Wanting to keep cake - and eat funding too

IRELAND should not be penalised because of its recent success. So says the Fine Gael manifesto. The subject is European Union structural funds and their fate after 1999, and to pick on Fine Gael is perhaps unfair.

The party, to its credit and unlike most, does more than mention the EU in its manifesto, and the phrase is one that could as easily come from any of the parties. But it's a bit like the young man, who, having murdered his parents, appealed to the judge to "have mercy on a poor orphan".

The whole point about EU structural funds, particularly those for the Union's poorest Objective One areas, whose income does not exceed 75 per cent of EU GDP per capita, is that they are supposed to be the means to help catch up with the rest of Europe, to create a level playing field. (Cohesion funds go to those with less than 90 per cent of GNP per capita.)

The purpose of the special levels of Community support to Objective One regions, which consume some 70 per cent of the funding, is thus to make such payments redundant precisely by lifting regions above the EU average. To talk of being "penalised" in this context smacks of what a Commission official was overheard grumbling after a recent meeting with an Irish minister about regional spending - "these bloody people want to have their cake and eat it!"

That is not to say that structural funding will end in 1999, or that the Government should not push for a maximum take to avoid "undoing the good work". Or that it could not make a case for changing the criteria for Objective One eligibility by incorporating an unemployment element.

The next government could perhaps divide up the State so that rural areas retained their Objective One status. Or it could make the case that GNP rather than GDP is a better of measure wealth, although that would still put us above the current eligibility limit.

Ireland's success is predicted by the Commission to push the GDP per capita to 102 per cent of the EU average and GNP per capita to 88 per cent (calculated as an average over the three years running up to 1999). Indeed, even cohesion funding is in doubt as eligibility will be based on 1998 alone - projected at 92 per cent of EU average GNP.

The truth is, however, that we must prepare ourselves for a significant reduction in our net take from the EU, currently running at over £2 billion a year and totalling since our accession more than £20 billion (including CAP payments). It may not be long indeed, before we become net contributors.

The reason will not primarily be the culprit usually blamed, the enlargement of the Union, but Ireland's own economic growth, fuelled in part by EU transfers - about half a percentage point in the annual growth rate is directly attributable to EU payments.

The next government will then have to find money for the major roads and environmental projects that the EU has funded by up to 75 per cent, and for social spending on training that has transformed the RTCs. And what of programmes such as Youthreach, which targets children who have dropped out of school and would probably not exist were it not for the 75 per cent EU funding?

As the EU plans its most momentous expansion, Ireland is at a crossroads: will the enthusiasm of the Irish public for membership, among the highest in the Union, according to the polls, survive?

My suspicion is that it will and is far more deeply rooted than often credited - the Union has enabled Ireland to find a place for itself, an international role, out of the all encompassing shadow of its former colonial master. Our new economic self confidence can be mirrored in a political self confidence on the European stage.

There has been an evolution too in the official view of Europe, reflecting this sense of Europe being a good thing in itself, more than just the gravy train. Last year's White Paper on foreign policy was imbued with a sense of a new commitment to EU integration, going beyond the narrow self interests of our traditional smallstate pragmatism.

At the treatychanging InterGovernmental Conference Ireland has been reinventing itself, as the talks reinvent the Union, as part of the core group ideologically. That is reflected also in the Government's political determination to be one of the first group in the euro.

Completing the IGC at Amsterdam will be one of the last tasks of this Government in the postelection period, not seen as a major problem even if it is not reelected, as there appears to be total unanimity between Government and Opposition on the treaty issues. Persuading the Irish public to vote for ratification of the new treaty will be a key task of the new administration.

But beyond Amsterdam there will also be a series of major strategic decisions for the Union with considerable implications for Ireland. On July 16th the Commission publishes its opinions on the preparedness for membership of each the 10 applicant countries of central and eastern Europe (CEECs) and Cyprus and its outline financial perspectives for the 1999-2004 EU budget.

Enlargement of the EU to include the 10 CEECs will add 106 million to the 370 million population and 1.1 million square kilometres to its area, a third. But the combined GDP of the 10 represents less than 4 per cent of that of the existing 15. The average GDP per head in the 10 is just 30 per cent of that in the EU, with Romania at the bottom at 16 per cent.

The enormous challenge of bringing them up to par with the EU is not one that can be surmounted overnight, even if it was wanted. Commission economists estimate that their ability to absorb support is limited to roughly 4 per cent of GDP in any year.

If the EU contributed as much as that it would still represent only some 0.16 per cent of the GDP of the 15, a figure that should be well within its budget capabilities as growth picks up. (Ireland spends twice that, 0.31 per cent of its GDP, on development aid).

That is not to say that the enlargement will not have potentially profound consequences. The Common Agricultural Policy will have to be reformed (dealt with elsewhere in this series) and the competitive pressures on the EU from memberstates whose labour costs are only a fraction of our own may lead to considerable tensions.

But the challenge is not one we can turn our backs on. The political imperative is peace in Europe, and the economic fear is that unless these countries become places where people are able to make a living, they will move in their millions into the relative heaven that the current 15 represent.