Rural development policy from an EU perspective

3. Regional policy’s history – basic foundations to rural policy

In many countries of Western Europe regional and rural policy are closely interrelated and a sharp distinction between the two policy concepts cannot be drawn easily. It is therefore interesting to present here some remarks on the background of broader territorial schemes as expressed under the term regional policy.

In countries of Western Europe regional policy was introduced during the 1920s as a reaction to the strengthening of spatial disparities and the emergence of the first depressed regions, induced by sectoral crises (Artobolevskiy 1997, p. 32). All over the period since then social objectives have been the most important ones for regional policy. Though it was not officially established in all west European countries, in most countries key words depicting the main problems and regions of a country had been created by the start of the 1960s (e.g. Mezzo-giorno in Italy, Northern peripheral areas in Scandinavia, mountain regions). Many of these regional problem areas implicitly had a strong rural bias since large regional support areas covered regions with deeply rural characteristics. With rising criticism of regional policy in the 1970s and 1980s focus shifted towards policy priorities for increasing economic efficiency of the country. In many developed countries this led to a partial curtailment of regional policy and a reorientation from social to economic objectives.
It was only in the 1980s that the European structural policy which had previously just complemented national policies developed into a substantial Community structural policy. With the start of the reform of the Structural Funds the investment and volume had to correspond to the following 3 regional priority objectives since 1 January 1989:

Objective 1: promoting the development and structural adjustment of regions whose development is lagging behind

Objective 2: converting the regions or parts of regions seriously affected by industrial decline

Objective 5b: facilitating the development and structural adjustment of rural areas

In many respects the reform of the EU Structural Funds in 1988 was accompanied by the rise of the debate on the ”The Future of Rural Society”. Through the commission paper under this title (CEC 1988) rural policy gained momentum as a specific European issue. Its underlying concept contributed to trigger the ensuring discussion addressing a much wider scope of functions for rural areas than had been considered before. The concept of an integrated approach for rural development programmes were reflected especially under the objective 5b-programmes but also in the objective 1 areas. With the ongoing discussions of the subject both the funds of the regional programmes enlarged (compare 1st and 2nd period of Structural Funds programmes) and new initiatives developed.
The second reform of Structural Funds in 1993 confirmed the approach taken and EU-commitment for regional policy has been deepened continuously over the 1990s. Moreover, the Cohesion Fund, established with the Maastricht Treaty, has provided since 1993 an additional instrument to support the 4 lagging EU-countries Greece, Spain, Ireland and Portugal in the preparation for the Monetary Union, and simultaneously to the economic growth process. With the EU-accession of the Scandinavian countries Finland and Sweden in 1995 the situation of sparsely populated areas was acknowledged as a distinct problem pattern and led to a further regional priority objective:

Objective 6: development and structural adjustment of regions with an extremely low population density

In the last decade the EU-measures to strengthen the cohesion and structures in less-developed regions have gained a substantive portion of the EU-budget. Since the second half of the 1990s the four Structural Funds and the Cohesion Fund together account for one third of the EU-budget which will induce an additional growth of GDP in the Cohesion countries of 0.5 to 1.5% in the current period 2000-2006 (EC2001a, p.148). The four Structural Funds are:

  • The European Regional Development Fund (ERDF)
  • The European Social Fund (ESF)
  • The European Agricultural Guidance and Guarantee Fund (EAGGF)
  • The Financial Instrument for Fisheries Guidance (FIFG)

Besides the European Union has two more major financial instruments to implement its structural policies, the Cohesion Fund and loans from the European Investment Bank (EIB) which are both based on a project-financing approach and are governed by their own specific rules.

The major part is covered by the first four instruments which operates within an integrated programming framework according to a set of principles defined in implementing regulations. The outline of the objectives of the first programming period (1989-1993) have been prolonged, in general, for the second period. The programmes of this second period (1994-1999) have addressed specific regional problems under the above mentioned objectives and focused their activities on objective 1 areas, accounting for almost 68% of total resources, a share which has been raised for the period 2000-2006 to about 70%.
In addition to the mainstream programmes there were separate Community Initiative programmes to support transnational, cross-border and inter-regional actions organised under 13 different themes, including the LEADER (and INTERREG) programme which focus on innovative actions in rural areas and building a European network of rural actors. In addition, a small proportion of total resources, some 1%, is reserved for technical assistance, pilot projects and innovative measures.

As analyses by the European Commission (2001a) pointed out there is now evidence available for actual convergence of lagging regions: From 1988 to 1998 GDP per head of the poorest regions with 10% of the EU population increased from 55.1% of the EU average to 61.0%, and in the poorest regions with 25% of the EU population it rose slightly from 66.6% to 68.3%. This trend can also be seen at the national level, as GDP per head in the three poorest Cohesion countries (Greece, Spain and Portugal) went up from 68% of the EU average to 79% (1999; EC 2001a, p.xi). Much of these regional shifts have a direct impact on rural areas, although the actual performance of regions is quite diverse. Depending on the territorial level of analysis further in-depth studies and inter-regional comparisons are needed to provide an advanced assessment on the impact for (specific) rural areas.

The most interesting element of Structural Funds from the conceptual point of view is the Community Initiative LEADER (Liaison entre Actions de Développement de l’Economie Rurale). It aimed at establishing local action groups, raising their awareness for rural development action and initiating this long-termed learning process. As the focus is on innovative actions and methods an important element is seen in the networking function of this Community Initiative.

The link between agricultural structural policy and a broader territorial approach was deepened for the regions targeted during the former periods by Objective 1 and 5b (and later 6) of the Structural Funds. Incorporating all actions envisaged under the different Structural Funds into a single programming schedule, pointed to the rising role of rural areas for the aim of ”economic and social cohesion”. It is in particular some of the remote rural areas which suffer under the most weak economic performances.

Although the regional objectives of the structural funds directly addressed rural features particularly in the case of objective 5b (”The economic diversification of fragile rural areas”) rural areas occur under all regional categories of structural funds. The greatest relevance for rural areas has therefore not been bound to objective 5b-areas but is attributed to the great share of rural areas in objective 1 regions. The assessment of economic development of rural areas in the EU in general is therefore largely related to the lagging regions in objective 1-areas: As has been mentioned previously there is evidence for convergence, as shown by figures for the poorest regions. However, at the same time disparities at the regional and particularly local levels persist (in particular, comparing poorest and richest regions) and call for ongoing Structural Funds programmes.
With Agenda 2000 reform the Structural Funds programmes have been concentrated and proposals for future reforms point in the same direction. The territorial and programme concentration intended to reach particularly regions and people most in need of support and to avoid overlapping activities. Moreover, the period for Structural Funds programmes has been extended to seven years (2000 – 2006) which should allow to achieve longer-term targeting of the programmes through the continued commitment for objective areas. Actually the share of EU population covered by the regional objectives has been decreased to about 41% (and for national support areas to 35%). The objectives of the Structural Funds have been reduced to the three following ones:

Objective 1: Development and structural adjustment of regions whose development is lagging behind

Objective 2: Economic and social conversion of areas facing structural difficulties

Objective 3: Adaptation and modernisation of policies and systems of education, training and employment

Figure 4: Objective Areas of Structural Funds, 2000-2006

Also the Community Initiatives have been restructured and limited to the four prime Initiatives INTERREG, LEADER+, URBAN and EQUAL. For rural development policy it seems important to have an Initiative like LEADER+ with a large scope for innovative actions, networking activities and, what is essential for the future perspectives, relying on a structure which allows an experimental character in its measures.
The actual rural development policy of the EU can therefore not be assessed easily by analysing one type of programme, but has to include elements from the following different EU-programmes, inter-linkages between these programmes, and further territorial actions provided by other programmes:

  • Objective 2 areas (new), particularly those parts focusing on problem of rural areas
  • LEADER+ programmes
  • Rural Development Plans, according to Reg. (EC) 1257/1999.

What has been said above, seems to be even more relevant to this period. The host of measures for rural areas have to be seen within Objective 1-programmes, and horizontal programmes (like Objective 3); moreover, other Community Initiatives, like INTERREG and partly also EQUAL, as well as local action group work, e.g. local AGENDA 21 and environment actions is of outmost concern to rural development. Having outlined the wide field of actions impacting on rural development it becomes clear that such a wide concept is not captured by the actual policy but lends itself heavily to the discussion of territorial development policy. It seems, however, promising that over the last years the preparation of the European Spatial Development Perspective - ESDP (CEC 1999) has shown the readiness for addressing such viewpoints at a European level and, particularly, the high relevance of rural issues and its territorial implications on the agenda.

4. Evolution of EU Policies for Rural Development

Most EU documents state that the main means of support for rural areas of the European Union was the Common Agricultural Policy (CAP) and this still remains the case to some extent. This reflects also the public opinion where rural is still strongly equalled with agriculture or, at least, primarily agriculture driven.

The distribution of CAP aid within the farming community, in general, does hardly address territorial aspects and is often described as being quite regressive: “the main beneficiaries have not been the smaller farmers and poorer regions but the larger farmers and more prosperous agricultural regions” (Lowe et al. 1999, p. 57). The original EC member states were not concerned with regional inequalities and only the British Government saw regional assistance as a counterweight to CAP spending, and in 1975 the European Regional Development Fund (ERDF) and the Less Favoured Areas (LFA) scheme were set up. The LFA programme authorised member states to pay financial compensation to farmers operating in mountains and other “less favoured areas” in order to ensure the continuation of farming, thereby maintaining a minimum population level, or conserving the countryside. The programme operated very early through direct income payments to farmers and directly indicated through its aims the tight inter-relationship of agriculture and environment, particularly in such areas. However, from the introduction of LFA support to the appreciation of its impact on environmental performance under Agenda 2000 decisions was a rather long way (Dax and Hellegers 2000). At first, possibilities of support were broadened through the introduction of “integrated development programmes” (in 1979), particularly shaped to the need of Southern European countries through the Integrated Mediterranean Programmes (in 1985). After the commission paper on “The Future of Rural Society” in 1988 rural development has been seen largely on the way to be stronger integrated into Structural Funds programmes (see above). The designated “rural areas” under objective 5b and the LEADER Initiative are strong indication of this. The LFA scheme was drawn into the new Objective 5a combining together the horizontal measures for the improvement of agricultural structures. With the Agenda 2000 rural development is attached again more closely to agricultural administration and regulations, but on the other hand searches for some continuation of the concept of rural development going beyond agriculture. Yet, one can raise doubts about the opportunities for rural policies under these circumstances. These doubts relate both to the scope of activities being eligible or implemented as well as to the contents, e.g. with relation to its integrative capacity (c.f. Dax 1999, Lowe and Brouwer 2000) and the financial capacity for measures including non-agricultural activities. The up-take of measures has been very different in the previous periods and hence the distribution between the Member States reflects the priorities attached to rural development measures. For example, Austria, due to its ambitious agri-environmental programme and the highly developed less-favoured areas policy, receives a share of 10% of respective EU funds. In comparison the proportion for Spain is hardly exceeding this amount.

Integration approach of rural development

There is concern and discussion on the widening of the concept, including the difficulties of acceptability in society and implementation in administration structures (e.g. Buckwell et al. 1997). In many different fields the interest for rural specificity has evolved and lead to intensified debate. This concerns both the territorial dimension, and in particular regional policy which has extended its field of interest to local development processes and the interactions between different parts of the territory, in particular rural and urban areas. Besides the insertion of the discussion in the conceptualisation and implementation of the new Structural funds programmes for the period 2000 – 2006 these issues have been outlined and agreed upon in the ESDP. Following this document a common research activity on the spatial development of an enlarging European Union has been agreed upon and is now undertaken in the form of the European Spatial Planning Observation Network (ESPON), which includes rural areas as an important dimension of future spatial development. which is now being investigated. Other policies, like environment, tourism, traffic etc. have to deal with their territorial impacts, and hence an assessment of the rural dimension. This wide concept has been particularly discussed over the last decade within OECD which tried to develop a common framework to provide orientation for the diverse national approaches towards advancing in the direction of a comprehensive rural policy in the interest of the society as well as rural people. Analysing the challenge of rural policy with a territorial perspective which allowed for recognition of individual place specific needs and underlined by the importance of exchange with other areas, this phase of OECD work on rural development provided momentum to the international debate and strongly influenced the understanding of EU development of rural areas as well. Both the conceptual framework (OECD 1993) and the implications of the diversity of rural areas (OECD 1996a) could underline that rural areas are not doomed to failure but that policy actually matters.

Whereas previously actions for rural development had focused on its backwardness and were restricted mainly to the agricultural sector, empirical studies at the international level have confirmed that there is no uniform development trajectory. In particular, this means that rurality in itself does not automatically mean lagging economic development. In particular OECD (1996b) has revealed through the establishment of a territorially disaggregated data set that for a series of countries employment increase (in the 1980s, and some recent data suggest also for the 1990s) was higher in rural than in urban regions, an argument which was taken up largely in the international discussion and by EU Commission (e.g. CEC 1997).

This heterogeneity of performance of rural areas cannot be explained sufficiently by standard economic theory. It appears that in many cases intangible aspects are the most important in ”making the difference” (OECD 1998, p. 12f.). Thus the reason for (economic) success does not just lie with physical capital but often must be sought in human capital (the ability of people to participate in the economy) and social capital (the capacity of communities to organise themselves). Hence the aim of rural policies consists in far more than simply compensating disadvantaged areas/people. It is realised that it is central to initiate development processes and to focus on the institutional framework for relevant initiatives. In such a context the contribution of the LEADER initiative, albeit small from its financial resources, might be crucial for the kind of discussion and processes required to overcome regional inertia which was prevailing in many rural areas (Saraceno 1999). Its innovative character and its intention to foster inter-regional co-operation seems to be at the core of the development process. From its outset it has combined these elements with the notion of ”bottom-up” approach, including a wide variety of local stakeholders and interests.