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Last Updated: Wednesday, 5 May, 2004, 10:27 GMT 11:27 UK
EU expansion - the cash impact
Guto Thomas
By Guto Thomas
BBC Wales Europe correspondent

Money
Will Wales lose out as 10 new countries join the EU?
The European Union's expansion with the arrival of 10 new countries will present an unprecedented challenge for the competitiveness and internal cohesion of the EU.

One of the key issues for Wales is what will happen to the funding which has been provided to West Wales and the Valleys under the Objective One, Two and Three schemes.

As a result of the growth, this whole financial system is being revamped - but is this good or bad news?


What does the expansion mean for Wales?

It means the health and wealth of the Welsh economy will be compared with the poorest regions in Eastern Europe, rather than the generally richer parts of Western Europe.

That means that parts of Wales will no longer be one of the most economically deprived areas, and could lose out on extra financial support from the EU - such as Objective One.

Rhondda terrace
Objective One funding has helped areas like the valleys

Where does that leave Wales?

We do not know yet. The big question is whether Welsh gross domestic product (GDP) will be just above or just below the financial threshold (which is 75% of the average of all the countries in the EU).

We will not know the answer to that until the average GDP for 2001, 2002 and 2003 are all worked out, which will take another year or two.

Any claims made by any political parties before then are therefore claims, estimates or guesses.

So what are the options for Wales once we know about GDP?

Scenario One: If GDP is below 75%, then West Wales and the Valleys would once again qualify for the highest level of funding available - i.e. a new Objective called "Convergence and Competitiveness". This seems highly unlikely.

Scenario Two: If it remains just above 75%, the European Commission wants to provide temporary support to regions which would have been under the threshold until enlargement happened.

This "phasing out" support has been proposed as 85% of the current level of Objective 1 in 2007, tapering down to 60% in 2013 (This 'phasing out' support will ONLY be available for 2007-13).

Scenario Three: If the GDP figures for Wales improve dramatically over the next two years, then West Wales and the Valleys would not qualify for the top level of funding, because it would no longer qualify under the 'statistical effect.'

Calculator
The calculators will be out as the figures are all worked out

This would be both good and bad news. Good, because it would show that the Welsh economy has improved and strengthened since 1999; but bad, because a significant source of extra support would be denied.

2007 sounds a long way off - what's the rush?

It may sound a long way off, but in fact, the timetable for securing an agreement on the future shape of regional funds is very tight.

Key arguments need to be won at an early stage if there is to be consensus between all 25 Member States, which would see Wales continuing to receive major financial support until 2013.

Why do we need to change the system in the first place?

The reason why things need to change, is to accommodate the 10 new countries which joined the European Union on 1 May.

On average these countries are about 40% poorer than the old Europe, which means that the whole system has to be reformed.

And that means, that enlargement will have a direct impact on how much EU aid Wales will get in the relatively near future.

When will this debate be resolved?

Nobody knows - it has only just started, and politicians in Wales are only just getting to grips with it.

But it will undoubtedly become one of the key issues in Welsh politics over the next few years.





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