HUMPHRYS: One of the things that strikes some people as rather odd about the way Europe works is that we give the Commission lots of money and then they give it back to us... some of it anyway. And in many cases we can't get it back unless the government promises to match the grants with more taxpayers money. Well at the moment there's several billions of pounds of new Euro-cash waiting to be collected by the most deprived parts of Britain. Terry Dignan has been to Wales where people have started asking why the money isn't being grabbed with both hands. TERRY DIGNAN: Another coachload of schoolchildren arrive at Llancaiach Fawr in the South Wales valleys where visitors are whisked back to the days of the Civil War. More than sixty thousand come here annually, generating income for an area hard hit by industrial decline. ACTUALITY: Welcome you are to my master's this fine house. My names is Blethyn, Blethyn Thomas. If you wish I will lead you forth within. DIGNAN: The house was restored by Caerphilly Council using half a million pounds of European Union money. Now the EU is promising West Wales and the Valleys more than a billion pounds of extra cash to step up the battle against economic decline. ACTUALITY: Attend to your match. Low upon your match. Present your patch to your pan. Fire! DIGNAN: There are fears that, ultimately, Wales may see little of this money. That's because it won't be released unless it's matched pound for pound by the public sector in Wales. Some believe the issue could fatally undermine the new National Assembly's Labour administration. Although Wales now has self government, the amount it can spend is still controlled by the UK Government in London. It's argued that if Gordon Brown doesn't provide the money Wales needs to match the EU's one point two billion pounds, the Nationalists, Plaid Cymru will be handed a huge propaganda victory. Nearby, in the Rhymney Valley, where coal was once king, they're greening the slag heaps. Now that West Wales and the Valleys have been given so called Objective One status in recognition of their needs, there'll be much more money to revitalise the area. Spearheading the council's plans for regeneration is Plaid Cymru's Lindsay Whittle. Where are we now Lindsay? CLLR LINDSAY WHITTLE: We're just leaving the town of Rhymney at the moment. This is an area which is suffering very much from social deprivation and an area that is in desperate need of funding. Within a very short space of a few miles from this very spot we had four or five collieries operating employing thousands of, of miners. They don't exist any longer so Objective One funding will clearly bring investment into these valleys. It's much-needed investment. Unemployment is running at twenty per cent at the moment. We need this money. Europe has said we can have this money. We want this money. We deserve this money. We demand this money." DIGNAN: And if they get it Llancaiach Fawr will be enlarged to take a hundred thousand visitors a year. ACTUALITY: This now is our servants hall. DIGNAN: But Brussels is adamant. It won't pay for all of a project like this. It will share the cost. The one point two billion pounds it's prepared to hand over to Wales must be matched pound for pound. But the question is being asked, where will this extra money come from? Improving the rail system and the roads' network will be a big priority for the Valleys if the Objective One cash is released. The line here runs to Cardiff - and it's to Cardiff - home of the devolved National Assembly - that many in Wales now look for solutions to Welsh problems. Brussels is willing to pay the one point two billion from next January. Merseyside, South Yorkshire and Cornwall will also gain though not as much as Wales, which could receive a hundred and seventy million pounds a year. But not if it can't match this money. Unless Gordon Brown is prepared to come to the rescue, obtaining the cash may mean raiding the budgets of schools and hospitals in the Valleys. DAFYDD WIGLEY: Gordon Brown and the Treasury are awash with money and we're talking not of thousands of millions of pounds here. For the first year we're talking of a hundred and eighty million pounds, or perhaps slightly less than that. And it'd be an absolute travesty if we had to cut back ourselves on expenditure, on health and education in Wales, in order to make up for the lack of money coming from the Treasury in London. ALUN MICHAEL: Now that's a crude misinterpretation and I think it's being done for political effect because we've spelt out how the money has been sourced. And the fact of the matter is that the arrangements that I negotiated with the Treasury at the tail end of last year mean that we're able to meet in full our manifesto commitments to health and on education and training. And at the same time be certain that we could put in place the arrangements that were necessary to get the Objective One funding. DIGNAN: So, good news for the Valleys. Or is it? The money Alun Michael's negotiated - thirty-five million pounds - nowhere near matchs the EU's hundred and seventy million. And, anyway, according to the Labour member for Caerphilly, it was meant for frontline services, not to match Objective One funding. RON DAVIES: It's not new money from the Treasury and I think that's, that's potentially worrying for those of us who represent Objective One areas because it means the principle has now been conceded that match funding will not come as new money from the Treasury but will have to come out of existing resources. DIGNAN: In the Rhymney Valley the adult education college is oversubscribed. Council leader Lindsay Whittle believes the new EU funding will help pay for expanding it over several years. That first requires a long term commitment by Labour to match the European money. ACTUALITY: Well, this college is certainly doing very well. It's the corner stone of the success of the Upper Rhymney Valley regeneration scheme and we have two hundred and seventy students here who are all very keen to train and be prepared for when the employment comes. Now the private sector is not going to invest money if it's not sure that the matched funding is going to arrive and that's why the Government needs to ensure that matched funding is with us." DIGNAN: There's frustration here that Labour won't make commitments beyond next year. The Government says further funding must await its next Spending Review. DAVIES: It's not unreasonable for us now also to say to the Treasury and to Gordon Brown you argued the case for us to Europe, they are putting up the money, now in good faith you should put up the money as well." MICHAEL: The impact of such a large Objective One decision has to be taken into account in the negotiations we have with the Treasury. I don't have any doubt that that process is capable of dealing with this challenge and that's why I'm so keen that everybody in Wales should stop fussing about something that - it does have to be worked through, I don't deny that at all but which is capable of being worked through. DIGNAN: But the other parties in Wales are losing patience. They've set a November deadline for Alun Michael to come up with the money to make full use of next year's European funding. Here at the National Assembly, Plaid Cymru is threatening to join forces with the Liberal Democrats and the Tories to bring down Alun Michael's administration over the issue of Objective One funding. Labour has no majority in the Assembly and a vote of no confidence is a real possibility. Ultimately what's at stake is how much weight the Labour Government in Wales carries with the Labour Government at Westminster. WIGLEY: The matter is so serious that they have to understand that this will be an issue of confidence and if they don't get the money from the Treasury then the Alun Michael Government will be out of office. MICHAEL: As soon as the smaller parties get off this hook of simply thinking that attacking Labour or attacking London is the way to do things and recognise that they've got a responsibility to be creative and involved in what we do in this Assembly the better it will be for all of us. DIGNAN: In the Rhymney Valley land disfigured by the waste of a departed industry is seeded. But much more investment is needed to attract new employers. The voters of the Valleys gave Labour a shock in the first elections to the National Assembly. Some of those who long campaigned for devolution now warn of the consequences if Labour mishandles the issue of Objective One money. PROF KEVIN MORGAN: Plaid Cymru see this as the one issue in which they could push Wales into a post Labour era. They're very confident that this is the issue. Therefore the stakes are very high for the Labour Party. If Labour doesn't deliver on matching funds for Wales it can't expect to be the biggest party in the Assembly at the next elections and it may not form therefore the next Government in Wales. DAVIES: The Labour Party got taken apart for a whole range of reasons, but we got taken apart in the Assembly elections and unless we win this we'll be giving a very big stick to Plaid Cymru to attack us with in the coming years. DIGNAN: And Plaid will use it to harass Labour at every opportunity. The issue of European funding has become the main battleground in the struggle between the two parties for dominance in Wales. The Nationalists are preparing to step up their attack. Their target is a guarantee from the Labour Government of Wales that the money on offer from Brussels will be fully matched. If the money arrives, argue Plaid, then visitors and investors will surely follow. If it doesn't Labour's grip on Welsh power may become a thing of the past.