The EU supports regions in Europe that are at a great economic and social disadvantage. According to EU Commissioner Elisa Ferreira, this cohesion policy is one of the most successful measures of the European Union. In the course of the Green Deal and due to the covid pandemic, the EU has changed its funding policy in 2021. The Diplomatisches Magazin talked about this with EU Commissioner Elisa Ferreira.
DM: Ms Ferreira, to what extent do underdeveloped European regions benefit from cohesion policy?
Elisa Ferreira: Some years ago, the World Bank labelled the EU ‘a convergence machine’ because of its capacity to support Member States catch up and converge with the EU average. The example of the Central and Eastern Member States that have joined in the big wave of 2004 is clear. Before accession, these Member States were slightly above 50% of the EU GDP average; currently most of them are above 75%. While being a long-term transformational policy, Cohesion also proven its value as an emergency response, notably in the recent pandemic crisis, where a temporary unprecedented flexibility (Coronavirus Response Investment Initiatives) was introduced enabling Member States to direct Cohesion funds to the most affected sectors. Hence, Cohesion is a living policy, constantly adapting to new realities and priorities, while remaining faithful to its core Treaty objective.
DM: What are the main changes in the funding guidelines?
Elisa Ferreira: The legislative framework for the 2021-2027 period features several novelties. In particular, it strengthens the alignment between the funds and new EU priorities by concentrating resources on implementing the green and digital transitions. This investment is crucial to ensure futureproof, sustainable and inclusive growth.
A new instrument has been created as part of the Cohesion policy, the Just Transition Fund. It aims at accompanying the climate transition by alleviating the corresponding social and economic costs in the territories most negatively impacted. In addition, the new legal framework also includes numerous and substantial simplification measures as requested by regional stakeholders. They make the policy more effective and reduce administrative costs, for both final beneficiaries and the funds’ managing authorities. Drawing the lessons from the recent crisis, the new framework makes the policy more flexible and adaptable to unforeseen events and sets for their systemic review in 2025.
DM: The fund promotes innovation, among other things “by supporting small and medium-sized enterprises”. Won’t this lead to an unfair distortion of competition and to the detriment of conventionally operating enterprises?
Elisa Ferreira: The objective of the European Regional Development Fund, when supporting productive investments in SMEs, is very clear: it shall promote innovative projects in those sectors identified in the smart specialisation strategies drawn by EU regions themselves. Regional policy has a strong territorial logic. It is important to clarify that this policy is governed under shared management, which means that it is the national and regional authorities who have the final responsibility of selecting the projects to be supported. Innovation is indispensable for sustainable development: companies that do not innovate would not survive in a competitive market. That is why EU funding incentivises innovation in SMEs to enhance their competitiveness and help them move up in the value chain. Importantly, innovation encompasses a large spectrum of elements and companies operating in traditional sectors disposing of growth potential, can – and shall – also be innovative and receive support from Cohesion policy.
DM: What about projects after the 2021-2027 programming period. When the funding ends, the projects may also come to an end. Is that sustainable?
Elisa Ferreira: Cohesion policy is an investment policy. It is essential to bear in mind that the impact of the policy continues after the end of financial support, and thus is not limited in time to the eligibility period. Moreover, projects can be supported under different programming periods, under certain conditions they can also be phased in from one period to the other. Our evaluations clearly demonstrate the long lasting impact of the policy, which reaches its full potential several years after the completion of the programmes. Technically, expenditure for the 2021-2027 period will be eligible until end of December 2029 and projects can be implemented at any time during this period.
DM: Almost a third of the total EU budget – EUR 392 billion – has been set aside for Cohesion Policy for 2021-2027. Where does the money for this come from? Through savings in other places?
Elisa Ferreira: The EU budget (EUR 1.2 trillion) is funded by contributions from Member States, custom duties, a share of collected VAT and tax on non-recycled plastic packaging waste. EU policies, including Cohesion Policy, are funded with these resources. As a response to the pandemic crisis and to support a future oriented recovery, the Commission also took the historical step of borrowing directly from the financial markets EUR 750 billion. To repay these funds the Commission is proposing new own resources for the EU budget. These are significant amounts but they have to be put in perspective. The EU budget accounts for just around 1% of the EU GDP. National budgets are significantly higher (some close to 40% of national GDP). The share of Cohesion policy has been broadly stable in the last EU budget, amounting to around one third of the EU expenditure. This importance mirrors the scope of Cohesion policy challenges. Let me stress that Cohesion policy enables and contributes significantly to the achievement of several EU policies and priorities, some of which do not dispose of their own EU funding instrument, or only marginally. In this respect, the allocation granted by the co-legislators to the Cohesion policy has not been set up to the prejudice of other policies.
Moreover, all countries and regions stand to benefit. It is a win-win. Previous studies show that for every euro invested there is a return of 2.74 euros (274%)!
Finally, it is a tangible expression of EU solidarity. Look around and you will see a hospital, a school, a bridge a company that has benefitted from Cohesion support. It is a policy that brings real change and added value to our citizens.
Interview Marie Wildermann