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Why Europe’s New Cohesion Policy is Unlikely to Enhance the Effectiveness of EU Structural and Investment Funds

1 Comment 🕔12.Dec 2014

This article is part of our EU Cohesion Policy 2014-2020 feature.

Factory in Copșa Mică, Romania. Credit: Orioane

Factory in Copșa Mică, Romania. Credit: Orioane

by Adam William Chalmers and Lisa Maria Dellmuth

 

The new rules governing the European Union (EU) Cohesion Policy, which came into force on December 22, 2013, mark some of the most significant changes to the policy in its nearly 40-year history. Chief among these changes are new and more stringent rules on conditionality and sanctions for the allocation of EU Structural and Investment Funds (ESIF), a coupling of ESIF with the Europe 2020 priorities, and a more binding regulation of the partnership principle among private and public actors. For the 2014–2020 programming period, it is clearly not “business as usual” for EU Cohesion Policy. But to what extent will these policy reforms impact the effectiveness of Cohesion Policy? This article addresses this question and conceives of effectiveness on two related dimensions: first, in terms of a needs-based allocation of ESIF in line with EU goals; and second, in terms of an allocation that is legitimate or accepted in the eyes of citizens.

 

A needs-based allocation of ESIF?

Central to EU Cohesion Policy is a commitment to reducing economic, social and territorial disparities between Europe’s regions and to deliver on the Europe 2020 objectives (European Commission 2011a). To this end, the EU channels funds from Europe’s haves to its have-nots. On paper, the redistribution of EU funds follows a relatively straightforward technical-functional logic, seeing poorer regions and member states receiving more funds than their more affluent counterparts. Several factors, however, diminish the effectiveness of this process. Instead of a needs-based logic, redistribution is a function of intense lobbying (Chalmers 2013), pork barrel and electoral politics (Dellmuth and Stoffel 2012), regional government’s administrative incapacity to absorb EU funds (Dellmuth 2011), and the European Commission’s lack of resources and incentives to get involved in the political motivations for local project selection (Dellmuth and Stoffel 2012). The revamped Cohesion Policy appears to address several of these issues and reaffirms an objective needs-based redistribution of ESIF.

Conditionality. The most striking reform is the new conditionality requirements. Previous programming periods implemented a form of ex post conditionality, evaluating regional investments after investment priorities and projects were already set. New measures introduce ex ante conditionality, assessing whether the conditions necessary for the effective implementation of funds are in place before investment commitments have been determined, as well as a more contentious form of macro-economic conditionality. In this latter case, funds allocation is subject to states and regions already having in place “sound economic policies” (European Commission 2011b, p. 3), with the Commission reserving the right to suspend funding if they do not. Stricter rules for conditionality are well suited to the funds’ effectiveness, potentially improving absorption and reducing the amount of funds used by politicians for electoral purposes. Of course, these new measures run the risk of penalizing regions for economic conditions over which they might have little control. The new framework also entails reforms of the so-called “performance reserve” acting as a carrot for regions to meet their development objectives and providing the Commission with some leeway in incentivizing that member states’ use structural funds to further EU goals. The reserve is allocated to regions that have “met their milestones in relation to the achievement of the program’s objectives” (European Commission 2011b, 3), being an integral part of ex-ante conditionality.

 

Classification of regions 2007-2013 (left) vs. 2014-2020 (right) according to CP. Credit: Cranberry Products

Classification of regions 2007-2013 (left) vs. 2014-2020 (right) according to CP. Credit: Cranberry Products

 

Europe 2020. The problem of the effective needs-based allocation of funds has also been addressed by linking Cohesion Policy with the Europe 2020 objectives. The potential for increased effectiveness is, in this case, less clear. Perhaps a result of negotiating the new terms of Cohesion Policy against the backdrop of the Euro-crisis, Cohesion Policy has been recast as a key tool for delivering the Europe 2020 objectives, namely the promotion of “smart, sustainable, and inclusive growth” (European Commission 2011b, 1). To this end, the scope of potential Cohesion Policy investment priorities has been significantly narrowed. There are now 11 specific thematic objectives to which all Cohesion Policy funds are channeled in an attempt to link funding objectives more closely to the Europe 2020 agenda. This narrower set of priorities may limit politicians’ capacity to use EU funds for electoral purposes, but may as well encroach on a region’s flexibility when it comes to using funds to target those development issues most urgent to that region. Fierce opposition to these reforms from the Visegrád Four (Czech Republic, Hungary, Poland, Slovakia) has been rather telling: these member states stress the importance of retaining flexibility in determining for themselves how to best invest Cohesion funds (Euractiv 2011).

Partnership. The reformed Cohesion Policy reasserts its commitment to promoting effectiveness by introducing a new Code of Conduct on Partnership. This document enhances the so-called Partnership principle from previous programming periods, institutionalizing the consultation of a broad range of state and non-state actors (including bodies representing civil society as well as those promoting social inclusion, gender equality, and non-discrimination) in the allocation process. The Code of Conduct has the potential to foster sustainable partnership among concerned actors, making it easier to identify local needs. Of course, member states are not mandated to follow these new principles of inclusion, with the policy reforms ambiguously stating that they “should” do so. How these new measures translate into a more needs-based allocation ultimately depends on the extent to which member states implement this new Code of Conduct.

In sum, the new framework presents a clear commitment to enhancing the effectiveness of ESIF. However, these efforts are unlikely to significantly improve effectiveness, as the Commission’s incentives and resources to enforce EU goals remains limited. The Commission has little incentive to interfere with domestic funding strategies, as oversight procedures and sanctions are “costly.” If the Commission pursues an agenda that differs from regional and national preferences, national governments may ‘cut the wings’ of the Commission when reforming the structural funds for the next funding period (Pollack 2003). It is therefore unlikely that the Commission would interfere with how the funds are spent in the member states (Dellmuth and Stoffel 2012).

 

Greater acceptance of the EU in the eyes of citizens?

Fiscal transfers within the EU serve the dual purpose of mitigating economic disparities across regions as well as acting to increase social solidarity amongst EU citizens. Indeed, this solidarity function is hard-wired into Cohesion Policy: the policy is typically characterized as “an expression of solidarity between EU countries” (European Commission 2014a, p. 3) and meant to strengthen “social cohesion” by targeting issues of equal opportunities for EU citizens, gender inequality, and discrimination. The degree to which citizens share a solidarity reflex and think that the EU has the right to rule can influence the EU’s potential to make a difference. If citizens do not accept the EU’s right to rule, the EU may experience problems gaining state support for ambitious Cohesion Policy goals and achieving effective compliance with EU goals (Dellmuth and Tallberg 2014).

Citizen support for European integration is not exclusively a function of individual citizens’ pocketbooks, but rather a combination of economic considerations, identity-related factors, and trust in political institutions. Furthermore, there is only a very tenuous link between fiscal transfers for the 2000–2006 programming period and support for European integration. Citizen support is unrelated to regional transfers, but seems to increase if their country is a net beneficiary to the EU budget (Chalmers and Dellmuth 2014). It appears as if Cohesion Policy has fallen short of its goal of increasing support for further EU integration. But does a reformed Cohesion Policy have the potential to increase public support?

Conditionality. In improving the effectiveness of a needs-based allocation of funds, the EU’s new conditionality requirements may also lead to a greater sense of legitimacy and citizen support (cf. Dellmuth and Tallberg 2014). However, the reform of the performance reserve threatens to undermine solidarity among EU citizens by driving a wedge between good performers and bad performers, and reinforcing the notion that member states (and their regions) are in competition with one another rather than working together.

Europe 2020. Europe 2020 is not only a growth strategy, but also includes an emphasis on social inclusion and education. Through a closer link between ESIF and the Europe 2020 goals, the EU may be able to provide more visible funding in these areas, and increase support for its policies – provided that member states secure a needs-based allocation of ESIF.

Partnership. The new Code of Conduct for partnership is explicit in extending consultation to those who would otherwise be left out of such consultation processes, like the “most vulnerable and marginalized communities, which are at the highest risk of discrimination or social exclusion, in particular persons with disabilities, migrants, and Roma people” (European Commission 2014b, p. 1). In this respect, it could potentially increase the social legitimacy of the EU. Again, however, this depends on the degree to which the member states seek to establish sustainable partnership.

 

Conclusion

The 2014–2020 programming period has marked a significant change in EU Cohesion Policy. However, the degree to which these changes are able to make ESIF allocations more effective remains to be seen. While the revamped policy goes some distance in assuaging issues of a needs-based allocation of funds as well as an allocation that raises the social legitimacy of European integration, it equally raises some new problems. In particular, stricter conditionality will likely do away with and even anticipate the inefficient use of funds. At the same time, the coupling of Cohesion Policy with the Europe 2020 priorities runs the risk of exacerbating rather than mitigating economic disparities. The picture is less equivocal for the question of social legitimacy. The EU’s renewed commitment to social inclusion, its new Code of Conduct, and its extension of the consultation process all work to build a bridge between EU policies and EU citizens, potentially fostering greater public support for the larger EU integrative project. This article shows that the new reforms have the potential to enhance the effectiveness of the spending of more than a third of the EU’s budget, which is close to 352 billion euros, but that we cannot expect a great impact in the absence of profound reforms. Specifically, given that the Commission’s capacity and incentives to deviate how ESIF are spent domestically are limited and unlikely to go beyond checks for irregularities and illegal spending implies that member states are likely to pursue existing funding practice.

 

Adam William Chalmers is an Assistant Professor of Political Science at Leiden University (Netherlands). His research focuses on issues in international political economy and global regulatory politics.

Lisa Maria Dellmuth is a Postdoctoral Fellow at Stockholm University. Her research focuses on the inter-relationships between public opinion, distributional conflict on the domestic and international levels, and international organisations, including the European Union. Her research has been published in leading journals such as the Journal of European Public Policy, and for her research on Structural Funds allocations in the European Union, Lisa received the Sage Award for the best article published in European Union Politics, 13 (2012).

 

This article is part of our EU Cohesion Policy 2014-2020 feature. 


 References

Chalmers, Adam William. 2013. “Regional Authority, Transnational Lobbying and the Allocation of Structural Funds in the European Union.” Journal of Common Market Studies 51(5): 815–31.

Chalmers, Adam William, and Lisa Maria Dellmuth. 2013. “The Politics of Redistribution: Structural Funds, Elite Cues and Public Support of the European Union.” Presented at the annual meeting of the Swedish Political Science Association, Stockholm.

Dellmuth, Lisa Maria. 2011. “The Cash Divide: The Allocation of European Union Regional Grants.” Journal of European Public Policy 18(7): 1016–33.

Dellmuth, Lisa Maria, and Jonas Tallberg. 2014. “The Social Legitimacy of International Organizations: Interest Representation, Institutional Performance, and Confidence Extrapolation in the United Nations.” Review of International Studies, available on CJO2014. doi:10.1017/S0260210514000230.

Dellmuth, Lisa Maria, and Michael Frank Stoffel. 2012. “Distributive Politics and Intergovernmental Transfers: The Local Allocation of European Union Structural Funds.” European Union Politics 13(3): 413–33.

Euractiv. 2011. “EU Cohesion Policy 2014–2020.” Available at <www.euractiv.com/regional-policy/eu-cohesion-policy-2014-2020-linksdossier-501653> (accessed October 26, 2014).

European Commission. 2011a. “A Budget for Europe 2020 – Part II: Policy fiches.” COM(2011) 500 final. Brussels.

European Commission. 2011b. “Cohesion Policy 2014–2020: Investing in Growth and Jobs.” Available at <http://ec.europa.eu/inforegio> (accessed October 26, 2014).

European Commission. 2014a. “The European Union Explained: Regional Policy.” Available at <http://europa.eu/pol/pdf/flipbook/en/regional_policy_en.pdf> (accessed October 26, 2014).

European Commission. 2014b. “Regulations: Commission Delegated Regulation (EU) No 240/2014 of 7 January 2014 on the European code of conduct on partnership in the framework of the European Structural and Investment Funds.” Official Journal of the European Union, L74 (en).

 

1 Comments

  1. 🕔 10:01, 16.Jan 2015

    SPQR

    With all of the changes that have taken place in relation to making sure that the new Cohesion policy places stricter requirements on management authorities to produce the results promised in the ex-ante evaluation and the annual review of results, it is surprising that we still hear suggestions that the Commission’s “wings can be clipped” in citing Pollock (2003). This didn’t happen in the 2000-2006 cycle nor in the 2007-2013 cycle, and it certainly is not going to happen in the 2014-2020 cycle where the Cohesion policy represents for many Member States the only source of financial investment. The Visegrad Four may complain as much as they like, but they are net beneficiaries in relation to EU funds. The financial and economic crisis has driven home the realisation that the EU is one of the few sources of financial resources available and the new rules do not seem to suggest the resort to an extensive amount of flexibility. In conclusion, the request of the Visegrad Four to make their own decisions on how to use EU funds is not new. It was present from the beginning of their participation in the Cohesion policy.

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