Will Cohesion Policy Recover from Covid? An Initial Assessment

The Special European Council on 17-21 July 2020 was significant for reaching agreement on an innovative and substantial Next Generation EU instruments recovery package, chiefly via the Recovery and Resilience Facility, in response to the COVID-19 crisis. The Council also achieved a political agreement on the Multiannual Financial Framework, over two years after the European Commission published its budgetary and policy reform proposals in May 2018. The interinstitutional negotiations are still underway, and the European Parliament is seeking to make changes in several areas. However, notwithstanding some remaining questions on the allocation of REACT-EU, there is now a budgetary framework on which to base planning for Cohesion Policy from the start of 2021. The major challenge for the Member States and EU institutions is now to use the available resources to facilitate recovery from the COVID-19 pandemic, whose health threats continue to constrain economic activity – and may continue to do so until a vaccine is widely introduced. The pandemic has of course affected countries and regions differently. The risk is that it will further entrench territorial inequality, slowing a resumption of European regional convergence, especially in those parts of Europe that have yet to recover fully from the financial and economic crises of the late 2000s. Policymakers responsible for Cohesion Policy face several difficult tasks in parallel. One is bringing the 2014-20 programmes to a successful conclusion, in many cases adjusted through CRII/CRII+ in response to the crisis. Although most resources have generally been committed, spending rates are as low as 35-40 percent in countries such as Spain, Greece, Croatia and Romania. A second task is to complete the programming for 2021-27 in the new circumstances of the COVID-19 crisis, and with potential competition for ‘good projects’ from the Recovery & Resilience Facility. Lastly, policymakers need to programme the use of REACT-EU intended as a ‘bridge’ between the two programme periods. This paper examines the current state-of-play of Cohesion Policy from political, budgetary and policy perspectives. It reviews the outcome of the Special European Council in July 2020 and the outstanding challenges and concerns. It then examines the budgetary implications of the political agreement for Cohesion Policy allocations in 2021-27 relative to current allocations and other instruments in the Recovery Plan. The next section reviews experiences with the implementation of the emergency measures introduced under CRII and CRII+, developments in the negotiations on the Cohesion Policy recovery package, and national perspectives on the implications of the pandemic for the design and implementation of the 2021-27 programmes. The final section presents the key conclusions