Abstract
This article addresses the ongoing debate on the future of the EU cohesion policy and changes in its management rules, as anticipated by the European Commission, for the period after 2013. There are many reasons to assume that the cohesion policy has entered a new stage of development, as its future outlook will depend much on the intensity of the current economic crisis, the financial difficulties of EU Member States, the ruling atmosphere of euroscepticism and the lack of European solidarity. For supporters of a strong EU cohesion policy, it is as much of a challenge to demonstrate its positive effects on all European regions as it is to introduce the necessary reforms to make it even more effective, modern and central to realising the Europe 2020 strategy.
The new image of the cohesion policy
The process of preparing the next multiannual budget of the European Union (EU) has always been closely linked to the changes being drafted to the rules for implementing the cohesion policy. Hence, along with the acceleration of the procedure for determining the EU Multiannual Financial Framework (MFF) for 2014–2020, the debate on the reform of the cohesion policy is increasingly intensive and new documents concerning the reform are appearing. 1 Today's climate is not favourable for this discussion and there are many signs that the policy will be significantly shaped by current events. The problems at present are the economic crisis, the financial difficulties of EU Member States and, more broadly, the ruling atmosphere of euroscepticism and the concrete lack of solidarity. These factors, however, are not new drivers in the formulation of the cohesion policy. As history shows, reform and change have often been the result of temporary political and economic circumstances. It is therefore not always the experts’ view that is of the greatest importance for changing policy priorities and mechanisms; more often these are shaped by politicians and their short-term interests.
This article describes the situation as of September 2011, that is, before the official announcement of the European Commission proposal for new regulations on the cohesion policy for 2014–20.
In the debate on the cohesion policy, we are usually dealing with two extreme ways of perceiving the matter. One emphasises closing the gap in development as measured by gross domestic product (GDP) per capita, and stresses that the policy should be concentrated on supporting the poorest areas in the EU. Undoubtedly, such a narrow vision of the cohesion policy is connected to reducing its impact on and its share in the Community budget. This way of thinking may also lead to the idea of re-nationalising the policy. This view, however, raises some questions. For instance, should the cohesion policy eventually come to an end, assuming it achieves positive results and neutralises regional divergences? Or should the threshold for benefiting from cohesion funds be adjusted in order to account for differences between rich and poor regions?
At the other extreme are proponents of a strong EU cohesion policy based on a large budget. They would like to change its image from ‘the charity policy for the poorest’ to ‘a development, growth and innovation policy for all’. This second conception of the cohesion policy emerged during the negotiations over the current EU Financial Perspective (2007–13). This approach—which comes down to the so-called Lisbonisation of the policy—is now reflected in the tendency to closely link instruments of the cohesion policy with the implementation of the Europe 2020 strategy.
The division between these two approaches towards the cohesion policy is even sharper in the context of economic problems caused by the ongoing financial crisis. An unwillingness to co-finance the EU budget is usually associated with a particular perspective on the cohesion policy. In the current debate we can see a vacillation between the two extreme positions. Both of them, however, may threaten the existence of the policy. If its sole objective is economic convergence, the policy should be designed to come to an end. If, however, the policy is to be shaped only on the basis of interim targets such as the EU strategy (Lisbon or Europe 2020), this could lead to expenditure cuts to the advantage of other EU policies such as research, transport and energy. Finally, in both cases, one can predict the phasing out of cohesion policy instruments and the policy's eventual elimination.
Instead of framing the debate in terms of these two extreme views, we should creatively and effectively use the ideas, experience and instruments of the cohesion policy to develop a more moderate approach. Let it be a policy that supports both poor and rich areas of the EU, but in different ways. Let it be a modern policy that applies known and proven, as well as entirely new, instruments. The cohesion policy, with its investments and pro-development character, can play a special role in the fight against current problems caused by the economic crisis, by achieving the mid-term objectives of the new European strategy until 2020 as well as those objectives even more distant in time—objectives which go beyond the strategy. The cohesion policy has the potential to generate a competitive advantage for companies, regions and countries, and to develop human and intellectual capital, and digital impetus. This approach does not undermine the provisions of the Treaty on the Functioning of the European Union, which state that the policy's aim is to strengthen economic, social and territorial cohesion (consolidated version, Art 147), nor does it change the fact that the policy is still largely focused on the poorest regions in Europe. Rather, this approach constitutes a certain shift of emphasis, pointing to the fact that the cohesion policy is more than a time-limited tool for reducing disparities in development: it is a policy that will always be necessary and that can bring benefits to the whole EU. 2 This is so because economic, social and territorial disparities are a permanent fact—even if we manage to overcome some of them, new ones will arise, coming for example, from demographic developments, mobility barriers or climate change. In the future we may be faced with divergences in development that we do not know about now. There will always be a reason to invest in projects promoting cohesion and convergence, although these reasons may have different dimensions and characters than those we see today. Therefore, if disparity is a constant, the policy aimed at eliminating it also needs to be continuous and permanent.
The results of the study conducted by the Institute for Structural Research indicate that benefits from transfers to Poland in the framework of the cohesion policy for the EU-15 are significant and amount to about 18.5% of the total allocation. See Ocean korzy ci uzyskiwanych przez Pa stwa UE-15 [6, p. 3].
Do not forget about shared management
When assessing cohesion policy one has to take into account that the financial management of this policy is shared between the European Commission and the Member States [1]. This type of shared management applies to about 76% of the EU budget. 3 Hence the quality of cohesion policy expenditure in terms of its legality, compliance with procedures and achievement of goals largely depends on the functioning of the individual Member States. This is in spite of the fact that it is the European Commission that is ultimately responsible for the execution of the budget before the European Parliament (EP). Special attention is paid to this issue during the procedure of the annual budget discharge in the EP (based on the results of the report by the European Court of Auditors). For several years the Court and the Commission have cautioned that the financial information provided by Member States is incomplete and unreliable [2, pp. 12–23]. The latter remains an important weak spot for the policy and is often criticised as part of the EU budget. In light of some Member States’ nonchalance it is justifiable to demand stricter control and payment suspension rules, especially for countries that have notorious problems with appropriate and legal spending.
See Who manages the money? [9].
The fact that cohesion policy expenditures fall under the shared management category means that the policy is pursued in accordance with the principle of multilevel governance. Therefore, we must not forget that the responsibility for the effective spending of EU funds rests in large part with the Member States, their regions and the other entities involved in the shared management system.
How much? What for? How?
As mentioned, the preparation of the next MFF is closely related to the reform of the cohesion policy. The proposal for changes already announced by the European Commission should be seen in light of the issues described above. The rationale for the EU cohesion policy and its instruments can be addressed by answering three fundamental questions: How much? What for? and How?
How much?
This question refers to the financial arrangements and rules of allocation. Taking into account the current circumstances, the proposal for the MFF announced by the European Commission in June 2011 [3] may satisfy supporters of the cohesion policy. It amounts to €336 billion, added to which is the €40 billion earmarked for the new fund—the Connecting Europe Facility—a total of €376 billion. This is an increase over the period 2007–13 and as such represents one-third of the total budget for 2014–20. Of course, we cannot be sure now how much of that will remain after negotiations with the Council; the procedure for agreement on the financial framework for 2007–13, for example, saw an 8.4% reduction between the amount proposed by the European Commission for heading 1b (cohesion policy) and the final negotiated amount [5; quoted after 7]. Expenditures continue to be directed towards the poorest regions of the EU, but the idea of introducing a new category of ‘transition regions’ makes the idea of a ‘cohesion policy for all’ more relevant. Most often, interventions in the framework of this policy bring results in the medium term and they should not abruptly change direction and geographical scope. The support for regions with GDP per capita above 75% of the EU average should be further differentiated, because currently this category also includes regions with GDP levels reaching 300%. Countries such as Poland support the idea because they are thinking with a long-term perspective. Soon, thanks to the cohesion policy, the GDP in some regions of Poland will exceed 75% of the EU average. These regions should not be punished for their success by a radical cut in EU funds.
Another important issue related to the budget for the cohesion policy is the capping of allocations in relation to gross national income (GNI). The European Commission proposes to introduce two main changes: to set the cap as a percentage of GNI (not GDP), and to fix the maximum share of EU funds at 2.5% of the GNI (of a given Member State). It seems to be the right solution, taking into account the growing absorption problem in some countries, especially those affected by the crisis. Another equally important (but in its nature quite opposite) argument for the reduction relates to economic growth. Should the maximum level of the allocation of 4% of GDP be maintained, budgetary capabilities would be exceeded given the economic growth in some countries. Moreover, lowering the 4% cap would obviously bring savings to the EU budget.
What for?
Answering this question means referring to the concentration of policy instruments that bring European Added Value (EAV) and as such contribute to the achievement of the Europe 2020 strategy goals. Although it has been proven many times already that the cohesion policy does generate EAV, there are still many who ask fundamental questions about whether the policy actually provides additional impetus for development. Would it not be possible for regions and enterprises to realise all those projects without EU co-financing? These questions sound even louder in the current economic situation. Therefore, it is crucial for supporters of the cohesion policy to be able to identify the specific effects of the projects implemented with the support of EU funds. One way to do this is to link the funds to the implementation of the Europe 2020 strategy. The need to establish such a link was obvious from the moment the strategy was announced and was actually not new [4, pp. 24–25]. As already mentioned, under the current EU Financial Perspective we have to work with the ‘earmarking’ or ‘Lisbonisation’ of funds, that is, the rule that the relevant portion allocated to the Member State has to contribute to the goals of the Lisbon strategy. According to some analyses, 67% of the cohesion policy's financial resources are already focused on achieving the objectives of the strategy [8]. The EP has rightly warned, however, against narrowing the impact and importance of the cohesion policy to a tool for implementing the Europe 2020 strategy. The autonomy, fundamental principles and objectives of this policy have to be respected. Only then can a smooth realisation of the Europe 2020 strategy—and permanent results thereafter—be assured. Particular attention should be paid to the fact that this policy cannot be limited or matched to the implementation of only one of the strategy's three priorities (inclusive growth, sustainable growth and smart growth). The cohesion policy defies such simple and rigid divisions; it is multidimensional and contributes to smart, sustainable and inclusive growth at the same time.
One of the European Commission's new ideas for better concentrating the cohesion budget on EAV and the Europe 2020 strategy is ring-fencing the Connecting Europe Facility (for investments in transport and energy infrastructure). Although this concept in itself is correct, the implementation mechanism proposed by the Commission may be difficult for some Member States to accept. According to the European Commission, decisions about allocating resources to projects should be taken by its administration. In other words, there should be no national envelopes, and the competition for the fund should take place at the EU rather than at the national level. The Member States may be sceptical about such a solution, especially given that eventually the implementation of these big and complex projects will require a significant commitment from their administrations. This may be yet another difficult issue in the negotiations over the rules for cohesion spending in the new MFF.
How?
Answering this question means referring to management and implementation improvements as proposed by the Common Strategic Framework, conditionality, partnership contracts, and innovative financial instruments. The legitimate aim of these changes is to orient the policy towards objectives and outcomes rather than procedures and the fast disbursement of allocations. Innovations in managing the policy should concentrate on the evaluation and monitoring stages and, as compared with the present system, there should be more attention given to the qualitative rather than the quantitative results of policy actions.
Some significant misgivings have arisen about the concept of conditionality. This mechanism rightly assumes that the impact of cohesion funds should not be weakened or hampered by the inappropriate macroeconomic and financial policy of a Member State, by the incorrect transposition of EU law, or by institutional or administrative shortcomings. Thus, the payment of funds would be executed under the condition that a given state fulfils its obligations, which are often associated with its macroeconomic performance (macroeconomic conditionality). In the case of payment suspension, the victim may be a region or city which will not be reimbursed for its project. Such a situation—when the subnational level is punished for negligence at the national level, or for mistakes not related to the cohesion policy—cannot be accepted. Put simply, regions should not agree to such conditionality when the construction of a sewage treatment plant depends on the progress of pension reform in the state.
In response to the question of how, the European Commission has also prepared a set of instruments called ‘the performance framework’. This consists of ideas such as partnership contracts, milestones, performance reserves and better and more intensive use of innovative financial instruments. It is worth noting in particular that the partnership contract signed by the European Commission and a given Member State is to be a tool for strengthening the commitment to implement the goals of the Europe 2020 strategy as well as the National Reform Programmes and convergence programmes with the use of structural funds. Still, we do not know what role regional authorities will play in such a contract, what their position will be in the multilevel governance system or how the concept will be applied in individual Member States, with their different administrative orders and competences at the subnational level.
Concluding remarks
The future shape of the EU cohesion policy depends both on the share of the budget that is granted and the rules for implementation. The final amounts allotted for the cohesion policy in the MFF are not known yet, as they depend on negotiations in the Council that have only just started, with their most difficult stage still ahead. Although the EP is struggling to influence this process, it is a fact that its role is limited at this stage of the procedure. Soon, however, new legislative regulations for the implementation of the cohesion policy will be debated in the EP. Apart from the general regulation and the regulations specific to each fund, the Financial Regulation will have a fundamental impact on the implementation system in Member States. All these legal acts will be adopted using the codecision procedure, in which the EP operates on an equal footing with the Council. Therefore, the EP's role in this regard is more significant than in the case of the budget. In the procedure of shaping cohesion policy regulations, there will still be an opportunity to confront the new ideas proposed by the European Commission with the interests of stakeholders such as Member States, regions, local communities, cities, NGOs and businesses. The outcomes of both procedures—for the MFF and for the regulations on cohesion policy—are interrelated. The ongoing political and economic developments in Europe are, unfortunately, more threatening than favourable for the policy. Therefore, our primary concern in discussing the next stage in the evolution of the cohesion policy is to make sure that short-sighted arguments do not prevail over the evident long-term benefits of this policy.
The cohesion policy is the most transparent European policy, which makes its successes—but also its failures—immediately visible. The essence of shared management means that difficulties in policy implementation often arise from the weakness of both the Brussels administration and the administrations of Member States. It is very easy, therefore, to draw conclusions and point to additional cohesion policy problems relating to various external conditions such as a crisis, and diminish its meaning, to the benefit of other EU policies. This is an obvious mistake, because the new economic situation requires the strengthening, not weakening, of the EU cohesion policy.