EU Funds – Are they Helping to Decentralize or Further Centralize Croatia?

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Do all regions in Croatia have a fair shot at EU funds? A very interesting analysis by Šime Erlić, head of the EU funds department in the Zadar City Council.

Šime Erlić, head of the EU Funds department within the Zadar city council, published a very interesting analysis on May 2, 2016, asking what are the primary goals of Croatia’s regional development policy and what is it that we are trying to achieve with the EU Funds. He is wondering whether splitting Croatia into just two statistical regions now puts Zagreb in a much more privileged position compared to less developed parts of the country when it comes to withdrawing money from the EU funds, meaning that instead of the much talked about decentralization of Croatia we are now witnessing deep centralization with Zagreb as the centre of all power.

The difference between the levels of development in Zagreb compared to some other parts of the country is now so great it poses a question whether Zagreb should be allowed any subsidies, especially ones from EU funds. How else can we expect the convergence of all regions in Croatia and the possibility for other regions to come even close to the nation’s capital in terms of development?

As long as Zagreb is allowed to compete equally with other parts of the country for the EU funds, we will have the “vacuum” effect because Zagreb, with its power and the sheer number of institutions, is simply sucking the development potential of the entire country.

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EU has limited the support for most developed regions a long time ago, and it is standard practice for developed cities to only be allowed to participate in support programmes for a few specific development areas such as investments in research and development and CO2 lowering projects. All other types of EU-funded support bypass the most developed cities. And this is not surprising considering that the aim of EU funds is to create more “even” regional development and to decrease the huge difference between certain regions.   

Further centralization of Croatia was enabled by several very important decisions which were imposed over the last few years, most important one being the new regional division of Croatia which worked to Zagreb’s advantage. Back in 2013, Croatia was divided into 2 statistical regions which replaced the old system from 2006 in which Croatia was divided into three strategic regions- Northwestern Croatia, Pannonian Croatia, and Adriatic Croatia. One of the stated reasons for the new division was the fact that the Northwest region, because of the high GDP rate per capita in Zagreb had a GDP which was 75% above the average rate in the EU 27, (78,3% to be exact). Because of the relatively high GDP per capita, in the financial perspective 2014 – 2020, the amount of available EU funds for this region and the percentage of co-financing would drop from the current 75-80% to 50%.

That’s why the former government went into the re-mapping of Croatia and opted for two regions – Continental Croatia and Adriatic Croatia, Even though most experts considered this option to be the least optimal one (area is not homogenous, great difference between the development of Slavonia and Zagreb etc), the Ministry justified the change by saying that this new division would allow maximum usage of EU funds because the inclusion of Zagreb as strong “absorption potential” into the EU funds withdrawal process would enable maximum spending of the allocation given to Croatia until 2020.

In other words, Zagreb was purposely “drowned” into Continental Croatia’s average in order to enable the capital city to take part in the withdrawal of U funds that are originally intended for less developed regions ( with a GDP below 75% EU’s average).

By adding Zagreb to the same region with Slavonia and Podravina we got an unsustainable mix of overly developed capital city and the most underdeveloped parts of the country, which is anything but generous to Slavonia which, on paper, now looks more developed. Furthermore, by lowering the average development ratio of Zagreb, this city is now eligible for a higher percentage of co-financing. Let us remind you, less developed regions are co-financed with up to 85% of funds while more developed regions receive 50% for their projects.

And last but possibly the most important thing, this kind of regional division now enables better availability of funds allocated for specific themes and needs. If you’re a developed region, not all EU funds are available and projects have to meet the investment ratios so there is less opportunity to finance basic infrastructure and most projects that will get funding have to be either for research and development or somehow connected to lowering of CO2 emissions. Furthermore, if your city’s development surpasses 90% of EU’s average (which is the case with Zagreb), then it does not have an access to cohesion funds that finances capital investments in traffic infrastructure, environment protection etc.

To conclude, funds allocated by specific themes that would be accessible to underdeveloped regions like Slavonia, Lika, Inland Dalmatia etc are now also available to Zagreb since he was added to this “lower league” with a very unfair regional division. It was all done under the premise that the inclusion of Zagreb will ensure more efficient spending of funds allocated by the EU, because if Zagreb cannot apply to all available funds, there’s less chance we’ll spend it all. On one hand, this is probably true, but on the other, this decision is bad for the regional development o the rest of Croatia in the long run.

We’re toying with the entire EU regional policy.  The EU didn’t just wake up one morning and decided to give more to the underdeveloped and less to developed regions, it was gone as the main instrument to lower the difference between regions. Differences that are extremely visible in Croatia and they will only be more significant in the long run, thanks to political moves like this one.  


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