Explanatory Memorandum to COM(2020)451 - Amending Regulation 1303/2013 for extra resources for crisis repair due to COVID-19 and preparing a green, digital and resilient recovery of the economy (REACT-EU) - Main contents
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| dossier | COM(2020)451 - Amending Regulation 1303/2013 for extra resources for crisis repair due to COVID-19 and preparing a green, digital and ... |
|---|---|
| source | COM(2020)451  |
| date | 28-05-2020 |
1. CONTEXT OF THE PROPOSAL
• Reasons for and objectives of the proposal
Since the start of the COVID-19 pandemic, the Commission has tabled a number of proposals to ensure that all available funding in the 2014-2020 programmes financed from the European Structural and Investment Funds (ESI Funds) can be mobilised to provide immediate responses to the direct and indirect effects of the crisis. These amendments secured the possibility to mobilise available funding to address the needs stemming from increased pressure on health systems as well as to provide support to employers and employees to weather the extraordinary situation. Member States and regions were provided with immediate liquidity and flexibility to allow them to target the ESI Funds where they were most needed. The possibility to make use of a 100% Union financing for these measures for the accounting year starting in 2020 will contribute to alleviating the burden on their public finances.
The spread of the coronavirus across countries has prompted many governments to introduce unprecedented measures to contain the pandemic such as businesses being shut down temporarily or widespread restrictions on travel and mobility. This in turn has led to sharp decline in the level of output in many economies with severe social consequences. It will pose significant challenges for public finances and debt management in the years to come, which in turn may limit public investment necessary for the economic recovery. In addition, national and regional capacities to address the effects of the crisis, differ between Member States and regions due to the diverse economic structures and fiscal positions. If left unaddressed, such differences may result in an asymmetric recovery and lead to increased regional disparities, which in turn can undermine the Internal Market, the financial stability of the Eurozone and our Union as a whole.
The situation is slowly evolving, and many regions and Member States prepare for a cautious easing of restrictions on their societies and enterprises, and restarting their economies. Nevertheless, the direct and indirect effects of the crisis have already taken their toll in many sectors, the process of recovery will take time and the need for further confinement measures cannot be excluded. The economy is contracting and unemployment is rising; the uncertainty of the situation to follow may lead to slower recovery.
In order to prevent the widening of disparities as well as to avoid an uneven recovery process, it is therefore necessary to provide additional support over the short and medium term to Member States and regions, in particular those whose economy has been hardest hit by the pandemic and have least capacity to bounce back, to reinforce their crisis response capacity, to help their economies and societies weather the situation and to prepare the foundations of a swift recovery of their economies.
The extraordinary measures granting the greatest flexibility and financing possible from the ESI Funds have played a major role in supporting Member States and regions addressing the immediate effects of the crisis. It is clear however, that their extent was limited by the availability of unallocated funding remaining at the end of the 2014-2020 programming period. In that context, more needs to be done and this is only possible through making available additional resources.
The Commission is proposing to harness the full power of the EU budget to mobilise investment and frontload financial support in the crucial first years of recovery. These proposals are based on two pillars. On the one hand, a revised multiannual financial framework for 2014-2020 and an emergency European Recovery Instrument, which will temporarily boost the financial firepower of the EU budget by using the headroom in the EU budget to raise additional financing on the financial markets. On the other hand, a reinforced multiannual financial framework for 2021-2027. The Commission is proposing to strengthen key programmes through the European Recovery Instrument to channel investment quickly to where it is needed most, reinforce the single market, step up cooperation in areas such as health and crisis management, and equip the Union with a budget tailor-made to drive the long-term transition to a more resilient, greener, and digital Europe, while supporting the principles of the European Pillar of Social Rights. The present proposal belongs to the first pillar mentioned above.
These additional resources can only be deployed quickly in the real economy, if they are made available in the context of the still ongoing programmes of the 2014-2020 programming period.
It is therefore proposed that additional resources of EUR 58 272 800 000 in current prices are made available for the Structural Funds for the period 2020 to 2022 1 . The additional resources for 2020 stem from an increase of the global resources for economic, social and territorial cohesion in the multiannual financial framework for 2014-2020 and constitute additional global resources for the ERDF and the ESF for the current period. The additional resources for 2021 and 2022 constitute external assigned revenue stemming from the European Recovery Instrument.
These amounts will be distributed among Member States taking into account their relative prosperity and the extent of the effects of the current crisis on their economies and societies. By way of derogation from the rules applicable to external assigned revenue set out in the Financial Regulation, these additional resources shall follow the applicable rules set out in the CPR once they are assigned to operational programmes, including CPR rules on commitments and decommitments.
Member States may use these amounts under the Investment for growth and jobs goal from the European Regional Development Fund (ERDF) or the European Social Fund (ESF) to support operations fostering crisis repair in the context of the COVID-19 pandemic in the regions whose economy and jobs have been more hardly hit and preparing a green, digital and resilient recovery of their economies, or to increase the allocation for programmes supported by the Fund for European Aid to the most deprived (FEAD).
In order to allow the targeting of these resources to the geographic areas where they are most needed, as an exceptional measure and without prejudice to the general rules for allocating Structural Funds resources, the additional amounts are not to be broken down per category of region. However, Member States are expected to take into account the different regional needs and development levels so that focus is maintained on less developed regions, in line with the objectives of economic, social and territorial cohesion. Member States should also involve local and regional authorities, as well as relevant bodies representing civil society, in accordance with the partnership principle.
In addition, a new cross-cutting thematic objective “Fostering crisis repair in the context of the COVID-19 pandemic and preparing a green digital and resilient recovery of the economy” will be made available for the purposes of their implementation to allow for a simple programming process and the widest possible scope. This thematic objective will only be available for the programming and implementation of the additional resources. These cannot be combined with any other thematic objective and it shall not be possible to transfer the resources from the “regular” allocation under this new dedicated thematic objective. As country-specific recommendations issued in the context of the European Semester in 2020 identify specific priority areas for frontloading public investment to facilitate economic recovery, Member States are encouraged to take account of these priority areas when programming the additional resources.
In order to allow for a rapid reimbursement and simplified access to the additional resources, it is proposed that 50% of the additional resources for the year 2020 are made available immediately, following the approval of the programme(s) or programme amendment(s) concerned, as initial pre-financing which will only need to be cleared at the closure of the programmes. Member States and regions are encouraged to use this pre-financing to provide advance payments to beneficiaries in order to strengthen their financial liquidity. It is also proposed that annual pre-financing in the years 2021, 2022 and 2023 shall be paid in respect of the additional resources allocated to programmes. Given the need to make sure that these additional resources are deployed rapidly to investments on the ground and take effect in the real economy, it is not proposed to extend the final date of eligibility, which shall remain – also for the additional resources – 31 December 2023 (for expenditure incurred at the level of beneficiaries). Nevertheless, it is clarified that the commitments linked to the additional resources shall be decommitted in accordance with the rules to be followed for the closure of the programmes (i.e. in 2025 following the submission of the necessary documents pursuant to Article 141 CPR).
It is also envisaged that the electronic exchange system used for official exchanges between the Commission and the Member States in accordance with Article 74 i CPR is adjusted to provide the possibility to Member States to submit requests for operational programmes or for operational programme amendments for the allocation of the additional resources for the years 2020, 2021 and 2022 without any delay. 0.35% of the additional resources need to be allocated to technical assistance at the initiative of the Commission.
In addition, it is also proposed that the additional resources may be used to co-finance eligible expenditure up to a 100% from the EU budget. In order to allow for this possibility, it is necessary that these resources are programmed under one or more new dedicated priority axes or, where appropriate, under a new dedicated operational programme.
It is clarified that thematic concentration requirements, including requirements to allocate a certain share of the ERDF to sustainable urban development, ex ante conditionalities or provisions regarding the performance reserve, the application of the performance framework and communication strategies do not apply to these additional resources. Nevertheless, given the additional support, which may be entirely financed from the EU budget without any national co-financing, it is reasonable to require that Member States and managing authorities inform the general public, potential beneficiaries, beneficiaries, participants and final recipients of financial instruments about the existence and origin of this additional support.
In order to avoid additional administrative burden, but to ensure that experience from the implementation of the additional resources is properly analysed, it is proposed that each Member State benefiting from the additional resources shall prepare one single evaluation assessing the effectiveness, efficiency and impact of these resources. While no common indicators are proposed to be established at EU level, in order to ensure the comparability and the possibility to aggregate at EU level supported outputs, Member States are encouraged to make use of the programme-specific indicators made available by the Commission to track COVID-19 related response measures financed from the Funds.
These exceptional changes shall be without prejudice to the rules that should apply under regular circumstances and shall not set a precedent for the rules applicable to the 2021-2027 programming period.
• Consistency with other Union policies
The proposal is limited to targeted amendments necessary for the purposes of establishing rules making available the additional resources and governing their implementation. The proposal is consistent with the overall legal framework established for the ESI Funds and is limited to a targeted amendment of Regulation (EU) No 1303/2013. The proposal complements the recent amendments 2 introducing specific measures to mobilise investments in the health care systems of the Member States and in other sectors of their economies in response to the COVID-19 pandemic; and the specific measures to provide exceptional flexibility for the use of the ESI Funds in response to the COVID-19 outbreak (Coronavirus Response Investment Initiative) as well as all other measures aimed at addressing the current unprecedented situation. The measures are consistent with the Commission’s proposal for a European Recovery Instrument and proposal for a MFF revision.
2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY
• Legal basis
The proposal is based on Articles 177 and 322 of the Treaty on the Functioning of the European Union.
• Subsidiarity
The proposal does not modify the delivery mode of Structural Funds’ programmes, which remains under shared management.
Shared management is underpinned by the subsidiarity principle, as the Commission delegates strategic programming and implementation tasks to Member States and regions. It also limits EU action to what is necessary to achieve its objectives as laid down in the Treaties.
The proposal aims to allow for making available additional resources and clarify the rules governing the use of those resources in the context of programmes under the current programming period.
• Proportionality
The proposal is limited to and targeted at setting out the necessary rules to be followed to make the additional resources available. Those rules do not go beyond what is necessary to make additional resources available and set out the rules applicable for the implementation of those resources.
• Choice of the instrument
The choice of instrument is a Regulation of the European Parliament and of the Council, in accordance with the ordinary legislative procedure as set out in Article 177 of the Treaty.
3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS
• Ex-post evaluations/fitness checks of existing legislation
• Stakeholder consultations
There was no consultation of external stakeholders. However, the proposal follows extensive consultations with Member States and the European Parliament over recent weeks, and takes account of the more than 400 questions received from national authorities concerning their handling of crisis response measures through the Coronavirus Response Investment Initiative Task Force.
• Collection and use of expertise
• Impact assessment
An impact assessment has been carried out to prepare the proposals for Regulation (EU) No 1303/2013. These limited and targeted changes do not require a separate impact assessment given that they only relate to setting out the rules applicable to the additional resources made available in the context of the COVID-19 pandemic.
• Regulatory fitness and simplification
• Fundamental rights
4. BUDGETARY IMPLICATIONS
The proposal will lead to additional commitments in the year 2020, financed from an increase of the ceiling of the 2014-2020 Multiannual Financial Framework. It will also lead to additional commitments for the years 2021 and 2022, financed from external assigned revenues. It will trigger additional payments in the years 2020 to 2025.
5. OTHER ELEMENTS
• Detailed explanation of the specific provisions of the proposal
It is proposed to amend Regulation (EU) No 1303/2013 (the Common Provisions Regulation) to ensure that exceptional additional resources are made available for Member States from the Structural Funds to provide assistance for fostering crisis repair in the context of the COVID-19 pandemic for the geographical areas of Europe whose economy and jobs have been harder hit and preparing a green, digital and resilient recovery of the economy.
It is proposed that the additional resources are made available for budgetary commitment from the Structural Funds under the Investment for growth and jobs goal, for the years 2020, 2021 and 2022. The additional resources for 2020 stem from an increase of the resources for economic, social and territorial cohesion in the multiannual financial framework for 2014-2020 and constitute additional global resources for the ERDF and the ESF for the current period. The additional resources for 2021 and 2022 constitute external assigned revenue stemming from the [European Recovery Instrument]. The Commission will be empowered to set out in an implementing decision the breakdown of the totality of the additional resources for each Member State for the years 2020 and 2021 on the basis of the allocation criteria based on the latest available objective statistical data concerning Member States’ relative prosperity and the extent of the effect of the current crisis on their economies and societies. Given the specific vulnerability of the economies and societies of outermost regions, the allocation method should provide for a dedicated additional amount for those regions. In order to reflect the evolving nature of the effects of the crisis, it is proposed that this Commission Implementing Decision is revised in 2021 in order to set out the additional resources for each Member State for the year 2022 on the basis of the same allocation method, using the latest statistical data available by 19 October 2021.
Additional resources need to be broken down between the ERDF and the ESF through the programming of resources without any limitations. Member States shall also have the possibility to use a part of these additional resources for the FEAD. The additional resources will be allocated to one or more dedicated separate priority axes within an existing programme or programmes through a request for amendment of the programme or programmes concerned or to a new dedicated programme through the preparation and submission of a new operational programme.
The additional resources may only be used to support operations fostering crisis repair in the context of the COVID-19 pandemic, or preparing a green, digital and resilient recovery of the economy through investments in operations contributing to the transition towards a digital and green economy under a new thematic objective complementing the thematic objectives set out in Article 9, and technical assistance. The regular CPR rules will apply for the starting date for eligibility of expenditure and the selection of operations receiving support from these additional resources.
It shall be allowed that up to 4% of the additional resources remaining available for programming under the ERDF and the ESF (not including the amounts used to support the FEAD, where applicable) may be allocated to technical assistance either to existing technical assistance priority axes or programmes receiving financing from the ERDF or the ESF, or to one or more newly created technical assistance priority axes.
The additional resources not allocated to technical assistance and the FEAD shall exclusively support operations both from the ERDF and the ESF under the new thematic objective “Fostering crisis repair in the context of the COVID-19 pandemic and preparing a green, digital and resilient recovery of the economy”. For the purposes of programming and implementation, this thematic objective shall also constitute a single investment priority.
For the ERDF, the additional resources shall primarily be used to support investment in product and services for health services and to provide support in the form of working capital or investment support to SMEs including operational and personnel costs and health and safety measures.
For the ESF, the additional resources shall primarily be used to support job maintenance, including through short-time work schemes and support to self-employed, job creation, in particular for people in vulnerable situations, support to youth employment measures, skills development and to enhance access to social services of general interest, including for children.
50% of the additional resources for the year 2020 will be paid as initial pre-financing to the programmes concerned. That initial pre-financing needs to be totally cleared from the Commission accounts not later than when the programme is closed. The additional resources will also be taken into account for the purposes of calculating the amount of the annual pre-financing to be paid in accordance with the standard rules in 2021, 2022 and 2023.
By way of derogation from normal co-financing requirements, it should be allowed that priority axes receiving support from the additional resources programmed under the newly established dedicated thematic objective are co-financed from the Funds up to 100%.
Requests for the amendment of an existing operational programme to accommodate the additional resources submitted by a Member State have to be duly justified and will in particular set out expected impact of the changes to the programme on fostering crisis repair in the context of the COVID-19 pandemic or preparing a green, digital and resilient recovery of the economy.
Where a dedicated operational programme is established, the justification needs to explain the expected impact of the changes to the programme on fostering crisis repair in the context of the COVID-19 pandemic or preparing a green, digital and resilient recovery of the economy. Where a dedicated operational programme is established, only designated programme authorities of on-going programmes may be identified by the Member States.
It is necessary to set out that Member States ensure that at least one evaluation is carried out by 31 December 2024 to assess the effectiveness, efficiency and impact of the additional resources as well as how they contributed to achieving the goals of the new dedicated thematic objective. In addition, it is also necessary to ensure that Member States and managing authorities while carrying out their responsibilities linked to information, communication and visibility, should use all reasonable means to ensure that potential beneficiaries, beneficiaries, participants, final recipients of financial instruments and the general public are aware of the existence, volume and additional support stemming from the additional resources. For the purposes of those requirements, it is necessary to set out that the reference to the Funds is complemented or replaced by a reference to the [“REACT-EU”].
Finally, it is necessary to clarify that provisions concerning the requirements on thematic concentration, ex ante conditionalities, the performance reserve and application of the performance framework as well as the need to prepare a communication strategy do not apply to the additional resources.