REPORT on development problems and structural assistance in Germany in the period 1994-1999 (C4-0047/96, C4-0048/96, C4-0049/96, C4-0673/96 and C4-0674/96)

7 January 1997

Committee on Regional Policy
Rapporteur: Mr Gerhard Botz

By letter of 12 December 1994 the Commission forwarded to the European Parliament its decision of 29 July 1994 on the establishment of the Community support framework for Community structural assistance in the German Objective 1 regions (C4-0047/96); by letters of 22 December 1994 and 2 February 1995 it forwarded its decisions of 14 December 1994 on the approval of the Single Programming Document for Community structural assistance in the areas of Germany concerned by Objective 2 (C4-0048/96, C4-0049/96 and C4-0673/96); and by letter of 24 July 1995 it forwarded the Single Programming Document for Community structural assistance in the areas of Germany concerned by Objective 5b (C4-0674/96).

At the sittings of 31 January 1995 and 13 January 1997 the President of Parliament announced that he had received these documents and referred them to the Committee on Regional Policy as the committee responsible and to the Committee on Agriculture and Rural Development and the Committee on Social Affairs and Employment for their opinions.

At its meeting of 18 January 1995 the Committee on Regional Policy appointed Mr Botz rapporteur.

The committee considered the draft report at its meetings of 23 September 1996, 28 October 1996, 25 November 1996, 16 December 1996 and 17 December 1996.

At the last meeting it adopted the motion for a resolution unopposed with one abstention.

The following were present for the vote: Speciale, chairman; Botz, rapporteur; Berend, Camisón Asensio, Crampton, Dary (for Castagnède), Goepel (for Langenhagen), Hallam (for Hume), Howitt, Izquierdo Collado (for Frutos Gama), Klaß, McCarthy, Myller, Otila, Schroedter, Sornosa Martínez, Vallvé, Virrankoski (for Moretti) and Walter.

The opinion of the Committee on Social Affairs and Employment is attached. The Committee on Agriculture and Rural Development decided not to deliver an opinion.

The report was tabled on 7 January 1997.

The deadline for tabling amendments will be indicated in the draft agenda for the relevant partsession.

A MOTION FOR A RESOLUTION

Resolution on development problems and structural assistance in Germany in the period 1994-1999

The European Parliament,

- having regard to the Commission's decision to set up a Community support framework for structural assistance in the German Objective 1 regions Mecklenburg-Western Pomerania, Brandenburg, Saxony-Anhalt, Saxony, Thuringia and Berlin (East)[1] (C4-0047/96), and in particular to that Community support framework,

- having regard to the Commission decisions on the approval of the Single Programming Document for Community structural assistance in the areas of Germany concerned by Objective 2[2] (C4-0048/96, C4-0049/96 and C4-0673/96), and in particular to those Single Programming Document,

- having regard to the Single Programming Document for Community structural assistance in the areas of Germany concerned by Objective 5b (C4-0674/96),

- having regard to its resolutions of 15 July 1993 on the Community response to the problem of restructuring in East Germany and to the economic and social crisis[3] and on the Community support framework for the five new Länder of the Federal Republic of Germany[4],

- having regard to the document entitled: 'Community Structural Assistance and Employment' (COM(96)0109) and to the Commission Communication concerning a European strategy for encouraging local development and employment initiatives (COM(95)0273),

- having regard to the results of the public hearing of 28 October 1996 on development problems in connection with structural measures under Objectives 1, 2 and 5b in Germany,

- having regard to the report of the Committee on Regional Policy and the opinion of the Committee on Social Affairs and Employment (A4-0002/97),

A. whereas the demands upon structural and regional policies in the reunified Germany have increased considerably as a result of the particular situation of the process of economic and social transformation in the New Federal Länder (NFL) and the deterioration of the general economic situation in the EU,

B. whereas the creation of internal unity in Germany is also of great significance for the further integration of Europe and is proving more difficult than expected,

C. whereas the rising level of unemployment is the most serious social problem for the reunified Germany (16% in the new Länder, 9.7% in the old Länder), and whereas the actual level of unemployment, especially in the new Länder, is significantly higher even than that shown by the statistics which are influenced by short-term government-supported job-creation measures and retraining, qualification and further training schemes,

D. whereas the new Länder covered by Objective 1 will receive ECU 13.64 bn from the European Structural Funds in the period 1994-1999 because they are among the poorest regions in the EU and have had to cope with an unprecedented and full-scale structural upheaval affecting all areas of the economy and of society,

E. whereas ECU 733 m will be provided in the period 1994-1996 and ECU 854 m in the period 1997-1999 from the EU Funds for the German Objective 2 regions to combat the specific problems of regions with declining industrial production,

F. whereas the rural areas of Germany covered by Objective 5b of the European Structural Funds will receive ECU 1.229 bn in European structural aid in the period 1994-1999 for development and structural adjustment,

G. having regard to the outcome of the two reforms of the Structural Funds, in 1988 and 1993, and to the principles of environmental protection and equality of opportunity, the inclusion of the local and regional level and the direct involvement of the social partners enshrined therein,

H. whereas certain Community initiatives fund the same measures as Objective-region assistance and have been criticized, in particular by the Land ministries responsible for implementing them, as entailing excessive bureaucracy,

I. whereas the German support instrument known as the 'Joint scheme for the improvement of regional economic structures' is of outstanding importance as a cofinancing instrument for a number of German regions,

J. aware of the increased need for coordination between the German and European agencies, which is a consequence of the federal structure of Germany,

K. whereas only 1% of Structural Fund resources are made available for pilot projects, and whereas that amount is in no way commensurate with such projects, which involve lengthy, costly and labour-intensive applications to the Commission,

1. Acknowledges and praises the joint efforts made by Germany and the EU to secure the economic renewal of the German Objective 1 regions (new Länder) and the successful contribution made by the European Structural Funds to improving the situation in the German Objective 2 and 5b regions and regards them as an essential expression, both now and in the future, of European solidarity with the disadvantaged regions of Germany;

2. Regards the creation and preservation of jobs as a very important task, in addition to support for regions where development is lagging behind and to the elimination of disparities in the European Structural Funds, and draws attention to the high priority of training and further training in this connection;

3. Regards increased support for small and medium-sized undertakings as an important means of improving the situation in the German Objective 1, 2 and 5b regions and of creating employment; calls for more attention to be given to the lack of an adequate capital base among SMUs and recommends that use be made of the existing opportunities for the Structural Funds to participate in the supply of risk capital;

4. Calls for the lack of advisory and service capacity which would enable SMUs to exploit existing opportunities for support to be remedied and recommends making increased use of resources from Technical Assistance for such measures, particularly as there are still marked shortages in the new Länder in terms of marketing and management, and recommends the inclusion of positive experiences from other Member States in future considerations;

5. Regards the delays which have occurred in approving the Community support framework and the single programming documents (SPDs), particularly for Objectives 2 and 5b, as unjustifiable and therefore calls on the Commission, the German Federal Government and the Land governments to improve cooperation between them and to find solutions, in a dialogue aimed at achieving results with the relevant audit boards, to the following problems concerning the implementation of the Funds:

- unsatisfactory coordination between the individual Funds as a result of differing administrative rules and a lack of cooperation by the relevant directorates-general;

- too much time wasted on complicated checks for compliance with aid legislation which may subsequently lead to delayed approval of operational programmes and authorizations under aid legislation;

- the excessively complicated financial arrangements involved in the Funds, which may force the regions to seek interim financing;

- the continuing lack of transparency in European structural support;

6. Is concerned at the current flow rate of Structural Fund appropriations earmarked for Germany and calls on the Land ministries responsible and the Commission to ensure that appropriations are paid out from the European Structural Funds on schedule;

7. Notes that more informative and practicable assessment criteria must be devised as soon as possible as a contribution to the qualitative improvement of prior appraisal, monitoring and ex post evaluation which is urgently needed to verify the success of Structural Fund assistance, with account being taken of the fact that development projects should comply with the principles of permanent development;

8. Proposes that, in future, Community initiatives carried out in Germany should be more narrowly focused and considers that some initiatives could be better integrated into EU Objective-region assistance;

9. Notes that the Monitoring Committees bear a heavy responsibility in implementing CSFs, reminds them of the powers they have to revise the CSF, subject to the conditions laid down in the framework regulation, and calls on them to make greater use than hitherto of these powers in the interest of the regions;

10. Stresses the major importance of the participation of the economic and social partners in the work of the Monitoring Committees as an essential element of the partnership;

11. Hopes that more attention will be given to the proposals of local and regional authorities in drawing up and implementing planning documents and notes in this connection the positive experience of North-Rhine Westphalia with the regional conferences;

12. Points out that prior selection of pilot projects in the regions would both reduce the Commission's workload and guarantee a commensurate amount of co-determination for the Member States;

13 Calls once again on the German authorities to act on their duty to publish details of participation of the European Structural Funds in projects and measures under Article 32 of coordinating Regulation (EEC) No 2082/93 and to make a more active contribution that reflects the amount of aid from the EU Funds;

14. Notes with growing concern the current poor economic situation in the new Länder, which is reflected in the marked slowdown in economic growth and the continuing high level of unemployment, and calls, therefore, on the Federal Government to make use of the possibilities for structural assistance for employment and, in particular, speedily to eliminate hindrances to local employment and development initiatives;

15. Discerns some initial success in the form of a regionally circumscribed economic upturn, which gives hope of a future self-sustaining recovery, but feels that these emerging 'regions of hope', which must one day come to replace the old industrial heartlands, must not be endangered by a premature reduction in support rates;

16. Notes with concern that, in the new Länder, even six years after the unification of the German state, the uncertain property ownership situation is holding up urgently needed investment and calls for the periods needed to process restitution claims, which are still too lengthy, to be shortened;

17. Expressly welcomes the partial disconnection of ERDF support from the German 'Joint scheme' as an important step towards a more flexible support strategy in the new Länder, since this will make it possible to use the broader spectrum of support under the ERDF (e.g. in the funding of waste water disposal plant), and urges the Federal Government to continue with the modernization of the 'Joint scheme' which it has begun;

18. Fears that investments already made from the EAGGF Guidance Section might be jeopardized by a retroactive alteration of the legal framework in agriculture (fourth amendment to the Agricultural Adjustment Act);

19. Points out to the Commission and the Council yet again that it regards the support period of three years for Objective 2 regions as too short for it to make a lasting impact on the problems of regions suffering from industrial decline;

20. Reminds the Commission that, in its periodic and current review of the implementation of the Structural Funds, it should devote special attention to the full application of the European Structural Funds Regulation - with particular regard to environmental protection, equality of opportunity and partnership - and, where appropriate, intervene within the limits of its possibilities and responsibilities in order to guarantee such application;

21. Instructs its President to forward this resolution to the Council, the Commission, the German Federal Government, the governments of the Länder and the German parliaments.

• [1] OJ L 250, 26.9.1994, p. 18
• [2] OJ L 384, 31.12.1994, p. 26
• [3] OJ C 255, 20.9.1993, p. 145
• [4] OJ C 255, 20.9.1993, p. 145

B EXPLANATORY STATEMENT

1. Objective 1 regions - the new Federal Länder

In the light of the particular situation obtaining in the New Federal Länder (NFL) and the deteriorating general economic situation in the EU, the demands on structural and regional policy in the reunified Germany have increased. Germany today has the same regional disparities as the EU as a whole.

The achievement of economic and social convergence has thus also become a domestic issue for Germany.

In order to recover its internal unity, Germany needs a lengthy period of major national effort, and the EU will also be called upon, given the very poor economic situation in the five new Länder and East Berlin, to continue to provide substantial financial resources.

Review of the programming period 1989-1993:

Between 1991 and 1993 the new Federal Länder and East Berlin received a total of ECU 3 billion from the EU. The Commission approved 20 programmes, which were drawn up on the basis of the development plan submitted by the Federal Republic. At ECU 65 per capita of population, the amount of assistance provided was below that for other comparable Objective 1 regions in the EU (EU average: ECU 127 per capita in the period 1989-1992).

Owing to the unique structural upheaval in the new German Federal Länder, rapid financial support from the EU was extremely important. Even taking account of the fact that the EU funds accounted for only part of the financial assistance for rehabilitation in the new Länder, there can be no doubt that the European Union's assistance has made an essential contribution to the integration of the former GDR in the European single market.

The Federal Government estimates that the ERDF has helped to create more than 122 000 jobs and to maintain more than 102 000 other jobs. Operations supported by the ESF benefited some 300 000 people, over 50% of them being women.

The current assistance period (1994-1999)

Since the beginning of the current assistance period, the new Federal Länder have been treated as a normal Objective 1 region of the European Union.

A total of ECU 13 640 million has been made available from the European Structural Funds for the Community Support Framework, which was adopted on 29 July 1994 (ECU 880 per capita, as compared with ECU 1600 for Ireland). This funding is intended to encourage considerable public and private investment, the total volume of which should reach some ECU 58 billion.

Of central importance for the rapid reconstruction of eastern Germany's traditional industrial regions is the restoration of their competitiveness with the EU's developed regions. The opening up of EU markets and the revitalization of healthy economic and trading contacts with the central and eastern European states are factors of particular importance for the east German economy.

With the aid of the EU's structural policy, about 700 000 jobs are to be created or maintained during the period 1994-1999. Up to the year 1998, according to Federal Government estimates, employment is to rise annually by 0.5%, an objective which, given the current economic situation, will be difficult to achieve. Per capita GDP should rise from ECU 9000 (1993) to about ECU 14 800 by 1998.

Specific attention will be paid in the current programming period to improving infrastructure and technological equipment and to increasing labour productivity and the capital stock of businesses.

Self-sustaining growth zones must be established in the new Länder which can take over the functions of the industrial heartlands that have fallen into decline and stimulate the development of the whole region.

With a view to the attainment of these objectives, ECU 13 640 million is being made available from the European Structural Funds, broken down as follows:

ERDF 50%,

ESF 30%,

EAGGF and FIFG: 20%.

The following major problems in the new Länder are highlighted in the CSF:

- inadequate private investment, which is known to be a basic precondition for the creation of jobs and an increase in competitiveness;

- lack of investment, difficulties with the creation of loan guarantees and strong competitive pressure from low-cost suppliers from the neighbouring eastern European countries;

- lack of a high-technology basis in the industrial and service sectors;

- problems in the establishment and promotion of SMUs;

- underdevelopment with regard to important factors influencing company location such as telecommunications and basic transport networks;

- one of the lowest per capita GDPs out of all the Objective 1 regions;

- general collapse of the manufacturing sector. Accordingly, employment and training measures must be geared primarily to the introduction of new technologies and products as well as to improvement in management and marketing;

- particularly heavy losses in job opportunities for women;

- agricultural structures in east Germany are manifestly different from those in the remainder of the EU, though often highly efficient;

- the new Länder are very rural in nature and in part thinly populated. The changes that have occurred in recent years have seriously affected the rural areas, not only because of decreasing agricultural production but also because of the generally adverse economic trends;

- the pressing need to clean up the environment (e.g. Wismut).

The specific difficulties of the new Länder arise from the requirement that all the problems connected with restructuring must be solved simultaneously and in the short term, if a real economic upturn is to be attained.

Therefore, on conclusion of negotiations between the Federal Government and the Commission, the following priorities were established for structural assistance in the Objective 1 regions in Germany:

Allocation of Structural Fund resources to the

various development priorities in the new Länder (1994-1999)

(in ECU million)

development priorities	total	ERDF	ESF	EAGGF	FIFG
support for production investment and accompanying investment in production-related infrastructure	2430.6 (17.8%)	2375.2	55.4
measures to support small and medium-sized undertakings	2317.9 (17.1%)	2064.7	253.2
measures to promote research, technological development and innovation	613.1 (4.5%)	485.0	128.1
measures to protect and improve the environment	1105.7 (8.1%)	805.7	300.0
measures to combat unemployment and promote the development of human resources, vocational training and further training and employment	3648.2 (26.7%)	584.1	3064.1
measures to promote agriculture, rural development and fisheries	3224.3 (23.6%)	425.3	107.3	2608.2	83.5
technical assistance	300.2 (2.2%)	80.0	183.9	36.3
Total	13 640.0	6820.0	4092.0	2644.5	83.5

Table 1

Additional resources from European Investment Bank loans must be added to the amounts set out above.

2. Objective 2 in Germany

In the programming period 1994-1996, the European Union is making available a total of ECU 6.9 billion for the economic and social conversion of regions seriously affected by industrial decline. Objective 2 regions in the EU were limited in the framework regulation to 15% of the population of the EU. Ultimately, 16% of the population of the EU are being aided in the current period under Objective 2.

In the period from 1994 to 1996, the EU will disburse ECU 733 million for the Objective 2 regions in Germany (Bavaria, West Berlin, Bremen, Hesse, Lower Saxony, North-Rhine Westphalia, Rhineland Palatinate, Saarland and Schleswig- Holstein).

Allocation of Objective 2 resources to the German regions

(Period from 1994 to 1996)

Objective 2 region	Structural Fund contribution in ECU million	%
Bavaria	14.66	2.00
Berlin	158.32	21.60
Bremen	46.91	6.40
Hesse	21.26	2.90
Lower Saxony	42.51	5.80
North-Rhine Westphalia	361.37	49.30
Rhineland Palatinate	23.46	3.20
Saarland	49.11	6.70
Schleswig-Holstein	15.39	2.10
Total	732.99	100.00

Table 2

The priorities set out in the Single Programming Documents (SPDs)submitted by the Länder and approved by the Commission after a lengthy delay in December 1994 were:

- preservation or creation of jobs and undertakings (e.g. in Bremen 4500 and 14 000 jobs respectively; in Bavaria 35-40 new businesses)

- establishment of new industrial sites (e.g. 50 ha in Saarland, 250 ha in Lower Saxony)

- further training (e.g. for 600 persons in Bavaria)

- environmental investment.

For the attainment of these strategic objectives, the following development priorities were laid down in the SPDs:

- establishment, conversion and expansion of industrial sites and creation of start-up centres for SMUs

- infrastructure creation, including infrastructure for SMUs

- new technology, including technology transfer

- training of skilled workers and career guidance

- environmental investment

- research and development.

Sectoral breakdown of structural aid in Objective 2 regions in Germany:

development priorities	in ECU million	%
manufacturing sector	245	33
human resources	293	40
planning and regeneration	132	18
environmental protection	52	7
technical assistance	11	2
Total	733	100

Table 3

Evaluation findings for the programming period ending in 1996 are not yet available. The Land governments are currently putting evaluation studies out to tender. No conclusive report on the programming period from 1994 to 1996 can be published until those findings are submitted.

In the period beginning in 1997, ECU 854 million may be disbursed for support in Objective 2 regions in Germany.

Allocation of Objective 2 resources to the German regions

(Period from 1997 to 1999)

Objective 2 region	Structural Fund contributionin ECU million	%
Bavaria	17.08	2.00
Berlin	184.46	21.60
Bremen	54.65	6.40
Hesse	24.77	2.90
Lower Saxony	49.53	5.80
North-Rhine Westphalia	421.03	49.30
Rhineland Palatinate	27.33	3.20
Saarland	57.22	6.70
Schleswig-Holstein	17.93	2.10
Total	854.00	100.00

Table 4

The Commission and the German Federal Länder have made prompt efforts to ensure that similar delays do not occur in the period 1997-1999 as in the previous period. The programming documents drawn up by the Federal Länder are currently being reviewed by the Commission. The first indications are that the quality of the programming documents submitted is better than in the previous period.

The Commission therefore assumes that, on the basis of the decision taken on 22 October on the approval procedures for Objective 2 in the period 1997-1999 (SEC(96)1815), the German SPDs will be approved in January or February 1997.

3. Objective 5b regions

In the period from 1994 to 1999, the EU will disburse ECU 6.667 billion in aid to Objective 5b regions. Of that amount, some ECU 1.2 billion will be allocated to Germany. These resources will be used in the structurally weak areas of Bavaria, Baden-Württemberg, Hesse, Lower Saxony, NorthRhine Westphalia, Rhineland Palatinate, Saarland and Schleswig-Holstein.

The programming documents approved in two stages by the Commission in December 1994 and February 1995 for the Länder referred to above will facilitate total investment of ECU 4.529 billion. Aid for the Objective 5b regions will be provided from the EAGGF (Guidance Section), the ERDF and the ESF.

Allocation of Objective 5b resources to the German regions

(Period from 1994 to 1999)

Objective 5b region	Structural Fund contribution in ECU million
Bavaria	560.2
Baden-Württemberg	74.9
Hesse	80.8
Lower Saxony	245.1
North-Rhine Westphalia	46.8
Rhineland Palatinate	111.3
Saarland	24.06
Schleswig-Holstein	85.9
Total	1229.03

Table 5

Priorities for Objective 5b aid in Germany are centred on the following three main areas:

Priority 1: Diversification and redirection of agricultural and rural structures, together with environmental and nature protection (e.g. development of new sources of agricultural income, village development and improvement of tourism facilities)

Priority 2: Development and diversification of non-agricultural activities (creation of new jobs)

Priority 3: Development of human resources (aid for training, aid for career change, advisory services).

Measures to be assisted in Objective 5b regions in Germany as part of EU aid for Objective 5b regions (selected examples):

Bavaria

Generation of heat from agricultural and forestry waste, promotion of tourism;

Creation of 10 800 jobs by the development of new sources of income, vocational training;

Training courses for 5000 young people, employment subsidies for 3200 persons.

Baden-Württemberg

Village renovation, improvement of tourism facilities, protection of the countryside;

Local and regional employment initiatives;

Acquisition of skills by countrywomen.

Hesse

Development of innovative products and alternative marketing methods, preservation of the countryside;

Improvement of infrastructure, advisory services for undertakings;

Skills training for young people and women.

Lower Saxony

Development of new sources of income, marketing of local products;

Modernization of infrastructure, development of SMUs;

Further training and retraining.

North Rhine-Westphalia

Environmentally acceptable road construction, renovation of 36 villages, modernization of waste water processing plant.

Rhineland Palatinate

Improvement of infrastructure and village life, marketing of local produce;

Creation of jobs in the productive sector;

Career changes, further training.

Saarland

Renovation of 40 villages;

Environmental protection measures;

Training places for about 1000 persons.

Schleswig-Holstein

Development of new sources of income, improvement in tourism;

Infrastructure measures, development of new markets through research and development;

Increase in the skills level of the rural population.

4. Development problems in Objective 1, 2 and 5b regions in Germany

General development problems in Objective 1, 2 and 5b regions in Germany

Owing to the stringent requirements arising from the decentralized administration of Structural Fund appropriations, further efforts must be made in the dialogue between the relevant German and European authorities to improve the implementation of European Union structural assistance.

To date, it has not proved possible to make the substantial improvements in the coordination of the Funds called for in the 1993 reform in the case of structural assistance in Germany. This is mainly because of the different administrative procedures required for the individual EU Funds. If the potential synergies from the linking of operations under the various Funds are to be better exploited, there is an urgent need for improved coordination between the various Commission directoratesgeneral and the relevant Land ministries in Germany.

The administrative procedures for the Structural Funds are highly complicated and time consuming. More effective solutions must be found for this problem. Mutual recriminations between the administrations concerned are no substitute for a serious effort to find a goal-oriented solution to this difficult problem. The Commission, the Federal Government and the Land governments must engage in joint consultations with a view to carrying out the necessary improvements. The relevant solutions must, firstly, make greater allowance for German federalism and, secondly, safeguard the operation of the Commission as a pan-European institution. In this connection, the Commission's proposals in the context of the SEM 2000 programme on the improvement of financial management deserve particular attention and must be further developed in joint dialogue.

The 1993 reform of the Structural Funds attached great importance to more detailed and improved evaluation of the measures which receive support. It is difficult and time-consuming, however, to quantify the anticipated socio-economic impact of the Structural Funds, and many of the evaluation criteria are controversial. It is therefore essential that those criteria should be developed further.

Before the programming plans are adopted by the Commission, the individual measures have to be reviewed by the Commission's DG IV to ensure their acceptability in terms of aid legislation. These procedures are time-consuming and, particularly in the case of innovative measures, if not notified in good time, lead to considerable delays. This entails enormous problems for the final beneficiaries, particularly in the case of Objective 2 with its short assistance period of three years.

The difficulties described above, and which are the result of the organization and administration of the Funds, have led to delays in the flow of appropriations from the EU Funds. It cannot therefore be assumed with any certainty that it will be possible for all the EU appropriations at the disposal of the German target regions to be called down on schedule.

One of the biggest development problems with regard to assistance from the EU Structural Funds is the provision of complementary appropriations from the budgets of the Länder and municipalities, which is becoming increasingly difficult in Germany, too. The reasons for this have to do with the poor economic situation, the efforts to achieve budget consolidation and increased payments by certain western Federal länder as part of the German Länder equalization scheme. The 'Joint scheme for the improvement of regional economic structures' (GA) is therefore gaining in importance as a national cofinancing instrument for certain regions. In order to be able fully to exploit the scope of the ERDF, a further adjustment of the GA to the requirements of the 90s is therefore urgently required.

One of the most serious problems faced by the less-favoured German regions is the inadequate capital base of businesses. This applies particularly to SMUs. This means that even minor economic setbacks can cause insoluble problems. For these reasons, the existing scope of the Structural Funds in terms of the provision of risk capital needs to be further exploited and, where necessary, made more flexible. In the new Länder, this also applies to larger businesses which, for reasons that are wellknown, were unable to accumulate capital reserves during the boom years of the 80s.

Since the 1993 reform, the work of the Monitoring Committees has taken on particular importance. Their work must be geared to a more flexible implementation of the CSF in line with local conditions. Pursuant to Article 6 of Regulation (EEC) No 2081/93, the Monitoring Committees are free to adjust the arrangements for financial participation providing they do not amend the overall amount of the Community contribution and respect the harmonized limits for each objective. Such adjustments must be communicated to the Commission and the Member State immediately, and they enter into force after confirmation by the Commission within 20 working days.

The 13 Community initiatives (CI) of the EU constitute an important move towards a Community solution of Europe-wide problems. However, they urgently need to be more narrowly focused in terms of content with a reduced number of priorities. At present, the CIs promote some of the same areas as are being prioritized under normal target-region assistance. The CIs whose content corresponds to the criteria of target-region assistance should in future be integrated in the CSFs. The high administrative cost of the CIs cannot be justified, given the comparatively low level of funding. The number of CIs must therefore be reduced.

Although half of the 1994-1999 programming period has now elapsed, it must regrettably be pointed out yet again that the national agencies in Germany have failed to comply adequately with their duty to publish details concerning the contribution of European funds to projects, and the public are unable in individual cases to ascertain what role European structural policy has played in a given operation.

Cooperation with the two social partners is deemed to be generally successful. However, in a number of German Objective 1 regions, problems have been encountered in involving the economic and social partners. Thüringia and Saxony refused for a long time to comply with their obligations in this area, and it was not until intensive talks had been held between the Commission and the Land governments concerned that their assent to improvements in this regard could be secured.

It is extremely important for the successful development of the German target regions that account should be taken of the proposals from the regions themselves. The planning documents drawn up by the regions must play a greater part in the decisions on support. Fruitful results were achieved in terms of the involvement of the regions in North-Rhine Westphalia with the regional conferences which gather all those concerned round a single table.

Specific development problems of the new Länder

The present trend in economic development in the new Länder is giving cause for great concern. Whereas the rate of economic growth in the new Länder was much higher than in the western German Länder during the period 1991-1993, there is now a danger that this trend will be reversed. This threatens to create an even wider development gap between the new Länder and the former Federal Republic and the other developed European regions. If this trend is not effectively stopped, the goal of economic and social cohesion both within Germany and within Europe as a whole will be under long-term threat.

In June 1996, the official rate of unemployment in the new Länder was 16%, whereas in the former Federal Republic it was 9.7%. However, these statistics do not fully reflect the real extent of the economic problem. Given the large number of job creation schemes, retraining measures and early retirement schemes, which are not included in the official unemployment statistics, the real rate of unemployment in the NFL must be put at 30%.

There is a very wide gap in the NFL between the demand for and the production of goods. This is met by internal German financial transfers and EU structural aid (1991-1996 approx. DM 900 billion net transfer). Although it is well known that this aid leads to the donor regions benefiting too from the financial transfers through increased demand for products and services, it is putting internal German and European solidarity, given the poor economic situation, to a severe test.

The first green shoots of a (regionally circumscribed) economic recovery are raising hopes of a future self-sustaining boom. However, these emerging 'regions of hope', which are destined one day to replace the devastated industrial heartlands, must not be jeopardized by a premature reduction in support rates.

The economic development of the new Federal Länder is being hampered in particular by their very small share of the export market. Following the virtually total collapse of their traditional economic and trading links with the former COMECON states, they currently account for only 3% of total German exports.

Thanks to the intensive efforts being made by the Commission and to the pressure being exerted by the new Federal Länder, it has been possible to make some changes in the method of implementing ERDF aid during the current programming period. The ERDF aid directly linked to the national 'Joint scheme for the improvement of regional economic structures' until the end of 1993 can now be used to cofinance measures outside the joint scheme, and this will make it easier to provide aid over a broader range.

Six years after German unity was achieved, there are still a number of development problems directly related to reunification in the NFL. The uncertain property ownership situation still constitutes a major obstacle to investment. It still takes several years to process restitution claims, and this deters potential investors. The retroactive amendment of general legal provisions, such as the fourth amendment of the Agriculture Adjustment Law, is causing a great deal of uncertainty among business operators and is jeopardizing the achievements of restructuring operations carried out hitherto and, hence, the investments that have already been made from the European Structural Funds for the stabilization of agricultural structures.

Continuing structural change in the German Objective 1 regions and the deteriorating competitive position of European industry have given rise to a high level of long-term unemployment. These formerly highly skilled workers have less and less chance, the longer they remain unemployed, of finding new employment. Training and retraining measures, therefore, are of crucial importance for the preservation and development of these human resources. They are also essential in the interests of social peace given the enormous psychological stress caused by the radical change of system.

Specific development problems of Objective 2 and 5b aid in Germany

It has not been possible to reduce the length of the programming stage, as intended by the last reform, for the German Objective 2 and 5b regions. Although the deadlines set by the Commission for the drawing up and approval of programming documents for the German Objective 2 and 5b regions were, as rule, met by the Länder, the Commission demanded improved versions because of the poor quality of the programming documents submitted. This must be regarded as the main reason for the delays in the approval of the programmes. The Länder, responsible for the drawing up of the programmes, frequently took the view that the Commission was making retrospective demands which were of no relevance to the objectives of Structural Fund aid. The necessary improvements to the programming documents submitted frequently required lengthy consultations and disputes between the CSF partners.

The late approval of the programmes for the Objective 2 and 5b regions resulted in a whole year of the programming period being wasted, and this caused particular problems for Objective 2 assistance, which only ran for a very limited period of three years (1994-1996). The present three-year period for Objective 2 assistance does offer an opportunity of reacting flexibly to new developments, but it is still a very short period for medium- to long-term structural policy. The western Länder are therefore calling for this period to be extended.

Delays in approval for programmes resulted in regional authorities having to provide preliminary finance for measures, and this caused serious problems for the local authorities and the Länder, given their straitened financial circumstances, and was at variance with the principles emphasized in the 1993 reform.

The settlement system between the Commission and the national agencies is highly complicated, susceptible to breakdown, and slow. Delays very frequently occur in the transfer of funds. The retention of 20% of the final annual instalment until the final account has been submitted results in the regions having to make interim payments. That causes serious budgetary problems for the German partners involved. The Länder have therefore proposed that the authorizations of the Land authorities should be used as a basis for payment, a proposal which deserves particular consideration in the case of the ESF.

Despite individual problems in the implementation of EU resources, the contribution made by aid from the European Structural Funds in the German Objective 2 and 5b regions is considerable and is making a major contribution to solving their problems. It is viewed and appreciated by those regions as a practical expression of European solidarity.

OPINION

(Rule 147)

of the Committee on Social Affairs and Employment

for the Committee on Regional Policy

Letter from the committee chairman to Mr Roberto Speciale, chairman of the Committee on Regional Policy

Brussels, 21 November 1996

Dear Mr Speciale,

At its meeting of 21 November 1996, the Committee on Social Affairs and Employment examined the situation of ESF structural interventionsin Germany and asked me to submit the following remarks:[1]

1. The committee took note of the ESF contribution to structural interventions in Germany as summarized in the attached table;

The committee:

2. also recalled that Germany was among those countries which in 1995 experienced serious delays in using ESF money: out of the total underspent of ECU 1 500 million Germany accounted for 355 million; the total implementation rate for Germany during that year was only 65%; the main problems were recorded in relation to Objective 3 (only 17.7% taken up), 4 (0%) and 5b (only 14%);

3. was informed of the efforts made to reprogramme resources with a view to

- adjusting the financial plans so as to absorb in the forthcoming years the amounts left over from 1994 and 1995 and, in some cases,

- redefining priorities within and between programmes in order to channel resources towards projects capable of absorbing the resources made available to the German authorities,

- extending the 1994-96 Single Programming Document for Objective 4 to cover the total programming period (1994-1999)

and welcomed them;

4. took note that these efforts were already giving good results in relation to Objective 1 and 3, thus bringing commitment rates to more satisfactory levels (around 90% for both);

5. invited the Commission to continue to monitor the situation with regard to the above two objectives and take further steps should this be necessary during 1997;

6. finally called on German authorities and the Commission to pursue similar efforts in relation to Objective 4 and 5b where the situation was still causing concern.

(sgd) Stephen Hughes

• [1] (5)The following took part in the vote: Menrad, acting chairman and acting draftsman; Andersson, Boogerd-Quaak, Cabezón Alonso, Colino Salamanca (for Blak), Ettl, Filippi (for Carlsson), Gonzalez Triviño (for Vandemeulebroucke), Hernandez Mollar, Jensen (for Angelilli pursuant to Rule 138(2)), McMahon, Mann, Ojala, Pronk, Ribeiro, Schiedermeier, Schmidbauer (for Carniti), Skinner, Theonas (for Elmalan), Vanhecke, van Velzen, Weiler and Wolf.