Changing governance of cohesion policy

Authored by: Carolyn M. Dudek

The Routledge Handbook of European Public Policy

Print publication date:  November  2017
Online publication date:  November  2017

Print ISBN: 9781138927339
eBook ISBN: 9781315682723
Adobe ISBN:

10.4324/9781315682723-10

 

Abstract

Regional economic disequilibria was viewed as both an obstacle to and result of European integration (European Commission, 1962, 1965, 1969). Cohesion policy evolved into a program to redistribute funds to less developed regions throughout Europe in order “to reduce economic, social and territorial disparities” (European Commission, 2016). With successive EU enlargements, cohesion policy became an increasingly important instrument to alleviate economic disequilibria across regions in Europe, as well as lessen the negative socio-economic impact of EU membership. The budgetary allocation of cohesion policy demonstrates the policy’s significance. For instance, the 2014–2020 cohesion program is 32.4 percent of the total EU budget or €351.8 billion (European Commission Regional Policy Info Regio, 2012). In addition to its large budgetary allocation, the policy implementation is quite complex including several levels of government: European, national, regional and local levels, as well as non-governmental actors within member states to coordinate and implement the policy.

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Changing governance of cohesion policy

Introduction

Regional economic disequilibria was viewed as both an obstacle to and result of European integration (European Commission, 1962, 1965, 1969). Cohesion policy evolved into a program to redistribute funds to less developed regions throughout Europe in order “to reduce economic, social and territorial disparities” (European Commission, 2016). With successive EU enlargements, cohesion policy became an increasingly important instrument to alleviate economic disequilibria across regions in Europe, as well as lessen the negative socio-economic impact of EU membership. The budgetary allocation of cohesion policy demonstrates the policy’s significance. For instance, the 2014–2020 cohesion program is 32.4 percent of the total EU budget or €351.8 billion (European Commission Regional Policy Info Regio, 2012). In addition to its large budgetary allocation, the policy implementation is quite complex including several levels of government: European, national, regional and local levels, as well as non-governmental actors within member states to coordinate and implement the policy.

This chapter will examine the evolution of cohesion policy governance and budgeting and how subsequent enlargements have shaped the policy. Under President Jacques Delors, the Commission established the partnership principle between the EU and lower levels of government to guide the governance and implementation of cohesion policy. There has been significant disagreement in the literature regarding the success of the partnership principle in practice, but more recent reforms in the 2007–2013 cohesion policy framework and under the current 2014–2020 programs suggest greater partnership, and a shift in governance to promote all levels of governments’ participation in cohesion policy. Moreover, this chapter will examine how the policy’s budgetary aims and priorities have changed to address new realities and challenges with respect to the single market, including a geographical shift of funds to the CEECs.

Governance of cohesion policy

The very nature of cohesion policy has provoked a re-examination of subsidiarity, which is defined in Article 5 (3) of the Treaty on European Union as follows: “Under the principle of subsidiarity, in areas which do not fall within its exclusive competence, the Union shall act only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the member States, either at central level or at regional and local level, but can rather, by reason of the scale or effects of the proposed action, be better achieved at Union level.”

European regional development programs have to varying degrees impacted the relationship and policy responsibility of different levels of government within EU member states (Leonardi, 2006; Bachtler & Michie, 1993; Marks, 1993). As the EU has sought to reduce regional disparities, all levels of government—whether local, regional, national or supranational—have been involved in cohesion policy governance. This explains why many analyses of cohesion policy are often grounded in the multilevel governance model literature, an approach which focuses on the reallocation of policy responsibilities across levels of government. Indeed, some scholars have gone so far as to argue that the EU’s cohesion policy has changed the role of various levels of government (J. F. Bachtler & Mendez, 2007; Hooghe & Marks, 2001; Marks, 1993; Morata & Munoz, 1996; Tommel & Verdun, 2013). This is so, because EU cohesion policy reallocates money from the EU to underdeveloped regions within member states, thus potentially empowering regional governments to create and implement their own development policies with little involvement from central government. Therefore, scholars suggest that EU cohesion policy involves a simultaneous centralization of power to the EU level and decentralization of power to sub-national governments (Hooghe & Marks, 1996, 2001; Marks, 1993). As a result, the Commission plays an increasingly central role supporting and promoting the interests of sub-national governments. In effect, a new partnership is created between the EU and regions allowing regional governments to assert their autonomy and to advance decentralization (Conzelman, 1995; Marks, 1993).

Although some scholars attempt to rank order levels of government or present gains and losses of policy responsibility within cohesion policy as if it is a zero-sum game (Allen, 2000; Anderson, 1992; Conzelman, 1995; Hooghe & Marks, 2001; Stone Sweet, Sandholtz, & Fligstein, 2001), other scholars point out that cohesion policy governance involves negotiations and networks, not just constitutional frameworks shaping institutional hierarchical government relationships (Pierre & Peters, 2005). As a result, subnational levels of government work directly with the EU, thus bypassing the national government (Pierre & Peters, 2005; Tommel & Verdun, 2013). In addition, cohesion policy non-state actors such as business corporations and non-profit organizations also play a role in governance (Pierre & Peters, 2005; Tommel & Verdun, 2013). Thus, some scholars suggest that EU cohesion policy-making is characterized by non-hierarchical modes of governance—a form of governance requiring negotiation and compromise among various levels of government and across several state and non-state actors (Tommel & Verdun, 2013). In sum, earlier studies of EU cohesion policy accorded greater centrality to national government; over time, it was recognized that power had shifted such that European, regional, and local levels of government as well as non-state actors were exercising more policy influence and/or responsibility.

This evolution from hierarchical governance to a more fluid multilevel approach characterized by partnership and negotiation among levels of government can be understood as a function of cohesion policy’s changing focus and priorities—factors which will be examined in the next section.

History pre-1988

Regional development policy was originally conceived as a mechanism to give direct transfers to central governments as a side payment for membership: the UK and Spain are cases that exemplify cohesion as a payment for membership (Allen, 2000; McCann & Ortega-Argilés, 2013; Tommel & Verdun, 2013). The Treaty of Rome dealt with the problem of regional economic disparities across the six original European Economic Community (EEC) members by creating three instruments: the European Social Fund (ESF), the European Agricultural Guidance and Guarantee Fund (EAGGF) and the European Investment Bank (EIB). The ESF focused on providing employment opportunity and retraining. The EAGGF bought and stored surplus produce, encouraged agricultural exports and improved the living and working conditions of farmers (McCormick, 2004). The EIB was established to fund projects in less developed regions, especially rural regions. The focus of these funds demonstrates that in the earlier days of the Community there was strong emphasis on utilizing cohesion funds to support the EEC’s other principal policy—the Common Agricultural Policy (CAP) (Dall’Erba, 2003; European Commission, 2013). The Commission, in an indication of the growing importance of regional policy in the EEC’s formative years, issued an Action Program (1962) and a Memorandum of Regional Problems (1965), culminating in a Memorandum on Regional Policy (1969), with the latter recommending the coordination of national and EU policies to address regional disequilibria (European Commission, 1969).

With the 1973 accession of the UK, Ireland and Denmark, regional policy was firmly established with the creation of the European Regional Development Fund (ERDF) in 1975. Echoing the role regional policy played in the founding of the EEC, the ERDF was a concession to the UK, which as an EEC member now faced higher prices for imported foodstuffs, due to the Common External Tariff, without the compensatory side payments CAP provided. The UK’s economy was more industrial and service based than, for example, France—a major beneficiary of the CAP. As a result, the UK sought ERDF as a source of aid for its deindustrialized regions. Thus, the ERDF was not originally intended to decrease economic and structural backwardness of Europe’s poorer regions, but rather to ensure that those member states contributing to the CAP, but whose agricultural sector received lower pay outs, would receive compensation—the just retour, which has been a central feature of EU budgetary policy (Allen, 2000; Morata & Munoz, 1996; Pollack, 1995). The accession of Spain and Portugal in 1986, both with lower per capita GDP than the Community average, further put pressure on the budgetary priorities in the European Community (EC)—(as it was then called), placing further pressure on CAP as the EC’s major budgetary item. Significantly, regional development came into its own as a major EU policy priority and the newest accession states, Spain and Portugal, were able to gain influence within the EC to promote cohesion policy (Laffan & Shackelton, 2000; Manzella & Mendez, 2009).

Introduction of the partnership principle

Although regional economic disequilibria were recognized in the Treaty of Rome, cohesion was first given a legal basis with the Single European Act (SEA) (1986), just after the Iberian enlargement. The main policy instruments to address cohesion were: ERDF, EAGGF and ESF. Prior to 1989, structural funds were doled out to specific projects that were co-financed, and member states played a major role in the decision to create and implement projects. Within the Regional Policy DG it became clear that a case-by-case distribution of projects was not adequate to promote the wealth-generating capacity of poorer regions (Meadows, 2003).

The SEA introduced the partnership principle and renamed regional development policy to “cohesion policy.” The logic of the partnership principle was to promote the participation of regional or local authorities in the adoption and implementation of regional policies made possible through EU co-financing. The underlying assumption was that regional policy makers would be more adept at evaluating their local economy and implementing the policies; thus making EU regional policies more efficient and effective (Balme, 1997; Leonardi & Nanetti, 1990). In addition, the Commission had hoped to lessen regional dependence on national government resources and to allow regional actors greater discretion (Smyrl, 1997). Thus, in 1988, the introduction of cohesion in the SEA initiated a significant reform of regional policy and its main budgetary elements. (European Commission, Directorate-General for Regional Policy, 2008; Hooghe, 1997).

The record of the partnership principle is mixed. For a variety of reasons—including the domestic setting, constitutional constraints and national government attempts to preclude regional governments from gaining more autonomy, realization of the partnership principle has varied across countries (Chardas, 2014; Dudek, 2005; Ferry & McMaster, 2013; Meadows, 2003; White, 2003). One of the underlying problems is that EU member states organize their territories differently—some are federal states (Austria, Belgium and Germany), some are unitary states (the classic example being France), and some countries with “quasi-federal” features have devolved certain powers to regions (Italy and Spain, but increasingly the UK as well). Therefore, the partnership principle did not fully appreciate the distribution of competencies between national and regional governments as well as the disparities in the political weight and the sensitivity of EU member states, especially those with autonomous regions and significant secessionist sentiment (e.g., Catalonia in Spain and Scotland in the UK). Due to these factors, the partnership principle was not as effective and far-reaching as the Commission had anticipated in proposing this reform (Dabrowski, 2014; Meadows, 2003).

Establishment of the cohesion fund

Another reform of regional development policy emerged in 1993 in anticipation of the creation of Economic and Monetary Union (EMU). Spain, Ireland, Portugal and Greece joined forces to advocate cohesion policy in advance of the Maastricht Treaty. In fact, Spain threatened to block passage of the Maastricht Treaty if the EU did not include new cohesion funds and a doubling of structural funds as compensation for joining EMU (Morata & Munoz, 1996). Thus, the 1993 reform is a reflection of the pressure these countries placed on Maastricht negotiations to receive side payment to help deal with the projected negative impact of EMU’s convergence criteria on their economies. As a result, the Maastricht Treaty established the Cohesion Fund, which was reserved for member states with GDP less than 90 percent of the EU average. In a blow to the multilevel governance trend in EU regional policy, funds disbursed under this new program went directly to central governments, which would then decide disbursement. The 1993 reform introduced new measures to improve transparency and simplify the allocation of funds, but a “partnership” was still not fully achieved (Brunazzo, 2010).

Assessment of regional policy reforms

Table 8.1 summarizes the objectives of the 1988 and 1993 reforms (a sixth objective was added in 1995). Objectives were tied to specific funds.

The main beneficiaries of the 1989–1993 program were Spain (ECU 14.2 billion), Italy (ECU 11.4 billion), Portugal (ECU 9.2 billion) and Greece (ECU 8.2 billion) (European Commission, Directorate-General for Regional Policy, 2008). The beneficiaries of the 1993–1999 program were slightly different with Spain (ECU 42.4 billion) still receiving the lion’s share, but Germany also receiving a significant portion to assist with East German re-unification (ECU 21.8 billion), Italy (ECU 21.7 billion), Portugal (ECU 18.2 billion), Greece (ECU 17.7 billion) and France (ECU 14.9 billion) (European Commission, Directorate-General for Regional Policy, 2008). These objectives and distribution of funds demonstrate a major emphasis on Objective 1, included ERDF, ESF and EAGGF. With EAGGF signaling particularly more emphasis on agriculture and infrastructure in rural areas.

While some scholars argue that EU regional policy limited the power of national authorities (Thielemann, 2002) to the benefit of the Commission’s “influence on policy orientations and financial allocations” (J. F. Bachtler & Mendez, 2007, p. 551) and regional governments (J. Bachtler & Michie, 1993; Leonardi, 2006), others argue that constitutional constraints in some countries limited the role of regional governments (Colino, 1996; Dudek, 2005) because the European Regional Development Policy was centralized at the EU level (J. Bachtler & Michie, 1993).

Table 8.1   Objectives for 1988 and 1993 programs

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

1989–1993 (64% of total funds)

1994–1999 (68% of total funds)

Objective 4: facilitating the occupational integration of young people

Objectives 3 and 4 combined:

1989–1993 (10% of total funds)

1994–1999 (9.1% of total funds)

Objective 2: converting regions seriously affected by industrial decline (10.6%)

1989–1993 (9% of total funds)

1994–1999 (10.6% of total funds)

Objective 5: (a) speeding up the adjustment of agricultural structures and (b) promoting the development of rural areas

1989–1993 (9.2% of total funds)

1993–1999 (7.8% of total funds)

Objective 3: combating long-term unemployment

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

1993–1999 (.4% of total)

2000 and 2007 reforms

In 1999 and 2006 cohesion policy underwent further reforms. In 1999 reforms were created as part of the Agenda 2000 negotiations (J. F. Bachtler & Mendez, 2007). The 1999 reforms improved cooperation between the Commission and the member states regarding “financial control and discipline” (European Commission, Directorate-General for Regional Policy, 2008, p. 20). Moreover, there was “stronger involvement of member states and regions in program monitoring and assessment” (European Commission, Directorate-General for Regional Policy, 2008, pp. 20–21). Management of cohesion policy devolved to the member states as it “introduced a clearer division of responsibilities and stricter application of the principle of subsidiarity” (Official Journal of the EU, 2005). Some scholars argue that these reforms caused a renationalization of the policy (Bache, 1998), whereas other scholars dispute this claim (J. F. Bachtler & Mendez, 2007).

The 1999 reform also streamlined the Objectives, merging Objectives 2 with 5 and 3 with 4 (see Table 8.2). This reduction of the number of objectives increased the concentration of assistance, but also moved toward greater simplification.

As with previous major cohesion policy reforms, this phase was heavily influenced, if not driven by enlargement—in this case, the 10 (Central and Eastern European Countries-CEECs) + 2 (Cyprus and Malta) enlargement in which 12 new member states acceded to the EU. The principal challenge was to extend cohesion funds to 12 new member states. Consequently, the 2007–2013 multi-annual financial framework (MFF) instituted a new category to phase out regions that had previously qualified for cohesion funds. The objectives were revised and renamed to reflect the new realities of a 27-member EU as follows: convergence, regional competitiveness and employment, and European territorial cooperation. The revision of the categories highlighted the EU’s focus on innovation, the environment, adaptation to social changes, and cross-border cooperation. Moreover, the 2007–2013 budget geographically shifted funding, with 51 percent of total regional spending concentrated in the CEECs, despite the fact that these member states accounted for less than one quarter of the total EU population (European Commission Regional Policy-Info Regio, 2012).

Table 8.2   Revised objectives for the 2000–2007 program

Objective 1: promoting the development and structural adjustment of regions whose development is lagging behind (69.7% of the total allocation EUR 135.9 billion)

Objective 2: supporting the economic and social conversion of areas facing structural difficulties (11.5% of the total allocation EUR 22.5 billion)

Objective 3: supporting the adaptation and modernization of policies and systems of education, training and employment (12.3% of the total EUR 24.05 billion)

Many CEECs have experienced difficulty complying with the partnership objectives of cohesion policy, which ties funding to involving lower levels of government in policy planning and implementation, with scholars suggesting that this conditionality has had varied impacts across new members (Ferry & McMaster, 2013; Hughes, Sasse, & Gordon, 2004). CEECs are organized as unitary systems, with some still quite hierarchical, years after their transition to liberal states (see Hughes et al., 2004). At any rate, CEECs differ markedly in the extent to which they incorporate features of multilevel governance in policymaking: Bulgaria is highly centralized (Yanakiev, 2010); Romania has made some progress toward decentralization, but it has mostly been to access and manage structural funds and has not fundamentally empowered subnational governmental units (Dobre, 2010); and, in Poland there has been more progress toward decentralization and regional level governance (Churski, 2008). Given these differences among the CEECs, implementation of the partnership principle has been mixed (Dabrowski, 2014).

In terms of partnership, however, case studies in Greece and the CEECs suggest that informal as well as formal institutions have not necessarily promoted as much regional government participation in cohesion policy as the partnership principle suggests (Chardas, 2014; Dabrowski, 2014; Ferry & McMaster, 2013). For instance, in Greece, perhaps as a result of the 2008 economic crisis and the ensuing sovereign debt crisis, austerity inhibited domestic institutional reform of regional governance simply because regional governments found themselves without resources (Chardas, 2014). In the CEECs scholars have found variations in the extent to which regional governments have played a greater role in cohesion policy (Dabrowski, 2014; Ferry & McMaster, 2013). Patronage networks and strong central government control over development policy has inhibited partnership expanding to the regional and supranational levels (Dabrowski, 2014).

In addition to enlargement playing a key role in cohesion policy reforms in this time period, the Lisbon Strategy 2000 (the goal of making the EU a leading knowledge-based economy) helped shape the 2000–2006 reforms (European Parliament, 2000). In particularly in 2005, with the “relaunch” of the Lisbon Strategy, cohesion policy emphasized economic growth and employment in knowledge-based industries (Communication from the Commission, 2006). This Lisbon “relaunch” also informed the negotiations for the 2007–2013 program (Communication from the Commission, 2006; Mendez, 2011) by shifting cohesion funding to R&D and innovation at the expense of infrastructure projects.

2014–2020 cohesion policy

The 2014–2020 cohesion policy program is believed by many to be much more far reaching regarding multilevel governance and the partnership principle as well as both addressing the euro-crisis and re-thinking development priorities and policy implementation (McCann & Ortega-Argilés, 2013). The 2014–2020 program consists of 11 thematic objectives within the three major priorities of ERDF, ESF and the Cohesion Fund (European Commission, 2014a), which are laid out in Table 8.3.

ERDF and ESF eligibility categories include 1) less developed regions (GDP/head <75 percent of EU average), 2) transition regions (GDP/head between 75 percent and 90 percent of EU-27 average), and 3) more developed regions (GDP/head>=90 percent of EU-27 average) (European Commission, 2014a); whereas, Cohesion Fund eligibility includes countries that have a GNI/head<90 percent of the EU-27 average and those that are currently being phased out, such as Cyprus (European Commission-InfoRegio, 2014).

High unemployment in Europe, lack of competitiveness as well as intellectual discussions within policymaking circles promoted a re-conceptualization of cohesion policy. Danuta Hubner, the European Commissioner for Regional Policy from 2004–2009 desiring a re-thinking of regional policy, held a series of hearings with experts from around the world. Fabrizio Barca Director-General in the Italian Ministry of Economy was commissioned as rapporteur of the proceedings. The Barca 2009 Report became a very influential publication that shaped the discussion for changing the 2014–2020 program (McCann & Ortega-Argilés, 2013; Mendez, 2011). This report asserted the notion of a more place-based approach to regional development along with the partnership principle, in a move away from the top-down policy focus on sectors and hierarchical policy architecture (Barca, 2009; Jouen, 2009; McCann & Ortega-Argilés, 2013). Member states were given the responsibility to recognize and employ appropriate partners in the different stages of cohesion policy from formulation, to implementation, to oversight. Although the partnership selection procedure explicitly takes “into account the different institutional and legal frameworks of the member states and their national and regional competences” (European Commission, 2014b), it also creates an oversight process that includes lower levels of government and non-government actors. As part of the partnership regulation

Table 8.3   Priorities for 2014–2020

ERDF

ESF

Cohesion Fund

1 Strengthening research, technological development and innovation

5 Promoting climate change adaptation, risk prevention and management

8 Promoting sustainable and quality employment and supporting labor mobility

2 Enhancing access to, and use and quality of, information and communication technologies

6 Preserving and protecting the environment and promoting resource efficiency

9 Promoting social inclusion, combating poverty and any discrimination

3 Enhancing the competitiveness of SMEs

7 Promoting sustainable transport and improving network infrastructures

10 Investing in education, training and lifelong learning

4 Supporting the shift toward a low-carbon economy*

11 Improving the efficiency of public administration

*Objective 4 is under both ERDF and Cohesion Fund priorities

Source: European Commission-Directorate General for Regional Policy, “Priorities for 2014–2020” http://ec.europa.eu/regional_policy/en/policy/how/priorities, last updated January 15, 2015

Member states shall provide:

  • the list of partners involved in the preparation of the Partnership Agreement;
  • the actions taken to ensure the active participation of the partners;
  • the role of the partners in the preparation of the Partnership Agreement;
  • the results of the consultation with partners and a description of its added value in the preparation of the Partnership Agreement.

(European Commission, 2014b)

Progress reports and monitoring of the programs also must explicitly record partners’ participation and partners’ opinions on how they are included in the process. Similar to the Open Method of Coordination, the Commission will also provide “good practice and innovative approaches” regarding the experience of partnership (European Commission, 2014b). The 2014–2020 program also creates more oversight to ensure the inclusion of lower levels of government and non-government actors in the formulation, implementation and oversight of cohesion policy, as well as at the EU level, as part of establishing policy goals and the monitoring process.

The partnership regulation in current cohesion policy attempts to create mechanisms that make it difficult for member states to exclude partners. The partnership under this new system seems to be truly multilevel. The inclusion of non-governmental actors suggests the embodiment of a more non-hierarchical governance style that requires negotiation and compromise among levels of government and across several state and non-state actors.

The funding focus of the 2014–2020 program has changed to cover all regions and to address new priorities. General goals include “growth, and jobs, as well as tackling climate change, energy dependence, and social exclusion” (European Commission, 2013). The program also includes a new Youth Employment Initiative linked to ESF to address particularly high youth unemployment brought about by the Eurozone crisis and the lingering effects of the 2007 global financial crisis. In addition, under the new program certain key sectors are targeted such as “innovation and research, the digital agenda, support for small and medium enterprises, and low carbon economy” (European Commission, 2013). Just over two years into the program (at the time of this writing), it is too early to assess whether partnership has been strengthened, however, the guidelines for the 2014–2020 program suggest improvements.

Conclusion

Cohesion policy has shifted over the lifespan of the policy. These changes can mainly be understood in the context of the partnership principle, enlargement and the EU’s shifting policy priorities. Cohesion policy initially was a side payment to national coffers to accommodate the negative effects of EU membership and has been transformed to a policy with more specific policy objectives to deal with contemporary issues such as growth, jobs and climate change. Moreover, the governance of the policy, particularly in the 2014–2020 program, promotes policy objectives across several levels of government.

Due to constitutional constraints and national governments jealously holding on to sovereignty, achieving partnerships among the EU, national, regional and local levels of government has experienced mixed results across EU member states. Changes in the 2007–2013 and 2014–2020 cohesion programs, however, have made it increasingly difficult for national governments to act as the main (or, perhaps, exclusive) level of government for the program. Moreover, the pattern has been to provide space for non-governmental actors to participate. The success of the partnership principle, particularly creating an increased role for regional and local governments, has been strongly dependent on internal political dynamics (Chardas, 2014; Dabrowski, 2014; Dobre, 2010; Ferry & McMaster, 2013; Yanakiev, 2010). At the same time, the European level sets the goals of cohesion policy and plays a role in monitoring the policy and the partnership itself. The many partners involved in cohesion policy signals a more non-hierarchical multilevel style of governance than first envisioned in the early years of structural/cohesion policy.

As government responsibility and participation in cohesion policy has shifted over time, so too has the focus of the policy. In earlier years, the cohesion budget focused (mainly) on infrastructure and rural areas. With enlargement, the geographic focus of the policy shifted first to the Mediterranean, and then eastward to assist newer members, and the goals of the policy shifted accordingly. So, for example, cohesion policy changed to absorb the Lisbon Strategy’s goals of innovation, growth, jobs and the environment.

Cohesion policy accounts for approximately one-third of the EU’s budget. As such, it promises to continue to be a significant EU policy for promoting a sense of “solidarity” between EU member states with higher per capita GNP and less wealthy member states.

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