The Regional Policy Dilemma of the European Union

The integration of the former communist countries of central and eastern Europe into the European Union will create a dilemma for the EU's regional policy. The EU's expenditure on regional policy (which we term its regional policy) was guided by political reactions on deepening and enlarging the EU and not by a rational regional policy strategy. In contrast, the strong EU instrument of subsidies surveillance, developed for competition policy (which we will call its reactive regional policy) has been relatively successful in avoiding a national race of regional policy subsidies among the member states. We show that a shift from active regional policy to reactive, competition-oriented regional policies would be a way to handle the challenge of enlargement for the established member states, but at the same time this shift will be difficult for the applicant countries.