Reform of EU cohesion policy inevitable, German official says

Revision of EU spending priorities, including regional development and agricultural support, should be prioritised over discussions on a new programme of joint EU borrowing, said Ole Funke, coordinator for EU fiscal policy at the German Chancellery.

Speaking on Wednesday (12 June) at a panel discussion on a proposal floated by German trade unions, and referred to as a “Future Fund” – a follow-up to the EU’s €728.3 billion post-pandemic Recovery and Resilience Facility (RRF) – Funke argued that the debate should focus on how to differently allocate the existing budget, rather than raising additional funds.

“Normally, our EU budget should be the Future Fund,” the official said.

The fact this isn’t, “has a lot to do with path dependencies,” he said. Noting a stark difference between what economists and experts recommend as EU funding priorities and actual EU spending. Two-thirds of these are used for agriculture and cohesion funding.

“I believe we need to break out of this dependency path, as much as we politically can in the next budget negotiations, and focus on the question of where our investment needs to actually lie,” he said.

Funke said that particularly on “structural and cohesion funds […] things cannot remain as they have been in the past.”

The debate around of how the next EU long-term budget, known as Multiannual Financial Framework (MFF), should look like, has been increasingly heated. Many current beneficiaries of EU funds fear that any change could see them loose their funding, in favour of policy areas seen as a higher priority in the upcoming EU legislation.

Though the next seven-year MFF will only start in 2028, negotiations will “start slowly ” next year, Funke noted.

Outgoing Commissioner for Cohesion and Reforms, Elisa Ferreira, already warned last week that new EU spending priorities, such as defence, should not cut into the Cohesion budget.

We cannot always say no

Overall, the option of either new joint EU debt, or larger national contributions, faces opposition in Germany – which is the EU’s biggest net contributor.

“If I look back over the past 20 or 25 years, we in Germany have always been better at saying what we don’t want when it comes to European fiscal policy,” said Daniela Schwarzer of the Bertelsmann Foundation, which co-organised the event.

“We very often hear: we don’t want joint debt, we don’t want Eurobonds, we don’t want a new edition of NextGen EU,” she added, urging German lawmakers to “overcome” this.

On Monday (13 June), the country’s Finance Minister Christian Lindner (FDP/Renew) conditioned his support for a second term of Commission President Ursula von der Leyen on a commitment that there will not be a new round of joint EU debt.

However, “in the difficult times we are in, when we talk about European spending, we must always bear in mind that it must also be legitimate spending for the net contributor states,” Schwarzer acknowledged.

Thus, “We must also agree on the conditions under which we want to support a larger EU budget, for example, and other financing instruments,” citing lessons to be learned from the conditionality of the RRF.

Nils Redeker, deputy director of the Berlin-based Jacques Delors Centre, raised similar points as Funke, arguing that “there is also some potential for savings in cohesion policy.”

“I am not totally convinced that we need to send money to Europe to then spend it on regional policy in Bavaria,” he said, touching upon the fact that all EU regions get a slice of the cohesion programme’s European Regional Development Fund – a principle staunchly defended by the EU’s Committee of the Regions.

‘Investment shock’

Differing views were expressed by those who fear that, with the post covid recovery fund coming to an end by 2026, key EU priorities like the green and digital transition will face a “cliff effect” on the available funding.

In April, French president Emmanuel Macron called for an “investment shock” at the EU level to safeguard and boost Europe’s competitiveness – a call that was echoed by the French ambassador in Berlin, François Delattre, on Wednesday.

“If we just look at the three areas of defence, clean technologies and artificial intelligence, we are already talking about hundreds of billions of euros per year,” Delattre said.

“And in fact, this cannot simply be left to the individual European member states. It simply doesn’t work, because otherwise, you would destroy our European single market,” he added.

Thanks to relaxed Covid-era EU rules for national state aid, Germany and France have distributed massive subsidies to clean industries over the past few years. This has caused headaches in many smaller countries, which want to end the current exceptions as soon as possible.

[Edited by Anna Brunetti/Rajnish Singh]

Read more with Euractiv