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Economic and social disparities in the EU

A homeless man having a meal in Bratislava
In the St Vincent de Paul refuge for the homeless in the capital of Slovakia, Bratislava, more than 150 people find a safe place to sleep and a hot meal. © SDC

Enlargement towards the east presented the EU with new challenges. Although the new EU member states are catching up, significant disparities in the countries’ development remain. For the EU, strengthening economic and social cohesion is a key concern. Switzerland is helping to overcome these challenges by making its own independent contribution. 

On 1 May 2004, Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia – the EU 10 – joined the European Union. Three years later, on 1 January 2007, Bulgaria and Romania joined, and, on 1 July 2013, Croatia became the 28th member of the EU. This eastward enlargement has presented the EU with major challenges as the economic and social disparities in the union have become even more pronounced.

Economic environment in the new EU member states

The 13 new EU member states experienced a strong economic upswing between 2001 and 2007. Increasing integration in the global economy also increased these countries’ exposure to external shocks, however. The economic and financial crisis initially hit the new EU member states very hard. The 6.7% average economic growth rate of the EU 13 in 2007 had fallen to minus 6.8% in 2009. The situation has stabilised in the meantime. The economies of the EU 13 countries are, on average, back on a growth path, albeit at a significantly lower level.

Per capita income (adjusted to purchasing power parity) of the EU 13 is still well below the EU average with the shortfall ranging in 2015 from around 47% of the EU average in Bulgaria to 88% in Malta.

Support through the EU cohesion policy and EEA

In the period between 2014 and 2020, as part of its cohesion policy, the EU is spending a total of some EUR 194.1 billion in order to boost the level of economic and social wellbeing in the new EU member states.
 
Cohesion policy 2014 - 2020

In the five-year period from 2009 to 2014, the three countries of the European Economic Area (EEA), Norway, Iceland and Liechtenstein, also contributed some EUR 1.8 billion in support for the EU. Over the seven-year period 2014 – 2021, they will be contributing a further EUR 2.8 billion to the EU, of which Norway will be paying 97%.

EEA website

Is Switzerland making a contribution to the EU Cohesion Fund with its enlargement contribution?

The European Union’s cohesion policy is being implemented by means of various funds that are financed by all of the EU Member States via the EU budget. The three major funds are the European Cohesion Fund, the European Regional Development Fund, and the European Social Fund. The Swiss enlargement contribution is being implemented independently of these funds.  

It is misleading whenever either the term “Cohesion Fund” or “Cohesion Payment” is used instead of the term “Enlargement Contribution” because these terms are normally used to refer to the instruments of the EU’s cohesion policy. The Swiss enlargement contribution is not part of the EU’s cohesion policy, nor does Switzerland make any cohesion payments to the EU. With its autonomous enlargement contribution Switzerland finances specific, high quality projects with the aim of reducing the economic and social disparities in the 13 new EU member states.

In this way, it supports the EU objective of strengthening the economic and social cohesion (to be understood as internal cohesion), and it does so in its own particular way. Indeed, the projects are bilaterally agreed upon with each individual partner country, with Switzerland  making the final decision on approval of the financing. In addition, the projects are closely monitored by Switzerland, for instance by way of its own contribution offices in the country concerned. As a rule, the partner countries finance at least 15% of the project costs on their own. Swiss enlargement contribution payments, amounting to a maximum 85% of the given project’s overall cost, are staggered on the basis of the partner country’s requests for reimbursement. With these requests, the partner country must submit certified expense vouchers and reports on project progress status.

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Last update 22.05.2017