Europe, for all its integration, still likes to think of itself as a collection of regions as well as nations.
Never is this more clearly illustrated than when Brussels discusses changes to its regional development policy, which it is currently doing as part of frantic negotiations to agree its budget for 2007-2013.
The European Commission devotes almost a third of its annual budget to its "so-called" Cohesion Policy.
In broad terms, this strategy aims to improve the quality of life for its citizens through sustainable economic growth while seeking to reduce the large disparities in wealth between countries and regions.
Specific funds also exist to help relieve regional economic crises caused by sudden company failures and restructuring.
Total expenditure is huge, currently amounting to 37bn euros ($45bn; £25bn) a year.
Fuel for growth
Sustained investment over many years has helped lift large parts of Spain, Portugal and Ireland out of relative poverty and provided a legacy of quality transport and energy infrastructure across the EU.
Targeted regions have commonly seen their economies grow faster than the EU average.
Cohesion funding has served as one of the EU's most valuable public relations tools, used to counter frequent criticism that it is detached from the everyday needs and concerns of its 450 million citizens.
So much so that politicians variously refer to major projects funded this way as "our fuel" or the "human face" of Europe.
"Projects supported by structural funds show that Europe cares and makes a difference," says Danuta Hubner, the European Commissioner for Regional Policy, in charge of Brussels' second largest budget.
"We could spend all the money we have on one big motorway going across Europe both ways and that would be it, but the needs of the regions are very different."
Rethink
But with ten new members and Europe facing unprecedented economic and social challenges, Brussels is having to rethink its strategy.
Given the size of the budget and Europe's current economic ills, it is no surprise this has provoked fierce arguments.
The Commission's outline strategic framework, currently out for public consultation, has been produced against a backdrop of faltering growth and high unemployment in many EU countries.
European leaders are under pressure to channel investment more effectively to boost long-term productivity.
"The overall growth rate in the EU has been weak which is a threat to our social model," says Peter Straub, president of the Committee of the Regions, an elected assembly of regional representatives from across Europe.
Growing pains
As well as confronting the challenge of increased global competition, the EU is having to address economic pressures from its own enlargement.
Prior to 2004, the output of the EU's poorest regions amounted to 67% of its average GDP but this has now fallen to under 30%.
More than 90% of citizens of the EU's 10 newest members live in regions with a per capita GDP less than 75% of the EU average.
In an effort to narrow this chasm, the 10 are receiving 8bn euros in investment in 2004-6, Poland accounting for nearly half the total.
Going forward, Brussels says its will focus its attention on supporting the most disadvantaged regions, which - under its new proposals - would swallow 78% of cohesion fund spending as opposed to 70% currently.
"Enlargement means that the economic and social disparities are more acute than ever and our challenge is to convert these challenges into opportunities," says Mrs Hubner.
Competitive focus
This focus has led to criticism that investment in skills, training and technology in countries such as Spain, Portugal and Greece - whose growth is essential to the EU's overall competitiveness - may suffer.
The twin goals of convergence and competitiveness are achievable, Brussels believes, highlighting innovative new measures to raise competitiveness, such as giving small firms access to credit and capital.
Others are not quite sure, such as Milan Turba, director of strategic planning for Prague's City Authority.
There is a paradox, he says, between money being pumped into the most deprived urban areas, and the clear need to supplement dynamic "cluster" areas where businesses and universities are located.
"We hope for a new policy after 2006 which focuses on the real needs of the cities," he says.
Regional policy is steadily moving centre stage as the EU attempts to deliver on the stated economic goals of its Lisbon strategy, laid out in 2000 and substantially revised last year.
For the first time, Brussels is proposing to link funding to progress in meeting targets on jobs and research and development expenditure.
Regional policymakers say greater decentralisation is needed if these goals are to be met.
"Regions need to develop their own programmes and assume political responsibility for them," says Mr Straub. "We can only obtain the Lisbon objectives if the regions and cities are fully involved."
Budget battle
For all its grand vision, the future of EU regional spending remains firmly in the hands of member states, yet to agree a budget for 2007.
Brussels is proposing a 33% increase in the total cohesion budget to 336bn euros, a rise which several member states say is far too high.
The UK has called for a "disciplined" regional budget focused on the poorest regions, which may put it on a collision course with other states.
Speaking in Brussels, deputy prime minister John Prescott said individual countries should have more freedom to address their own priorities.
"Richer countries should be able to spend more of their own money helping their poorer communities without the interpretation of state aid rules making it unnecessarily difficult," Mr Prescott said.
"We all know that our collective response to the Lisbon agenda is currently not expected to deliver what we have promised.
"Instead of moving towards the extra 20 million jobs to be created by 2010, Europe still has 20 million people unemployed."
By: N. Peter Kramer
