Explanatory Memorandum to COM(2004)492 - General provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund - Main contents
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| dossier | COM(2004)492 - General provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund. |
|---|---|
| source | COM(2004)492  |
| date | 14-07-2004 |
On 10 February 2004, the Commission adopted a proposal for the financial perspectives of the enlarged European Union of 27 Member States for the period 2007-2013 [COM(2004)101]. In this context, the Commission took the view that the Union’s intervention in a number of key policy fields required strengthening. In particular, the Commission decided that an ambitious cohesion policy should be an essential element of the financial package.
The decision reflected the work that had been undertaken since the publication of the Second cohesion report in 2001 which launched the debate on the future of cohesion policy in the enlarged Union [COM(2001)24]. On 18 February 2004, the Commission adopted the Third cohesion report [COM(2004)107] which presented a detailed proposal for the priorities and delivery system for the new generation programmes under cohesion policy for the period 2007-2013. The proposal is coherent with the broad guidelines set out in the Commission’s communication on the next financial perspective.
The Third cohesion report concluded that the enlargement of the Union to 25 Member States, and subsequently to 27 or more, presents an unprecedented challenge for the competitiveness and internal cohesion of the Union. Enlargement has resulted in the widening of the economic development gap, a geographical shift in the problem of disparities towards the east and a more difficult employment situation:
- the gap in per capita GDP between the 10% of the population living in the most prosperous regions and the same percentage living in the least prosperous ones has more than doubled compared with the situation in EU15.
- in EU25, 123 million people - representing some 27% of the total population - live in regions with a per capita GDP below 75% of the EU average as against 72 million people, or 19% of the total, in EU15. Of these, four out of ten citizens are living in regions belonging to the 15 “old” Member States while the other six are nationals of the 10 “new” Member States.
- Four million jobs will have to be created if the average level of employment in the 10 new Member States is to be aligned with that of the rest of the EU. Within the enlarged EU, appreciable employment gaps also persist according to age and gender.
At the same time, the whole of the Union faces challenges arising from a likely acceleration in economic restructuring as a result of globalisation, trade opening, the technological revolution, the development of the knowledge economy and society, an ageing population and a growth in immigration.
Finally, economic growth in the EU has slowed appreciably since 2001. As a result, unemployment has risen again in many parts of the Union with all the social implications which this entails. As a springboard to the future, the Union should fully exploit the opportunities provided by the current trend towards recovery.
In an effort to improve the performance of the EU economy, the Heads of State and of Government of the Union meeting in Lisbon in March 2000 set out a strategy designed to make Europe the most successful and competitive knowledge based economy in the world by 2010. The Nice Council in December 2000 translated the Lisbon objectives on poverty reduction into a co-ordinated EU strategy for social inclusion. At the Gothenburg Council in June 2001, the Lisbon strategy was widened adding a new emphasis on protecting the environment and achieving a more sustainable pattern of development.
Cohesion policy makes an important contribution to realising these aims. In effect, growth and cohesion are mutually supportive. By reducing disparities, the Union helps to ensure that all regions and social groups can contribute to, and benefit from, the overall economic development of the Union. Articles 3 and 158 of the Treaty reflect this vision, which has been reinforced in the draft Treaty establishing a Constitution by the introduction of a clearer reference to the territorial dimension of cohesion.
Cohesion policy is also necessary in a situation where other Community policies have important benefits combined with limited but localised costs. Cohesion policy helps to spread the benefits. By anticipating change and facilitating adaptation cohesion policy can help to limit the negative impacts.
For this reason, cohesion policy in all its dimensions must be seen as an integral part of the Lisbon strategy, even if today, as the Commission pointed out in its proposal on the next financial perspective, the policy design underlying Lisbon needs to be completed and updated. In other words, cohesion policy needs to incorporate the Lisbon and Gothenburg objectives and to become a key vehicle for their realisation via the national and regional development programmes.
Strengthening regional competitiveness through well-targeted investment throughout the Union and providing economic opportunities which help people fulfil their capabilities will thus underpin the growth potential of the EU economy as a whole to the common benefit of all. By securing a more balanced spread of economic activity across the Union, regional policy helps to reduce the pressures of over-concentration, congestion and bottlenecks.
The reform of cohesion policy also should provide an opportunity to bring greater efficiency, transparency and political accountability. This requires, first and foremost, the definition of a strategic approach for the policy spelling out its priorities, ensuring co-ordination with the system of economic and social governance, and allowing for a regular, open review of progress made. It calls for further simplifying the management system by introducing differentiation and proportionality in the context of sound financial management. Furthermore, it is necessary to further decentralise the responsibility toward the partners on the ground in Member States, regions and local authorities.
The present draft regulation is the proposal of the Commission for the next generation of cohesion policy programmes. It constitutes the basis on which, according to Article 55 of Council Regulation (EC) No 1260/1999 of 21 June 199 laying down general provisions on the Structural Funds, the Council shall review the mentioned regulation by 31 December 2006 at the latest. The Commission outlines the need to adopt the regulations in the course of 2005 in order to dedicate 2006 to the programming for the period 2007-2013.
Contents
- 2. The new architecture for EU cohesion policy after 2006
- Concentration on three Community objectives
- 2.1. Convergence
- 2.2. Regional competitiveness and employment: anticipating and promoting change
- 2.3. European territorial cooperation
- 3. An integrated response to specific territorial characteristics
- 4. A better organisation of the instruments operating in rural areas and in favour of the restructuring of the fisheries sector
- 5. Simplification and decentralisation: a reformed delivery system
- 5.1. More strategic orientation on the priorities of the Union
- 5.2. Programming
- 5.3. Financial management and control
- Management and control system
- Financial management
- 5.4. Concentration of resources
- 5.5. A stronger accent on performance and quality
- 6. FINANCIAL RESOURCES
The Commission proposes that actions supported by cohesion policy should focus on investment in a limited number of Community priorities, reflecting the Lisbon and Gothenburg agendas, where Community intervention can be expected to bring about a leverage effect and significant added value. Accordingly, for the operational programmes, the Commission proposes a core list of a limited number of key themes as follows: innovation and the knowledge economy, environment and risk prevention, accessibility and services of general economic interest. For employment related programmes, the focus will be on implementing the reforms needed to progress towards full employment, improve quality and productivity at work, and promote social inclusion and cohesion, in line with the guidelines and recommendations under the European Employment Strategy (EES).
The pursuit of the priority themes would be organised around a simplified and more transparent framework with the future generation of programmes grouped under three headings: convergence; regional competitiveness and employment; territorial co-operation.
The “Convergence” objective concerns the less developed Member States and regions which in accordance with the Treaty are the top priority for Community cohesion policy. The Treaty calls for a reduction in disparities between “the levels of development of the various regions and the backwardness of the least favoured regions or islands, including rural areas” (Article 158). Enlargement will bring about an unprecedented increase in the disparities within the Union, the reduction of which will require long-term, sustained efforts.
This objective concerns, first and foremost, those regions, whose per capita GDP is less than 75% of the Community average. The key objective of cohesion policy in this context would be to promote growth-enhancing conditions and factors leading to real convergence. Strategies should plan for the development of long-term competitiveness and employment.
The Commission also proposes that temporary support should apply under this priority to those regions where per capita GDP would have been below 75% of the Community average as calculated for the Union of Fifteen (the so-called statistical effect of enlargement). These are regions where objective circumstances have not changed, although their GDP per head will be relatively higher in the enlarged Union. In the interest of equity, and to allow the regions concerned to complete the process of convergence, support will be higher than decided in Berlin in 1999 for the so-called “phasing out” regions of the current generation.
Programmes would be supported by the financial resources of the European Regional Development Fund (ERDF), the European Social Fund (ESF), and the Cohesion Fund, in accordance with the principles set out in the Treaty.
The Cohesion Fund will apply to Member States with GNP lying below 90% of the Community average. The assistance of the Cohesion Fund will be conditioned to the fulfilment of the conditions of economic convergence as well as of the necessity to avoid excessive public deficits in accordance with Article 104 of the Treaty.
In line with the priorities set by the financial perspective, the Cohesion Fund will strengthen its contribution to sustainable development. In this respect, trans-European transport networks, in particular, the projects of European interest, and environment infrastructures would remain the central priorities. In order to reach an appropriate balance to reflect the particular needs of the new Member States, it is envisaged also to support projects such as rail, maritime, inland waterways, and multimodal transport programmes outside the TEN-T, sustainable urban transport and environmentally important investments in the key fields of energy efficiency or renewable energies.
Emphasis will also be given to the strengthening of institutional capacity and the efficiency of public administration, including the capacity for managing the Structural Funds and the Cohesion Fund.
While interventions in the less developed Member States and regions remain the priority of cohesion policy, there are important challenges that concern all EU Member States such as rapid economic and social change and restructuring, trade globalisation, a move towards a knowledge-based economy and society, an ageing population, growing immigration, labour shortages in key sectors and social inclusion problems.
In this context, the Union must have an important role to play. For cohesion policy outside the least developed Member States and regions, the Commission proposes a two-fold approach:
- First, through regional programmes financed by the ERDF, cohesion policy will help regions and the regional authorities to anticipate and promote economic change in industrial, urban and rural areas by strengthening their competitiveness and attractiveness, taking into account existing economic, social and territorial disparities.
- Second, through programmes, financed by the ESF, cohesion policy will help people to anticipate and to adapt to economic change, in line with the policy priorities of the EES, by supporting policies aiming at full employment, quality and productivity at work, and social inclusion.
Under the new regional programmes financed by the ERDF the Commission proposes a stricter concentration of interventions on the three priority themes: innovation and the knowledge economy, environment and risk prevention, accessibility and services of general economic interest.
The single funding source for the new programmes will be the ERDF. From a resource allocation point of view, two groups of regions need to be distinguished:
- The regions currently eligible for Objective 1 not fulfilling the criteria for the convergence priority even in the absence of the statistical effect of enlargement. Such regions will benefit from support on a transitional basis (under the heading “phasing in”) which will follow a path comparable to that for regions no longer eligible for Objective 1 in the period 2000-2006.
- All other regions of the Union covered neither by the convergence programmes nor by the “phasing in” support described above.
As regards the operational programmes financed by the ESF, the Commission proposes to underpin the implementation of the employment recommendations and to strengthen social inclusion, in line with the objectives and guidelines of the EES.
To this end, support should focus on four policy priorities that are crucial for the implementation of the EES and where Community funding can provide added value: increasing the adaptability of workers and enterprises; enhancing access to employment and increasing participation in the labour market; reinforcing social inclusion and combating discrimination, mobilising reforms in the fields of employment and inclusion.
Building on the experience of the present INTERREG Initiative, the Commission proposes to create a new objective dedicated to further the harmonious and balanced integration of the territory of the Union by supporting co-operation between its different components on issues of Community importance at cross-border, transnational and interregional level.
Action will be financed by the ERDF and will focus on integrated programmes managed by a single authority in pursuit of key Community priorities linked to the Lisbon and Gothenburg agendas.
All regions along the internal terrestrial and certain regions along the external terrestrial borders as well as along certain neighbouring maritime borders will be eligible for cross-border co-operation. The aim will be to promote joint solutions to common problems between neighbouring authorities, such as urban, rural and coastal development and development of economic relations and networking of SMEs.
As far as the broader actions to promote transnational co-operation is concerned, the Member States and regions are invited to assess the usefulness and effectiveness of the existing 13 transnational cooperation zones (defined under INTERREG IIIB) in the light of enlargement. The objective will be to decide together with the Commission on a number of zones for transnational cooperation which are sufficiently coherent and where there are common interests and opportunities to be developed. It is envisaged that such cooperation will focus on strategic priorities with a transnational character such as R&D, environment, risk prevention and integrated water management.
Finally, the Commission proposes that regions should in future incorporate actions in the field of interregional cooperation within their regional programmes. To achieve this, regional programmes will need to dedicate a certain amount of resources to exchanges, cooperation and networking with regions in other Member States.
An effective cohesion policy needs to take into account the specific needs and characteristics of territories such as the outermost regions of the Union, islands, mountain areas, in sparsely populated parts in the far north of the Union and certain border areas of the Union.
It also needs to support in an appropriated manner, urban regeneration, rural areas and areas dependent on fisheries, ensuring complementarity and consistency with the specific agricultural and fisheries financial instruments.
Consequently, the Commission intends, within the convergence objective, to set up a specific allocation to compensate for the specific constraints of the outermost regions, as recognised by article 299.2 of the Treaty and requested by the European Council of 21-22 June 2002 in Seville. In addition, an action “Grand Voisinage” aimed at facilitating cooperation with the neighbouring countries will be included under the new “European territorial co-operation” programmes.
Since the problems of accessibility and remoteness from large markets are particularly acute in many islands, mountain areas and sparsely-populated regions, particularly in the far north of the Union, the allocation of the resources for the regional competitiveness and employment priority will take account of this by using “territorial” criteria, thus reflecting the relative disadvantage of regions with geographical handicaps.
Member States should ensure that the specificities of these regions are taken into account when it comes to the targeting of resources within regional programmes. In an effort to promote more action in these sometimes neglected areas and to take account of the higher cost of public investment in per capita terms, for the next period it is proposed that territories with permanent geographical handicaps should benefit from an increase in the maximum Community contribution.
Building on the strengths of the URBAN initiative, the Commission intends to reinforce the place of urban issues by fully integrating actions in this field into the regional programmes. Regional programmes will need to indicate how urban actions are dealt with and how the sub-delegation of responsibilities to city authorities for these actions is organised.
4. A better organisation of the instruments operating in rural areas and in favour of the restructuring of the fisheries sector
The Commission proposes to simplify and to clarify the role of the different instruments in support of rural development and the fisheries sector. The current instruments linked to rural development policy will be grouped in one single instrument under the Common Agricultural Policy designed to:
- Increase the competitiveness of the agricultural sector through support for restructuring
- Enhance the environment and country side through support for land management, including co-financing of rural development actions related to Natura 2000 nature protection sites
- Enhance the quality of life in rural areas and promoting diversification of economic activities through measures targeting the farm sector and other rural actors.
The present Community Initiative, LEADER+, will be integrated into the mainstream programming.
Similarly, action in favour of the restructuring of the fisheries sector would be grouped under a single instrument, which would focus on actions to accompany the restructuring needs of the fisheries sector, and to improve the working and living conditions in areas where the fisheries sector, including aquaculture, plays an important role.
An important part of these proposals is that the financial resources transferred from cohesion policy to these new instruments will continue to be deployed in such a way that the same degree of concentration is achieved as today on helping the less developed regions and countries covered by the convergence programmes.
Outside these interventions, cohesion policy would support the diversification of the rural economy and of the areas dependent on fisheries away from traditional activities.
Whereas the delivery mechanism for cohesion policy has demonstrated its capacity to implement quality programmes and projects of European interest on the ground, a number of problems have been encountered in the management of current programmes.
The Commission therefore intends to maintain the key principles of cohesion policy – programming, partnership, co-financing and evaluation. However, it proposes to enhance the efficiency of the policy by introducing a number of reforms designed, firstly, to encourage a more strategic approach to programming, secondly, to introduce further decentralisation of responsibilities to partnerships on the ground in the Member States, regions and local authorities, thirdly, to reinforce the performance and quality of programmes co-financed through a reinforced, more transparent partnership and clear and more rigorous monitoring mechanisms, and fourthly, to simplify the management system by introducing more transparency, differentiation and proportionality while ensuring sound financial management.
The Commission proposes that an overall strategic document for cohesion policy should be adopted by the Council, with an opinion of the Parliament, in advance of the new programming period and on the basis of a Commission proposal, defining clear priorities for Member States and regions.
This strategic approach would guide the policy in its implementation and make it more politically accountable. It would help to more tightly specify the desired level of synergy to be achieved between cohesion policy and the Lisbon and Gothenburg agendas and would increase the consistency with the Broad Economic Policy Guidelines and the European Employment Strategy.
Each year, the European Institutions would examine progress on the strategic priorities and results achieved on the basis of a report by the Commission summarising Member States’ progress reports.
In addition, the Commission proposes to simplify further the system in a number of key aspects.
The programming system will be simplified as follows:
At the political level: on the basis of the strategic guidelines adopted by the Council, each Member State would prepare a national framework document on its development strategy, which would be negotiated with the Commission and constitute the framework for preparing the thematic and regional programmes, but not having the role – as the existing Community Support Framework – of a management instrument;
At the operational level: on the basis of the policy document, the Commission would adopt national and regional programmes for each Member State. The programmes would be defined at an aggregate or priority level only, highlighting the most important operations. Additional detail, reflected today in the so-called “programme complement” would be abandoned as well as the management by measure.
The number of funds will be limited to three (ERDF, ESF and Cohesion Fund) compared to the current six.
As opposed to current multi-Fund programmes, future ERDF and ESF interventions would aim at operating with only one fund per programme. In this respect, the action of each fund would be made more coherent by allowing the ERDF and the ESF to finance, respectively, residual activities related to human and physical capital. Funding of these activities would be limited and directly linked to the main domains of interventions of each Fund. This would allow both for a simplification and increased effectiveness of programming.
The Cohesion Fund and the ERDF will follow a single programming system, where transport and environment infrastructures are concerned. Large projects would be adopted by the Commission separately, but managed within the related programmes.
Within the framework of shared management, one of the key objectives of the future regulatory package for the 2007-2013 programming period is to clearly delimit on the basis of experience gained from the current body of law, the framework, the nature, and the division of responsibility between the different actors concerned by the execution of the Community budget. These include the Member States and the implementing bodies, on the one hand, and the Commission, on the other. In this respect, a clarification will contribute to improve efficiency, efficacy and the overall balance of the system.
The draft regulation laying down general provisions for the ERDF, the ESF and the Cohesion Fund increase the coherence and transparency of the overall architecture of the management and control systems of the Funds:
- The coherence, as is clearly define the minimum conditions applicable to the control and audit systems at all levels of the process, as well as the respective tasks and obligations of the different actors;
- The transparency, as it is necessary that the different actors concerned by the controls become aware of the results of the controls of each part, in order to improve efficiency, efficacy and the overall balance of the system.
The draft regulation defines a common basis of a minimum set of conditions which any management and internal control system concerned by the management of the Funds shall comply with, and the responsibilities of Member States and of the Commission for ensuring the respect of the principle of sound financial management. To this end, the Member States shall provide an assurance in relation with the management and control systems:
- At the beginning of the period, via the opinion on the system by an independent audit body;
- Each year, via the opinion of the audit authority supported by an annual control report; and
- At the end of the period, via the assurance on the final statement of expenditure.
When the Commission disposes of the assurance on the existence and sound functioning of the national management and control systems – assurance based on its own audits and national audits -, it will be able to base its assurance concerning the legality and regularity of the declared expenditure on the results on national controls. Accordingly, it will be able to limit its own on-the-spot audits to exceptional circumstances only.
Along the same lines, the regulatory architecture proposes that the degree of Community intervention in the management, evaluation, and control is a function – among other things – of the importance of its contribution. The draft general regulation allows Member States to apply their own rules and management and control structures when the national contribution is prevailing to a significant degree. This option applies only if the Commission has received an assurance on the reliability of national management and control systems.
The principle of additionality – i.e. EU resources should add to rather than replace national resources - will remain a key principle of cohesion policy. However, in line with the principle of proportionality, the Commission will verify its application only within the “convergence” objective. Member States would be responsible for ensuring that the principle of additionality applies within the “Regional competitiveness and employment” and “European territorial co-operation” programmes.
Concerning financial management, two important aspects are introduced to simplify the system. Indeed, payments will be operated at the level of the priorities, and no longer at the level of the measures as it is the case today. In addition, the Community contribution will be calculated on the basis of public expenditure only. The payment system (payment on account and reimbursement) as well as the principle of the automatic de-commitment are maintained.
The draft regulation also proposes the setting up of a procedure of interruption, withholding and suspension of payments in case of serious problems at the moment of the presentation of the request for interim payment.
With a view to simplify the financial management, the Commission proposes to allow partial closure of programmes for operations, which have been completed. The schedule of this closure is decided by each Member State.
National rules would largely determine eligibility of expenditure, with the exception of a limited number of fields such as VAT, where Community rules would continue to apply.
The major concentration of resources should remain on the poorest Member States and regions with an emphasis on the new Member States. At the level of the individual development programmes, concentration would be achieved by focusing on the Lisbon and Gothenburg priorities as well as, in the “convergence” regions, on institutional capacity building.
With regard to the regional competitiveness programmes, the current emphasis (under Objective 2) on the zoning of eligible areas at the level of communes, municipalities and wards has meant that concentration has been understood almost exclusively in micro-geographical terms. While the geographical concentration of resources in the worst affected pockets or areas must remain an essential part of the effort in the future, it must also be recognised that the prospects of such areas are intimately linked to the success of the region as whole.
As many regions have recognised, this requires the development of a coherent strategy for the whole region as a way of addressing the needs of its weakest parts. For the future, it is therefore proposed to abandon the current system of micro-zoning, allowing the appropriate balance between the geographical and other forms of concentration to be determined in the drawing up of the regional competitiveness programmes in partnership with the Commission.
This should not imply any dilution of the level of effort in deploying EU financial resources. Under the “regional competitiveness” strand, each operational programme should justify its geographical, thematic and financial concentration.
In the context of the partnership, regions would have the responsibility in the first instance for concentrating financial resources on the themes necessary to address the economic, social and territorial disparities at regional level. The Commission would verify and confirm consistency at the moment of deciding the programmes.
Finally, through the principle of de-commitment of unused funds (the “N+2 rule”), a discipline unique to regional and cohesion policy, there would remain a strong incentive in favour of the efficient and rapid realisation of the programmes.
Effectiveness calls for a greater focus on impact and performance, and for a better definition of the results to be achieved. Overall, the efficiency of cohesion policy would be improved by the establishment of an annual dialogue with the European Institutions to discuss – on the basis of the Commission’s yearly report – the progress and results of national and regional programmes, so to enhance transparency and accountability towards the institutions and the citizens.
Evaluation before, during and after the end of the programmes would remain essential to the overall effort to maintain quality. In addition, the Commission proposes to set up a Community performance reserve whose main objective would be to reward the Member States and regions which show the most significant progress towards the agreed objectives.
Finally, the Commission proposes that Member State create within their national allocation a small reserve enabling them to respond swiftly to unexpected sectoral or local shocks resulting from industrial restructuring or the effects of trade agreements. This reserve would be used for providing ancillary support to affected workers and to the diversification of the economy in the areas concerned, acting as a complement to the national and regional programmes which should constitute the principal instrument for restructuring in anticipation of economic change.
These proposed changes should bring greater transparency to the operation of the policy, facilitating the access of citizens and companies thus increasing the number of projects coming forward and helping to make a contribution to greater value-for-money through increased competition for support.
The financial resources dedicated to cohesion policy reflect the ambition of an enlarged Union to promote growth and job creation in its less favoured areas. For the period 2007-2013, the Commission proposes to allocate a EUR 336.1 billion (which equates to EUR 373.9 billion before the transfers to the proposed single rural and fisheries instruments) in support of the three priorities of the reformed cohesion policy.
The indicative repartition of this amount among the three objectives of the reformed policy would be as follows:
- Around 78% for the “Convergence” objective (less developed regions, cohesion fund, and “statistical effect” regions), with the emphasis on help to the twelve new Member States. The absorption limit (“capping”) for financial transfers to any given Member State under cohesion policy will be maintained at its current 4% of national GDP, taking into account amounts included under the rural development and fishery instruments. The regions concerned by the so-called statistical effect would benefit from a specific, decreasing allocation under the Convergence objective to facilitate their “phasing out”.
- Around 18% for the “Regional competitiveness and employment” objective. Outside the phasing-in regions the distribution between the regional programmes financed by the ERDF and the national programmes financed by the ESF would be 50-50.
- Around 4% for the “European territorial co-operation” objective.
For the distribution of the financial resources among Member States, the Commission proposes to apply the method based on objective criteria used at the time of the Berlin Council (1999) for the “convergence” priority, taking into account the need for fairness regarding the regions affected by the statistical effect of enlargement.
Resources for the objective “regional competitiveness and employment” would be allocated by the Commission between Member States on the basis of Community economic, social and territorial criteria.
Finally, the population living in the eligible regions as well as the total population of the Member States concerned would guide the distribution of resources under the “European territorial co-operation” objective.