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Q&A on the legislative package for EU Cohesion Policy 2014-2020

European Commission - MEMO/13/678   10/07/2013

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European Commission

MEMO

Brussels, 10 July 2013

Q&A on the legislative package for EU Cohesion Policy 2014-2020

Cohesion policy is implemented through programmes which run for the duration of the EU seven-year budget cycle. The current 455 programmes are foreseen until 2013. This is why it is necessary to define the architecture of the policy for the new generation of programmes and allocations for 2014-20.

When will the package be adopted?

The European Commission adopted its legislative proposals to frame Cohesion Policy for 2014-2020 on 6 October 2011. The legislative package has been discussed in Trilogues (trilateral negotiations between the European Commission, the Council and the European Parliament) during 2012-2013. The final adoption of the new legislative frame is expected for autumn 2013.

What is included in the legislative package?

The legislative package on the EU Cohesion Policy 2014-2020 includes an overarching regulation setting out common rules governing the European Regional Development Fund (ERDF), the European Social Fund (ESF), the Cohesion Fund (CF), the European Agricultural Fund for Rural Development (EAFRD) and the European Maritime and Fisheries Fund (EMFF). One set of rules instead of 5. Three specific regulations for the ERDF, the ESF and the Cohesion Fund are also included, as well as two regulations dealing with the European territorial cooperation goal and the European grouping of territorial cooperation (EGTC). The Commission also adopted proposals for two instruments in the area of employment and social policy, namely the European Globalisation Adjustment Fund (EGF) and the Programme for Social Change and Innovation (PSCI), as well as a communication on the European Union Solidarity Fund (EUSF). The Youth employment initiative has subsequently been integrated into the package following the agreement at the European Council in February 2013.

Why a new legislative package?

Since the EU has defined new long-term objectives for growth and jobs ("Europe 2020 strategy"), there is a need to align the policy better to these goals for achieving the agreed targets on employment, education, poverty, innovation, research & development (R&D) and climate (renewable energy, energy-efficiency and greenhouse gas emissions). This implies tackling the impact of the global economic crisis, unemployment and poverty, climate change, and other challenges that affect all EU regions. Given their share of the EU budget (more than one-third), cohesion policy instruments are key in boosting Europe's economic competitiveness, fostering social cohesion, and creating more and better jobs.

Which are the new elements in the package as compared to the past?

Concentration on "Europe 2020": Partnership Agreements, agreed between the

Commission and Member States, will set out the commitments to concrete actions to deliver Europe 2020 objectives. Minimum allocations are fixed for a number of priority areas where the EU has set itself goals. For example, in more developed regions, at least 80% of ERDF resources at national level have to be allocated to the shift towards a low-carbon economy (energy efficiency and renewables), research and innovation, information and communication technologies (ICT) and the improvement of the competitiveness of Small and Medium-sized Enterprises (SMEs). This amount will be 60% in transition regions and 50% in less developed regions, reflecting their broader development needs. For the low carbon economy, there is a further obligation to allocate at least 20% (in more developed), 15% (transition), and 12% (less developed) to this objective. ESF investments will be fully aligned with EU objectives and targets on employment, education and poverty reduction.

Better coordination of various EU actions:

All Partnership Agreements tailored for and with each Member State will find a single European reference frame for coordination between the funds and other EU instruments in the Common Strategic Framework. Member States will be allowed to combine ERDF, ESF and Cohesion Fund in "multi-fund" programmes to suit their growth plans, improve coordination on the ground and achieve integrated development. The purpose is to allow the biggest impact on the ground.

Strong focus on results:

EU funding will offer strong incentives to deliver Europe 2020 objectives. A number of framework conditions must be in place "ex-ante", before the funds are disbursed (for instance, the proper functioning of public procurement systems) to ensure that investments can be made in the most effective manner. Also, progress towards the achievement of objectives will be closely monitored and measured against a set of milestones agreed as part of a performance framework. The Commission also proposes to make the release of additional funds contingent on performance.

Sound macro-fiscal environment:

To ensure that the effectiveness of the funds is not undermined by unsound macro-fiscal policies, the Commission proposes to establish a tighter link between cohesion policy and European economic governance, such as the excessive deficit procedure, excessive imbalances procedure and the European semester of economic policy coordination. It means that programmes financed by the Funds can be adapted to changing economic circumstances. In certain situations, the Commission could request the review of the Partnership Contract to support the implementation of Council recommendations. Failing to take remedial actions may lead to suspension of funding.

Reinforcing territorial cooperation:

Territorial cooperation among regions (cross-border, transnational and interregional) is reinforced, since it offers clear EU added value.

Territorial cohesion:

There will be a clear focus on sustainable urban development with at least 5% of the ERDF resources allocated for "integrated actions" managed by cities in this field by each Member State. In addition, the Commission will launch calls for innovative actions in the field of sustainable urban development and make ESF human capital investments in cities easier. Particular attention will be paid also to areas with specific natural or demographic features, with a specific additional allocation for the outermost regions and sparsely populated areas.

Further simplification of the policy is a guiding principle (such as introducing simplified reimbursement rules, possibility to implement funds on the basis of joint action plans paid on the basis of results, harmonising eligibility rules and management and control systems between different EU funds, etc.).

What is the state of play of the negotiations on the legislative package?

Agreement has been reached on most negotiation chapters including requirements for programming and thematic concentration and the content of the Common Strategic Framework. This is also the case for the majority of the text of the Fund-specific rules that determine the scope and investment priorities for each of the Funds. A number of chapters related to implementation of the funds, such as management and control arrangements, eligibility rules and requirements for monitoring and evaluation have also been agreed.

Solid progress has been made on the remaining chapters such as ex-ante conditionalities and financial instruments, where the co-legislators are close to formalising an agreement. Ex ante conditionalities are conditions that should be in place before funds are approved. For example, a Member State wanting to use EU funds to invest in water management will be required to transpose the related EU environmental legislation. Transport investments with EU funds such as road and port projects would have to form part of an overall transport strategy - presented as a condition- where such projects are part of EU priority routes.

Rules on using financial instruments will be simplified in the future so that EU structural funds can be used more easily to leverage extra funds in the form of loans, guarantees and private equity to provide much needed credit particularly for SMEs across Europe .

Financial matters that are part of the agreement on the Multi-Annual Financial Framework, including the provisions on the Youth Employment initiative, and financial management arrangements still need to be integrated into the package.

What are the main important issues still open for negotiation?

The most important outstanding points relate to macro-economic conditionality and the arrangements for the implementation of the performance reserve. The positions of the European Parliament and the Member States diverge on both issues.

1. Macroeconomic conditionality

The effectiveness of cohesion policy in promoting growth and jobs depends significantly on the economic environment in which it operates. Past experience suggests that the funds in some instances have not delivered expected outcomes due to unsound macroeconomic framework conditions. Establishing a tighter link between cohesion policy and the European semester of economic policy coordination would, therefore, ensure coherence between macroeconomic policies at national level and investments through European programmes. Thus, the Commission has proposed that when a country faces economic difficulties, the Commission can invite the Member State to revise its strategy and programmes. Only if the economic situation becomes so serious to undermine the effectiveness of cohesion investment, continued support from the Cohesion Fund, the ERDF the ESF, the EAFRD and EMFF will become dependent on the fulfilment of certain fiscal or economic conditions. This “conditionality” has already existed for the Cohesion Fund, but the process of the suspension of funding will now be more automatic and extended to all funds.

The provisions on macroeconomic conditionality provide for:

  1. a possibility for quick reprogramming of ESI Funds in support of Council recommendations, or to address an excessive deficit, macroeconomic imbalances or other economic and social difficulties or to maximise the growth and competitiveness impact of the CSF Funds for Member States receiving financial assistance from the EU.

  2. suspension of commitments and payments where a Member State fails to take corrective action in the context of the economic governance procedures.

While the Council in principle supports the macro-economic conditionality, the European Parliament has remained opposed.

2. Performance Reserve

The objective of the performance reserve is to ensure and to reward good performance in the implementation of programmes. the Commission proposes that programmes and priorities which achieve milestones set for 2018 can benefit from the performance reserve after a performance review undertaken in 2019.

Where there is a serious failure to achieve milestones (i.e. serious underperformance compared to what was initially planned), the respective programmes and priorities cannot benefit from an allocation from the performance reserve.

The Commission proposal for the size of performance reserve was 5% of the total allocation, the Council has proposed to increase this to 7%. The EP is not convinced of the need for performance reserve.

What categories of regions after 2014?

Regions will continue to receive support within three (3) defined categories:

  1. less developed regions, whose GDP is below 75% of the Union average, will continue to be the top priority for the policy.

  2. transition regions, whose GDP is between 75% and 90% of the EU 27 average.

  3. more developed regions, whose GDP per capita is above 90% of the average.

The second category would cover 51 regions and more than 68 million people, including 13 regions that move out of the current "convergence" objective (less developed regions), reflecting the success of the policy. The purpose of the new category is to ease the transition of these regions, which have become more competitive in recent years, but still need targeted support. It also ensures fairer treatment for regions with similar levels of economic development.

What will be the co-financing rates after 2014?

For the new category of transition regions the maximum co-financing rate will be 60% from EU side and in exceptional cases up to 80%. The other ceilings for co-financing rates remain unchanged, i.e. maximum 50% for the most developed regions, maximum 85 % for the less developed regions and maximum 85 % for the Cohesion Fund.

What are the Partnership agreements?

Each Member State will draw up a partnership agreement where it will assess its development needs and define its priorities for delivering on the Europe 2020 strategy, taking account of the National Reform Programmes and, where appropriate, the relevant Country-specific recommendations. The Partnership Agreement will contain notably:

  1. selected thematic objectives (Member States can choose out of a menu of 11 objectives in line with the “Europe 2020” strategy) and for each of the thematic objectives a summary of the main expected results;

  2. a review of whether the necessary framework conditions at national level are in place (ex ante conditionalities) ;

  3. mechanisms to ensure consistency in the functioning of performance framework

  4. a summary of actions planned to achieve the reduction in the administrative burden for beneficiaries.

When do the Commission expect the partnership agreements to be finalised?

The Commission expects all partnership agreements to be finalised by the end of this year and agreement on all programmes by the European elections in 2014 so that no time is lost in directing these funds towards investment in growth and jobs on the ground.

Since the Member States are now targeting EU investment on a more limited number of priorities, which sectors will no longer receive support?

To ensure that EU investments are concentrated on those priorities which maximise

European added value and contribute to the economic growth, package includes include minimum allocations for a number of areas where the EU has made concrete commitments. For example, in more developed regions, at least 80%of ERDF resources at national level would be allocated to the shift towards a low-carbon economy (energy efficiency and renewables), research and innovation, information and communication technologies and the improvement of the competitiveness of small- and medium-sized enterprises (SMEs). This amount is foreseen at 60% in transition regions and 50% in less developed regions, reflecting their broader development needs.

The proposals also ensure that there is sufficient flexibility for Member States and regions to focus on investments in line with their own development needs and challenges set out in their National Reform Programmes. Some areas will be excluded from ERDF support altogether, such as the decommissioning and the construction of nuclear power stations and the tobacco sector.

What will be the allocation for cohesion policy?

Following the political agreement between the European Parliament, the Council Presidency and the European Commission on the Multiannual financial framework 2014-20 on 27 June 2013 the allocation of cohesion policy in 2014-20 will be €325.1 billion with the following breakdown:

Budget 2014-2020 EUR billion

EUR 325.1 billion

Less developed regions

Transition regions

More developed regions

Territorial cooperation

Cohesion fund

Extra allocation for outermost and sparsely

populated regions

Youth employment initiative (top-up)

164.3bn

31.7bn

49.5bn

8.9bn

66.3bn

1.4bn

3bn

For more information see:

IP/13/670

http://ec.europa.eu/regional_policy/what/future/proposals_2014_2020_en.cfm

https://www.yammer.com/regionetwork

Twitter @EU_Regional @JHahnEU


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