Effects of EU-Funds on Territorial Cohesion - Public and Private Resources for Regional Development in the Least-Developed, Most Deprived Micro-Regions of Hungary

The trade-off, limits and problems of double-orientation of development policy today - i.e. the goal of regional convergence and the growth and effectiveness-oriented economic development policy – are challenging throughout the world. Due to this duality and the structural problems caused by the crisis at present regional development policy in Hungary is secondary to other economic policy goals, national budgetary resources have shrunk – despite that certain micro-regions are characterized by low economic performance, lack of employment opportunities, social problems, but also with weak absorption capacities for development funds. Recognizing these problems from 2009-10 there was a special program within EU funded development policy targeting the 33 least developed micro-regions with territorial focusing and increased funding intensity. This paper is assessing the success of allocating exra-resources to these backward micro-regions and compares EU funding with national public resources for investment as well as private investments.What is the spatial pattern of these three different resources? What drives development in these backward areas? Our initial hypothesis is that available development policy funds are minor compared to private (business) investments or state budgetary resources, hence only additional role can be expected. Yet, in least developed, economically depressed and poor areas the private sector is very weak, thus here we can expect development policy to have a more major role. A micro-region and settlement based database of funds was built, connecting municipality-wise demographic, infrastructure, economic, financial, business accounts and grants data originating from different sources. The empirical analysis focuses on the 2007-2011 period, but also compares results of the 2004-2006 period (former EU budget cycle) with respect to the 33 ( 47 ) least developed micro-regions targeted by the special program.