Closer to Brussels, no 24 "Cohesion Policy after 2020"

closer to

BRUSSELS E-MAGAZINE OF THE MAŁOPOLSKA REGION BRUSSELS OFFICE

COHESION POLICY AFTER 2020

24

#

Cohesion Policy after 2020

3

Table of contents

Preface Jacek Krupa Marshal of the Małopolska Region

Benefits for regions within the scope of future cohesion policy

4

8

Interview with Filip Skawiński, PhD, analyst for the Delegation of the European Commission in Poland

New Cohesion Policy for all the regions?

12

regions4cohesion

18

Cohesion Policy Post 2020

22

A Glass half-full

28

MAŁOPOLSKA CONQUERS BRUSSELS

The influence of Małopolska on shaping the Cohesion Policy after 2020 Magdalena Ujejska

32

QUESTIO IURIS

2

Interview with Mieczysław Struk, Marshall of the Pomorskie Region and a Member of the European Committee of the Regions

The successful initiative lead by Lower Austria Franziska Stadelmann

Behind the Scenes of the Negotiation Process Aleksandra Kisielewska

or the Commission’s proposal for the next MFF Grégory Claeys and Zsolt Darvas

closer to BRUSSELS #24

Ladies and gentlemen, the resources that the regions receive within the framework of the European Cohesion Policy could be well called the best spark to unleash the dormant potential of local communities.

Therefore, its importance for regional development can surely be deemed invaluable. For that very reason one of the most important issues of the on-going debate that is taking place on the European level is the future shape of the EU budget after 2020, as well as the exact role that the new Cohesion Policy is supposed to play.

First significant decisions within that domain have already been taken.

The European Commission has, on May 2, 2018, presented a draft of the Multiannual Financial Framework for the years 2021–2027.

Moreover, the drafts of the directives on Cohesion Policy have been presented on May 29, 2018 .

Facing such challenges as Brexit or the political attempts at remodeling the shape of the EU, the authors of the current issue of “Bliżej Brukseli” are trying to analyze the role that Cohesion Policy will play in the new EU budget and how one will be able to use it to maintain the leading role that the regions have in promoting Europe.

The articles cover multiple aspects that are the focal points of current European politics, such as: sustainable mobility, digitization, environmental pollution, and energy security. They also show how Małopolska is participating in the activities aimed at developing the Cohesion Policy on a European scale.

I am certain that the articles contained in this issue will be an important and interesting voice in the current dynamic debate on those topics of crucial importance; both to our country and continent.

Please, enjoy the publication!

Jacek Krupa Marshal of the Małopolska Region

Cohesion policy after 2020

3

Biography

Filip Skawiński, PhD Since 2008 he has been working as an analyst for the Delegation of the European Commission in Poland, where he focuses, among others on the issue of the budget of the European Union and cohesion policy.

The graduate of the Jagiellonian University (political sciences) and the UniversitĂŠ de Rennes (EU law), he was granted PhD (political sciences) in 2007. Before being employed in the European Commission, he lectured, for instance, at the Jagiellonian University and the Tischner European University in Cracow and he worked as an associate professor for the Institute of Urban Development in Cracow.

4

closer to BRUSSELS #24

Benefits for regions within the scope of future cohesion policy Interview with Filip Skawiński, PhD analyst for the Delegation of the European Commission in Poland 1 Renata Jasiołek: In May this year the European Commission presented the project of the new budget for the European Union for 2021–2027.

According to the assumptions, it is to be simple, modern and flexible, it is to be directed to the adjustment of ambitions of the EU to its resources. In your opinion, is it the answer to the current challenges which should be faced by Europe?

Filip Skawiński: The shortest answer to this question is definitely yes. Preparing the project of the multiannual budget, the European Commission, first and foremost, is trying to adjust it to what they believe are the most essential challenges, now and in

the perspective of next several years.

The process of the EU’s preparation of the proposal itself lasted since the beginning of 2017, when Günther Oettinger, the present Commissioner for the budget, was nominated. He was involved in intensive talks with the Member States on the EU priorities after 2020.

The outcome of these discussions was, for instance, a significant increase in resources for the fields such as migration and boarder management or security and defence since the dominant view in the EU is that it is required due to the external situation.

Furthermore, the Committee suggested that the budget should be more flexible. Here, there is a kind of dilemma as when resources are strictly allocated to various sectoral actions, it is considerably easier for recipients to plan their multiannual investment programmes.

However, the experiences such as the crisis of migration depicted that the EU budget has

Cohesion policy after 2020

5

to be more flexible since the necessity of quick reaction sometimes prevails over some plans.

The Commission also wanted the budget suggested by them to be simpler, which means to use it in an easier manner. Not much resulted from the simplification plans in the past, but this time real changes are considered such as the decrease in the number of programmes, by over one third, connecting fragmented sources of funding in new integrated programmes as well as a major simplification of using financial instruments.

Additionally, the Commission wants to radically decrease the administrative burden of beneficiaries and managing authorities.

2 R.J.: The new tool suggested by the EC, which is a continuation of the so-called Junker Plan, is the InvestEU Programme. It is going to connect numerous currently available EU financial instruments, supporting investments owing to which financing such projects will be easier, more effective and flexible. The module of the Member States will also be available within the InvestEU Fund, which means they will be able to contribute to the EU guarantee, voluntarily transferring max 5% of their funds for the Cohesion Policy to it. Is it, in your opinion, a good idea? Will the Member States want to take advantage of it?

F.S.: This initiative is a continuation and reinforcement of current actions of the

6

European Commission. On the one hand, it is crucial to continue the achievements of the European Fund for Strategic Investments (EFSI), which is more known as the Juncker Plan. For the last 3 years it has made it possible to launch investments at the total value of about 335 billion euro, the sum of which is similar to the total financial envelope on the Cohesion Policy in the Union budget between 2014 and 2020. With regard to the Juncker Plan, we are talking about private or self-governmental investments, financed from the low-interest loans due to the guarantees from the EU budget and the European Investment Bank.

On the other hand, financial instruments should be more widely used also within structural funds. Certainly, from the beneficiaries’ point of view, a grant is frequently more beneficial, but financial instruments also have a lot of advantages. They can allow to generate incomparably more investments while using the same amount of public money. Secondly, the investments run in this way, by definition, have to be economically viable. It allows to avoid a situation when a project is realized only because 50 or even 85 per cent of costs of investment has been financed by the Union and it would be a pity not to use it.

In the meantime, the project does not respond real needs of a given company or commune‌ It seems that the Member States, including Poland, are more and more convinced about the fact that offering the financial instruments by the Union is a right way. It does not mean at all that they will replace the current Cohesion Policy realized through grants. The latter will still considerably predominate in terms of the scale of invested European resources.

closer to BRUSSELS #24

the majority of resources is received by the weakest ones.

3 R.J.: On the basis of already available documents concerning the Cohesion Policy after 2020, could you say what the main directions and the areas of development of European regions will be? How real is the risk of “a two-speed Europe”, in your view?

F.S.: The differentiation, in any case still very big, in the development level of the European regions is a fact.

First of all, it results from various historical occurrences, and the Union Cohesion Policy aims to support less developed regions to catch up with others or to overcome structural problems. The slogan “a two-speed Europe” has often appeared recently, but in another context. It was considered whether the Union would start to divide into the group of states interested in constant deepening of integration and those which are not see any interest. Notwithstanding, Jean-Claude Juncker, the present Chairperson of the European Commission absolutely objects to it. Instead of the differentiation, he suggests equalizing the level of integration, for example, through helping the states from outside the euro zone to join it. The Cohesion Policy operates similarly, as a matter of fact its very name implies it. One should not worry that it would divide in two, somehow in the unfavourable manner for less developed regions. It is exactly on the contrary: as the Cohesion Policy is addressed to all regions because each of them has some difficulties to overcome although

However, it is already known that new directions and tendencies will appear in the Cohesion Policy as the multiannual EU budget has to take current challenges and aims of the EU into consideration.

Firstly, the greater emphasis will be placed on the European added value – resources should be transferred where, from the point of view of the EU, they will bring most of benefits. For instance, preferences for projects of the trans-European or at least trans-border significance can be expected in the field of infrastructure.

Secondly, the support criteria of the regions within the Cohesion Policy are changing, though not radically. The relative level of the gross domestic product per inhabitant will be the main criterion to allocate resources, but other factors such as unemployment (especially among the youth), the climatic change or receiving and integrating migrants will also be taken into account.

Besides, linking EU funds with respect of the rule of law would be a crucial proposed change. It is unknown in which version this solution will be introduced, but it should be emphasised that its possible application is to effect the budget of a given state not beneficiaries on the regional or local level.

Cohesion policy after 2020

7

Biography

Mieczysław Struk Marshall of the Pomorskie Region Served as Mayor of the city of Jastarnia for 12 years from 1990 and as a councilman to the Sejmik (the Regional Council) of the Pomorskie Region since 1998. Served as chairman of the Audit Committee in the years 1998–2002 and as chairman of the Commission for Development Strategy and Spatial Policy in the years 2002–2005. Has been a member of the Pomorskie Region Board since 2005. Has been the Marshall of the Pomorskie Region since the 22nd of February 2010.

Has been a member of the Committee of the Regions since 2010.

He participates in the works of two Commissions: for Natural Resources (NAT) and for Territorial Cohesion Policy (COTER).

Opinion rapporteur: Reform of the Common Fisheries Policy (NAT, 2012), Territorial classification and typologies (COTER, 2017) and The cost and risk of non-cohesion: the strategic value of cohesion policy for pursuing the Treaty objectives and facing new challenges for European regions (COTER, 2018).

For his contribution provided to the local and regional government, he was awarded the so-called Local-Governmental Oscar – the Grzegorz Palka Award.

8

closer to BRUSSELS #24

New Cohesion Policy for all the regions?

Interview with Mieczysław Struk, Marshall of the Pomorskie Region and a Member of the European Committee of the Regions Renata Jasiołek: In the wake of the press conference of the European Commission held on May 29, 2018, we know slightly more about the future of the Cohesion Policy beyond 2020. Were the proposals you made in your review reflected in the European Comission’s proposal? Which issues, lobbied for by the regions, remain valid, and which ones were not included in the Commission’s proposals?

1

Mieczysław Struk: Many of the proposals made by the regions have been successfully implemented. More importantly – the Cohesion Policy remains one of the European Union’s fundamental policies, and the reduction of its financial extent turned out to be lesser than expected. It is a noteworthy fact in the context of numerous negative myths surrounding the Cohesion Policy as well as the continually imperfect system of informing the EU citizens and decision-makers of the actual, multidimensional benefits which the policy confers on all the Member States.

Meanwhile, as compared to the numerous EU activities, it is but the Cohesion Policy that is characterised by the most reliable efficiency measurement system; it is consistently evaluated, and its success rate is continually improving. Other proposals made by the regions were also reflected in the European Commission’s work. For instance, the 7-year-long programming period (significant from the strategic point of view) was maintained, and emphasis was put on the so-called place-based approach (which will aid us in adjusting the interventions to the regional and local needs).

Unfortunately, many of the proposed solutions appear to be disadvantageous or incomprehensible. In the Committee of the Regions’ review, we opted for the tightest possible ‘symbiosis’ between the available funds, whereas the draft General Regulation leaves out the European Agricultural Fund for Rural Development, which will significantly hinder the coordination of interventions from this fund with, for instance, the European Regional Development Fund (ERDF)

Cohesion policy after 2020

9

or the European Social Fund+ (ESF+).

The solution is truly disadvantageous, since we need to implement the kind of tools that would encourage undertakings aimed at enhancing the connection between rural and urban areas.

Moreover, the weakening of the coordination of the ERDF and the ESF+ is quite apparent.

This is a step towards reducing the comprehensive range of the interventions under the Cohesion Policy. Not only does it contest the role of the regions as entities carrying out an active social policy, but it also questions possible implementation of 2-fund operational programmes and integrated projects, which should be regarded as a great success of the current programming period. In addition, the synergy between the funds is weakened by the drastic reduction of the Cohesion Fund responsible for major network infrastructural projects. This will have negative consequences for the entire EU. In the Committee of the Regions’ review, we extensively covered the aspect of the Cohesion Policy which is related to the development of the potential of institutions and partners involved in the implementation of the programmes and the execution of the projects.

Contrary to that, the Commission’s proposal does not provide for any form of allocation for the Technical Support which serves to support the administrative capacities. The fact was justified by the need for simplification, but I think it will result in complications. There are other issues which raise my concern (for example, the solutions regarding the territorial aspect, the unnecessary return to the n+2 principle, or the very high rate of national co-financing). We will continue an active dialogue with the European Commission in that respect which, hopefully, will

10

result in the best possible solutions for the regions and, consequently, the citizens.

R.J. In your review, you called upon the European Parliament and the European Commission to develop a methodology for the evaluation of costs resulting from the lack of cohesion. In your opinion, what would the results of such an analysis be?

2

M.S. The European Commission as well as individual Member States and regions carry out systematic evaluations, analyses and calculations related to the efficiency of the Cohesion Policy. These are useful activities, but it appears that the methodology for measuring the Cohesion Policy’s efficiency and the consequences of its limitation, taking the entire EU into account, would provide us with an objective point of reference. It would be the ultimate verification of the efficiency of the Cohesion Policy. I am most confident about the results of the said verification. So far, the European Commission have developed a method for the evaluation of the Cost of non-Europe and the Cost of non-completion of the TEN-T. I am therefore certain that the analytical bodies of the EC and the European Parliament would manage to develop a method to evaluate the Costs of non-cohesion in the EU.

R.J. How do you find introduction by the EC of the fund allocation criteria, for instance, climatic changes, unemployment among young people, or the influence of migration?

3

closer to BRUSSELS #24

Will those factors actually result in better alignment of the Cohesion Policy with the needs of individual regions?

Extensive work needs to be carried out in terms of the territorial approach of those regulations.

M.S. I have a positive opinion of it. When it comes to the diagnosis of the current challenges faced by the European Community, the Commission’s proposal and the Committee of the Regions’ review are completely consistent. Of the said challenges, demographical changes are some of the most noteworthy ones. They have extensive economic, social and environmental consequences. The problem of migration is closely related to it; above all, it should be considered from the perspective of the economy and the labour market, since it relates to the employers’ demand for employees. It is indeed a burning matter, not only for regions of Poland.

R.J. In conclusion, how do you see the future of the EU, its regions and cities in the years to come, taking into consideration the anticipated results of the Cohesion Policy 2020+ as dictated by the EC? Will the EU become more or less coherent, and will the developmental disproportions between the Member States increase or decrease, or, perhaps, will they be eliminated completely?

The diagnosis of the climate-related challenges is also accurate – the frequency of extreme weather conditions will likely rise throughout Europe, as will the severity of their consequences. Individual regions differ greatly in the way they experience the above-mentioned climatic changes, but the increasing risk of natural disasters increases the scale of potential losses, in particular in densely populated areas.

The scale of the aforementioned challenges shows that the role of the Cohesion Policy is to develop a multidimensional, long-term strategy for all the European regions.

The challenges are simply too monumental for individual regions to face alone. Naturally, place-based interventions should be developed in a manner helping individual regions adjust the Policy to their respective circumstances.

On the regional level, I can see numerous initiatives in that regard, and we will gladly share our good practices with the Commission.

4

M.S. Certainly, the fact that the Cohesion Policy continues to be an important part of the EU’s functioning is a positive accomplishment.

We should not forget, however, that the process of ‘alignment’ of the European regions is a long-lasting one, and that it is only partially dependent on the Cohesion Policy funds, or on the EU funds in general. Still, pragmatic and consistent implementation of the Cohesion Policy will certainly improve the regions’ resistance to the so-called external shocks that the current global economy abounds in.

Let us remember that what we have right now are but draft regulations. Efforts of all the European regions should be concentrated so that the final provisions will be as practical and clear as possible. From the very start, we have been putting emphasis on the need to implement new solutions, tailored to the specific needs of individual regions.

Only in that way will the potential of the entire Europe be channelled towards economic growth and will the citizens actually benefit from the European integration.

Cohesion policy after 2020

11

Biography

Franziska Stadelmann She studied Political Science at the University of Vienna and World Society and Global Governance at the University of Lucerne. After graduation in 2013 she completed multiple internships in London, New York and Brussels which helped me to get valuable work experience before I started working at the Brussels Liaison Office of the Lower Austrian Provincial Government in March 2015.

In Brussels she help to represent Lower Austria and its interests in the European Union, and under the lead of the Head of Office, Mrs. Ilse Penders-Stadlmann, she helped to establish and manage the Regional Initiative by Lower Austria for the prolongation of regional funding for all regions after 2020 (“regions4cohesion�).

12

closer to BRUSSELS #24

regions4cohesion The successful initiative lead by Lower Austria

I

n 2015 emerged discussions about the necessity of the continuation of Cohesion policy for all regions after 2020, once the current EU budget has ended. Critical voices argued that in the future there is no need for a Cohesion policy that covers all regions and only less developed regions should receive future funding since the more developed regions are already in a good economic position. Others argued that Cohesion policy is outdated and should be abolished all together, since by now the costs seem to outweigh the benefits.

The EU decision-making process is a long term approach: what is decided this month or year,

takes a few years to be implemented in the member states and regions.

Therefore strategic thinking must have a long term focus. Once those long-term discussions have started, Lower Austria realised that the regions need to take action and need to make their voice heard in Brussels in order to ensure future Cohesion policy for all regions.

The regions have no legislative power in the decision making process, especially not regarding the EU budget. Yet, it is the regions which are closest to the citizens and their daily life and needs. Therefore Lower Austria started the regional initiative for the prolongation of EU Cohesion policy for all regions after 2020.

Cohesion policy after 2020

13

The aim was to gather as many European regions as possible in order to sign a common political declaration which stated the most important reasons in favour of a prolongation of Cohesion policy for all regions after 2020.

A working group drafted the common declaration which was finalised in regular network meetings in Brussels where usually 40 or more regional representatives were present and gave their input. This common agreed declaration was then signed by the highest regional representatives and all of the signed declarations were put together in a “book of signatures”.

The highlight of this first part of the initiative was the “Summit of Regions” which was organised on September 28, 2016 in Brussels. It consisted of a conference in the Committee of the Regions with regional presidents as key speakers.

It was followed by a reception in the Representation of the Free State of Bavaria where the books

Lower Austrian Governor Johanna Mikl-Leitner and Commissioner Günther Oettinger

14

closer to BRUSSELS #24

of signatures where handed over to the highest representatives of the European Institutions.

It was a clear sign to them that they need to take the regions’ perspective into their considerations.

SEPTEMBER 2018. A STRONG RENEWED REGIONAL POLICY FOR ALL REGIONS POST 2020 Canarias (ES)

Guadeloupe (FR)

Martinique (FR)

Guyane (FR)

Réunion (FR)

Mayotte (FR)

Malta

Açores (PT)

Madeira (PT)

Oryginal cartography provided by eurostat

Partners regions fully covered Partners regions partially covered

This was the “map of regions” on September 28th 2016 showing all of the supporting NUTS2 regions. The initiative had then 337 partners, comprising of 188 NUTS-2-regions and 5 interregional organisations, which represented 72% of the EU28 population.

Cohesion policy after 2020

15

The “Summit of Regions” concluded the first phase of the initiative and as a follow-up it was agreed to keep the network updated about relevant new developments and information.

In 2017 the European Commission then published the “White Book on the Future of Europe”, followed by five successive reflection papers and the 7th Cohesion report in fall 2017. All those newly published documents increased the worry from the regions that Cohesion policy will face a radical change and cut in funding wherefore the regional network decided to take action again.

As a response to the new documents published by the Commission, the network drafted a new position paper which was approved in December 2017 by the regional network and was handed over in January 2018 by Lower Austrian Governor Johanna Mikl-Leitner to Commission President Jean-Claude Juncker and to Commissioner Günther Oettinger, who is responsible for the European budget.

Lower Austrian Governor Johanna Mikl-Leitner

The message was clear: Don’t forget about the regions in your future financial considerations!

In the end of May 2017 the European Commission unveiled their future plans for Cohesion Policy after 2020 and stated in their documents that all European regions are going to receive Cohesion policy funding after 2020! This was a first success! The next steps consist of reaching out to the Council and the European Parliament regarding the future of Cohesion policy.

Additionally to the initiative, the European Committee of the Regions (CoR), as the EU institutions for the regions, pushed the Cohesion policy agenda further and created the #CohesionAlliance, an institutionalized coalition between the leading European associations of cities and regions and the CoR. This shows that European regional initiatives can have an impact on the overall political decision-making process.

16

closer to BRUSSELS #24

The initiatives are successful if the regions join forces, collaborate and work together towards a common goal.

Only together we can have an impact and make our voices heard.

JUNE 2018. A STRONG RENEWED REGIONAL POLICY FOR ALL REGIONS POST 2020 Canarias (ES)

Guadeloupe (FR)

Martinique (FR)

Guyane (FR)

Réunion (FR)

Mayotte (FR)

Malta

Açores (PT)

Madeira (PT)

Oryginal cartography provided by eurostat

Partners regions fully covered Partners regions partially covered

The “map of regions” in June 2018: All in all there are 342 partners of this bottom-up regional initiative, comprising of 193 NUTS-2 regions and 5 interregional organisations, which represent a total of 83 % of the EU27 and 74% of the EU28 population.

Cohesion policy after 2020

17

Biography

Aleksandra Kisielewska since 2013 the Counsellor, the Head of the Regional and Cohesion Policy Section in the Permanent Representation of the Republic of Poland to the EU in Brussels.

Previously, an employee of the Polish Ministry of Regional Development, the Head of the Unit. She was responsible, among others, for negotiations on the package of regulations of the Cohesion Policy for 2014–2020 and the programme of the Polish Presidency of the Council in 2011 in the area of the Cohesion Policy.

She studied at the Warsaw School of Economics, where in 2011 she obtained the PhD degree in Economics.

18

closer to BRUSSELS #24

Cohesion Policy Post-2020 Behind the Scenes of the Negotiation Process

T

he official stage of negotiations of the next, fourth (for Poland), financial perspective started on May 2, 2018 this year, on the day the European Commission published the regulations comprising the Multiannual Financial Framework (MFF) package for the 2021–2027 period, which were supplemented on May 29, 2018 with legal acts governing the principles of the Cohesion Policy. Before we go on to present the figures, it is worth looking at the political message from the European Commission, at the objectives of the new multiannual budget, at the principles on which it is to be based and at the timetable for the negotiations.

Objectives and challenges – between continuation and a need for changes The title itself of the MFF regulation A Modern Budget for the Union that Protects, Empowers and Defends explains a lot. According to the European Commission, its proposal offers a modernized budget that better reflects the political priorities of the Union of 27 states, as set, among others, out in the Bratislava Declaration of 2016 or the Rome Declaration of 2017. Therefore, there is so much emphasis on common values, structural reforms, migration and border management, and defence policy. The budget needs to be modernised not only because of these new challenges, but also because of Brexit. The gap arising

from the United Kingdom’s withdrawal from the EU should be partly supplemented through new resources and partly through a reduction of expenses and redeployments from existing programmes. Therefore, according to the EC, as you will see in the following, reductions in the Cohesion Policy and in the Common Agricultural Policy were inevitable.

The objectives of the Cohesion Policy are set out as follows: 1. smarter Europe; 2. greener, low-carbon Europe; 3. more connected Europe; 4. more social Europe; 5. Europe closer to citizens.

It can be seen, therefore, that at the strategic level, the EC proposed to continue the existing main areas of policy support, introducing certain limitations, e.g. by extending the list of activities which will not be able to be financed by European funds.

The shape of the so-called ‘negative list’ will be one of the most difficult areas of negotiations between the European Commission and the Member States.

Cohesion policy after 2020

19

Support rules: flexibility first, simplification second The grounds for the proposed changes, as declared by the Commission, are, first and foremost: 1. adjusting funds to the changing EU priorities; 2. increasing flexibility when socio-economic conditions change; 3. developing closer links to the European Semester, in order to support structural reforms; 4. introducing a more transparent conditionality system; 5. reducing necessary administrative burdens for beneficiaries and managing bodies.

Comparing the current and the new perspective, a shift in the emphasis of the EC can be seen, from the need to achieve specific objectives set at European level (also due to the lack of an appropriate development strategy at EU level, the successor to Europe 2020) to the need for greater flexibility in programming and managing European funds. This is a consequence of the migration crisis and, according to the EC, too low flexibility of the current MFF. Calendar—quick or „normal� negotiations?

However, what the EC has surprised everybody with, is perhaps its proposed timetable for the MFF negotiations, which is completely different from what we have been used to so far, it is simply quick. Commissioner Guenther Oettinger has made it clear in several statements that his objective is to make substantial progress on the future MFF ahead of the EU summit in Sibiu (Romania) on May 9, 2019.

20

The main reason for this is the upcoming Elections to the European Parliament scheduled for May 2019, which also means the appointment of a new Commission in the autumn of 2019. The message from the current EC (but also from the current EP) is clear: the new EP and the new EC could mean a significant extension of the MFF negotiations, a change in priorities, which would have a negative impact on the beneficiaries of the budget.

The Member States are, for various reasons, more sceptical of such an ambitious agenda, as reflected in the very laconic conclusions of the European Council in June, which encouraged the Council and the EP to negotiate quickly and comprehensively (but without setting a specific target date, as the EC had hoped). In their opinion, it is more realistic to conclude the negotiations in the second half of 2020, under the German Presidency.

One of the reasons for this distanced position of the majority of Member States, including Poland, is the scale of reduction of the two currently largest policies: cohesion and agriculture.

Numbers at a glance The graph below shows a comparison of the current and future (EC proposal) financial perspectives. It clearly shows increases in expenditure in the security, foreign affairs, structural reforms and EC directly managed activities, as well as declines in cohesion (10%) and agriculture (15%).

closer to BRUSSELS #24

Comparison of MFF 2014–2020 vs. MFF 2021–2027 (at constant prices of 2018) 396 645

MFF 2014–2020 336 623

* The author of the text used the positions of the Government of the Republic of Poland concerning the MFF and the Cohesion Policy for the 2021–2027 period, adopted respectively by the CEA on June 7 and 29, 2018.

198 075 131 643 62 318

94 167

109 139 70 792 75 602

5.

ion

str at ini m Ad

ob

al

Eu ro p

e*

4.

141

Gl

S itiz ecu 3. en rity sh ip an

dc

2.

AP

:C ing lud

he 1b s . po ion lic y Co

Inc

m

an

C 1 ag ent a. em ra en l t

16 873

22 182

P S r t rog upp 6. he ram or ref m t or e m s

330 643

MFF 2021–2027

fo

365 131

Source: Ministry of Foreign Affairs

For this reason, Poland, among others, is opposed to the proposed division of the Cohesion Policy budget into individual regions and the Member States of the European Union. The amount of funds allocated to Poland, in the amount of to EUR 64.4 billion, compared to the current budget, will decrease by 23%, which is much more than the decrease in the Cohesion Policy budget.

The group of countries dissatisfied with the EC’s proposal both in terms of expenditure and income is large, which means that negotiations are going to be exciting but difficult.

What next?

Everyone will return to the negotiating table in September. Ministers for European Affairs will be meeting on September 18, 2018, and the various committees in the Parliament have announced a very tight timetable for work on the various sectoral acts. At the political level, several additional meetings will be held, bringing together, among others, the friends of cohesion policy – in Hungary, Romania and Bratislava, which currently holds the Presidency of the Visegrád Group.

At the strategic level, the traditional divisions into net beneficiaries and net contributors will probably return, with mixed coalitions at the working level, depending on the problem, the topic and the instrument. The objective facing Polish negotiators is invariably the same – getting the greatest amount of funds on the best possible terms for Polish beneficiaries.

Cohesion policy after 2020

21

Biography

Grégory Claeys Grégory Claeys has been a research fellow at Bruegel since 2014 and an associate professor at the Conservatoire National des Arts et Métiers in Paris where he teaches macroeconomics since 2015.

His research interests include international macroeconomics and finance, central banking and European economic governance.

Prior to joining Bruegel, he conducted research in several capacities, including as a visiting researcher in the Financial Research Department of the Central Bank of Chile in Santiago and as an economist in the Research Department of the French bank Crédit Agricole in Paris.

He holds a PhD in Economics from the European University Institute (Florence), an MSc in economics from Paris X University and an MSc in management from HEC Paris.

22

closer to BRUSSELS #24

A glass half-full The Commission’s proposal for the next MFF

T

he Commission’s proposal for the next Multiannual Financial Framework provides a good basis for subsequent negotiations and includes a number of bold suggestions.

But it has a number of deficiencies and some of the proposed tools are conceptually weak. We make proposals as to how to improve them in the coming negotiations.

Our assessment can be summarised as “glass half-full”, a cautiously positive assessment. We highlight a number of shortcomings of the proposal, yet given the various constraints we regard a number of elements of the proposal as reasonable, and some of them even as innovative.

Squaring the circle Spending more with fewer resources is mission impossible, but this is the trade-off that EU countries are currently facing. On one side, a number of spending priorities have gained importance in recent years – such as border control, migration, security, defence, external actions, research, digital transformation and youth mobility. This could be compensated with deep cuts in the two largest traditional EU programmes – the Common Agricultural Policy (CAP) and cohesion policy – but some countries reject this strategy.

On the other side, Brexit will leave a large hole in the EU budget.

Some net contributor countries reject the idea to increase their contributions as a share of the Gross National Income (GNI).

Therefore, the Commission faced major constraints and challenges when drafting the proposal.

Positives of the Commission proposal: 1. Increased spending was proposed in a number of spending categories that really constitute European public goods: in border control and defence; in research, innovation, digital fields; in migration. There are also major synergies in pan-European projects, like research for example.

2. Considering the impossible task of spending more with fewer resources, we find the reallocations across spending categories reasonable. CAP is proposed to be reduced by 5% in nominal terms and even more so if we consider inflation, i.e. in real terms (15%), while cohesion policy is proposed to increase by 6% in nominal terms, but reduced by 7% in real terms. Therefore, we welcome the attempt to shift resources away from these two traditional programmes (and especially from CAP) towards new priorities.

Cohesion policy after 2020

23

Biography

Zsolt Darvas a Hungarian citizen, is a Senior Fellow at the Brussels-based think-tank Bruegel. He is also Senior Research Fellow at the Corvinus University of Budapest. Before joining Bruegel in late 2008, he was the Research Advisor of the Argenta Financial Research Group in Budapest (2005–2008).

Before that, he worked at the research unit of the Central Bank of Hungary (1994–2005) where he served as Deputy Head during 2001–2005. He had visiting researcher positions at the Bank of Finland, Deutsche Bundesbank, De Nederlandsche Bank, Stockholm School of Economics and Bruegel, and worked for research projects of the European Commission, European Parliament, the OECD, the World Bank and the Asian Development Bank.

Zsolt Darvas holds a Ph.D. in Economics from Corvinus University of Budapest, where he teaches courses in Econometrics since 1994. His research interests include macroeconomics, international economics, finance, EU governance and social policy.

His current works focus on policy-related issues, such as the European economic governance, financial integration and development, income inequality and inclusive growth, migration, estimation of real-time reliable output gaps and aggregation-theoretic measurement of money.

24

closer to BRUSSELS #24

3. It is also welcome that the Commission aims at a major reform of CAP, by shifting the focus from compliance to results, by supporting more small farmers, and by correcting the imbalances in country-allocations.

4. Increased national co-financing of spending in cohesion and CAP pillar II is also welcome.

Given the improved economic situation, Member States have the resources to complement EU funding at a higher rate.

Furthermore, EU cohesion funds have a growth potential, but may not always deliver in practice either because they are poorly managed or used for the wrong types of investment. Larger national contributions might improve project selection, ownership and the management of these funds.

5. The proposal includes increased flexibility and emergency tools, including extra flexibility between headings and years, possible re-programming at mid-term, and programme reserves within each programme. Such flexibility would help redirect EU spending in case of unforeseen developments.

6. We appreciate the attempt to formally monitor the rule of law in EU countries.

The respect of the rule of law is a fundamental value of the EU, and a pre-condition to enter the union in the first place. Deficiencies on this front could hinder the proper implementation of the EU budget and therefore the rule of law is an essential precondition for managing EU funds.

7. The Commission also made some proposals to change the revenue side of the EU budget in the next MFF, many of which appear to be quite reasonable.

Gradually phasing out “rebates on rebates” and other revenue correction mechanisms is the logical outcome of Brexit. National contributions to the EU budget should be based on a commonly agreed formula, to which ad-hoc corrections (like the rebates) are not necessary.

Another good proposal is to introduce a basket of “genuine” own resources, which could represent as much as 12% of revenues over the next MFF. The Commission also proposes an increase of the revenues from customs duties.

Since the EU is a customs union with common external trade policy, we find it reasonable to direct customs revenues to the EU budget.

Negatives of the Commission proposal 1. The proposal includes some simplifications, like reorganising several spending programmes and reducing the total number of such programmes but the structure of the proposed budget remains complex.

Also, the continued distinction between “commitments” and “payments” makes the structure thorn. A fundamental reform is badly needed, such as a proper accrual-based multiannual budgeting framework augmented with a cash budget, according to best practices of international organisations.

Cohesion policy after 2020

25

2. While a stated principle of the proposal is improved transparency, it does not include a proper comparison of the spending priorities of the current and the proposed next MFF. In fact, the Commission presented and widely popularised current-price comparisons for seven main spending categories (by excluding the UK from the current MFF) – but it did not do this for the two largest spending categories, CAP and cohesion policy, which is astonishing. We suggest to present clear comparisons along the lines of:

l l l l

current prices, constant prices, the share of total EU spending, the share of GNI.

3. There is little European value added in direct income transfers to farmers. Certainly, CAP has a number of crucial goals with pan-European value but the goal of providing a fair standard of living for the agricultural community is clearly a social policy and is limited to one particular sector.

Why provide EU income support to this particular sector, even if that is an important sector, if other important sectors do not receive income support? A radical change would be the renationalisation of direct transfers along with the amendment of state aid rules to make this possible. A less radical

26

solution would be the introduction of national co-financing of direct transfers, similar to the national co-financing of the CAP pillar II rural development fund.

4. We find the increase in external action commitments too timid. The EU has a responsibility for helping its less-fortunate neighbours and other parts of the world, and has an interest in doing so if it wants to reduce the migration pressure in the long run. Instead of a relative decline, we propose a relative increase in external action commitments (with resources coming from the reduction of EU-financed direct transfers to farmers, as we argued in the previous point).

5. While we welcome the attempt to propose a euro-area stabilisation instrument, its actual design is disappointing.

If approved as proposed, it will be ineffective.

A loan instrument has been proposed that could be granted to countries facing a large shock, who followed sound fiscal and macroeconomic policies before the economic downturn. The volume of such loans could total â‚Ź30bn and could be potentially interest-free. However, no country likes to take a financial assistance loan from official lenders like the EU, and this facility could be seen as such. Countries with sound fundamentals are less in need of financial

closer to BRUSSELS #24

assistance as they can borrow themselves, unless they suffer a liquidity crisis – but in such a case, the ECB’s Outright Monetary Transactions (OMT) programme should be used. Moreover, €30bn is a very low amount and the use of this facility would take resources away from other financial assistance facilities. We highlight a (modest) possible design which might be politically feasible: accumulating all ECB profits in a rainy-day fund, which would be used in a crisis to foster investment throughout the euro area.

6. The reform delivery tool to foster structural reforms will likely be ineffective.

There are major implementation problems with the European Semester recommendations. We do not see how the EU budget could incentivise implementation, and we suggest this limitation be recognised.

Instead, the best hope for a higher rate of implementation is to increase reform ownership, in which the already-proposed national competitiveness councils should play a large role, because such councils must comprise a trusted group of domestic experts.

7. The euro-adoption tool is conceptually weak (and also too small in size, but that’s a secondary problem). Countries like Sweden, the Czech Republic and Hungary will not

change their mind about adopting the euro just because a few hundred million euros is offered for preparation – i.e. money will not incentivise euro membership, in our view. And countries wishing to join will do so even without this small financial facility. On the other hand while there are clear criteria for entering the euro area (the so-called “Maastricht criteria”, enshrined in the EU Treaty), the decision to join the European exchange rate mechanism (ERM II) is based on a non-transparent discretionary decision.

If non-euro countries are to be encouraged to join the euro, the very first step should be a transparent clarification of the conditions to enter the ERM II. Overall, in our view, the Commission’s MFF proposal provides a good basis for subsequent negotiations, but many details are unclear and it has a number of deficiencies which require improvements.

Source: Bruegel: http://bruegel.org/2018/05/ the-commissions-proposal-for-the-next-mffa-glass-half-full/

Cohesion policy after 2020

27

Biography

Magdalena Ujejska graduate of the Cracow University of Economics, Faculty of Economics and International Relations (2002), participant of a six-month professional internship in France as part of the “Leonardo Da Vinci” program.

Employee of the Marshal Office of the Malopolska Region since 2005. Until 2017 she was the manager of the „Business in Malopolska Centre” team, currently she is the EU Policy Officer at the Malopolska Region Office in Brussels.

She collaborates i.a. with ERRIN (the European Regions Research and Innovation Network).

28

closer to BRUSSELS #24

MAŁOPOLSKA CONQUERS BRUSSELS The influence of Małopolska on shaping the Cohesion Policy after 2020

M

ałopolska has been actively participating and engaging in shaping regional policy, both the current and the future one (post 2020). This is possible thanks to the experiences we’ve gathered until now, i.a. in the scope of programming and spending European funds.

Our region is not the main beneficiary of funds coming from the Cohesion Fund (6th place in the country in terms of the value of funds spent and 7th place in terms of the number of projects from the Cohesion Fund for the years 2014–2020), however the projects implemented by Małopolska have significantly contributed to the socio-economic development of the region. These projects mainly referred to: building major roads and a motorway, the development of the passenger terminal of Kraków International Airport, modernizing railway lines and purchasing rolling stock, developing tram lines or improving water and sewage management. These projects have resulted in the improvement of the transport and communication accessibility of the region and this, in turn, had a significant impact on increasing the investment activity and, thus, creating new workplaces.

When, along with the commencement of the discussion on cohesion policy after the year 2020, information appeared at the EU forum about the planned limitation of this policy, there emerged a necessity to express strong and joint will of the EU regions regarding maintaining the policy at least at the current level and defining what it should be like in the next programming period, and Małopolska immediately started collaborating with other regions.

The first initiative, led by the Lower Austria region, was preparing the declaration entitled: “Strong, renewed Cohesion Policy for all regions after 2020”.

This declaration was a response to the “White Paper on the Future of Europe” published by the European Commission (a reflection paper on the future of the EU financial issues) and the “7th Cohesion Report”. The document which has been prepared and signed by the European regions draws attention to Cohesion Policy’s regional dimension

Cohesion policy after 2020

29

which is so important in the discussion on the future of the EU, the document also indicates the significant role of regions in planning the reform of this Policy, underlines the importance of the principle of subsidiarity and the European added value and advocates maintaining the EU budget at, at least, the current level.

At the same time, the Declaration formulates requests related to focusing the financing on the most important challenges and priorities of the EU as well as to strengthening transborder, transnational and interregional collaboration.

The regions also point attention at the necessity to carry out reforms of procedures in order to increase the effectiveness of the Cohesion Policy, they advocate simplifying the rules of its implementation, they are also in favour of an at least 7-year programming period. They perceive Europe’s strength in the collaboration of regions and cities. The project of the EU regions’ declaration formulated as a result of the initiative of Lower Austria, was signed by Małopolska on 28th September 2016 along with 336 representatives of other European regions, cities, municipalities and transregional organizations.

Another undertaken initiative is the so called #CohesionAlliance, which is a very broad union (formed by the European Committee of the Regions together with leading European associations of regions and cities) of entities convinced that EU’s cohesion policy has to remain the pillar of UE’s future.

30

closer to BRUSSELS #24

The inauguration of this undertaking took place in Brussels in October 2017, during the European Week of Regions and Cities. It is broadly understood promotion of the Cohesion Policy which is conducted not only by the countries and regions of the EU, but also by various types of institutions, non-governmental organizations, universities, schools etc. The #CohesionAlliance can be joined by anyone who believes in strong Cohesion Policy and considers it the appropriate solution for the future of Europe. The declaration on #CohesionAlliance, for strong cohesion policy of the EU after 2020, which has until now been signed by 6 476 entities and may still be acceded, underlines the role of a long-term investment policy for the regions of Europe. Such a policy is necessary for reducing developmental disparities between regions. Therefore, information related to cohesion policy should be spread as broadly as possible, the budget for the operations of this policy should be strengthened and the policy itself has to be based on existing European structural and investment funds. Another

request of the initiative is the strengthening of the partnership principle and of the approach directed at particular areas through developing the key role of local and regional authorities.

Within the scope of #CohesionAlliance everyone acts jointly for a strong policy promoting economic, social and territorial cohesion in the European Union after 2020.

By being also part of i.a. the ERRIN network (European Regions Research and Innovation Network) or the Vanguard Initiative, Małopolska on a current basis collaborates with other European regions in terms of elaborating a common position referring to the future cohesion policy. We want it to still deliver as much benefits as possible for our region and for other European regions.

Cohesion policy after 2020

31

QUESTIO IURIS

COM(2018) 321 final of 2.05.2018

32

Communication from the Commission to the European Parliamen, the European Council, the European Economic and Social Committee and the Committee of the Regions A Moderne Budget for a Union that Protects, Empowers and Defends. The Multiannual Financial Framework for 2021–2027. (…)

Once every seven years, the European Union decides on its future long-term budget – the Multiannual Financial Framework.

The next such budget, starting on 1 January 2021, will be the first for the European Union of 27. (…)

The new EU budget will be a simpler, more flexible and more focused budget.

A budget guided by the principles of prosperity, sustainability1, solidarity and security. A budget for a European Union that protects, empowers and defends. A budget that unites and does not divide. A budget that is fair for all Member States. A budget for Europe’s future. (…)

II. COHESION & VALUES Investing in: l Regional development and cohesion, l Completing the Economic and Monetary Union, l People, social cohesion and values.

The Commission is proposing to modernise and strengthen Cohesion Policy2.

Working together with other programmes, the funds will continue to offer essential support to Europe’s Member States and regions.

1 The Commission will adopt at the end of the year a Reflection Paper “Towards a Sustainable Europe by 2030, on the follow-up to the UN Sustainable Development Goals, including on the Paris Agreement on Climate Change” to address possible ways on how to integrate the Sustainable Development Goals further in EU policy making.

2 Cohesion Policy is delivered through three main funds, the European Fund for Regional Development, the European Social Fund and the Cohesion Fund.

closer to BRUSSELS #24

The aim is to drive up convergence, to help reduce economic, social and territorial disparities within Member States and across Europe, as well to support delivering on the political priorities agreed in Bratislava and Rome.

Cohesion Policy will play an increasingly important role in supporting the ongoing economic reform process in the Member States. The Commission proposes to strengthen the link between the EU budget and the European Semester of economic policy coordination, which takes regional specificities into account. The Commission will propose dedicated investment-related guidance alongside the annual Country-Specific Recommendations, both ahead of the programming process and at mid-term to provide a clear roadmap for investment in reforms that hold the key to a prosperous future.

Economic and social conditions differ significantly between regions. Whereas there has been important upward convergence in many areas, some regions have actually diverged in recent years, even in relatively richer countries.

This evolution should be reflected in Cohesion Policy, so that no region is left behind.

The relative per capita gross domestic product will remain the predominant criterion for the allocation of funds – as the main objective of Cohesion Policy is and will remain to help Member States and regions lagging economically or structurally behind to catch up with the rest of the EU – while other factors such as unemployment (notably youth unemployment), climate change and the reception/integration of migrants will also be taken into account.

The Commission also proposes to increase national co-financing rates to better reflect today’s economic realities. This will have the benefit of increasing ownership at national level, sustaining larger investment volumes and improving their quality. Due consideration will be given to the specificities of the outermost regions and sparsely populated areas.

The new legal framework will also allow for more efficient links with other EU programmes. For example, Member States will be able to transfer some of their allocated funds to the InvestEU fund, in order to have access to the guarantee provided by the EU budget. They will also be able to fund “Seal of Excellence” projects identified by the Horizon Europe programme as internationally excellent projects in their regions. This will help ensure that investment in infrastructure is well-coordinated with other EU investment in crucial areas such as research and innovation, digital networks, decarbonisation, social infrastructures and skills.

As announced by the Commission in December 20173 , the future of the EU budget cannot be separated from the goal to bring about a more stable and efficient Economic and Monetary Union, to the benefit of the Union as a whole.

Under the Treaties, all Member States of the EU are part of the Economic and Monetary Union, also the Member States with a derogation or an opt out, which all participate therefore in the European Semester process.

Under the Treaties, the euro is the currency of the EU, and economic convergence and stability are objectives of the Union as a whole.

This is why the tools to strengthen the Economic and Monetary Union must not be separate but part and parcel of the overall financial architecture of the Union.

3 COM(2017) 822.

Cohesion policy after 2020

33

The new Multiannual Financial Framework 2021–2027: A Modern Budget for a Union that Protects, Empowers and Defends

I. SINGLE MARKET, INNOVATION & DIGITAL 1. Research & Innovation l Horizon Europe l Euratom Research & Training Programme l International Thermonuclear Experimental Reactor (ITER) 2. European Strategic Investments l InvestEU Fund l Connecting Europe Facility l Digital Europe Programme (including Cybersecurity) 3. Single Market l Single Market Programme (including Competitiveness and Small and Medium-Sized Enterprises – COSME, Food Safety, Statistics, Competition and Administrative Cooperation) l EU Anti-Fraud Programme l Cooperation in the Field of Taxation (FISCALIS) l Cooperation in the Field of Customs (CUSTOMS) 4. Space l European Space Programme

II. COHESION & VALUES 5. Regional Development & Cohesion l European Regional Development Fund l Cohesion Fund l Support to the Turkish-Cypriot Community 6. Economic & Monetary Union l Reform Support Programme including the Reform Delivery Tool and the Convergence Facility l Protection of the Euro Against Counterfeiting 7. Investing in People, Social Cohesion & Values l European Social Fund + (including Integration of Migrants and Health) l Erasmus+ l European Solidarity Corps l Justice, Rights & Values l Creative Europe (including MEDIA)

III. NATURAL RESOURCES & ENVIRONMENT 8. Agriculture & Maritime Policy l European Agricultural Guarantee Fund l European Agricultural Fund for Rural Development l European Maritime & Fisheries Fund 9. Environment & Climate Action l Programme for Environment & Climate Action (LIFE)

34

closer to BRUSSELS #24

IV. MIGRATION & BORDER MANAGEMENT 10. Migration

l Asylum & Migration Fund 11. Border Management

l Integrated Border Management Fund

V. SECURITY & DEFENCE 12. Security

l Internal Security Fund

l Nuclear Decommissioning (Lithuania)

l Nuclear Safety and Decommissioning (including for Bulgaria and Slovakia) 13. Defence

l European Defence Fund

l Connecting Europe Facility – Military Mobility 14. Crisis Response

l Union Civil Protection Mechanism (rescEU)

VI. NEIGHBOURHOOD & THE WORLD 15. External Action*

l Neighbourhood, Development and International Cooperation Instrument (including external aspects of migration)

l Humanitarian Aid

l Common Foreign & Security Policy

l Overseas Countries & Territories (including Greenland) 16. Pre-Accession Assistance

l Pre-Accession Assistance

VII. EUROPEAN PUBLIC ADMINISTRATION 17. European Public Administration

l Administrative Expenditure, Pensions and European Schools

INSTRUMENTS OUTSIDE THE MFF CEILINGS

l

Emergency Aid Reserve EU Solidarity Fund l European Globalisation Adjustment Fund l Flexibility Instrument l European Investment Stabilisation Function l

Cohesion policy after 2020

* The European Peace Facility is an off-budget fund outside the Financial Framework

35

closer to

BRUSSELS E-MAGAZINE OF THE MAŁOPOLSKA REGION BRUSSELS OFFICE

24

#

Editor in Chief: Renata Jasiołek Contact with the editors: Małopolska Region Brussels Office rue de la Science 41, 1040 Brussels, Belgium bruxelles@umwm.pl Design: Loyal Solutions www.loyal.com.pl