Cohesion policy reflects what the EU is all about — and will remain for the ECA one of the most important areas to audit

Interview with Martin Weber, ECA Director

From right to left, Martin Weber interviewed by Gaston Moonen.

Cohesion: a multi-faceted concept

Martin Weber clearly knows the ins and outs of cohesion policy. He has been in charge of auditing cohesion policy twice in his career already: in 2014, Martin was appointed as a director for the first time, having previously worked as a head of unit in the same area; he then joined the field again in 2021. He believes that cohesion policy exemplifies what the EU stands for. ‘Cohesion policy illustrates what the EU is all about: as it is stated at the very beginning of the Treaty, in Article 3, the Union is there to promote economic, social and territorial cohesion and solidarity among Member States’.

Knowledge is the key to doing a proper job in auditing cohesion policy

According to Martin, auditors in his directorate need to be well equipped to do a proper job. ‘First, they need to be familiar not only with the rather detailed EU legal framework and sectoral regulations, but also state aid and public procurement rules. They also need to know the legal and administrative characteristics of each of our Member States, and how those rules are applied by them’.

Cohesion: more than a system of financial redistribution in a single market?

When asked about the need for cohesion policy, i.e. the European Regional and Development Fund (ERDF), the Cohesion Fund (CF) and the European Social Fund (ESF), Martin makes the link with the EU’s single market. In part, he sees cohesion policy as a vehicle for financing investments and policies that support the effective functioning of the single market. However, he also agrees that there is a redistribution element. ‘Cohesion policy also compensates for some of the negative economic effects that

Critical yet constructive audit reports aiming for further improvements

The ECA is known for issuing critical audit reports on different aspects of cohesion policy. For Martin, this comes with the job. ‘Our role as the EU’s independent external auditor is to assess EU policies and spending with a critical eye. Our audit reports are not meant to be flattering’. He goes on to explain that with a focus on risks, there is an almost natural tendency to identify weaknesses and shortcomings. ‘But we want to do this in a constructive manner, and we want to help the system to improve and to operate better. This is not criticising a policy as such’.

Ineligible projects or costs, and non-compliance with public procurement or state aid rules, are the main types of irregularities in cohesion policy

Cohesion policy has traditionally been one area of the EU budget where the ECA finds the most irregularities. Ineligible projects or costs, and non-compliance with public procurement or state aid rules, are the main types of irregularities in cohesion policy. ‘However, this does not necessarily mean that the money has been wasted, nor does it mean that it has been embezzled. What our audits show is that there is an issue where compliance with rules is concerned. And there are different factors contributing to that’. Meanwhile, he emphasises the need to differentiate, as not all programmes are affected by irregularities to the same extent. ‘In fact, when you look at the 2014–2020 period as a whole, our audits have shown that more than 40% of all the programmes we have audited were not affected by a material level of error’.

The RRF — a new instrument in parallel with cohesion

Martin and his colleagues in the directorate also observe very closely how the Recovery and Resilience Facility (RRF) works in practice. There may be differences between the RRF and cohesion policy, but there are also many similarities. ‘Interestingly, in the budget system it goes together with cohesion. If you look at the investment areas where financing takes place, they largely overlap. The main difference is that the RRF can also finance reforms in the Member States’.

The RRF is the EU’s first performance-based budget

Martin particularly emphasises the performance orientation of the RRF, which is really built into the programme’s design from the beginning. ‘The objectives of the national plans are specified in terms of milestones and targets, and these are followed up and reported on, so you can easily monitor the performance aspects of the initiative’. However, Martin believes that this will not necessarily make it easier to assess the overall impact of the RRF, also because of the very significant (and cross-national) multiplier effects of such programmes.

Absorbing funds may not have necessarily become more difficult, despite a significant increase in EU spending

One of the issues the ECA has reported on for several years now is absorption problems and delays in policy implementation. In several causes, according to Martin. ‘This might indicate administrative difficulties, or problems in planning or implementing investment projects. But absorption can also be looked at as an indicator for high-quality spending. This is an issue we sometimes highlight, because when there is still a lot of money around, the temptation might be to use it for any reason, rather than lose it’.

RRF governance differs from that of cohesion policy

As for governance of the RRF, Martin points out that there is quite a difference with cohesion policy. ‘The RRF is direct management, so Member States are fully in charge of managing RRF expenditure. Meanwhile, the Council — in other words, the Member States collectively — also plays a different role. The Commission assesses and negotiates the national recovery and resilience programmes, but, in order to be approved, they also need to obtain a positive opinion from the Council. This is also the case for disbursements’. Martin thinks that the Council’s involvement in approving programmes is the counterweight to this ‘extraordinary budgetary solidarity — ‘which was put in place to mitigate the economic and social consequences of the COVID-19 pandemic’.

The new ‘rule of law’ conditionality matters, both for cohesion policy and for the RRF

In January 2021, the new ‘rule of law’ conditionality came into force, and this is already showing its effects on the EU’s financial management. ‘The Commission has now initiated this procedure for the first time, against Hungary’. By doing so, the Commission publicly states that it believes it can no longer assume that the Hungarian authorities can ensure that all EU spending is legal and regular. ‘Which is clearly a worrying signal for EU finances’.

More socio-economic convergence in the EU because of cohesion policy?

One of the big questions, also from an auditor’s perspective, is whether cohesion policy is successful as an engine for convergence. ‘I would say that up to the 2008 financial crisis, there clearly was convergence. Since then, we may have witnessed a levelling-off and even a partial reversal of the trend, in the form of increasing divergence between urban and rural areas. At least this is what the data recently published by the Commission in its 8th Cohesion Report show. In the coming years, we will also have to see what effects the last two crises — the COVID-19 pandemic and Russia’s invasion of Ukraine — will have had on the socio-economic development of the various regions of the EU and its Member States’.



Articles from the European Court of Auditors, #EU's external auditor & independent guardian of the EU's finances.

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European Court of Auditors

Articles from the European Court of Auditors, #EU's external auditor & independent guardian of the EU's finances.