Nikola Hochhholdinger and Alexandra Schantl, KDZ Centre for Public Administration Research Austria
The Austrian financial equalization system provides financial resources to finance local governments tasks. Due to the specific framework conditions and challenges of urban local governments (ULGs) and rural local governments (RLGs), the question of how these funds can be distributed fairly between ULGs and RLGs seems to be a never-ending story. While RLGs want to have their structural challenges due to the rural exodus compensated by this intragovernmental transfer system, ULGs want to be reimbursed for their increased need for infrastructure development and their additional tasks due to the influx of people. However, there is a second level of redistribution in the form of an extensive subsidy system that leads to differentiated distribution effects with regard to urban and rural areas.
In this context EU funding has become more and more important over the last decades, in particular with regard to regional policy and development. For the EU-funding period 2014-2020 Austria has benefitted from the European Structural and Investment Funds (ESIF) through four national programs with 4.92 billion supplemented by EUR 5.74 billion of national co-financing. The biggest part of the funding has been dedicated to the European Agricultural Fund for Rural Development (EAFRD) with 72.5 per cent, around 20 per cent to the European Regional Development Fund (ERDF) and 8.2 per cent to European Social Fund (ESF). With less than one per cent of the planned funding, the European Maritime and Fisheries Fund (EMFF) is the smallest and least relevant program in Austria.
To implement both innovative inner-city and urban-regional initiatives in Austria the ESIF plays a decisive role. The scope of urban regional action according to integrated multi-level approaches in the administration (multi-level governance) in Austria would be considerably lower without start-up funding from the EU.
However, the current funding structures and frameworks (complex intervention logic, multiple funding authorities/agencies, lack of coherence between the various EU funds and instruments) as well as the lack of long-lasting rollover funding or follow-up investments, hinder the sustainable use of EU funds both for the integrated development of urban regions and for bridging the urban-rural gap.
A recently published study on quantitative effects of ESIF-funding in Austria has shown that EU funding in Austria clearly contributed to reduce spatial disparities in Austria over the last 25 years. According to the EU Rural-Urban-Typology the highest funding intensity – spending per capita – of the ESIF funds was found in peripheral rural areas (see figure below). This also indicates that RLGs ultimately benefited more from the funding than ULGS due to the different thematic and geographical orientation of the single ESIF programs.
Since social, ecological and economic processes and challenges correspond less and less to administrative borders, also in Austria with the 2014-2020 funding period EU funds have been increasingly dedicated to functional areas as well as to the cooperation of ULGs with their – often rural – surrounding areas in order to strengthen territorial and social cohesion.
For urban-regional (urban-rural) measures it has been mostly resources from the European Structural and Investment Fund that come into effect; respectively from the ERDF and the EAFRD. Thus, the Austrian program ‘Investment in Growth and Jobs’ (Article 7 – Integrated and sustainable urban development) has supported, for instance, the Upper Austrian urban regions and urban-rural cooperation in Tyrol (CLLD). The cooperation between the City of Villach and its surrounding regions works with LEADER resources from the EAFRD. Other functional spaces that go beyond the Austrian national borders, such as the cooperation in in the area of the Lienz Valley with Bruneck in South Tyrol, are supported by the EU’s Interreg programs.
However, EU funding shall not and cannot replace national funding. In order to be able to continue successful EU initiatives and projects even after EU funding has phased out, the ‘EU start-up funding’ needs to be secured in the long term through national (reform) programs. This applies above all to the integrated development of functional areas. A good example of how EU funds contribute to sustainable investment both in ULGs and RLGs is the Styrian Regional Development Law that came into force in 2018. The purpose of this law is to create the best prerequisites for a targeted cooperation between all governmental authorities (Land/region/local governments) concerned with economic and social development. A yearly amount of EUR 12 million is available for these tasks, distributed among the seven Styrian regions and spent on their own responsibility. The law incorporates citizens’ participation as an essential issue for the regions. The main superordinate goal is to equalize regional imbalances and to govern structural spatial development. The tasks are set on two levels:
- the regional government level (Land Styria): Development strategy framework for the entire province, coordination of regional strategies and spatial policies, tuning of flagship projects;
- the regional level: Coordination and enforcement of inter-municipal cooperation within the region, elaboration and realization of regional development strategies, proposals for appropriate projects, permanent monitoring.
The regional tasks are performed by so-called Regionalverbände (regional authority associations) and their authority independent bodies, the president, the board and the assembly. In the assembly the mayors and councilors of the participating municipalities are represented. There are currently seven Regionalverbände. Financial resources can be used for management tasks as well as for projects to benefit the regional populations (e.g. mobility improvement, logistic concepts, social procurement etc.). Since the available regional budget can also be used as co-financing for EU projects, there is additional funding for local projects and investments. Furthermore, the potential and willingness of both ULGs and RLGs to use EU funds for their local projects increases.
Although EU funding plays a minor role in Austria in relation to national funding, it has successively become more important in the last decades, especially in regional policy and development. Local governments have benefited from ESIF-funding through many different projects and conjoint initiatives and EU-funded projects have been crucial catalysts and promotors for starting innovative processes and implementing new and cooperative government structures especially on the regional level both in Austria and cross-border.
However, there are differences between ULGs and RLGs in absorbing EU-Funds. While RLGs benefit from the largest ESIF program in Austria – the EARDF – the funding opportunities for ULGs are limited for two reasons: the ERDF funds in Austria, where ULGs are potential beneficiaries, still focus on economic support for SMEs and research measures, while funds for sustainable urban development measures and investments are very limited. On the other side the majority of the EAFRD funds go to small RLGs, although ULGs with up to 30,000 inhabitants would be eligible.
With the new approach on supporting functional areas since the last funding period 2014-2020 it seems that also ULGs will benefit better from EU-funding in future and that this territorial approach could not only strengthen cooperative regional governance but also cushion the urban-rural divide.
However, to successfully and sustainably use EU funding for functional areas improvements are still needed. This demand is also in line with both the current position paper of the Austrian Association of Cities and Towns for the funding period 2021-2027 and the findings of a recent Austrian Conference on Spatial Planning (ÖROK) study that requests to strengthen the resource potentials of regions as actors for the attainment of programming objectives in order to improve the effectiveness of funding on local and regional level.
Styrian Regional Development Law (StLREG, Steiermärkisches Landes- und Regionalentwicklungsgesetz) and Amendment to the Styrian Regional Planning Law (Änderung des Steiermärkischen Raumordnungsgesetzes), XVII. GPStLT RV EZ 1912/1 AB EZ 1912/4
Ministry of Agriculture, Regions and Tourism, ‘Austrian Programme for Rural Development 2014-2020’ <https://www.bmlrt.gv.at/english/agriculture/rural-development/austrian-rural-development-programme-2014—2020—text-of-the-programme-after-its-first-amendment–version-2.1.html>
Scientific and Non-Scientific Publications:
Austrian Association of Cities, ‘Position paper (Summary): Cities & Urban regions 2020+ Positions of the Austrian cities and urban regions regarding the design of the EU grant decisions 2021-2027’ (2019) <https://www.staedtebund.gv.at/fileadmin/USERDATA/themenfelder/europa/2020__positionpaper_january2020.pdf>
European Commission, ‘Country Data for Austria’ (European Structural and Investment Funds, last updated 2021) <https://cohesiondata.ec.europa.eu/countries/AT#>
Mayerhofer P, Bachtrögler J, Nowotny K, and Streicher G, ‘Quantitative Wirkungen der EU-Struktur- und Kohäsionspolitik in Österreich – ein Beitrag zu 25 Jahre Österreich in der EU (WIFO 2020)
Österreichische Raumordnungskonferenz ÖROK, ‘Die regionale Handlungsebene stärken – Status, Impulse und Perspektiven‘ (publication series no 208, ÖROK 2020) <https://www.oerok.gv.at/fileadmin/user_upload/O__ROK_SR_NR._208__2020__Reg_HE_online-Version.pdf>
 European Commission, ‘Country Data for Austria’ (European Structural and Investment Funds, last updated 2021) <https://cohesiondata.ec.europa.eu/countries/AT#> accessed January 2021.
 Peter Mayerhofer, Julia Bachtrögler, Klaus Nowotny, and Gerhard Streicher, ‘Quantitative Wirkungen der EU-Struktur- und Kohäsionspolitik in Österreich – ein Beitrag zu 25 Jahre Österreich in der EU‘ (WIFO 2020) 11.
 Mayerhofer and others, ‘Quantitative Wirkungen der EU-Struktur- und Kohäsionspolitik in Österreich‘, above.
 Community Led Local Development Instrument.
 Liaison entre actions de développement de l’économie rurale – instrument of the EAFRD.
 Ministry of Agriculture, Regions and Tourism, ‘Austrian Programme for Rural Development 2014-2020’ 73.
 Austrian Association of Cities, ‘Position paper (Summary): Cities & Urban regions 2020+ Positions of the Austrian cities and urban regions regarding the design of the EU grant decisions 2021-2027’ (2019).
 Österreichische Raumordnungskonferenz ÖROK, ‘Die regionale Handlungsebene stärken – Status, Impulse und Perspektiven‘ (publication series no 208, ÖROK 2020) 12.