EU's €31bn 'reusable' cohesion funding loans largely failed, auditors find

Billions of euros of EU cohesion funds sat unused instead of being reinvested in new projects, missing a major opportunity to multiply the impact of taxpayer money, according to the European Court of Auditors (ECA).

The European Union designed financial instruments to make cohesion funding work harder — allowing repaid loans to be reinvested in new projects rather than disappearing after a single use.

But a new audit published on Wednesday (3 December) reveals the system has largely failed to deliver on that promise.

Of 61 such financial instruments examined from the 2014-2020 funding period, only 12 actually reused any repaid money to support new investments during the eligibility period.

Another 19 used some of the returned funds, but merely to cover management costs and fees.

In total €31bn were invested during that time through financial instruments.

"Even though member states had to report on the reuse of these funds, the European Commission has not verified this information closely or used it to monitor progress. As a result, we still do not know how much of the money has actually been reinvested," said Alejandro Blanco Fernández, the ECA member in charge of the audit.

In EU cohesion policy — the bloc's regional development programme aimed at reducing economic disparities — most funding typically comes as grants: payments that recipients never repay. Financial instruments offer an alternative approach.

The key difference is that these financial instruments are repayable. When cash is returned, it can theoretically be used again to support new projects, creating what's called a "revolving effect" that allows the same public funds to help more people or organisations over time.

After eligibility periods ended, the money returned by recipients — called legacy funds — was generally reused for cohesion policy goals. However, EU legislation allows these funds to be converted into grants, which undermines the intended revolving effect.

While the legal framework has evolved over the years and includes a rule requiring reinvestment, the auditors found it lacks clarity about how to maximise the reuse of repaid funds.

The auditors now urge the commission and national capitals to increase the use of such refunded money during each funding period.

This could be done by encouraging reuse of repaid money before requesting additional funds, and by making automatic reinvestment of repaid money a standard practice, so that more projects and recipients can benefit.

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