The Commission set out its proposals for reform of the Funds in its Third Cohesion Report of February 2004 and in draft Structural and Cohesion Funds Regulations of July 2004. The draft Regulations set out the Commission’s thinking on the size and focus of the Funds as well as the rules for approving and implementing Structural Funds programmes from 2007-2013.

The Commission’s original proposals for the size and focus of the Funds can be summarised as a focus on three objectives:

1. Convergence would receive around 78% of funding and would be allocated (like the present Objective 1) to regions with GDP per head bellow 75% of the EU average. There would be transitional support for regions that lose Objective 1 eligibility, with more generous support for regions that lose out as a result of so-called ‘statistical effect’ i.e. the fall in the average EU GDP as a result of enlargement.
2. Regional Competitiveness and Employment would receive around 18% of funding and would be used (like the present Objective 2 and Objective 3 ) to address problems relating to economic restructuring and to fund labour market programmes. It would be available for all regions other than beneficiaries of Objective 1 funding and would be allocated on the basis of population, with some modulation for other factors such as unemployment.
3. European Territorial Cooperation would receive around 4% of funding and would be used (along the lines of the current Community Initiative to finance cross-border, trans-national and interregional co-operation).

The Commission’s original proposals would lead to a 50:50 split in funding between old and new Member States, with the poorer regions of the richer Member States continuing to receive EU support.

Consideration of the Commission’s draft Regulations by the European Parliament

Draft reports on the five draft Regulations were published in March 2005 for discussion in the Regional Development Committee. The reports on the General Regulation and Regulations on the European Development Fund (ERDF), the Cohesion Fund and the European Grouping of Cross Border Co-operation (EGCC) were adopted by the Regional Development Committee in May 2005, while the Employment and Social Affairs Committee adopted a report on the ESF regulation in June 2005.  All five Regulations were discussed and voted on in the plenary session on 6/7 July following a debate on Structural Fund reform on 5 July.