What Is Cohesion policy?
Cohesion policy refers to the European Union's (EU) primary public finance strategy aimed at strengthening economic, social, and territorial cohesion across its member states and regions. It is a key component of the EU's broader economic development agenda, designed to reduce regional disparities in income, wealth, and opportunities. The policy channels substantial investment into projects that foster economic growth, job creation, business competitiveness, and sustainable development throughout the European Union. Cohesion policy utilizes various financial instruments, primarily the European Structural Funds and the Cohesion Fund, to achieve its objectives.
History and Origin
The origins of Cohesion policy can be traced back to the 1957 Treaty of Rome, which founded the European Economic Community and mandated efforts to promote "harmonious development" among its territories24. Early initiatives included the establishment of the European Social Fund (ESF) in 1957 to support employment, and the European Regional Development Fund (ERDF) in 1975 to finance regional projects23. A significant reform in 1988 integrated these and other funds into an overarching cohesion policy, introducing core principles such as focusing on less-developed regions, multi-annual programming, strategic orientation of investments, and partnership with local and regional stakeholders21, 22. The Maastricht Treaty in 1993 further solidified the policy by introducing the Cohesion Fund, specifically targeting member states with a Gross National Income (GNI) per capita less than 90% of the EU average, and establishing the principle of subsidiarity19, 20. Since then, Cohesion policy has evolved through various programming periods, consistently representing a significant portion of the EU budget, often exceeding one-third of the total.
Key Takeaways
- Cohesion policy is the European Union's main investment policy, targeting economic, social, and territorial disparities.
- It is funded primarily through the European Structural and Investment Funds (ESIF), including the European Regional Development Fund (ERDF) and the European Social Fund (ESF+), and the Cohesion Fund.
- The policy aims to foster economic growth, job creation, social inclusion, and sustainable development across all EU regions.
- Funds are managed jointly by the European Commission and member states through multi-annual programs.
- Cohesion policy has continuously adapted to new challenges, such as globalisation, climate change, and various economic crises.
Interpreting Cohesion policy
Cohesion policy is interpreted as a dynamic framework that adapts to the evolving needs and challenges of the European Union. Its application is guided by a set of policy objectives that are periodically reviewed and refined. For the 2021-2027 period, for instance, these objectives include a smarter Europe (focusing on innovation and digitalization), a greener Europe (emphasizing climate action and the circular economy), a more connected Europe (improving mobility and digital networks), a more social Europe (promoting social inclusion and education), and a Europe closer to citizens (supporting local development)17, 18. The effectiveness of Cohesion policy is often assessed not just by the amount of funds absorbed by member states, but also by its tangible impact on improving quality of life, reducing unemployment, fostering environmental sustainability, and enhancing regional competitiveness.
Hypothetical Example
Consider a hypothetical region within an EU member state, "Region Alpha," which has experienced declining traditional industries and faces challenges such as high youth unemployment and a lack of modern infrastructure development. Under the Cohesion policy framework, Region Alpha's national and regional authorities, in partnership with the European Commission, would develop an "Operational Programme." This program might allocate funds from the European Regional Development Fund (ERDF) to establish technology incubators and provide training in digital skills for young people, aiming to diversify the local economy. Simultaneously, funds from the Cohesion Fund could be directed towards upgrading transportation networks and investing in renewable energy projects, thereby improving regional connectivity and environmental performance. Through such targeted interventions, Cohesion policy seeks to revitalize the region and improve its overall socio-economic outlook.
Practical Applications
Cohesion policy is applied across a vast array of sectors and areas within the EU, reflecting its broad objectives of fostering balanced development. Its practical applications include direct funding for research and innovation initiatives, support for small and medium-sized enterprises (SMEs) to enhance their competitiveness, and substantial investment in digital technologies16. The policy also plays a critical role in developing sustainable transport and energy networks, promoting human capital development through education and training programs, and supporting measures for poverty reduction and social inclusion14, 15. Member states, in collaboration with the European Commission, use these funds to implement national and regional strategies. For example, the OECD highlights that the policy provides substantial funding, nearly €400 billion from EU funds for 2021-2027, complemented by national co-financing, to support a diverse range of beneficiaries from local authorities to SMEs and research institutions.
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Limitations and Criticisms
Despite its significant budget and objectives, Cohesion policy faces various limitations and criticisms. One recurring critique centers on the complexity of its rules and procedures, leading to administrative burdens and absorption challenges for member states. 11, 12Some analyses suggest that while Cohesion policy has a positive impact on regional output and growth, it sometimes "targets the wrong places and reaches the wrong people," failing to significantly reduce overall regional disparities or primarily benefiting those at the upper end of the income distribution. 10There are debates about whether the policy sufficiently emphasizes economic growth or has become overly broad in its mission, leading to a diffusion of its impact. 8, 9Furthermore, the effectiveness can be influenced by "conditioning factors" such as administrative capacity and the quality of governance within the recipient regions, meaning the impact is not uniform across all areas. 6, 7Calls for reform often suggest a sharper focus on truly disadvantaged areas and improved funding access for smaller entities.
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Cohesion policy vs. Regional policy
While often used interchangeably, "Cohesion policy" and "Regional policy" in the European Union context refer to the same overarching framework. Regional policy is the broader term for the EU's efforts to address geographical imbalances and promote development across its regions. Cohesion policy is the specific name given to the comprehensive set of instruments and objectives designed to implement this regional policy, with a focus on strengthening economic, social, and territorial cohesion. Essentially, Cohesion policy is the primary mechanism and formal designation for the EU's fiscal policy initiatives aimed at reducing regional disparities and fostering balanced development, differentiating it from broader concepts like monetary policy.
FAQs
What are the main objectives of Cohesion policy?
The main objectives of Cohesion policy are to strengthen economic, social, and territorial cohesion across the EU by reducing regional disparities. This includes fostering economic growth, creating jobs, promoting social inclusion, and ensuring sustainable development.
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How is Cohesion policy funded?
Cohesion policy is primarily funded through the European Structural and Investment Funds (ESIF), which include the European Regional Development Fund (ERDF), the European Social Fund Plus (ESF+), and the Cohesion Fund. These funds are supplemented by co-financing from the national budgets of member states.
Which regions benefit most from Cohesion policy?
While Cohesion policy targets all EU regions, a significant portion of the funding is directed towards "less developed regions" where the Gross Domestic Product (GDP) per capita is below a certain threshold. The Cohesion Fund, for example, is specifically reserved for member states whose gross national income per capita is less than 90% of the EU average.
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Does Cohesion policy only focus on economic aspects?
No, Cohesion policy has a multifaceted approach. While economic development is central, it also strongly emphasizes social objectives, such as social inclusion, poverty reduction, and human capital development through education and training. Additionally, environmental sustainability is a key priority, with significant investments in green technologies and climate action.1, 2