Fiscal threat added to reform of regional aid

Commission seeks to impose sanctions, but poorer members states are likely to oppose move.

The European Commission will today (6 October) recommend that the suspension of EU cohesion funds be included among possible sanctions if member states violate deficit and debt thresholds. The controversial plan overshadowed other reforms to the EU’s Cohesion Policy for the 2014-20 spending period. 

The reforms – which will be presented and approved today – aim to refocus regional aid towards fulfilling priorities and goals set out in the Europe 2020 jobs and growth strategy.

Officials said that José Manuel Barroso, the Commission president, and Olli Rehn, the European commissioner for economic and monetary affairs, both insisted on including the sanction plan in the package, despite the misgivings of Johannes Hahn, the European commissioner for regional policy. The change was added to a draft of the proposal on Monday (3 October).

Angela Merkel, Germany’s chancellor, and Nicolas Sarkozy, the French president, have both lobbied Barroso to propose a one-year suspension of cohesion funds as an economic sanction within the excessive deficit procedure, to dissuade member states from breaching the EU’s stability and growth pact.

Barroso said yesterday (5 October) that he wanted the policy “to support our efforts to enhance fiscal discipline and pursue growth-enhancing reforms”.

A Commission official said the sanction was foreseen only “as a last resort”, and ought not to overshadow the reform package as a whole.

Policy in jeopardy

Danuta Hübner, a centre-right Polish MEP and the chairwoman of the European Parliament’s regional development committee, attacked the idea. “We are creating a monster,” she said. The proposed sanctions put the entire Cohesion Policy in jeopardy, she added.

Hübner said that imposing a freeze on regional aid programmes would damage efforts to help the EU’s poorest countries, especially those such as Greece that are dependent on EU aid. She said central and eastern European member states were also likely to oppose the move.

A spokesman for Hahn said the main aim of the reform package was to improve the impact of aid to all EU regions, not just the poorest. In June, the Commission proposed giving cohesion policy a budget of €376 billion for the 2014-20 financing period.

It said aid should focus on the priorities of the Europe 2020 programme: combating poverty, improving education levels and use of renewable-energy sources, promoting small and medium-sized businesses and financing research and innovation projects.

The reforms foresee setting stricter conditions, controls and benchmarks within new ‘partnership contracts’ that the Commission will sign with member states.

Those contracts will set out how and where EU aid should be spent. Failure to meet these benchmarks could lead to delays in releasing more funds, while those states that exceed targets will benefit from a bonus scheme.

The plan also creates a new transitional funding category, making regions eligible for aid if their gross domestic product per capita is less than 90% of the EU average but above the current 75% ceiling.

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