Thirteen disadvantaged counties will secure special Objective One status with maximum European funding and industrial grants until 2006 if the Government decides to divide the State into separate administrative regions.
A formal Cabinet decision is not expected for some weeks. But sentiment within Government and particularly within the Department of Finance is said to have shifted significantly in favour of regionalisation in recent months during the preparation of a new national economic plan.
The change in policy would skew structural funding and industrial development away from the Dublin, Cork and Limerick regions, which have benefited most from the emergence of the so-called "Celtic Tiger", and towards the West, the Border counties and the Midlands.
Economic studies commissioned by the Government have shown that these areas would fall within the income limit of 75 per cent of GNP, which would qualify them for full Objective One status under the new tranche of European Structural and Cohesion Funds which will run from 2000 to 2006. After that, there is a chance they would continue to benefit economically through a transitional arrangement to Objective Two status.
The counties that would gain from such a Government decision are: Donegal, Leitrim, Sligo, Cavan, Monaghan and Louth; Mayo, Roscommon and Galway and Longford, Westmeath, Offaly and Laois. A switch in policy would, however, be likely to deprive the remaining 13 counties of a transitional arrangement under which the entire State would have been granted a "soft landing" by the European Commission, with Objective One status being gradually phased out during the lifetime of the new structural funds. Cohesion funding would, however, continue to be available to the entire State until a review in 2003.
Government policy has traditionally regarded the State as a single economic unit for EU funding and grant purposes. Centralised planning is conducted through the Department of Finance. Recent economic growth has, however, brought the State's per capita income above the 75 per cent average required to benefit from Objective One grant status. But, rather than have the Republic divide into separate economic regions at this stage, in order to retain maximum structural funding, the EU Commissioner for Regional Affairs, Ms Monika Wulf-Mathies, offered a transitional "soft-landing" arrangement.
Initially, the last coalition government appeared to have been swayed by this approach, which offered as much, if not more, funding for the State as a whole. It was publicly advocated by the Social Affairs Commissioner, Mr Padraig Flynn. And, despite a commitment in the present Fianna Fail/Progressive Democrats government programme to "seek" Objective One status for the West of Ireland, the Border regions and other rural areas suffering population declines, it did not seem official policy would change.
The economic studies undertaken by the Department of Finance - in tandem with intensive lobbying by organisations from the West and Border regions - transformed that political landscape by showing that half the counties in the State could benefit from regionalisation without any overall loss in funding.
Since then, intensive consultations have taken place with Ms Wulf-Mathies and it is believed she is now prepared to accept regionalisation, provided there is an adequate devolution of powers to regional bodies.
Differences still exist between the Commission and Government representatives on the extent of those powers, with the Department of Finance arguing that the application of infrastructural and cohesion funding should still take place within a national plan framework.
Last May, the eight regional authorities within the State submitted development plans for their areas to the Department of Finance and these are now being co-ordinated within the context of a national plan which will run from 2000 to 2006.
Before the plan can be adopted, however, the Government will have to take a formal decision on regionalisation. Any change in Ireland's status will be discussed and agreed by the European Council, under the German presidency, next March. As things stand, Northern Ireland is also scheduled to lose Objective One status for structural funding because per capita income there has reached 85 per cent of the EU average.