Changes from report parliamentary committee draft to plenary report

EXPLANATORY STATEMENT - SUMMARY OF FACTS AND FINDINGS

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As a decade of cohesion policy investments draws to an end, the time has come to take stock of the policy’s implementation and achievements during the past programming period and to contribute to the reflection on its future.

Cohesion policy investments across the EU have resulted in unparalleled positive impacts on regions, cities, rural, border and remote areas. Directly or indirectly, every EU Member State has experienced the positive effects of financing through the EU budget. EU investments in transport infrastructure, energy, small and medium-sized enterprises (SMEs), skills, innovation, agriculture, reforms and other fields build the EU in times of peace and rebuild it in times of crisis. The multi-priority investment approach of cohesion policy, combined with its shared management have contributed to the EU’s priorities: SME support, research and innovation, digitalisation, farming, urban infrastructure, tourism, large transport infrastructure, culture and education, healthcare, cross-border projects, the energy transition, energy efficiency, climate and environment. The outcomes of the thousands of local projects confirm the indispensable role of regional investment through cohesion policy and consolidate its role and visibility in the multiannual financial framework.

Your rapporteur’s conclusions and recommendations are based on the wealth of available data on the implementation of the main cohesion policy funds 2014-2020 - European Regional Development Fund (ERDF), Cohesion Fund (CF), European Social Fund (ESF) and Youth Employment Initiative (YEI). Data is naturally scarcer on the cohesion instruments adopted as a response to the COVID-19 pandemic and the recent Ukraine and energy crises - the Coronavirus Response Investment Initiatives (CRII and CRII+), REACT-EU (Recovery Assistance for Cohesion and the Territories of Europe), CARE (Cohesion’s Action for Refugees in Europe), FAST-CARE (Flexible Assistance to Territories) and SAFE (Supporting Affordable Energy). This is because not enough time has passed to allow for proper insight. Nevertheless, your rapporteur believes that, despite certain limitations, some lessons can be drawn from a preliminary assessment of investments.

To draft this report, your rapporteur has examined not just the effectiveness of the implementation of 2014-2020 funds, but also the actual effectiveness of the policy: after all, an increased focus on performance and results was one of the key features of this period. In other words, beyond financial implementation, the rapporteur looked at available data on the actual results of the investments to try to determine how the available cohesion instruments have delivered on the cohesion objective enshrined in the Treaty, as well as on the priorities of the Union strategy for smart sustainable and inclusive growth.

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ChangedThis assessment exercise has meant that the rapporteur has grappled with the challenges that cohesion policy is facing, some of which have been extensively discussed by the Committee on Regional Development (REGI) in the last parliamentary term. Despite the policy overhaul that took place before the current programming period, cohesion policy is once again at a turning point: it has to compete with other instruments and delivery models, and is expected to deliver on a growing set of long-term priorities while being increasingly called on to respond to emergencies. The survival of cohesion policy will depend on a successful conclusion of the 2014-2020 period and an effective implementation of the 2021-2027 programmes, as well as on its ability to reinvent itself, adapt to a changing world and tackle emerging challenges. The rapporteur’s intention foris that the conclusions and recommendations of this report to serve as input for the ongoing interinstitutional debate on these matters and thus help shape the future cohesion framework.

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Procedure and sources

Your rapporteur has relied on the following sources, among others:

 discussions held in the REGI committee with the Commission and the permanent representatives of the Member States on the implementation of cohesion policy funds (an ongoing exercise that began in July 2022);

 publications by Parliament’s research services, including: Parliament’s PolDep B study on absorption rates (preliminary results);

 an analysis of available data, including the open databases on cohesion policy managed by the Commission’s Directorate-General for Regional and Urban Policy (DG REGIO), Cohesion Open Data Platform, the Coronavirus Dashboard and Kohesio;

 Commission sources, including the eighth report on economic, social and territorial cohesion and the annual implementation reports of the EU’s Structural and Investment (ESI) Funds;

 a European Parliamentary Research Service review of studies by other EU institutions, including the European Court of Auditors (ECA) and the European Investment Bank (EIB), policy papers and evaluations of the policies implemented by individual Member States;

 the work of the high-level group on the future of cohesion policy;

 the public hearing on simplification of cohesion policy held in the REGI Committee on 23-24 October 2023,

 the interparliamentary committee meeting on the future of cohesion organised by the REGI Committee on 7 November 2023,

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Changed contacts with the Commission, managing authorities andauthorities, regional and local authorities.authorities and other stakeholders.

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Cohesion policy in the 2014-2020 period

A new framework

In the 2014-2020 period, a single set of rules was introduced to cover the EU’s five Structural and Investment Funds for reasons of coordination and complementarity, as well as in order to establish a robust link with the Union strategy for smart, sustainable and inclusive growth (Europe 2020 strategy). The ERDF, the CF and the ESF became one of the investment pillars of the 2020 strategy, while at the same time contributing to cohesion aims. Article 9 of the Common Provisions Regulation (CPR) translated the priorities of the Europe 2020 strategy into 11 thematic objectives (TOs), which each of the ESI Funds needed to support.

In addition, the ERDF, the ESF and the CF had the specific goal of supporting investment for growth and jobs in all categories of regions. The ERDF also supported the territorial cooperation goal.

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ChangedTo round up the strategic programming approach, the CPR created a stronger link with country-specific recommendations and provided tools and guidance to achieve synergies between the funds, such as the possibility of multi-fund programmes, integrated territorial investments,investments (ITIs), community-led local development (CLLD) and joint action plans.

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In addition, the new framework introduced new mechanisms to improve the policy’s effectiveness, such as the performance framework, the performance reserve and the ex ante conditionalities. It also included important simplification measures, made reporting requirements lighter, introduced e-cohesion and took some steps towards results-based management.

Lastly, the new framework enhanced the territorial dimension of the policy when compared to the previous programming period. The Common Strategic Framework annexed to the CPR and the European Code of Conduct on Partnership are an example of this.

Cohesion as a crisis response tool

From 2020, several major crises have shaken the EU and the wider world. The COVID-19 pandemic, the Russian war of aggression against Ukraine and the energy crisis it triggered have had a serious impact on people and businesses in all EU regions. Cohesion policy played a major role in the EU’s response to this difficult situation. In 2020, a series of amendments to the 2014-2020 rules, CRII and CRII+, granted Member States greater flexibility to use cohesion funds to support vulnerable people, businesses and the health sector. In 2021 extra funds were made available through REACT-EU to support future-oriented measures.

In 2022, the flexibilities introduced through CARE and FAST-CARE helped Member States reallocate available 2014-2020 funding to assistance for people fleeing Ukraine. The 2014-2020 framework was further modified by SAFE as part of RePowerEU. Thanks to this initiative, cohesion policy was able to help vulnerable households and SMEs cope with the sharp hike in energy costs resulting from the war in Ukraine.

Findings on implementation

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ChangedThe rapporteur has looked at the implementation of investments made under the 2014-2020 cohesion policy legal framework, based on Regulation (EU) No. 1303/2013. TheAs of February 2024, the EU payments for the main funds through which the policy was delivered (the ERDF, the CF and the ESF), together with the Youth Employment Initiative (YEI), haveamounted providedto a total of EUR 449368 billion for the 2014-2020 period (84 % of theperiod, plannedwith EURan 532absorption billion).rate Theseof figures91% include(excluding national cofinancingco-financing and the additional resources provided under REACT-EU. Without taking into account REACT-EU funds, absorption should reach 89 %.REACT-EU).

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ChangedFor payments, the 2014-2020 period has followed the usual project life cycle, although more slowly. Payments started late and were slow at the beginning of the period (8(7.6 % by end 2016). Although they accelerated substantially from 2017 onwards, as of 2018, most Member States had slower payment rates than at the equivalent stage in the previous programming period. This is arguably due to the fact that the 2014-2020 framework was adopted fairly late, just a few days before its official start,start. Appointing national authorities and thatmeeting pressurethe topre-requisites implementintroduced wasfor lowerthe thanex-ante inconditionalities 2007-2013also astook alonger resultthan expected. The impact of the change to the decommitment rules (n+3).(n+3) on the pace of implementation remains unclear.

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ChangedAs of 2020, implementation has beenwas affected first by the COVID-19 pandemic and then by the refugee and energy crises. The reprogramming effort under CRII(+) and the possibility of 100 % co-financing through CARE, among other measures, have contributed to accelerating expenditure rates in 2020, 2021 and 2022. Still, at the end of 2022 the absorption rate (including(excluding REACT-EU) was just 77 %.

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ChangedThe spending rate kept accelerating in the second half of the period and expenditureExpenditure has significantly caught up in 2023, so that thea samecomparable implementation percentage has been reached as at the same point in 2007-2013. However, overall financial implementation has been slower than in the previous period. Several programmes face decommitments for not reaching their payments targets, and significant differences can be observed across Member States, regions and at programme and TO level. Payments for transition regions tend to be slower, as does expenditure under TO5 (climate change adaptation), TO4 (low-carbon economy), TO11 (administrative capacity) and TO6 (environment).

For funding available under REACT-EU, to date, just about 50 % of the total available funds have been paid out to Member States. There is a risk, already pointed out by the ECA, that Member States are rushing to spend the available funding before the end of the period and paying insufficient attention to performance and value for money.

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ChangedIn terms of absorption patterns, roughly one third of Member States are late absorbers. As of November 2023,While the current average payment rate in the EU wasis 8691 %, with some of the older and larger Member States are lagging significantly behind. Although it is likely that these countries will accelerate their performance towards the end of the period, their presentThe persistently low absorption patterns in certain Member States suggest underlying structural problems, which regularly result in great pressure on authorities towards the end of the programming period, and could eventually lead to the loss of availableunsatisfactory funds.results Itand shoulda belower notedeffectiveness thatof Parliamentinvestments, isor advocatingto the postponementloss of the closure date forESI Funds to 31 Decemberavailable 2024.funds.

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ChangedWe can therefore conclude that a slow spending rate is a major problem in certain Member States. Agreements on the multiannual financial framework (MFF) are reached late and this consistently delays the adoption of the regulatory framework for cohesion in each programming period. This should also be better tackled in future programming periods. In addition, previous analyses show that the delays in the spending of EU structural funds tend to accumulate across programming periods. Preliminary data on the 2021-2027 period indicate that absorption is even lower in the current cycle than in 2014-2020.

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ChangedHowever, absorption is just one aspect of implementation. In his preparatory work for this report, your rapporteur has identified a series of additional factors that have influenced implementation and the effectiveness of cohesion policy in 2014-2020, including the complexity of rules and procedures, administrative burdens, the capacity of local and regional authorities, the price crises and the labour shortages that the EU has recently experienced. These are the basis for the recommendations in the motion for resolution.

Programming, reprogramming, implementation and closure of cohesion investments affect policy outcomes nationally but most of all locally, at regional and sub-regional level. The CPR for cohesion policy and the sectoral regulations covered by the CPR have been improved over time. The changes introduced to the 2021-2027 regulations addressed a number of challenges. However, one area of improvement that has not yet been sufficiently tackled is implementation at local level through local authorities, including municipalities. Therefore, your rapporteur has focused the report on recommendations for the local level.