Original publication: July 2018
Authors: Marek Kołodziejski, Diána Haase – Research Administrators
Short link to this post: http://bit.ly/2L0KIHC
On 29 May 2018, the European Commission presented the package of proposals for regulations governing regional development and cohesion policy beyond 2020. These proposals are to adapt EU cohesion policy to new challenges in the context of a new Multiannual Financial Framework for the period 2021-2027. The package is composed of four items:
- Regulation 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 COM/2018/375 final – 2018/0196 (COD);
- Regulation on the European Regional Development Fund and on the Cohesion Fund COM/2018/372 final – 2018/0197 (COD);
- Regulation on specific provisions for the European territorial cooperation goal (Interreg) supported by the European Regional Development Fund and external financing instruments COM(2018) 374 final – 2018/0199(COD);
- Regulation on a mechanism to resolve legal and administrative obstacles in a cross-border context COM(2018) 373 final 2018/0198(COD).
The European Social Fund, one of the two Structural Funds, remains an important part of cohesion policy; the proposal on the ESF+ (Regulation of the European Parliament and of the Council on the European Social Fund Plus (ESF+), COM(2018) 382, 2018/0206 (COD)) falls under the responsibility of the Committee on Employment and Social Affairs.
The rules included in these proposals apply to a future Union of 27 Member States, taking into account the expected Brexit in March 2019.
Common Provisions Regulation (CPR)
The proposal for a Common Provisions Regulation (CPR) will set out common rules for seven shared management funds:
- CF: Cohesion Fund
- EMFF: European Maritime and Fisheries Fund
- ERDF: European Regional Development Fund
- ESF+: European Social Fund Plus
- AMIF: Asylum and Migration Fund
- BMVI: Border Management and Visa Instrument
- ISF: Internal Security Fund
The Committee on Regional Development is the lead committee only for ERDF and Cohesion Fund; with the Committee on Employment and Social Affairs being competent for the ESF+ (this briefing focuses on ERDF and the Cohesion Fund). Contrary to the period 2014-2020, it is not proposed to be covered by the CPR any more the European Agricultural Fund for Rural Development (EAFRD).
The eleven thematic objectives used in 2014-2020 cohesion policy have been replaced by five policy objectives for ERDF, ESF+, the Cohesion Fund and the EMFF:
- A smarter Europe – innovative and smart economic transformation;
- A greener, low-carbon Europe;
- A more connected Europe – mobility and regional ICT connectivity;
- A more social Europe – implementing the European Pillar of Social Rights;
- Europe closer to citizens – sustainable and integrated development of urban, rural and coastal areas through local initiatives.
Objectives for the other three funds (AMIF, BMVI and ISF) will be defined in fund-specific regulations.
As demanded by the European Parliament, the future EU cohesion policy will cover all EU regions. They are classified in three categories (ERDF, ESF+): less-developed, transition and more developed regions (defined on NUTS level 2).
Based on the current experiences of electronic data exchange in the cohesion policy, the new proposals further develop the concept of E-cohesion. All data necessary for monitoring progress in implementation including results and performance of programmes will now be transmitted electronically every two months. It means that the open data platform will be updated in almost real time. Beneficiary and operations data will similarly be made public in electronic form, on a website run by the managing authority.
The European Commissions claims that the proposed regulations will radically simplify rules for financial management of projects, and proposes, among others, greater use of simplified cost options and more proportionality in audit. The Commission proposes to reintroduce the decommitment rule N+2 (in the current period rule N+3 is in force) as well as to reduce (comparing to the current period) the level of prefinancing to an annual payment of 0.5% of the total support of each fund.
As the proposed budget covers a period of 7 years it is considered necessary to guarantee adequate flexibility of the cohesion policy to react to unexpected challenges. The proposed regulation introduces a mid-term review for programmes supported by by the ERDF, the ESF+ and the Cohesion Fund that will allow Member States to adapt the use of ESI Funds to the future challenges. Only the first 5 years (period 2021-2025) will be programmed initially. Allocations for the last 2 years will be made on the basis of mid-term review leading to corresponding reprogramming in 2025. The review will revisit the initial priorities and objectives of the programmes taking account of: progress in achieving objectives by end-2024, changes in the socio-economic situation and new challenges identified in country specific recommendations in 2024.
ERDF and the Cohesion Fund
The proposed regulation defines provisions applicable to both ERDF and Cohesion Fund intervening under the “Investment for jobs and growth” goal and, with regard to the ERDF, under the “European territorial cooperation” goal (Interreg).
In particular it:
- Maintains thematic concentration, with the top two priorities being support to innovation, digital economy and SMEs delivered through a smart specialisation strategy (P1); and the low carbon and circular economy in line with the overall 25 % commitment for the climate objective (P2); The majority of European Regional Development Fund and Cohesion Fund investments will be geared towards P1 and P2. Member States will invest 65% to 85% of their allocations under the two funds to these priorities, depending on their relative wealth;
- Lays down specific policy objectives to ensure that ERDF and Cohesion Fund contribute to the above mentioned five policy objectives;
- Makes a list of activities not to be supported, including direct support to large enterprises, airport infrastructure (outside the outermost regions) and some waste management operations (e.g. landfills);
- Further develops regional cooperation and sustainable urban development.
Thematic concentration criteria will apply at national level.
This Regulation supports sustainable urban development: at least 6% of the ERDF resources is proposed to be allocated to sustainable urban development in the form of community-led local development, integrated territorial investments or another territorial tool. Urban tools will be combined in a single programme, the European Urban Initiative which includes exchanges, capacity building, pilot actions, and communication.
The Regulation also sets out special measures to accommodate the specific situation of outermost regions that include schemes to offset transport costs and investments.
The proposed regulation covers not only the territorial cooperation between Member States (under (internal) economic, social and territorial cohesion) but also development cooperation and economic, financial and technical cooperation with non-EU countries.
As these types of activities are separately addressed in the Treaty on the Functioning of the EU, it is legally not possible to establish a single cooperation fund for activities inside and beyond the EU borders. However, aiming to simplify the rules for similar projects between Member States and with non-EU countries, the European Commission has proposed that the EU’s external financing instruments will have special rules to transfer part of their resources to Interreg programmes. These instruments are:
- IPA III: Instrument for pre-Accession;
- NDICI: Neighbourhood, Development and International Cooperation Instrument; and
- OCTP: Council Decision on the association of Overseas countries and territories establishing the funding in form of a Programme.
In the period 2021-2027, the European territorial cooperation goal (Interreg) will have five components:
- cross-border cooperation;
- transnational and maritime cooperation;
- outermost regions’ cooperation;
- interregional cooperation;
- interregional innovation investments.
Two Interreg-specific objectives are set out in the proposed regulation:
- better Interreg governance;
- a safer and more secure Europe.
The co-financing rate at the level of each Interreg programme shall be not higher than 70 %, unless, a higher percentage is fixed in legislations for IPA III, NDICI or OCTP.
A new Small project fund is part of the proposal: it should allow local and civil society to set up small projects using simplified cost options.
Resolving legal and administrative obstacles in a cross-border context
Even though Interreg programmes facilitate cross-border cooperation and support development of the internal market, there exists still important barriers for citizens and businesses in taking full advantage of the potential of the border territories. These are legal barriers (especially those related to health services, labour regulation, taxes, business development), and barriers linked to differences in administrative cultures and national legal frameworks: in short, barriers that cannot be “simply” resolved with financial instruments. A number of effective mechanisms for cross-border cooperation already exist at inter-governmental, regional and local level but many cross-border areas in the EU do not have a comparable mechanism that could offer solutions to challenges they face.
The proposed regulation establishes obligations on Member States to define, per border with a neighbouring Member State, a mechanism to resolve legal obstacles in a joint cross-border region. The proposed regulation introduces a model Mechanism to apply, for a common cross-border region, in a given Member State, the legal provisions from the neighbouring Member State (if applying its own laws would present a legal obstacle to implementing a joint project). This can be done for projects being an item of infrastructure or any service of general economic interest. This Mechanism consists of one of the following measures:
- European Cross-border Commitment, which is self-executing, or
- European Cross-border Statement which requires a further legislative procedure in the Member State.
Member States may opt for the Mechanism established under the proposed Regulation or continue to use (if existing) other effective mechanisms to resolve (when identified) legal obstacles for a cross-border region.
The application of this Regulation will be deferred by one year after its entry into force in order to grant Member States a year to adopt its national implementation provisions.
Resources for cohesion policy in the period 2021-2027 are provided in article 103 of CPR. Commitments can reach in this period EUR 330 624 388 630 in 2018 prices. That amount will be indexed at 2% per year.
The methodology on the calculation of budget allocated for each Member State is provided in Annex XXII to the CPR. It is important to remember that even if the budget is allocated to each Member State (“national envelopes”), the overall allocation is a sum of allocations for its individual eligible regions, plus the allocations under the Cohesion Fund (if eligible), allocations under the ETC goal, as well as of additional funding for outermost regions.
The allocation methodology takes into account the gap between the region’s GDP per capita and the EU’s average, which reflects regional prosperity. In addition it takes into account social, economic and territorial factors such as: youth unemployment, low education level, climate change and the reception and integration of migrants.
As regards the Cohesion Fund, the eligibility criteria is unchanged comparing to the period 2014-2020: Member States whose GNI per capita is below 90% of EU average will benefit from the Cohesion Fund. The amount of support from the Cohesion Fund to be transferred to the Connecting Europe Facility remains EUR 10 billion, however, contrary to the mechanism in place in 2014-2020, 30 % of the resources transferred shall immediately be available to Member States eligible for funding from the Cohesion Fund.
A total of EUR 60 000 000 will be allocated for the PEACE PLUS programme where it is acting in support of peace and reconciliation. In addition, at least EUR 60 000 000 shall be allocated for the PEACE PLUS programme from the allocation for Ireland under the European Territorial Cooperation goal (INTERREG) for the continuation of North-South cross border co-operation.
The co-financing rate for the Investment for jobs and growth goal shall not be higher than:
- 70 % for the less developed regions and outermost regions;
- 55 % for the transition regions;
- 40 % for the more developed regions.
The ESF+ Regulation may establish higher co-financing rates for priorities supporting innovative actions.
The co-financing rate for the Cohesion Fund shall not be higher than 70 %.
EC proposals: http://europa.eu/rapid/press-release_IP-18-3885_en.htm
EC Fact sheet http://europa.eu/rapid/press-release_MEMO-18-3866_en.htm
 EP resolution of 17 April 2018 on strengthening economic, social and territorial cohesion in the EU: the 7th report of the European Commission (2017/2279(INI)).