Brussels is shaking up one of its biggest pots of cash.
The European Commission on Tuesday published its long-term plans for cohesion policy — the money and programs the EU uses to reduce regional disparities across the bloc. Such funding makes up around a third of the EU’s current seven-year budget. A press release and a memo in all languages are available online.
In some countries, the policy has left a huge mark: In Poland, for example, over 60 percent of public investment between 2015 and 2017 came from EU cohesion money.
With the U.K. leaving the EU and the bloc grappling with new challenges like migration, the Commission plans to cut the amount of money devoted to cohesion in the next budget cycle, running from 2021 to 2027. But it will still be one of the largest buckets of EU cash, with the Commission planning to allocate an inflation-adjusted €373 billion to the policy over seven years.
While several member countries have already declared the Commission’s plans unacceptable, winners and losers are less clear-cut than they first appear. And this is only the opening bid in negotiations that will play out between member countries, the Commission and the Parliament in the months (and likely years) ahead.
1. Southern Europe’s bittersweet moment
On the surface, Greeks, Italians and Spaniards should be celebrating. While cohesion is set to be cut overall in the EU budget, Greece’s allocation would go up by 8 percent, Italy’s funds would rise by 6.4 percent and Spain’s by 5 percent.
But the plan comes with strings attached. The Commission is proposing to tighten the link between EU funds and structural and economic reforms. In other words: no cash if you don’t follow our prescription for economic management. Whether such a sanction would actually be applied is open to question — but at the very least it takes some of the shine off the offer of more cash.
Some governments may also feel that after years of economic troubles they should be getting far more support from the EU budget than these modest increases.
And not all the Southern Europeans are set to get more: those who suffered the most with structural reforms and pulled their economies out of the mud, like Portugal, are now doing relatively well economically and thus not eligible for an increase.
“I’m hoping there will be a corrective factor, which has to do with being a good student and which means that as well as the classic funds there will be specific funds for those economies that are coming out of the Excessive Deficit Procedure and are in convergence and need structural support,” Portuguese Foreign Minister Augusto Santos Silva said.
2. Rising east pays price of success
Much of Central and Eastern Europe has experienced an economic boom in recent years — but that means it will receive less in cohesion funding. The Visegrad Four countries of Central Europe — Poland, Slovakia, the Czech Republic and Hungary — would each receive about a quarter less in the next budget cycle. Estonia and Lithuania would also experience cuts of 24 percent.
By contrast, poorer countries in Eastern Europe, such as Romania and Bulgaria, will see modest increases.
While the reductions for Central Europe and the Baltics are in some ways the price of success, they will leave a large gap in public investments in many countries. Governments in Warsaw and Budapest, which rail against Brussels on a daily basis, will likely use the budget debate as another chance to tell voters the EU and Western European capitals don’t have their best interests at heart.
Konrad Szymański, Poland’s state secretary for European affairs, told POLITICO the Commission’s proposal is unacceptable.
“We are ready to seek a compromise, but Central Europe should be treated fairly against other priorities and regions,” he said in an email. “Poland is on the path of economic development and the role of transfers from the EU budget will decrease, however we do not give our consent for budgetary revolution.”
3. It’s not just policy, it’s politics
Critics of EU cohesion policy complain that some of the cash goes to richer countries. Big beneficiaries include parts of France and eastern Germany. When money is tight, why not stop spending cohesion money in countries that could pay for projects themselves out of their national budgets?
Not a good idea, according to the Commission. With Germany and France the biggest net contributors to the EU budget post Brexit, the Commission knew it could not ask them to pay more into the common pool while taking away all their cohesion funds. The Commission’s proposal openly emphasizes the importance of the “visibility of cohesion policy funds in all member states.”
One clear signal to Western Europe in the proposal is the broadening of the middle category of regions eligible for cohesion funding. Previously, such “transition regions” were defined as having GDP per capita between 75 and 90 percent of the EU average — but that would change to between 75 and 100 percent.
Under the new proposal, most parts of France are considered not “developed,” but “transitional” — and thus eligible for more EU funding. France will only lose 5.4 percent of its current level of cohesion funding in the next budget.
4. Regions to get greener
Two of the big sources of cohesion funding, the European Regional Development Fund and the Cohesion Fund, will both have strict guidelines on what kind of programs they can back — and green criteria will play an important part.
Under the Commission’s proposal, 30 percent of funds for less-developed and transitional regions will have to be spent on promoting “a greener, low-carbon Europe,” and 25 percent of funds in developed regions will be earmarked for green programs.
But green campaigners are not completely satisfied.
“It is a green success that the European Regional Development Fund will no longer allow investment in fossil fuels, airport infrastructure and landfill. However, we are most alarmed by the announcement that regional funding could be transferred into a new investment fund of the European Commission,” said Monika Vana, regional development spokeswoman for the Greens/EFA group in the European Parliament.
“The European Commission acknowledges the transformative potential of Regional Development funding to catalyse the fair transition towards a green and low-carbon Europe. Now it needs to set ambitious climate action targets for the other spending programs,” said Markus Trilling, finance and subsidies policy coordinator at Climate Action Network (CAN) Europe.