The Structural Funds and the Cohesion Fund are the financial instruments of EU regional policy, which intends to narrow the development disparities among regions and Member States by pursuing economic, social and territorial cohesion.
Funding for regional and cohesion policy in 2007-2013 amounts to €347bn - 35.7% of the total EU budget for that period (just over €49 billion a year), comprising € 278 billion for the Structural Funds and € 70 billion for the Cohesion Fund. All cohesion policy programmes are co-financed by the member countries, bringing total available funding to almost €700bn.
In 2007 four new financial instruments were set up to provide technical assistance (JASPERS & JASMINE), improve access of SMEs to microfinance (JEREMIE) and support urban development (JESSICA).
The ERDF is currently the larger of the funds amounting to €210bn. It aims to strengthen economic and social cohesion in the European Union by correcting imbalances between its regions. Financing is provided through:
- • direct aid to investments in companies (in particular SMEs) to create sustainable jobs;
- • infrastructures linked notably to research and innovation, telecommunications, environment, energy and transport;
- • financial instruments (capital risk funds, local development funds, etc.) to support regional and local development and to foster cooperation between towns and regions;
- • technical assistance measures.
An amendment made in 2009, today allows for up to 4% of each MS ERDF allocation to be used to co-finance national, regional and local schemes related to energy efficiency and renewable energies in existing housing with the view to support social cohesion.
The ESF contributes to the integration into working life of the unemployed and disadvantaged sections of the EU population, mainly by intervening in the framework of the Convergence and Regional Competitiveness and Employment objectives. It amounts to €76bn.
The ESF provides support in the following areas:
- • adaptation of workers and enterprises: lifelong learning schemes, designing and spreading innovative working organisations;
- • access to employment for job seekers, the unemployed, women and migrants;
- • social integration of disadvantaged people and combating discrimination in the job market;
- • strengthening of human capital by reforming education systems and setting up a network of teaching establishments.
The Cohesion Fund (CF) aims to speed up economic, social and territorial convergence in the EU by providing grant financing to environment and transport infrastructure projects. It amounts to €70bn and it is intended for countries whose per capita GDP is below 90% of the Community average. However, in the case that the public deficit of a beneficiary Member State exceeds 3% of national GDP (EMU convergence criteria), the Cohesion Fund will not approve any new project for aid under until the deficit has been brought under control.
The Structural and the Cohesion Funds will be used to finance regional policy between 2007 and 2013 in the framework of three objectives:
- Convergence: to accelerate the convergence of the least developed EU Member States and regions by improving growth and employment conditions. This objective is supported by the ERDF, the ESF and the Cohesion Fund, and it represents 81.5% of the total resources allocated. The co-financing ceilings for public expenditure amount to 75% for the ERDF and the ESF and 85% for the Cohesion Fund;
- Regional competitiveness and employment: objective to anticipate economic and social change, promote innovation, entrepreneurship, environmental protection and the development of labour markets which include regions not covered by the Convergence objective. It is supported by the ERDF and the ESF and accounts for 16% of the total allocated resources. Measures under this objective can receive co-financing of up to 50% of public expenditure;
- European territorial cooperation: to strengthen cross-border cooperation at transnational and interregional levels in the fields of urban, rural and coastal development, and foster the development of economic relations and networking between small and medium-sized enterprises (SMEs). These are handled by the European Territorial Cooperation objective, otherwise known as INTERREG, which is supported by the ERDF and represents 2.5% of the total allocated resources. INTERREG IV covers the period 2007-2013 and is further divided into INTERREG IVA, IVB and IVC, covering cross-border, transnational and interregional projects respectively. Measures under the Territorial Cooperation objective can receive co-financing of up to 75% of public expenditure.
The Funds’ support for the three objectives always involves co-financing. The rates of co-financing may be reduced in accordance with the "polluter pays" principle or where a project generates income. Of course, all projects must comply with EU legislation, particularly with regard to competition, the environment and public procurement.
Organisations that can benefit from regional funding include public bodies, some private sector organisations (especially small businesses), universities, associations, NGOs and voluntary organisations. Foreign firms with a base in the region covered by the relevant operational programme can also apply, provided they meet European public procurement rules.
The European Commission's end of 2011 analysis has shown record levels of payments in Member States, ensuring the timely implementation of the EU's main investment policy. In 2011 Member States received by the Commission some EUR 32.9 billion, an amount 8% higher than the one allocated for 2010.
The average payment rate for all 3 funds (ERDF, ESF, Cohesion Fund) in the EU-27 was at 33.4% of the allocated amounts on 31 December 2011 varying from 16.5% to 48.3% between countries, with the analysis per fund revealing that the ERDF payments increased by 55% from end 2010 to end 2011.
Meanwhile, following the entry into force of Regulation 1311/2011 on 20 December, Greece and Romania received temporary "top-up" of a value of 374 million € in the aftermath of the financial crisis.