Substantial reforms are called for by February 20th’s second-ever European Commission initiated expert report on Cohesion Policy. The European Union’s three-decade-old Cohesion Policy is the world’s largest regional development program and dubbed a convergence machine by the World Bank for its ability to economically uplift less-developed regions. It is also highly scrutinized—and with good reason too, since it wields about a third of the total EU budget (€392 billion over a period of seven years).

In recent years, Cohesion Policy’s proponents have been on the defensive, experiencing a crisis of confidence that some have even called an identity crisis. It is no surprise then, that during the presentation of the new report so much time was dedicated to answering a basic question: Why do we need Cohesion Policy in the first place?

The answer is clear: The EU must harness its economic potential to stay a globally relevant player while also not leaving Europeans behind. The consequence of further economic divisions would be further political polarization, endangering the EU itself. However, to win support for Cohesion Policy in the future, it must be improved, and just how that can be done has proven to be a difficult question to answer.

What is being reviewed and what is the conclusion?

The expert group met almost monthly in 2023 to discuss a range of topics including why many EU regions struggle with stagnating economic growth, whether Cohesion Policy should be adapted to respond to short-term crises, and how Cohesion Policy can be better aligned with other policy areas.

In the past, Cohesion Policy has generally been effective in developing EU regions and narrowing disparities between them, though not for all regions. And recently, Cohesion Policy’s role in helping the EU face its great challenges has grown increasingly unfocused.

This new report centers on the current political debate around Cohesion Policy and attempts to connect it with today’s big transformative challenges. But in doing so, many pages offer backward glances rather than a forward look. In this regard, it provides a sneak preview of the 9th Cohesion Report (expected mid-March), which will take stock of Cohesion Policy’s recent effectiveness.

With so much space in the report dedicated to the policy’s past and its raison d’être, concrete recommendations for reform are few. When the report does look ahead, it calls for a streamlined Cohesion Policy more in tune with its original form and with a focus on a genuine place-based and transformative approach.

This is, however, no conservative, back-to-basics proposal. The authors do eventually pivot from defensively justifying Cohesion Policy’s existence to, by the end of the report, arguing for the principle of cohesion to propagate across all EU policy areas, writing, “Cohesion is far too important to be left to Cohesion Policy alone.”

This bold message goes way beyond the ‘doing no harm to cohesion’ mantra and explicitly calls for building bridges between Cohesion Policy and other policies at the EU and member state level (energy policy could be the best place to start).

Cohesion Policy must still answer questions on governance and conditionality.

What the report does well—and where we see concrete steps ahead—is pointing out specific areas where Cohesion Policy can be made more inclusive and dynamic in helping regions shape their futures.

For one, the report offers solid ideas for Cohesion Policy to help the competitiveness of the EU single market. Drawing on research showing that EU regions have untapped potential for cross-border cooperation, the report goes further by proposing how Cohesion Policy could help create dedicated regional agencies to foster interregional collaboration by matching local assets with global—not just European—FDI, value chains, and knowledge networks. This would also contribute to a more integrated Europe and strengthen Europe’s economic position in the world.

A major problem of the current design of Cohesion Policy is limited local institutional capacity and governance. The absorption rate of funds is particularly low in the least developed regions, although investments there could have the biggest impacts. Consequently, the report argues for capacity-building for local administration, strengthening regional governance and empowering local authorities, though it remains vague on how to accomplish this.

Most intriguing are considerations in the report of the Recovery and Resilience Facility (RRF). The report’s authors advocate for taking elements from the RRF, like a performance-based approach, and integrating them into the territorial logic of Cohesion Policy. The RRF, established during the COVID-19 crisis, lacks a territorial dimension below the member state level but imposes strict conditionality.

In contrast, Cohesion Policy follows a long-term programming approach with an explicit territorial dimension but currently lacks conditionality. Implementing conditionality in Cohesion Policy is challenging, especially in non-federal member states where regions have less political power. What could have strengthened the report, then, would have been concrete proposals for how to square the circle and bring territoriality and conditionality together within Cohesion Policy.

In conclusion, this new report has set the stage for further discussions on Cohesion Policy in the months to come and will serve as a valuable guide to answer to the open questions surrounding the future of Cohesion Policy.

About the authors

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

Thomas Schwab is Project Manager for the Europe’s Future Program at the Bertelsmann Stiftung. He works as an economist analyzing the effects of European economic policies for territorial distribution and cohesion.

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