Cohesion policy — Where has it come from? Where is it going?
By Professor John Bachtler, European Policies Research Centre
Cohesion policy is one of the oldest EU policies, dating back in one form or other to the 1960s. The mission, diversity, complexity and major budget of this EU policy has generated extensive research interest on the part of think tanks, evaluators, auditors and of course academics. The latter includes Professor John Bachtler who throughout his career has researched regional and local development policies in Europe, with a particular focus on cohesion policy. John Bachtler is Professor of European Policy Studies and a Director of the European Policies Research Centre (EPRC) based at the University of Strathclyde in Glasgow and at Delft University of Technology. He has led EPRC research on regional policy, rural development, territorial development, foreign investment, RTDI and policy evaluation and has been an expert adviser to numerous government departments and European organisations. In this article, he presents an overview of how cohesion policy has evolved and the key aspects he considers most relevant for cohesion policy in the future.
Correcting territorial imbalances and promoting harmonious development
EU cohesion policy is one of the most complex and interesting policies of the European Union. For over three decades, it has been allocated a major share of the EU budget – currently €392 billion for 2021–27 — dedicated specifically to the Treaty goal of strengthening the economic, social and territorial cohesion of the EU by correcting territorial imbalances and promoting ‘harmonious development’ between countries and regions. Implementation of this funding is through co-called ‘shared management’: multiannual programmes are developed by national and regional authorities, but under European Commission oversight, and delivered through projects that meet specified strategic objectives and targets. Programmes and projects are supported by EU funds (currently the European Regional Development Fund (ERDF), Cohesion Fund, European Social Fund+ (ESF+) and Just Transition Fund) to meet political priorities in key areas – physical and digital infrastructure, business development, research and innovation, employment and training, low carbon and sustainability, and poverty reduction. The policy’s reach at regional and local levels is huge: during the 2014–20 period, cohesion policy funded over 392 operational programmes (OPs), and around 1.5 million projects administered by about 500,000 project beneficiaries (1).
Since the reform of the Structural Funds in 1988, the funding, performance and added value of cohesion policy has been frequently contested, with periodic reforms reshaping the policy according to EU priorities and administrative requirements. The evolution of the policy through these reforms (see Table 1) provides insights into the changing balance of policy influence between and within the main EU institutions (Council, Parliament, Commission) and between the EU and Member States (2).
Table 1: Evolution of cohesion policy, 1988–2027
Below, the development of cohesion policy is reviewed over time, highlighting the ‘turning points’ (3), and then discuss the main challenges facing policymakers.
Evolution of cohesion policy
The origins of cohesion policy date back to the creation of the ERDF in 1975 (although the ESF was operating from 1965 onwards), initially with a small budget to fund projects under the domestic regional policies of Member States. From 1984, funding began to be used increasingly for programmes — either undertaken at the initiative of the EEC (Community Programmes) or at the initiative of Member States (National Programmes of Community Interest). The 1980s also saw the piloting of ‘integrated development operations’, most notably the Integrated Mediterranean Programmes, which foreshadowed the Structural Funds model introduced in 1988.
By the late 1980s, the accession of Portugal and Spain, and the adoption of the Single European Act, brought pressure for a more substantial Community commitment to territorial imbalance particularly associated with the anticipated effects of the single market programme. The 1988 reform ‘marked the arrival of cohesion policy as a core EU policy in its own right underpinned by a Treaty commitment to cohesion, a substantial budget, bringing all three Structural Funds (4) under a common governance framework’. (5) In particular, the reform established a set of principles that have mostly continued in some form up to the present: concentration on less developed regions; programming through multiannual strategies; partnership with subnational governments, economic and social stakeholders, and civil society; and additionality to ensure EU funding did not substitute national funding.
Subsequent reforms during the 1990s responded to the deepening of economic integration with preparations for a single currency. Economic and social cohesion became a core Treaty objective in the Maastricht Treaty, the Cohesion Fund was created to support infrastructure development, and the budget of the policy was again increased significantly. The expansive trend, which saw budgetary appropriations for cohesion policy reach a high point of 0.45 percent of EU GDP, came to end in 1999.
Preparations for the EU accession of Central and Eastern European countries, and fiscal consolidation in advance of the launch of the euro began a slow process of budgetary retrenchment from the 2000–06 period onwards, and also a redirection of spending from southern Europe to the ‘new’ and poorer Member States to the east. In the reforms of 2006 and 2013, the focus of cohesion policy progressively became determined by wider EU political priorities (Lisbon Strategy, Europe 2020), through strategic frameworks for programmes, and minimum levels of spending on key objectives. The policy was increasingly criticised for its administrative complexity, leading to successive simplification initiatives though with mixed influence. From the early 2000s, cohesion policy became scrutinised more (and criticised) for levels of irregularity, leading to greater emphasis at EU and national levels on the financial control and audit of spending.
Alongside these trends (6), an important set of reforms were introduced to the policy’s governance in the 2013 reform to address criticism of the policy’s performance and effectiveness. New measures for 2014–20 included a stronger focus on results in the programme strategies, an obligatory performance reserve to reward the achievement of spending targets at the mid-point of the programme cycle, and the introduction of ex-ante conditionalities to improve the institutional, regulatory and strategic conditions for cohesion policy spending. Macro-economic conditionality was extended from the Cohesion Fund to all Structural Funds.
Greater external influence on the policy in the 2014–20 period came from the European Semester process to coordinate Member State economic and employment policies, and promote reforms. Cohesion policy was expected to contribute to Country-Specific Recommendations through the investment priorities of programmes.
Lastly, the 2013 reforms promoted a more ‘place-based’ policy approach through sustainable urban, integrated territorial investment and community-led local development strategies. The wider use of financial instruments (loans, equity, guarantees) was also encouraged to create revolving funds and reduce the dependency on grants.
The latest turning points in the policy are against the backdrop of three crises for the EU: Brexit; the COVID-19 pandemic; and the Russian invasion of Ukraine. Brexit was essentially a political challenge to the dynamic of European integration and highlighted the ‘geography of discontent’, pushing the EU to re-assess how it engages with citizens, including — as part of the 2020 reforms — a new cohesion policy objective called ‘Europe closer to citizens’. The COVID-19 pandemic challenged the EU in terms of health policy and economic resilience; the Recovery Plan for Europe enabled the EU to borrow for the first time to part-fund the NextGenerationEu with a new policy instrument — the Recovery and Resilience Facility — to rival Cohesion Policy. The pandemic also demonstrated the ability of cohesion policy to respond quickly to crises in the form of the Coronavirus Response Investment Initiative (CRII/+) to redirect existing funding, followed by the Recovery Assistance for Cohesion and the Territories of Europe (REACT-EU). The latest crisis resulting from the Russia-Ukraine war is presenting new demands for cohesion policy, first to provide emergency support to refugees and then to assist their integration into labour markets and support the reorientation of energy supplies.
Over almost half a century, therefore, cohesion policy has evolved from a relatively minor fund to one of the most important spending priorities of the EU (see Table 2) despite recent cuts. What of the future?
Table 2: Share of EU spending on cohesion policy
The latest Commission’s Cohesion Report makes clear the scale of the challenges for cohesion. While there has been positive progress with convergence between less-developed regions and the EU average, some middle-income and less developed regions have declined, especially in southern EU Member States. Regional disparities in key labour market indicators are still higher than before 2008, indicating the long shadow of the 2008–10 financial and economic crises. There has been mixed progress in reducing disparities in some of the key growth factors (e.g. innovation, entrepreneurship) that help explain the widening differences between so-called ‘frontier regions’ or ‘regional high-income clubs’ and the rest of the EU.
These differences in regional development need to be addressed against the backdrop of ambitious EU political and policy objectives for the 2021–27 period7. Most immediately, the EU needs to channel investment from the Recovery and Resilience Facility (RRF) quickly and effectively to projects that can spur economic recovery from the pandemic, manage the social consequences and increase resilience to future shocks. Beyond the recovery, the EU seeks to accelerate a green transition to help manage climate change, and digital transformation, both of which have differential social and territorial impacts. Further, the EU is promoting far-reaching structural reforms and stronger EU-level governance in order to improve the EU’s long-term development prospects. And the generational challenge for the EU is how to ensure that recovery and the transitions are ‘just and fair’, recognising popular discontent with so-called ‘places left behind’.
Looking forward to the period 2021–2027, there are important questions for cohesion policy. The first relates to the purpose of the policy. The implication of the analysis in the Cohesion Report is that cohesion policy needs to maintain a strategic, long-term focus on convergence and the reduction of regional disparities. Yet, the policy is also expected to respond to short-term crises. While it provided a fast and effective response during the pandemic, the use of the policy as a crisis-response tool absorbs substantial administrative resources, and it risks diverting policy attention and funding from the core purpose of the policy.
A related question is whether there is a need to reassess the principles of the policy. While cohesion policy still refers to fundamental principles set out in the reform of the Structural Funds in 1988, their application has changed. The concentration on the less-developed regions has fallen over time. In 1989–93, the so-called Objective 1 regions accounted for half of the European Communities’ population in designated areas and 73% of funding; in 2021–27, the Less Developed Regions covered 28% of the EU population and accounted for 61% of the cohesion policy budget. Since 2007, all regions have been eligible for Structural Funds including the more prosperous parts of the EU. Programming of resources through multiannual strategies continues, but the scope to respond to local needs and opportunities has become increasingly constrained by requirements to deliver wider EU objectives, to transfer tranches of funding to other EU instruments, to respond to emergencies, and to comply with conditionalities. The partnership principle also still applies, but there has been a rationalisation of regional programmes and centralisation of decision-making in several Member States, particularly where the scale of cohesion policy funding has diminished over time. And the additionality principle requiring that EU funding does not substitute for national funding was discontinued for 2021–27.
Of particular note is the way in which the 1988 ambition of a coordinated application of EU Funds (ERDF, ESF, European Agricultural Guidance and Guarantee Fund:Guidance Section) has been weakened. Rural development under the European Agricultural Fund for Rural Development and fisheries/maritime support under the European Maritime and Fisheries Fund are now completely divorced from cohesion policy, and the ESF+ now has much less of a regional development commitment and role.
A broader question concerns the relationship between cohesion policy and other EU policies. In 2021–27, the EU funding landscape has become more multi-faceted with a range of instruments that have implications for economic, social and territorial cohesion. The RRF is the main new funding stream, but other spatially relevant interventions include the Common Agricultural Policy, Horizon Europe, Connecting Europe Facility, Asylum, Migration and Integration Fund, the LIFE programme, InvestEU, the Digital Europe Programme, EU4Health Programme and Erasmus+.
The European Commission has identified strengthening coordination, ensuring clear demarcation and developing complementarities between EU Funds and instruments, as fundamental objectives for the 2021–27 period. The need for such an approach is evident from the experience hitherto with the RRF and National Resilience and Recovery Plans (NRRPs). Although the NRRPs are expected to address social and territorial cohesion as one of the six pillars of the RRF, only ten percent of RRF funding has the ‘primary policy’ aim of social and territorial cohesion, although a further 33 percent has cohesion as a ‘secondary policy’ aim8. Concern over the extent of synergies is heightened by the separate institutional arrangements for designing and implementing the NRRPs and Partnership Agreements in many Member States9, and the lack of involvement of local and regional authorities (10).
Lastly, with respect to implementation, one of the most persistent problems for the policy since the early 2000s has been the growing complexity of the management and implementation system. Driven by external criticism of the financial management and performance of the policy, there has been a ‘layering’ of regulatory requirements (including an ‘audit explosion’) (11) that have placed growing demands on coordinating and managing authorities, intermediate bodies and beneficiaries.
The administrative capacity to cope with these rules and manage cohesion policy funding effectively varies greatly across the EU, reflecting differences in quality of government within and between Member States. This variation in capacity influences the degree to which national and regional authorities can absorb funding, ensure regularity and avoid errors, and achieve strategic objectives and outcome targets (12). Currently, even in Member States with high quality of governance, the multiple challenges in current programming of mainstream OPs, REACT-EU and Just Transition Fund, meeting the ambitious targets of the green and digital transition, and ensuring coherence with other EU instruments, are daunting.
Under pressure from Member States, the Commission has undertaken successive attempts at simplifying management of the Funds dating back to 1998. However, there remains an unresolved tension between the EU-level aspirations for ‘good management’ and the cost and capacity to comply with the regulatory requirements. A question for the EU to consider is whether complexity is endemic to a system that requires a single regulatory framework for managing and delivering the Funds over 27 Member States. The time may be right to reflect on whether the shared management model needs to be reconsidered.
(1) European Commission Kohesio online platform
(2) Bachtler J and Mendez C, ‘Cohesion Policy: Doing More with Less’, H.Wallace, M.A.Pollack, C.Roederer-Rynning and A.R.Young (Eds), Policymaking in the European Union (8th edition), 2020, OUP, 233–253.
(3) Manzella, G P and Mendez C, The turning points of EU cohesion policy, Working Paper for the Barca Report, 2009.
(4) European Regional Development Fund (ERDF); the European Social Fund (ESF); and the Guidance Section of the European Agricultural Guidance and Guarantee Fund (EAGGF).
(5) Bachtler, Mendez and Wishlade (2013), op. cit.
(6) A more detailed account of the history of the policy can be found in Bachtler and Mendez (2020), op.cit., and Bachtler J, Mendez C and Wishlade F, EU Cohesion Policy and European Integration: The Dynamics of EU Budget and Regional Policy Reform, 2013, Aldershot, Ashgate.
(8) European Commission, Report from the Commission to the European Parliament and the Council on the implementation of the Recovery and Resilience Facility, Brussels, 1.3.2022 COM(2022) 75 final.
(9) Bachtler J and Mendez C (2021) op.cit.
(10) Valenza A, Iacob A, Amichetti C, Celotti P, Zillmer S and Kotrasinski J, Regional and local authorities and the National Recovery and Resilience Plans, 2021. Study for the European Committee of the Regions, Brussels.
(11) Mendez C and Bachtler J, ‘Administrative reform and unintended consequences: an assessment of the EU Cohesion Policy “audit explosion”’, Journal of European Public Policy 18(5): 746–765, (2021).
(12) Bachtler, Mendez & Wishlade (2014) op. cit. Mendez C and Bachtler J (forthcoming, 2022) The quality of government and administrative performance: Explaining Cohesion Policy compliance, absorption and achievements across EU regions, Regional Studies
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.