Budget 2021 – 2027: mixed funding is needed to promote innovation

Representatives of the EU’s regions want to see more integration between the many and disparate EU programmes that are intended to support the growth of innovation clusters and promote regional development, in the 2021 – 27 budget.

At a recent meeting organised by the Science|Business Network,, there were calls for funding streams, including Horizon Europe, Digital Europe, Structural Funds and the Single Market Programme, to be more systematically applied to create interregional clusters and value chains, with simpler rules and less red tape.

“For the next programming period we mainly have fragmented instruments,” said Marta Marin, delegate of the Basque Country to the EU. Hungarian MEP Katalin Cseh agreed, calling for “a very serious simplification of the process.”

According to Cseh, the administrative burden of applying for EU money - both structural funds and Horizon 2020 grants – is too great. Researchers in central and eastern Europe often hire companies to help them write proposals. “I am not sure if this money is meant to be spent this way,” she said.

Cseh is at one with others in central and eastern Europe who argue that Horizon Europe research funding should be applied in a way that helps countries in this part of EU catch up with richer member states. Less red tape would boost eastern participation in the research and innovation programme, she said. Hungary ranks in the bottom half of the commission’s innovation scoreboard.

The European Commission wants to improve funding instruments for regional innovation and to open the way for poorer countries to spend structural funds on research, but its hands are tied until member states agree on a budget and priorities for 2021-2027.

“If there is no agreement on the money, there is no agreement on the legislation,” said Nicola de Michelis, director for smart and sustainable growth at the European Commission’s directorate-general for regional policy.

Member states have to agree on the multiannual budget and settle disagreements over spending priorities. Until there is an agreement “no one can start working” and there could be delays to EU programmes that are due to start in 2021, De Michelis said. “We are in a very difficult transition.”

In the budget debate, member states are haggling mostly about finding a balance between net beneficiaries and net contributors. “That equilibrium is such that cohesion countries will try to preserve cohesion money,” said De Michelis. “This is the realpolitik of how this works.”

National and regional strategies

Another open question is to what extent regions and member states have scoped their investment plans for the next budgetary cycle that begins in 2021.  While money from structural funds is disbursed from the EU budget, it is up to member states to decide how to spend it.

One attempt by the EU to encourage regions to come up with coherent innovation agendas that focus on specific topics, avoiding duplication and fragmentation, is smart specialisation. While that is considered to have had positive outcomes in some regions, there has been no systematic evaluation. “Without a body that checks and ensures, these strategies risk losing their momentum,” said De Michelis. The commission wants regions to establish systems to oversee and evaluate these strategies.

Cohesion versus research

The purpose of Horizon Europe is to support excellent research and the most promising innovations, regardless of geographic origin, not to reduce the performance gap in research and innovation between rich and poor member states. There are other policy and funding instruments in place - or to be devised – that are intended to strengthen the capacity of poorer regions, including their science infrastructures. As De Michelis noted, “Legislation allows member states to transfer cohesion money to research.”

The commission is open to working with member states to find new and better ways to use regional and cohesion funds to strengthen research and innovation in poorer regions. “Regional policy and research policy do two different jobs,” said De Michelis.

Synergies aren’t working

Another attempt by the commission to use cohesion money to bridge the performance gap was the establishment of so-called “synergies” in which it was intended the Horizon R&D programmes would ‘talk’ to other EU funding streams. According to De Michelis these synergies have been a “gigantic source of complication.”

One notable example of how synergies failed is the “seal of excellence”, an attempt by the commission to help researchers whose Horizon 2020 applications were graded above the evaluation threshold, but which were not funded, to get grants from elsewhere. The seal was intended to vouch for scientific excellence so researchers could automatically get money from structural funds, a stream of EU funding usually spent on building roads, railways and other basic infrastructure.

According to De Michelis the idea failed to get off the ground. “I don’t know how many of those projects we financed,” he said. That was partly because structural funds and Horizon 2020 have different evaluation criteria. Most projects stamped with the seal of excellence did not match the logic and objectives of regional policy plans.

Despite discouraging results to date, synergy has its supporters. “I like very much the idea of synergies, even if it has been rather wishful thinking and generic collaboration spirit than real achievements”, said Philippe Vanrie, Head of Secretariat at Eureka Network.

He suggested regions should come up with optimised plans for innovation schemes, while EU funding rules should give more degrees of freedom and be less prescriptive. Eureka is pushing for “more synergies for less overlapping, and more complementarity and additionality,” Vanrie said.

Cseh agreed there should be more flexibility. “We overprescribe what needs to be done,” she said. The EU should find a way to make synergies work.

Ideas from the private sector

Michael Kiesewetter, chairman of the board at NBank, the regional development bank of Lower Saxony, Germany, who assists innovative SMEs in the region to access growth capital, including from the EU, said the EU has “too many programmes” for which the application process is “too complicated”.

Large companies have dedicated departments to deal with EU red tape, but SMEs need advice on what money is available and how to access it. “For the time being it’s just me and my people doing this,” Kiesewetter said.

Kiesewetter would like to see the EU use digital technologies to create an electronic support using artificial intelligence to access EU research funding, similar to online retailer Amazon. SMEs could see what research and innovation funding is available and apply with just a few clicks.

Oriol Alcoba, director general of the Barcelona innovation accelerator ESADECreapolis, suggested there could be greater progress if the EU started to use public procurement as a means to promote innovation. This policy has been successful in the US. One notable example is the Department of Defense awarding a €7 billion contract to Microsoft to develop a cloud platform for the government.

“That is 60 per cent of overall R&D expenditure in Spain in a year,” said Alcoba. “Mission oriented, public-procurement, could be a great [funding] tool.”