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Speaking Points: Informal Meeting of EU Ministers responsible for Cohesion Policy

European Commission - SPEECH/14/335   25/04/2014

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European Commission

[Check Against Delivery]

Johannes HAHN

Commissioner for Regional Policy

Speaking Points: Informal Meeting of EU Ministers responsible for Cohesion Policy

Informal Ministerial Meeting

Athens, 25 April 2014

There are two key issues before us today. First of all, 27 Partnership Agreements to set out the strategies for the 2014-2020 EU Structural and Investment Funds have now been formally submitted to the European Commission. Poland, Latvia, Lithuania and Slovakia have received our observations, and we hope to adopt the German and Danish partnership agreements in the coming weeks.

While many member states did not submit their partnership agreements until April, the Commission will do its best to ensure adoption takes place as soon as possible - this of course will also depend on the degree to which member states take on the Commission's comments.

But the overriding principle in this exercise should remain that quality is not sacrificed for the sake of speed. We should bear in mind that these are strategies that will shape our economies for the next seven to ten years.

Seven Member States have also submitted all of their Cohesion Policy programmes, in addition to the PAs. Overall, 81 programmes have arrived. We estimate it will take the Commission between 2-3 months to give full feedback on these programmes and we can already see that there is still a lot of room for improvement in most programmes.

There are certain cross-cutting challenges that have emerged in the negotiations with Member States. These are areas where we need improvements to ensure efficient and effective use of EU taxpayers' money.

Firstly, concentration on key areas for sustainable growth in each Member State and region.

The new regulations foresee concentration of funding on the areas related to the objectives of Europe 2020 and introduced thematic concentration requirements for the European Regional Development Fund (ERDF) and for the European Social Fund (ESF).

Yet, not everything which is legally possible must be financed at any cost. We still need to ensure that investments make sense, that they are coherent with a targeted development strategy, and resources are not spread too thinly.

All too often, we need to remind Member States that it can no longer be "business as usual": funding a few local roads here, some regional airports there. Projects need to follow strategy, not the other way around.

Secondly, there is the challenge of result orientation. A focus on results, being able to measure the direct contribution to socio-economic development from our funds, is an absolute necessity.

The new regulations make it a reality and have created a much firmer framework for setting out and following up on the expected results. What we see in the draft operational programmes is that we still have some way to go to arrive at clear specific objectives and measurable, realistic targets, which form the foundation of result orientation.

Thirdly, ensuring that preconditions for effective investments are in place.

The Commission was glad to see that the Council and the European Parliament shared its views when it came to putting in place the necessary preconditions for effective and efficient spending. The Commission, together with Member States, is making a major effort to determine whether the necessary strategies are in place and are of sufficient quality, before deciding to allow spending in key areas, such as research and innovation, health, education, infrastructure investments.

With virtually all the Partnership Agreements in and operational programmes arriving, we are fully dedicated in the coming months to negotiating the best possible outcome for investments from the European Structural and Investment Funds for 2014-2020. But commitment is needed from both sides to ensure good quality programmes are put in place.

Now let me turn to the main topic of our discussion today. First of all I'd like to and thank the Greek Presidency for organising a discussion on the SME support in the new programming period.

SMEs are critical to European economies and, unfortunately, they have been especially hard hit by the global crisis. Support to SME competitiveness is a top priority for the European Structural and Investment Funds, in particular the European Regional Development Fund. It is time to put in place the correct measures to boost their growth and competitiveness.

It is therefore important to get the programming right and design a policy mix that not only addresses concrete SME needs and opportunities but has the transformative potential to steer SMEs towards higher competitiveness levels, new and improved products and services, and new markets. The best programmes are based on a thorough analysis and understanding of what are the needs, opportunities and bottlenecks of SMEs in a given territory, not only at a general level but in terms of the whole lifecycle of these companies and the different sectors they are active in.

The best programmes also display a clear intervention logic from the analysis of the needs to the identification of specific objectives and measures needed to maximise the growth potential of SMEs, and the way we measure the impact of these measures. Therefore, setting generic objectives and for instance simply repeating the investment priorities of the regulation and not tailoring them to the specific needs and opportunities in the territory should clearly be avoided.

We notice a tendency to use the SME objective (so called thematic objective 3) as a repository for a wide variety of projects, such as public infrastructure investments (for instance for access roads, business real estate, short-term subsidies to declining sectors), that have little to do with supporting SMEs in a targeted way specific to their situation.

On the contrary, business support needs to be well embedded into the areas that are identified in the smart specialisation strategies.

Smart specialisation not only means a decision about the business sector but it is about linking the business community to research, public administration and education according to the assets and competitive advantages identified by the regions.

One of the main bottlenecks for SMEs is access to finance. Because lending to SMEs represents for banks a higher category of risk than lending to large corporations or to households, banks normally require overcollateralization of loans to SMEs. This, for entrepreneurs starting a new business but also for well-established SMEs, represents a true obstacle to access to bank credit and to other forms of finance. This situation should change.

Cohesion policy offers many good examples where SME access to finance has been greatly facilitated through ERDF funded guarantee schemes.

Financial instruments can offer a good alternative as more efficient forms of public support to help deliver finance to SMEs, particularly in areas of demonstrated market gaps. They can serve as catalysts to attract private investments in areas where returns are lower or risks are higher. Therefore they offer the necessary financing to achieve public policy objectives where market players shy away from such investments.

According to the preliminary information collected during the informal negotiations and in the early stages of the formal negotiations, nearly all Member States foresee a substantial use of financial instruments as part of the delivery options to fund investments in line with the specific priorities of the programmes.

One word on the SME Initiative. The Commission and the EIB proposed it as a possible response to SME financing difficulties in accessing bank credit, particularly in the context of the financial and economic crisis and of the reorganisation of banks' balance sheets in the context of the new capital requirements (Basel III and Capital Requirements Directive).

The Commission considers that, as currently in place, the SME Initiative should go forward without further delays.

Finally, it is also crucial to enhance synergies between ERDF and ESF funded policy actions relevant to SMEs and SME support measures under other EU initiatives. Synergies at the strategic level are to be promoted directly through smart specialisation, with capacity building, innovation and business support in mind, with Horizon 2020 and European initiatives such as the European innovation partnerships or Technology Platforms.

Member States need to be open and flexible enough to allocate funds to exploit these synergies. It is important that they use all related options provided by the regulations to enhance the impact of their programmes for SMEs and for their positioning in international value chains.

Let me conclude by saying that the Commission is supporting Member States in finding the most suitable approach towards SMEs. A number of guidance documents for Managing Authorities have already been made available and we will continue working closely with you.

The reformed regional policy is focused to support and to push the real economy. That must be primary expressed in our support for SMES. This is vital.

Thank you.


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