EU Regional and Cohesion Policy and Economic Integration of the Accession Countries

Abstract

This paper deals with specific issues concerning the relationship of regional development strategies and EU integration of the 'Accession Countries' of Central and Eastern Europe (CEECs). In this context the specific role of pre-accession regional development support and the future regional and cohesion funding in enhancing market integration is of particular importance. The completion of the European Monetary Union stipulates much more effort for adjustment and co-ordination of policies in the CEECs than for other European countries in former accession processes. As long as mobility of labour and flexibility of wages is limited across an enlarged EMU and no genuine fiscal equalisation scheme is available, the impact of asymmetric shocks could be vehement (and thus weakening Europe as a whole). The question is whether the CEECs will be - apart from fulfilling the Maastricht criteria - sufficiently integrated into the EU markets and thus well prepared for the participation in EMU. The idea examined in this paper is related to the possible role of European regional policy as a quasi fiscal transfer scheme. So far it has been the approach to employ regional policy to strengthen inter-regional convergence, and thus to offset market imperfections disturbing the Solow pattern of growth. But the choice of the strategy of regional policy during the pre-accession and post-accession phase in the CEECs has to consider the new quality of EMU and consequently needs to be linked to the aim of integration of these less developed transition countries into the highly developed EU markets. The necessary process of catching-up in real convergence raises the question whether regional policy ought to support backward regions in the CEECs or to support their national growth poles. In the paper the CEECs are subject to a comparative analysis of their respective level of integration, by looking at different variables like symmetry of business cycles, intra-industry trade and level of FDI. The empirical evidence suggests that on the one hand, the less the single CEE economies are assessed as integrated into EMU the more a national orientation of regional policy (support of growth poles) would be suggested. On the other hand, the risk of the more integrated CEECs (Czech Republic, Hungary, Slovenia) in increasing spatial equity is strongly associated with the relative loss of competitiveness because the marginal opportunity costs of spatial equalisation are increasing with the economic progress, also suggesting a national orientation of regional policy.