EU Law: Structural Funds

Cohesion may be a concept difficult to understand, but the structural funds and related policy instruments of the European Community (European Union) are readily comprehended in terms of euros.

The resources are managed by the European Commission (Regional policy) and spent or invested in the EU member states.

This blog post offers information about both EU law and policy.

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Article 159 TEC

Article 159 TEC (ex Article 130a) sets out the means to achieve the strengthening of economic and social cohesion.

The member states are primarily responsible for economic policies, but they have undertaken to coordinate them. Article 159 TEC adds the cohesion objectives to the factors to take into account when conducting and coordinating economic policies.

Article 159 lays down a horizontal requirement to take into account the cohesion objectives in Community actions and policies generally as well as the implementation of the internal market.

The European Community (European Union) supports the achievement of cohesion objectives through the Structural Funds. The following Structural Funds are specifically mentioned:

· European Agricultural Guidance and Guarantee Fund, Guidance Section
· European Social Fund
· European Regional Development Fund

In addition, the first paragraph mentions:

· the European Investment Bank
· the other existing Financial Instruments

The second paragraph of Article 159 TEC sets out an obligation for the Commission to report on economic and social cohesion every three years, if appropriate with proposals.

Other measures can be adopted according to the co-decision procedure.


Here is the current Article 159 of the Treaty establishing the European Community (TEC), as published in the latest consolidated version of the treaties, OJEU 29.12.2006 C 321 E/118–119:

(TITLE XVII
ECONOMIC AND SOCIAL COHESION)

Article 159 TEC

Member States shall conduct their economic policies and shall coordinate them in such a way as, in addition, to attain the objectives set out in Article 158. The formulation and implementation of the Community's policies and actions and the implementation of the internal market shall take into account the objectives set out in Article 158 and shall contribute to their achievement. The Community shall also support the achievement of these objectives by the action it takes through the Structural Funds (European Agricultural Guidance and Guarantee Fund, Guidance Section; European Social Fund; European Regional Development Fund), the European Investment Bank and the other existing Financial Instruments.

The Commission shall submit a report to the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions every three years on the progress made towards achieving economic and social cohesion and on the manner in which the various means provided for in this Article have contributed to it. This report shall, if necessary, be accompanied by appropriate proposals.

If specific actions prove necessary outside the Funds and without prejudice to the measures decided upon within the framework of the other Community policies, such actions may be adopted by the Council acting in accordance with the procedure referred to in Article 251 and after consulting the Economic and Social Committee and the Committee of the Regions.



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Original Lisbon Treaty (ToL)

Although the Treaty of Lisbon is unreadable on its own, it spells out how or if the current treaties are amended.

Sometimes there are no specific amendments, although most of the times one or more of the horizontal amendments apply.

Article 2, point 132 of the Lisbon Treaty amended Article 159 TEC (OJEU 17.12.2007 C 306/85):

132) In Article 159, second paragraph, the words ‘economic and social’ shall be replaced by ‘economic, social and territorial’.



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Renumbering ToL

The Table of equivalences of the original Treaty of Lisbon tells us that Title XVII first became Title XVII with the addition of territorial in the TFEU (ToL), and renumbered Title XVIII Economic, social and territorial cohesion in the consolidated version.

Article 159 TEC initially became Article 159 TFEU (ToL) before the renumbering of the treaty made it into Article 175 TFEU in the consolidated version (OJ 17.12.2007 C 306/217).


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Lisbon Treaty consolidated

Article 175 TFEU

Territorial was added to the Title and the preceding Article and consequently to Article 159 TEC. The Article has been renumbered. The Community has been replaced by the Union and the procedure referred to in Article 251 (co-decision) has been renamed the ordinary legislative procedure.

Article 175 TFEU appears like this in the consolidated version of the Treaty of Lisbon (OJ 9.5.2008 C 115/127):

(TITLE XVIII
ECONOMIC, SOCIAL AND TERRITORIAL COHESION)

Article 175 TFEU
(ex Article 159 TEC)

Member States shall conduct their economic policies and shall coordinate them in such a way as, in addition, to attain the objectives set out in Article 174. The formulation and implementation of the Union's policies and actions and the implementation of the internal market shall take into account the objectives set out in Article 174 and shall contribute to their achievement. The Union shall also support the achievement of these objectives by the action it takes through the Structural Funds (European Agricultural Guidance and Guarantee Fund, Guidance Section; European Social Fund; European Regional Development Fund), the European Investment Bank and the other existing Financial Instruments.

The Commission shall submit a report to the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions every three years on the progress made towards achieving economic, social and territorial cohesion and on the manner in which the various means provided for in this Article have contributed to it. This report shall, if necessary, be accompanied by appropriate proposals.

If specific actions prove necessary outside the Funds and without prejudice to the measures decided upon within the framework of the other Union policies, such actions may be adopted by the Council acting in accordance with the ordinary legislative procedure and after consulting the Economic and Social Committee and the Committee of the Regions.



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General EU aims

The third subparagraph of Article 3(3) of the amended Treaty on European Union (TEU) states that the EU shall promote economic, social and territorial cohesion, and solidarity among member states.

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EU powers in general

The powers of the European Union are attributed or conferred by the member states through the treaties (including their aims). The Treaty of Lisbon makes an effort to present the different categories of powers (modestly called competences) in a systematic manner.
The taxonomy of EU competence is set out in Article 2 TFEU. The three main or general categories are exclusive competence in 2(1), shared competence in 2(2) as well as supporting, coordinating or supplementing competences in 2(5), although the exact scope and arrangements are laid out in the various treaty provisions as stated in 2(6):

Article 2 TFEU

1. When the Treaties confer on the Union exclusive competence in a specific area, only the Union may legislate and adopt legally binding acts, the Member States being able to do so themselves only if so empowered by the Union or for the implementation of Union acts.

2. When the Treaties confer on the Union a competence shared with the Member States in a specific area, the Union and the Member States may legislate and adopt legally binding acts in that area. The Member States shall exercise their competence to the extent that the Union has not exercised its competence. The Member States shall again exercise their competence to the extent that the Union has decided to cease exercising its competence.

3. The Member States shall coordinate their economic and employment policies within arrangements as determined by this Treaty, which the Union shall have competence to provide.

4. The Union shall have competence, in accordance with the provisions of the Treaty on European Union, to define and implement a common foreign and security policy, including the progressive framing of a common defence policy.

5. In certain areas and under the conditions laid down in the Treaties, the Union shall have competence to carry out actions to support, coordinate or supplement the actions of the Member States, without thereby superseding their competence in these areas.

Legally binding acts of the Union adopted on the basis of the provisions of the Treaties relating to these areas shall not entail harmonisation of Member States' laws or regulations.

6. The scope of and arrangements for exercising the Union's competences shall be determined by the provisions of the Treaties relating to each area.



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Article 4 TFEU: Shared competence

Economic, social and territorial cohesion is mentioned among the competences listed as shared in Article 4 TFEU:

Article 4 TFEU

1. The Union shall share competence with the Member States where the Treaties confer on it a competence which does not relate to the areas referred to in Articles 3 and 6.

2. Shared competence between the Union and the Member States applies in the following principal areas:

(a) internal market;

(b) social policy, for the aspects defined in this Treaty;

(c) economic, social and territorial cohesion;

(d) agriculture and fisheries, excluding the conservation of marine biological resources;

(e) environment;

(f) consumer protection;

(g) transport;

(h) trans-European networks;

(i) energy;

(j) area of freedom, security and justice;

(k) common safety concerns in public health matters, for the aspects defined in this Treaty.

3. In the areas of research, technological development and space, the Union shall have competence to carry out activities, in particular to define and implement programmes; however, the exercise of that competence shall not result in Member States being prevented from exercising theirs.

4. In the areas of development cooperation and humanitarian aid, the Union shall have competence to carry out activities and conduct a common policy; however, the exercise of that competence shall not result in Member States being prevented from exercising theirs.

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Protocol (No 28)

The intergovernmental conference attached a Protocol (No 28) on economic, social and territorial cohesion to the treaties, perhaps indicating a growing willingness to take the capacity of less prosperous (new) member states into account both as contributors to the common coffers and as recipients of funds, when coming long term budgets (fiancial perspectives) are prepared and implemented:

PROTOCOL (No 28)
ON ECONOMIC, SOCIAL AND TERRITORIAL COHESION

THE HIGH CONTRACTING PARTIES,

RECALLING that Article 3 of the Treaty on European Union includes the objective of promoting economic, social and territorial cohesion and solidarity between Member States and that the said cohesion figures among the areas of shared competence of the Union listed in Article 4(2)(c) of the Treaty on the Functioning of the European Union,

RECALLING that the provisions of Part Three, Title XVIII, on economic, social and territorial cohesion as a whole provide the legal basis for consolidating and further developing the Union's action in the field of economic, social and territorial cohesion, including the creation of a new fund,

RECALLING that the provisions of Article 177 of the Treaty on the Functioning of the European Union envisage setting up a Cohesion Fund,

NOTING that the European Investment Bank is lending large and increasing amounts for the benefit of the poorer regions,

NOTING the desire for greater flexibility in the arrangements for allocations from the Structural Funds,

NOTING the desire for modulation of the levels of Union participation in programmes and projects in certain countries,

NOTING the proposal to take greater account of the relative prosperity of Member States in the system of own resources,

REAFFIRM that the promotion of economic, social and territorial cohesion is vital to the full development and enduring success of the Union,

REAFFIRM their conviction that the Structural Funds should continue to play a considerable part in the achievement of Union objectives in the field of cohesion,

REAFFIRM their conviction that the European Investment Bank should continue to devote the majority of its resources to the promotion of economic, social and territorial cohesion, and declare their willingness to review the capital needs of the European Investment Bank as soon as this is necessary for that purpose,

AGREE that the Cohesion Fund will provide Union financial contributions to projects in the fields of environment and trans-European networks in Member States with a per capita GNP of less than 90 % of the Union average which have a programme leading to the fulfilment of the conditions of economic convergence as set out in Article 126,

DECLARE their intention of allowing a greater margin of flexibility in allocating financing from the Structural Funds to specific needs not covered under the present Structural Funds regulations,

DECLARE their willingness to modulate the levels of Union participation in the context of programmes and projects of the Structural Funds, with a view to avoiding excessive increases in budgetary expenditure in the less prosperous Member States,

RECOGNISE the need to monitor regularly the progress made towards achieving economic, social and territorial cohesion and state their willingness to study all necessary measures in this respect,

DECLARE their intention of taking greater account of the contributive capacity of individual Member States in the system of own resources, and of examining means of correcting, for the less prosperous Member States, regressive elements existing in the present own resources system,

AGREE to annex this Protocol to the Treaty on the European Union and the Treaty on the Functioning of the European Union.



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Structural Funds


Information about the Structural Funds can be found through the web page of the Directorate-General for Regional Policy, stating that in the period 2007-2013, cohesion policy will benefit from 35.7% of the total EU budget or 347.41 billion euros (current prices):

http://ec.europa.eu/regional_policy/policy/fonds/index_en.htm

The key objectives are presented on the web page:

http://ec.europa.eu/regional_policy/policy/object/index_en.htm


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European Agricultural Guidance and Guarantee Fund, Guidance Section

We turn to the Structural Funds specifically mentioned by Article 159 TEC and Article 175 TFEU. In order of appearance the first one we encounter is the European Agricultural Guidance and Guarantee Fund, Guidance Section.

Instead we find the Directorate-General Agriculture and Rural Development responsible for Rural Development Policy 2007–2013, in other words outside the scope of Structural Funds managed by the Directorate-General Regional Policy.

http://ec.europa.eu/agriculture/rurdev/index_en.htm


Even the consolidated Lisbon Treaty seems to behind the times, when we see that the current legal act has created a fund with a new name:

Council Regulation (EC) No 1698/2005 of 20 September 2005 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) (OJEU 21.10.2005 L 277/1).

The EAFRD Regulation is found here:

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2005:277:0001:0040:EN:PDF


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Some have argued that structural funds spending is the biggest item on the EU budget, ahead of agriculture, but that would require the “second pillar” of the common agricultural policy (CAP) to be counted as part of the structural funds.

Arguably, during the period 2007–2013 structural measures within the context of rural policy are even more tied to the administration of agricultural policy than previously.

Accordingly, my view is still that agriculture is the greatest expense in the EU budget, ahead of the structural funds, and that this will be the case in 2009.


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European Social Fund (ESF)

Basic information about the European Social Fund (ESF) can be found here:

http://ec.europa.eu/regional_policy/funds/fse/index_en.htm

The ESF Regulation, officially Regulation (EC) No 1081/2006 of the European Parliament and of the Council of 5 July 2006 on the European Social Fund and repealing Regulation (EC) No 1784/1999 (OJEU 31.7.2006 L 210/12), is available here:

http://ec.europa.eu/regional_policy/sources/docoffic/official/regulation/pdf/2007/fse/ce_1081(2006)_en.pdf

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European Regional Development Fund (ERDF)

You can access information about the European Regional Development Fund (ERDF) here:


http://ec.europa.eu/regional_policy/funds/feder/index_en.htm

The ERDF Regulation, officially Regulation (EC) No 1080/2006 of the European Parliament and of the Council of 5 July 2006 on the European Regional Development Fund and repealing Regulation (EC) No 1783/1999 (OJEU 31.7.2006 L 210/1), can be found here:

http://ec.europa.eu/regional_policy/sources/docoffic/official/regulation/pdf/2007/feder/ce_1080(2006)_en.pdf

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European Investment Bank

The European Investment Bank (EIB) is mentioned as one of the actors supporting the cohesion objectives.

More information can be found on the web pages of the EIB:

http://www.eib.org/

The latest version of the legal framework of the European Investment Bank, although not in force, is Protocol (No 5) on the statute of the European Investment Bank, annexed to the Lisbon Treaty TEU and TFEU (OJEU 9.5.2007 C 115/251).


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Cohesion Fund

Among other existing Financial Instruments we find the important Cohesion Fund, designed for the poorer member states. For the 2007-2013 period the Cohesion Fund concerns Bulgaria, Cyprus, the Czech Republic, Estonia, Greece, Hungary, Latvia, Lithuania, Malta, Poland, Portugal, Romania, Slovakia and Slovenia. Spain is eligible to a phase-out fund only as its GNI per inhabitant is less than the average of the EU-15.
Introductory information about the Cohesion Fund, important for infrastructure projects and the environment, can be found here:

http://ec.europa.eu/regional_policy/funds/cf/index_en.htm

Council Regulation (EC) No 1084/2006 of 11 July 2006 establishing a Cohesion Fund and repealing Regulation (EC) No 1164/94 (OJEU 31.7.2006 L 210/79) can be found here:

http://ec.europa.eu/regional_policy/sources/docoffic/official/regulation/pdf/2007/cohesion/ce_1084(2006)_en.pdf

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European Union Solidarity Fund (EUSF)

The Member States and countries negotiating accession can request aid from the European Union Solidarity Fund (EUSF) in the event of a major natural disaster. Basic information is found here:

http://ec.europa.eu/regional_policy/funds/solidar/solid_en.htm

The legal act setting up the EUSF is Council Regulation (EC) No 2012/2002 of 11 November 2002 establishingthe European Union Solidarity Fund (OJEC 14.11.2002 L 311/3), which is available here:

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2002:311:0003:0008:EN:PDF

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European Grouping for Territorial Cooperation (EGTC)

According to the Inforegio web page, the EGTC is a new European legal instrument designed to facilitate and promote cross-border, transnational and interregional cooperation. Unlike the structures which governed this kind of cooperation before 2007, the EGTC is a legal entity and as such, will enable regional and local authorities and other public bodies from different member states, to set up cooperation groupings with a legal personality.

Information about this new legal instrument is accessible here:

http://ec.europa.eu/regional_policy/funds/gect/index_en.htm

The establishment of the new legal instrument has required a legal instrument of its own. Regulation (EC) No 1082/2006 of the European Parliament and of the Council of 5 July 2006 on a European grouping of territorial cooperation (EGTC) (OJEU 31.7.2006 L 210/19) is accessible here:

http://ec.europa.eu/regional_policy/sources/docoffic/official/regulation/pdf/2007/gect/ce_1082(2006)_en.pdf

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Instrument for Pre-Accession Assistance (IPA)

If we cast our net somewhat wider than the internal cohesion of the European Union, the work can be said to commence in advance with regard to candidate countries and potential candidate countries.

From January 2007 onwards, the Instrument for Pre-Accession Assistance (IPA) replaces a series of European Union programmes and financial instruments for candidate countries or potential candidate countries, namely PHARE, PHARE CBC, ISPA, SAPARD, CARDS and the financial instrument for Turkey.

Information is found here:

http://ec.europa.eu/regional_policy/funds/ipa/index_en.htm

The basic legal instrument is Council Regulation (EC) No 1085/2006 of 17 July 2006 establishing an Instrument for Pre-Accession Assistance (IPA) (OJEU 31.7.2006 L 210/82), available here:

http://eur-lex.europa.eu/LexUriServ/site/en/oj/2006/l_210/l_21020060731en00820093.pdf

Implementing rules have been issued by the Commission, Commission Regulation (EC) No 718/2007 of 12 June 2007 implementing Council Regulation (EC) No 1085/2006 establishing an instrument for pre-accession assistance (IPA) (OJEU 29.7.2007 l 170/1), published here:

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2007:170:0001:0066:EN:PDF

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Financial engineering

The Commission offers a web page on financial engineering with various combinations aiming at promoting development in EU regions:

http://ec.europa.eu/regional_policy/funds/2007/jjj/index_en.htm


Ralf Grahn