EU budget last lap – going for gold, and green
Bankwatch Mail | 8 August 2014
Mathieu Fichter, Team Leader on ‘Sustainable Growth’ in the European Commission’s Regional and Urban Policy directorate (DG Regio), and Markus Trilling, EU Funds coordinator for Bankwatch and Friends of the Earth Europe, discuss and reflect on the challenges and opportunities that are being thrown up as we enter the final negotiating stages in the programming process for the EU budget 2014-2020.
This article is from Issue 60 of our quarterly newsletter Bankwatch Mail
Markus Trilling: The Partnership Agreements (PAs) have been submitted, the Operational Programmes (OPs) are taking shape – how is the EU Funds 2014-2020 programming process proceeding from DG Regio’s perspective, and what are the main challenges that you’re encountering in the process?
Mathieu Fichter: As you know PAs from all member states have been submitted, already around nine of them have been adopted, and the remainder are on track to be adopted – we hope – by the end of October this year. The Commission has also received around 60 percent of the OPs related to the European Regional Development Fund (ERDF) and the Cohesion Fund, and the remainder should be submitted by the end of July.
It’s a bit difficult of course to give an overall perspective because of differences between the member states – different levels of pace and progress etc. It should be underlined, however, that we’ve been having very constructive discussions and negotiations in most cases. Needless to say there are sometimes difficult points, but in the main we’re able to find solutions that are acceptable to both the member states and the Commission, with effective and efficient use of the funding for the individual countries being the paramount consideration.
A major positive is the fact that first estimates show that a minimum of about EUR 38 billion has been allocated for investments aimed at bringing about the shift to the low-carbon economy. With the addition of the national/regional co-funding and private funding, not least through financial instruments, this will provide very substantial support to projects dedicated to energy efficiency, renewables or clean urban transport. This will foster jobs, energy security and sustainable regional development.
“A major positive is the fact that first estimates show that a minimum of about EUR 38 billion has been allocated for investments aimed at bringing about the shift to the low-carbon economy.”
Also positive is the mobilisation in general of the Commission to support this negotiation process. All the directorate generals concerned are providing thematic inputs to ensure that what the member states are proposing to do with the funding is closely aligned with EU policies in all areas – such as environment, climate, energy, innovation and so on.
Having said this, there are some challenges – some major, some minor – and it’s very country-specific: there’s no real cross-cutting challenge that applies to every member state. The first thing to mention in terms of difficulty is trying to ensure a good ‘intervention logic’. By this we’re talking about ensuring that the spending plans contain four key elements. First, what are the needs and the gaps in the countries, in terms of specific areas. So, to take ‘environment’ – what are the needs, what is the ‘gap analysis’ related to biodiversity, to water, to waste, and so on? Then, what are the objectives of the investments linked to a selection of priorities? And then, what are the results and the impacts? And here we really have difficulties to see a very clear approach in a number of member states.
Our work for a greener EU budget
Sometimes we may have a very good ‘state of play’ analysis, but then the selection of objectives and priorities is not clear. Or, often, the expected results are not so well highlighted. So, developing and improving this intervention logic across many of the member states is a key focus for the Commission.
In terms of our own remit especially on environment, one area for attention is proper consideration of Article 8 on sustainable development – for many of the member states it’s proving to be a struggle to have this horizontal approach. In concrete terms, this requires establishing the instruments and tools to implement this Article 8 requirement, because we need to go beyond merely theoretical commitments. But we know that if there are no concrete instruments such as green public procurement, specific project selection criteria, working groups on sustainable development and so on, then it might not really be followed up. So this is one of those areas that the Commission is quite systematically focusing on – in order to push member states for real outcomes.
A further challenge is the limited funding in more developed regions. The difficulty for these regions is to allocate funding for adaptation to climate change (‘thematic objective 5’) and environment (‘thematic objective 6’) because of the ‘concentration requirement’, and the Commission preference for not seeing just a little bit of funding everywhere. Thus there are big decisions in the more developed regions about what needs to be funded.
On Strategic Environmental Assessments (SEAs), again it’s not a universal problem but we see in some countries that there are difficulties in this respect – it can seem that some member states have not fully grasped the SEA rationale, namely that it’s not a ‘punishment’ but instead a tool for ensuring that regional and national sustainable development materialises via the funds.
The ‘Partnership Principle’ also is falling a bit short of expectations, and this is definitely work in progress. Overall, it’s moving forward, but the picture is extremely mixed, and the Commission has limited power in this particular area. I would further highlight the 20 percent commitment to climate spending, part of the overall multi-annual framework deal for 2014-2020. Things are looking really rather positive here. We didn’t know how the member states would react to this, and actually implement it, but it’s safe to say that the majority of member states are hitting – or exceeding – the 20 percent green spending figure in their submitted plan. Of course we’re remaining vigilant on this, as there are some few cases where getting close to the target is not yet happening.
MT: Could you perhaps clarify and expand a bit more on the issues related to, and potentially due to affect, the ‘more developed regions’?
MF: The background here is that we have three categories of regions based on GDP level. So, below 75 percent of EU average GDP is a ‘less developed region’, 75-90 percent is classed as a ‘transition region’, and regions with GDP over 90 percent when compared to the EU average are the so-called ‘more developed regions’.
The requirement for ring-fencing the funding under the ERDF is more stringent in the more developed regions – effectively, their ability to choose among the different thematic objectives is significantly reduced, while the less developed regions have a much freer hand for spending, and also more money, for example via the Cohesion Fund.
MT: Just how much, from what you can detect so far, are the funds being viewed as a lifesaver, especially in countries and regions that have been most badly hit by the enduring economic crisis and austerity measures?
MF: What is crystal clear is that in many member states in the east, in the south but also in other cases, EU funding will be a large component of the available public money, so its role will be crucial in the years to come, principally because municipalities, regional authorities and national authorities have seriously limited financial capacity. And of course this is why there are – shall we say – tough battles going on within member states, between ministries, to get a hold of the new EU funding. The effects of this that can sometimes be discerned are, for instance, that there can be the wish to keep certain programmes rather vague to allow for fine-tuning or later spending decisions, depending on developing circumstances.
At the same time, DG Regio’s wish is – in line with stimulus thinking – to ensure that we have more investments of a multi-benefit type. Thus when it comes to investment areas such as nature protection, or water and waste, we’re looking for them to have the potential to exploit increased job creation and SME support. The trick can be to convince member states that ‘green growth’ is not a luxury – it can bring major economic benefits. So, the EU funds are clearly a counter-balance to some of the austerity measures, but it’s also a challenge to have a positive approach underpinning this new pot of money, and not just to revert to traditional thinking and planning for basic infrastructure funding.
“EU funds are clearly a counter-balance to some of the austerity measures, but it’s a challenge to not just revert to traditional thinking and planning for basic infrastructure funding.”
MT: Going back to what you’ve said about certain difficulties being encountered related to ‘strategic approach’ (or otherwise), about SEA, about problems associated with the mainstreaming of sustainable development across the multitude of spending lines, and especially regarding the central and eastern European (CEE) countries where – on average – 60 percent of public investments are being realised via the EU funds – Bankwatch’s firm belief is that the EU funds have a massive role to play in our region’s hoped for transition to cleaner, leaner, lighter economies.
Do you see this path being taken by CEE member states, and how would you compare what’s in the pipeline now with the last spending period of 2007-2013?
MF: Things are definitely moving in the right direction. In programme documents arriving from many of the CEE states, the opportunity to link green growth and innovation is being seized. There is clearly, too, greater understanding of how to link resource efficiency and waste management to economic development. A sense also that natural assets are important – so green infrastructure, still very much in the early days, is cropping up increasingly in the planning, although we of course have to see what happens in the implementation.
Naturally, there is still room for improvement. Governance issues and capacity issues still persist, and the thinking in some member states remains that you want to design programmes that are doable. The danger can be that shiny, bright project concepts are placed in programmes, but end up not being implemented. And weak capacity for implementing such shiny projects only adds to the problems, so devoting attention and funding to the basics – such as training people and reforming administration – has to be considered.
Also, we’re trying to encourage member states to pursue more strategic approaches – and overall strategies – across individual sectors, which is also a result of the new ‘ex-ante conditionalities’. This is all about insisting on the establishment of more coherent, joined up strategies that can be a solid framework for verifying where countries are going, and what is their plan – masterplans in the transport sector will be expected from some member states, and in Poland for instance there will be a masterplan for water drawn up, to subsequently guide EU funds’ investments.
Clearly lacking, again, is sufficient understanding of the ‘green economy’, and a lack of co-operation and horizontal work in CEE countries, where vertical, or ‘silo’ approaches still dominate. Cross-cutting, co-operative approaches are fundamental to the green economy concept.
MT: You touched upon the implementation question, involving the capacities of the managing authorities, and the ease of implementation of programmes. We know in the last budgetary period that funds ‘absorption’ was a stand-out problem, linked to excessive bureaucracy and too much paperwork. Is it going to now be easier to get the funds running? And, related, how do you think citizens with certain initiatives will be able to benefit directly from the EU funds?
MF: There is a battle ongoing regarding simplification, for sure, and this can bring certain benefits. But the most important thing to be improved is capacity within individual member states, and this is why one of the ex-ante conditionalites has been linked to administrative capacity.
The Commission will provide, where necessary, support in such efforts, encouraging member states to use technical assistance, especially in areas such as energy or climate, and tapping into available funding on this from the likes of the European Investment Bank, and other relevant instruments, of which there are many – for example, ELENA and JASPERS. In the enduring crisis times, administrative know-how has to be improved so that the money can move quickly and effectively – we can’t afford to drag our heels again.
And yes, involving stakeholders such as citizens and NGOs is critical in the whole set-up here, in making sure that funding is well implemented, and that it’s a generally participatory process. And the Commission is pushing on this certainly in the new member states, where there is room for improvement. The ‘Community-led local development’ initiative should be integral here, but it’s take-up to date in the area of environment, energy and climate change has been rather limited .
MT: Looking to the future and the next seven years, what can the Commission do to keep member states and regions on some sort of a sustainable development path? And what role for partners do you see? How can they really get involved to ensure the best outcomes via the new EU budget for the environment and people?
MF: Well, having good programmes is absolutely necessary, but it’s only half of the job. So, the Commission’s goal in this context is first to provide further support in terms of guidance, expertise and good practice – as we’ve done in the past. And certainly this time around providing guidance on nature protection and biodiversity, green growth etc. will be essential, and also to encourage exchanges between member states.
Another avenue here of course is the monitoring committees at national level, which in the initial stages are critical when project selection criteria are being established, setting the framework really for the next seven years. All partners have a critical role to play in this crunch moment: setting the criteria, adopting instruments for monitoring the implementation of projects, including the inclusion of sustainable development.
This is the scene-setting stage, i.e. now, that can lead to a smooth functioning of the next seven years, so involvement from member states, the Commission and socio-economic partners is paramount.
Our provision of further support in the area of innovation and green growth is also a big thing for us – as you know, there will be the national or regional innovation strategies for smart specialisation and the support of the smart specialisation platform. In this framework there is also focus on climate and energy. Peer reviews, workshops and seminars can contribute to ensuring that real change takes place on the ground, i.e. going beyond simply ‘good’ rhetoric in programme documentation. This is going to be a longer term mobilisation effort in the coming years.
We haven’t really touched on the ‘core funding’ issue, but it will be a challenge again, especially in the short-term for municipalities and the regions to find the 15-25 percent funding from their side. So this is why we are promoting financial instruments more, and also working with the EIB to find solutions in this area too.
MT: When can we expect to see final approval for the operational programmes?
MF: Certain more technical strands of the programmes will probably drag into 2015 for final sign-off. The end of October this year is the general deadline, but we’re prepared to go beyond this to ensure that good quality programmes get signed off and are adopted by the member states.
MT: Final question – with the rather deep scepticism from many of the richer member states about the usefulness of the EU budget, plus also perhaps the growing anti-EU sentiment across the continent, does the Commission feel under some pressure to ensure that the budget for 2014-2020 delivers, and that the EU is seen to be a force for good in people’s lives, and for their environment?
MF: This is absolutely clear-cut. This policy is one of the most significant implementation arms of the EU, so it’s a huge responsibility to ensure that real, positive benefits materialise on the ground, and to ensure that this gets communicated. We need to make the EU dimension visible, but the best way to achieve this visibility is through good projects. And I think low carbon and environment projects particularly present a great opportunity for maximising benefits across the entire EU, and really showing EU solidarity. We’re keenly aware of this, and the responsibility to deliver, to provide EU ‘added value’, especially now in the ongoing crisis context.
MT: Well, many thanks Mathieu. It sounds very much like a cautiously optimistic view emanating from the Commission, and we wish you good luck in concluding the spending negotiations in the months ahead.