New European look for Cohesion Policy

Terminology

The New Cohesion Policy is regulated in treaties as one of the fundamental policies actively pursued by the European Union. Title XVIII of the Treaty on the functioning of the European Union (TFEU, 2012), entitled Economic, Social and Territorial Cohesion, deals precisely with Cohesion Policy. According to Article 174 of the TFEU, the European Union shall work for the harmonious development of the whole Union. In pursuit of this objective, it supports actions in the three areas of social, territorial, and economic cohesion by eliminating disparities in development within individual regions. As with the previous financial framework, the EU published a new plan for cohesion policy and explained the new aspects that European citizens will have to deal with in the upcoming 2021-2027 perspective. Therefore, this article aims to present the EU’s approach to cohesion policy for the coming years.

New financial perspective and new priorities

With the advent of this new financial perspective, the EU is facing new challenges, not only in the political arena but from an economic standpoint too. Undoubtedly, the most important and noticeable objective of the new cohesion policy would be the orientation of the approach towards an increasingly digital transformation, without excluding the pursuit of a greener Europe. 

Cohesion policy in the new financial perspective will focus on five growth-oriented policy objectives (European Commission, 2022a) 

1. a more competitive and smarter Europe
2. a greener, low-carbon transition towards a net zero-emission economy
3. a more connected Europe through improved mobility
4. a more social and inclusive Europe
5. a Europe closer to its citizens. This objective is to be ensured by supporting initiatives for the sustainable and integrated development of each territory.

Union funds

Each of the EU funds will support specific objectives addressed by the cohesion policy. As a rule, the European Regional Development Fund will support each of the above goals (European Commission, 2022a). Its most important priorities include goals 1 and 2, i.e. a competitive, intelligent Europe, and environmental aspects, like ecology and low-emission transformation. The resources from the European Social Fund will support activities in the implementation of Objective 4, concerning a social Europe (European Commission, 2022a). Under this new perspective, the activities of the Union will emphasise even more the importance of social inclusion within European societies. Objectives 2 and 3 will be implemented under the Cohesion Fund (European Commission, 2021) Within this thematic concentration, the Union’s action will be directed toward the forward-looking goal of creating an even more competitive Europe than today.

Assumptions of the New Cohesion Policy 

One of the basic assumptions under the new financial perspective is the inclusion of climate objectives in the measures. In particular, they are concerned about the balanced contribution of investments in climate and environment, and the inclusion by the Member States of activities in the spheres of adaptation to climate change (European Commision, 2021). The new perspective takes into account the need to give more powers to authorities and to make local, urban, and territorial jurisdictions more active in the context of managing the funds. As a result of this approach, a purpose has been added to the policy objectives, which will be implemented exclusively through territorial and local development strategies (European Commision, 2021). Within the framework of the new financial perspective and the new cohesion policy, the need for simplification has been taken into account. Thus, there will be a single set of rules dedicated to all EU funds. It is also planned to limit the issue of secondary legislation, which will translate into changes in the context of reporting and monitoring. It is assumed that in the new cohesion policy, program controls, management verifications, and the single audit principle will be limited. An undoubtedly new element is the introduction of flexibility in the area of adapting cohesion policy programming to emerging challenges and needs. This flexibility will be the result of a review of the socio-economic situation in a given country (European Commission, 2021).

European Commission Report

In February 2022 the European Commission published a report based on which it was possible to identify fundamental differences in the development level of regions of the Union. Despite the policies that have been pursued, there are still fundamental disparities in development (European Commission, Eighth Report on Economic, Social and Territorial Cohesion, 2022d). 

EU cohesion policy measures contribute to improving and increasing GDP per capita, as the example of Ireland shows. Ireland’s GDP grew by 1.56% in 2000 and by 1.2% in 2005. (T. Dorożyński, 2010). The European Commission emphasises the positive impact of cohesion policy in many reports, but there are also different studies indicating a different approach. However, there is no evidence that a lack of action by cohesion policy would increase disparities between regions (Boldrin, F. Canova: Inequality and Convergence in Europe’s Regions: Reconsidering European Regional Policies, Economic Policy 2001, No. 32.) Indeed, differences in development between regions have generally been minimised, especially in the area of social and economic development. By 2023, GDP per head in the less developed regions is expected to increase by 5 percentage points (Kucharczyk, 2022). Thanks to cohesion policy measures, less developed regions, especially in Eastern Europe, have started to develop, which has resulted in smaller and smaller disparities in development. Differences in development have become less significant through actions in the area of employment. Changes in the area of employment concerned a breakthrough in employment in the agricultural sector and a shift of employment to higher value-added sectors (Eighth Report on Economic, Social, and Territorial Cohesion, 2022). These changes, according to the report presented, were one of the most important factors for growth and for structural change in the area of agricultural employment. In addition, EU funding has also allowed additional investments to be carried out.  The authors of the report noted an increase in financial outlays on cohesion policy measures. Comparing the 2007-2013 programming period with the 2014-2020 one, the increase in spending has been between 34 and 53% (Eighth Report on Economic, Social and Territorial Cohesion, 2022). However, rapidly developing countries are experiencing further development disparities within individual regions. The gap in regional development is also observed in the context of implemented innovations and is caused by a lack of investment in research and development (Eighth Report on Economic, Social and Territorial Cohesion, 2022). Poorer regions do not have the means to carry out research and development, and it is this that brings about diversification, both economically and socially (new jobs, diversified offers, greater competition on the market) (Eighth Report on Economic, Social and Territorial Cohesion, 2022).

Cohesion policy in the context of the war in Ukraine 

Given the ongoing war on the territory of Ukraine, the European Union has decided to take action and assist the Member States hosting refugees. The proposal adopted by the European Commission concerns actions under the Cohesion Policy for Refugees in Europe (CARE) (European Commission, 2022c). These actions will enable the Member States to provide emergency support to people fleeing the war in Ukraine. Implementation of CARE requires greater flexibility in the area of cohesion policy regulations compared to the 2014-2020 period. This flexibility can be seen in the rapid allocation of resources for emergency support (European Commission, 2022c). REACT-EU funds are also to contribute to this objective. Recovery Assistance for Cohesion and the Territories of Europe is an EU initiative responding to the crisis caused by the coronavirus pandemic. It includes two investment initiatives, and it does not only aim to rebuild the EU economy, but also to strengthen it for possible future crises and to help build a green and digital Europe. Due to the war in Ukraine, part of the funds (10 million euros) have been allocated to the Member States to assist refugees (European Commission, 2022b)

 CARE’s flexibility is also to be seen in the area of cohesion policy regulations. These changes include

– the possibility of using REACT-EU funds

– use of ERDF (the European Fund for Regional Development (ESF) and ESF (the European Social Fund resources for support measures 

– simplification of rules on reporting and amending programs

– eligibility of expenditure with retroactive effect from the date of the invasion. Expenditure on support measures will be eligible (European Commission, 2022c)

CARE will finance the basic needs of refugees such as temporary accommodation, provision of food, and medical care. As a result of CARE, Member States will have an increased capacity to respond to new assistance needs as they arise. CARE funds may be used to support activities in the area of developing key solutions for long-term integration, among others.  In the second half of March, the European Commission proposed raising the total amount of advance payments in support of REACT-EU by EUR 3.4 billion (European Commission, 2022b).  

The CARE instrument is an example of EU support targeted at Ukrainian society, which will help the fleeing population settle in the host Member States.

Conclusion

We can now understand how the cohesion policy is one of the European Union’s most important policies sought nowadays. The current challenges faced by the  European Union set the direction of cohesion policy for the coming years. The changes we are observing in Europe – summarised by an increase in the importance of technology, and an emphasis on ecology- determined the development of cohesion policy through, among other things, the financing of projects in the areas of digitization, which is also noted in the context of the war in Ukraine. Shortly, these will determine the direction in which the EU’s cohesion policy will go 

References