MEPs worry about ‘funding gap’ for EU regions as talks press ahead

European lawmakers want to ensure there is no financing gap in cohesion policy between the current and next budgetary period as negotiations drag on. [Sgutterstock/mnimage]

EU lawmakers want to ensure there is no financing gap between the next budgetary period for the policy that aims to reduce disparities between European regions, even if talks on the new regulation laying out the ground rules for the use of EU funds gets delayed.

The European Parliament and the Council representing the EU’s 27 member states are currently negotiating a range of legislative proposals that will regulate the flow of European money to regions, known as the “cohesion package.”

However, several major obstacles remain in the talks concerning the common rulebook,  the “Common Provisions Regulation” (CPR), which will cover most of the bloc’s regional funds.

“What would a transition setup look like for regions and beneficiaries?” asked leftist MEP Martina Michels during a meeting with the EU’s regional policy chief Elisa Ferreira on Tuesday (10 November).

“Because I think it’s fairly clear now that we can’t have a regulation coming into force on the 1st of the first [month],” said Michels who spoke at a meeting of the Parliament’s regional development committee.

One of the leading negotiators on the file, social democrat Constanze Krehl, also asked if additional EU money to battle the economic fallout of the coronavirus pandemic, known as REACT-EU, can start flowing from the beginning of next year even if the CPR is not agreed.

EP faces roadblocks as lawmakers push for quicker deployment of COVID-19 funds

Lawmakers on the European Parliament’s regional development committee are keen to see a quicker deployment of funds for the mitigation of the immediate effects of the COVID-19 crisis but they face an uphill battle with the member states who propose less money and potentially longer procedures.

Green MEP Niklas Nienass echoed the concern about a “funding gap period that we hope not to run into, but we need backup plans for.”

Commissioner Ferreira pointed out that REACT-EU, unlike most other funds under negotiations, is anchored in the previous 2014-2020 budgetary framework.

This could make the transition easier, as the rules for the past period are already in place.

However, the recovery instrument will receive its funds from the €750 billion pandemic recovery fund that the European Commission will borrow from the markets. This makes REACT-EU potentially vulnerable to blocking vetoes from member states like Hungary and Poland, which are unhappy about linking EU spending to rule-of-law criteria.

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Commissioner Ferreira sought to downplay the transition gap worries by pointing out that regions will be able to retroactively bill their expenses under REACT-EU starting from 1 February 2020.

But there are several other unresolved issues in the CPR negotiation, the most controversial of which remains the so-called “macroeconomic conditionality” linking the disbursement of EU funds to the bloc’s budget rules, the stability and growth pact.

Both the Commission and the Council want to see a link between the disbursement of structural funds and EU countries’ fiscal health, potentially allowing to suspend parts of payments if a member state fails to take action to reduce its budget deficit.

The Parliament opposes the criteria, fearing it may deprive economically fragile regions of much-needed support during the pandemic.

Nevertheless, the Commission kept the conditionality in its revised proposal for the cohesion package this spring.

Divisions over economic criteria in cohesion policy negotiations

Negotiations on cohesion policy between the European Parliament, Commission and Council will take place on Thursday (15 October), focusing on how strictly the flow of money is regulated and whether it should be distributed according to economic criteria. EURACTIV Germany reports.

According to conservative MEP Raffaele Fitto (ECR), it would be “useless and perhaps even harmful for the Commission to insist on the macroeconomic conditionality at this stage” considering that EU funds “are so important for weak regions”.

In response, Commissioner Ferreira said “it’s not the Commission that is insisting” on the budget conditionality. “So, I think it is a political issue,” she added, saying the decision is “in the hands of the co-legislators” in the Parliament and Council.

“Of course, we’ve got to be aware of it,” she added.

The Council and Parliament negotiators hope to wrap up the talks on REACT-EU and a separate regulation to finance cooperation between border regions in November, and resolve the remaining issues with the CPR, the Just Transition Fund as well as the other parts of the cohesion package before the end of the year.

(Edited by Frédéric Simon)

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