The European Regional Development Fund (ERDF) was established in 1975 to promote regional economic convergence and to assist regions facing severe economic problems due to the decline of traditional heavy industries. Since 1988 ERDF has been one of the European Union’s (EU)Structural Funds. The other three are the European Social Fund (ESF), the guidance section of the European Agricultural Guarantee and Guidance Fund and the Financial Instrument for Fisheries Guidance (FIFG). For the period 2000–06, the Structural Funds together with the Cohesion Fund (which is targeted specifically at Greece, Ireland, Portugal and Spain) account for approximately one-third of EU expenditure.
The Treaty of Rome did not contain a provision for a community regional policy, although many policies have regional impacts, most notably the ESF. The ERDF was established in 1975 as the main instrument of Community regional policy. The primary purpose of the ERDF is to address regional economic disparities. It represents only a small fiscal transfer from the richest member states to the poorest regions of the EU and has a significant direct economic effect only on the very poorest regions.
The Structural Funds are equivalent to approximately 0.4% of the gross domestic product (GDP) of the EU, around €175,000m. over this period. The ERDF receives approximately two-thirds of the Structural Funds budget. Seventy per cent of this funding goes to regions whose development is lagging behind. These have per caput income that is less than 75% of average EU GDP per caput. These are termed Objective 1 regions. In addition, 11.5% of the funding assists economic and social conversion in areas experiencing structural difficulties—Objective 2 regions. Finally, 12.3% of the funding promotes the modernization of training systems and the creation of employment (termed Objective 3) outside the Objective 1 regions. The ERDF contributes funding to Objectives 1 and 2.
There are also four Community Initiatives which account for 5.35% of the Structural Funds budget. These include INTERREG III (for cross-border, transnational and interregional co-operation), URBAN II (to promote the sustainable development of cities and declining urban areas), Leader+(to support rural development through local initiatives) and Equal (to combat inequalities and discrimination through improving access to the labour market). Of these, the ERDF contributes to INTERREG III and URBAN II.
The Structural Funds and the Cohesion Fund represent the main instruments of social and economic cohesion policy for the EU. Their aim is to strengthen the structural factors which determine competitiveness and, thereby, the growth potential of the most disadvantaged regions. The broad policy framework for social and economic cohesion policy was established in 1988 with a major reform of the Structural Funds. These reforms were closely linked to the agreement of the Single European Act and to a recognition that closer economic integration may not bring about growth for all regions, particularly those lagging in terms of EU GDP. In addition to doubling the financial support to the Structural Funds, the 1988 reforms also brought the then three funds (FIFG was established along with the Cohesion Fund in 1993) together under a common set of regulations.
The scope of ERDF is relatively wide-ranging. For the 2000–06 period, funds may be used to support infrastructural improvements (particularly in lagging and peripheral regions) and the regeneration of industrial sites and support for rural areas (in Objective 2 areas); and also to support small and medium-sized enterprises and innovation and technological development capacity.
The implementation of the ERDF, and that of the Structural Funds as a whole, is underpinned by four principles established in the 1988 reforms. These include the concentration of funds on a few policy objectives and targeted at defined population levels, the agreement of multi-annual regional or thematic programmes to establish priorities at the local or regional level, the development and implementation of programmes through partnership of the public sector and social partners, and additionality, whereby the contribution of the EU is additional to, and not a substitute for, the contribution of the member states.
The current Structural Funds and Cohesion Fund regulations will expire in 2006. New regulations were proposed in 2004 for the period 2007–13. Following the conclusions of the Lisbon Summit in 2000, key policy priorities will be the creation of more and better jobs, greater social inclusion, equal opportunities and continued support for the knowledge-based society. Following the accession of countries in 2004 with significantly lower levels of GDP per caput than the average of the previous EU member states, the eligible funds will be targeted predominantly at the new member states with some transitional funding provisions made for the current recipients. The ERDF will be used in 2007–13 to support the following objectives: convergence (the economic catch up of the poorest regions); regional competitiveness and employment (support outside the poorest regions); and European territorial co-operation (to promote co-operation between all regions, specifically around sustainable development).
