6/24/2018

PLES
EU COHESION POLICY AND REGIONAL
TRAIAN
DANIEL POLICY

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Dictionary of terms:

Term Definition

The cohesion policy Represents the main instrument for transposing into practice the
principle of solidarity between EU Member States.

European social fund Supports employment-related projects throughout Europe and invests in
(ESF) Europe’s human capital – its workers, its young people and all those
seeking a job.

Cohesion fund (CF) Funds transport and environment projects in countries where the gross
national income (GNI) per inhabitant is less than 90% of the EU
average.

European agricultural Focuses on resolving the particular challenges facing EU's rural areas.
fund for rural
development (EAFRD)
European maritime and Helps fishermen to adopt sustainable fishing practices and coastal
fisheries fund (EMFF) communities to diversify their economies, improving quality of life
along European coasts.

Competitiveness of Small and medium-sized enterprises are vital for the EU's economy,
SMEs accounting for more than 99% of European businesses and two thirds of
private sector jobs.

Lisbon Treaty International agreement that amends the two treaties which form the
constitutional basis of the European Union

European Commission Institution of the European Union, responsible for proposing legislation,
implementing decisions, upholding the EU treaties and managing the
day-to-day business of the EU.

Regional policy The current regional policy pursues to promote growth and full
employment of labour force in the less developed regions, to strengthen
regional competitiveness and territorial cooperation.

Operational programme Operational programmes are detailed plans in which the Member States
(OP) set out how money from the European Structural and Investment Funds
(ESIF) will be spent during the programming period.

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 1. Introduction:
The cohesion policy of the European Union represents the main instrument for transposing into
practice the principle of solidarity between EU Member States. Also, it contributes to the
achievement of its fundamental objectives, namely, to support the aims of economic growth, the
improvement of the social and territorial cohesion by reducing the economic development
disparities between regions and by fairly disseminating the benefits of the single market within the
European Union, while enhancing the overall competitiveness of the EU economy (Neal, 2007, pp.
171-173; Armstrong, 2007, pp. 421- 424; Leonard, 2005, p. 172). The added value of the cohesion
policy is important because it represents additional investments in infrastructure, human resources,
modernization and diversification of regional economies. Thus, an additional economic growth and
a higher employment rate are achieved; the beneficiary Member States and regions are supported in
their efforts to quickly reduce the disparities to the average EU economic and social development
level. The cohesion policy contributes to the improvement of the institutional capacity and to the
modernization of public administration, increasing transparency and encouraging good governance.

2.Cohesion policy funds:

European regional development fund (ERDF) – promotes balanced development in the different
regions of the EU.
The ERDF focuses its investments on several key priority areas. This is known as 'thematic
concentration':
 Innovation and research;
 The digital agenda;
 Support for small and medium-sized enterprises (SMEs);
 The low-carbon economy.
The ERDF resources allocated to these priorities will depend on the category of region.

 In more developed regions, at least 80 % of funds must focus on at least two of these priorities;
 In transition regions, this focus is for 60 % of the funds;
 This is 50 % in less developed regions.
Furthermore, some ERDF resources must be channelled specifically towards low-carbon economy
projects:

 More developed regions: 20%;

 Transition regions: 15%; and
 Less developed regions: 12%.

European social fund (ESF) - supports employment-related projects throughout Europe and
invests in Europe’s human capital – its workers, its young people and all those seeking a job.

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 Cohesion fund (CF) – funds transport and environment projects in countries where the gross
national income (GNI) per inhabitant is less than 90% of the EU average. In 2014-20, these are
Bulgaria, Croatia, Cyprus, the Czech Republic, Estonia, Greece, Hungary, Latvia, Lithuania, Malta,
Poland, Portugal, Romania, Slovakia and Slovenia.
It is now subject to the same rules of programming, management and monitoring as the ERDF and
ESF though the Common Provisions Regulation.

For the 2014-2020 period, the Cohesion Fund concerns Bulgaria, Croatia, Cyprus, the Czech
Republic, Estonia, Greece, Hungary, Latvia, Lithuania, Malta, Poland, Portugal, Romania, Slovakia
and Slovenia.

The Cohesion Fund allocates a total of € 63.4 billion to activities under the following categories:

 trans-European transport networks, notably priority projects of European interest as identified by

the EU. The Cohesion Fund will support infrastructure projects under the Connecting Europe
Facility;
 environment: here, the Cohesion Fund can also support projects related to energy or transport, as
long as they clearly benefit the environment in terms of energy efficiency, use of renewable energy,
developing rail transport, supporting intermodality, strengthening public transport, etc.
The financial assistance of the Cohesion Fund can be suspended by a Council decision (taken by
qualified majority) if a Member State shows excessive public deficit and if it has not resolved the
situation or has not taken the appropriate action to do so.

European agricultural fund for rural development (EAFRD) – focuses on resolving the
particular challenges facing EU's rural areas.
European maritime and fisheries fund (EMFF) -helps fishermen to adopt sustainable fishing
practices and coastal communities to diversify their economies, improving quality of life along
European coasts.
Cohesion Policy finds its origins in the Treaty of Rome
Preamble to the Treaty of Rome (1957): necessity ‘to strengthen the unity of their economies and to
ensure their harmonious development by reducing the differences existing between the various
regions and the backwardness of the less favoured regions’.
Article 174 Treaty of Lisbon (2010): ‘In order to promote its overall harmonious development, the
Union shall develop and pursue its actions leading to the strengthening of its economic, social and
territorial cohesion. In particular, the Union shall aim at reducing disparities between the levels of
development of the various regions and
the backwardness of the least favoured regions.

Cohesion Policy delivers the Europe 2020 strategy

• Launched in March 2010: Follow-up to the Lisbon Agenda (2000 and 2005).
• A strategy from the European Commission ‘for smart, sustainable and inclusive growth’
over the next 10 years
• Smart agenda: innovation; education; digital society.
• Sustainability agenda: climate, energy, and mobility.
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 • Inclusive agenda: employment and skills; fighting poverty and social exclusion.

3 Authorities to implement Cohesion Policy

• A managing authority to implement the operational programme, and a monitoring
committee to oversee it.
• A certification body to verify the statement of expenditure and the payment applications
before their transmission to the Commission.
• An auditing body for each operational programme to supervise the efficient running of the
management and monitoring system.
11 thematic objectives
1) Research and innovation
2) Information and comumunication technologies
3) Competitiveness of SMES
4) Low-carbon economy
5) Combating climate change
6) Environment and resource efficiency
7) Sustainable transport
8) Employment and Mobility
9) Social inclusion
10) Better education, training
11) Better public administration

3.The absorption of the Structural and Cohesion Funds in Romania and the
main challenges encountered in the implementation process
Due to its impact on regional development, the process of absorption of Structural Funds is highly
complex, has a continuous character and involves important financial, human and administrative
resources. In the public discourse, the Romanian public administration has been often criticized for
its poor administrative capacity that resulted in a low rate of absorption of the Structural Funds.
However, given the fact that Romania participates in the first financial programming period (2007-
2013) as a Member State of the EU, considering the specificity of the absorption process of
Structural Funds and analyzing relevant data on the implementation process of the Romanian
Operational Programmes, we can remark a complex and nuanced overview, which is in a
continuous transformation process. For the 2007-2013 programming period, Romania benefits from
the ninth largest financial package for Cohesion policy (see Appendix 1). The EU support for
Cohesion allocated for Romania in this period is approximately €19.2 billion under the
Convergence objective and €455 million for the European Territorial Cooperation objective.
We can notice that for Romania the Structural and Cohesion Funds per capita are significantly
lower than for other Central and Eastern European , which involves chances for a better financial
support in the new programming period 2014-2020. The first stage in the implementation process of
the Structural Funds is the preparation of a project portfolio in order to ensure a swift access to the
financial resources following the approval and launching of the operational programmes. The
institutional system for the management and implementation of the operational programmes was
completed in 2009, only in the third year of the programming period, when the European
Commission accredited the management and control systems (MCS) for the operational
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programmes (Government of Romania, 2010, p. 71). The absorption capacity, i.e. the ability to use
effectively the received financial assistance, is determined by the capacity of the eligible entities to
develop and implement viable, good quality projects. In this context it is important to improve the
capacity of public authorities to identify, prioritize, and prepare the appropriate investment projects.
The absorption capacity of the public authorities, especially in small and medium-sized localities, is
limited by the lack of experienced and appropriately trained staff, there are shortcomings in the
skills related to budget planning and project management (Molle, 2007, p. 213). The Structural and
Cohesion Funds are of major importance for regional development in Romania and for the
reduction of development disparities to the EU average, and, therefore, most operational
programmes enjoyed a great interest from potential beneficiaries. Thus, by the end of 2011, the
projects submitted to obtain financing from the Structural and Cohesion Funds have exceeded even
twice the amount allocated to the operational programmes. Thereby, the percent of EU contribution
to the submitted projects in relation to the total EU allocation for operational programmes in the
programming period 2007-2013 is over 200% for the Administrative Capacity Development OP,
the Human Resources Development OP, the Increase of Economic Competitiveness OP, and for the
Regional OP. The projects submitted for approval exceeded the amount of financial resources
allocated for the operational programmes also in the case of the Transport OP, and the Environment
OP. The only operational programme which has recorded a lower interest is the Technical
Assistance OP, although the effective implementation of this operational programme could
positively influence the overall absorption of the Structural and Cohesion Funds.
The second stage in the absorption process of the Structural and Cohesion Funds is the approval of
the submitted projects by the Managing Authorities of the operational programmes, following a
process of evaluation and selection. The data which has been recorded by March 2012 can be
considered encouraging and gives us the hope that by the end of 2015 a larger part of the financial
package allocated to Romania will be actually implemented. If we consider the figures for the
approval rate, we can remark that the percentage value of the EU contribution for the approved
projects slightly exceeds for the Human Resources Development OP and the Administrative
Capacity Development OP the total EU funding for these operational programmes for the period
2007-2013. For these OPs practically the last two stages of the absorption process remain, namely
the financing contracting, which involves funding decisions and the actual payments to the
beneficiaries of implemented projects, followed by the settlement of invoices submitted to the
European Commission. 128 There are cases when the approval rate slightly exceeds 100%.
However, for those operational programmes new calls for beneficiaries to submit projects on some
of the priority axes are still launched; this is due to the fact that additional resources will be
available for those operational programmes, among other things due to the fact that the managing
authorities are required to recover the full pre-financing granted to beneficiaries, if the beneficiaries
do not send any request for reimbursements within four months of the receipt of the pre-financing
for their projects. For projects for which beneficiaries do not submit within six months after the
receipt of the first installment of the pre-financing, requests for reimbursements at least in the
amount of 20% of the pre-financing granted, the managing authorities must recover the unused
amount of the pre-financing. Other two operational programmes have registered high approval
rates, exceeding 90% of the total available EU funding, namely the Environment OP, and the
Regional OP, while the Increase of Economic Competitiveness OP has an approval rate which
exceeds 70%. The lowest approval rates are recorded by the Transport OP (57.57%) and the
Technical Assistance OP (40.81%). Three operational programmes are recording contract rates that
are below the national average. The Increase of Economic Competitiveness OP has a contract rate
of over 45%, while the Transport OP and the Technical Assistance OP have recorded the lowest
contract rates, which are exceeding 35%. One of the main challenges for Romania in the current
programming period is to accelerate the implementation process of the Transport OP, which is the
most important OP in terms of the allocated financial resources, and the failure to implement this
OP makes it impossible to achieve the targets set in the National Strategic Reference Framework
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related to the development of transport infrastructure, which will have negative implications on the
productive integration of Romania into the EU single market. The last stage of the absorption
process consists in the actual payments to the beneficiaries of the implemented projects and the
settlement of invoices, which reflect the implementation process, after they are submitted to the
European Commission. From May 2009 until mid-2011, the beneficiaries who have won Structural
Funds supported projects could get a pre-financing amounting to 30-40% of the eligible value of the
project contract or the completed financing order/decision signed between the Managing
Authority/Intermediate body and the beneficiary (articles 13-14, Order of the Ministry of Finance
no. 2548/2009); before May 2009, the available pre-financing amounted to 20% of the eligible
value of the project contract. This pre-financing was provided in a single installment. Over the
programming period the procedure has changed and the beneficiaries received a first installment of
10% of pre-financing and the remaining 20% was received if the beneficiaries demonstrated
through supporting documents that they have spent at least half the amount of the received 10% of
pre-financing. The European Commission has allocated up to 15% of the value of the contract as
advance payments for the pre-financing of projects, the government covering the difference up to
the remaining value of the pre-financing.

4.Regional Policy is the EU’s main investment policy

The Regional policy of the European Union (EU), also referred as Cohesion Policy, is a policy with
the stated aim of improving the economic well-being of regions in the EU and also to avoid regional
disparities. More than one third of the EU's budget is devoted to this policy, which aims to remove
economic, social and territorial disparities across the EU, restructure declining industrial areas and
diversify rural areas which have declining agriculture. In doing so, EU regional policy is geared
towards making regions more competitive, fostering economic growth and creating new jobs. The
policy also has a role to play in wider challenges for the future, including climate change, energy
supply and globalisation.

Regional Policy targets all regions and cities in the European Union in order to support job creation,
business competitiveness, economic growth, sustainable development, and improve citizens’ quality
of life.

In order to reach these goals and address the diverse development needs in all EU regions, € 351.8
billion – almost a third of the total EU budget – has been set aside for Cohesion Policy for 2014-
2020.

Characteristics and Concept

The intent of the current regional policies is not the mere transfer of income from the affluent
countries to the poor countries, but also the provision of support for the programs aimed at
resolving regional issues. In addition to placing importance on partnerships among member states,
regions, the EU and various other entities in the execution and implementation of these policies,
such efforts as policy evaluation and monitoring are being made to enhance the effect of the
policies.

Support Mechanism

Financial aid is provided over a number of years through funds such as the Structural Fund to
regions subject to support, which are selected from among the base group of 274 regions (counted
in terms of provinces and similar regional units) to supplement and thereby promote national,

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regional, and private investment from a medium-term perspective (the budget for the 2014-2020
period is 351.8 billion euros, which is 32.5% of the total budget of EU).

Regional policy in context of Europe Strategy 2020

The current regional policy pursues to promote growth and full employment of labour force in the
less developed regions, to strengthen regional competitiveness and territorial cooperation. Some of
the established objectives have not been achieved fully during the current programming period;
therefore, in the future they shall be further taken over and supported. The perspectives regarding
the future regional policy 2014-2020 take into account the actual context of its implementation , but
it should provision correctly the effects of the economic and social crisis on medium- and long-
term. The economic and financial crisis that affected all Member States to various shares can be
combated also by actions of the regional policy considered as true “salvation” solutions. The
Europe 2020 Strategy for smart, sustainable and inclusive growth has as basis three interrelated
priorities: - smart growth - by strengthening knowledge and innovation; - sustainable growth -
assumes the realisation of the economy based on efficient, sustainable and competitive use of
existing resources; - growth based on sustaining social inclusion –implies the development of
inhabitants’ knowledge, full employment of labour force, competences development, poverty
alleviation, etc. The key-indicators proposed for achievement by the Europe 2020 Strategy fulfill
the SMART criteria being directly linked to the trends registered on the labour market, by the
sustainable and social development: 1. increase of population’s employment rate (20 – 64 years)
from the current level of 69% to at least 75%; 2. investments in research-development should reach
3% of the EU GDP; 3. fulfillment of the 20/20/20 objective (or 30/20/20, in case of complying with
certain conditions) regarding climatic changes and energy; 4. early school-leaving rate under 10%,
the weight of young population to graduate tertiary education of at least 40%; 5. diminishment the
number of persons at risk of poverty by about 20 million. The interdependent key-targets
established by the Strategy must be transposed by the Member States and Romania in specific
national targets and in action guidelines by considering the own economic situation of each state.
Putting into practice the actions determined by the European policy depends, to a large extent, on
the existence of firm political commitment, and on an efficient implementation mechanism both at
EU and Member States’ level. Furthermore, for attaining the strategic objectives a set of seven
flagship initiatives were proposed which aim at: innovation, education, digital society, climatic
changes and energy, competitiveness, labour force employment and competences training, poverty
alleviation. These initiatives are accompanied by a series of legal acts, key-instruments (internal
market, industrial policy, EU’s economic foreign agenda and financial instruments that have as
purpose to increase the focus on implementing the objectives of the Europe 2020 Strategy. The
development of the Strategy took into account possible implications on medium- and long-term of
the financial and economic crisis, of the way in which budgetary and monetary policies shall be
able to manage this phenomenon, and the direct support granted to the economic sector, etc.
Regarding the governing framework, the Europe 2020 Strategy presupposes clearly defined and
measurable objectives that would evaluate correctly progresses being organised on a thematic
approach and on more exact country monitoring. In order to obtain these effects, evaluations and
reporting shall be developed simultaneously on the Europe 2020 Strategy (the structural reforms
component) and on the Growth and Stability Pact (the macros-stability and public finances
component).

Regional policy in Romania

Romania had the chance to become a member of the European Union in 2007. This membership
implies many advantages and rights, but also some obligations. The simple fact that we are a
member does not bring everything for granted. Romania should be aware that regional policy only
bring the expected benefits in combination with a comprehensive national policy development and a
coherent policy direction. Regional development policy itself cannot be the main and only pillar for
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the general development of a state. In the absence of other mechanisms, regional policy may not
have the intended effects Regional development should be a partnership between administration,
economy and community The regionalization process in general is perceived as an artificial, top-
down process, made without the consultation of local communities and without taking into
consideration the cultural, ethnic and historic characteristics. The results of this process are difficult
to evaluate and unfortunately not very obvious (low impact). Regional programs oriented towards
reduction of disparities should consider that poorer regions are less capable of absorbing funds and
even more, to use them effectively. If local abilities cannot generate themselves prosperity, it is
better to offer assistance to these regions for developing abilities in creating income from economic
activities. It is also important to mention that the intervention area is not always thought at the
optimum that would allow to maximize the advantages and diminish the negative effects; the limit
urbal/rural is kept as reference. The eight development regions are not administrative units and
whether they are the most efficient division of the country remains an open question. However, the
current structure cannot be modified, as Romania has to keep this division of the territory during the
implementation period 2007-2013. The eventual change of the current structure is a complex
process that requires the consultation of all the actors implicated, including the European
Commission. The success of a region will in the end depend upon its autonomous capacity to take
matters in hand, to organise various actors around common goals, to adapt and to succesfully adjust
to outside pressure. Ultimately, the source of development lie in the region itself, in its people, in its
institutions, its sense of community and, perhaps, most important of all, in the spirit of innovation
and entrepreneurship of its population (Polese, M, 1998).

BETTER PUBLIC TRANSPORT FOR A BUZZING CITY- ERDF: EUR 11 million - Cluj-
Napoca - 2007-2013 - Sector: transport and mobility
Almost EUR 11 million of ERDF funding went towards modernising and upgrading one of the most
used transport lines in the city of Cluj-Napoca. New trams with high-quality services on-board
connect renovated stations, while travel time has been halved, travel congestions avoided and noise
pollution significantly reduced. Authorities estimate that the new trams, tracks and stations will lead
to a 10% increase in travellers. This is good news for the environment as more and better electric
trams mean not only faster and safer travel, but also fresher air in the buzzing city.
MAKING TECHNOLOGY FOR CHAMPIONS- ERDF: EUR 110 000 - Roman - 2007-2015 -
Sector: innovation in SMEs
This is the story of a small company from the north-east region of Romania that went global,
supplying giants like Boeing, Airbus and Renault with its products. Thanks to EU funding, Ratis
Serv acquired top-notch equipment and machinery. One of their greatest successes occurred in
2013, when the company delivered parts for the Renault F1 cars, one of which won the Formula 1
world championship!
BRINGING BULGARIA AND ROMANIA EVEN CLOSER- Cohesion Fund EUR 70 million
- Vidin-Calafat - Sector: transport
In 2013, a second bridge was opened between Calafat (Romania) and Vidin (Bulgaria), replacing
the ferries that used to link the two cities. The bridge provides a timely road and rail connection
between the two Member States, stimulating collaboration between the two countries, and paving
the way for further infrastructure projects across the Danube.

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5. Conclusion
The actual regional policy promotes the equilibrate development at European level and pursues to
diminish disparities between and within regions, ensure solidarity among its member state and
convergence process. Also, it sustain the growth model establish by the Europe 2020 Strategy,
including the necessity of meeting the societal challenges, and those related to labor force
employment in the Member-States and in the regions. From the perspective of the Europe 2020
Strategy, the regions can continue in obtaining differentiated support depending on their economic
development level (GDP/per capita), a clear distinction being made between “less developed” and
the “more developed” regions. With respect to the regions with a similar level of economic
development, the possibility shall be given to implement support gradually, by a simplified system
that will include a new intermediary category of regions. This category would contain eligible
regions currently under the convergence objective, but for which the GDP/per capita is higher than
75% from the European Union average. Another aspect worth signaling is the way in which the
European Social Fund (ESF) is oriented on fulfilling the objectives of the Strategy and to a better
visibility of financings and impact. Also, the Cohesion Fund shall continue supporting the Member-
States for which the GDP/per capita is placed under 90% of the Union’s average. The regional
policy shall promote other territorial dimensions of cooperation as well (trans-border, transnational
and inter-regional), but shall take into account the revision and simplification of the current
provisions regarding trans-border cooperation at the external borders of the EU, as well as of the
present practices regarding transnational actions financed both by ERDF and ESF.

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