Brussels, 06/10/2011 (Agence Europe) - On Thursday 6 October, the European Commission unveiled its proposal for review of cohesion policy for the next 2014-2020 period, which should better reflect the objectives of EUROPE 2020 strategy and simplify the various European Structural Funds regulations. The watchword of the revised cohesion policy is for achieving results and clarifying procedures. “Cohesion policy has already contributed a lot to building prosperity in the EU. But given the economic crisis, it must now become a motor for growth and competitiveness. (…) And we are modernising the policy with conditions to ensure performance and results, incentives for those who deliver most effectively, and simplified procedures”, the commissioner responsible for regional policy, Johannes Hahn, explained. He has therefore put an end to speculation (see EUROPE 10460 and 10467) by confirming a funding ceiling not in excess of 2.5% of national GDP, priority investment in innovation, energy efficiency, SME competitiveness, and a regulation common to various funds. However, among the new rules proposed, many are already causing irritation, such as the measure on macroeconomic conditionality or the 5% reserve from funds as a means to encourage heightened performance.
It is evident that, with a budget representing over one third of the European budget (€336 billion in proposals under the multi-annual financial framework 2014-2020), negotiation on the renewed cohesion policy proposal will be in the spotlight in coming months.
Different types of regions. Generally speaking, regions will be placed in different categories: -the least developed regions (GDP below 75% of European average), transition regions (GDP between 75 and 90%), and most developed regions (above 90%). Funds will be distributed according to the classification, after a partnership contract has been sealed with each member state.
Partnership contract subject to conditions. The contract aims to make optimal use of funding received by member states by imposing preconditions (ex ante) to ensure, for example, that appropriate legislation is set in place or that rules governing audits or calls for offers are clear. The release of 5% of funds placed in reserve will be subject to meeting a condition after the programme has been carried out depending on the results obtained through investment of European money. Also, investment will be limited to 11 thematic sectors established according to the 2020 objectives (research, information and communication technology, SME competitiveness, transition towards a low-carbon economy, adaptation to climate change, sustainable resource use, sustainable transport and reduction of bottlenecks, job and education promotion, and the effectiveness of the public administrations).
Macro-economy enters the scene. Conditions begin to heat up when a macro-economic measure mechanism, hitherto reserved for the Cohesion Fund, is extended to five structural funds: the European Regional Development Fund (ERDF), the Cohesion Fund, the European Social Fund (ESF), the European Agricultural Fund for Rural Development (EAFRD), and the European Maritime and Fisheries Fund (EMFF). The initiative aims to maximise results from regional investment. A member state that does not master its debt, and which does not submit to the Commission's recommendations, may have payment of funds suspended first of all, to be cancelled in extreme cases. This is the mechanism that caused the most heated polemic. Commissioner Hahn replied that it is a “last resort” measure, preceded by many other stages, to be applied on a case-by-case basis, but that it allows funds to be paid out in an ideal context so that cohesion policy may truly deliver the hoped-for results.
General regulation. A series of conditions, and stringent rules, would surround the granting of funding under one and the same regulation, common to all five structural funds. This approach aims to simplify and clarify cohesion policy. However, the Cohesion Fund, the ESF and the ERDF will, in addition, have their own regulation. Two regulations deal with the European territorial cooperation goal and the European grouping of territorial cooperation (EGTC).
Ceiling. The general regulation provides for the rate of structural funds allocated to a member state not to exceed 2.5% of its GDP. This ceiling is intended to ensure maximum absorption of funding distributed via the structural funds. This is all the more important as the projects financed by cohesion policy still require a financial quid pro quo from the countries concerned.
Co-financing. The co-funding obligation must not damage national budgets. The Commission, in its proposal, therefore, establishes different co-financing rates that vary with the category of regions (85 % European funding for the less developed regions, 60% for transition regions and 50% in the most developed regions).
Cohesion Fund. All EU member states whose GDP is less than 90% of the European average will qualify for Cohesion Fund support. European aid will, however, target only infrastructure projects related to the environment (including energy efficiency) and transport (TEN-T), with an eye firmly on adaptation to climate change and the transition to a low-carbon economy. The proposal rules out aid for nuclear power plant decommissioning programmes.
ERDF. Regional funding will be allocated according to the key objectives of the new cohesion policy - SMEs, innovation, and energy efficiency - but more tightly in the transition and more developed regions, with almost 80% of aid allocated to only three of the proposal's 11 priority areas. These regions will see 20% of ERDF funds going to energy efficiency and renewable energy, 30% to innovation and 30% to support SMEs, while the poorest regions will only be required to devote 6% of the funding to energy efficiency and will be able to share out the remaining regional funding among the 10 other areas.
Territorial cooperation. Commissioner Hahn was quick to show his support for territorial cooperation by noting that there has to be trans-national action. Funding of €13 billion will go to territorial cooperation.
Next steps and criticism already. Overhauling the policy is an ambitious project for Hahn and it has already brought some tensions which will affect negotiations between the Council and the European Parliament over the coming months before a compromise is reached, it is expected, before the end of 2012 (that these negotiations are intimately linked to those establishing the EU's multiannual financial framework serves only to stoke the fires).
Criticism is directed principally at the macro-economic mechanism. Neither Greens, nor Socialists, nor Christian Democrats give their backing to this sword of Damocles that is the threat of seeing funding suspended. The Committee of the Regions even said it was irritated that no account had been taken of its point of view and those of the Parliament and other stakeholders in the Commission's proposal. (MD/transl.jl/rt)