What will the European Union’s future cohesion policy look like? Will it cover all the regions or will it only concern the least well off? Could it even only be for the poorest member states, as some people want (see page 9)? The answers to these questions will be taking shape soon, via a report due out this month on the EU’s budget review.

That will already give an idea of the size, the criteria and the potential beneficiaries that the European Commission is thinking about. There will be more clarification in November with the fifth report on economic, social and territorial cohesion in the EU, which will set out the main orientations of this future policy. The report is nearly completed (see Europolitics 4050). Only the conclusions are on hold, waiting for the Commission’s position on the budgetary review to be completely finalised. The legislative texts will arrive at the end of the first half of 2011 following the proposal on the EU’s next financial framework.

So the final adjustments to the report on economic and social cohesion are awaiting the budgetary review. This makes sense since this policy is clearly closely linked to the future EU budget. Everything depends on the budget. A policy for everyone, a policy for some, the fate of the regions in transition… all depend on the future budget.

At the end of 2009, an unofficial document from the Commission services on the general reform of the EU’s budget created a stir in the regions. The text was clearly calling for a reorientation of expenditure priorities, which would entail a renationalisation of cohesion policy – concentrating resources on the states lagging furthest behind – and for a sectoral approach to the challenges. The volley of criticism that it unleashed seems to have led to the EU executive taking a step backwards and the latest comments by Commission President José Manuel Barroso and Budget Commissioner Janusz Lewandowski seem to suggest a less radical vision (see page 13).

“One of the merits of coming out with this paper is to have made it possible to understand the difficulty of these proposals,” says the cabinet of the Regional Policy Commissioner Johannes Hahn. But it makes no sense to dream. However the Commission presents things, the member states, or rather a good number of them, will tackle the budget review exercise with the idea of drastically cutting expenditure in their heads. The EU’s primary budget item – with €347 billion for the 2007-2013 period – cohesion policy may well be shaking in its boots ⁽¹⁾.

A big argument is the crisis, even if that annoys the regions. “We’re saying that cohesion policy is necessary precisely because of this economic context,” says Eleni Marianou, the secretary-general of the Conference of Peripheral Maritime Regions (CPMR). “Because it is a policy that is aimed at economic development, it is THE means we have to get Europe and the regions out of the crisis. We need to set the record straight because I have the impression that we only see the expenditure but without thinking too much about what it is used for. For us, it is essential to say that, because of this economic situation, because of this context of global crisis, we need this cohesion policy. We must stop considering this investment simply as expenditure to be kept down.”

TERRITORIES VERSUS SECTORS

The two are of course linked but, in addition to the size of the budget, it is its very structure which is of concern. Even if the budgetary review that is being prepared will be less radical than the document at the end of 2009, the Commission seems to be in the midst of an ideological debate on what place to reserve for sectoral and territorial policies. Here again, the regions are up in arms. “The starting point must be the territory, its needs and the challenges it must face and not a sector,” says Frédéric Vallier, the secretary-general of the Council of European Municipalities and Regions (CEMR).

Jean-Charles Leygues, the former deputy director-general of DG Regional Policy, which had steered through the previous reform of the Structural Funds, agrees. On 3 June in the European Parliament, he issued a warning. His argument came in the form of figures. “Eurostat data show that 55% of EU regions have a GDP lower than the EU average. Among the regions slightly above that, more than a third are in the bracket between 100% and 150% of the average. An extreme minority – 15 regions out of 271 – are in a situation of real competitiveness.” And the European territory suffers from comparison with its ‘rivals’. “The gaps in development range from one to eight between the EU regions, against one to 2.5 in the US and one to two in Japan.” In short, the problems need to be tackled with the territories as the starting point. “A sectoralisation policy would result in strengthening the most competitive sectors and increasing regional disparities.”

But some arm-twisting will need to be done, because, while the issue resurfaces in every budget review, it has never seemed as important as it is today. For example, there is consideration going on regarding the future of the European Social Fund (ESF) (see page 20)and the transport funds. It is not being ruled out that these “come out of” cohesion policy. Wrapped up in the argument of the ‘visibility’ of investments, this prospect worries the regions. Michèle Sabban, the president of the Assembly of European Regions (AER): “The separation envisaged between the ESF and the remainder of the Structural Funds would present the risk of exacerbating a lack of coordination that is already striking and of running down the synergies that exist with the European Regional Development Fund (ERDF). Sectoral policies, easier to sell in terms of communication because they are easier to explain, are not the solution for the development of regions in Europe, they are only an addition to it.” But whether the regions like it or not, the debate is underway. And among their traditional allies, the MEPs, not everyone is hostile.

HOW? - THE MAIN PRINCIPLES

Beyond the ‘for whom’, there is the how, the way in which the future cohesion policy will be put in place and will be organised on the ground. Here, one touches on the main principles that will appear in the regulatory proposals to be presented by the Commission in 2011. Below is a snapshot of the points that will be talked about over the coming months.

First of all, this policy is certain to be more geared around results. That is the only way to get out of the debate on added value once and for all. But while everyone agrees on the principle – Commission, member states and regions – finding out what it means concretely will generate some stormy debates. To determine ‘contracted’ objectives, performance indicators, monitoring and conditionality, it will be necessary to enter into discussions that many member states have so far refused. These are debates that many regions also dread. Governance will clearly be a big issue in the reforms to come, more difficult no doubt than it has ever been (see page 22). While they are not opposed to strengthened conditionality of cohesion policy in principle, the regions have already reacted to the idea of conditionality of aid linked to respect of the Stability and Growth Pact, issued by the Commission at the end of 2009. “We totally reject the Commission’s proposal to suspend the granting of Structural Funds for states whose deficit would be deemed to be excessive. That would make cohesion policy the only EU policy in which sanctions could be applied on authorities who are not responsible for it. What’s more, this suspension would unfairly affect local and regional authorities, who may be performing well, even in a country in deficit problems. This proposal would have a discriminatory nature given the unequal distribution of resources of Structural and Cohesion Funds between member states. That could lead to the cohesion policy being distorted,” Bresso warns.

A key principle of cohesion policy, the rule of automatic decommitment (‘N+2’ – member states lose the funds granted to a programme if they have not been spent within two years) will also be looked at (see page 22). The crisis, which has upset national/regional budgets and, as a result, their capacity to co-finance programmes, has given more weight to those who are calling for greater flexibility in this principle of good financial discipline. But it will not disappear. “Let’s never forget that, in the period from 1994 until 1999, when this system did not even exist, we found ourselves with billions and billions of outstanding commitments [money not yet spent - Ed]. So, you can criticise ‘N+2’ but it has an important role,” says Nicola De Michelis, deputy head of cabinet for Johannes Hahn.

There will also need to be some clarification on the links with the ‘Europe 2020’ strategy, the successor of the Lisbon strategy. Everyone, including the regions, agrees on the need to recognise that cohesion policy has to support the main priorities of the strategy if only, and this should not be forgotten, because it is a key argument to justify a cohesion policy that continues to cover all the EU’s regions. But everything seems to be about the balance to be found with what, up until now, continues to be cohesion policy’s primary mission: reducing disparities between the territories. Both the regions and MEPs say that cohesion policy needs to remain an “independent policy”. But is there a contradiction between the two approaches? Hübner does not think so. “It’s even the opposite,” she says. By focusing investment on the 2020 priorities, “we modernise cohesion policy, we use it to invest in what creates competitiveness and jobs”.

Be that as it may, the regions fear that putting too much stress on the ‘Europe 2020’ strategy works in favour of investment into the EU’s geographical centre to the detriment of areas on its periphery. Their message is that other tools need to be envisaged to finance 2020. There are thus some doubts about the benefits of ‘earmarking’, the obligation on member states, in the Structural Funds Regulation, to invest a certain percentage of the money received into projects that support the old Lisbon strategy. In this connection, the Committee of the Regions’ opinion on the future of cohesion policy, adopted in April 2010, asks if the earmarking of funds based on the strategy’s objectives has had an impact on cohesion. Frédéric Vallier (CEMR) thinks that the real problem lies in the way the strategy is defined. “Decentralised levels of government are asked to implement ‘earmarking’ policies without having had a chance to put a word in edgeways during their design. Our national associations representing local and regional authorities have had varying experiences with ‘earmarking’ but a number of them have noticed that it can create real problems and limit their flexibility.” For or against, the Commission has begun considering the future of this mechanism.

The concept of ‘territorial cohesion’ introduced by the Lisbon Treaty is also to be dealt with. Perhaps precise criteria should have been attached to it to be sure of what it means for cohesion policy and the type of action to be supported. But the Commission has always refused to do that. The regions agree at least that this is a legal argument – since it is in the treaty – against renationalising cohesion policy and/or making interventions based on sectors.

But how can the Commission concretely translate this concept into its proposals? This is where the level of scale of intervention could come into play. First of all, territorial cohesion “could be translated by a more significant involvement of the subregional level in the definition and implementation of the policy,” explains De Michelis. The idea of an urban budget item that is a bit stronger than it is today appears to be taking shape. MEPs support it. For Eurocities, the association representing cities, compulsory urban priorities should also appear in member states’ programmes. “And the principal cities in a region or functional area should be directly involved in setting up these priorities and in determining the appropriate scale of intervention,” it says.

The idea that it is not necessary to reduce intervention in the area of economic and social development to predefined administrative units (so-called ‘NUTS’ in EU jargon) is also an issue specific to discussions on territorial cohesion. The region would of course stay at the heart of this policy, but the Commission is looking at the possibility of allowing programmes to be developed on other scales. “We can put together several regions, several towns or even job catchment areas, mountainous areas, etc. This is the idea of having a functional territory,” explains De Michelis. In his Open Forum article in this edition, Commissioner Hahn says something along the same lines: “We are thinking about the most appropriate territorial scales of intervention for the future”. This is a debate onto which consideration of the macro-strategies ( see pages 24-26)and the strengthening of the territorial cooperation objective are being grafted.

It will be necessary to enter into discussions that many member states have so far refused

Ten-year financial framework?

Lengthening programming periods? The EU’s next financial framework will, in any case, perhaps be drafted for ten years – instead of the current seven years – along with a possibility to revise it after five years. European Commission President José Manuel Barroso clearly referred to the possibility very recently. “I would like to look at a ten-year framework, with a mid-term review of the financial dimension after five years – a ‘five plus five’ option. This will give us longer-term planning and a clearer link with the mandates of both our institutions,” he said in his speech on the ‘State of the Union’, on 7 September before the European Parliament. The Committee of the Regions would be delighted with the idea. The CoR’s President, Mercedes Bresso, welcomed it as “one of the CoR’s essential demands”. “The Committee has for a long time called for a system that will allow EU institutions to have more flexibility in drawing up the Union’s budget and political priorities”. The president of the CoR thinks that the review of expenditure, at the halfway point, should go up to 25% of the total budget. Danuta Hübner, the former regional policy commissioner and chair of the Parliament’s Committee on Regional Development, also applauded it. “For cohesion policy, it is the only way to do it,” she thinks. “The revision at the halfway point will increase this policy’s flexibility.”

Timetable looking tricky

In the best case scenario, the new legislative proposals will come out in the first half of 2011. That means that, in terms of timetabling, the situation is exactly as it was in 2004, when the Commission’s proposals had been presented two and a half years before the beginning of the new programming period. Back then, it had been necessary to pull out all the stops in the last few months before the new programming period to be ready on time and to allow member states and regions to roll out their programmes on the ground as quickly as possible. The procedure will be further complicated this time given that the Lisbon Treaty plunges cohesion policy into a new legislative framework, that of co-decision, meaning a longer adoption procedure with two readings (it is pointless to dream about reaching an agreement at first reading). If one also factors in that discussions will feature issues that are more difficult than ever – such as performance indicators, results and conditionality – there is no shying away from the fact that the timetable looks like being a real headache.

⁽¹⁾ The call by the vast majority of European regions for a cohesion policy for all the territories will be addressed during these Open Days in a seminar organised by the Atlantic Alliance (Andalucia, Lower Normandy, Brittany, Galicia, the Irish regions, the Basque country, Wales, Portugal and the South-West UK) consortium. Their aim is to put together the arguments in favour of their call. The seminar takes place on 6 October, from 11:15 until 13:00, at the Fundacion Galicia Europa.