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José Manuel Durão Barroso

President of the European Commission

Speech by President Barroso: "Together doing more and better for growth and jobs"

EU Friends of Cohesion High level Meeting

Bucharest, 1 June 2012

Prime Ministers,

Ladies and gentlemen,

It is a pleasure to be with you today here in Bucharest in Romania to discuss the crucial role of the future EU budget in contributing to growth and jobs.

And I would like to warmly thank Prime Minister Victor Ponta for having invited me to this High Level Meeting of the EU Friends of Cohesion.

Cohesion policy is firmly anchored in the Lisbon Treaty, the treaty of the European Union. Article 174 states that and I quote "the Union shall develop and pursue actions leading to the strengthening of its economic, social and territorial cohesion;……it shall aim at reducing disparities between levels of development of the various regions and backwardness of the least favoured regions…".

So this is Treaty language. And I am reminding all of us of this because it is important to know that cohesion policy is not just a policy for some countries in Europe, it is a fundamental objective of the European Union as a whole. It is a principle enshrined in our treaties. That is why I hope that next time we have friends of Cohesion – we have not only the 15 Chairmen that are here today but in the near future 28 governments of Europe when Croatia is going to join us - because I expect all governments of Europe to be friends of cohesion. Cohesion is not just in the interest of the the least developed regions - economic, social and territorial cohesion has a fundamental role in the European Union based on the fundamental principle of solidarity.

This is why this article is so important, because it states what is the "raison d'être" of the European Union – to reduce divisions and to create opportunity and economic growth for all. And indeed cohesion has been one of the greatest achievements of the European Union – bringing prosperity to millions of people emerging in many cases from decades of authoritarian or totalitarian rule, and providing inspiration for millions more. People that want to join Europe or people that follow with great respect and admiration the great achievements of European integration.

The results of cohesion policy are very clear. When you see the transformation of so many regions, all across our Union. For instance, GDP per head in all convergence regions grew by 10% compared to the EU 27 average between 2000 and 2008. This is an impressive degree of convergence in just eight years. And in some regions and some countries the convergence was even more impressive but on average it was 10% of convergence effect.

This transformational power of cohesion means that this policy is not a luxury of the European Union. It is part of the fabric, of the essence of the European Union.

Yet, today we are drawing up the future of Cohesion policy - within the wider budget discussion, the multiannual financial framework - at a time of unprecedented turbulence and pressure on public finances. We know that national treasuries are facing difficult choices and, in some cases, extremely painful decisions.

In this context, the European budget is seen by some – albeit a minority – as an easy target. With reduced spending power at home, some view the MFF as an extravagance to be minimised, and a potential source of savings to repatriate. Solidarity is seen as an indulgence for good times, and their contributions and gains as part of a zero-sum game. In fact, cohesion is not that and our budget is not that. Our budget, it is a budget for investment and for growth and I believe that we all agree that in current times we need to combine stability with growth. But at the same time that some are presenting the European budget as something that is not so important for growth, others, including the Member States represented here, see the European budget as a vital catalyst to help the countries where national budgets will not or cannot provide necessary investment.

So how can we square this circle? How can we overcome these divergences that sometimes exist in the European debate?

I believe we need all those who support Cohesion policy to now stand firmly behind it, to get our message across and spread the word, loud and clear, about what the European Union budget is, and what it is not.

We need to dispel the myth that the EU budget is a budget for 'Brussels', for the EU structures or institutions. No – the EU budget is a budget for growth and investment – the money is not for Brussels. It is money for our regions, our cities, our rural areas. It is money for our citizens, our students, our workers, our entrepreneurs, our scientists, our innovators, our farmers. It is money for the unemployed and those who are afraid of being unemployed. It is money for the future of Europe and for all those who want to have a future in Europe.

With these principles in mind, and with meticulous preparation, the Commission set out proposals for the future budget in June last year.

As the negotiations proceed, we are standing up for our proposed level of the Cohesion budget at every opportunity and we are pleased to have the backing of a very important number of Member States, the European Parliament, the Committee of the Regions and other stakeholders.

We need to be strong and clear in making the case for Cohesion.

We need also to do it in a consistent and persistent manner. We must be crystal clear on a number of points, namely its benefits to date and its potential to boost European growth and competitiveness. As you said, Premier Minister, it is important that the cohesion is perceived as some specific policy separated from the rest of European objectives. We have strategy for growth – Europe 2020 – and indeed we are preparing new initiatives for growth. The important issue now is to link the cohesion programmes with our overall strategy for growth in Europe because this is what our citizens want and wait from us - that we give them hope, that we tell them that yes, there are difficulties but it is going to be possible to overcome these difficulties.

Firstly, we must be clear on the benefits of Cohesion policy. If we agree that for growth, some public investment is necessary, and I believe that anybody with common sense understands that we need some public investment, we should recognize that, in many of our Member States, it is the biggest and most stable source of public investments, the European budget. Since 2009, Cohesion policy, just as an example, has represented 97% of total public investment in Hungary, 78% in of total investment Lithuania, and 44% here in Romania. So wonder what the situation was in these countries if there was not the contribution of the European budget. It is a lifeline that has provided stability in times of crisis, but also flexibility in times of need.

Since the beginning of the crisis, almost 20 billion euro from structural funds, including the Cohesion Fund, have been reprogrammed towards more growth-related areas such as R&D, business support and energy.

Co-financing rates have been increased in five Member States, countries under programme including Romania, which has allowed them quicker access to over five billion euros to date. Moreover, a significant reprogramming exercise is now taking place, at my initiative, to get young people into work and to get finance to SMEs in need, namely in eight Member States where there is the highest youth unemployment rate.

About 7.3 billion Euro of EU financing has been targeted for accelerated delivery or reallocation through this initiative so far, with at least 460 000 young people and 56 000 SMEs likely to benefit.

Ladies and gentlemen,

We must be equally clear that the benefits of Cohesion policy are not confined to the least wealthy Member States and regions – in fact, far from it. It is not only about solidarity even if we believe that solidarity is important, but also about economic convergence. So the benefits of cohesion are not just for the cohesion regions but for the EU as a whole because it is this convergence that allows us to keep and deepen the Single Market, that is the basis for growth in Europe, that is the basis for employment and is the basic political content in the EU. And we a Single Market where competition is of course respected but at the same time that we have actions to increase convergence so that we can in fact keep and enforce the single market and all the common principles of our Union.

Indeed, some empirical and independent studies have shown that the direct economic benefits of Cohesion spending to the EU15 countries before the last enlargements are very significant, both from increased exports, as well as contracts awarded. And, other major benefits have also been achieved in terms of innovation, R&D, social mobility, environmental protection and transport networks, that benefit the entire Union, but are, of course, more difficult to quantify in purely economic terms. Because let's be also honest about it economy is extremely important but we are not always speaking about economy and competitiveness, we are also speaking about social development, human development. And we know very well that in some of the countries here that is was the Structural Funds that have abled the increase the level of public care, to reduce child mortality, to increase life expectancy. Isn't this an improvement from human point of view? It is an important contribution and I think we should acknowledge it.

So looking ahead, we must build on these benefits and maximise them if we are to succeed in our economic growth strategy including of course the most urgent thing: boosting Europe's competitiveness.

That is why we must now also make the case that the proposed future Cohesion policy – while still focused on convergence – also ensures more than ever before, that every euro spent brings added economic value for Europe. We understand the need for rigour, and we are for rigour, but we have to make the case on why in some situations an euro spent at the European level bring more than several euros spent at the national level.

I think we all should understand that the culture of entitlement is gone, to be replaced by a culture of results. It is no longer enough for a region to show it needs funds, it must also show it will make best use of the funds. It is no longer sufficient to spend funds, but we must instil a determination to use them as a springboard for growth, for competitive, for our common values.

This is the logic of the proposed system that the Commission has proposed that can be demonstrated through some of its key features:

First of all – where should we spend the money on.

In the current difficult economic circumstances, and given the challenges of competitiveness Europe is facing, our proposal provides true added economic value, making every euro count for growth by trying to hit at the same time several targets. And it is important to understand this. When we speak about investment in Cohesion funds very often is not only about Cohesion. It is for instance also for environment protection, common to all EU, sustainability, or increasing the research capacities. That is why in our proposal we are prioritising spending on jobs and growth-boosting areas such as completing the internal market, the digital agenda, renewable energy, research and innovation; and providing more and better opportunities for our young people.

We need a modernised cohesion policy and a modernised common agriculture policy. We need to link policy and spending more closely to our strategy for growth - the Europe 2020 strategy. We need a common agriculture policy that contributes to our environmental objectives and a cohesion policy that helps completing the 21st century infrastructure needed for our Internal Market.

Yes, these two great EU policies – cohesion and agricultural - must help to deliver Europe's competitiveness and its capacity to build the future, so that coming generations can enjoy the prosperity, security and stability.

That is also why the Commission places such importance in those funding instruments which will provide true European value added, notably the Connecting Europe Facility.

The Connecting Europe Facility will trigger investments where there is a market failure, notably where cross-border and transnational investments in transport, energy and telecommunications are lacking. By closing the missing links in these key networks we will strengthen our internal market and show that one Euro spent at the European level brings more than one Euro spent at the national level. This is, in fact, a key driver for further convergence that will particularly benefit Cohesion countries. Just yesterday I was with some of the Prime Minister here present in the Baltic Summit where we discussed for instance in terms of energy how important it is to have funding at European level to support projects that without those funds will not come to reality for very obvious reasons. There is such a pressure in our national budgets that of course each country will prioritise its own projects and not the transnational projects. That is why the Connecting Europe concept makes sense. It responds to some kind of need for the infrastructure that we need for Europe as a whole.

That is why we also have to look at not only where we spend the money, but how we will use it. And also we need to focus on a limited range of priorities, or themes, to ensure maximum impact. At a time when there are so many difficulties it is very important that it is on a limited number of priorities so that people understand where we are in fact making our contribution for growth and jobs. We have a reinforced duty to measure performance.

It is entirely normal that the use made of funding should be monitored, reported upon and followed up in order to ensure that it is used appropriately and delivers the intended results. We have included this monitoring and reporting as key features of our proposals.

Thirdly, we should also consider conditionality. The ex-ante conditionality aims at ensuring maximum effectiveness of future Cohesion policy. Conditionality will be directly linked to cohesion policy investments and based on legal commitments agreed by all Member States.

I know that the macro-economic conditionality is strongly debated, but we consider it essential. This is not about 'punishing' Member States. It should ensure that the five main funds are being used for supporting sound fiscal and structural policies that enhance growth.

Linking the funds to the new economic governance mechanisms of the Union, specifically the Country Specific Recommendations (CSRs), will integrate their use into both the wider economic objectives of the Union, but also the focused and tailored according to the specific situation in each country.

The Commission has sought to ensure that this conditionality is balanced with proportionality and equal treatment.

It is critically important for our ambition in cohesion policy that a consensus among Member States is reached on the need to combine this ambition with credible mechanisms of delivery and conditions for maximising its impact on the overall objectives of the Union. And let me tell you very frankly that I believe that without these mechanisms there will not be a consensus for the kind of budget we, at least most of us around these table, want to have.

To conclude, let me just say that I warmly welcome the EU Friends of Cohesion group's commitment to a stronger and more united Europe.

We share the same ambition to build a Union fit for the 21st century, a Union that can withstand all weathers, a Union that can go on delivering its citizens prosperity, and social justice in an increasingly challenging and competitive world.

This is about leadership and ownership. There is a lot that can be done at the EU level, but there is also a lot that has to be done at national level.

It is time to implement together a European renewal agenda, time to lay the foundations for a more sustainable future.

Today I have outlined what I see as some of the major achievements and justifications for Cohesion policy at the European level.

I believe what is needed now is to move our case forward. It is also for the Member States that are benefitting and will benefit from this policy to point out the concrete benefits of the cohesion funding. The more excellent examples we can assemble, the stronger the argument becomes for funding in the future. If you want the level of the cohesion envelope to remain strong in the future, you really need to show that it is producing tangible results, and also that the right lessons for the future have been drawn - that the new approach to cohesion embodies the concept of "Better Spending". I think this is essential if we want to have a consensus and success in the MFF negotiations.

In these very challenging times, it is more important than ever that you make the case for cohesion and link cohesion with the overall objectives of growth and competitiveness in Europe.

Cohesion policy is also a response to the current crisis and indeed beyond the crisis.

I am confident that we will not fall for a self-defeating pessimism. And that once more Jean Monnet's visionary wisdom will be proved right; "Europe will be forged in crises, and will be the sum of the solutions adopted for those crises." Yes, we are living in difficult times, but let's make the current difficulties a motive for more European determination in a common response and certainly, cohesion policy is an essential element of the European response to the crisis and for the future of our Union.

Thank you for your attention.

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