Explanatory Memorandum to COM(2018)374 - Specific provisions for the European territorial cooperation goal (Interreg) supported by the European Regional Development Fund and external financing instruments

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dossier COM(2018)374 - Specific provisions for the European territorial cooperation goal (Interreg) supported by the European Regional Development ...
source COM(2018)374 EN
date 29-05-2018


1. CONTEXT OF THE PROPOSAL

On 2 May 2018, the Commission adopted a proposal for the next multi-annual financial framework for the period 2021-2027 1 .

Simplifying the framework has been identified as a key objective in the reflection paper on EU finances as well as by the ex post evaluation of the current framework and the public consultation on the framework for 2021-2027. Experience suggests that the current rules are overly complex and fragmented, leading to an unnecessary burden on programme managers and final beneficiaries.

On the European territorial cooperation goal (Interreg), the Commission proposes a major effort to simplify cooperation beyond the borders of the Union. The Treaty on the Functioning of the European Union ('TFEU') distinguishes clearly between territorial cooperation between Member States and economic, financial and technical cooperation with non-EU countries. Territorial cooperation between Member States takes place under (internal) economic, social and territorial cohesion (Title XVIII of Part Three on Union policies and internal actions). Economic, financial and technical cooperation with non-EU countries comes under Chapter 2, and development cooperation under Chapter 3, of Title III (cooperation with third coutries and humanitarian aid) of Part Five on the Union’s external action, as well as Part Four on the association of the overseas countries and territories (OCTs).

It is therefore not legally possible to establish a single cooperation fund inside and beyond the EU borders. However, in a major effort to simplificy and maximise synergy between them, the Regulations governing the EU's future external financing instruments,

·IPA III: Instrument for pre-Accession 2 ('IPA III'),

·NDICI: Neighbourhood, Development and International Cooperation
Instrument 3 ('NDICI') and

·OCTP: Council Decision on the association of Overseas countries and territories 4 establishing the funding in form of a Programme ('OCTP'),

aim to establish clear rules to transfer part of their resources to Interreg programmes. These will then be implemented mostly under the rules established by the Regulation on specific provisions for the European territorial cooperation goal (Interreg) supported by the European Regional Development Fund and external financing instruments ('European territorial cooperation goal (Interreg) Regulation'). These will be implemented by Interreg programme authorities in the Member States under shared management.

Regarding IPA III, the amount of the contribution to Interreg programmes will be determined under Article 10 of the ETC/Interreg Regulation, which will apply to the use of the contribution. Where appropriate, IPA III may also contribute to transnational and interregional cooperation programmes or measures that are established and implemented under the ETC/Interreg Regulation (Article 5 i and (5) of the IPA III Regulation).

Concerning NDICI, where measures are to be implemented which are global, trans-regional or regional, the Commission may decide, under the relevant multiannual indicative programmes or the relevant action plans or measures, to extend the scope of actions to countries and territories not covered by the NDICI Regulation. The aim would be to ensure Union financing was coherent and effective or to foster regional or trans-regional cooperation. In particular, the Commission may include specific financing to help partner countries and regions strengthen their cooperation with neighbouring outermost regions of the EU and with overseas countries and territories covered by the OCTP Decision. To this end, NDICI may contribute, where appropriate and on the basis of reciprocity and proportionality regarding the level of funding from the OCTP and/or the ETC/Interreg Regulation, to actions implemented by a partner country or region or any other entity under this proposed Regulation, by a country, territory or any other entity under the OCTP Decision or by an outermost region of the EU under joint operational programmes or to interregional cooperation programmes or measures established and implemented under the ETC/Interreg Regulation (Article 33(2) of the NDICI Regulation and Article 87 of the OCTP Decision).

To enable consistency with other EU policies in this area, the rules on delivery and implementation of the European Regional Developent Fund ('ERDF') is governed as far as possible by the Common Provisions Regulation ('CPR'). This sets out common provisions for all seven shared management funds at the EU level. These are notably:

·CF: Cohesion Fund 5

·EMFF: European Maritime and Fisheries Fund 6

·ERDF: European Regional Development Fund 7

·ESF+: European Social Fund Plus 8

·AMIF: Asylum and Migration Fund 9

·BMVI: Border Management and Visa Instrument 10

·ISF: Internal Security Fund 11 .

To simplify the legislative structure and ensure the applicable provisions are clear, the CPR sets out common and fund-specific rules. So goes for the Regulation covering both the ERDF and the Cohesion Fund intervening under ‘Investment for jobs and growth’ and, for the ERDF, under the ‘European territorial cooperation’ goal (Interreg).

Programmes under the European territorial cooperation goal (Interreg) involving several Member States and also non-EU countries have special features. The European territorial cooperation goal (Interreg) Regulation therefore sets out Interreg-specific rules for both the CPR and the Regulation covering both the ERDF and the Cohesion Fund. It also sets out specific rules for programmes under the ETC/Interreg goal ('Interreg programmes') where Member States cooperate with non-EU countries.

The EU's external financing instruments set out clear transfer rules to all Interreg components. During the 2014-2020 programming period, IPA-CBC programmes were already managed by DG REGIO and the implementing rules, based on the IPA Regulation, were mostly aligned with the Interreg rules for cooperation progammes in Member States. ENI-CBC progammes were managed by DG NEAR; the implementing rules, based on the ENI Regulation, set out a number of differences from the Interreg rules. Cooperation around outermost regions was mostly organised at project level, plus some pilot actions involving Interreg programme authorities in implementing cooperation measures under indirect management.

2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY

EU action is justified by Article 174 TFEU: (T)he Union shall develop and pursue its actions leading to the strengthening of its economic, social and territorial cohesion. In particular, the Union shall aim at reducing disparities between the levels of development of the various regions and the backwardness of the least favoured regions.

The aims of the ERDF are defined in Article 176 TFEU: The European Regional Development Fund is intended to help to redress the main regional imbalances in the Union through participation in the development and structural adjustment of regions whose development is lagging behind and in the conversion of declining industrial regions.

In addition, Article 174 TFEU states that particular attention is to be paid to rural areas, areas affected by industrial transition, and regions which suffer from severe and permanent natural or demographic handicaps. These include the northernmost regions with very low population density and island, cross-border and mountain regions.

Article 178 TFEU constitutes the legal basis to adopt implementing regulations for the ERDF, the cohesion policy fund supporting the European territorial cooperation goal (Interreg).

Regarding support from the EU's external financing instruments, Article 212(2) TFEU constitutes the legal basis for economic, financial and technical cooperation with non-EU countries in general, including those eligible for accession: 1. Without prejudice to the other provisions of the Treaties, and in particular Articles 208 to 211, the Union shall carry out economic, financial and technical cooperation measures, including assistance, in particular financial assistance, with third countries other than developing countries. Such measures shall be consistent with the development policy of the Union and shall be carried out within the framework of the principles and objectives of its external action. The Unions operations and those of the Member States shall complement and reinforce each other. 2. The European Parliament and the Council, acting in accordance with the ordinary legislative procedure, shall adopt the measures necessary for the implementation of paragraph 1.'

Article 209(1) TFEU constitutes the legal basis for cooperation with developing countries: ‘1. The European Parliament and the Council, acting in accordance with the ordinary legislative procedure, shall adopt the measures necessary for the implementation of development cooperation policy, which may relate to multiannual cooperation programmes with developing countries or programmes with a thematic approach.’

Finally, Article 349 TFEU provides for adopting specific measures to take account of the structural social and economic situation of the outermost regions, which is compounded by certain specific features which severely restrain their development.

Contents

1.

Subsidiarity and proportionality


The impact assessment 12 identified various reasons why EU action adds value to national action. These include the following:

·In many countries, the ERDF and the Cohesion Fund represent at least 50% of public investment – these Member States would otherwise not have the financial capacity to make such investments.

·There are significant potential spillovers across national and regional boundaries, for example for investments in innovation and SMEs. There is an important role for the EU level in ensuring that such spillovers materialise and preventing underinvestment. Moreover, investments need to be designed to maximise spillovers.

·In most regions, including more developed ones, smart specialisation strategies (RIS3) represent a consistent strategic framework for investments and bring about high added value. These were triggered by the strategic programming requirement for ERDF support and the corresponding pre-condition. In fact, the benefits of such strategies tend to be highest in the most developed regions (particularly in the Nordic countries, Austria, Germany, Benelux and France).

·It promotes EU priorities. This includes structural reforms of labour markets, transport, environment, energy, education and social policies and programmes, as well as administrative modernisation.

·The ERDF delivers tangible results in areas which matter to people - The EU budget helps to deliver on the things that matter for Europeans 13 . Helping regions adapt to the challenge of globalisation, creating 420 000 jobs by supporting 1.1 million SMEs between 2014 and 2020, tackling urban poverty — all these are priorities for the European public. It is noteworthy that many of these results are particularly evident outside the cohesion countries.

The policy choices in the proposed Regulation are proportionate, for reasons that include the following:

·The programmes are not managed directly by the European Commission, but are instead implemented in partnership with the Member States (under shared management).

·The combined rules (the associated CPR plus this Regulation) are substantially simpler and more consolidated than those for the previous period.

3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS

2.

Ex post evaluation of Interreg 2007-2013


By end 2013, Interreg programmes had funded nearly 7 000 projects in policy areas at the core of the Europe 2020 strategy. These included the creation and expansion of economic clusters, the establishment of centres of excellence, high education and training centres, cooperation networks between research centres and cross-border advisory services for businesses and -start-ups. The 1 300 or so environmental projects involved the joint management of natural resources, including sea and river basins; cooperative action to combat natural risks, to respond to climate change and preserve biodiversity and pilot initiatives to develop renewable energy.

The Interreg programmes contributed to a number of improvements, including accessibility, joint education and training, and increased protection from environmental and man-made risks. The internationalisation of SMEs was improved, particularly in cross-border regions. The programmes also contributed to wider effects, notably by reducing specific barriers to cooperation (mainly cultural and physical barriers) and improving social integration.

The ex post evaluation also found the following:

1. Interreg programmes remained very broad and were often aimed primarily at developing cooperation and linkages. It is important to strike an appropriate balance between cooperation (which remains a central element of Interreg) and leveraging the learning for the goals of Cohesion Policy.

2. Limited attention seems to have been paid to the notion of a functional region or area when identifying the regions to support. However, this is essential to considering the potential benefits of cross-border and transnational cooperation.

3. Most programmes have adopted a bottom-up approach when deciding which projects to support. This made it difficult to pursue a coherent strategy to promote the development and socio-economic and territorial integration of the regions concerned, even though most individual projects made a contribution.

4. There was very limited coordination between Interreg programmes and mainstream ones. The potential for complementing one with the other and reinforcing the effects on development was therefore lost.

These weaknesses are being addressed through the regulations for the 2014-2020 programming period. In particular, the result and performance framework should ensure a greater concentration of funds on a limited number of policy aims, with a well-articulated intervention logic at the outset and measurement of results.

The 2021-2027 period will seek to further strengthen cooperation. This will be done through the following measures in particular:

1. Adapting the architecture of Interreg programmes to take better account of functional areas. Cross-border programmes will be better streamlined in order to concentrate resources on land borders where there is a high degree of cross-border interaction. Maritime cooperation will be reinforced by combining the cross-border and transnational dimension of working across sea basins in new maritime programmes.

2. Embedding cross-border cooperation into recent policy work outlined in the Commission Communication 'Boosting Growth and Cohesion in EU Border Regions’ 14 ('Border Regions Communication'). Focusing programmes on actions that are of direct interest to people and businesses located in border regions.

3. Strengthening the transnational and maritime cooperation Interreg programmes that cover the same functional areas as the existing macro-regional strategies (MRS). Increasing the alignment between funding and MRS priorities.

4. Reinforcing interregional cooperation for innovation as outlined in the Commission Communication Strengthening Innovation in Europes regions - Strategies for resilient, inclusive and sustainable growth' 15 . This will be done by proposing a new interregional instrument aimed at helping those involved in smart specialisation strategies (S3) to cluster together, in order to scale up innovation and bring innovative products and processes to the European market.

5. The CPR and ERDF regulations will further encourage and support stronger coordination between Interreg programmes and Investment of Jobs and growth programmes. This will be done by ensuring cooperation actions are well represented in the priorities funded under those programmes.

3.

Lessons learnt from IPA 2014-2020


IPA actively promotes territorial cooperation, for example through cross-border programmes, transnational and interregional cooperation programmes, and macro-regional strategies. The added value is obvious: reconciliation and confidence-building in the Western Balkans, the overcoming of geographical and mental barriers, and the development of good neighbourly relations - all these remain key aspects of the enlargement process that are addressed solely by EU programmes and not by other donors.

Ex post evaluation of ENPI CBC 16 programmes in the 2007-2013 period

The thirteen ENPI CBC programmes implemented during the 2007-2013 period covered nine EU land borders, three sea basins and one sea crossing. The financial resources allocated amounted to EUR 947.2 million combining funds from ENPI, ERDF and IPA. The contribution from participating countries and/or project beneficiaries brought the total allocation to EUR 1.2 billion. The programmes involved thirty-four countries, nineteen EU Member States and twelve of the sixteen neighbourhood partner countries plus Norway, Russia and Turkey.

Altogether, the programmes funded 941 projects over the period for a total contracted amount of EUR 910 million (as of April 2017), out of which 38% was channelled to projects promoting economic development, 32% to environment, 19% for social development and 11% for security issues. The bulk of EU funding (70%) was channelled through standard projects selected through calls for proposals. Large-scale infrastructure projects (LIP’s) represented 22% of the total EU funding contracted (approximately EUR 195 million), while strategic projects covered a minor share (8% of the total EU funding contracted). In total, there were 867 standard projects, 51 LIPs and 23 strategic projects. The participation in calls for proposals has been very high (in total, more than 7 000 applications were submitted across all programmes), attesting the appeal of CBC among stakeholders in the eligible areas. In total, ENPI CBC involved 4 569 organisations from thirtysix different countries, out of which 2 106 were from partner countries.

The ex post evaluation praised the impressive number and variety of cross-border cooperation projects as well as the solid basis for cooperation compared to the previous period, with well-established programme authorities and more experienced beneficiaries. At the same time, the evaluation noted the insufficient evidence on the achievements of the ENPI CBC programmes, delays in the programme and project implementation, as well as the broadly formulated programme objectives and priorities of calls that diminished the overall impact. Some of these elements have already been (fully or partially) addressed by the current generation of 2014-2020 programmes.

Recommendations for the upcoming programming period include enhancing focus and impact of the programmes, seeking more synergies with other EU instruments and policies, enhancing the added value of large infrastructure projects, improving programme efficiency, improving performance frameworks and monitoring and evaluation practices, and strengthening the technical assistance and support to programmes.

4.

Mid-term review of ENI CBC programmes in the 2014-2020


The mid-term review of the ENI CBC programmes for the period 2014-2020 has found that the CBC strategy remains appropriate in the context of the EU policy framework and provides response to the developments in the region. Indeed, CBC is seen to be an important vehicle for positive collaboration between citizens, local authorities and civil society on both sides of the EU border, even in cases where wider bilateral relationships may be challenging. Although programme development and implementation have moved slower than originally planned, there is recognition from partners that the process has improved compared to previous years and that commitment to implement successful programmes remains strong.

5.

Stakeholder consultation


An online public consultation took place between 10 January and 9 March 2018. The consultation covered cohesion policy, i.e. ERDF, Cohesion Fund and ESF, including aspects of ETC/Interreg.

·Regarding the most important challenges, the largest proportion (94% of respondents) identified ‘reducing regional disparities’ as very important or rather important; this was followed by ‘reducing unemployment, quality jobs and labour mobility’ and ‘promoting social inclusion and combating poverty’ (91%).

·Of the challenges, ‘Fostering research and innovation’ was regarded as the one most successfully addressed (by 61%), followed by ‘territorial cooperation’ (59%).

·76% of respondents considered that the funds add value to a large or fairly large extent; under 2% that they have no added-value at all.

·Complex procedures (86%) were seen as by far the biggest obstacle to the achievement of objectives. Next were audit and control procedures (68%), and lack of flexibility to react to unforeseen circumstances (60%).

·For simplification, the most frequent choice was ‘fewer, clearer, shorter rules’ (90%); this was followed by ‘alignment of rules between EU funds’ (79%) and ‘increased flexibility’ in allocating resources both to and within a programme area (76-77%).

In answering the open questions, respondents on balance strongly supported the following:

·Cohesion policy for all regions (though with a continued focus on less developed ones).

·Policy innovation, including smart specialisation strategies and smart investment more generally.

·Continuing and developing of thematic concentration.

·A focus on local challenges (especially sustainable urban development)

·Interregional cooperation, both cross-border and across Europe. The latter is essential for smart specialisation – innovation in high tech sectors often depends on exchanges and spillovers from cooperation between clusters or knowledge hubs across Europe.

These issues are being addressed in this proposed Regulation which:

·continues to focus on tackling regional disparities and the challenges facing regions across Europe;

·continues and enhances thematic concentration on smart growth via smart specialisation strategies and on low-carbon and sustainable development;

·maintains support for interregional cooperation, extending this to smart specialisation; and

·promotes local development based on integrated territorial and local strategies and encourages sustainable urban development as well as capacity building in this field.

In addition, the CPR Regulation will provide a framework for the ERDF to:

·simplify the complex procedures associated with it;

·increase flexibility to respond to emerging challenges; and

·align rules between the various EU funds covered.

6.

Impact assessment


The options deal with a 7% reduction in the budget by:

·Option 1: Reducing the contribution to the more developed regions.

·Option 2: Maintaining support in key areas (thematic concentration) and reducing it for other themes.

Option 2 is the preferred option, for reasons including the following:

·To maintain a focus on the themes of highest EU added value, where evidence from the evaluation suggests the policy has had the strongest impact.

·Many of the greatest challenges (globalisation and economic transformation, transition to the low-carbon economy, environmental challenges, migration and pockets of urban poverty) increasingly affect many regions across the EU, including more developed ones. EU investment is both necessary and a sign of solidarity.

·Maintaining critical mass - investments in the more developed regions are already small in per capita terms.

·In the public consultation, the vast majority of stakeholders supported the ERDF in all regions. This approach also ensures cohesion policy funds have better visibility in all Member States.

7.

Simplification


There is evidence of substantial administrative costs associated with the ERDF, estimated in a recent study 17 at 3% of average programme costs. The administrative burden on beneficiaries (including SMEs) is higher.

Most of the simplifications in the ERDF will be created by the CPR. Many are difficult to quantify financially in advance, but the study made the following estimates:

·Making greater use of simplified cost options (or payments based on conditions) for the ERDF could substantially reduce total administrative costs – by 20-25% if these options are applied across the board.

·This more proportionate approach to control and audits implies an major reduction in the number of verifications and in the audit burden for “low risk” programmes; this would reduce total administrative costs of the ERDF by 2-3% and costs for affected programmes by a much greater amount.

Another major aspect of simplification is that this proposal would integrate support from the ERDF and from EU's external financing instruments, as set out above.

8.

E-cohesion and data exchange


The 2014-2020 programme period required a system of electronic data exchange between beneficiaries and managing authorities and between the different authorities of the management and control system. This proposal for a Regulation builds on this and develops further certain points in relation to data collection. All data necessary for monitoring progress in implementation including results and performance of programmes will now be transmitted electronically every 2 months. This means the open data platform will be updated in almost real time.

Data on beneficiaries and operations will similarly be made public in electronic form, on a website run by the managing authority.

4. BUDGETARY IMPLICATIONS

This proposal does not have budgetary implications. The proposal on the ERDF and Cohesion Fund Regulation sets out budgetary implications of the ERDF which is the source fund for actions covered by this proposal.

5. SUMMARY OF THE CONTENT OF THE REGULATION

Much of the delivery and implementation of the ERDF is covered in the CPR. This proposal for a Regulation should therefore be seen in this context. Its main focus is on key implementation and cooperation issues, notably:

·the definition and geographical coverage of the five components;

·Interreg-specific objectives and scope;

·adaptations of the CPR rules on programming, programme authorities, management and control and financial management; and

·integration of EU external financing instruments.

9.

Chapter I - General provisions (Article 1 to 13)


Subject, scope and Interreg components

This Chapter sets out the subject matter and scope of the ETC/Interreg Regulation. In particular, it describes the five Interreg components: cross-border, transnational and maritime, outermost regions’, interregional cooperation and the new interregional innovation investments.

10.

Geographical coverage


The Commission carried out a more than two-years study and consultation process known as the 'Cross-border review'. This gathered evidence showing that border regions generally perform less well economically than other regions within a Member State. Access to public services such as hospitals and universities is generally more difficult in border regions. Navigating between different administrative and legal systems is often still complex and costly.

As a follow-up to the Cross-border Review, the Commission adopted the Border Regions Communication proposing a number of concrete measures to be taken by the EU and national, regional and local governments. These measures include 'considering the legal and financial framework for cross-border cooperation'. The Communication proposes to explore ways in which future funding programmes, including Interreg, can make a more strategic contribution to preventing and resolving border obstacles and developing cross-border public services.

Consequently, the cross-border cooperation component will be concentrated on land borders, whereas cross-border cooperation on maritime borders will be integrated into the enlarged ‘transnational cooperation and maritime cooperation’ component.

The 2021-2027 proposals for both the Investment for Jobs and growth and ETC/Interreg goals reflect this commitment in two ways. First, they significantly raise the profile of cooperation actions in the programmes. Second, they help the cross-border programmes to focus more than before on institutional cooperation, resolving border issues, and investing in joint services of public interest.

11.

Resources and co-financing rates


These provisions cover the resources, both from ERDF and the EU's external financing instruments. A ‘return’ mechanism of the remaining funds is set out in case no submission is made or no financing agreement of an external Interreg is signed. In particular for external cooperation, co-financing should be higher than for the Investment for jobs and growth goal.

12.

Chapter II - Interreg-specific objectives and thematic concentration (Articles 14 and 15)


Taking into account the special features of Interreg, two Interreg-specific objectives are set out:

13.

'better Interreg governance'; and


'a safer and more secure Europe',

The proposed Regulation also sets out specific percentages for thematic concentration.

Chapter III - Programming (Interreg programmes – territorial development – operations and small project fund- TA) (Articles 16 to 26)

This Chapter adapts the CPR rules to Interreg programmes. A new feature is the ‘Small project fund’ allowing local and civil society to set up small projects using simplified cost options.

Chapter IV - Monitoring – evaluation – information and communication (Articles 27 to 35)

This Chapter also adapts the CPR rules to Interreg programmes.

To ensure a consistent monitoring of performance, the proposed Regulation also maintains and refines the common set of output indicators, while adding for the first time a common set of results indicators. The latter make it possible to report results in real time on the Open Data Platform and to compare them across programmes and Member States. They will also feed into discussions on performance and successful evaluations.

Chapter V – Eligibility (Articles 36 to 43)

Eligibility rules should be established as far as possible by each Member State with a minimum of EU rules. However, this approach does not work for Interreg programmes where between 2 and 27 different sets of national rules may contradict and clash. This Chapter therefore sets out a clear hierarchy of EU, Interreg progamme-specific and then national eligibility rules. The detailed provisions under Commission Delegated Regulation (EU) No 481/2014 of 4 March 2014 18 are integrated into this proposed Regulation.

14.

Chapter VI - Interreg programme authorities, management ad control (Article 44 to 48


The CPR rules on programme authorities, management and control are adapted to Interreg programmes. This affects in particular the functioning of the single audit authority and hugely simplifies the audit of operations.

15.

Chapter VII - Financil management, accounts and financial corrections (Articles 49 and 50)


Interreg programmes should receive higher and faster pre-financing than other cohesion policy programmes to enable beneficiaries who often do not have sufficient own resources to get their operations started. In addition, the recovery chain should be established in detail.

16.

Chapter VIII - Particpatin of third countries and OCTs in Interreg progammes under shared management (Articles 51 to 59)


The starting point is that normal ETC/Interreg rules will apply. Certain adaptations are needed to take into account that non-EU countries or partner countries or OCTs are not bound by EU law. This impacts on programme authorities, management methods, eligibility, large infrastructure projects, procurement, financial management and the conclusion of financing agreements.

17.

Chapter IX - Specifc rules on indirect management (Articles 60 and 61)


These cover the interregional innovation investments and may concern cooperation between outermost regions’.

18.

Chapter X - Final provisions (Articles 62 to 65)


These cover delegation, comitology and transitional provisions.

19.

ANNEX


The Annex covers the template for Interreg programmes.