Cohesion Policy and ESI Funds in 2021-2027: a policy debate Cohesion Policy and ESI Funds in 2021-2027: a policy debate

16 June 2019 /

The forthcoming European Parliament elections to be held in May 2019 could have a significant impact on the outcome of many policies, among which we shall consider with particular emphasis the EU Cohesion Policy and the framework of ESI Funds. The year 2020 represents a bridge between the end of the current 2014-2020 programming period and the beginning of the next period within the 2021-2027 Multiannual Financial Framework (MFF). The Juncker Commission issued in 2018 an official proposal for the new Common Provisions Regulation (CPR), constituting the legal framework for EU funds in the upcoming programming period. The proposed CPR aims to moderately redesign the whole policy, by taking into account the “lessons learnt” from the previous programming period and by introducing new features to facilitate final beneficiaries. 

  1. Cohesion Policy in the 2014-2020 programming period 

The current MFF, issued for the 2014-2020 programming period, allocated almost €454 billion for the so-called ESI Funds: the European Regional Development Fund (ERDF), the European Social Fund (ESF) and the Cohesion Fund (CF) – which constitute the cohesion policy of the EU, along with the European Agricultural Fund for Rural Development (EAFRD) and the European Maritime and Fisheries Fund (EMFF).

The legal framework for ESI Funds is located inArticle 177 TFEU, according to which the European Parliament (EP) and the Council “…shall define the tasks, priority objectives and the organization of the Structural Funds, which may involve grouping the Funds” in accordance with the ordinary legislative procedure (Articles 289, 294 TFEU) and prior consultation with the Committee of Regions and the Economic and Social Committee. Art. 177 TFEU sets up a specific Common Provision Regulation (CPR) – Regulation EU 1303/2013[1]– which arranges the basis for the administration of funds. Each fund than has its own specific regulation. The Asylum and Migration Fund (AMF) and the Internal Security Fund (ISF) also fall under the discipline of the current CPR.

2.  Proposals for the 2021-2027 Cohesion Policy

The European Commission (EC) issued a proposed CPR[2], listing the reforms needed for a new Cohesion Policy. The Juncker Commission accordingly recommended the allocation of €330 billion for the 2021-2027 programming period into the ESI Funds financial framework, alongside with a reform project for the design of the whole policy, aiming at reducing the administrative burden and conceding more flexibility to beneficiaries in the use of funds.

  • Thematic Objectives 

Thematic Objectives (TOs)[3]shall be reduced in number, from 11 to 5 (Paragraph 5, Title II proposed CPR). The new policy objectives shall now concern:

  1. Smart Europe (innovation, digitalisation, support for SMEs) ;
  2. Green Europe (carbon free economy, implementation of the Paris Agreement, renewables…);
  3. Connected Europe (strategic transports and digital networks);
  4. Social Europe (social rights, quality employment, education, social inclusion…);
  5. Citizens’ Europe (supporting locally-led development strategies, urban development…).

According to the EC’s forecasts, a thinner framework of TOs shall lead to better-channeled investments. Between 65 % and 85 % of the funds shall be allocated from each Member State in TO 1 and TO 2, and at least the 25 % of these shall be specifically directed to climate action[4].

A strong focus is given to local projects, through the implementation of an already existing tool known as Community-Led Local Development (CLLD)[5](Article 25 proposed CPR), but with a minimum 6 % threshold of investments of the total ERDF contribution to MSs into urban development (Articles 24-27 proposed CPR). Finally – under TO 4 – the Asylum and Migration Fund (AMF) shall be used as a tool to develop short-term local integration strategies for refugees and migrants.

  • Allocation 

The proposed CPR shall maintain the current arrangement of areas used for the allocation of funds, but with major changes in the classification of the regions (Title VIII, Article 102 proposed CPR). Under “Less developed regions”, the CPR shall identify those with a GDP per capita below the 75 % of the average GDP of the EU-27. Regions with a GDP per capita between the 75 % and the 100 % of the EU average shall be classified as “Transition regions”, while the remaining ones shall be considered as “More developed regions” (GDP pc > 100 % of EU average).

The EC proposal reviews the accounting method for the criteria to follow in the allocation phase to the regions. Unlike the 2014-2020 programming period, the EU shall now take into account climate and migration actions taken by the Member States, pondering them respectively 1% and 3% of the allocation (Table 1).

Article 106(3) of the proposed CPR on the “Determination of co-financing rates” sets the discipline as for: “The co-financing rate for the investment for jobs and growth goal at the level of each priority shall not be higher than: (a) 70 % for the less developed regions; (b) 55 % for the transition regions; (c) 40 % for the more developed regions”. More specifically, the proposed regulation provides that the co-financing rate for the Cohesion Fund at the level of each priority shall be no higher than 70 %, with the exception represented by the ESF+ Regulation which may establish higher co-financing rates for priorities supporting innovative actions. Interreg. programmes[6]as well – as provided by Art. 106(4) – can be financed at a rate “…no higher than 70 %. The ETC Regulation may establish higher co-financing rates for external cross-border cooperation programmes under the European territorial cooperation goal (Interreg)”.

The proposed CPR shall also redesign the n+3 rule for spending – adopted for the 2014-2020 programming period – returning to the former n+2 rule. Member States Cohesion Policy allocations are divided into annual amounts which must be spent within two or three years – indeed – with N being the start year when the money is allocated.

  • Administrative simplification

The Commission called for a smarter and simpler procedure in both the use of and the enforcement on funds. For what concerns audit and control, more reliance shall be given on national procedures of check-and-balance. On the side of beneficiaries, flexibility on the use of funds shall be enhanced. As for the new proposal, in 2021, beneficiaries shall be allowed to transfer money from one priority to another, without the formal approval of the authorities. The Commission proposed the maximum ceiling of 5 % of a priority’s budget to be transferable. The given flexibility shall also be used for the integration of funds into the Juncker Commission’s InvestEU[7]programme (Art. 10 proposed CPR), as well as for the concurrent implementation of financial instruments and grants from the EU.

The core of the simplification framework mostly relies on the use of ex-ante conditionalities (ExACs). As stressed by the Court of Auditors (ECA), ExACs turned out to be most of the administrative burden for beneficiaries in the programming period 2014-2020[8]. The current CPR composes a framework of 48 ExACs, of which 7 “horizontal conditionalities” (concerning general principles of anti-discrimination, public procurement…), 29 “thematic conditionalities” on employment, social inclusion and similar, 8 “thematic conditionalities” on agriculture and 4 remaining “thematic” on fisheries (Regulation EU 1303/2013, Annex XI). Consistent with the ECA report, the EC suggests preventing “over-regulation” through reordering conditionalities by priority.

A conditionality that instead could be introduced in this framework shall concern the possibility of linking the use of ESI Funds to the respect of the rule of law by the Member States, with indeed a clearly political target[9].

  • Macroeconomic compliance 

The next programming period of ESI Funds shall also be framed into the context of macroeconomic governance of the EU, the European Semester[10]. Country-specific recommendation (CSRs) – issued by the Commission to check the compliance of MSs’ public finance with fiscal discipline – shall be taken into account twice during the whole programming period, at the beginning of 2021 and within a mid-term review in 2024 (Article 14 proposed CPR). As provided by Art. 15(1)(a) of the proposed CPR, the regulation shall maintain the right for the Commission to review and propose amendments to relevant programmes “…to support the implementation of a relevant country-specific recommendation (CSR) adopted in accordance with Article 121(2) TFEU[11]and of a relevant Council recommendation adopted in accordance with Article 148(4) TFEU[12], addressed to the Member State concerned”. Also, as provided by Art. 15(7), the Commission has the power to make proposals to the Council to suspend all or parts of the commitments or payments for one or more of the programmes whenever a Member State turns out not to be on track with CSRs.

3.  Conclusion 

Coherent with the “lessons learnt” from the previous programming period, the proposed CPR designs a new Cohesion Policy following the criteria of simplification and de-burdening. EU Cohesion Policy proved to be the most benchmark-reliant, and the current proposal seems to affirm it. As set out by the European Parliament Research Service, the legislative process to be followed for the adoption of the new CPR is now awaiting a plenary vote of the EP. Thus, it will likely be the next institutional set-up of the EP to vote and amend the proposal. Given the uncertainty over the balance of the next majority in the hemicycle, Cohesion Policy’s CPR could be partially revised in terms of political priorities. But as the structure and framework have been designed taking into account the previous programming period, no major changes are likely to come.

Federico Dante De Falco

For further information:

European Commission (2018) – “Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL laying down common provisions on the European Regional Development Fund, the European Social Fund Plus, the Cohesion Fund, and the European Maritime and Fisheries Fund and financial rules for those and for the Asylum and Migration Fund, the Internal Security Fund and the Border Management and Visa Instrument”, at https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=COM%3A2018%3A375%3AFIN

European Commission (2017) – “Value Added of Ex ante Conditionalities in the European Structural and Investment Funds”, at https://ec.europa.eu/regional_policy/en/information/publications/studies/2017/the-value-added-of-ex-ante-conditionalities-in-the-european-structural-and-investment-funds-esi-funds

European Commission (2015), “European Structural and Investment Funds 2014-2020: Official Texts and Commentaries”, at  https://ec.europa.eu/regional_policy/en/information/publications/legislation/2015/european-structural-and-investment-funds-2014-2020-official-texts-and-commentaries

European Parliament, Policy Department for Structural and Cohesion Policies, DG for Internal Policies (2018) – “Research for REGI Committee – Conditionalities in Cohesion Policy”, at http://www.europarl.europa.eu/thinktank/en/document.html?reference=IPOL_STU(2018)617498

[1]See the Official Journal of the EU at https://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1557758514752&uri=CELEX:32013R1303

[2]See European Commission (2018) at https://ec.europa.eu/commission/sites/beta-political/files/budget-may2018-common-provisions_en.pdf

[3]In the 2014-2020 programming period, the European Structural and Investment Funds, in particular the European Regional Development Fund (ERDF), the European Social Fund (ESF) and the Cohesion Fund, will support 11 investment priorities, also known as thematic objectives. (European Commission Glossary)

[4]See European Commission at http://europa.eu/rapid/press-release_MEMO-18-3866_en.htm

[5]See European Commission at https://ec.europa.eu/regional_policy/en/information/publications/brochures/2014/community-led-local-development

[6]European Territorial Cooperation (ETC), better known as Interreg, is one of the two goals of cohesion policy and provides a framework for the implementation of joint actions and policy exchanges between national, regional and local actors from different Member States. The overarching objective of European Territorial Cooperation (ETC) is to promote a harmonious economic, social and territorial development of the Union as a whole. Interreg is built around three strands of cooperation: cross-border (Interreg A), transnational (Interreg B) and interregional (Interreg C).
Five programming periods of Interreg have succeeded each other:
INTERREG I (1990-1993) –  INTERREG II (1994-1999) – INTERREG III (2000-2006) – INTERREG IV (2007-2013) – INTERREG V (2014-2020)

[7]  See European Commission (2018) at http://europa.eu/rapid/press-release_MEMO-18-4010_en.htm

[8] See European Court of Auditors, Special Report 2017 at https://www.eca.europa.eu/en/Pages/DocItem.aspx?did=43174

[9]  Commission Proposal COM[2018]324. For an in-depth analysis of the proposal, see Federico Dante De Falco (2019) at https://www.eu-logos.org/2019/02/27/linking-eu-funds-to-compliance-with-the-rule-of-law-an-analysis-of-the-proposal/#_ftnref1

[10] See European Commission at https://ec.europa.eu/info/business-economy-euro/economic-and-fiscal-policy-coordination/eu-economic-governance-monitoring-prevention-correction/european-semester_en

[11]Treaty on the Functioning of the European Union, Article 121, paragraph 2: “The Council shall, on a recommendation from the Commission, formulate a draft for the broad guidelines of the economic policies of the Member States and of the Union, and shall report its findings to the European Council”. See Eur-Lex at https://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1558010032930&uri=CELEX:12012E/TXT

[12]Treaty on the Functioning of the European Union, Article 148, paragraph 4: “The Council, on the basis of the reports referred to in paragraph 3 and having received the views of the Employment Committee, shall each year carry out an examination of the implementation of the employment policies of the Member States in the light of the guidelines for employment. The Council, on a recommendation from the Commission, may, if it considers it appropriate in the light of that examination, make recommendations to Member States”. See Eur-Lex (ibidem)

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