Disinfectant is sprayed in a school in Greece in 2020 - © Ververidis Vasilis/Shutterstock
The repeated use of structural funds by the EU institutions to deal with crises risks having repercussions on the main objective of strengthening the territorial cohesion of the European regions. A report by the European Court of Auditors
The advent of the pandemic has had profound consequences in the EU member states, triggering a process of economic recession and prompting immediate action at the European level to face shared challenges. In a short space of time, the Commission managed to introduce several changes to the legislation governing cohesion policy for the 2014-2020 financial period, in order to be able to offer answers to the needs outlined by national governments. Huge amounts of resources were made available to member states in a short time, useful for initiating measures to combat the crisis.
In addition to liquidity, the changes implemented to the cohesion policy have provided states with greater flexibility and simplified procedures in redirecting available economic resources towards the most affected sectors.
The instruments launched to face the crisis
The European Commission initially adopted two investment initiatives in response to the pandemic (CRII and CRII+) with contributions from the resources still available from the 355 billion Euros allocated to cohesion policy for the seven-year period 2014-2020. Both initiatives allowed states to make investments with up to 100% coverage from the European budget, to be implemented by 2021.
The Recovery Assistance Instrument for Cohesion and Territories of Europe (REACT-EU) was subsequently adopted, adding an additional 50.4 billion Euros to the cohesion funds available, to be spent by 2023. REACT-EU took the form of a sort of "bridge loan" between the end of the 2014-2020 period and the postponed start of the new 2021-2027 financial seven-year period due to the significant delays caused by the pandemic. Italy and Spain were the main beneficiaries of REACT-EU, together representing 57% of the entire budget available.
The discretion of the states
The changes made to the cohesion policy legislation were audited by the European Court of Auditors, with the aim of understanding whether or not they have helped member states deal with the pandemic. The results highlight some confusion on the risks deriving from the use of cohesion funds to deal with emerging crises, considering that these funds are mainly intended for the implementation of actions aimed at reducing the development disparities between the various European regions.
In its report of early February, the Court recognises the speed of the EU in providing responses to deal with the consequences of the pandemic, but highlights that the measures adopted risk exacerbating rather than reducing the differences in social and territorial development in Europe.
The CRII/CRII+ initiatives have introduced changes to the main features of the cohesion funds, allowing states a high level of discretion in the use of resources, not limited to the provision of responses to the pandemic. REACT-EU then further deviated from the rules of cohesion policy, granting member states the possibility to distribute the additional funds among the regions and expanding the types of eligible investments.
According to the Court, this margin of appreciation has sometimes been to the detriment of less developed regions. For example, in countries such as Greece, Hungary and Italy, underdeveloped regions have seen a – small but significant – decrease of 5.6 million Euros compared to the previous seven-year period. On the other hand, substantial resources went to the more developed regions (+ 1.7 billion Euros compared to the previous seven-year period) or in transition (+ 82 million Euros).
Other problems encountered
The flexibility offered by the three instruments mentioned above has allowed member states to allocate considerable additional resources to the healthcare, employment, and business support sectors. However, it was noted that the states have adopted varied programming methods, with the consequent occurrence of cases where some member states have concentrated their funds from REACT-EU in a single investment sector.
Moreover, the state's ability to absorb funds has always been a sore point. At the end of 2021, the spending rate of the funds envisaged for the period 2014-2020 reached only 62%, a level similar to that of the previous seven years. On the other hand, the implementation of different lines of financing due to the crisis has created additional burdens on the national administrations, finding themselves faced with the pressure to spend the available funds by 2023 and at the same time with the risk of being detrimental to the profitable use of resources and performance.
“The measures increased the administrative workload of the managing authorities and further delayed the launch of the 2021-2027 programmes”, noted the Court.
In conclusion, the provision of temporary changes to cohesion policy to deal with a crisis should not, according to the European Court of Auditors, become ordinary practice, risking losing sight of the objective of economic, social, and territorial convergence of European regions.
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