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EUROPEAN UNION

Committee of the Regions

FactsheetAn online course (MOOC) for regional and local authorities

EU cohesion policy and Structural and Investment Funds

Economic and social disparities vary significant-ly between the EU regions and hamper the har-monious development of the Union. EU cohesion policy’s overarching objective is to tackle these disparities and contribute to economic, social and territorial cohesion between the EU regions. The policy’s resources have increased significantly since its inception in 1988 and currently amount to about one third of the EU’s budget or EUR 351 billion during the 2014-2020 period. Based on the principle of multilevel governance, the implemen-tation of EU cohesion policy and the five European Structural and Investment Funds involves the re-gions in many Member States to a significant de-gree and is aligned with the Europe 2020 strategy and the EU’s economic and financial governance.

Rationale

The EU generates 43% of its economic output in just 14% of its territory – the geographical penta-gon formed by London, Hamburg, Munich, Milan and Paris – which is home to about one third of its population. The rationale of EU cohesion pol-icy is based on the political agreement that the Union’s internal market policies should be accom-panied by fiscal redistribution in order to exploit and equally spread the advantages of a common economic area. In this sense, cohesion policy may be understood as the “visible hand” of the EU, fos-tering economic integration throughout its terri-tory. As new growth theories suggest, “geography matters” and “the territory” can make a difference and stimulate higher productivity if endogenous factors are placed at the centre of regional de-velopment policies. Given the wide disparities

between the EU regions, the EU has accordingly made promoting “economic, social and territorial cohesion, and solidarity among member states” one of its major objectives, as enshrined in Article 3 of the Treaty on EU (TEU).

Legal foundations and legislation

Introduced by the Single European Act in 1986, the objective of “economic and social cohesion” was extended to incorporate “territorial cohesion” by the Lisbon Treaty and is now based on Article 3(3) TEU, and Article 4(2)(c) and Title XVIII (Eco-nomic, social and territorial cohesion) including Articles 174-178 of the Treaty of the Functioning of the EU (TFEU) and accompanied by Protocol No. 28. Economic, social and territorial cohesion is one of the fundamental principles of the EU with the objective of fostering the “harmonious and sustainable development” of the whole Union. It belongs to the field of “shared competences”.

As laid down in Article 174 TFEU, the Union aims to reduce disparities between the levels of devel-opment of the various regions and the backward-ness of the least favoured regions. The same arti-cle highlights types of regions to which particular attention shall be paid and names “rural areas, ar-eas affected by industrial transition, and regions which suffer from severe and permanent natural or demographic handicaps such as the north-ernmost regions with very low population den-sity (arctic regions) and island, cross-border and mountain regions”. The Lisbon Treaty introduced the “ordinary legislative procedure” to be applied for all legal acts related to cohesion policy, namely the regulations governing its funds.

page 2 of 4An online course (MOOC) for regional and local authorities

EUROPEAN UNION

Committee of the Regions

EU cohesion policy and Structural and Investment Funds

Secondary legislation covering EU cohesion policy and the five European Structural and In-vestment (ESI) Funds between 2014 and 2020 is made up of a set of regulations governing five in-struments: the European Regional Development Fund (ERDF), the European Social Fund (ESF), the Cohesion Fund (CF) - all of which come under EU cohesion policy – and the European Agricultur-al Fund for Rural Development (EAFRD) and the European Maritime and Fisheries Fund (EMFF). The set of regulations includes:

• the Common Provisions Regulation (CPR) set-ting out common rules governing the ESI Funds;

• specific regulations for the ERDF, the ESF, the Cohesion Fund, the EAFRD and the EMFF;

• a regulation covering the objective of “Euro-pean territorial cooperation”, supported by the ERDF.

Between 2014 and 2020, EU cohesion policy fund-ing in the order of EUR 351 billion will be concen-trated on two goals: “Investment for Growth and Jobs” (96.7% of the total budget) and “European Territorial Cooperation” (2.8%). The ERDF, the Co-hesion Fund and the ESF will focus on three cate-gories of regions:

• Less developed regions (Gross Domestic Prod-uct/head below 75% of EU average to receive 51.8 % of the total budget);

• Transition regions (GDP/head 75-90%: 10.1% of the budget)

• More developed regions (GDP/head above 90%: 15.5% of the budget)

In addition, the allocation of the Cohesion Fund (18.0%) will be concentrated on Member States with Gross National Income/head below 90% of the EU average.

Finally, regulations dealing with the European Grouping of Territorial Cooperation (EGTC), the European Globalisation Fund (EGF) and the Pro-gramme for Social Change and Innovation were adopted in this context, as well as a Communi-cation on the European Union Solidarity Fund (EUSF).

Governance and implementation

EU cohesion policy is governed by regulations the adoption of which is based on the ordinary legislative procedure. In the ‘shadow’ cast by the unanimity, which is required at the Council in re-lation to the overall budget, recent reforms have confirmed the policy’s path-dependent devel-opment while at the same time it has referred to the Lisbon and Europe 2020 strategies (thematic concentration) and the EU’s enhanced economic and financial governance (macroeconomic condi-tionality).

Cross-border, transnational and inter-regional cooperation25 years ago, “Interreg” was developed to tackle common challenges in cross-border regions through shared solutions in the field of health, research and education, transport or sustainable energy. During the period 2014-2020, European Territorial Cooperation is one of the two goals of EU cohesion policy with a budget of EUR 10 billion from the European Regional Development Fund for 60 cross-border, 15 transnational, four inter-regional and networking programmes inside the EU, and another 36 cross-border programmes with accession or neighbouring countries of the EU.

page 3 of 4An online course (MOOC) for regional and local authorities

EUROPEAN UNION

Committee of the Regions

EU cohesion policy and Structural and Investment Funds

The process of implementing EU cohesion policy and ESI Funds for the period 2014-2020 began at the end of 2013 with negotiations on national strategic plans along with investment priorities for the five funds, the Partnership Agreements be-tween the European Commission and the Mem-ber States. In accordance with the legal provisions, the consultation on Partnership Agreements had to take place with various levels of government including regional and local representatives, as well as with interest groups and civil society or-ganisations (principle of multilevel governance). Concurrently, a total of about 540 Operational Programmes (OPs) – which translate investment priorities and objectives into tangible action – were to be put forward within three months of submitting the Partnership Agreements.

• ERDF/Cohesion Fund/ESF: 393 OPs will be co-financed by these funds, including mul-ti-fund OPs. 201 of these will be ERDF OPs (or combined ERDF and Cohesion Fund OPs) and 153 will be managed by regions. This figure in-cludes 79 programmes under the European Ter-ritorial Cooperation (ETC) objective. Across the three cohesion policy instruments, the percent-age of OPs managed by regions is approximate-ly 74.3% accounting 35.4% of total expenditure.

• EAFRD: 118 rural development programmes, co-financed by the EAFRD to the tune of EUR 95.6 billion, are planned between 2014 and 2020. 91 OPs (77%) will be managed at regional level, representing 41.7% of the total amount.

• EMFF: As during the previous period, there will be 27 national OPs with a total budget of EUR 5.7 billion (none for Luxembourg).

For EU cohesion policy, the new programming period will mean a shift in funding priorities in comparison with the previous period. This reflects the thematic concentration measures contained within the Europe 2020 strategy targets. Funding priorities will be as follows:

• EUR 124 billion (37% of the total) are earmarked for research and innovation, ICT, SMEs and a low-carbon economy, an increase of almost 22% compared to the previous period;

European Groupings of Territorial Cooperation and macro-regionsSince 2006, an EU regulation on European Groupings of Territorial Cooperation (EGTC) provides a European legal instrument to facilitate and promote cross-border, transnational and interregional cooperation. Currently some 50 EGTCs enable regional and local authorities and other public bodies from different Member States to act on different issues within the framework of a legal personality.

EU macro-regional strategies aim to add value to action, whether by the EU, national or regional authorities or the third or private sectors, in a way that significantly strengthens the functioning of the macro-region. Such strategies have been adopted by the European Commission and endorsed by the Council of the EU since 2009 and the adoption of the EU Strategy for the Baltic Sea Region (EUSBSR), followed by the EU Strategy for the Danube Region (EUSDR) in 2011, and the EU Strategy for the Adriatic-Ionian Region (EUSAIR) in 2012. The EU Strategy for the Alpine Region (EUSALP) is due for adoption in autumn 2015. As such, neither EGTCs nor macro-regional strategies receive EU funding but must instead use existing resources.

page 4 of 4An online course (MOOC) for regional and local authorities

EUROPEAN UNION

Committee of the Regions

EU cohesion policy and Structural and Investment Funds

• EUR 98 billion (29%) is to be invested in employ-ment, social inclusion and education and train-ing measures, slightly more than in the previous period;

• EUR 59 billion (17.6%) is allocated to transport and energy infrastructure, a reduction of 21% from 2007–2013;

• EUR 39 billion (11.6%) will be invested in envi-ronmental protection, a decrease of 27%;

• EUR 4.3 billion (1.3%) is allocated to institution-al capacity building and the efficiency of public administrations, a 72% increase on the previous period.

The European Committee of the Regions engag-es in continuous dialogue with the European Par-liament, the European Commission and regional authorities and regularly proposes - through its opinions and its Commission for territorial cohe-sion policy (COTER) - solutions on how to improve the implementation of EU cohesion policy.

EU cohesion policy post-2020

In a speech delivered at the 55th annual confer-ence of the European Regional Science Associa-tion (ERSA) in Lisbon in August 2015, Regional Pol-icy Commissioner Corinna Creţu spoke for the first time on her agenda for the reform of EU cohesion policy post-2020, including ten key questions likely to play a crucial role in the reform debate. In the run-up to the proposal for new regulations (2018), she announced a public consultation for 2017, following the publication of the 7th Cohe-sion Report, and the Commission’s late 2015 re-port on the results of the Partnership Agreements (PA) for the Implementation of the EU Structural and Investment Funds (ESIF) 2014-2020. With re-gard to stakeholders to become involved in the reform debate, she mentioned “national and re-gional policymakers, the academic community, international institutions like the OECD, the Euro-pean Investment Bank or the World Bank, as well as NGOs and others”.

In 2014, the European Committee of the Re-gions set up an expert group on the future of EU cohesion policy beyond 2020 to discuss future trends and the policy’s narrative. A final report will be prepared by early 2016.

Disclaimer

The content of this document and any opinions expressed therein do not necessarily represent the official position of the European Committee of the Regions (CoR). It is addressed to the participants of the online course (MOOC) of the CoR on “regions, EU institutions and policy-making“. Reproduction and translation for non-commercial purposes are authorised, provided the source is acknowledged and the CoR is given prior notice and sent a copy.

Manuscript completed in October 2015

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