In the application of EU Structural Funds there are two guiding considerations: on the one hand, EU-wide policies; and on the other local priorities. The two may not always coincide, especially in the short term. However, it would be incorrect to think of them as opposing forces.

In fact, they are different perspectives to the common objective of enhanced economic growth and greater prosperity. Both perspectives need to be taken into consideration and this is what happens in practice. EU policies determine the principal criteria in the overall allocation of the Structural Funds to the relevant regions.

However, these generic criteria are then linked to local priorities at the stage where programmes are translated into actual projects for implementation.

There are those who advocate greater reliance on local factors in the determination of which initiatives to support through the Structural Funds. The argument put forward is that no one knows better than those who are most directly concerned.

This is undeniably the case, but there are also other factors that need to be kept in mind. In particular, there is a real danger that local considerations might place excessive weight on shortterm measures at the expense of longer term goals.

A typical case in point is expenditure on physical infrastructure. Certain infrastructural projects are clearly essential, whichever way you look at them. However, there may also be infrastructural improvements that, although very appealing at the local level, do not contribute to raising productivity and an undue emphasis on them would reduce the availability of funds for investment in other, much more critical areas.

A fundamental objective of EU policy has always been stronger economic development. This objective is intrinsically linked to the renewed Lisbon Strategy for Growth and Jobs. Consequently, it is clear that the Lisbon Strategy has acquired particular relevance in the formulation of EU cohesion policy.

In the words of Commission President, José Manuel Barroso: "The close relationship between cohesion policy and the renewed Lisbon Strategy should come as no surprise. After all, regions need growth and jobs - that is what cohesion policy has always been about. But the Lisbon strategy has given this a sharper focus."

President Barroso was speaking in Brussels, on June 12, at the launch of the conference 'Innovating through EU regional policy'. The event was also addressed by Danuta Hubner, Commissioner for Regional Policy, who summarised very aptly the principal focus of the conference:

"The European Commission and the national and regional authorities are working hard to prepare and make cohesion policy 2007-2013 deliver jobs and growth to our regions. Research and innovation have a key role to play in this collective effort and we want to see that they feature much more strongly in the investment strategies advanced by the Structural Funds."

Commissioner Hubner stressed that, in today's open, global economy, competitive advantage and sustainable growth must be sought through the application of knowledge.

Support for the priorities of the Lisbon Strategy, including research and innovation, is central to the proposals for the next generation of EU regional policy programmes. The target for the so-called convergence regions is that 60 per cent of their financial allocation under the Structural Funds should be devoted to the priorities of the Lisbon Strategy.

The new legislative framework for cohesion policy 2007-2013 will highlight the knowledge economy and research, technological development and innovation capacities as key priorities for investment.

EU regional policy is intended to enable regions to exploit fully their potential for growth to manage economic and social change successfully, which is not an option but the reality that needs to be faced. Again, to quote Mrs Hubner:

"The potential of EU regional policy to bring greater cohesion between regions is grounded in its capacity to deliver the EU's Lisbon agenda. Competitiveness and cohesion not only go hand in hand.

"In an open, global economy, competitive advantage, sustainable prosperity and the application of knowledge is the key to bring sustainable cohesion. We must therefore make sure that regional policy does its utmost to support competitiveness."

If one looks back at the last six years, it is clear that the context for regional policy has changed significantly. Within the enlarged EU, there is a greater divergence between regions than before. Over the same period, the challenges posed by an increasingly global market have become more pronounced.

The challenge to European enterprise is not restricted only to the low-tech sectors but increasingly also in the field of high-tech, and the competition is not coming only from the United States and Japan but also from countries like China and India. Others are not standing still, which means that neither can the EU. In fact, the EU has to be able to innovate more and faster.

Within this new scenario, regional policy must focus more on global issues while solutions to global problems have to be sought through initiatives at the regional level. The nature of economic growth today is such that many of its potentially key drivers, innovation being one of them, have to be sought and nurtured at the local level.

This is the level at which most businesses, especially small and medium-sized enterprises, interact with one another and where lies the greatest potential for them to come into contact with centres of learning and technology.

Today, competitiveness is intrinsically linked to knowledge or, more exactly, to the ability to exploit and apply knowledge in a manner that allows you to stay ahead of the competition. Being innovative, in what you produce or provide and in how you do it, has become more and more important and will continue to do so in the near future.

In the global economy, more and more firms are becoming increasingly mobile. And the most innovative among them tend to be even more mobile than average. This means that they select the location from where they want to operate, based on their own evaluation of which location enhances most their competitive advantage.

A feature of globalisation is that, today, it has become easier to access facilities and skills around the globe. This has increased the relative importance of location as a key factor in the search by companies for measures that will enhance their competitive position.

Effectively, as a result of globalisation, local conditions have become more important than they ever were before. Companies that are leaders in innovation will seek to go where the workforce is well educated, there is ready access to R&D support facilities such as laboratories, and where opportunities for networking with universities and other enterprises appear to exist.

It should be evident that member states and regions can and must play a leading role in creating favourable conditions for such co-operation to develop at the local level.

Given these considerations, the challenge to the EU, certainly from the perspective of those responsible for its regional policy, is to help improve the performance of those regions where innovation does not currently appear to feature sufficiently.

This will also require regions to look beyond their borders to find partners, perhaps in the context of international networks, with whom to develop new initiatives to foster greater innovation.

Another speaker at the Brussels conference was Commission Vice-President Gunther Verheugen. His closing remark is worth quoting: "Real progress can only be made if we bundle resources and aim higher. We must offer a future perspective for all regions in Europe.

"Pushing forward the innovation agenda should unite all regions, irrespective of where they start from. For this, everybody has to do their homework first, but European co-operation and solidarity help accelerate the process and provide better results."