European Commission promises ‘lighter, more user-friendly’ regional funding

A controversial new method for distributing regional aid and measures to cut red tape were among an overhaul of the EU’s €373 billion post-2020 cohesion budget presented in Brussels on Tuesday.

Cohesion funding, a gigantic redistribution effort to help poorer EU regions catch up with the rest, will become “lighter, more user-friendly and flexible” for beneficiaries, said Corina Crețu, the EU’s regional commissioner.

For businesses, entrepreneurs and universities looking to tap what, despite Brexit-driven cuts, is still the EU’s second biggest pot of money, the next budget round “offers less red tape, with simpler ways to claim payments using simplified cost options,” European Commission documents read.

Officials say the new rulebook will be half as long. Among the expected changes: companies in receipt of cohesion money will no longer have to hand in every single invoice or pay slip but can use estimates, such as flat rates or fixed prices for certain categories of costs, or for staff and other business expenses, such as insurance or rent.

Beneficiaries of the funds should also only be subject to a single audit rather than multiple, often uncoordinated, checks.

“This time round, we’ll try being quicker on our feet,” said a senior Commission official. Project oversight will tighten. “We will move back to a more disciplined implementation. Now, authorities will need to implement projects within two, not three, years,” the official said.

Investment will flow, as before, to a handful of familiar targets: climate change support, broadband coverage, transport networks, digital technologies and industrial modernisation, and employment and education training schemes.

There will still be money for bridges and motorways, and the Commission will also offer new incentives to invest in new research and business facilities.

Under a new feature called 'Interregional Innovation Investments', regions with similar investment proposals could band together and apply for additional financial support.

Member states will also be invited to transfer some of their money and investment decision-making power to the Commission’s planned new mega-investment fund, ‘InvestEU’. “This will significantly increase firepower of funds,” said Jyrki Katainen, Commission vice-president.

So-called smart specialisation strategies will still guide investments in research and innovation, and failed but excellent proposals made by researchers to the EU’s research programme, Horizon Europe, can get a ‘seal of excellence’, and use it to apply for regional funding without needing to pass another application and selection process.

More for south, less for east

Deciding how the huge pot of money filters out to member states used to be exclusively based on GDP per head, but now new, contentious criteria are added to the calculation.

Youth unemployment, education levels, carbon emissions, and most controversial of all, progress towards integrating migrants, will now factor into the distribution formula. 

Commission officials say that the revised formula for calculating the way to distribute money is not, as some have interpreted, part of a political decision to punish countries like Hungary or Poland for failing to accept EU-mandated migrant quotas.

Rather than politics, eligibility for funds is still predominantly tied to how well member state economies are performing, officials said.

Strong growth in Poland, Hungary, the Czech Republic, Estonia and Lithuania means these countries face sharp cuts of 23-24 per cent in their receipts in real terms. Cohesion funding accounted for more than 60 per cent of public investment in Poland and more than 55 per cent in Hungary, in 2015-2017, so it can be expected that cuts will be fiercely debated. The proposals will need to be approved by 28 member states.

While central and eastern Europe fare badly in the shakeup of funds, regions in southern countries such as Greece, Italy and Spain – places where the effects of the 2008 economic crash are still evident – see cohesion increases.

The improved health of the European economy overall means the Commission wants to chip in less to regional projects. It proposes to lower its co-financing rate, from the current maximum of 85 per cent of the costs of a project today, to 70 per cent.