Rethinking Europe’s Development Strategy
The European Union’s flagship cohesion policy, designed to bridge economic gaps between regions, faces unprecedented scrutiny as new research questions its effectiveness and proposed reforms threaten to reshape its fundamental structure. With €392 billion allocated to regional development in the current budget cycle, the program represents one of the EU’s most ambitious attempts to address economic disparities across member states.
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Questioning the Return on Investment
Recent analysis by Zareh Astryan, professor of economics at Münster University, suggests the EU’s cohesion policy delivers minimal economic returns. His research indicates that every euro spent generates only about €1 in additional GDP growth, raising serious questions about the program’s efficiency. This comes at a critical moment as Brussels prepares for its most significant budget overhaul in over three decades.
“The findings challenge conventional wisdom about regional development funding,” Astryan noted in his research shared with the Financial Times. His analysis comes amid broader industry developments in economic policy evaluation across global institutions.
Von der Leyen’s Controversial Restructuring
European Commission President Ursula von der Leyen has proposed merging regional development funds with agricultural subsidies, creating a combined €865 billion fund. While this would give member states greater flexibility in spending decisions, it would simultaneously halve specifically earmarked regional development funding to €218 billion.
Commission Vice-President Raffaele Fitto defended the current approach, stating: “Regions are close to the territory, they know the needs, and it will be fundamental to confirm this approach also for the future.” The proposal has nevertheless sparked intense debate about the future direction of EU spending priorities.
The Private Investment Paradox
Astryan’s research reveals a complex picture of cohesion funding’s impact. While the direct GDP returns appear modest, the funds demonstrate significant leverage in attracting private capital. His analysis found that every euro of cohesion spending attracts between €2 and €3 of private investment, primarily in construction and real estate sectors.
However, this creates a dependency concern. When regions lose access to cohesion funds, private investment often collapses, suggesting the policy may create temporary stimulation rather than sustainable growth. This pattern reflects similar challenges in global economic systems where temporary stimulus measures struggle to generate lasting development.
Diverging Perspectives Across Europe
The debate over cohesion funding reveals starkly different realities across the EU. In eastern Slovakia’s Prešov region, cohesion funds account for approximately 80% of public investment. Regional governor Milan Majerský emphasized their critical importance: “Without cohesion policy, we really wouldn’t be able to repair a large number of roads, bridges, schools, social facilities, hospitals, suburban bus transport. Slovakia would not be able to function without EU funds.”
Meanwhile, officials from wealthier northern and western EU nations—the primary contributors to the bloc’s budget—argue that cohesion spending has largely achieved its objectives. A diplomat from a net-paying country noted: “A lot of countries have become richer in absolute terms but also in relative terms… this goes to show the robust economic development of these countries and lessens the amount of cohesion funds needed.”
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Success Stories and Uneven Impact
Murcia in southern Spain stands as a testament to cohesion funding’s potential. Since Spain’s EU accession in 1986, strategic investments in infrastructure, agriculture, and water management have transformed the once-arid region into one of Spain’s fastest-growing economies.
“This is undoubtedly thanks to the work that has been done with European funds over all these years,” stated Murcia’s president Fernando López Miras. The region’s success story demonstrates how targeted economic development strategies can yield significant long-term benefits when properly implemented.
However, economists caution that such successes aren’t universal. Ugo Fratesi, professor of regional economics at Politecnico di Milano, observed: “On average, cohesion policy seems to have been effective in delivering growth for European regions, but that’s not the same for all of them.” The uneven impact raises questions about whether a one-size-fits-all approach remains appropriate.
Broader Context and Future Negotiations
The cohesion policy debate occurs against a backdrop of shifting global economic priorities. As nations worldwide grapple with budget allocation challenges, from fiscal crises affecting millions to changing economic trajectories in major powers, the EU’s internal debate reflects broader global tensions in development financing.
The coming negotiations over the next multiannual financial framework promise to be contentious. Siegfried Mureșan, one of the lead budget negotiators, warned: “The current draft of the commission’s long-term EU budget satisfies no one and must be rewritten. Farmers, businesses and citizens are watching closely.”
Meanwhile, the discussion extends beyond traditional economic concerns to encompass emerging challenges like supply chain security issues that affect global economic stability. Even investment market trends show how global economic uncertainties influence policy decisions at the regional level.
The Path Forward
As the debate intensifies, the fundamental question remains: how can the EU best balance immediate regional needs with long-term strategic priorities? The proposed merger of funds represents a significant shift toward greater national flexibility, but critics worry it could undermine decades of progress in reducing regional disparities.
The controversy surrounding EU regional development funds highlights the complex trade-offs facing European policymakers. With economic convergence between regions stalling in recent years and new global challenges emerging, the outcome of these budget negotiations could shape Europe’s economic landscape for generations.
What remains clear is that any successful reform must acknowledge both the program’s achievements and its limitations, while adapting to a rapidly changing global economic environment where traditional development approaches face increasing scrutiny.
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