Europe should consider moving to cohesion policy 2.0

If the European Union is also about overcoming the divergences in Europe, both social and economical, then cohesion policy is its most visible and ambitious tool. European Commissioner for Regional Policy Johannes Hahn called it the «inherent part of the European idea.» The current program that runs from 2007 to 2013 has a total budget of 347 billion euros. Critics say that the system is a huge waste of money, burdened with red tape, with no coordinated policy on an EU level, a system where major companies are the main beneficiaries although it is destined to support small and medium-sized enterprises. This is not the main problem, though. According to a recent investigation by the Financial Times, only 10 percent of the program halfway through the spending circle has been paid out. In times of crisis, evidently, cash-hungry national governments simply struggle to raise the necessary amount of co-financing. But crises always helped Europe to take a major step forward. The current crisis could help rethinking cohesion policy – to use it more efficiently and try to use it more intelligently to overcome the European euro and budget crisis. Evidently, the main problem is that some member states are neither capable of using the money properly nor co-financing it. According to the annual accounts of the European Union, since 1994, member states have received 7.719 billion euros in structural aid that should not have been paid out. Only 709 million euros has been recovered. Here is the new approach: The European Commission should administrate cohesion funds more and more directly. While member states abolish their co-decision right, the Commission provides that the funds are directly used to implement projects that help to develop the economy as a kind of Marshall Plan revisited. How would this work in practice, though? Money is given for specific funding projects. Member states – that is to say beneficiaries – must therefore come up with a precise project, file the necessary paperwork for this project and then the Commission might grant the funding that was approved for that particular project. To make sure that money is not siphoned off by corrupt officials or wasted on crony projects, the European Commission has to define established criteria. Just take the example of Greece, the country whose falsified statistics and hidden budget deficit triggered the ongoing euro crisis. If the country is ever to repay its debts, amounting to more than 300 billion euros of gross domestic product, it has to generate growth, preferably in a sustainable way. But austerity measures that are necessary to help the country get itself back on track are at the same time choking the country. Why not use the cohesion funds that so far have not been retrieved to boost the economy? There is still a huge sum in the pipeline. Up to 2013, Greece has been allocated about 26 billion euros in the funding period 2007-13. Only 6 billion euros has been absorbed so far, which amounts to roughly 22 percent. Debt-ridden Greece is evidently struggling to raise the necessary money for co-financing. The Commission could directly administrate the remaining 20 billion euros, either through an executive agency or via the European Investment Bank. Thus a leverage effect of up to 200 billion euros could be affected. In Greece’s case, cohesion policy does indeed have the potential to make the substantial difference. According to statistics compiled by the European Commission, between 2000 and 2006, cohesion policy has contributed to increasing Greek GDP by 2.8 percent. Over 23,000 enterprises were supported to perform better, 7,000 startup businesses also got their share. Greece, as well as other countries in the «olive belt,» should therefore get the chance to try a new approach. The EU has to concentrate its cohesion efforts on coming up with investment for research and development, as well as for the improvement of transport infrastructure and education and training. Europe is in a deep crisis. And deep crises need new approaches. Now it just needs the courage to take the next step. (1) Jorgo Chatzimarkakis is a member of the European Parliament with the Free Democratic Party of Germany.

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