What do Commission’s Reflection Papers say about territorial development?

By the CPMR Secretariat

Future of Europe pic

Reflecting on territorial development

The European Commission has in the past month published four of the five promised Reflection Papers (including today the paper on the Future of Europe’s Defences), in follow up to the White Paper on the Future of Europe. These Reflection Papers look in more detail at themes/policy areas and how these could or should be pursued in a future EU.

In this blog we consider how the first three papers address the territorial dimension of EU policy-making, and what they have to say about the place of Cohesion Policy in the vision for the future EU. We will also comment on the Defence Paper shortly, and the final paper on Future of EU Finances when this is published in the coming weeks.

Future of Cohesion Policy

On 26-27 June, the Commission will launch at the Cohesion Forum in Brussels a parallel debate on the future of Cohesion Policy post-2020, and the CPMR will present its position on the future of this policy. We have made clear already in our initial messages on the future of Europe, set out in a political statement published on 9 May, the central place that territorial social and economic cohesion must have in any future vision of the EU, addressing the growing disparities across the EU, and driving sustainable investments across the EU territory.

In reaction to the White Paper we expressed concerns at the lack of reference to a ‘territorial’ dimension from the Commission, and the backhand attack on Cohesion Policy (described as regional development in Scenario 4) as an area where EU intervention ‘is perceived as having more limited added value, or as being unable to deliver on promises’.

Growing recognition of territorial dimension?

There are some signs of some movement in the three reflection papers in our direction, notably in the Harnessing Globalisation paper, with clear recognition of a need for a territorial approach to address growing disparities between and within (i.e. the regional level) EU Member States.

Whilst these signs are positive we have remaining concerns that the Commission’s take on how to develop a territorial development is not fully in align with our view, as we articulate below.

The reflection paper on the Social Dimension of Europe

The Commission made an interesting choice by publishing the first reflection paper on the Social Dimension, which can be clearly be read as seeking to demonstrate the priority and importance of Social Europe to  the Commission’s reflection. It also means a quick reaction to the pledge in the Rome Agenda on social Europe adopted by the EU27 on 25 March.

… provides a good picture of the imbalances across Europe making the case for a strong future Cohesion Policy

Section 2 of the paper “today’s social realities” provides detailed analysis and data pointing out the diversity of social and territorial realities across Europe. It explicitly mentions the persistence of divergences between countries and regions.  This is very much in line with the work that the CPMR has been undertaking on persistent and growing social and economic disparities across Europe.

Section 3 sets out drivers for change: the emerging trends and future challenges that Europe will face and need to respond to: demographic change, and new models of living and working.

… building a consensus on the future shape of Social Europe

The paper presents three scenarios for the future shape of Social Europe.

Scenario 1 – EU action limited to the ‘free movement’ –  rights would be a catastrophe for Cohesion Policy, threatening the policy altogether

“European funds to support the reconversion of regions that are hit hard by the effects of globalisation would shrink or be abolished. Social programmes in the Member States that are cofunded substantially by EU money would have to be discontinued or funded nationally.”

Scenario 2 – Those who want to do more in the social field do more (focusing on the euro area). Such an approach, as the Commission notes in the paper risks fragmentation of the EU and the CPMR has made clear in its political statement its support for solidarity, and a common approach to cohesion across the whole EU territory. The paper is silent on the implications of this approach an EU-wide Cohesion Policy, and to other EU funding streams.

Scenario 3 (deepened integration) – on the face of it is more promising, as it sees a role for EU funding to ‘support skills development, labour market integration projects, the fight against poverty and promote social innovation’. However, such funding would be conditional on meeting reform measures.

… no explicit mention of the role of ESI funds to promote Cohesion 

We must also, however, be careful about what the Commission understand by EU level intervention and the types of funding or instruments they see being used to deliver this. The paper includes a reference to the Youth Guarantee in its role to foster youth employment, yet fails to mention the European Social Fund, the key EU instrument to support labour market integration and work related skills.

It also mentions the support of agriculture funds in helping rural areas make significant improvements. Yet there is no mention of the role of European Structural and Investment (ESI) Funds more generally in support territorial development.

This is both disappointing and worrying. We argue strongly that it is precisely the EU Cohesion policy that has been designed to address disparities and to stimulate development across Europe.

The second paper on Harnessing Globalisation

The paper on Harnessing Globalisation rightly points out that the benefits brought by globalisation “spread unequally among regions”. There is the acknowledgment that some regions are left behind and are seen as ’losers’ of globalisation, especially in southern, central and eastern Europe. The European Commission recommends action be taken to address these inequalities and to strengthen social cohesion. The analysis provided in the paper chimes well with the CPMR’s very own policy messages on EU policies with a territorial dimension and the future of Cohesion Policy.

a positive picture on the role of Cohesion policy funds and regions to overcome the negative effects of globalisation

It is positive to see explicit mention of the role of the ESI Funds in helping to promote “essential investments” and “the development of human capital and employment”.

One of the solutions suggested by the Commission as a European response to harnessing globalisation is to work closely with “more empowered regions”. An entire section is dedicated to the need to strengthen the role of regions, and to target regional and local investments needs. The role of smart specialisation strategies is also mentioned very positively.

stresses the role of the Investment Plan for Europe to reduce investment gap in Europe

The role of the European Fund for Strategic Investments (EFSI) in closing the investment gap in Europe is largely praised throughout the document. The paper also describes EFSI as an effective use of regional funds.

EFSI is an instrument to support investment, it is not a policy and cannot replace, Cohesion Policy which provides a much broader long-term investment strategy for all European Member States and regions. Moreover, in contrast to ESI Funds, the distribution of EFSI is geographically and sectorally highly imbalanced.

… underlines the importance of the multi-level governance in harnessing globalisation

Only one scenario is offered in this paper: promoting the role of multi-level governance. It is very positive to see that the Commission encourages the involvement of all levels of administration (European, national, regional and local) to address the issue of globalisation.

The third paper on Deepening Economic and Monetary Union

… stresses the social and economic divergences across Europe emerging from the 2007/2008 crisis

This paper continues with a territorial theme underpinning that since the crisis the trend in Europe has changed from convergence between regions to divergence.

Yet, in considering EU level actions taken in responding to the crisis we see again a clear oversight of the role of Cohesion Policy: the paper focuses on the launch of EFSI and the pursuit of structural reforms and responsible fiscal policies.

ESI Funds do get a mention and there is recognition of their importance for “certain Member States to foster economic and social convergence…”, however, the paper also underlines that ESI Funds and the EU Budget more generally are not designed to play a “…macroeconomic stabilisation function…”.

… underlines that the path toward re-convergence across Europe requires structural reforms

The European Commission suggests several guiding principles for deepening the EMU, such as economic convergence. And considers how EU fiscal tools could be developed to support this – including the EU budget taking note of the limited scope for it to play a macroeconomic role.

One option suggested is to modulate co-financing rates taking account of the economic conditions of Member States, although the paper doesn’t elaborate what this would mean in practice and which programmes it would affect.

A second suggestion is the creation of a “dedicated fund” to encourage Member States to implement reforms, although again the Commission doesn’t elaborate on this.

A third suggestion is to make “…the disbursement of the ESI Funds, or part of them conditional on progress in implementing concrete reforms to foster convergence”. A link was introduced in the 2014-2020 programming period: Member States were required to address all relevant Country-Specific-Recommendations when designing the Operational Programmes co-financed by these funds.

However, the suggestion in the paper would take this a step further and if introduced would mean that Cohesion Policy would become a tool to encourage carrying out national structural reforms within the framework of the European Semester.

Such an option would run counter to the historical ‘raison d’être’ of the policy as a territorial development policy. The majority of structural reforms have no bearing on regional development and have no link to competences held by regional authorities.

…new schemes to be financed out of the EU Budget? Euro area Budget?

The paper also highlights a couple of potential new stabilisation mechanisms including a European Protection Investment Scheme and a European Unemployment Scheme. How would such new innovations be financed? Through the MFF? Through other sources? Similar questions arise around the idea of a Euro area budget, which is also raised in the paper.

The risk for Cohesion Policy: more competition on limited resources could mean less finance available for this key policy. The Reflection Paper on Future of EU Finances will have more to say on this. We will be keeping a very close on these developments.

The discussion on strengthened defence co-operation could also potentially add to these pressures on resources. A quick glance at the reflection paper on the Future of European Defences sees the Commission raising the prospect of stronger financial commitment from the EU level towards defence: “an EU budget reflecting a new ambition in defence, coupled with a large-scale European Defence Fund, should enable Europeans to spend better and improve value for money.” We will say more on this in our blog on the Future of European Defence reflection paper.