COVID-19: Commission paves way to draw €37 billion from structural funds

The money is to come from unused structural funds, which normally have to be returned to the Commission each year. Thus, €8 billion, which were planned for 2019, are to remain in the hands of the member states, and another €29 billion are to be paid out early. [EC - Audiovisual Service]

The European Commission proposed numerous changes to its cohesion policy rulebook on Thursday (2 April) in order to draw €37 billion of unused funds to finance various measures during the coronavirus pandemic. But these measures can only help to a limited extent. EURACTIV Germany reports.

The Commission adopted a legislative package on Thursday allowing for the use of €37 billion from the EU structural funds promised three weeks ago. To this end, the executive is proposing far-reaching changes to the rulebook of cohesion policy.

“We must use all our instruments. We will reallocate every euro available in the EU budget and we will relax all the rules,” said European Commission President Ursula von der Leyen.

Yesterday’s proposal follows from the CRII package proposed on 13 March, which grants €37 billion financial aid to combat the coronavirus for EU member states. However, for the changes to enter into force, the European Parliament and the Council will have to give their approval.

The money is to come from unused structural funds, which normally have to be returned to the Commission each year. Thus, €8 billion, which were planned for 2019, are to remain in the hands of the member states, and another €29 billion are to be paid out early.

This is how the EU’s €100 billion corona-fund will work 

Member states will provide guarantees to raise up to €100 billion for a new temporary fund to support workers in hard-hit countries affected by coronavirus, such as Italy and Spain, according to the proposal seen by EURACTIV.com.

Member states can move EU funds indefinitely

To implement this, the Commission proposed changes to the rules of cohesion policy to make the use of the funds more flexible and less bureaucratic. Member states should be given the opportunity to shift unlimited funds between the different funds this year, and also to transfer money between richer and poorer regions.

As is the case for Northern Italy, some economically prosperous and densely populated regions, in particular, have been hit hard but they have limited access to EU funds under the current arrangements.

Despite the new freedoms, member states should “first examine other ways of transferring funds before considering transfers from the budget of less developed regions”, as these transfers could potentially have negative effects, the draft says.

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Unlimited refinancing should now also be possible between the substantive priorities of the current funding programmes. Only 8% had been proposed, according to an EU diplomat. Besides, EU member states can now temporarily overstretch their budgets by 10% with regards to certain priority areas such as healthcare, provided the money is saved elsewhere.

Member states can move EU funds indefinitely

With yesterday’s proposals, the Commission is responding to requests from the Parliament’s Committee on Regional Development (REGI). In a video conference held by the committee’s chairs and Commissioner Elisa Ferreira on 30 March, the MEPs had insisted on the relaxation and simplification of the rules so that the promised €37 billion could be paid out quickly.

The president of the Committee of the Regions, Apostolos Tzitzikostas, has said that he supports the Commission’s efforts allowing a quick reprogramming of the investment planned before the crisis. “Cohesion policy funds are once again proving vital on the ground in unprecedented times of crisis”.

Nevertheless, the impact of structural funds could be limited. Despite accounting for around a third of the current EU budget, the €454 billion euros are mostly programmed for years in operational programmes and can, therefore, only serve for emergency measures to a limited extent.

Above all, they are likely to be used for the longer-term development of health infrastructure in the regions.

“Cohesion policy cannot compensate for the lack of unity in the EU Council and shoulder the financing of corona measures alone,” a source from the Committee of the Regions told EURACTIV.

At an EU summit on 26 March, leaders were unable to agree on whether to use the European Stabilisation Mechanism (ESM) or the so-called ‘corona bonds’, for example.

Netherlands, Austria push for tougher conditions for corona-loans

The Hague and Vienna are insisting on including stricter conditionality attached to loans for coronavirus-hit countries, toughening up the formula proposed by the eurozone’s bailout fund (ESM) and seen by EURACTIV.com.

New EU budget and more money for cohesion?

The EU’s new financial packages are now fueling calls for a revision of and increase in the EU budget from 2021.

The REGI Committee, for instance, hopes that more money will be allocated to cohesion policy. While the Commission’s current proposal provides for 10% cuts, territorial disparities are likely to worsen in the course of the coming economic crisis, warned REGI chairman, Younous Omarjee (GUE/NGL).

The Committee of the Regions also hopes to gain momentum for more regional funding in the current crisis, as its president, Apostolos Tzitzikostas, stressed that “cohesion policy funds are once again proving vital on the ground in unprecedented times of crisis”.

Commissioner Ferreira has also expressed her support. “The limits of the EU budget – 1% of the GDP, or 0.3% for cohesion – are restricting us. We need a rapid agreement on a robust and ambitious EU budget for 2021-2027,” she wrote on Twitter this week.

[Edited by Beatriz Rios/Zoran Radosavljevic]

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