Lauri Läänemets: Let us trust small cities and rural areas with EU billions

Lauri Läänemets (SDE).
Lauri Läänemets (SDE). Source: Kairit Leibold/ERR

The more peripheral the region, the more European Union funds should be directed there, Lauri Läänemets writes.

There is a document awaiting a decision on the government's desk that in its current form would only add to regional inequality. I'm taking about European subsidies and their allocation that ignores regional peculiarities and tends to favor the capital instead. The same warning is delivered by various recent studies.

European billions mean modern schoolhouses, green energy, better care for the elderly, safer neighborhoods and new possibilities for children. They also have a direct effect on job creation that is key to more even development in Estonia.

The government must approve the 2021-2027 EU budget period funding measures list after it finishes putting together the 2021 state budget. The list is based on wishes of ministries, while local governments and civil society organizations have largely been sidelined so far. And yet, European subsidies affect everyone's lives and not always positively.

President Kersti Kaljulaid pointed out a rather bitter fact in her speech to mark the start of the fall session of the Riigikogu – that prosperity in Tallinn is 135 percent of the EU average, while that in the rest of Estonia comes to just 55 percent. That is a difference of two and a half times, whereas recent allocation of European subsidies has worked to deepen inequality.

Even though all governments have invested tens and hundreds of millions of euros into rural areas, the effect of European billions is inviolable.

The recent system of support allocation prefers those who are already strong, although this has not been a conscious choice. In situations where smaller regions compete for European funds against the wealth and know-how of Tallinn and its neighboring municipalities, the outcome is very seldom surprising. And so, money and projects increasingly end up in the capital and [the second largest city] Tartu.

Let us look at the measure of smart specialization where money was made available for cooperation between companies and universities. By 2019, of the total volume of €16.4 million, 68 percent had gone to Tallinn, 16 percent to Tartu and 12 percent to Harju County. The rest of Estonia only got €4 million from the "pot," meaning that most counties were left with nothing. Let us also look at the enterprise measure of €44.1 million where we see that Harju and Tartu counties used 77 percent, with 23 percent left for the rest of the country.

Warnings in terms of regional differences deepening have now been issued by the Human Development Report, analyses by the Praxis Center for Policy Studies and Riigikogu Foresight Center, as well as the finance ministry's regional development strategy report, not to mention a host of economic geographers and social scientists.

The main traits of peripherization are dwindling populations and economic activity. A good living environment, practical services and active culture can attract people to small cities and rural areas. While people leave small places mostly in search of work. There is little local governments can do about the latter. As long as liberal right-wing economic logic rules the day, resources will pool where there is already an abundance of them.

The second bottleneck of Estonian regional policy and EU subsidies allocation is failure to consider regional peculiarities and needs. They are present in words and the public administration minister's plans, but the vision of ministries wins the day. It is up to the latter to propose EU subsidy measures.

And so, it is little wonder that social transport support measures tend to fit the needs of larger cities and not the Seto Municipality. Harju County companies are more successful at applying for support not just because of their access to information and know-how – the measures simply fit their level of development better than that of their counterparts in Valga County.

The solution is not complicated, while it requires political will and trust placed in local people. KredEx divided Estonia into five regions for the apartment buildings renovation measure as more capable regions tended to get the lion's share in the past. The same approach should be used far more often when it comes to European support.

In order to maintain jobs outside major centers and attract new companies and vacancies, a third of European subsidies needs to be distributed on the local as opposed to the central government level. And the greater the rate of peripherization in a given region, the more EU funds it should receive. Coupled with the right to decide its use, it can give local governments, companies and NGOs the levers they need to curb peripherization.


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Editor: Marcus Turovski

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