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Informal European Council of Ministers meeting on regional policy in Chalkidiki, Greece, on 16 May

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Rhodri Morgan, First Minister
I wish to make a statement following my recent attendance at an informal European Council of Ministers meeting on regional policy in Chalkidiki, Greece, on 16 May.  DTI Minister Alan Johnson and I comprised the United Kingdom delegation.  

This was not only the first attendance of the accession states at a Regional Affairs Council, but also a first for a Minister of the Welsh Assembly Government.

The main item on the agenda was the future of the structural funds in the next EU Financial Perspective, namely 2007-2013.  The next round of structural and cohesion funds will apply to a European Union of 25 member states.

The challenge facing the meeting revolved around the much greater disparities between the member states than the EU has ever faced before.  All the new entrants have a per capita GDP below the current EU average.  They are all poorer than the poorest member state.  The lowest four have a GDP of less than 40 per cent of the average.  Enlargement will therefore have the statistical effect of reducing the average EU GDP per head level and, as a consequence, of the 75% of GDP per head maximum level, below which regions are eligible for Objective One funding.  On current European Commission data, West Wales and the Valleys will no longer qualify for Objective One.

There are two views emerging over the best way to deal with those disparities in EU GDP between nations and regions. It is clear that the new member states will need structural funds support.  Commissioner Barnier believes that two-thirds of the regional policy budget should be available for the most needy countries and regions through Objective One, the Cohesion Fund plus Objective One “A”.  [The new category to describe those regions losing eligibility for full Objective One status only because of the statistical effect of EU enlargement and not because of any relative improvement in economic performance.]

The remaining third of the budget should be allocated to a “menu” of geographical or thematic priorities.  This could potentially mean that Objective Two was no longer assigned to a pre-defined geographical zone.  As the EU Assisted Area map is based primarily on the Objective One and Two designations, this could have a considerable impact on the future ability of Wales to assist private sector investment through Regional Selective Assistance.  

There is no possibility of our structural fund programmes continuing as now post 2006 because of the 75% cut off.  The most needy regions are clearly going to be those in the new member states.  

The UK Government published their proposed framework for future regional policy for the UK in March this year with a consultation period lasting until 4 July.

The main principle behind the UK Government proposals, as outlined by UK Government Minister Alan Johnson at Chalkidiki, is to take back to member state level after 2006 the main responsibility for devising and funding regional assistance in the existing EU of 15.  The 10 new member states would be the focus of European Commission attention, and would be directly assisted rather than receiving funding under the guise of a pan-European regional development framework.  At Chalkidiki, this view was supported by Denmark, Sweden and the Netherlands but not by the Commission, or the accession member states nor by some existing ones.  Both views were expressed forcibly at Chalkidiki.

This is an issue of fundamental importance to Wales, especially West Wales and the Valleys plus the Objective Two areas.  Between them, those areas cover 74% of the population of Wales.  The UK Government has given a guarantee that Wales and other UK Objective One and assisted areas will not lose out financially as a result of its repatriation proposals.  On the other hand we are already aware of the strong commitment amongst the stakeholders to the innovations in regional development that European Regional Policy and the structural funds have brought about.  Stakeholders also put a high value on the strong partnerships which have emerged as a result of the structural funds programmes in Wales.

The Assembly Government is managing the consultation process in Wales on future regional policy in the UK.  We are therefore now actively engaging with stakeholders across Wales about these fundamental issues.  Assembly Government officials have engaged in detailed discussions with the WLGA during the present consultation period.  DTI officials were also able to join them for a recent trilateral discussion.  The WLGA has already made clear its opposition to the proposal to repatriate regional development funds and we will be discussing this further at a meeting with them later this week.

On Thursday last week, a full day’s seminar and briefing session for all stakeholders in Wales on the future of regional policy was held in Llandrindod Wells.  This event provided detailed briefing on the UK government consultation paper and also provided a forum for debate and an opportunity for Assembly Government officials to receive direct feedback.  During this consultation period, the Assembly Government is also taking an active part in the structural funds policy group alongside the DTI, and will be attending a meeting later this week to continue discussions.

Following the conclusion of this consultation exercise, we will be able to put forward a balanced view representing the best interests of Wales, especially the directly affected 74% of Wales taking full account of our current structural fund programmes, as well as their likely shape in the future within the greatly enlarged EU.