Amid Opposition claims that Ireland's future benefits from the EU structural funds have been jeopardised, the Government was last night heading for a confrontation with the European Commission over its attempts to split the State into two regions for funding purposes.
Yesterday's ruling by the EU's statistical service, Eurostat, against the inclusion of Clare and Kerry in a new disadvantaged region, as well as the limited scope of the Government's proposed regional devolution, will be strongly challenged both politically and statistically, the Government says.
A letter from Eurostat, the official statistics agency of the EU institutions, to the Central Statistics Office in Dublin, the contents of which have been leaked in Brussels to the dismay of the Government, is a response to plans for sub-dividing the State to allow partial continuation of the highest level of Obective 1 EU funding.
In its letter, Eurostat, objects on statistical grounds to the dismantling of previous sub-regional classifications of counties to allow Clare and Kerry to be included artificially, as Eurostat sees it, in a large disadvantaged region involving the Border, the west and the midlands.
While Eurostat does not give a view about the overall subdivision of the State in two, it does warn that the Government's proposals for two regional authorities to dispense EU cash do not go far enough in devolving other powers.
In a formal statement last night, it was made clear that the Government remained fully committed to regionalisation "in line with the application submitted to Eurostat". This entails the division of the State into two regions: the 15 Border, midlands and western seaboard counties, including Kerry and Clare, which would retain Objective I status; and the remaining 11 counties which would be ter med as Objective I in transition.
"The Government considers that the response from Eurostat is negative but we stress that this is not the end of the road," the spokesman added. The Department of Finance has also sought an urgent meeting at official level with Eurostat for early next week.
Government sources made no attempt to hide their anger at the twin-rejection of the addition of two extra counties to the Objective I region coupled with the apparent inadequacy of their overall regionalisation proposals.
Claiming that it was "a semi-political response", the sources openly speculated that the European Commission had had a political input into the Eurostat decision. "The suspicion is that they would like to use this as leverage in the overall negotiations in the coming weeks," a well-placed source said.
Timing of the Eurostat decision has caused embarrassment to the Government as it attempts to maximise EU structural funding just as the Agenda 2000 talks on the next budget move into the final phase. EU talks on Agenda 2000 are now firmly under way in Brussels and tomorrow an informal summit of EU leaders convenes in Bonn where intense negotiations are expected.
The issue is not likely to be raised formally at the summit, however, where any hint that Ireland is involved in what the Regional Affairs Commissioner, Ms Monika Wulf Mathies, has called "subsidy shopping", would detract from the Taoiseach's strong pitch for continued high levels of structural funding.
Mr Ahern however has made it clear he will raise the matter directly with the Commission next week and a letter of protest is being sent from the Minister for Finance, Mr McCreevy, to the Economic Affairs Commissioner, Mr Yves Thibault de Silguy.
Even if the Government is not successful in its attempts to get Eurostat to change its ruling, there is still confidence in Brussels that an application for regionalisation confined to 15 counties of the Border, west and midlands, with an expanded regional structure, is likely to be approved.
That is almost certain to be the fall-back position for the Government, which regards the splitting of the State in two as crucial, not only for funding purposes but, more importantly, some would say, because Objective 1 status also allows continued use of industrial incentives.