‘Cohesion policy is essential to the functioning of Europe’

By Gaston Moonen

With the transition goals it presented in its Green Deal and Digital Strategies, the Von der Leyen Commission made it clear from the outset that multiple instruments, both traditional and new, would be used for targeted investment and inclusive growth. Cohesion is one of the core EU policies which, from its early days, has aimed to support transition and promote convergence. Elisa Ferreira, EU Commissioner for Cohesion and Reforms, not only has many years of experience in various economic and social convergence roles, but is also very much aware how essential cohesion investments and reforms can be to achieve the overall goal of ensuring that no one is left behind. An interest that should motivate all Member States and one which, in her view, is essential to the democratic fabric of the Union.

Cohesion as the antidote to a segmented Europe

Although for many people the word ‘cohesion’ may sound like a technical EU term, Elisa Ferreira connects it to core EU values. ‘For me, cohesion policy is a crucial part of what we Europeans call “democracy”. Democracy provides equal opportunities for people to have a decent life and a good job, and to be able to participate in and contribute to our community’. She explains that ‘free competition in the internal market is good’, but to work properly, the internal market needs to operate on a level playing field to which cohesion policy contributes by rebalancing opportunities between unequal partners. Thanks to cohesion policy, less developed countries and regions can ‘play the game’ and be an integral part of the common market.

When discussing how successful cohesion policy has been in recent decades, Elisa Ferreira highlights its role as a convergence machine for the European Union. She then adds decisively: ‘Honestly, it would have been very difficult to keep Europe together throughout all these years if cohesion policies had not existed. Because when we enlarged the EU from the initial six Member States to the current 27, incorporating economies that were really lagging, if you had not supported the new economies, you would have created a very fractured and segmented Europe’.

She argues, however, that this risk still exists: ‘Even now, we see that if you overlook parts of European territory — and when I say “territories”, I mean the communities living these territories — and if they feel or are actually left behind, and do not have a stake in overall growth and well-being, if they feel that Europe does not include them, then very often the reaction is: “they don’t care about me, so I don’t care about them”’. And this completely destroys the political unity that is required for Europe to be the community of destiny that we all want it to be… and which we have managed to achieve in recent decades. So I think cohesion policy is essential to the functioning of Europe!’

Encouraging convergence data

The Commissioner points to research and data which, in her view, confirm the link between cohesion and the capacity to catch up, thereby preventing the sort of extreme polarisation which would undermine the democratic basis of the EU. ‘We have just published the 8th Cohesion Report, where we carry out this evaluation of the policy every three years. In this report, we present some very detailed figures, and conclude that the convergence machine is working, the most backward regions have substantially caught up, and that the convergence rate has been substantially increased by cohesion policy’.

She explains that, thanks to cohesion policy in the 2014–2020 period, the GDP per capita of less developed regions is expected to increase by up to 5% by 2023. We also observed ‘a 3.5% reduction in the gap between the GDP per capita of the 10% least developed regions and the 10% most developed regions. These are telling indicators, but the evidence is not only quantitative. When you look at health systems, the increase in life expectancy across Europe, education indicators, the provision of common goods and universal services such as sewage, clean water, and waste treatment … If you look at how much has been achieved all over Europe, this is also a consequence of cohesion policy’.

Addressing cracks and possible fractures

Besides successes, the 8th Cohesion Report also identifies what it calls cracks or fractures that need to be repaired. Elisa Ferreira is very much aware of these internal divides, and the reasons why they occur. ‘The initial phase after accession to the EU is usually characterised by a very strong growth impetus’. She points out that this happened with the accession of Member States from southern Europe, and clearly also with those from central and eastern Europe. ‘However, after a certain period, several of these regions reach a ceiling or fall into a development trap, very often because growth tends to concentrate in capitals or metropolitan regions. That’s when the cracks start to appear, because some of the most backward regions just miss the growth train’.

The Commissioner explains that some parts of southern and south-western Europe, ‘are caught in a middle-income trap, as they have to move from low-cost labour and infrastructure-based development towards more sophisticated levels of competitiveness. This is another kind of crack’.

In Elisa Ferreira’s view, the EU’s political priorities, such as the green and digital transitions, despite their growth potential, also need to be managed carefully. ‘When we concentrate our future efforts more on green and digital innovative technologies, we have to realise that different people have different starting points. Tailored regional strategies are necessary so that all can share in the benefits of these transitions’. She cites the example of digitalisation. ‘As we enter the digital age, with many services going online, if you have some regions without connectivity, the people who live in those areas will be even more excluded than before, because they cannot do basic things like renewing their identity card. That is a real problem’.

Besides infrastructure capacity, she raises another issue: the ability to use networks and digital services: ‘If you look across Europe, you will see that there are still segments of the population that don’t know how to use these services. You still have digital illiteracy or limited ability. So this requires special attention to make sure that we don’t create new divides — digital divides — and that we don’t increase internal fractures’.

Cohesion support consistent with single market principles

When discussing how cohesion policy aligns with single market principles and objectives, Elisa Ferreira makes it clear that there is great awareness in the Commission of the need to make these areas compatible. ‘Our objective is to speed up convergence in the regions. Of course, in reality, differences still exist and some of them will persist. But we have to make sure that the differences do not lead to permanent, structural divergence’. She argues that market forces do not create convergence by themselves, and so it is important to be aware of the different territorial impacts of horizontal policies. ‘Because whatever horizontal policy we have — commercial policy, industrial policy, you name it — you will necessarily have different impacts across different territories, not only across countries but also across regions. So you need a balancing factor to ensure sustainable competitiveness in an open single market’.

Control is one thing, capacity another

Besides inherent differences between regions, another element influencing the impact of policy on the ground is implementation capacity. The Commissioner identifies two sides to this issue. ‘One is the formal dimension of complying with regulations, monitoring costs, and following management and control procedures’. She explains that this is based on a robust structure, building not only on the audit activities of the Commission and the managing and audit authorities in the Member States, but also on the European Court of Auditors’ work. She also refers to the Commission’s zero tolerance policy towards fraud, transparency requirements, and information about the ultimate recipients (‘beneficial owners’) of EU funding: ‘And to fight fraud, we are working on even more sophisticated ways to obtain information about conflicts of interest’.

However, for the Commission, the control framework is not the only aspect. The other element is content: the objectives of the multiannual programmes and their results on the ground. ‘You can have all the formalities you like, but if you have a training course where the quality of what you’re teaching isn’t good enough and participants are not deriving sufficient benefit from it, then you end up with something that did not perform as you wanted’.

Stressing the need for good institutions and good public administration, the Commissioner also explains the work of DG Reform, ‘a directorate-general that is perhaps not so well known yet because it is more recent’, but which serves as the main source of technical support and exchange of best practices that benefits Member States’ administrations and reform efforts.

Capacity building to enhance absorption capacity

When discussing how versatile cohesion policy is, Elisa Ferreira cites the recent example of the pandemic. ‘Cohesion policy is a traditional policy, but also a flexible policy. We are always trying to find out which improvements we can introduce, building on previous experience and the needs experienced by Member States and citizens. As I said in the article I wrote for an earlier edition of the ECA Journal (1), during and especially at the start of Reformthe pandemic we used the unspent amounts that we had in the EU budget to provide an immediate response to the crisis. ‘With unanimity in the European Parliament and the Council, we created the Coronavirus Response Investment Initiatives. This enabled us to redirect a substantial amount — €23 billion, to be precise — to buy masks and ventilators, and to provide working capital for companies and online teaching, the aim being to support the Member States’ emergency expenditure. And this was really one instance of adapting to emergency’ (2).

Another example she gives is the Recovery Assistance for Cohesion and the Territories of Europe instrument — REACT-EU. ‘With this programme, we are topping up the 2014–2020 Multiannual Financial Framework and adding extra flexibility to move from crisis support to repair and transition’.

As regards synergies with the new instruments created to cope with the crisis, such as the Recovery and Resilience Facility (RRF), Elisa Ferreira explains that the main purpose of the Facility is to support the overall recovery, ‘since it is mostly a kind of counter-cyclical instrument. This meant it was a much more targeted and short-term instrument’. She points out that the innovation here is that the Commission ties reforms to it, not only investments, as well as mandatory objectives for climate and digitalisation. ‘But in fact, it was an emergency instrument’.

The Commissioner also notes that national recovery and resilience plans often do not sufficiently factor in regional differences, and do not entail a place-based strategy because they were created, ‘due to time pressure, to be managed at the national level. But we need to ensure that the projects that we do, the reforms that we support, don’t do harm to internal cohesion, within Member States themselves’.

In the meantime, cohesion policy for the 2021–2027 period, with the objective of longer-term development, is currently being agreed with Member States. ‘The first Partnership Agreement was concluded with Greece (3) and we have about a dozen Member States that have already formally submitted their draft plans, which we are currently discussing in detail with them. It requires a lot of work and effort to achieve the best possible programmes’. Elisa Ferreira explains that Member States that have difficulties with execution often face the issues she mentioned above: low administrative capacity, problems with procurement, and bureaucracy. She underlines that her staff help Member States address these bottlenecks, and that the National Recovery and Resilience Plans also help to improve procedures, checks for conflicts of interest, and management. ‘Work is ongoing, but there is progress — very substantial progress, I would say — in the area of management’.

Performance as a condition for cohesion funding

When discussing whether performance will become the main yardstick for cohesion spending, as is envisaged for RRF expenditure, the Commissioner is prudent. ‘Well, we’ll see when we have results and a proper evaluation of how the new mechanism and methodologies are actually performing. We have also introduced — and the ECA is already aware of this — considerable simplifications in the last Common Provision Regulation and the Cohesion legislation. The fact is that there was a general complaint about excessive bureaucracy and a disproportionate number of procedures, in particular for small projects’. She underlines the importance of evaluating the effectiveness of the simplifications introduced for the 2021–2027 period to see if the concerns raised have been properly addressed.

Elisa Ferreira concludes that, with this in mind, she is very interested in seeing how the situation will actually develop, and in drawing lessons from the recovery for the purposes of regional policy. ‘We are completely open to reassessing certain methodologies which are important for improving cohesion policy,’ and, with an eye to the future, adds ‘Let’s see what we can learn from other areas to better prepare for the future’.

The Commissioner is clearly aware of the concern expressed by politicians and others about how the new instruments align with existing programmes and projects, including the risk that traditional and new policy instruments may compete with each other. She also mentions the new rule-of-law conditionality that will help protect the EU budget further: ‘We have to make absolutely sure that the mechanisms within a Member State are sufficiently robust so that we can guarantee that taxpayers’ money is used for its intended purpose and in line with our values’.

A call for further dialogue on audit methods

For several years now, various ECA reports have covered multiple aspects of cohesion programmes and their mixed results, reporting on successful programmes but also on gaps between plans and their implementation. The Commissioner finds these reports extremely useful. ‘We take them very seriously, analyse them closely, and do our utmost to correct what the ECA identifies as critical areas. We also present the findings to the European Parliament’s Budgetary Control Committee, and we take their feedback very seriously’.

She also thinks there are opportunities for both institutions to clarify their respective methodologies to assessing the financial management and performance of cohesion policy instruments. ‘I often say that the options for our methodology, for example when calculating the overall error rate, might justify us sitting down together and discussing very carefully how we can adjust and improve our methodologies. Quite frankly, I think we should, without interfering with the competences that the auditors have, including of course their independence, engage in continuous dialogue about our methodology’. ‘The fact is that we are as interested in the sound financial management of taxpayers’ money and in reaching our planned targets as the auditors are’. She notes that the error rate for cohesion policy has decreased over time, and stresses the importance of presenting reliable but also clear and comprehensible information to the public and the media so as to ensure that a clear distinction is made between administrative errors and fraud.

Another point she highlights, more in relation to the performance of the instruments, is that not everything can be orchestrated. ‘We are not in a planned economy and so some of the instruments are used by beneficiaries, by promoters, by companies, by people. It is up to the free economy to react to the stimuli and objectives we present’. She notes that, unlike in chemistry, reactions might be different than expected. ‘So I think there is an element of substance that we can highlight and which is useful for the overall picture regarding performance. After all, not all readers of the ECA’s assessments are experts’.

Achieving convergence is in the common interest of all Member States

When discussing her aims for the future and the legacy she would like to leave behind when it comes to cohesion policy and the objectives of this policy, Elisa Ferreira comes back to the importance of convergence. ‘I am an economist by training. I was a university teacher, then eventually became minister for environment and planning. But I actually started my career addressing the very same issues of regional convergence. So this is a subject very close to my heart, and even if I have done many other things in the meantime, I am back where I started’.

The Commissioner explains that she has always been attentive to the issue of stimulating growth and aiming for convergence across different territories. ‘And the tensions in these territories — the economic tensions that drive them apart — have increased with globalisation and the use of certain technologies. And they increase every time there is a crisis’. She notes that the 2008 financial crisis opened new fractures, as did the pandemic. ‘So what I would like to leave behind, as my legacy, is a kind of common understanding across Europe that even the wealthiest regions and countries are better off if their neighbours are equally developed. Because if that is not the case, the divergences are harmful, even to the growth of the most developed areas, because those areas would then be crowded with people who have been forced to leave the places where they were born. For the sake of balanced development, convergence is in the interest of all of us, be it rich or poor regions. If all politicians and citizens could understand this reality — this common interest — and take ownership of this agenda, I would be extremely happy’.

(1) Elisa Ferreira, Why EU added value is in the fabric of cohesion policy, in: ECA Journal No 3/2020, Realising European added value.

(2) The interview took place on 24 February 2022, the day Russia invaded Ukraine. At the time of publication, Cohesion policy flexibility had been called upon once more to deal with an emergency situation. The CARE (Cohesion Action for Refugees in Europe) instrument was introduced to channel unspent Cohesion funds to help Member States to provide accommodation for people fleeing the war in Ukraine.

(3) As of 24 May 2022, the Commission has adopted six Partnership Agreements — Austria, Czechia, Finland, Germany, Greece, Lithuania.

This article was first published on the 1/2022 issue of the ECA Journal. The contents of the interviews and the articles are the sole responsibility of the interviewees and authors and do not necessarily reflect the opinion of the European Court of Auditors.

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