Original publication: September 2018
Author: Viorica Viță
Short link to this post: http://bit.ly/2MkiuYi
Background and Aim
In the 2014-20 financial period, the use of conditionalities in Cohesion policy has been significantly extended by the introduction of a comprehensive set of macroeconomic and ex ante conditionalities. In May 2018, the European Commission (‘Commission’) put forwards its legislative proposals on the 2021-27 financial period, that consolidate prior conditionalities and introduce new ones, most notably: the rule of law conditionality.
The aim of this study is to discuss the Commission’s proposals for 2021-27, in the light of the prior experience of conditionalities in Cohesion policy and draw relevant policy recommendations.
Conditionality is an established EU governance tool that may usefully assist the EU to ensure compliance and effective application of its laws and policies throughout EU spending operations at the national level (1.1). The experience of established federal systems shows that when used inside internal governance settings – such as the EU Cohesion policy – conditionality is first and foremost a constitutional matter (1.2). Consequently, all use of conditionalities in Cohesion policy must have due regards to the constitutional principles that guide the exercise of power in the EU. Particular attention should be paid to principles guiding the division of power between the EU and Member States, and to the respect of EU fundamental rights (1.2.2). The study also finds that the type of conditionality used is of critical importance for achievement of the policy goal sought (1.3).
During 1994-2013, two incipient conditionalities were present in Cohesion policy: the macroeconomic conditionality attached to the Cohesion fund (2.1.1) and infringement conditionality attached to Structural Funds (2.1.2). The inconsistent enforcement of 1994-2013 macroeconomic conditionality rules, which singled out one Member State in the entire history of the tool (Hungary, 2012) showed problematic in practice (2.1.2). The infringement conditionality was successfully used to safeguard the EU financial interests (Italy, 2008), however it has not led to compliance with the breached provisions of the EU Waste Directive by 2018 (2.1.2).
The 2014-20 financial period marks a stage of historic expansion of conditionalities in Cohesion policy (2.2). The enforcement of macroeconomic conditionality has proven to be highly difficult, due to shortcomings of the legal framework, fragile economic situation of the countries concerned (Spain and Portugal, 2016), late timing and strong opposition of the European Parliament (184.108.40.206). The ex-ante conditionalities incentivised the start of important legislative, institutional and policy reforms in an incredibly short amount of time. The sustainability and impact of the reforms remains however uncertain, as highlighted by the Court of Auditors (2.2.2).
The 2021-27 proposals consolidate and further expand the use of conditionalities in Cohesion policy (Part 3). The proposed ‘macroeconomic conditionality’ remains conceptually similar to the 2014-20 financial period (3.1). A notable novelty is the introduction of an ‘escape clause’ to acknowledge situations of deep economic downturn and avoid situations where funding would be suspended when most needed. The proposal maintains the ‘structured dialogue’ with the European Parliament. However, the Commission is no longer required to consider the ‘opinions’ expressed during the said dialogue in its suspension proposal. A set of 4 horizontal and 16 thematic ‘enabling conditions’ replace, streamline and significantly improve the legal framework of 2014-20 ex-ante conditionalities (3.3). An ‘infringement conditionality‘ is (re)introduced, which is expected to usefully protect the financial interest of the EU, where Cohesion policy expenditure is negatively affected by breaches of relevant EU laws (3.3). A novel ‘rule of law conditionality’ is proposed as a stand-alone, cross-cutting requirement applicable to all EU budget expenditure, including Cohesion policy (3.4). The study finds that a rule of law conditionality may in principle assist the EU to safeguard the EU financial resources from unwarranted waste and ensure compliance with EU rule of law principles on a number of occasions (3.4.1). It also argues that the EU has the implicit competence to adopt a rule of law conditionality (3.4.2). The study concludes that the current proposal would need to be significantly revisited to translate in an effective and workable rule of law conditionality on the ground (3.4.3).
Macroeconomic conditionality (Art. 15 (7)-(12), CPR proposal)
- The negative mandatory suspension strand of macroeconomic conditionality attached to Cohesion spending should be used in subsidiary to intrinsic EU economic governance enforcement tools, and only where the latter have proven insufficient to ensure macroeconomic and fiscal stability (1), and where the said non-compliance would put at risk Cohesion policy expenditure, having regards to its seriousness, duration, extent and recurrence (2). Under the current CPR proposal (Art. 15 (7)-(11)), it is simply odd that suspension of EU funds may be ordered, while sector-specific economic governance enforcement tools are not applied first.
- It is desirable that a Commission proposal on suspension be based on prior and transparent impact estimates (in the context of Art. 15 (9)), that would be timely communicated to the interested stakeholders, including to the European Parliament for the purposes of the structured dialogue (Art.15 (12)).
- It would be desirable to see the European Parliament have a clearer and greater role during enforcement, consistent with its post-Lisbon legislative and budgetary functions and its greater European democratic legitimacy. The opinion of the European Parliament should be sought before any enforcement, and duly accounted for in the final suspension proposal (in the context of Art. 15 (9) and (12)).
Enabling conditions (Art. 11, Annex III-IV, CPR proposal)
- It is critical that EU legislators maintain the important qualitative improvements of enabling conditions as reflected in the CPR proposal. Enabling conditions should remain simple, clear, precise, meaningfully linked to spending, focused on measurable results, and continuously fulfilled, monitored and applied throughout the financial period.
- The thematic area of enabling conditions should match the Commission internal institutional structure and policy responsibilities of its DGs. For instance, DG Justice should be closely involved in the assessment and monitoring of EU Charter enabling condition, and its expert opinion should trigger swift action of the Commission departments in charge of spending management (i.e. DG REGIO or DG EMPL).
- Transparency, legal certainty and accountability should guide the implementation of all enabling conditions during the 2021-27 period. Form this point of view, it is also advisable to explicitly extend the applicability of the principle of partnership to enabling conditions (in the context of Art. 11 and Art.6 (2), CPR proposal).
Infringement conditionality (Art. 91 (1)(d), CPR proposal)
- Enforcement of infringement conditionality should be coupled with technical assistance (Arts. 29-30), to support the regions and Member States that struggle in compliance due to lack of sufficient administrative capacity and expert knowledge. This would ensure that the financial interests of the EU are protected by conditionality, while at the same time, the regional development objectives of Cohesion policy are achieved.
Rule of law conditionality (COM (2018)324 final, Rule of law conditionality proposal)
- The rule of law conditionality proposal should undergo profound and significant legislative amendments to translate into an effective and workable conditionality instrument. The internal coherence and consistency of the proposal require special attention (see, 220.127.116.11-18.104.22.168).
- It is critical that the rule of law conditionality be focused on a set of limited and concrete rule of law components (i.e. independence of judiciary), which demonstrate a sufficiently direct link to spending (Art. 3, Rule of law conditionality proposal).
- The ‘appropriate financial measures’ should be consistent with EU financial rules (CPR proposal) and the extent of financial sanctions should be determined pursuant to clearly specified and foreseeable objective criteria (Art. 4 (1), Rule of law conditionality proposal).
- The ‘reasonable grounds’ triggering the conditionality process should be clearly stated, in line with the principle of prohibition of arbitrariness of the executive power (Art. 5 (1), Rule of law conditionality proposal).
- Credible guarantees, including prior impact assessments, should be foreseen to ensure that the economic interests and legitimate expectations of final beneficiaries are not unduly affected (Art.4(2), Rule of law conditionality proposal).
- To address the concerns regarding the equal treatment of Member States, the conditionality process should be held to the highest standards of transparency, with due regards to the obligation to give reasons. A decision ‘to enforce’ or ‘not to enforce’ the conditionality should be duly reasoned, so as to allow for a meaningful democratic debate, accountability and judicial review (Art. 5, Rule of law conditionality proposal).
- The enforcement of the rule of law conditionality should be entrusted to the Commission, in line with its budgetary implementation functions enshrined in the EU treaties (Art. 317 TFEU) and consistent with EU practice in external action spending. Enforcement by the Council would lead to a distortion of the current budgetary functions under the Treaty (Art. 5(6)-(7), Rule of law conditionality proposal).
- It would be desirable that the opinion of the European Parliament and of the Council be sought before any enforcement, and duly accounted for in the final suspension proposal, to ensure a genuine European democratic legitimacy of the process (Art. 5, Rule of law conditionality proposal).
Link to the full study: http://bit.ly/617-498
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