The effects of the EU’s Cohesion Policy

From the article:

By some measures, these investments made some EU members among the largest recipients of development assistance in the world. For example, from 2007 to 2013, Poland received €58 billion from European cohesion funds. In that same time, similarly populated Kenya received the equivalent of only €13 billion euros in official development assistance (ODA). In that same period, European cohesion funding exceeding €250 per capita went to Czechia, Estonia, Hungary, Latvia, Lithuania, and Slovakia each year, about five times the ODA per capita going to low-income countries.

While it’s not the only cause of the impressive development experienced by emerging market EU members , these investments were important contributors to growth and social progress. This was seen first in lower-income EU members like Spain and Ireland and later in Central and Eastern European members that joined the EU in the 2000s. These advances in EU convergence precisely what the EU’s Cohesion Policy was designed to achieve: European policymakers agreed that deeper economic and political integration requires reducing inequalities between regions.

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EU members benefiting from EU Cohesion Policy experienced impressive development. Ireland, Croatia, Malta, Lithuania, Poland, and Estonia all experienced growth above 6%. Growth in the EU was clearly tilted towards poorer members, helping advance the convergence that Cohesion Policy sought: except for Greece, every EU member that qualified for Cohesion Fund assistance grew faster than the EU members too rich to qualify for the Cohesion Fund.

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Despite the methodological difficulties of attributing growth impact, Cohesion Policy funding was clearly central in enabling investment, particularly in infrastructure. For example, from 1986 to 2006, European financing funded 40% of Spain’s eight-fold increase in highways and 38% of its new rail infrastructure. From 2007 to 2013 in Hungary, 94% of railways and 54% of road investments were financed by cohesion funding. For some countries, EU cohesion funding has accounted for more than half of government capital investments.

Comparisons with similarly situated countries that lacked such support suggest that Cohesion Policy funding played an important role in advancing development. For example, when Lithuania entered the EU in 2004, Mexico had a higher GDP per capita, but now Lithuania’s GDP per capita is twice as high as Mexico’s. Mexico was also part of a major free trade zone with advanced economies through NAFTA, but NAFTA did not include development financing. Likewise, Türkiye and Poland had similar GDPs per capita in 2004, and both are geographically proximate to richer European countries. However, Poland enjoyed the benefits of the EU while Türkiye did not, and Poland’s GDP per capita is $9,000 higher today. Still, the impressive growth of some non-EU countries in Eastern Europe underlines that cohesion funding was not the sole driver of development.