Around one third of the EU's budget is dedicated to counterbalancing the natural effects of the internal market, by redistributing resources and economic development across the EU.
The main policy instruments available for this purpose are the European Regional Development Fund (ERDF) and the European Social Fund (ESF) – the 'structural funds'. Money is allocated from these funds to promote regional economic regeneration and combat unemployment in sub-national areas of deprivation.
Funds are disbursed from the ERDF and ESF on the following bases.
1. Concentration – the use of funds in the areas of greatest need
2. Programming – a preference for medium-term development projects, rather than one-off projects
3. Partnership – shared responsibility between the commission, member states and local and regional bodies
4. Additionality – projects are co-financed by the EU and national bodies
In consultation with the commission and regional and local bodies, member states submit three to five-year-plans, bidding for structural funds, outlining how money would be spent in pursuit of the three objectives of the schemes. These are:
1. Support for the poorest regions
2. Support for the economic and social conversion of areas with structural difficulties
3. Support for the development and modernisation of education, training and employment policies
After extensive consultation, the commission draws up community support frameworks, setting out broad priorities for action, the forms of assistance available and indicating envisaged financial allocations.
These are then operationalised either through operational programmes, individual applications for large-scale projects or global grants to national or regional intermediaries.
There is another 'structural' fund, known as the cohesion fund. This is only open to Ireland, Spain, Portugal and Greece, and funds infrastructure development in those poorer member states. It accounts for around three per cent of the EU budget.
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