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17th Oct 2021

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New EU regional aid rules have inbuilt 'tensions'

  • EU aid money now comes with macro-economic strings (Photo: EnvironmentBlog)

New rules governing how EU aid money is spent has already resulted in better thought-out projects, says the European Commission, but local politicians grumble that they continue to drown in red tape.

In place for the 2014-2020 budget period, the revamped system links regional aid money (€325bn over the seven years) to sound economic governance and requires projects to slot in with the EU's long-term economic goals.

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  • Iskra Mihaylova, chair of the European Parliament's regional affairs committee - MEPs will make sure "the interests of the regions are protected" (Photo: European Union/Gino De Laurenzo)

EU regional affairs commissioner Johannes Hahn says there has been a "clear shift" in funding priorities towards energy efficiency, social inclusion and a low carbon economy.

Lithuania, for example, will see 50 percent of its €8bn programme (€6.8bn from the EU and €1.2bn from Lithuania itself) spent on achieving a low-carbon economy.

The rules remain complicated

But discussions between Brussels and member states are slow as both the EU and regional bureaucracies adjust to focussing not on whether the money has been spent – this has led to not-always-useful roads and airports being built in the past – but on whether it has been spent well.

Lithuanian finance minister Rimantas Sadzius summed the negotiations up as being "long and very difficult at times".

And while the aims of cohesion funding have become more structured, the rules remain complicated.

Garrelt Duin, North Rhine-Westphalia's economy minister, noted that when he cut down on the number of people involved in working on EU regional aid, he fell foul of EU rules.

"We had 100 people on the administration of [cohesion policy]. It looked like a plan for a nuclear plant," he said at a Brussels conference in September.

"We cut it to 10 people for the new programming period. The EU commission then came along and said 'you need to provide 50 interim liaison points'. So I have just cut the number of posts and now we have to increase them again."

Alberto Nunez-Feijoo, president of Galicia, said the simplification issue was on "everyone's intray".

The other issue on everyone's intray is what so-called 'macro-economic conditionality' will mean in practice, with critics fearing that regions risk getting punished for bad behaviour by the central government.

Nunez-Feijoo urged "flexibility" in how the rules are interpreted but Jyrki Katainen, who is to be a powerful vice-president in the incoming EU commission, noted that "if the macro-economic situation is weak, then investments for the future don't bear fruit".

The two comments reflect the broader debate in Europe about the merits of constant deficit-cutting.

There are tensions in the system

The European Parliament has said it will keep a close eye on how they are implemented.

Iskra Mihaylova, head of the EP's regional affairs committee, said deputies will ensure "the interests of the regions are protected".

Meanwhile, experts are sceptical about the feasibility of tying EU aid to good economic governance.

Professor Iain Begg of the London School of Economics notes that the specific policy recommendations given by the commission as part of the EU's budgetary semester are sometimes highly controversial - such as pension reforms in Latvia or structural reforms in Italy.

"I see real difficulty in translating the macro-economic governance and sound economic governance into the application of cohesion policy. There are tensions in the system."

This story was originally published in EUobserver's 2014 Regions & Cities Magazine.

Click here to read previous editions of our Regions & Cities magazine.

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