1989 Generation Initiative

This article briefly summarizes the ongoing work from the Economics delegates of our yearly policy cycle “A New Contract: Reconnecting the EU with its citizens”. The following summary covers one of their two proposals, to be refined and presented to the European Parliament amongst others by October.

 

The EU has been ambitious in its address of regional support, not limited to but including the EU-funded COHESIFY project and the European Structural and Investment Fund (ESIF) which have cumulative funding of 454 billion euros.

 

However, these projects are constrained in both their scope and success. A recent study published by Gagliardi and Percoco in 2016 finds that, while European Cohesion funds have positively impacted economic growth in laggard areas, this is predominantly due to the economic success of proximate rural areas. Similar papers have been published questioning the effectiveness of the underlying foundation of European Cohesion Policy, including Iain Begg, who concludes that reforms among the governance role of cohesion policy and relative dissemination are necessary arenas to address within the broader context of unresolved cohesion (2010), and Farole et. al who argue that the efficiency-equity trade-off under which Regional Cohesion Policy was constructed must be revisited with greater attentiveness to geographical region vis a vis economic development.

With that in mind, our work currently focuses on the following strands of reform:

  1. Implementation of transparency, accessibility, and conditionality regulations, in particular re-engaging citizens through awareness of EU funding allocation;
  2. Affirming solidarity with the European Parliament’s Building blocks for a post-2020 EU Cohesion policy refusing proposed cuts to cohesion policy funding and investment as proposed by the White Paper on the Future of Europe;
  3. Underline the importance of expanding Youth Initiative Programs and funding including the Youth Guarantee and Youth Employment Initiative both independently, and as suggested by the European Parliament’s Building blocks for a post-2020 EU Cohesion policy via facilitation of innovative sectors including but not limited to digital and low carbon economies.
  4. In line with the “small business” faction of ESIF, cohesion funds should be allocated to local stakeholder bodies with the credentials, data, and administrative capacity to disseminate funds aiming at the highest economic trade-off feasible: Funding levels for these delivery bodies would be based on a set of (yet to be developed) automatic indicators. When choosing these indicators, factors influenced by free movement (e.g. pressures on local social housing, wages, employment availability, the effect of mass migration to other member states etc.) should take a prominent role. It is essential that these indicators provide room for action for Western European regions (e.g. by enabling tackling pressures created by inflowing migration) as well as for Eastern European ones (by enabling taking action against skill shortages created by migration). Thus, funding could help redress imbalances all across the European Union.
  5. Address socioeconomic imbalances by the restructuring of regional/cohesion funding by fostering entrepreneurial activity through enabling new funding streams through European Investment Bank (EIB) bonds; this funding stream would provide repayable loans of various size with affordable interest rates. Revenue from this stream could help finance / cross-finance projects in the second stream, which would primarily aim to fund and foster socioeconomic development activities for which a loan structure would be unfeasible.

Our proposed reforms embody the importance of context-dependence in the effectiveness of cohesion funding: flexibility and tailored interventions are crucial if the goal is convergence for all.

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