Experts, cities, regions worried over repurposing of cohesion funds

The European Commission’s plan to reshuffle cohesion funds to finance innovative technologies raises concerns over the repeated use of the EU’s place-based policy to address new emerging needs.

The European Commission’s announcement of a new Strategic Technologies for Europe Platform (STEP) to finance innovative technology solutions by reprogramming cohesion funds – the place-based policy aimed at reducing regional disparities – has not pleased local and regional authorities.

“Prospects of the recentralisation of EU funds for investment [and] reshuffling of existing funds put key objectives such as cohesion at risk,” said Vasco Alves Cordeiro, president of the Committee of the Regions, after STEP was announced on 20 June.

According to John Bachtler, co-director of the European Policies Research Centre, the repurposing of cohesion funds could be “seriously damaging.”

While it is not yet clear to what extent the funds could be diverted in reality, STEP’s priorities “are potentially not going to be in line with the programmes that have been laboriously developed over five years or more and are only just starting to be implemented,” he said.

More disparities ahead?

At the same time, experts warned that STEP could end up increasing disparities, rather than reducing them.

“It will help parts of the EU, but it will not help other parts and it might increase the innovation divide and disparities between regions,” Alison Hunter, senior advisor at the European Policy Centre (EPC), told EURACTIV.

“On paper the Commission is saying that they will ensure a geographically balanced distribution of projects,” she said, adding that not all regions can engage in the same way on deep tech innovation investments.

Transition regions which do not have the investment structure and cannot capitalise in the same way on deep tech, could fall behind.

“The geography of innovation is increasingly linked to the geography of deep tech investment infrastructure and results in pockets of the EU in the richest states,” Hunter explained.

According to Bachtler, there is also a concern that the funding could go to large companies, which can benefit from STEP, rather than small firms, which could potentially slow down SME development in poorer areas.

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The EU’s cohesion policy, which aims at reducing regional disparities, benefits high-skilled, richer households more than low-income households and exacerbates inequality within EU regions, according to a recent study.

A crisis tool

Among regions and cities, the steering of cohesion funds for STEP has fuelled pre-existing fears of recentralisation of the policy, which had already emerged after cohesion funds were used to address the fallout of the pandemic and the war in Ukraine. 

“Unfortunately, it has become commonplace that across a series of European challenges, cohesion is seen as a convenient pot of money into which the EU can look for the reallocation of funding, when it is unwilling to provide the budgetary resources to meet the objectives that it sets itself,” Bachtler said.

In his view, this often results in a “threat to the multi-level governance model that is the hallmark of cohesion policy and which is one of the main ways in which regional and local authorities can have a role in terms of the allocation of European funding.”

Frustration over the repeated use of cohesion funds to address crises is also spreading among local and regional representatives, who want to preserve cohesion’s role as a place-based investment policy.

“What I see as a real danger is that the European Commission comes up with new proposals for how to use cohesion every month,” Michael Schmitz, advisor at the German County Association, told EURACTIV.

“Cohesion is the only budget available, the only ‘real money,’ but this [use of it] kind of defeats its long-term purpose,” he said, adding that “we would rather have a proposal targeted for the long term.”

The European Court of Auditors (ECA) also warned that repeatedly using cohesion policy to address crises may divert it from its long-term and primary goal of reducing disparities in development between regions.

A review of the policy?

The changes in the use of cohesion funds have brought questions on whether the policy should be reviewed.

Following the Commission’s announcement of STEP, CoR president Cordero pointed to the need for “an in-depth rethink of the EU investment framework.”

According to Hunter, the EU should also reconsider its growth model.

“The default [growth] model has not been available to regions with less investment and innovation capacity,” she said, adding that the EU should think about how to compensate these regions in the next programming period.

At same time, cohesion’s long-term objectives should continue to be a priority for the EU, according to the experts.

“I don’t think the fundamental purpose of cohesion needs to be rethought. It is very much a contemporary objective,” he said, pointing at increased growth stagnation and discontent across European regions.

“Although some parts of the European Commission and some member states seem to take pride in reducing relatively the allocation of funding to cohesion policy, this strategy is to my mind counterproductive if one is concerned at all about the stability and security of European integration going forward,” Bachtler concluded.

[Edited by János Allenbach-Ammann/Alice Taylor]

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