TOGETHER OR APART? STRUCTURAL FUNDS AND REAL CONVERGENCE IN THE NEW MEMBER STATES

The objective of this study is to analyze the relationship between the structural funds provided by the European Union (EU) and the real convergence of the New Member States that joined the EU in 2004. We also assess the effect of the crisis on this. According to the empirical studies in this area, the impact can be both negative and positive. Furthermore, in the latter case, the correlation is not very strong and depends on several factors. To meet the research objective, we have structured this paper into five parts. In the first part, we make a short presentation of the Cohesion policy and its evolution in time. In the second part, we explore the importance of the subject in the economic literature. In the third one, we explain the methodology used in this paper. We contribute to the literature by creating a Real Convergence Index (RCI) and by assessing the evolution of this index and of the structural funds payments from 2004 until 2010 in five New Member States (Hungary, the Czech Republic, Poland, Slovakia and Slovenia). The fourth part describes the results obtained. The structural funds payments reached a maximum level in 2007 in all the countries, with the exception of Slovenia. After this point, they recorded decreasing levels, mainly because of the economic and financial crisis. Within this group of countries, Poland and Slovakia recorded an increase in RCI during 2009 and 2010, even though the amounts of payments started decreasing. The highest level of structural funds payments and the maximum level of RCI are not synchronized, with the exception of the Czech Republic. This could come as a result of the lagging effects of structural funds on the economic convergence. The fifth part of the paper summarizes the conclusions of our research. The analysis confirms the previous work in this field. Specifically, it does not provide us with a clear result regarding the relationship between the absorption of structural funds and the real convergence. The implications for Romania are not very encouraging. This means that the efforts for increasing the absorption rate of EU funds will not necessarily lead to a faster real convergence process. Consequently, the effectiveness of the Cohesion policy remains under question.