The EU Cohesion Policy as a Backbone of Member States' Regional Development

The EU Cohesion Policy as a Backbone of Member States’ Regional Development

Photo: ua.depositphotos.com / weyo
24 July 2023
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The cohesion policy is one of the key policies and a principal investment instrument of the European Union, aimed at reducing regional disparities and promoting economic and social cohesion among its member states. The policy covers all European regions, categorizing them based on their economic, social, and territorial situations.

Concept and genesis of the EU Cohesion Policy

Although the Treaty of Rome did not explicitly mention cohesion policy, it emphasized the EU’s responsibility to foster solidarity and economic and social cohesion among member states. This commitment is reflected in Article 2 of the Treaty on European Union (TEU). The establishment of the European Social Fund (ESF) and the European Investment Bank (EIB) further solidified the policy’s objectives, focusing on employment opportunities, living standards, and economic and social cohesion.

Initially, cohesion policy did not hold significant political priority within the first decade of the European Economic Community (EEC) due to limited economic disparities among the founding member states. However, with the first enlargement in 1973, which included the UK, Denmark, and Ireland, economic disparities increased, prompting the establishment of the European Regional Development Fund (ERDF) in 1975. The ERDF aimed to address regional imbalances by co-financing productive investments, job creation, and infrastructure, particularly benefiting the UK’s depressed industrial areas.

Subsequent enlargements, such as Greece in 1981 and Portugal and Spain in 1985, further emphasized the need for substantive financing to bridge the development gap with the EU average. The cohesion policy gained full recognition as an EU policy with the Single European Act in 1985, aiming to complete the internal market and complement free-market principles with a social and redistributive policy. This led to the introduction of a new stand-alone chapter in the Lisbon Treaty (Art. 174-178 TFEU), which defines the framework for EU economic, social, and territorial cohesion, highlighting the objective of reducing disparities and backwardness in regions.

The Multiannual Financial Framework (MFF), particularly Delors I (1988-1992), provided a significant boost to the cohesion policy in terms of financial resources and implementation mechanisms. It transformed from a project-based financial support approach to a comprehensive policy instrument incorporating multi-annual programming, partnership, and additionality principles. In 1992, the Cohesion Fund (CF) was established as the fourth cohesion policy fund, financing environmental and transportation infrastructure projects in member states with GNP per capita below 90% of the EU average. The recent addition to the institutional architecture is the Just Transition Fund (JTF) in 2021, aligned with the EU’s green transition paradigm.

The substance of the EU cohesion policy is consistently aligned with EU policy priorities. During the MFFs from 2000-2006 and 2007-2013, the focus was on effectively implementing the Lisbon strategy, which aimed to increase growth, jobs, and productivity. Additionally, during the last completed MFF (2014-2020), the policy supported the objectives of the Europe 2020 strategy, focused on smart, sustainable, and inclusive growth. This period also witnessed the integration of 13 new member states from Central and Eastern Europe, all of which were less developed than the EU average, into the cohesion policy framework.

Thus, the EU cohesion policy has evolved from its conceptual basis to become a crucial instrument for promoting economic and social well-being and reducing regional disparities within the EU. It has adapted to changing circumstances and policy priorities over the years, supporting the development objectives of member states and contributing to the overall harmonious development and cohesion of the European regions.

Basic Principles for the Management of EU Cohesion Policy Funds

The management of EU cohesion policy funds adheres to some key principles to ensure effective and efficient use of resources while maximizing the impact on regional development:

  1. Concentration: Funds primarily target the least developed regions with the greatest need for support.
  2. Programming: Resources are allocated based on medium-term national development plans, ensuring stability and coherence in policy implementation.
  3. Additionality: EU funds complement, rather than replace, member states’ own structural expenditure, promoting partnership and shared responsibility.
  4. Partnership: Close cooperation between the European Commission, member states, private sector entities, and regional/local authorities enhances project targeting, innovation, monitoring, and evaluation.
  5. Efficiency: Member states bear the primary responsibility for implementing and monitoring cohesion policy, with a focus on improving efficiency and rewarding successful developmental programs.
  6. Subsidiarity: The EU’s role is to support member states at the regional, national, and European levels, with the Commission engaging where its intervention is more effective.

Cohesion Policy in the EU Budget

Cohesion policy plays a significant role in the EU budget. It represents one of the largest investment policies, accounting for a substantial portion of EU expenditure. The Multiannual Financial Framework (MFF) reflects the agreement among the EU member states and the parliament on the budgetary priorities facilitating the budgetary procedure and the management of various programmes. It sets the financial framework for cohesion policy, outlining the total amount allocated to different funds and programs over a specific period, usually seven years.

The European Structural and Investment Funds (ESIF) are the main financial instrument supporting cohesion policy. These funds consist of several components, including the ERDF, the ESF, the Cohesion Fund, the European Agricultural Fund for Rural Development (EAFRD), and the European Maritime and Fisheries Fund (EMFF).

The ERDF is the largest component of the ESIF and focuses on promoting economic and social cohesion by investing in infrastructure, innovation, and entrepreneurship. It supports projects related to transport, energy, digital infrastructure, research and innovation, and the transition to a low-carbon economy. The ESF, as mentioned earlier, is dedicated to promoting employment, social inclusion, and skills development.

The Cohesion Fund provides financial assistance to member states whose GNI per capita is below a certain threshold. It supports large-scale infrastructure projects in the areas of transport, energy, and environment. The EAFRD and EMFF, support rural development and fisheries respectively, contributing to the overall objectives of cohesion policy.

For the current MFF for the period 2021-2027 the EU member states collectively agreed on a comprehensive financial package amounting to EUR 1,824 billion. It places a strong emphasis on cohesion policy, reflecting the EU’s commitment to reducing disparities and promoting sustainable development. This package consists of two components: the regular Multiannual Financial Framework (MFF) for the period, totalling EUR 1,074 billion, and the NextGenerationEU instrument with a value of EUR 750 billion. Table 1 below outlines the agreed allocation of funds from the MFF and NGEU by expenditure priorities.

Table 1. Allocation of funds under the MFF 2021-2027 and the NGEU (billion EUR; in 2018 prices)

Source: EU institutions, various sources

The Role of Regional Development in EU Approximation Process 

Regional development plays a crucial role in the EU approximation process, particularly under Chapter 22 of the EU acquis, which form the basis of the accession negotiations. EU acquis is the collection of common rights and obligations that constitute the body of EU law. Chapter 22 Regional policy and coordination of structural instruments governs the EU regional development policies and aims to strengthen economic, social, and territorial cohesion. The legal basis for regional development is outlined in Articles 174-178 TFEU, which emphasize reducing disparities between regions and promoting cohesion instruments/funds.

The acquis for Chapter 22 consists mainly of framework and implementing regulations that do not require national legislation transposition. These regulations define the rules for developing, approving, and implementing cohesion policy fund programs at the national and regional levels. While the European Commission negotiates and agrees on these programs, their implementation is the responsibility of member states, who must adhere to EU legislation on public procurement, competition, environment, and other areas.

The key elements of Chapter 22 include establishing a legislative framework, an institutional framework, administrative capacity, programming, monitoring and evaluation, and financial management and control. Member states must develop legislation allowing for multi-annual programming, budget flexibility, and efficient financial control. They must also establish the necessary institutions, coordination mechanisms, and partnerships to implement the programs. Adequate administrative capacity, including qualified staff and organizational arrangements, is crucial. 

Conclusion

The EU cohesion policy has evolved significantly since its inception, reflecting the EU’s commitment to promoting economic and social cohesion among member states. Through its legislative development and substantive evolution, cohesion policy has become a comprehensive instrument aimed at reducing regional disparities, fostering sustainable development, and strengthening the European project. By providing targeted investments, strategic planning, and financial support, the EU cohesion policy continues to play a vital role in shaping the socio-economic landscape of Europe.

This short article has been produced with the assistance of the European Union and its member states Germany, Poland, Sweden, Denmark, Estonia and Slovenia. It is part of a Policy Paper “Ukraine’s EU Accession Process in the field of Regional and Local Development, Ministry responsible for regional and local development in the driving seat!”, jointly prepared by prof. Mojmir Mrak and Piotr Zuber, international experts of U-LEAD with Europe, in March 2023 (U-LEAD with Europe – Ukraine’s EU accession process in the field of regional and local developm…). All terms in this article are meant to be used neutrally for men and women.

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