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| 21.7.2023 | EN | Official Journal of the European Union | C 257/12 |

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Opinion of the European Committee of the Regions on the mid-term review of the Multiannual Financial Framework: the local and regional perspective

(2023/C 257/03)

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| | | | | --- | --- | | Rapporteur: | Thomas HABERMANN (DE/EPP), Head of Rhön-Grabfeld District Council | |

POLICY RECOMMENDATIONS

THE EUROPEAN COMMITTEE OF THE REGIONS (CoR)

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| | 1. | notes that the Russian war of aggression in Ukraine and the continued occupation of Ukrainian territories, in breach of international law, is not only causing immense destruction and suffering on the ground, but is also having a tangible impact on the European Union, its Member States and local and regional authorities in both rural and urban areas; |

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| | 2. | further notes that the European Union has not yet fully recovered from the COVID-19 pandemic, which already added a financial burden, particularly for local and regional authorities; |

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| | 3. | points out that the existing Multiannual Financial Framework (MFF) was created before the start of the war in Ukraine, the COVID-19 pandemic, high energy costs, and high inflation. Two years after its adoption, it is clear that the current framework does not offer a sufficient response to the current crises; |

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| | 4. | in this connection welcomes the fact that the Interinstitutional Agreement accompanying the Multiannual Financial Framework obliges the European Commission to present an MFF mid-term review, and calls for a comprehensive assessment of its scope, including its budgetary ceilings and its flexibility measures and how it functions; |

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| | 5. | underlines the importance of the horizontal principles that underpin the MFF and all related EU policies, in particular with regard to delivering on the Union’s climate and biodiversity targets and promoting gender equality; insists that the revision must keep these principles at the heart of the MFF and deliver on the Union’s commitment to ensuring an equitable, resilient, sustainable and socially fair recovery for all, including the implementation of the revised 2030 framework for Union climate, energy and environmental targets with the objective of making the EU climate neutral by 2050; |

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| | 6. | stresses that the design of the MFF has a significant impact on developments in local and regional authorities and that a large portion of European funds are directly used to strengthen local and regional authorities; |

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| | 7. | reiterates the importance of EU cohesion policy in achieving economic, territorial and social cohesion in all regions. Without this key pillar of European support, the success of the European single market would be jeopardised. Commits to working on the Cohesion Alliance to ensure that the future Multiannual Financial Framework provides for a strong, improved cohesion policy that continues to play a central role in Europe; |

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| | 8. | notes that low absorption rates of EU cohesion funds in some countries are mainly due to the late approval of programmes and the fact that a number of different EU support programmes have different rules and diverging deadlines for commitments and payments run in parallel (e.g. the Recovery and Resilience Facility, REACT-EU, the Just Transition Fund (JTF), Structural and Investment Funds), along with the excessively short planning and implementation periods for retroactively eligible crisis intervention measures; calls for aligning the rules of different shared-management funds under the common Provisions Regulation and underlines that current low absorption rates in some programmes cannot be used as a benchmark for reducing the budget allocated to cohesion funds; |

An MFF that supports investment at local and regional level

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| | 9. | stresses that high inflation, the cost of housing, caring for and integrating refugees, and the sharp rise in energy costs also pose major challenges for local and regional authorities. Even in Member States that are more robust economically, local and regional authorities are often no longer able to make the necessary investments by themselves. In addition, the scarcity of raw materials, skills shortages, and unstable supply chains pose further challenges that threaten economic stability in Europe; |

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| | 10. | points out that over half of the resources of the JTF come from the NextGenerationEU (NGEU) instrument and have a shorter duration to just 2023; notes with concern that, as a result, there is enormous investment pressure in the early years of the entirely new JTF that does not exist for the established cohesion policy funds; calls for the investment deadlines for JTF resources from NGEU to be extended (for example by extending the commitment deadlines), so as to avoid jeopardising the outflow of resources and to ensure that JTF resources are used in their entirety for effective and sustainable projects in line with the objectives of the European Green Deal; |

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| | 11. | points out that, additionally, a large proportion of the rules governing their implementation, adopted to achieve common European objectives, require significant investment at local and regional level, thus directly affecting sub-national budgets. This applies, for example, to the EU’s digital targets, the European Green Deal, and the ‘Fit for 55’ package, which requires more than half of the necessary investments to be made at local and regional level; |

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| | 12. | calls for the long overdue phase-out of harmful subsidies and for consistency between all EU funds and programmes in the MFF post 2027; insists that projects and programmes which are inconsistent with the objective of limiting global warming to under 1,5 oC, or with the objective of halting and reversing biodiversity loss, should not be eligible for support in the next MFF; |

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| | 13. | warns that local and regional authorities are overwhelmed by their existing investment obligations, due to the poor budgetary situation in many areas, and fears that the overall shrinking of public investment will seriously jeopardise the achievement of pan-European objectives, such as those of the European Green Deal, and hamper the prosperity of citizens and the overall economic potential of regions and municipalities; |

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| | 14. | considers, therefore, that strengthening the MFF alone, without at the same time strengthening the investment capacity of local and regional authorities, is not constructive in this context; also believes it to be important, in this context, to promote territorial development strategies (CLLD/ITI), where necessary through mandatory use, in order to involve the levels of governance closest to citizens in the planning, consultation, implementation and management of the funds; |

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| | 15. | notes that, while European funds can make a significant contribution to supporting sub-national authorities, they will not be sufficient in all cases to enable the necessary investments at local and regional level in order to implement EU rules; |

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| | 16. | points out, in this connection, that in most Member States there are no mechanisms whereby higher levels of government fully and automatically compensate local and regional authorities for the cost of implementing EU rules; |

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| | 17. | believes that a strong, competitive and sustainable European Union can only be achieved if the budgets of all levels of government have sufficient, interconnected and complementary resources; therefore, calls for a real review of the MFF that takes the new challenges on board and provides additional resources to address them; |

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| | 18. | considers that, when new EU legislative proposals are brought forward, the Commission should estimate the cost of implementation for the level responsible, consider whether compensation mechanisms exist at national level and determine the extent to which MFF resources will help to offset those costs; calls on the Commission and the Member States to ensure that adequate resources are available to offset the expenditure in the event of an investment gap, in order to ensure consistent development across the board; |

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| | 19. | in order to assess these aspects, calls on the European Commission to carry out a comprehensive territorial impact assessment, which should involve both the Member States and regional hubs, before drafting the rules; |

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| | 20. | emphasises that the 8th Cohesion Report calls for strengthening territorial impact assessments (TIAs) and rural proofing, so that the needs and specificities of different EU territories are better taken into account; refers in this respect to the CoR opinion Do no harm to cohesion — A cross-cutting principle contributing towards cohesion as an overall objective and value of the EU [(1)](#ntr1-C_2023257EN.01001201-E0001); calls on the budgetary authority to use the MFF review to add financial means to finance those TIAs. |

An MFF that strengthens the European Union and makes it more resilient

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| | 21. | notes that, in recent years, when a crisis has arisen, the responsiveness of the European Union has been constrained due to lengthy discussions on budgets, the financing of new measures and the insufficiency of available budgetary flexibility instruments; stresses its conviction that the MFF mid-term review was agreed upon to adjust those unforeseeable new challenges; |

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| | 22. | considers that the Multiannual Financial Framework is no longer up-to-date and needs to be revised; |

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| | 23. | points out that the MFF and own resources are interlinked; urges the Council and the Commission to respect the roadmap towards the introduction of new own resources, as agreed in the legally binding Interinstitutional Agreement (IIA) signed in December 2020, which is necessary to at least cover the repayment of NextGenerationEU; |

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| | 24. | welcomes the fact that the European Commission will present proposals for additional genuine own resources in 2023; underlines that this new revenue should enter the EU budget as non-assigned revenue and not only serve to refinance NextGenerationEU debt, but also, in the long term, strengthen the capacity of the EU, the Member States and local and regional authorities to respond to crises in the meaning of Article 174 of the Treaty on the Functioning of the European Union (TFEU). It should also help address, under primary law and with full consideration for the Member States’ competences, pressing policy issues in an economic environment marked by inflation and high energy prices, and reduce the EU’s dependence on GNI-based resources. The reform of the own resources system should examine the impacts on municipalities and regions as part of territorial impact assessments, take full account of the relevant EU Treaty provisions and further limit the EU’s dependency on existing GNI-based own resources; |

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| | 25. | points out that, before any new own resources are collected, their impact on local and regional authorities, businesses and households in the EU should be examined. In particular, existing systems of taxation at national, regional and local level must be taken into account in order to avoid competition between the European and national, regional or local levels, or even double taxation. In this context, the Committee also refers to the CoR opinion on The next generation of own resources for the EU budget [(2)](#ntr2-C_2023257EN.01001201-E0002); |

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| | 26. | reiterates the call made in its opinion on Making ETS and CBAM work for EU cities and regions [(3)](#ntr3-C_2023257EN.01001201-E0003) to allocate a share of new revenue directly to the level responsible for implementing the relevant EU rules; |

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| | 27. | believes that the MFF should contribute to decentralisation by strengthening the resilience and investment capacity of local and regional authorities on the ground. Pooling capacities at European level must not come at the expense of the crisis resilience and responsiveness of sub-national authorities; |

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| | 28. | urges the European Commission to undertake an analysis of possible models of involvement in negotiating, distributing, programming and implementing cohesion policy funds (in particular the CPR funds and the EAFRD), in order to optimise the participation of regional and local authorities in every step of 2028–2034 European funds management, and use the lessons learnt from the first half of the MFF to execute this analysis; |

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| | 29. | suggests that a central, comprehensive crisis response reserve should be set up in the MFF, which, if not used by the end of the budget period, should be used under the relevant fund to strengthen crisis prevention at the local and regional level, with longer implementation periods for measures that have already been programmed; |

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| | 30. | reiterates that Ukraine’s reconstruction is a European necessity and a moral duty, which will require Europe-wide coordination of direct support actions by the Member States and additional resources beyond the current EU multiannual financial framework (MFF) [(4)](#ntr4-C_2023257EN.01001201-E0004); the latter could be provided by, among other things, further developing the Multi-agency Donor Coordination Platform for Ukraine, which is supported by the Commission. The reconstruction strategy should build as much as possible on the methodology of the EU’s cohesion policy in order to best prepare Ukraine for the path to EU accession and approximation with the EU acquis. |

An MFF that provides tailored funding for implementing European measures

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| | 31. | notes that, in the past, the European Commission has regularly proposed new measures and, with regard to funding, made a blanket reference to regional policy or the Recovery and Resilience Facility (RRF), without checking whether the funds are available to finance the measures on the ground on the basis of the programmes or plans; |

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| | 32. | stresses, in this connection, that new tasks for the European Union also require new resources and welcomes the adoption of the interinstitutional agreement between the European Parliament, the Council and the Commission on new own resources, including a roadmap towards the introduction of new own resources. In addition, when new EU policies are introduced, the European Commission is asked to consider whether funds are available in the Multiannual Financial Framework for this purpose and whether these funds can be used in all Member States to implement the rules. With regard to regional policy funds, careful consideration should be given to whether existing funds have already been committed elsewhere or whether using them requires adjustments to be made to the operational programmes; |

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| | 33. | calls for the MFF to be aligned with EU policies and to provide the necessary financial means to implement those; stresses that the MFF review should be used to adjust shortcomings in the current multiannual budget; |

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| | 34. | highlights that the European Commission must ensure that the Union lives up to its international climate commitments in financial terms and provide funding to international climate finance in line with pledges made, and in particular to provide funding for the Loss and Damage Fund agreed during the COP27 and the relevant programmes under Neighbourhood Development and International Cooperation Instrument (NDICI)-Global Europe; |

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| | 35. | points out that, since its creation almost thirty years ago, the CoR has been underfunded compared to other EU bodies with a similar remit under primary law [(5)](#ntr5-C_2023257EN.01001201-E0005); nevertheless, it has effectively promoted better regulation and territorial impact assessment measures and has strengthened European democracy through its elected local and regional representatives; |

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| | 36. | points out that the CoR’s institutional budget in 2022 constituted less than 1 % of line 7 of the EU budget (‘European Public Administration’) [(6)](#ntr6-C_2023257EN.01001201-E0006), and that investing in the CoR is about delivering on the EU’s political priorities, bearing in mind that 70 % of EU rules are implemented at local and regional level and that local and regional authorities are responsible for, on average, half of public investment, one third of public expenditure, and a quarter of tax revenues; |

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| | 37. | stresses, therefore, that more use should be made of taxpayers’ money via the administrative chapter of the MFF (budget heading 7), in order to restore trust and enhance dialogue with citizens, in particular through the two EU political assemblies, composed of democratically elected members, namely the European Parliament and the European Committee of the Regions, taking into account the high level of trust that citizens have in their regional and local decision-makers and the proposals of the Conference on the Future of Europe [(7)](#ntr7-C_2023257EN.01001201-E0007); |

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| | 38. | regrets that the European Commission’s consolidated proposal for the 2024 budget under heading 7 of the MFF (‘European Public Administration’) does not include the CoR’s 2024 budgetary estimates, adopted by a large majority on 15 March 2023 (the ‘Tapping into the local and regional authorities’ potential to strengthen the EU’ project or ‘Cinderella’ project), especially considering the exceptional conjuncture of the approaching 2024 European elections, gains from the Conference on the Future of Europe’s outcomes and lessons learned from multiple crises with the local and regional government levels ever more on the frontlines; |

An MFF that promotes economic, social and territorial cohesion

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| | 39. | calls for the overall Multiannual Financial Framework to be aligned with the objectives of Article 174 of the TFEU and to contribute to overall economic, social and territorial cohesion through a balanced distribution of resources. In doing so, it must also be ensured that small municipalities have equal access to funding, especially through streamlined application procedures and targeted support by the European Union; |

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| | 40. | points out that the objectives of European cohesion policy can only be achieved if resources for long-term investment are available. Cohesion policy has proved a useful tool for providing an immediate response to recent crises, thanks, among other things, to the agility and effectiveness of the principle of partnership and multilevel governance and the existence of a specialised ecosystem of European fund managers based on the ground. However, it notes that, although there must be a degree of flexibility, the funds must not be used to respond directly to crises, as has been done in recent months and years. There is a need for a crisis-proof, protected budget item that allows for predictable and long-term investments for managing authorities and beneficiaries of funding; |

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| | 41. | stresses that it is of the utmost importance for the cohesion national envelopes to be available for all Member States as soon as possible in accordance with the legal requirements, in order not to hinder the implementation and to provide a level playing field for all beneficiaries; |

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| | 42. | calls for all funding to continue to be distributed with full respect for the partnership principle. The funds can be most beneficial if the relevant partners are involved in identifying challenges on the ground. In order to ensure full involvement, increase legal certainty for managing authorities, and reduce administrative burdens, the European Commission is asked to review the ‘European code of conduct on partnership in the Framework of the European Structural and Investment Funds’ [(8)](#ntr8-C_2023257EN.01001201-E0008) as soon as possible; |

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| | 43. | considers that the shared management system has proved successful in the case of the Structural Funds and should be maintained in the future. Newly created and existing funds should also follow this system and, if possible, be distributed under decentralised management; |

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| | 44. | in this connection, criticises the fact that funds for post-crisis recovery (NextGenerationEU) are not formally part of the budget, and considers that this structure makes it difficult to use resources in a consistent way. All current and future funds should be fully incorporated into the budget; |

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| | 45. | calls for efforts to be stepped up to combat disparities at local and regional level in Europe, which have been further exacerbated by the various crises; |

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| | 46. | stresses that many regions with a strong industrial base are undergoing a deep structural transformation; calls, in this connection, for future investment and cohesion policy to support the transformation and to provide targeted support to the regions concerned in shaping the green, social, demographic and digital transitions, respecting the ‘do no harm to cohesion’ principle, whereby ‘no action should hamper the convergence process or contribute to regional disparities’; |

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| | 47. | In this respect, in the process of drafting and implementing the transition fund, not only those territories which face the most challenges should be taken in consideration, but also those that have already, at some level started their transition. Also, if the local and regional authorities (LRAs) are not involved properly in this process, there is a risk of an unbalanced allocation of funds, without prioritising the NUTS 3 level; |

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| | 48. | calls on the European Commission to provide budgetary resources for the just transition of automotive regions, at the latest when designing the next MFF starting in 2028, but ideally as early as at the mid-term review of the current MFF. In this connection, the regions must be allowed flexibility in the use of funding, as the challenges vary widely; |

An MFF that makes the most efficient use of existing resources

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| | 49. | therefore calls on the European Commission to examine how existing funds could be used in the most efficient way. Requirements at European level should ensure that not only the budget of the European Union, but also local and regional budgets, can be used as efficiently as possible and that the use of resources is not made difficult by unnecessary bureaucracy; |

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| | 50. | takes the view that EU rules and their implementation nationally in the Member States, taking full account of the principles of subsidiarity and local self-government, should, wherever possible, give local and regional authorities broad discretion, in order to allow for practical, place-based approaches; |

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| | 51. | points out, moreover, that, particularly in the case of State aid and procurement law, the regulatory density and complexity of the legal provisions are high. A significant proportion of local and regional authorities are no longer in a position to carry out a full legal and technical assessment of the projects themselves and are obliged to seek legal and technical advice from third parties. The resources allocated to this purpose cannot be used for investments; this significantly reduces the ability of local and regional authorities to invest; calls on the legislative authority to ensure simplification measures and stresses the need to avoid gold-plating; funding is also requested to improve regional and local administrative capacity; |

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| | 52. | also notes in this context that lengthy procurement procedures make it much more difficult to implement projects within the project or funding period; |

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| | 53. | in order to strengthen the competitiveness of the EU and its local and regional authorities, calls for EU State aid rules to be adapted in order to ensure a level playing field for investment in future technologies and their production for all regions; |

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| | 54. | considers that further possibilities for simplifying applications and administration should also be explored in the area of the Regulations on the Structural Funds; proposes that the administrative burdens be identified by the Commission and the Member States, taking into account the characteristics, differences and objectives of the regions when defining the aid. For example, the consistency between the different funds at European level and their interaction with national and regional funding should be improved. It also highlights the particular situations of the outermost regions, rural areas and areas with natural handicaps and/or demographic challenges, and calls for exceptions to be made from certain obligations which, in most cases, can only be effectively discharged by beneficiaries with greater budget, equipment and population. In addition, provision should be made for the flexible use of the funds in the long term, as was possible in response to the COVID-19 pandemic. On the one hand, this would reduce administrative burdens and, on the other hand, simplification would serve to benefit smaller municipalities and businesses in particular; |

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| | 55. | considers that a possible EU ‘sovereignty fund’, coming in response to the United States’ Inflation Reduction Act, should support European companies through guarantees, similar to the European Fund for Strategic Investments (EFSI), by leveraging the released budgetary resources, but with an improved geographical balance which considers less developed areas in a fair and flexible way. |

Brussels, 24 May 2023.

The President of the European Committee of the Regions

Vasco ALVES CORDEIRO

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[(1)](#ntc1-C_2023257EN.01001201-E0001)  COTER-VII/026 (see page 16 of this Official Journal).

[(2)](#ntc2-C_2023257EN.01001201-E0002)  Opinion of the European Committee of the Regions on the next generation of own resources for the EU budget ([OJ C 79, 2.3.2023, p. 99](http://publications.europa.eu/resource/oj/JOC_2023_079_R_TOC)).

[(3)](#ntc3-C_2023257EN.01001201-E0003)  Opinion of the European Committee of the Regions — Making ETS and CBAM work for EU cities and regions ([OJ C 301, 5.8.2022, p. 116](http://publications.europa.eu/resource/oj/JOC_2022_301_R_TOC)).

[(4)](#ntc4-C_2023257EN.01001201-E0004)  Opinion of the European Committee of the Regions — The role of EU cities and regions in rebuilding Ukraine ([OJ C 498, 30.12.2022, p. 12](http://publications.europa.eu/resource/oj/JOC_2022_498_R_TOC)), paragraph 3.

[(5)](#ntc5-C_2023257EN.01001201-E0005)  Strengthening EU Democracy: unleashing the potential of a million local and regional politicians, European Committee of the Regions, p. 6.

[(6)](#ntc6-C_2023257EN.01001201-E0006)  154th CoR plenary session, 15.3.2023 — Appendix 1, Detailed CoR draft budget 2024, COR-2023-00005-01-00-NB-REF, p. 9.

[(7)](#ntc7-C_2023257EN.01001201-E0007)  Conference on the Future of Europe (CoFoE), Report on the Final Outcome, May 2022, including strengthening representative democracy ‘not only during European elections, but ahead of national, regional and local elections as well’ (CoFoE proposal 38.4), involvement in health union-related issues (CoFoE proposal 10.2) and the establishment of local youth councils (CoFoE proposal 36.8).

[(8)](#ntc8-C_2023257EN.01001201-E0008)  Commission Delegated Regulation (EU) No 240/2014 of 7 January 2014 on the European code of conduct on partnership in the framework of the European Structural and Investment Funds ([OJ L 74, 14.3.2014, p. 1](http://publications.europa.eu/resource/oj/JOL_2014_074_R_TOC)).

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