EU cohesion policy: a vital part in European integration

In contemporary European integration, the Union’s cohesion policy serves as an important instrument in resolving the member states’ development issues; this policy, in particular, provides the EU states with necessary resources to level-up growth and prosperity. Although the main goals of the EU cohesion policy remain generally the same (e.g. promotion of economic, social and territorial convergence through sustainable competitiveness, research and innovation, digital transition and “green deal”), there are some new aspects in the new policy guidelines dealing with the post-pandemic effect on growth and health systems and exploiting existing potentials for recovery and resilience.

Modernised European cohesion policy for 2021-2027 is based on a comprehensive legislative package (enters into force this July) to be accompanied by several implementing acts. The new policy is aimed at streamlining the EU “cohesion resources” for the member states and corresponding regions that are lagging behind the advanced states.

To get the support, the states have just to submit corresponding projects to the Commission and other EU institutions.

Important that the new cohesion policy provides support to workers and includes measures addressing youth unemployment and child poverty. Besides, “remade cohesion policy” now also includes a fully-fledged crisis-response mechanism to withstand possible future crises with some temporary measures for using EU funds to exceptional recovery circumstances.

Main source: https://cohesiondata.ec.europa.eu/

 

Short history

The EU Cohesion Policy contributes to strengthening economic, social and territorial cohesion in the EU-27; it aims to correct imbalances between countries and regions and to deliver on the Union’s political priorities, especially concerning green and digital transition.

In May 2018, the European Commission presented a package of proposals for regulations governing regional development and a new cohesion policy beyond 2020. The main idea of these proposals had been to adapt the continental cohesion policy to new challenges in the context of a new EU long-term budget, i.e. the Multiannual Financial Framework for 2021-27. These proposals had been later amended to address the unexpected consequences of the coronavirus pandemic, as well as the priorities stemming from the European Green Deal. Besides, additional amendments included proposals for an ESF+ Regulation to increase support for youth employment, for eliminating child poverty, with a stronger focus on green and digital skills. 

One third of the €1.8 trillion investments from the NextGenerationEU Recovery Plan, and the EU’s seven-year budget will finance the European Green Deal.

On “green deal”: https://ec.europa.eu/info/strategy/priorities-2019-2024/european-green-deal_en

 

European legislative background: the Treaty on the Functioning of the European Union (TFEU, art. 174) provides that, in order to strengthen the Union’s economic, social and territorial cohesion, the EU is to reduce disparities between the levels of development of the various regions and the backwardness of the least favored regions or islands, and that particular attention is to be paid to rural areas, areas affected by industrial transition, and regions which suffer from severe and permanent natural or demographic handicaps. https://ec.europa.eu/regional_policy/en/information/legislation/regulations/

 

With the new cohesion policy, the member states will have additional flexibility to transfer resources among various cohesion sub-funds at any point in time of the present financial programming period. Thus, there will also be further flexibility to enable the phasing of smaller operations, which will give the states more opportunities to complete operations not finished under the 2014-20 programs.

Reference to: https://ec.europa.eu/commission/presscorner/detail/en/QANDA_21_3059  

 

European Structural and Investment Funds (ESIF) for 2014-2020 included the following six sub-funds, with percentage of the total expenditures: ERDF -42,8; CF- 10,9; EAFRD- 25,2; ESF- 18,4; EMFF and YEI –about 14 percent together.

Source: https://cohesiondata.ec.europa.eu/overview#

 

The present cohesion policy’s “package” comprises the following regulations:

  • the Common Provisions Regulation (CPR) for shared management funds;
  • the European Regional Development Fund (ERDF) and Cohesion Fund (CF) Regulation;
  • the European Social Fund Plus (ESF+) Regulation;
  • the Interreg Regulation laying down specific provisions for the European territorial cooperation goal supported by the European Regional Development Fund and external financing instruments.

Reference to: https://ec.europa.eu/regional_policy/en/2021_2027/

 

Cohesion’s common rules and main areas of support

The Common Provisions Regulation (CPR) sets out common rules for EU shared management funds, which in the period 2021-27 are covering main eight funds: 1. European Regional Development Fund (ERDF); 2. Cohesion Fund (CF); 3. European Social Fund Plus (ESF+); 4. European Maritime, Fisheries and Aquaculture Fund (EMFAF); 5. Just Transition Fund (JTF);  6. Asylum, Migration and Integration Fund (AMIF);  7. Border Management and Visa Instrument; and 8. Internal Security Fund.

 

Four funds: the ERDF, the ESF+, the Cohesion Fund and the EMFAF are specifically intended to support five main cohesion policy objectives in the member states, which include: green and digital transition; connected, inclusive and social Europe, as well as efforts on “Europe that is closer to its citizens”.

Besides, in the new cohesion, some specific climate targets are targeted by the funds: about 30 percent of resources in the ERDF and about 37 percent in the Cohesion Fund, CF, accompanied by an adjustment mechanism to monitor and achieve the targets. Additionally, a specific “adjustment fund”, the JTF will support transition to a climate-neutral economy by 2050, as underlined by the European Green Deal and confirmed by the European Climate Law.

New, more ambitious EU Strategy for Adaptation to Climate Change, the European Climate Pact and the EU industrial strategy are to address the twin challenge of the green and digital transformation and new circular economy actions (coped with a sustainable finance strategy) are intended to further embed sustainability into the corporate governance framework. On these issues and “climate law in: https://ec.europa.eu/info/strategy/priorities-2019-2024/european-green-deal_en; https://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1588581905912&uri=CELEX:52020PC0080  

 

In particular, one of the financial supporting conditions requires that the EU states put in place effective mechanisms to ensure that all CPR programs are implemented in compliance with the EU Charter of Fundamental Rights. The CPR is also made much simpler: the EU co-legislators introduced about 75 simplification measures to make a one rulebook for the mentioned eight CPRs to increase synergies between the funds. In 2021-2027, synergies among different EU funds and instruments (both administrative and financial) are encouraged through the strategic planning process, identifying common objectives and common areas for activities across different programs.

The co-financing rates (the percentage of EU investments that the states can receive) have been already increasing, e.g. by about 40-50 percent for the “transition regions” with the GDP per capita below 100% in the period 2014-2020; further increase is envisioned in the new policy. Regional and local governments, social partners and the civil society organisations are to be involved in the preparation of partnership agreements and programs.

For the European Code of Conduct on Partnership:  

https://ec.europa.eu/regional_policy/en/policy/what/glossary/e/european-code-of-conduct

 

The European Regional Development Fund (ERDF) and Cohesion Fund (CF)

The ERDF and the Cohesion Fund (with a total of € 63.4 billion for the previous period), together with the European Social Fund and the newly created Just Transition Fund, form the core of the present EU Cohesion Policy funds.

These two funds will invest €274 billion in the EU’s regions (respectively, €226 billion ERDF and €48 billion CF, out of total €373 billion). The ERDF focuses its investments on several key priority areas, pursuant to “thematic concentration”: innovation and research, the digital agenda, support for SMEs, environment and the net-zero-carbon economy. The Cohesion Fund will support environmental infrastructure and priority EU projects in Trans-European Transport Networks; it will also cover projects of energy efficiency, use of renewable energy or sustainable urban mobility presenting clear environmental benefits.

More in: https://ec.europa.eu/regional_policy/en/funding/cohesion-fund/.

 

The ERDF aims to strengthen economic, territorial and social cohesion in the EU-27 by “correcting development imbalances” among and between the EU regions. The Cohesion Fund targets the reduction of economic and social disparities through investment in environment and Trans-European Transport Networks (TEN-T) in the area of transport infrastructure. It covers the states whose GDP per head during 2015-2017 was less than 90% of the EU average. In 2021-2027 these are Bulgaria, Croatia, Cyprus, Czechia, Estonia, Greece, Hungary, Latvia, Lithuania, Malta, Poland, Portugal, Romania, Slovakia and Slovenia.

 

Note: due to the new EU’s socio-economic and political orientation, at least 30% of the ERDF and 37% of the CF allocation will be devoted to achieving climate targets, with an overarching objective to support transition to a climate neutral economy structures in the state. Thus, the ERDF will focus on supporting a low-carbon growth by promoting clean and fair energy transition: it means, in particular, supporting the energy efficiency and renewable energy, diversification of regions dependent on energy intensive industries and providing incentives for delivering a “transition fair for all”. As regards mobility, cohesion policy and especially the ERDF will seek to support a successful transition to alternative fuels.

 

Cohesion policy through the Interreg

European Territorial Cooperation (ETC), known as “Interreg”, is one of the two main 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 EU states. The overarching ETC objective is to promote a harmonious economic, social and territorial development of the Union as a whole.

Interreg is built around four cooperative directions: cross-border (Interreg A), transnational (Interreg B), interregional (Interreg C) and integration of outermost regions in their neighbouring environment (Interreg D).

The new Interreg funds with the budget of €8 billion are to support cooperation between regions and maritime borders. For the first time, a specific allocation will be dedicated to strengthening the cooperation of the “outermost regions” (e.g. Caribbean region) to stimulate economic exchanges among regional partners. Interregional cooperation will also continue to promote exchange of expertise, good practices and capacity building through a dedicated set of programs. See the following weblinks: Interreg EuropeUrbactInteract and ESPON.

 

European Social Fund plus Regulation (ESF+)

Over the past 60 years, the European Social Fund (ESF) has been the EU’s main financial instrument in helping people to get better jobs and ensuring fairer job opportunities; the new European Social Fund Plus (ESF+) will be the main EU fund to invest in people. It will be the key financial instrument to implement the European Pillar of Social Rights, to support jobs and create fair and socially inclusive societies in the EU while providing needed resources for the recovery and resilience in the post-pandemic time. With a budget of €99.3 billion for 2021-27, the states are facilitated to create and protect job opportunities, promote social inclusion, combat poverty (incl. elimination of homelessness) and give workers the skills needed for the digital and green transition; it also includes requirements for the states to invest in young people and address child poverty.

In perspective, the ESF+ priorities will be even more closely aligned with the European Semester recommendations as the EU’s framework for coordinating economic and social policies in the states. The ESF+ will also support states to achieve progress on the 2030 EU headline targets on jobs, skills and poverty reduction set by the European Pillar of Social Rights Action Plan.

The ESF+ Regulation is the result of combining the existing European Social Fund (ESF), the Youth Employment Initiative (YEI), the Fund for European Aid to the Most Deprived (FEAD) and the Employment and Social Innovation Program (EaSI). This is a major step towards streamlining and simplifying existing rules across funds, and it will help improve the impact of EU funding.

Besides, the ESF+ provides for a link with the Charter of Fundamental Rights and CPR’s relevant provisions to enhance the Charter’s visibility: thus, it emphasises that all operations should be selected and implemented in respect of the Charter and refers to the CPR provisions on complaints whereby infringements of the Charter should be taken into account when determining corrective measures. For the 2021-27, the Commission proposes to allocate €99.3 billion from the EU budget to the ESF+; hence, the share of the ESF+ from the overall Cohesion policy budget increases from the current actual share of 23% of the Structural Funds to 27%.

Among the main ESF+ objectives are: to contribute to a more social and inclusive Europe, as well as increasing upward economic and social convergence; it aims to improve employment opportunities, raise the standard of living, facilitate labour mobility and increase economic, social and territorial cohesion. The ESF+ will invest in 3 main areas: a) effectiveness of labour markets and equal access to quality employment; b) quality and access to education and training; and c) social inclusion, health for people in vulnerable situations (as well as combating poverty, in particular child poverty, and homeless people).

The ESF+ will also promote the horizontal principles of gender equality, respect for fundamental rights, equal opportunities and non-discrimination.

ESF+ funding will also contribute to the implementation of the employment guidelines as defined under the European Semester and the UN Sustainable Development Goals.

More in: https://ec.europa.eu/info/business-economy-euro/economic-and-fiscal-policy-coordination/eu-economic-governance-monitoring-prevention-correction/european-semester/european-semester-timeline/autumn-package-explained_en#employmentguidelines

 

Youth employment issues within the ESF+ are having particular importance: the new ESF+ builds on the achievement of the YEI and the ESF, the main EU funding instruments for the Youth Guarantee during the last 5-year period (2014-20); this guarantee has helped improve the lives of more than 31 million young people in Europe, with more than 5 million young people signing up each year since 2014. 

Supporting youth employment, the new ESF+ fund is aimed at using at least 12,5 percent of the fund for reaching in the member states the rate of young people not in employment, education or training (NEET) above the EU average. All other member states will be required to invest an appropriate amount of their ESF+ resources in youth employment support, which shall include e.g. measures to promote the labour market integration of young people.

 

Just Transition Fund, JTF

The JTF is a new Cohesion policy fund with an overall budget of €19.2 billion, with €8.4 billion coming from the Multiannual Financial Framework (MFF budget for 2019) and €10.8 billion from NextGenerationEU (about €7.5 billion in JTF will be financed from the new European MFF 2021-27 and €10 billion from NextGenerationEU).

The JTF is a key element of the European Green Deal and is the first pillar of the Just Transition Mechanism with the aim of alleviating in the most impacted regions and industries the socio-economic costs resulting from the transition towards a climate-neutral economy. The JTF can finance a wide range of activities to diversifying national economies and helping people adapting to changing labour market. 

The JTF Regulation was adopted in May 2021; the legal instrument provides supporting means to the states taking into account: – the scale of the transition challenges of the highest carbon intensive regions emitting greenhouse gases; – the social challenges in the light of potential job losses and the need for subsequent re-skilling of workers and the states’ level of economic development and investment capacity. Territories will be chosen in negotiations between each EU state and the Commission, in the context of the approval of the territorial just transition plans.

The Commission presented its preliminary views on priority territories in each state in Annex D to the 2020 Country Reports, based on the following criteria: the intensity of greenhouse gas emissions and production of fossil-fuels; the impact on employment in the region (potential job losses); and the capacity of the region to deal with the impact of the transition towards a climate-neutral economy.

The member states can, however, decide to increase the available amounts with transfers from the ERDF and the ESF+; such transfers cannot exceed three times the amount of the JTF support under the MFF part nor 20% of the national allocation for the ERDF and for the ESF+. The co-financing rate will depend on the territories where investments and actions need to be focused: the amounts will be 85% for less developed regions, 70% for transition regions and 50% for more developed regions (i.e. higher than ERDF for transition and more developed regions).

 

Cohesion policy in supporting states’ rural areas

Cohesion policy supports sustainable growth and balanced development of all regions, including rural areas: such support is aimed at making rural areas attractive and vital as living spaces in terms of growth and jobs, but also equipping them with the needed infrastructure, mobility solutions and basic services.

In the EU’s budget period of 2021-27, the Cohesion policy will provide further support to rural areas in the form of investments for the digital and green transitions. Three-quarters of the Cohesion policy investment is earmarked to policy objectives preparing regions, including rural areas, for the twin transition to the smart, digital, modern economy and the climate-neutral and circular economy’s patterns.

Post-2020 Cohesion policy, particularly under its new territorial policy objective called “Europe closer to citizens”, will further foster investments responsive to local challenges through integrated territorial development strategies and involvement of local communities.

 

General reference to: https://ec.europa.eu/commission/presscorner/detail/en/ip_21_3058

Additional information in: Cohesion Open Data Platform; 2021-2027 long-term EU budget & Next Generation EU; Questions and Answers; Breakdown of Cohesion policy allocations per Member State; and European Social Fund plus

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