An EU requirement for genuine political devolution before the State can be split for funding purposes is set to compound the Government's embarrassment following its failure to get Clare and Kerry reclassified for funding purposes.
But the demand for greater devolution, in a letter on Monday from the EU Commission's statistical service, Eurostat, to the Central Statistics Office, is strongly contested by the Government, which insists that Eurostat is acting beyond its powers.
The letter controversially warns that the regional structures being proposed by the Government to administer EU programmes do not go far enough in devolving responsibilities to local areas to meet requirements for regionalisation, because they confine the remit of the new regional authorities to processing EU grants.
Eurostat is charged primarily with assessing the statistical validity of redrawing regional funding maps, but must also ensure that the lines on the maps correspond to real political enitities. In rejecting the case for redrawing the Irish map of eight sub-regions, Eurostat has effectively doomed the prospects of continued eligibility for maximum EU funding for Clare and Kerry.
Eurostat is involved at this stage, however, only in an exchange of views with the Government and has not ruled either on the bigger issue of sub-dividing the State in two for funding or rejected any formal application from the Government. Sources in Brussels say a new application based on only 13 counties is still likely to be successful. But the delay in reaching an agreement to allow regionalisation will also be a disappointment to the Government, because it threatens to embroil the issue in the complex horse-trading that will be involved in the final stages of the Agenda 2000 negotiations. Far better to have had the deal well sorted in advance.
In responding to the Government's soundings about its regionalisation proposals, Eurostat's director general, Mr Yves Franchet, is understood to have said in his letter to the CSO that before considering the case for dividing the State into two large regions, Eurostat had to consider whether the adjustment of the eight existing sub-regions was justified.
The only change proposed by the Government at sub-regional level is the adjustment to the "south-west" sub-region in respect of Clare and Kerry.
Eurostat is understood to argue that agreement was reached as recently as 1994 on the definition of the sub-regions and that it does not see a statistical case of significance for seeking a change now.
The statistical service does not go on to pass judgment on the more substantial proposal to split the State into two regions and Commission sources here admit there is a much stronger case for that.
Indeed, a major report on regional disparities in the EU from the Commission only last month hinted at a significant sympathy for regionalisation. It warned that in Ireland's case a "sign of potential fragility in the economy is the concentration of growth in certain areas, particularly in the east of the country".
It went on to make an argument that was music to Dublin's ears. "This underlines the importance of reviewing the distribution of assistance periodically to ensure that limited resources are concentrated in the regions that need it most," the report said.
But although Mr Franchet did not touch on the substantive issue, he did comment in the letter, according to Commission sources, on the Government's proposed administrative devolution at the regional level, suggesting the powers devolved appeared to be entirely related to the processing and spending of EU funds. Such a level of devolution might not be sufficient, he suggested, to meet the requirement to demonstrate the existence of what the Regional Affairs Commissioner, Ms Monika Wulf-Mathies, has defined as "a distinct administrative reality".
But Ms Wulf-Mathies's determination to advance the cause of real devolution by beefing up the content of that requirement has always been bitterly contested by the Government, which has insisted she has no legal basis for raising the bar. It had hoped, moreover, that the independent Eurostat would be coy about venturing on to such politically sensitive ground. In his response yesterday to Mr Franchet, the director of the CSO, Mr Donal Murphy, is understood to complain that Eurostat's position is "totally unacceptable" in overstepping its remit by trying to define what level of administrative devolution is required. It is a point that the Minister for Finance will also make in his letter to the Economic Affairs Commissioner, Mr Yves Thibault de Silguy. The letter also insists that the remit of the new authorities extends beyond EU issues to ensuring public service delivery and contributing to national development plans.
Mr Murphy, sources say, also defends the statistical basis of the redefinition of the sub-regions and expresses surprise at the tone of the Eurostat letter, arguing that the CSO's repeatedly stated willingness to discuss these matters in greater detail ahead of a decision appears to have been spurned.
The Department of Finance's proposed devolved structure, unveiled only last month, involved two new authorities entitled the "Border, Midland and Western Group Regional Authority" and the "Southern and Eastern Group Regional Authority" of 32 and 36 members respectively. The former was to consist of the 15 local authorities targeted for EU Objective 1 assistance, and the latter, of the 17 others.
MEPs were quick to respond. Mr Pat `the Cope' Gallagher (FF, Connacht/Ulster) said he was "disappointed, but confident that a redrawing of the boundaries will produce a favourable decision". Mr Joe McCartin (FG, Connacht/Ulster) called on the Government to resubmit an amended application without delay and said it had been playing a dangerous game for political reasons which threatened to cost the three disadvantaged regions dear.
Ms Nuala Ahern (Green, Leinster) said the Government had reaped the reward of treating the issue as a political football and argued that several counties of Leinster could have qualified for benefits if the Government had done its job properly.