Ireland's EU structural funds will be cut by as much as 80 per cent by the end of 2006, the European Commission declared last month. This will be as a result of the restructuring process that is taking place in the lead up to enlargement. For several years, Irish GDP has been well above the 75 per cent of average GDP per capita in the EU that defines the poorest regions of the Union. These are the regions that qualify for maximum grant aid under Objective 1, and Ireland has qualified until now. Indeed by 1997 Irish GDP growth, at 8.3 per cent, was the largest in the EU, and with Ecu 19,757 per head was for the first time above the EU average.
Ireland has been assured of a "soft landing" rather than a sudden cutting off of funds. It will receive its allocation of £5.62 billion under the current six year programme that will run up to the year 2000. The Commission is then proposing to reduce structural funding slowly over the first two years of the new millennium and then more dramatically over the following four years, so that it reaches around 20 per cent of the current figure. To soften the blow, Ireland may receive some additional funding at the mid-term review, when a 10 per cent reserve is made available to those countries which have made good use of their funding. After 2006 Ireland is likely to fall into the Objective Two category, which covers regions going through industrial restructuring or rural decline.
MEPs' reactions
MEPs across the political spectrum gave an upbeat response to the news. Gerard Collins (Irl, UFE) welcomed the Commission's acceptance of the need to introduce changes on a gradual basis. "A sudden cut-off of European funding would have risked provoking a major shock in our economy, undermining recent gains in the process. The transition period will ensure that many important projects will now be able to proceed as planned." He argued that the Irish government would have to "confront the difficult question of dividing the country into regions for the purpose of applying for European funding in future years (as) many regions notably in the south and west" were below the 75 per cent GDP threshold. A similar point was taken up by Bernie Malone (Dublin, PES) who argued that Dublin "at present receives far less per head than the rest of Ireland, despite higher unemployment and that with one third of the population it was the key to the national economy." Mrs Malone also stressed that, although Ireland would be a net contributor to the EU budget by 2016, it was still some way behind the European core in infrastructural terms; "a sudden cut-off in EU assistance would be disastrous."
Other MEPs welcomed the "soft landing" and Joe McCartin (Connacht/Ulster, EPP) stressed that "the details are still open for negotiation, and the proposed overall financial package leaves sufficient funds for Ireland to enjoy a good transitional package." He believed that "the Government should be able to make up all the deficit from Europe and maintain the current level of investment in public infrastructures." A similarly optimistic note was struck by Pat Cox (Munster, ELDR) who argued that "a prudent husbanding of the fruits of our current growth, and an imaginative partnerships between public and private sector, can deliver the necessary financial resources for our future development." "Ireland", he said, "had arrived at a level of economic maturity which, given political leadership, will allow us to take these changes in our stride."