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Glossary

Structural Funds and Cohesion Fund

The Structural Funds and the Cohesion Fund are the financial instruments of European Union (EU) regional policy, which is intended to narrow the development disparities among regions and Member States. The Funds participate fully, therefore, in pursuing the goal of economic, social and territorial cohesion.

For the period 2007-2013, the budget allocated to regional policy amounts to around € 348 billion, comprising € 278 billion for the Structural Funds and € 70 billion for the Cohesion Fund. This represents 35% of the Community budget and is the second largest budget item.

There are two Structural Funds:

  • the European Regional Development Fund (ERDF) is currently the largest. Since 1975 it has provided support for the creation of infrastructure and productive job-creating investment, mainly for businesses;
  • the European Social Fund (ESF), set up in 1958, contributes to the integration into working life of the unemployed and disadvantaged sections of the population, mainly by funding training measures.

In order to speed up economic, social and territorial convergence, the European Union set up a Cohesion Fund in 1994. It is intended for countries whose per capita GDP is below 90% of the Community average. The purpose of the Cohesion Fund is to grant financing to environment and transport infrastructure projects. However, aid under the Cohesion Fund is subject to certain conditions. If the public deficit of a beneficiary Member State exceeds 3% of national GDP (EMU convergence criteria), no new project will be approved until the deficit has been brought under control.

These Funds will be used to finance regional policy between 2007 and 2013 in the framework of the three new objectives, namely:

  • the "convergence" objective to accelerate the convergence of the least developed EU Member States and regions by improving growth and employment conditions. This objective is financed by the ERDF, the ESF and the Cohesion Fund. It represents 81.5% of the total resources allocated. The co-financing ceilings for public expenditure amount to 75% for the ERDF and the ESF and 85% for the Cohesion Fund;
  • the "regional competitiveness and employment" objective to anticipate economic and social change, promote innovation, entrepreneurship, environmental protection and the development of labour markets which include regions not covered by the Convergence objective. It is financed by the ERDF and the ESF and accounts for 16% of the total allocated resources. Measures under this objective can receive co-financing of up to 50% of public expenditure;
  • the "European territorial cooperation" objective to strengthen cooperation at cross-border, transnational and interregional levels in the fields of urban, rural and coastal development, and foster the development of economic relations and networking between small and medium-sized enterprises (SMEs). This objective is financed by the ERDF and represents 2.5% of the total allocated resources. Measures under the Territorial Cooperation objective can receive co-financing of up to 75% of public expenditure.

Structural Fund and Cohesion Fund support for the three objectives always involves co-financing. The rates of co-financing may be reduced in accordance with the "polluter pays" principle or where a project generates income. All projects must of course comply with EU legislation, particularly with regard to competition, the environment and public procurement.

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