European Commission proposes amendments to ESF+ and ERDF Regulations to consider current and emerging political priorities

Amendments aim to align investment priorities with the evolving economic, societal and geopolitical context as well as with climate and environment objectives, and to introduce greater flexibility and incentives for reprogramming and implementation to incentivise an facilitate the rapid deployment of resources and accelerate the implementation of the programmes in the areas identified as strategic priorities

On 1 April, the European Commission made a proposal to use the Mid-term review of Cohesion policy to adapt and maximise its contribution to the European Union’s political priorities. According to the European Commission, the objective of this initiative is to make cohesion policy more effective, by encouraging Member States and regions to invest in the European strategic priorities, while maintaining the focus of cohesion policy on reducing economic, social and territorial disparities.

Specifically, the the Commission proposed targeted amendments to the regulatory framework of the Cohesion policy funds to:

Align investment priorities with the evolving economic, societal and geopolitical context as well as with climate and environment objectives;
Introduce greater flexibility and incentives for reprogramming and implementation to incentivise an facilitate the rapid deployment of resources and accelerate the implementation of the programmes in the areas identified as strategic priorities (unfortunately, this flexibility and incentives do not apply to the investments in the already existing areas).

The proposed amendments do not imply changes to the annual ceilings of the Multiannual Financial Framework (MFF) for commitments and payments, and does not change the overall envelope. Amounts relating to additional pre-financing or increased percentage of funding for certain investments.

Main proposals

European Social Fund Plus (ESF+)

The proposed ESF+ reform does not alter the basic structure of the current Regulation, nor does it set new specific objectives, but rather allows Member States to redirect their resources towards a series of challenges and priorities identified as critical and emerging, and which mainly aim to address skills gaps and labour shortages, seen as key to growth, digital and green transition and the EU’s strategic autonomy. Critical priorities include:

Skills development in the defense industry, aiming to ensure that the EU workforce has the necessary skills to support the growing defense industry, strengthening Europe’s preparedness and security.
Supporting adaptation linked to decarbonisation, increasing the skills, upskilling and reskilling of workers, businesses and employers to climate change.

In order to facilitate and incentive reorientation of ressources towards the identified critical areas, the European Commission proposes a number of flexibility and incentive measures, including additional pre-financing (of 4.5%) and an extension of the eligibility period by one year if at least 15% of the funds are reallocated to the new priorities.

Specific measures are also proposed for the regions bordering Ukraine, Russia and Belarus considering the challenges they face.

European Regional Development Fund (ERDF)

With the mid-term reform of the ERDF Regulation presented by the European Commission, the ERDF partially moves away from its traditional focus exclusively on regional development, to become an instrument linked to the EU’s strategic autonomy and its capacity to respond to structural and geopolitical crises.

The formal incorporation of defense and security-related objectives is proposed, including the financing of dual civil-military infrastructure, strategic corridors and support for critical industries in regions bordering Russia, Belarus and Ukraine.

At the same time, affordable housing, water management, clean energy and ecological transition in vulnerable territories are incorporated as new priorities. These areas will have more flexible conditions and greater incentives to attract financing. The Commission seeks to respond both to the priorities of the European Green Deal and to the growing pressure on the housing market in many European cities. The proposal pays special attention to urban areas, proposing the reallocation of resources to the European Urban Initiative, with the aim of facilitating social innovation and sustainability projects in medium-sized cities.

The key is how it will be implemented at national and regional level: whether it will be done with social and territorial criteria, maintaining it as a tool for equity, or whether it will prioritize speed and competitiveness, with the risk that some regions and vulnerable groups, such as Roma, will be left behind.

As in the proposal for the ESF+, the Commission proposes a series of measures to make investments in these new priorities more flexible and incentivize them, including additional pre-financing (of 30%), the extension (by one year) of the eligibility period.

Next steps

European Commission’s amendments of the cohesion policy legislations wil now be discussed by the European Parliament and the Council.

Once an agreement is reached, Member States and regions are urged to submit their amendments to the programmes within two months from the entering into force of the revised legislation. The Commission will assess the proposed amendments and engage closely with the authorities to ensure that the revised programmes are adopted within two months from the submission of the amendments by the national or regional authorities.

The Commission’s objective is to conclude the reprogramming exercise of the mid-term review with Member States and regions by the in 2025, so that the adjusted programmes can start being implemented as of 2026 and over the second half of the current MFF cycle.