It has become the new national question: the Government's plan to split the State for the purpose of maximising European funding.

The proposed economic partition would see 13 counties in the midlands, west and Border areas retain Objective 1 status, guaranteeing maximum structural and cohesion fund grant aid, while, for the first time, the other half of the country would be classified for less favourable treatment.

A decision on the proposal could be made as soon as next week but, in the meantime, emotions continue to rise among public representatives and interest groups on both sides of the proposed new border.

Politicians from the more developed regions of the east and south have challenged the credibility of the division, pointing to areas of extreme deprivation and high unemployment in their regions. Some have argued for such urban and rural blackspots to be added to the Objective 1 status list. Others, however, believe such cases strengthen the argument for retaining Ireland's categorisation as a single region for EU funding, albeit at the lesser status of "Objective 1 in transition". But to the regions currently earmarked for Objective 1 status, such complaints smack of sour grapes.

From the Government's point of view, the logic behind the split is quite simple. Under the Community Support Framework (CSF), only regions whose GDP per capita is no more than 75 per cent of the EU average can qualify for Objective 1 status. As Ireland now exceeds that figure with a Gross Value Added per capita (an equivalent measure to GDP per capita) of 92 per cent in 1995, the only option is to accept "Objective 1 in transition status" or divide the country into developed and underdeveloped regions.

In the same year, the latest for which figures are available, only three regions fell below the threshold: the west, midlands and Border areas, which had GVA per capita indices of 64.4 per cent, 66.1 per cent and 71.1 per cent respectively.

Retaining Objective 1 status for these three regions, the Government has argued, would be a win-win situation for all concerned: the chosen regions would qualify for additional funds not just in the next financial period of 2000-2006 but beyond, while the other regions would benefit from greater devolution and continue to receive funding on a diminishing scale under "Objective 1 in transition" status.

However, many question whether the arrangement would result in more funds for Ireland. The Irish Congress of Trade Unions, which recently sent a delegation to Brussels to discuss the proposed move, believes it could backfire. "It might very easily be seen as an artificial mechanism for maximising funds and as a result sour the climate in which the Government will be negotiating," says Ms Patricia O'Donovan, ICTU's deputy general secretary.

"At the end of the day, there will be X billion ECUs allocated to Ireland. We should get the maximum for the country as a whole and determine ourselves how to spend it rather than getting stuck with restrictive criteria."

This argument is supported by the findings of an inter-departmental report, leaked to the media this week, which shows the difference between adopting the regional policy and leaving the State in one unit is only £100 million, or less than one-twentieth of the expected EU funding allocation.

The Department of Finance has declined to comment on the report, but official sources say it dramatically underestimates the difference between the two policies.

But whatever about the likely effect of the split on Ireland's total funding allocation, its impact on excluded urban blackspots remains the prime concern of politicians and interest groups in the eastern and southern regions.

Each backs its case with its own set of statistics: the mid west pointing to unemployment rates of up to 60 per cent in parts of Limerick city; the south east claiming above average poverty levels; and Dublin citing a fall in industrial employment of 26 per cent between 1971 and 1996.

There are reservations about the Government plan even among those set to benefit most. Mr Liam Scollan, chief executive of the Western Development Commission, admits the division creates certain "anomalies in terms of comparative economic wealth" with a prosperous county such as Louth included in the special region but the comparatively underdeveloped Clare excluded.

It also highlights existing boundary anomalies with different regional, tourism and health authorities operating different county divisions. AS and the IDA treat it as part of the midlands region.

Mr Scollan says, however, the Government's plan should proceed "as the lesser of two evils" and "in the longer term, the boundary issues can be addressed".

In a sense, the whole regionalisation issue can be seen in this context as a case of short-term gain versus long-term vision. The Government would argue that its proposal can deliver both, but it has yet to explain exactly what administrative structures will pertain for the proposed two new sections of the State.