BBC NEWS | Europe | The EU's spending challenge



by Oana Lungescu BBC correspondent in Brussels

The European Union will have to increase spending on poor regions or risk a deepening wealth gap after eastward enlargement, a European Commission report warned on Thursday.

The European commissioner in charge of regional aid, Michel Barnier, said that the disparities between the richest part of the EU population and the poorest will double next year after 10 mostly former communist countries join the bloc.

This report I present today shows a new reality in a European Union of 25 members, a reality where social and territorial disparities will be much more serious than they are today in a union of 15

Michel Barnier
EU commissioner for aid
Mr Barnier would like regional spending to go up by as much as 50% after 2007, but that will be hard.

The countries of central and eastern Europe - emerging from 40 years of communism and a decade of difficult transition - are much poorer than western nations.

So next year, when the EU will have 25 member states, a quarter of its population (116 million people) will live in regions which the EU describes as poor.

These are regions where output per capita is less than 75% of the community average, entitling them to the highest level of EU regional aid.

Wealth gap to double

At the moment, only 18% of people in the EU live in poor regions.

Romanian refugees in London
Inequality in Europe has led to migration
Mr Barnier warned that enlargement would bring an unprecedented widening of economic disparities.

"This report I present today shows a new reality in a European Union of 25 members, a reality where social and territorial disparities will be much more serious than they are today in a union of 15," he said.

"The gap between the richest and the poorest regions will double."

Mr Barnier's report divides an enlarged EU into three groups:

The first, comprising the poorest eight new members - Poland, Hungary, the Czech Republic, Slovakia, Lithuania, Latvia, Estonia and Malta - will have a fifth of the EU population but on average just 42% of the GNP per capita. But there is a wide range of wealth within this group too. The Czech Republic is the richest, with 65% of the EU average, while Latvia is the poorest, with 37%.

The second group includes three old members - Spain, Portugal and Greece - and the richest two of the newcomers - Slovenia and Cyprus. Together, they have 13% of the EU's population and around 70% of its average wealth.

The third and largest group includes all the other existing EU countries, with two-thirds of the union's population and 115% of the EU average wealth per capita.

Spending boost needed

One of the reasons for poverty is unemployment. The report says that three million jobs would have to be created to bring up the level of employment to that of the rest of the EU.

If we don't maintain a credible policy of solidarity, the gap will only get bigger and the riches will accumulate only in one part of the continent

Michel Barnier
Despite the fact that eastern Europe has a higher rate of economic growth than the EU, the employment rate across the region decreased for the fifth year in a row.

On the whole, unemployment in the candidate countries was 13% on average in 2001, almost six points lower than the EU average.

To start bridging the wealth gap, Mr Barnier says Europe will have to boost spending for its poorest regions in its next budget from 2007.

Internal EU studies show regional subsidies would need to be increased by 50%, reaching the equivalent of 0.45% of EU GDP.

"We'll have a real debate," he said. "But, after looking at the figures, at the development gap we're facing, I think this is the credibility threshold.

"If we don't maintain a credible policy of solidarity, the gap will only get bigger and the riches will accumulate only in one part of the continent, and that's good neither for the European spirit of solidarity nor for the strength of the euro."

Budget cut

But, as Mr Barnier is the first to admit, he will have a battle on his hands when the European Commission presents its proposals for the EU's next seven-year budget in November.

Polish farmers on a main road
Poland will be able to insist on its fair share of the budget
The EU's paymasters - Germany, Britain, the Netherlands and Sweden among them - want to enforce budget discipline and freeze expenditure after 2006.

They have already managed to cut the bill for enlargement to below what they had originally earmarked in the budget.

And they will spend 100 euros less per head for poor regions in eastern Europe than they did for Spain, Portugal or Ireland.

EU officials say that is because candidate countries still lack the civil servants able to use so much money efficiently. But, from next year, countries like Poland will sit down at the EU table and insist on their fair share in the future budget.


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