Though the EU’s 672,5 billion euro recovery fund
is all the rage when discussing European investment in the coming years,
the silent giant of cohesion policy
will be one of the main driving forces to achieve an equitable recovery,
and the EU’s digital and green aspirations.
Let's try to demystify the present and future of European cohesion!
So what’s new?
The new rulebook for the shared-management funds,
that is funds that are co-managed by the EU and the member states,
has a 30% climate target,
includes a lot of simplifications
and reinforces the so-called partnership principle
– meaning that the EU, national, regional and local authorities
should be closely involved at all stages of fund implementation.
This will be especially important in places
where the national government may not be
on good terms with local authorities,
which at times have the opposition in the driver’s seat,
like in Hungary and Poland.
So what are the main cohesion funds?
We won’t cover all the different money pots
that are referred to as structural or cohesion funds.
For the sake of clarity,
when we will talk about the current cohesion package here,
we refer to the European Regional development fund (ERDF)
and Cohesion Fund,
the Just Transition Fund and the REACT-EU.
There are also funds set aside for cross-border projects.
The highlight there is that now more attention will be given
to the so-called outermost regions,
that is European territories in the western Atlantic Ocean,
the Caribbean basin, the Amazonian forest
and the Indian Ocean of France, Portugal and Spain.
But back the funds.
So let’s take a look at these one by one.
First, the Regional Development and Cohesion Funds.
The two are usually spoken of together,
because they are covered by the same legislation.
The difference is that ERDF is the classical cohesion instrument
meant for small, regional initiatives
while the Cohesion Fund usually finances bigger infrastructural projects.
For the 2021-2027 period
the ERDF and Cohesion Funds have as their goal to bring about
a smarter, greener, more connected, more social Europe
that is closer to its citizens.
It has also a sharper focus on structurally disadvantaged areas,
such as depopulating places in Europe.
Second, we have the new 17.5 billion euro-strong Just Transition Fund
that will help coal-dependent regions transform their economies.
One of the stickiest issues during the negotiations
was the financing of gas projects as a transition fuel,
which led to a compromise:
gas will be supported in coal-dependent regions by the ERDF/CF funds
based on their income levels and coal reliance
but not by the JTF.
The REACT-EU is also a new fund,
and it will help prop up the bloc’s economy
by supporting health services and small businesses.
When the coronavirus first hit,
the European Commission relaxed rules on cohesion funding
to allow regions to draw on the 37 billion euro of unused EU cash.
The REACT-EU will act as a €47.5 billion bridge
between these emergency measures and the classical cohesion policy.
The fund is more flexible than the traditional cohesion funds,
so member states will have more leeway to decide on how to spend them.
Now, is there more or less money overall for cohesion?
As so often is the case in the Brussels bubble,
it depends on how you count.
If we only count the ERDF/CF then yes.
However, if we add to the mix the REACT-EU and the Just Transition Fund,
we end up with more cohesion money.
Why?
Because the former completely and the latter partially
are financed from the 750 billion
to be borrowed from the markets,
called Next Generation EU,
outside of the classical 7-year budget.
Taken altogether, cohesion instruments will make up
more than a sixth of the EU’s massive 1.8 trillion budget.
So when are we going to see the money?
Before discussing that,
we first have to go back in time a little bit.
Cohesion money generally follows the n+3 rule,
meaning allocated money has to be spent
at most three years after it is budgeted.
That means, the implementation of funds from the 2020 period
will run until 2023.
Moreover, the Commission will start completely closing the programmes
under the 2014-2020 long-term EU budget only in 2025.
But here is the twist:
European countries are still changing their programs
and reallocating money from the last period,
which was made possible by the relaxed coronavirus response rules.
This means, there is a significant overlap
between the previous period and the next one.
Here is where the REACT-EU comes in,
acting as a bridge between the longer-term cohesion policy
and short-term measures needed to combat the crisis.
Regions can retroactively submit a cheque under REACT-EU
starting from 1 February 2020 all the way up until 2023,
but then will have an extra two years to finish their implementation.
One thing for sure,
regions and cities will have a lot on their plate
and between all these funds,
they should have enough financial backing.
What remains to be seen though
is whether those implementing the EU money
have the capacity to do so,
and whether they intend to spend it in the right places.