the structural funds and cohesion policy suggest that a country like "Portugal has had 15 years to use a huge inflow of development funds to catch up with the rest of the E U , and that only Portugal is to blame i f the funds were not invested wisely" ("Keeping the E U . . . " , 2002, p. HI). A s traditional International Relations theory indicated in chapter 2, the larger and/or wealthier powers would not be inclined to grant large amounts of aid and financial aid unless it serves the real and direct interests of the great powers to do so. Accordingly, since the poorer members do not contribute anything directly in return to the Community aside to their adherence to the larger integration projects, the larger and/or members, in realist terms are increasingly reluctant to fund cohesion policy. However, the larger and/or wealthier E U members reap the benefits from the E U ' s larger integration projects and these integration projects require the cooperation of the poorer members, who as aforementioned, are placed at a competitive disadvantage with the S E A and E M U . Nevertheless, the larger and/or wealthier members resent being the paymasters in helping jumpstart the economic development of the poorer E U members. In other words, the larger and/or wealthier members want to have their cake and eat it to Unlike the final outcome of the Delors II reforms proceedings, the larger and/or wealthier members did not concede to the Commission and the coalition of smaller powers during the Agenda 2000 reforms debates. Collectively, the main goal of the 11 larger and/or wealthier members was to have the overall E U budget and the proportion 86 allocated to structural policies capped and preferably reduced (Bachtler, 1998, p. 650). The following sub-section examines the actual outcome from the Agenda 2000 reforms debate upon ratification of the reforms package. Outcome of the Agenda 2000 reforms debates Amidst the controversy surrounding it, the Commission adopted the Agenda 2000 reforms package on July 15th 1997 and these policies are currently in effect. Given the circumstances, the Commission, despite being firmly on the side of smaller powers decided to opt for more of a middle of the road solution. Accordingly, instead of asking the Council of Ministers to ratify a reform package that sought a major increase to the structural funds as was done with Delors I and Delors n, the completed Agenda 2000 reforms package sought only to sustain at 0.46% level of G D P established by Delors JJ. In other words, under such intense controversy during the Agenda 2000 reforms proceedings, the Commission decided to leave cohesion policy spending at roughly the same levels and decided to maintain similar policies to those established through Delors n. Overall, the Agenda 2000 reforms involved relatively little change and the hard questions concerning Eastern enlargement have been shelved (Bachtler, 1998, p. 647). The result has been that the structural funds "have targeted areas including one half the E U ' s population rather than concentrating on the minority of hardest cases [thus reducing] the degree of dispersal in order to free resources to deal with higher priorities" (Pinder, 2001, p. 87). Hence, in response, Bachtler contends "future rationale for the E U structural policy and the importance placed on cohesion remain open questions" (Bachtler, 1998, p. 647). The next and final section of this thesis assesses the central 87 question and the central arguments through a collective analysis of the case studies explored in this chapter. The Case Studies Added Up Bachtler's assertion that the "future rationale for the E U structural policy and the importance placed on cohesion remain open questions" (Bachtler, 1998, p. 647)" is complimentary to the central question of this thesis. Incidentally, Bachtler's statement is denounced by the same two arguments used to answer the central question of this paper. Accordingly, cohesion policy is important to the future of the European Union because it acts a mechanism of solidarity thereby promoting the long-term health and growth of the Community. Ultimately, every member state serves to benefit a great deal from a stronger and healthier union composed of economically modernized countries. In addition, cohesion policy guarantees a greater role for the Commission- a supranational institution that works to ensure that cohesion policy continues to be an important mechanism of solidarity. Therefore, as a result of these two main arguments or two main factors, the coalition of smaller powers wi l l continue to receive such large amounts of aid and financial redistribution from cohesion policy despite its unpopularity among the larger and/or wealthier members of the E U . The case studies presented in this chapter, particularly Agenda 2000, have highlighted the vast amounts of controversy surrounding cohesion policy. Nevertheless, it has been demonstrated that cohesion policy has persevered despite such adversity; in fact, cohesion policy has been strengthened with each subsequent reforms package. Even after the Agenda 2000 reforms package was adopted to maintain cohesion policy funding 88 levels established by Delors U in 1992, cohesion policy has nonetheless continued to grow thenceforward. European Union G D P levels have continually to rise and since cohesion policy is taken as a percentage of E U G D P , cohesion policy has continued to grow as well . Subsequently, cohesion policy funding has steadily risen throughout the last decade. For instance, the 2003 cohesion policy spending totaled is foreseen to be approximately 33 bill ion E C U , an increase of approximately 2 bill ion E C U from 1999 and 15 bil l ion E C U from 1992 (Ananova.com). This continued strengthening of cohesion policy proves the arguments made in chapter 3 where it is stated that cohesion policy, regardless of the herds of controversy surrounding it, w i l l continue to persist and grow due to its importance as a mechanism of solidarity and since it guarantees a greater role for the Commission. As the case studies demonstrated, the Commission has adopted an important role with regards to cohesion policy and thus cohesion policy indeed guarantees a greater role for the Commission and vice-versa. In the face of tremendous opposition, the Commission is the driving force behind cohesion policy and thus is ultimately the driving force behind the maintenance and growth of solidarity in the European Union. Hence, despite always present and apparent controversy, the continued growth of cohesion policy from Delors II onwards has proven the credibility of the arguments. A s a result, it is only through the mechanism of solidarity principle and the role of the Commission that one can understand why the coalition of smaller receives so much regional aid from cohesion policy given the large amount of controversy surrounding it. A l l in all, cohesion policy funding has continually increased from Delors I through Agenda 2000 to the present day. For instance, "successive increases in the 89 budget for E U structural and cohesion policies raised expenditure from 3.7 bill ion E C U in 1985 to 33 bill ion E C U in 1999. The proportion of the E U budget allocated to the Funds wi l l have risen from 18 to 37% over that period"(Bachtler, 1998, p. 647). More specifically, cohesion policy spending amounted to 200 bil l ion E C U during the 1993 to 1997 period and is scheduled to amount to 275 bill ion E C U for the 2000-2006 period (Hall and Rosenstock, 1998, p. 638). Notwithstanding the continual increase of cohesion policy funding, each of the cases examined in this chapter have played major roles in defining and shaping cohesion policy into one of the major pillars of European integration behind only the single market and economic monetary. From Delors I onwards, cohesion policy has sought to reduce regional disparities. With approximately one-third of the E U budget going towards cohesion policy annually, the members belonging to the coalition of smaller powers have received hundreds of billions of E C U . This regional aid is aimed at reducing disparities and it has successful at reducing the per capita income gap between the poorest and richest members of the E U . Members of the coalition of smaller powers have indeed achieved economic growth and development since the inception of cohesion policy with Delors I. The coalition of smaller powers for which cohesion policy is designed "have performed for the most part well , with the Portuguese and particularly the Irish economy growing faster than the Union's average, Spain also successful, and Greece, after faltering for a number of years, meeting the Maastricht criteria in 2000 (Pinder, 2001, p. 85). While it is not possible to say how much of this growth can be attributed to the structural funds, their contributions can hardly have been negligible (Pinder, 2001 p. 85). 90 In terms of G D P per capita, Ireland with an annual growth rate of 5 percent went from 63.6 % of E U average in 1983 to 89.9 % in 1995 (Dinan, 1999, p. 438). Spain went from 70.5 % in 1983 to 76.2 % in 1995, Portugal from 55.1 % to 68.4%, and Greece raised its per capita income only slightly from 61.9% in 1983 to 64.3% in 1995 (Ibid, p. 438). Greece has seemingly seen relatively insignificant progress despite millions of euros of economic aid from the E U and this may be primarily attributed to corrupt business practices and mismanagement of funds in Greece. A l l in all , cohesion policy has helped narrow the gap between the richest and poorest regions of the E U . In sum, "the four poorest Member States in the mid-1980s-Greece, Spain, Ireland and Portugal-had seen their average income per head grow from two-thirds to three-quarters of the E U average over the following 10 years" (Hall and Rosenstock, 1998, p. 637). Nevertheless despite the growth, the members comprising the coalition of smaller powers still have a long way to go and thus cohesion policy wi l l remain an important mechanism of solidarity and it w i l l subsequently guarantee a greater role for the Commission for many years to come. Incidentally, the conclusion takes the case of Portugal to illustrate the limits and tensions of cohesion policy thereby posing new questions for future research. 91 Chapter 5 Conclusion This thesis has argued that aside from its intended objective of reducing regional disparities, cohesion policy has acted as a mechanism of solidarity thereby promoting the long-term health of the entire E U and it has guaranteed a greater role for the Commission. Subsequently, it is because of these two major arguments or reasons that the members comprising the coalition of smaller powers continually receive large amounts of regional aid in the form of cohesion policy despite the large amounts of criticism surrounding it as well as its unpopularity among the large and/or wealthier members who after all, are the paymasters of cohesion policy. One of these poorer member states that has benefited from cohesion policy is Portugal and this concluding chapter briefly examines Portugal's highs and lows as a member of the E U thereby serving to illustrate some of the limits and tensions of cohesion policy. Indeed, Portugal receives large amounts of regional aid and this funding has tremendously aided in the growth and development of the country's economy. However, this economic development comes at the expense of negative domestic consequences. A s a member of the E U , Portugal is obliged to adhere to the criteria mandated by the S E A and T E U and as a result, these obligations have placed smaller powers like Portugal in precarious domestic situations. The S E A and the E M U require member states to engage in a wider range of activities with regard to the E U and at the European level. Incidentally, these requirements pose a much greater problem for Portugal, as it is not yet 92 ready to engage in such activity at the same pace or at the same levels as are the larger and/or wealthier members of the European Union. The Portuguese government has had a difficult time selling the E U to Portuguese citizens given the unpopularity of certain domestic policies related to fulfilling E U objectives and obligations. E U pressures have prompted successive governments in Portugal to draw up reform programs "to modernize the justice, health, education, and social security systems; make the economy more competitive by reducing state intervention and ownership; and, above all, improve the efficiency of an antiquated, slow-moving public administration" (Wise, 2002, p. I). Domestic pressures or domestic criticism on the other hand has placed successive Portuguese governments at cross-roads and has compelled them to hold back legislation and reform related to E U requirements. Subsequently, "one government after another has blamed forces of resistance - business interests, professional bodies, trade unions, even football clubs - for holding back change" (Ibid, p. I). The current Portuguese government promises to be different from its predecessors by saying that it "is not afraid to pay the price of unpopularity to carry out the structural reforms the country so badly needs" to achieve modernization and to fully take part in the European integration process (Ibid, p. I). Such a promise is easier made than kept because ordinary Portuguese citizens do not stop to think how the E U and modernization wi l l benefit them in the long run when they are presently suffering as a result of the structural reforms. Accordingly, there "is great concern that [Portugal] w i l l pay a heavy price i f the government insists on introducing structural reform measures intended to help the country modernize" says manager and general secretary of the C G T P - Intersindical 93 trade union federation (Ibid, p. I). However, as aforementioned, these policies were and are necessary in order for Portugal to meet E U criteria thereby moving forward along with the rest of the E U . Ever since the southern enlargement of the E U in the 1980s, Portugal has attempted to modernize its political, economic, and social institutions to compensate for the years of totalitarian rule prior to joining the E C . Totalitarian rule had left Portugal in a backwards and underdeveloped state and as a result, the transition into the realm of E U politics and meeting E U criteria has been a long and difficult ongoing process. Incidentally, Portugal has attempted to quickly modernize under conditions not suitable for such a large task given the E U ' s complicated and demanding series of reforms and progressions. Such a track record is the reason as to why Portugal is firmly entrenched within the camp of the coalition of smaller powers. Accordingly, despite hundreds of millions of Euros transferred annually from the wealthier member states to the less wealthier states, it is nonetheless going to take many more years for a country like Portugal to drop the stigma of being called a poorer member. Cohesion policy has had a significant impact in prompting Portugal's economic growth from 1987 to now but cohesion policy funding has to be greatly increased i f Portugal is to catch up to the richer members of the E U in the short-term. However, this is not going to take place given the large amounts of controversy associated with cohesion policy. Portugal's difficulties in achieving economic modernization have recently been highlighted by some of the country's current and larger economic ventures. For instance, Portugal has been working hard to modernize its infrastructure in preparation for the upcoming Euro 2004 soccer or futebol tournament. Despite the assistance of large 94 amounts of European Union funds, Portugal still needs to borrow money to ensure its readiness. According to Peter Wise, the "combination of municipal and regional debts place a heavy burden on the national government causing it to borrow money in order to complete the projects" (Wise, 2002, p. I). Other regions in the E U with similarly low levels of development as Portugal and its regions (although the country itself may be considered a region) have also struggled to modernize despite large amounts of E U funding. Therefore, cohesion policy is and wi l l remain as an important reference point and a mechanism of solidarity as Portugal, like the other poorer regions in the E U , struggle to modernize as quickly and efficiently as possible. Portugal is by no means an isolated example as the rest of the members of the coalition of smaller powers as well have experienced the same or similar circumstances. For all intensive purposes, Greece is having a difficult time assimilating into the European Community and meeting E U criteria but Spain and Portugal, after long and difficult negotiations, became model members apart from their tenacious advocacy of special interests (Dinan, 1998, p. 19). Ireland, the other member of the coalition of smaller powers, although joining the European Community much sooner, has experienced the largest growth rates of all , not only among the smaller powers but also among the entire community in general. It is already difficult enough for these poorer countries to meet the European Union's economic and political program but it is even more difficult to get the domestic population on side when on a day-to-day basis they are unable to recognize how being apart of the E U w i l l ultimately benefit their lives whereas they are more likely to experience how E U membership harms them on a day-to-day basis. 95 Despite its tremendous economic growth over the last 10 plus years, Portugal's struggles to modernize and uphold E U criteria illustrates the limits of cohesion policy. Cohesion policy steadily helps the Portuguese economy grow and therefore steadily reduces the income gap between Portugal and the richer member of the E U but it does not and cannot do enough to solve the economic and social hardships still faced by many ordinary Portuguese citizens. Incidentally, cohesion policy has not helped many more citizens in the E U , as many of the poorest regions are still very poor. Comprehensive reports on cohesion policy have demonstrated that the north-south economic divide is closing but the gap between richest and poorest regions in the E U has not changed considerably ever since the establishment of cohesion policy. For instance, according to 1993 statistics, "the most affluent ten regions in the E U have G D P per capita values more than three time times higher than the bottom ten" and these have continued to increase from 1993 through to 1997" (Armstrong, 1998, p. 369). Spain, Portugal, Ireland, and Greece on the whole have indeed been making economic strides thereby reducing the wealth gap between member states but this has not been the case with regards to several of Europe's poorest regions, many of which belong to those aforementioned countries. 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