Sustainable Prosperity for Europe

The EU Budget


The MFF 2014-2020: The role of local and regional authorities in the EU budget - Workshop held by the EPC in cooperation with the CoR

4 October 2011


Councillor Flo Clucas (UK; Liberal Democrats), chair of the CoR temporary Ad-hoc Commission on the EU Budget and rapporteur on the EU’s new post-2013 Multiannual Financial Framework (MFF), chaired the workshop, which was held two days before the European Commission presented its structural funding proposal.

Clucas said the new MFF had major implications for local and regional authorities (RLAs). A European strategy for long-term growth is needed and should take account of regional differences, rather than trying to impose a one-size-fits-all, top-down approach, she argued.

The EU and national levels had to act in partnership with local and regional authorities, Clucas said, warning that the threat of funding for local and regional authorities being suspended could hinder investment in innovation if RLAs are blamed for central government failings.

Fabian Zuleeg, chief economist at the European Policy Centre, presented a study entitled ‘What role for regional and local authorities in the post-2013 budgetary framework?’, produced bythe EPC on behalf of the CoR. 

The post-2013 MFF will have implications for RLAs, particularly given the context of ‘Europe 2020’ strategy, the EU’s new economic governance package, the European semester, national reform programmes and reform of the Stability and Growth Pact, Zuleeg said, warning that this combination risked “a top-down approach”.

He asked how RLAs could best be involved in decision-making and shaping decisions under the new framework, and how a link could be maintained between local and regional objectives and the strategic EU framework.

He viewed partnership contracts as central building blocks, since they act as the point of convergence between the European and national levels. Yet they also present a coordination challenge for RLAs, since they have a long-term perspective but national reform programmes are annual. He stressed that the post-2013 MFF would require consistency and coherence between different levels of government.

Zuleeg stressed the importance of involving RLAs early on in drafting national reform programmes and partnership contracts to make sure that their views are included in the process. The CoR’s proposed territorial pact could help by giving a long-term overview of spending, although this should not be a mandatory requirement, he believes.

RLAs can play an important role in implementing ‘Europe 2020’, since their budgets account for 17% of total public expenditure. But while regional budgets are generally in line with EU-wide objectives, some contain priorities that are important to individual regions but not covered in the post-2013 MFF.

Zuleeg questioned the concept of thematic concentration, suggesting it could be counterproductive.  He also felt that stricter conditionality for outcomes was problematic since it was difficult to measure results. Ex-post conditionality would require a very strong European framework to define indicators, and at the very least central guidance and advice from the Commission would be necessary.

Click here for Fabian Zuleeg’s presentation

Vasco Cal, an economic adviser in the European Commission’s Bureau of European Policy Advisors (BEPA), reminded participants that the concept of partnerships had been around since 1988, but that member states – even those with decentralised political structures – had been opposed to the idea. They wished to keep control of the process.

Addressing the concept of flexibility, Cal said some member states and regions had received EU aid but not carried out the expected accompanying reforms.

This led some to question the added value of the EU budget and ask whether clearer parameters should govern the way EU funding is spent. As a result, the European Council decided to apply conditionality to all EU-funded structural policies, Cal recalled.

The Commission was in charge of implementing these instructions, he said, suggesting that if conditionality were properly adhered to, then the end result would be more positive. “It’s like a nuclear bomb. The threat is there, but it’s a persuasive tool that will never be used,” he said.

Krzysztof Kasprzyk, a counsellor in the regional and cohesion policy section at Poland’s Permanent Representation to the European Union, described the policy decisions and directions lying ahead for the EU as a challenge, not a threat.

In implementing the Polish EU Presidency’s priorities, the RLAs are natural allies, Kasprzyk said, noting that his government believes cohesion policy to be one of the EU’s most effective policies.

“It is a key ingredient in implementing the Europe 2020 strategy, but cannot be top-down. There needs to be a balance between concentration and flexibility to take account of the territorial, economic and social conditions of individual regions,” he argued.

National reform programmes are annual and constantly changing, but this isn’t necessarily a problem with partnership contracts, which focus on a longer time frame. They are two potentially complementary processes, according to Kasprzyk. He asked how macro-economic conditionality could be applied as an incentive, not a threat, to make sure that RLAs were not penalised for developments outside their control.

He warned strongly against the temptation to take the easy “Christmas tree” route by automatically supporting any project perceived to be worthwhile. Policy should focus on certain objectives and in that sense, unlike the CoR, Poland believes thematic concentration could be productive.

RLAs have several roles to play: they could provide a critical, practical reality check on proposals; show how flexibility could be effectively applied; participate actively and pragmatically in partnership contracts; increase their own strategic capacity; and prepare integrated programmes at the appropriate territorial level, Kasprzyk argued.

Click here for Krzysztof Kasprzyk’s presentation

Elisa Roller, a deputy head of unit in the European Commission’s Directorate-General for Regional Policy, noted that the MFF proposal demonstrated the EU’s significant commitment to the ‘Europe 2020’ strategy.

She stressed the importance of multilevel governance and partnerships, and the role of RLAs in ‘Europe 2020’. She also pointed to the influence that the European Parliament was likely to have on future legislation and predicted that it would be an influential supporter of partnerships.

Roller defended the concept of thematic concentration as a response to the less-than-satisfactory results of the Lisbon Strategy, which had contained a very wide range of themes. It was a workable balance, she suggested, that avoided being too dirigiste while allowing a bottom-up approach. She also highlighted the responsibility to show European taxpayers that their money was being spent effectively and added value.

She said the Commission envisaged not just conditionality, but also incentives. It was not about punishing regions, but about using funds more effectively. Ex-ante ensured that EU legislation was being complied with; ex-post was designed to reward good practice; and macro-eco was necessary because for spending to be efficient and effective, the right macro-economic conditions had to be in place. If not, member states would cut public expenditure and EU cohesion policy programmes would suffer from the absence of national co-financing.

Responding to the presentations, Sir Albert Bore (UK; Labour), pointed out that RLA input had helped shape the ‘Europe 2020’ strategy. He said the CoR believed territorial pacts were necessary to reflect differences within member states and regions. He contrasted these with the UK’s European Social Fund programme, which is national and leaves no scope for local and regional input.

German councillor Erwin Mohr (European People’s Party) spoke of the detrimental effects that the economic and financial crises were having on funding and warned that absolute conditionality could remove EU finance from some regions.

Rhodri Glyn Thomas (UK) maintained that the current crisis should not become a driver for centralisation and stressed the importance of early participation by RLAs so they could respond positively to the EU agenda.

Dominic Rowles (CoR) suggested that the MFF should be flexible enough to respond to new policy priorities that could emerge between 2014 and 2020 but may not be evident now. He asked whether the limit on RLAs’ scope for action on conditionality should be compensated for by giving them a greater role in preparing programmes.

Discussion

The workshop was then opened to comments from the floor. One participant asked whether there would be sufficient time for the operational programmes to be put in place. Another emphasised the important role of cities in creating economic growth: “Their voices should be heard.” The scope for partnerships between regions was also raised.

Fabian Zuleeg reiterated his concerns over conditionality and thematic concentration. He suggested it was not necessary to reduce the number of areas where EU funding could be spent, particularly when the crisis meant some regions were struggling to finance basic services. Ex-post conditionality that focused on outcomes would be problematic, since it was difficult to determine what positive developments had been down to EU funding.

BEPA’sCal rejected suggestions that flexibility was insufficient. At the start of the crisis, the Commission had offered member states more flexibility in their use of structural funds, but this had been rejected, he said: “It was a problem of political will. The flexibility exists.”

He insisted that the role public money could play had changed since the 1980s. In future, it should be used as leverage, since on its own it would be insufficient to meet every need.

The Commission’sRoller agreed that time was of the essence. No-one expects operational programmes to be adopted by January 2014, but they could be adopted soon after. She dismissed suggestions that ex-ante conditionality should be compensated for by insisting member states give more involvement to RLAs. It would not be acceptable to governments, but the Commission would propose a code of good practice. When it comes to output, she explained that RLAs should be asked what they want to change in their regions and explain the indicators they would use to measure this.

Poland’s Kasprzyk insisted that cohesion policy should be used to tackle long-term structural problems. He emphasised the need for trust and good will if the new arrangements were to be effectively implemented. He appealed to RLAs to bring forward their own ideas and comments in the forthcoming debate – a point echoed by other members of the panel.

Bringing the workshop to a close, Clucas said that the CoR would adopt its resolution in its 14-15 December plenary session.

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