The European Regional Policy Commissioner, Johannes Hahn, is "receptive" to the idea of money being reallocated to Wales from parts of England so that West Wales and the Valleys will receive €2.1 billion over the next seven years, according to Welsh MEP Derek Vaughan.
Mr Vaughan says Commissioner Hahn has told him that the is still waiting for a formal proposal from the UK Government before he can take a decision. The European Commission's initial response to a cut in its budget included giving West Wales and the Valleys 22% less than the area has received over the last seven years.
Prime Minister David Cameron had insisted on the overall budget cut but then said that Wales should get the same 5% cut as the UK as a whole. The detailed counter-proposal is expected to actually show a small increase for West Wales and the Valleys, which remains one of the poorest parts of the entire European Union.
Wales gets a sympathetic hearing in Brussels partly because West Wales and the Valleys can spend all the allocated money and spend it in line with agreed objectives. That's something most of the other less developed regions of the European Union, the majority of them in eastern Europe, cannot always do.
At the same time it's accepted that just like in eastern Europe, the spending plans have to be tailored to local needs. The European Commission wants to see its regional aid budget spent on small and medium-sized businesses, research and development, low carbon projects and information technology. However, the Welsh Government has another major priority.
The Welsh Government's proposals on how it would spend the €2.1 billion will be part of the UK Government's proposal but behind the scenes informal talks have already led to an understanding about how the money would be used. The likely deal will allow the Welsh Government to spend half of it on infrastructure. Here's a rough outline of the way the money will probably be divided up:
- Roads, public transport and other Infrastructure 50%
- Small and medium-sized businesses 15%
- Research and development 15%
- Low carbon projects 12%
- Information technology 8%
Commissioner Hahn has said that he would like any priority for roads and other infrastructure projects to be reviewed during the seven years. He hopes that as the improvements benefit the economy, there will be more opportunity to invest in ways that lead more directly to job creation.