Changes from plenary report to adopted text

RemovedEXPLANATORY STATEMENT

RemovedA. Background to REACT-EU

RemovedREACT-EU is a proposal made by the European Commission to address the economic fallout of the Covid-19 pandemic. The closure or slowdown of economic activity across the Union has caused considerable economic and social damage, and REACT-EU is to be one tool to help resolve that. It follows two earlier proposals relating to cohesion policy, the Coronavirus Response Investment Initiative (CRII) and the Coronavirus Response Initiative Plus (CRII+), which both modified the rules for regional spending in order to facilitate recovery.

RemovedB. Scope of the proposal

RemovedThe REACT-EU proposal seeks to amend the Common Provisions Regulation for the 2014-2020 cohesion funds. It provides for an additional budget in two parts, for 2020 and for 2021-2022, and also sets out a number of derogations from the normal rules for cohesion spending, which specifically relate to the additional budget for the economic and social recovery. REACT-EU will not apply to the United Kingdom (even for the financial year 2020), as the Withdrawal Agreement provides that budgetary increases do not bind the United Kingdom during the transition period.

RemovedC. Budgetary aspects

RemovedThe proposal makes an additional EUR 5 billion available during the financial year 2020, which will be included in the budget. It also provides for an additional EUR 42 billion in 2021 and EUR 11 billion in 2022, which will be “outside” the budget, as they will constitute external assigned resources. The co-rapporteurs propose that the additional resources should also be available for budgetary commitment in 2023 and/or 2024 where required.

RemovedD. The problem of external assigned resources

RemovedExternal assigned resources are a specific class of EU resources which are “bracketed out” of the general budget, as they are resources which can only be spent on for a specific purpose. Generally, this applies to revenues from repaid grants and other reimbursements, which can only be used for their original purpose, and to payments from third countries for specific programmes, which can natually only be used for the programmes indicated by the country in question. When used in other areas, external assigned resources can raise issues of democratic accountability, as this is money which is not subject to the same democratic oversight as the rest of the budget, and constitutes an exception to the principle of budgetary universality (and, arguably, sincerity).

RemovedE. Breakdown of resources

RemovedThe proposal provides for a breakdown of resources by Member State, rather than by region as is customary in the area of cohesion policy. However, the Commission justifies this by the special nature of funding to address the economic and social consequences of Covid-19. The breakdown by Member State is to take place in accordance with the rules laid down in the new Annex VIIa, and applied in a Commission implementing act.

RemovedF. New thematic objective

RemovedREACT-EU creates a new, single thematic objective which will apply to the additional funding, entitled “Fostering crisis repair in the context of the Covid-19 pandemic and preparing a green, digital and resilient recovery of the economy”. This thematic objective will apply to both the ERDF and the ESF, in the context of existing operational programmes or specific new programmes, at the choice of the Member States. The co-rapporteurs propose that this new thematic objective should apply not only to the Investment for growth and jobs goal, but also to the European territorial cooperation goal (i.e. Interreg), as border regions have been particularly affected by the crisis.

RemovedG. Flexibilisation of cohesion spending

RemovedFor the additional funding under REACT-EU, the new Article 92b provides for a number of derogations which make programming and implementation more flexible. For example, transfers between the ERDF and ESF, and towards the FEAD, are made possible, with only the rules of the receiving fund being applicable.

RemovedH. Pre-financing rate

RemovedThe additional resources will give rise to a particularly high pre-financing rate of 50%.

RemovedI. Co-financing rate

RemovedThe REACT-EU proposal provides for a co-financing rate of up to 100% for spending related to the economic recovery.

RemovedJ. Other derogations

RemovedFurthermore, implementation of the additional funding will be not be subject to the usual rules on thematic concentration, ex-ante conditionalities, the performance reserve, or certain deadlines.

RemovedK. Communication

RemovedProjects funded under REACT-EU will have to publicly acknowledge that funding, in line with the usual rules for cohesion projects.

RemovedL. Conclusion

RemovedYour co-rapporteurs have considered this proposal very carefully, and propose that it should be adopted, subject to the modifications outlined in this report. However, it should be stressed that the various derogations and flexible rules it contains must remain temporary in nature, and that cohesion policy must return to its usual rules and controls from 2023 or 2025. This particularly applies to the massive use of external assigned revenues, which can be tolerated exceptionally, but cannot become a permanent phenomenon, as that use risks undermining democratic decision-making on the EU budget.

Removed1.9.2020