Commission sheds some light on cohesion policy reform

EPP MEP Lambert van Nistelrooij during an intervention in a meeting of the Committee on Regional Development of the European Parliament. [Javier Bernal Revert [European Parliament]

The European Commission cleared up some of the details of its proposal to reform cohesion policy in the next EU long-term budget during a second round of discussion with MEPs on Wednesday (21 June).

More flexibility and simplification in exchange for higher co-financing rates – that’s how the Commission justifies its decision to go from 85% to 70% of the contribution to the cohesion policy.

The measure is “alarming”, said S&D MEP Victor Boştinaru. With the current rate, the poorest regions have already experienced funding problems, Boştinaru underlined.

“We ask more in terms of co-financing but at the same time we are more flexible in some implementation areas such as the VAT,” said Eric Von Breska, director of DG for Regional and Urban Policy at the European Commission.

Simplification and flexibility to react to unexpected events, such as the migration crisis, are indeed the main objectives of the new cohesion policy. “I know we have talked about simplification before but this time we really mean it,” Von Breska underlined before the Parliament’s Committee on Regional Development.

The Commission has identified more than 80 simplifications achieved thanks to the new regulation. Among them, seven funds will be covered by the same rulebook and the cohesion fund and the European Regional development fund regulations have been merged.

Moreover, the Commission wants to reduce red tape by moving forward on the ‘simplify costs option’. This could lead to a reduction of up to 25% of the administrative burden, Von Breska argued. Furthermore, for all operations below €5 million, VAT will be “eligible, no questions asked,” Commission said.

Major projects will no longer have to be approved by the Commission and there will be a new category of ‘projects of strategic importance’, which the EU executive will encourage member states to report on. There will not be a designation process anymore either. “We will just approve the programmes’ authorities,” the Commission insisted.

Another major breakthrough is the Commission’s decision to allow EU countries to apply only national rules on those projects with a low error rate. “They wouldn’t have to do audits but only some operations to prove that the system is still functioning,” Von Breska explained.

In the case of Interreg projects, precisely because they have shown a low error rate along the years, the audit will assess samples of randomly selected projects instead of testing all of them.

The Commission has decided to keep the code of conduct as it is, despite the changes in the regulation, to avoid a delay as it happened during the implementation of the 2014-2020 provisions.

More importance to financial instruments

The Commission wants to make it possible for projects to combine loans and grants that could complement each other. The same body will carry out the implementation and the audit of the funded project. However, it is still unknown which body will be.

Moreover, member states might decide to allocate up to 5% of their structural funds to the InvestEU fund, which follows up on the Juncker Plan. “This contribution must serve cohesion policy objectives, but it would only be the rule of InvestEU that will apply,” the Commission clarified.

According to the EU executive, opting for this financial instrument could be an interesting option for member states that have problems with capacity building in these areas or want to benefit from EU interests rates on loans.

Same allocation, different envelops

The budgetary allocation for cohesion policy has been reduced by 10% in real terms according to the Commission and this is still a major concern for MEPs. “Cuts are very painful,” MEP Kerstin Westphal underlined.

Keeping in mind the reduced budget, the Commission’s main objectives were to concentrate the money in the poorest regions, ensure a meaningful cohesion policy in the most developed areas and mitigate the transition between periods.

The EU executive insisted on the transparency of the allocation method and underlined that the reason to include new indicators such as migration or fight against climate change is nothing but a reflection of the kind of policies the EU wants to pursue.

Concerning the change in the threshold of the categories of regions, Von Breska stressed that the Commission’s analysis “shows that all the regions below the average are catching up in the past few years”.

In particular, the Commission considers that the cohesion fund was “artificially inflated” for the members that joined since 2004. Now that the policy priorities have changed, the executive considers that it is time to redistribute the money.

“The fact that cohesion fund goes down does not mean that the allocation for the member states does too, it is an internal redistribution between the ERDF, the ESF and the cohesion fund,” Von Breska said.

More capacity to react to changes

The migration or the financial crisis proved the need for structural funds to be able to adapt to a changing environment. This is why the Commission has put the focus on introducing more flexibility in its proposal.

The two main changes are the possibility to shift up to 5% of the funds for different policy priorities only by informing the Commission [no need for approval], and to plan project implementation only for five years and leave the rest to the aftermath of the mid-term review.

In case there are emerging needs or new priorities, authorities will be able to restructure the funds.

Centralisation, the main critic

The European Parliament has shown on various occasions its concern towards a possible centralisation in the management of the funds. The new urban initiative is a good example.

“In many member states, cities simply do not have the capacity to manage our funds,” said Eric Von Breska. Therefore, the Commission proposed for the cities to develop the strategy and even select the projects but then, leave the management to “competent bodies”.

This proposal was largely criticised by MEPs. “How does the Commission say that through more concentration, the role of the regions will be strengthened? In which world is that possible?” GUE/NGL MEP Martina Michels asked.

“On the one hand you have the code of conduct, in which preparation the cities and regions were included, but if the state is going to have more power, it means that there is a re-centralisation, a renationalisation even,” said EPP MEP Lambert van Nistelrooij.

The Parliament clearly has some reserves towards the Commission’s proposal to reform the EU cohesion policy. However, the chair of the Committee on Regional Development, Iskra Mihaylova, said “we are prepared to negotiate”.

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