3 Times EU Cohesion Policy Has Been Used to Address Recent Crises

For the European Union, Cohesion Policy is both a powerful instrument for change in the form of the more than €350 billion available in funding from Cohesion Policy in the period 2021-2017, and a powerful promise, aiming to increase the prosperity of poorer EU regions towards the levels of the wealthiest. By design, these funds—the European Regional Development Fund (ERDF), the European Social Fund (ESF), the Cohesion Fund (CF) and the Just Transition Fund (JTF)—are used by EU member states and regions to undertake projects to improve the underlying conditions for their economies. These can include investment in infrastructure, education, administration, social services or to promote innovation.

The programmes and overarching goals for cohesion policy are decided for a seven-year funding period, and spending is supposed to follow a plan with many layered goals. For example, for the 2014-2020 funding period there were 123 fields linked to high-level goals across the various cohesion funds.

2014-2020: Cohesion Policy Planned EU financing by detailed themes (categorisation)

However, over the past three years, cohesion funds have regularly been used beyond their designed purpose to address crises. First in response to COVID-19, then to help with the uptake of refugees from war-torn Ukraine and finally the energy crisis.

The use of cohesion funds to respond to crises is not a new concept. Already during the 2008/2009 financial crisis, the EU extended the deadline for spending cohesion funds from the 2000-2006 programming period to mid-2009 and increased pre-payments to member states for the programming period 2007-2013 (most cohesion funds are generally spent in the second half of the seven-year funding period, so the pre-payments made far more money available than would have been otherwise).

The fact that cohesion funds have been mobilized to address three crises in the last three years shows that this is now the norm rather than the exception. When another crisis hits the EU, expect cohesion funds to play a part in the EU’s response.

Whether this is a good development depends on who you ask. The Directorate-General for Regional Policy (DG Regio) and the Regional Development Committee of the European Parliament have repeatedly worked swiftly to deliver up proposals and legislation to free up cohesion funds to address crises. This has been welcomed by member states as well, especially those most directly impacted by the various crises.

However, the European Committee of the Regions (CoR), which styles itself as the direct voice of regions and cities in Brussels, has consistently warned that such flexibility detracts from the long-term goals of cohesion policy, namely reducing economic disparities between regions and fostering sustainable economic growth in all EU regions.

This disagreement amounts to a debate on the most effective way to wield these large funds: whether to react quickly to crises to hopefully mitigate their impact, or to methodically use cohesion funds as intended over the course of the funding period to maximize their long-term impact.

First, this article looks at how cohesion funds have been used to react to crises. Then, it will examine the debate around this trend and some possible solutions.

COVID-19: Cohesion funds a rapid but insufficient fix

Proposed in mid-March 2020 by the European Commission and approved by the Council of the EU and Parliament a month later, the Coronavirus Response Investment Initiative packages (CRII and CRII+) made cohesion funds available to address the pandemic. Predating the Next Generation EU (NGEU) economic recovery plan, the CRII and CRII+ freed up funds to address healthcare shortages and to support small and medium enterprises facing a dire outlook due to lockdowns, collapsing demand and disrupted supply chains.

In total, €13.2 billion from the 2014-2020 Cohesion Policy total funds, about 3-4% of the total, was pulled from cohesion funds for the following purposes: ventilators, personal protective equipment, COVID testing, and support for hospitals; support for SMEs; job retention schemes and support for vulnerable groups; and for supporting tourism, social services, education and infrastructure.

The initiative enabled a flexible movement of funds from three cohesion funds—the European Regional Development Fund, European Social Fund and Cohesion Fund—and transfers between different kinds of regions, i.e., potentially from less developed regions to more developed regions.

Overall, the CRII/CRII+ received little attention from the general public, and EU policy experts judged it for what it was: a quick reshuffling of funds that was in general effective, but, given the scale of the problem, insufficient as the sole response. Of course, CRII/CRII+ was soon eclipsed by the NGEU recovery package, which was adopted in July 2020.

The Russian war against Ukraine: Response draws from the pandemic playbook in terms of cohesion money

Before one crisis ended, another began. By March 2022, as a result of Russia’s invasion of Ukraine, over 3 million Ukrainian refugees had entered the EU (Now it is nearly 8 million). Cohesion funds were made available in a manner consistent with the COVID-19 response: by introducing flexibility into how existing cohesion funds can be allocated to different programmatic areas.

The Cohesion’s Action for Refugees in Europe (CARE) was proposed on 8 March 2022 and adopted by the Council of the EU before the end of the month. It made it possible for cohesion funds to be moved between programmes in different funds (ERDF, ESF) to support areas key to processing and caring for refugees from Ukraine, like health, education, employment and social inclusion and improving reception centres. Around €17 billion to €20 billion as made available in this way. CARE also extended the 100% co-financing rate for cohesion policy programmes that was begun in the CRII/CRII+.

Energy crisis: Cohesion funding again put in play

Russia’s invasion of Ukraine led to widespread conviction amongst EU member states to stop using Russian oil, and, later, most member states agreed to reduce or eliminate imports of Russian gas. As a result, some EU member states that were heavily dependent on Russia for their heating and energy needs faced a new crisis. Reducing imports of Russian gas over the course of 2022 meant rising prices for consumers as supply dwindled. To help households and SMEs cope with high gas prices the Commission proposed redirecting unused 2014-2020 cohesion funds to cushion the blow. Called SAFE (Supporting Affordable Energy), this was done by adding amendments to the REPowerEU plan that already proposed to enable member states to use up to 12.5% of cohesion funds to expand renewables, strengthen grids, and electrify heating and industry, among other objectives.

Currently, only a provisional agreement on REPowerEU was reached between the European Parliament and the Council in the final weeks of 2022, so its impact has not yet played out.

Do crises and Cohesion Policy belong together?

The regular use of cohesion funds to address crises has fostered a debate amongst Cohesion Policy’s drivers and scholars about the best use of this powerful instrument. Between the Council, Commission and Parliament, which have worked quickly to bring added flexibility to cohesion funds in times of crisis, there is general agreement on the benefits. Commissioner Ferreira of DG Regio has argued that the flexibility of cohesion funds both heads off longer-term impacts and brings attention to Cohesion Policy.

But what is the cost of this added visibility in times of crisis? Regarding the COVID-19 cohesion policy response specifically, scholars noted at the time the tension between quickly addressing crises with pre-payments and added flexibility and getting the most impact from funding where it is needed for long-term goals.

There is also the issue of administrative capacity. In the case of using cohesion funds to assist member states with the uptake of Ukrainian refugees, the European Council on Refugees and Exiles (ECRE) and the Platform for International Cooperation on Undocumented Migrants (PICUM) pointed out that initiating projects to implement cohesion funds can be difficult for countries and regions already facing administrative burdens like dealing with crises.

If cohesion funds have been used as a flexible tool in times of crises, it has not been by design but rather due to necessity. These funds can be fairly easily and quickly made available to give support to member states, and so the EU has time and time again opted for this solution as a first step in crisis response. But if this debate over the prioritization of long-term goals versus short term crisis response is to be resolved, perhaps crisis reaction could be embedded in other permanent funds.

One option is to make NGEU permanent to give the EU the ability to take on joint debt to respond to crises. Or another possibility would be a new dedicated crisis fund with built-in flexibility, like the EU energy fund idea proposed by the thinktank Bruegel. These options could alleviate pressure on cohesion funds to be a reactionary tool and ameliorate tensions between short-term crisis response and the long-term sustainability goals of Cohesion Policy.

In the meantime, expect Cohesion Policy to remain a “first responder” to crises. Given that the reallocations—especially the amounts actually spent—remain relatively small in comparison to the total amount available in the various cohesion funds, this trend likely does more good than harm. First, the attention it draws to cohesion policy helps make EU citizens more aware of its impact. And second, as has been demonstrated in these most recent crises, cohesion policy does not bear sole responsibility to assist member states during crisis. Larger measures follow to overtake cohesion funds as the main response, meaning cohesion funds can continue to be implemented for projects addressing their long-term programmatic goals.

About the author

Nathan Crist is Project Manager in the Europe’s Future Program at the Bertelsmann Stiftung working on the Europe’s Economy Project.

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