A European Budget for Territorial Cohesion - up-dated:



 

A European Budget for Territorial Cohesion

Cohesion is one of the EU largest policies, with more than one third of the EU budget. Only the Common Agricultural Policy (CAP) is bigger. At the end of June (29th) the Commission presented its Budget Proposal, the Multi-Annual Financial Framework (MFF) for the period 2014-2020. In this time when some Member States are facing severe fiscal challenges, it is crucial that European cooperation focus on policy areas bringing benefits to most of them with a clear EU added value, while keeping a reasonable support to all territories.

The AEBR kept meetings with Director General Dirk Ahner in the middle of June, and with Commissioner Hahn on the 18th of July in order to exchange first impressions on this proposal. We could see that there were no revolutionary changes, but there is an increasing focus on Transnational and Interregional cooperation, while Cross-Border Cooperation (CBC) can suffer from the relevance paid to macro-regional strategies, unless cross-border structures and border regions are better involved in the planning of national and macro-regional strategies. In absolute terms, the budget allocated for CBC will remain the same or even increase a bit, due to the overall boost, but the share within the Territorial Cooperation Objective will decrease a bit. It seems difficult for many Commission’s departments to understand the meaning and impact of CBC. This has very much to do with the difficulties to communicate clearly what is happening in border areas. What is the impact of Territorial Policy is a main concern for DG Regio and it should be ours, too. More visibility is needed both top-down and bottom-up.

The interest in Interregional cooperation is a growing issue for many actors. Up to now, the thematic orientation of Interreg IV-C has been determined by the Lisbon Agenda and the EU 2020 Strategy, being most of the projects related to innovation and technology. Other frequent fields are SMEs and entrepreneurship, energy, transport networks and climate change. One of the problems detected by the direction of the program is the amount of energy devoted to the selection process (high number of applications) by the Interreg management workforce, and not enough to measure the impact of the projects. For the future, it is expected that more attention will be paid to long-term outcomes in order to illustrate the European added value within regional/local development processes, as well as the long-term impact in the lives of European citizens. Next programme should focus more on the thematic priorities of the EU 2020, but it should also include topics as governance and administrative capacity building.

Here it is worth mentioning the extraordinary attention paid to urban issues in the current debate. This has been highlighted by the current (Danish) Presidency and the EU institutions, including Commissioner Hahn. While accepting the importance of the urban dimension (there are also many cases of CB urban cooperation), EU Cohesion Policy has also been understood as a main element for the development of more challenging European territories (rural, affected by industrial transition, sparse populated, cross-border and mountain) and it has been stated in article 158 of the Treaty of Lisbon.

On the other hand, it seems very evident the need to differentiate between borders, and the need to stress capacity building in many areas. Border and cross-border regions, euroregions and other CB structures should pay a lot of attention to the developments at national level, and try to influence these processes. The same can be said about macro-regional strategies. These will include many cross-border aspects, and the regional/local level should be very much aware of them. Both the European and the national levels should be followed very carefully in this crucial moment for the future of European CBC.

The Commission’s budget proposal is allocating € 376 billion for spending under the instruments for Cohesion Policy:

 

-           Convergence regions                                                       € 162.6 billion

-           Transition regions                                                             € 38.9 billion

-           Competitiveness regions                                                   € 53.1 billion

-           Territorial cooperation                                                       € 11.7 billion

-           Cohesion Fund                                                                 € 68.7 billion

-           Extra fund for outermost and sparsely populated regions     € 0,926 billion

-           New Connecting Europe Facility                                              € 40 billion

It also includes € 40 billion for a new Connecting Europe Facility (CEF) designed to boost investment in transport, energy and ICTs. There are doubts regarding this new infrastructural fund. In particular, its management is still unclear, despite the Commission’s intention to handle it directly from Brussels in order to address major investments in energy, transport and advanced communications. Some relevant actors have shown their criticism with the idea of deducting money from the regional cohesion funds to finance the European energy and transport infrastructure networks. We could support this CEF provided that secondary networks and CB links are designed in consultation with local and regional authorities involved, as well as cross-border structures operating in the area.

The European Social Fund (ESF) will represent at least 25% of the cohesion envelope, not taking into account the Connecting Europe facility, i.e. € 84 billion.

Main elements of the proposed Multi-annual Financial Framework to be taken into account in the area of cohesion policy are:

  • Reinforced focus on results and effectiveness, with a systematic link between cohesion policy and the EU 2020 Strategy.
  • New conditionality provisions to ensure that funds are used to meet the Europe 2020 objectives, affecting both the initial allocation of funds and the release of additional funds. This is the other big concern, the question of conditionality linked to the aid, as the proposed cross-compliance arrangements seem to be rather complex.
  • The introduction of a new 'transition region' category including regions with a GDP per capita of 75-90% of the EU-27 average.
  • Partnership contracts between the Commission and the Member States to set out the commitments of partners at national and regional level and the Commission.
  • Measures to improve the absorption of funds by Member States.

You can find here the Policy Fiches of the proposed MFF:

http://ec.europa.eu/budget/library/biblio/documents/fin_fwk1420/MFF_COM-2011-500_Part_II_en.pdf

In general, regional policy keeps its scope to benefit all European regions, and has clarified a bit the typology with the creation of the “intermediate regions”, instead of the complex issue of phasing-in and phasing-out regions. We do not see major problems with the introduction of this “transition” region category. TheEuropean Parliament has also shown its support to the creation of the intermediate category of regions in the future cohesion policy, as well as on some degree of conditionality, a strong monitoring of irregularities, and the system of thematic priorities.

On the partnership contracts, some AEBR members have already shown their distress. CBC structures, not mentioned in the draft regulations, but playing a main role in day-to-day CBC, have particular concerns about national contracts for territorial cooperation.

A main obstacle yet to overcome is some Member States’ attitude towards this financial proposal. Some of them ask for austerity and reduction in the EU budget, but this is a clear mistake, as some more “national” investments in the EU can lead to savings at European level because of the economies of scale and synergies developed through the Union, as President Barroso has repeatedly declared. A stronger national lobby is very much needed by border and CB regions, euroregions, EGTCs and other CB structures, experts and interested people and institutions to keep a minimum awareness in national governments about the need of CBC as an efficient instrument for regional development and European integration. This document is intended to provoke the reaction of AEBR members, but also to provide with a documentary base for them to lobby national and regional authorities in order to better understand the importance of keeping CBC during the next funding period at least as up to now.

 

Draft Regulations for EU Cohesion Policy 2014-2020

In October 2011 the Commission adopted a draft legislative package which will frame EU Cohesion Policy for 2014-2020. The new proposals are designed to reinforce the strategic dimension of the policy and to ensure that EU investment is targeted on Europe's long-term goals for growth and jobs ("Europe 2020"). We agree, in principle, with the Commission’s proposal, and also acknowledge most remarks posed by the European Parliament. However, we miss the reference to cross-border structures and their role in the integration across European border areas. Instead, a misbalanced attention to the urban dimension and a growing interest in interregional and transnational cooperation make us worry about the impact of these mainstreaming approaches in future cross-border programmes.

As previously mentioned, a main issue is the Partnership Contract to be agreed between the Commission and Member States in order to commit to focussing on fewer investment priorities in line with the EU2020 objectives. Here we have a main remark: we should pay attention how are they going to be implemented, and they should not be applicable to ETC Programmes. This regulation’s package also harmonises the rules related to different funds, including rural development and maritime and fisheries, to increase the coherence of EU action.

You can find here all legislative proposals for regulation of the Cohesion Policy 2014-2020:

http://ec.europa.eu/regional_policy/what/future/proposals_2014_2020_en.cfm

During the negotiations of the future Structure Fund regulations between the Commission and the Parliament, the main conflict was caused by theconcentration in some previously defined objectives (the thematic objectives), and the minimum quotas for these objectives. The proposed 11 thematic objectives of the Cohesion Policy 2014-2020 are:

  • Research, technological development and innovation
  • Information and communication technologies
  • Competitiveness of SMEs and the agricultural sector
  • Low-carbon economy
  • Climate change
  • Environmental protection
  • Sustainable transport
  • Employment
  • Social inclusion and combating poverty
  • Education and training
  • Institutional capacity and efficient public administration

The REGI Committee of the Parliament has considered this proposal too rigid (22-23 November). In fact, this seems quite contradictory with the Commission’s call for flexibility, and it can affect very much the implementation of programmes and projects on the ground.

Macroeconomic conditionality is another source of debate, as Structural Funds could be part of the solution for countries with budgetary problems. There were other question marks: the performance reserve (5% of the fund), the “delegated acts” procedure, ... So, REGI will keep on discussing this during next meetings. This debate was also present at the Informal Meeting of Ministers responsible for EU Cohesion Policy (regional policy), territorial and urban development, on 24-25 November in Poznan. They also asked for more flexibility to take into account the needs of the different regions. Particularly intense was the position of the Committee of the Regions.

Not only Member States expressed doubts at the General Affairs Council (16 December), but also the MEPs were sceptical at the REGI Committee on the Commission’s proposal to concentrate a large part of support under ERDF (at least 80% for developed and transition regions and 50% for less developed regions) on three key priorities:

  • research, technological development and innovation;
  • strengthening of the competitiveness of SMEs; and
  • support for the shift to a low-carbon economy.

General rules are ok, but too many cross-references on different regulations, regarding in particular with fixed priorities, contracts, etc., can complicate very much the overall understanding of procedures, mainly  for ETC.

A minimum percentage would have to be devoted to the ESF (25 to 50 %, depending on the regions’ level of development).

For many MEPs, mandatory quotas from the start are against the needed flexibility. They do not reject greater thematic concentration to achieve the main objectives of growth and employment, but it is indispensable to involve the regions and other actors (as it is the case of cross-border structures) in the selection of priorities. This can be done by including them in the future partnership contracts to determine the investment priorities for each member state.

On the other hand, MEPs have demanded that the future common strategic framework, which will identify the priorities and types of investment for each of the thematic objectives of the cohesion policy, should be adopted by co-decision, rather than as a delegated act

Along January and February 2012, there has also been an offensive by some euro-sceptic think-tanks, attacking EU Regional Policy with arguments like reserving cohesion policy only for least developed member states (without taking into account differences within these countries and within the “richer” members of the EU). Most of these opinions are developed with a strong focus on the potential “savings” for net contributors. New EU member states would receive more from the Structural Funds, but Italy, Spain and Greece would lose the most.

In any case, the effects and deepness of the crisis have affected all discussions up to the point that the informal EU Summit last 30 January stressed the need toreprogramming current available Structural Funds (around € 80 billion) to invest more in measures to boost employment (particularly youth unemployment and training needs) and growth.

In this sense, Barroso has suggested Member states to use non-allocated funds to:

-     a Youth on the Move pact based in the 2010 Commission’s idea (drawing of national youth employment plans, increase training and apprenticeship opportunities, encourage youth mobility and guarantee that all youngsters find a job, education or training within a certain time after leaving school), and offer special support to countries with higher difficulties (Spain, Greece, Slovakia, Lithuania, Italy, Portugal, Latvia, Ireland and Romania) through action teams set up by the Commission, the member state and the social partners.

-     help SMEs expand and develop, reducing the administrative burden, and shortening the transposition deadline for directives contained in the Single Market Act from two years to one.

This proposal raised some strong reactions amongst MEPs, not about the substance of the proposal, but on the way to implement it. A first remark is the rejection to refer to these funds as “unspent” money. In fact, most of funds non-committed formally, are already allocated to priorities in each national programme. So, there could be a mixed risk of creating uncertainties over already approved programmes and also false expectations in direct beneficiaries and the public opinion. The final decision whether to adapt their programmes to the new reality should be taken by each member state.

A question which is always present in debates is macro-economic conditionality, due to the difficulties to find an agreement. We have discussed this issue intensively with other Associations and the Committee of the Regions, and the main concern lies in the fact that, while cohesion policy should help less developed regions, this macro-conditionality can affect them if their member states do not fulfil the conditions established in the Stability Pact. Instead of promoting growth and competitiveness, it will lead to a vicious circle, using the definition of the CPMR. On the other hand, growth and employment is the overall purpose of the cohesion policy, thus it is that on-going projects are reflecting this. The decision will last for a while, as the Danish Presidency does not expect any outcome in this semester (Danish Minister for European Affairs, Nicolai Wammen, was very eloquent during his address to the REGI Committee last 25 January), and the Parliament, despite of calling for a public hearing next 20th March, is not planning any vote before September.

Conditionality and cross-compliance arrangements should be better defined, orientated towards the future possibilities of many territories currently deeply affected by the crisis, and not as coercive measures. Macroeconomic considerations should not be the regulators of CB approaches.

The recent proposal to suspend part of the Cohesion Fund for Hungary in 2013 (almost half a billion €) due to the excess of deficit seems to be a precedent to extend macro-economic conditionality to all Structural Funds in the next period. All political groups at the Committee of the Regions have rejected this proposal, even if it only address the cohesion fund (managed at central level) as it would certainly have an impact on LRAs benefiting from projects co-financed by it.

In our opinion, an increased focus on interregional and transnational cooperationcould risk subsidiarity, but we also understand that it would strengthen the concentration on certain priority areas, reinforcing the EU2020 Strategy with better European coordination and easing the monitoring of the real impact of European funding. We fully agree with the general purpose of getting an impact on growth(focus on results and effectiveness), bringing benefits to most of the Member states with a clear EU added value, while keeping a reasonable support to all territories. And we hope that national approaches will not prevail over European and territorial-based ones. In fact, some AEBR members have already warned that some general provisions are not realistic in daily CBC.

And, regarding the allocation of funds for regional policy, there is growing voice asking for a more comprehensive set of criteria to evaluate richness. Using GDP as the single measure is quite an outdated procedure. For instance, the UNDP uses a more complex (and accurate) one to establish Human Development in a global scale (Human Development Index). Therefore, demographic and health status of the regions, income inequality, education level, environmental status and physical constraints could also be integrated in a more aggregate criterion for the allocation of funds.

It does not seem to be expected any substantial progress until the second half of 2012. In the meantime, we keep on discussing our main positions with interested stakeholders, gathering their opinions and identifying interesting practical cases, while keeping an eye on the development of urban issues. 

 


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