Alessandro Valenza (photo above left) is partner and founder of t33. He is a senior expert in European studies and evaluation, with a strong background in regional studies. Nicola Brignani (photo below left) a senior partner with t33 and is a has expertise in European Territorial Cooperation Programmes.
We know the Covid-19 pandemic will seriously affect almost all sectors in European countries, generating a systemic crisis. The latest OECD estimates predict a fall of at least 15% in GDP especially impacting transport, construction, manufacturing, services, trade and tourism.
Economists generally feel that after the emergency phase and ‘buffering’, particularly providing liquidity to economic activities, major public investment is needed. This is well expressed by Prof. Alberto Quadrio Curzio in his article ‘Il vaccino” economico al Covid-19 sono gli investimenti pubblici in infrastrutture’ (The economic vaccine for Covid-19 is public investment in infrastructure). Massive public investment involves two opposing risks. On the one hand, concentration of investment in ‘strong’ areas produces distribution asymmetries, increasing socio-economic gaps between territories. On the other hand, governments could be tempted to distribute ‘sprinkler’ financing – even in the extreme version of ‘helicopter money’ – without a strategic vision, choosing priorities on the basis of shared criteria and lacking rules for sound management and transparency.
Cohesion policy makes it possible to reach out individually to small and peripheral administrations, enabling them to make investments consistent with European national policies and, above all, relevant to their territories. Most EU infrastructure projects have a small financial dimension which is normally perceived as a limitation of cohesion policy. In the context of the current crisis, however, this is very positive.
It is through multiple investments with precise and common objectives, implemented through consolidated rules with widespread and structured governance, that cohesion policy resolves the trade-off between concentration and a strategic approach. This enables support to reach deep into territories and cover multiple economic areas.
The Commission has already widened ESIF flexibility to face the pandemic. The Coronavirus Response Investment Initiative (CRII) and (CRII+) enable resource transfer across individual ESI Funds as well as between different regions and thematic objectives. Member States can also benefit from full EU financing for crisis-related measures. The package also simplifies procedural steps for programme amendments, use of financial instruments, audit and extending the scope of support. Even more important is the proposed REACT EU initiative. For 2014-2020, REACT EU entails 55 billion of additional budget for 2020 to 2022, extending the flexibility of CRII and CRII+.
However, the increased flexibility and new resources may hide some challenges:
- a) enlarging the scope of the Cohesion Policy with 100% co-financing could divert resources from structural investments – which are desperately needed for the economic recovery – to current expenditure addressing the immediate social and health emergency. This is naturally a good thing in the short-term but can be dangerous in the medium-long term. Investing now with a view to future gains is normally politically less feasible than focusing on present needs.
- b) Two periods overlap. While the 2014-2020 period is extended to 2022, the 2021-2027 period is not delayed. This will result in an overload / overstretch for Managing Authorities since they are requested to both manage the novelties of the present period (REACT EU – CRI/CRI+) and to plan/negotiate new Programmes. All this in a time of uncertainty and instability. No wonder that Managing Authorities could easily opt to finance easy interventions rather than innovative complex investments.
- c) The new options are offered to Member States and not to single Managing Authorities. This may subvert the consolidated governance of ESIF and undermine the principle of subsidiarity. After 30 years of relative autonomy, Regional authorities could find themselves cut-out from the ESIF decision making process.
In conclusion, current cohesion policy is an ideal tool to channel resources in a disciplined way, deeply and strategically into territories using robust rules, a coherent strategic approach and, above all, solid governance.
In the light of these considerations, there are clear advantages to using ESIF to address the COVID-19 emergency also with the new initiatives of the Commission. Paradoxically, the same proposals can undermine the principles of additionality (discipline), partnership (solid governance) and concentration (strategic approach) which make Cohesion policy a unique instrument to boost the recovery.
A partial solution, it is to increase of the accountability and transparency for the way ESIF resources are used. The Commission can be braver in asking the Member States that more robust evaluations accompany especially implementation of the REACT EU initiative. At the moment, the Commission proposal requires that “at least one evaluation on the use of the additional resources is carried out to assess their effectiveness, efficiency” (point 11 of the revised article 92b). This implies, that a potential debate and reflection on use of the resources will take place only ex-post. Since evaluations are not merely an administrative burden and use of the resources is especially important, a sharper evaluation i.e. accountability system could immediately improve the impact Cohesion policy.
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