EUROPEAN COMMISSION Brussels, 31.5.2018 COM(2018) 391 final 2018/0213(COD) Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the establishment of the Reform Support Programme {SEC(2018) 280 final}

{SWD(2018) 310 final}

{SWD(2018) 311 final}



EXPLANATORY MEMORANDUM 1.CONTEXT OF THE PROPOSAL This proposal provides for a date of application as of 1 January 2021 and is presented for a Union of 27 Member States, in line with the notification by the United Kingdom of its intention to withdraw from the European Union and Euratom based on Article 50 of the Treaty on European Union received by the European Council on 29 March 2017. •Reasons for and objectives of the proposal Structural reforms are changes that modify - in a lasting way - the structure of economy and the institutional and regulatory framework in which businesses and people operate. They often aim at tackling obstacles to the operation of the drivers of growth by, for example, reorganising the markets for labour, products and services and financial markets, thereby encouraging job creation, investment and productivity. They can also aim at improving the efficiency and quality of the public administration and of the services and benefits offered by State to its citizens. If well-chosen and implemented, structural reforms can accelerate the process of upward social and economic convergence among the Member States, both inside and outside the euro area, and strengthen the resilience of their economies. The effects of such convergence and strengthening of resilience are expected to lead to greater prosperity and to smooth and stable functioning of the Economic and Monetary Union (EMU) as a whole. Effective implementation of structural reforms is necessary to enhance cohesion, raise productivity, create jobs, encourage investment and ensure sustainable growth. Europe’s economy is growing at its fastest pace in a decade, supported by record high employment, recovering investment and improved public finances. The current Union-wide economic situation is relatively positive, which provides a window of opportunity to put in place much needed reforms. However, implementation of reforms has been advancing slowly and unevenly across Member States, and it has not been satisfactory across all policy areas, leading to adverse impacts on convergence and on the resilience of the economies of the European Union Member States and therefore of the Union as a whole. In that context, making progress on the implementation of reforms in non-euro-area Member States on their way to joining the euro area could have positive impacts on the euro area as a whole. Therefore, implementation of reforms by non-euro-area Member States, which are taking steps to adopt the euro, deserves particular attention. One reason for the slow implementation of reforms is low administrative capacity. Another reason is that the benefits of structural reforms often materialise only over the long term, while their economic, social and political costs are often incurred in the short term. National governments might therefore refrain from carrying out some reforms due, for instance, to insufficient administrative capacity to conduct reforms, high political costs in the short term or adverse effects on some segments of the population. Governments that do embark on reforms sometimes find it difficult to see the reforms through to the end because the duration of an electoral cycle is often shorter than the time needed for the implementation of major reforms. As a consequence, necessary reform efforts may be delayed, abandoned or even reversed. The Juncker Commission, building upon the vision set out in the Five Presidents' Report, has focussed the Commission's priorities in the European Semester process on the "virtuous triangle" of boosting investment, pursuing structural reforms, and ensuring responsible fiscal policies. To promote structural reforms, President Juncker's 2017 State of the Union Address, together with the Reflection papers on the deepening of the Economic and Monetary Union and the future of the Union's finances, suggested building on the Commission's Structural Reform Support Programme (SRSP) and proposed a dedicated instrument, the Reform Delivery Tool, to provide financial incentives to Member States to carry out reforms. Achieving more convergence towards resilient economic structures was also highlighted as being equally important for those Member States preparing to join the euro area. Those political orientations materialised in a Commission Communication on new budgetary instruments for a stable euro area within the Union framework (6 December 2017). It proposed the creation – under the post-2020 Multiannual Financial Framework (MFF) – of a new reform delivery tool to support the implementation of reforms identified in the context of the European Semester and a follow-up programme to the SRSP, which would also include a dedicated convergence facility to support preparation for euro-area membership. The Commission's Communication on a new, modern MFF post-2020, prepared ahead of the Informal Leaders' meeting of 23 February 2018, confirmed that intention by announcing that the reform delivery tool and the convergence facility would need to provide strong support and incentives for a broad range of reforms across Member States. It also indicated that there would be a budget line for all instruments in the order of at least EUR 25 billion over a seven-year period. Lastly, the Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions "A Modern Budget for a Union that Protects, Empowers and Defends - The Multiannual Financial Framework for 2021-2027" of 2 May 2018 confirmed that choice. It announced a new, strong Reform Support Programme, which would offer technical and financial support for reforms at national level with an overall budget of EUR 25 billion. The new programme will be separate from but complementary to the future Union funds as defined in Regulation (EU) XXX/xxx (CPR successor). Against that background, the Commission is proposing a new Reform Support Programme (the Programme), which includes three separate complementary instruments: (i) the reform delivery tool, in the form of a financial support instrument; (ii) a follow-up programme to the SRSP, in the form of a technical support instrument; and (iii) a convergence facility, to provide specific and targeted support to non-euro-area Member States (also referred to as a "convergence facility"). The Programme thus aims to support Member-State governments and public authorities, upon their request for technical support or upon their submission of proposals for reform commitments, in their efforts to design and implement growth-sustaining structural reforms. The Programme is intended to contribute to the overall objective of enhancing cohesion, competitiveness, productivity, growth, and employment. It could also have a positive impact on the realisation of the European Pillar of Social Rights. For those purposes, it should provide sufficient financial incentives for the accomplishment of reforms of a structural nature and technical support to strengthen the administrative capacity of the Member States in relation to challenges faced by institutions, governance, public administration, and economic and social sectors. With that objective in mind, targeted technical support and financial incentives will be provided to all Member States, including – in the context of the convergence facility – those Member States whose currency is not the euro and which have taken demonstrable steps towards adopting the single currency within a given time-frame. •Consistency with existing policy provisions in the policy area The Programme will be consistent with existing policies carried out under the Union funds and other Union programmes. Furthermore, the Programme builds up on the current experience of the SRSP. Under the current MFF and the existing sectoral legislation, several instruments are available at Union level to support the implementation of structural reforms. On the policy side, the policy recommendations provided by the Union under the European Semester help to identify reform priorities and reach political agreement on thereon with Member States. In addition, the SRSP provides technical support to Member States for the preparation, design and implementation of structural reforms, while the Union funds programmes finance investment-project-related elements in the policy areas addressed by the Union funds. The legal framework of the Union funds requires thematic concentration of funding and sets a number of enabling conditions prior to the disbursement of funds. While it is foreseen that the link between the Union funds and the European Semester will be further strengthened in the new MFF and although those actions under the Union funds are instrumental for achieving the cohesion policy objectives and ensuring the effectiveness of these funds, they are not necessarily sufficient to address the obstacles to more rapid implementation of structural reforms in Member States.

Reform Delivery Tool The Programme, as an instrument for providing financial contributions to Member States, will provide financial incentives for the implementation of reforms in Member States, while ensuring consistency with actions financed under other existing Union programmes. To date, funds to support the implementation of investment-related actions linked to structural reforms in Member States are mainly available through the Union funds. However, while the Union funds can provide support to the investment components of some structural challenges relevant to cohesion policy, they are not intended for promoting the design and implementation of structural reforms to tackle challenges in all policy areas identified in the European Semester in their entirety. In addition, the Union funds cannot finance reforms that are purely regulatory and have no implementation or investment costs. Many of the structural challenges facing Member States cannot be addressed solely through investments or strict technical implementation of a programme; they may require a complex mix of policy actions and legislation, investments and improvements in the governance of institutions and systems. Structural reforms may also involve high political costs in the short term, which can prevent or slow down their implementation. In that respect, financial incentives from the Union budget may help overcome such obstacles and, combined with technical support or on a standalone basis, may help ensure political ownership of the reforms. A more in-depth dialogue between the Commission and the competent national authorities may encourage Member States to design and implement a comprehensive set of reforms. The Reform Support Programme, as an instrument to provide financial support, will allow for the provision of such financial incentives and it is, therefore, consistent with the measures under other Union financing programmes. Technical support instrument The Programme, as an instrument to provide technical support, allows the Commission to support Member-State authorities in their efforts to design reforms according to their own priorities and enhance their capacity to develop and implement reform policies and strategies, as well as benefitting from good practices and examples of peers. The technical support instrument builds on the success of the SRSP, which has experienced demand as high as four (in 2017) and five (in 2018) times its annual available budget in the two selection rounds during its implementation so far. It focuses on the provision of tailor-made support and expertise on the ground, to ensure that the Member States have the necessary institutional and administrative capacity to implement reforms. To that end, it aims to accompany the national authorities of the requesting Member States throughout the reform process or in defined stages or different phases of that process. The technical support instrument under the Programme, designed as a continuation of the existing SRSP, is consistent, coherent and complementary to the existing resources for capacity building and technical assistance, which are available within other Union financing programmes. The technical support adds value to the existing assistance provided by the various sectoral Union programmes and the actions carried out under the Union funds, since it offers a country-specific perspective, while supporting the most important actions undertaken in Member States in line with the key policy objectives of the Union. Convergence facility The Programme, as a convergence facility for preparation for euro-area membership, will allow the Commission to cater for the specific needs of non-euro-area Member States that embark on structural reforms, by offering additional tools for making their economies and social structures more resilient to shocks and better preparing them for euro-area membership. The convergence facility will come on top of the reform delivery tool that is available to all Member States. Currently, there are no instruments that provide direct financial incentives for the implementation of structural reforms in all Member States, let alone non-euro-area Member States. While Member States that are not in the euro area benefit from the Union funds, the latter are not intended to address major structural reforms that would underpin economic resilience and thereby help such Member States prepare comprehensively for future membership in the euro area. Through the provision of targeted support for non-euro-area Member States that have taken demonstrable steps to adopt the single currency within a given time-frame, the Reform Support Programme is expected to accelerate the process of convergence in those Member States, thereby contributing to the fulfilment of the convergence criteria and to the resilience of the euro area as a whole. As regards consistency with other provisions and policies, the Programme provides for complementarity, synergies, coherence and consistency with other Union programmes and policies at regional, national, Union and international levels, notably by complementing the policy guidance provided under the European Semester and by helping to leverage the use of the Union funds. The Commission will ensure that the actions proposed for implementation under the Programme are complementary to and do not overlap with other Union programmes and funds (the Union funds in particular), based on clear demarcation lines. In addition, coordination for all three instruments with respect to other Union programmes and Union funds will continue to be ensured via the governance of the various instruments within the internal working arrangements of the Commission. In particular, this will be achieved through the already-existing coordination mechanism involving representatives of the Commission services concerned. Decisions to provide support to a Member State will, inter alia, take into account the existing actions and measures financed by the Union funds and programmes. The coordination mechanism will be strengthened to reflect the increased need for complementarity, synergy, coherence and consistency among several programmes under the MFF, in particular with a view to, on the one hand, carrying out the process of programming of the Union funds under shared management, and, on the other hand, selecting reforms under the Programme, so as to maximise the efficiency and effectiveness of the Union actions and resources. As regards financial incentives, the fact that the reforms benefitting from financial contributions from the Programme will be identified in the context of the existing European Semester process will be instrumental for ensuring additionality and for avoiding the provision of support to reforms that would have happened in any case. In addition, the monitoring of the implementation of those reforms within the European Semester will provide additional safeguards to that effect. •Consistency with other Union policies The proposal is consistent with and provides for complementarity and synergies with the other Union policies such as those pursued through the European Semester, which focuses on the "virtuous triangle" of boosting investment, pursuing structural reforms, and ensuring responsible fiscal policies. Furthermore, the Programme builds upon the proposals made in the Reflection Paper on the Deepening of the Economic and Monetary Union, and is in line with the 2017 State of the Union address (and the annexed Letter of Intent) made by President Juncker to the European Parliament on 13 September 2017, which outlined proposals for the deepening of the Economic and Monetary Union. The proposal can also contribute to the realisation of the European Pillar of Social Rights. The reform delivery tool and the convergence facility were proposed by the Commission in its Communication of 6 December 2017 as new budgetary instruments and part of a package of initiatives to deepen the Economic and Monetary Union. The Programme is an effective way of providing support through both financial and technical means to Member States to implement structural reforms, which can in turn underpin the implementation of other Union policies. The reform process is complex, often politically costly, requires expertise on different areas simultaneously, and may have a cross-border impact. Union support under the Programme should contribute to enhancing the ability to undertake in-depth growth-enhancing reforms across a wide range of policy sectors across Member States with positive spillover impacts across the Union. Consistency and coherence with other Union policies will be pursued, on one hand, through the appropriate regulatory provisions on complementary funding contained in the various legislative acts establishing the various Union programmes and Funds and, on the other hand, through an enhanced internal coordination among the services involved in Union policies having complementary aspects, with a view to reaping synergies and reinforcing each other. Furthermore, the Programme builds on the current experience of the SRSP. 2.LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY •Legal basis The proposal is based on Articles 175 (third paragraph) and 197(2) of the Treaty on the Functioning of the European Union.

Article 175 (third paragraph) TFEU provides that, 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 European Parliament and the Council acting in accordance with the ordinary legislative procedure and after consulting the Economic and Social Committee and the Committee of Regions. Article 197(2) TFEU provides that the Union may support the efforts of Member States to improve their administrative capacity to implement Union law, inter alia, through facilitating the exchange of information and supporting training schemes. No Member State shall be obliged to avail itself of such support. The European Parliament and the Council, acting under the ordinary legislative procedure are to establish the necessary measures to this end, excluding any harmonisation of the laws and regulations of the Member States. In view of Articles 175 and 197 TFEU, the Programme is aimed to contribute to enhancing cohesion, competitiveness, productivity, growth, and employment, and, in this context, can decisively contribute to: (i) the completion of reforms of a structural nature aimed at improving the performance of the national economies and at promoting resilient economic and social structures in the Member States; (ii) strengthening the administrative capacity of the Member States in relation to challenges faced by institutions, governance, public administration, and economic and social sectors; and (iii) the completion of reforms of a structural nature that promote resilient economic and social structures and to strengthening the administrative capacity in the Member States, whose currency is not the euro and which have stated clear commitment and taken demonstrable steps to adopt the single currency within a given time-frame, in order to support preparation for participation in the euro area. •Subsidiarity (for non-exclusive competence) The funding of the proposed activities through the envisaged Programme respects the principles of European added value and subsidiarity. Funding from the Union budget concentrates on activities whose objectives cannot be sufficiently achieved by the Member States alone ("necessity test"), and where the Union intervention can bring additional value compared to action of Member States alone. The overall objectives of the Programme are the enhancement of cohesion, competitiveness, productivity, growth, and job creation. For that purpose, it should provide financial incentives for addressing challenges of a structural nature, and should help to strengthen the administrative capacity of the Member States insofar as their institutions and economic and social sectors are concerned. The underlying logic of the Programme is such that it is provided on a voluntary basis. As a result, each Member State itself decides whether action at Union level is necessary, in light of the possibilities available at national, regional or local level. The implementation of reforms remains a national competence and the Member States are involved throughout the whole process in the reform delivery tool. The implementation of structural reforms is a matter of common interest for the Union and the euro area, as reforms help strengthen the resilience not only of the economies concerned but also of the Union and the euro area as a whole. As regards the reform delivery tool, the Programme is a direct response to the weak and uneven implementation of the structural reforms in Member States, in particular in relation to challenges identified in the European Semester. In that respect, the Commission is best placed to take the initiative at the Union level as it benefits from comprehensive country-specific knowledge about reform implementation in the Member States and has the expertise to determine, together with the Member States concerned, the important challenges that need to be addressed. The agreement on reform packages between the Commission and the Member State (as endorsed in an appropriate implementing act) will enhance national ownership, since the original proposal for reform commitments will emanate from the Member State concerned and will be a "home-grown", country-driven product. This also implies continuous policy dialogue between the Commission and the Member State concerned. The duration of this instrument over the whole of the next MFF ensures continuity in the reform efforts, so that Member States can decide on the appropriate time to apply for financial support. As regards the technical support instrument (the continuation of the SRSP), the Commission is uniquely placed to take action at the Union level. Since the inception of the SRSP, it has established (and therefore already benefits from) a Union-wide database of expertise; it is in the best place to enable sharing of best practices; and it can create synergies to address reform efforts in various Member States and to address cross-country challenges. At the same time, the coordination of the support provided by the Commission ensures a comprehensive provision of expertise, sharing of good practices and support at various stages of the reform process. In addition, by developing synergies across Member States, the action at the Union level provides for a contribution to addressing cross-border or Union-wide challenges. As regards the convergence facility, the latter aims to increase resilience of non-euro-area economies by fostering real convergence. The latter is crucial not only for those Member States but also for the prosperity of the Union as a whole and, in particular, for the smooth transition to and functioning of the euro area. In addition, the instrument brings targeted technical support for administrative capacity with respect to the preparation for membership in the euro area. Action at Union level is thus necessary to achieve that objective. Those goals, namely addressing reforms challenges of structural nature, which will help strengthen the resilience of the economics concerned, of the Union and the euro area, and strengthening the administrative capacity of the Member States, cannot be achieved to a sufficient degree by the Member States acting alone, while the Union's intervention can bring an additional value by establishing a Programme that can incentivise financially and support technically the design and implementation of structural reforms in the Union. •Proportionality The proposal complies with the proportionality principle in that it does not go beyond the minimum required in order to achieve the stated objective at European level and which is necessary for that purpose. The support to be provided under the three instruments, which constitute the Programme for the period 2021 to 2027, is to be based on a voluntary request stemming from the Member State itself. The voluntary character of the Programme and the consensual nature of the cooperation throughout the entire process constitute an additional guarantee for respecting the proportionality principle and for the development of mutual trust and cooperation between the Member States and the Commission. •Choice of the instrument The goals described in the preceding sections cannot be reached through a harmonisation of legislations, or by voluntary action of the Member States. Only a regulation would allow them to be achieved. 3.RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS •Ex-post evaluations/fitness checks of existing legislation The reform delivery tool and the convergence facility are new proposals, which have therefore not yet been subject to ex-post evaluations/fitness checks.

The technical support instrument is a continuation of the existing 2017-2020 Structural Reform Support Programme, based on the Regulation (EU) 2017/825 which entered into force on 20 May 2017. Implementation of the SRSP began with the adoption of the 2017 Annual Work Programme in September 2017 and has continued with the adoption of the 2018 Annual Work Programme in March 2018. In accordance with Article 16 of Regulation (EU) 2017/825, by mid-2019, the Commission will provide the European Parliament and the Council with an annual monitoring report on the implementation of the Programme and an independent evaluation report. Even if, from a regulatory viewpoint, it is too soon to have a formal evaluation, some evidence exists from the earlier provision of technical support for structural reforms notably to Greece, under the Task Force for Greece (TFGR). Task Force for Greece (TFGR) The technical support for structural reforms provided to Greece by the Commission services, and coordinated by the TFGR, was subject to both internal and external evaluations, which provided useful lessons for the design of the Programme. The Commission is currently also carrying out an ex-post external evaluation of the technical support delivered to Greece. The technical support provided under TFGR was subject to an evaluation carried out by an independent consultancy in July 2014. Overall, that evaluation concluded that technical assistance had contributed to the implementation of the reform programme in Greece in the areas of tax administration and central administration during the period 2011-2013. That conclusion was based on an assessment of the effectiveness, efficiency, relevance and sustainability of the assistance delivered and was largely confirmed by the responses of most of the stakeholders involved, who indicated that, in the absence of technical assistance delivered by the TFGR, the reforms undertaken would not have materialised. In addition, a performance audit was conducted in 2015 by the European Court of Auditors to assess how effectively the TFGR had managed assistance to Greece and whether it had contributed positively to the process of reform implementation in Greece (limited to the economic adjustment programme). The Court of Auditors concluded that, overall, the TFGR had been successful in achieving its mandate – providing relevant technical assistance in areas covering almost the entire spectrum of public policy, which was largely in line with the conditions of the economic adjustment programme. Some shortcomings were identified by the Court of Auditors, notably the lack of a dedicated budget, the lack of a comprehensive strategy and the lack of systematic monitoring of the results. Those shortcomings were subsequently addressed within the SRSS and in the design of the 2017-2020 SRSP. •Ex-ante evaluation and first experience of the Structural Reform Support Programme (SRSP) Prior to the proposal for the SRSP in November 2015, which became Regulation (EU) 2017/825, the Commission carried out an ex-ante evaluation to assess the challenges and problems faced in relation to reform design and implementation in the Union, the possible solutions thereof, and therefore, in turn, the objectives of the SRSP and possible delivery mechanisms. The ex-ante evaluation concluded that the lack of reform implementation in the Member States limited the Union's capacity to respond to shocks, and notably limited the resilience of the EMU, which is necessary to ensure convergence among Member States and within their societies. According to the ex-ante evaluation, the main drivers of such challenges are limited administrative and institutional capacities and inadequate application and implementation of Union legislation. •Stakeholder consultations For the purpose of the open public consultation under the better regulation requirements, the SRSP was included in the "cohesion cluster", which covered questions in the following areas: regional policy, employment and social affairs, social inclusion, vocational education and training, research and innovation, business and industry, energy, justice and fundamental rights, migration and asylum, transport, rural development, digital economy and society, climate action, maritime affairs and fisheries, structural reforms, and youth. In the relevant questionnaire, the current SRSP was not explicitly mentioned as one of the funding programmes under the "cohesion cluster"; therefore, the questions had only limited relevance for the design of the Programme. However, some of the results of the public consultation may still be relevant (i.e. the responses to questions specifically mentioning the implementation of (structural) reforms in the Member States). In the context of the "EMU package" of 6 December 2017 on the deepening of the Economic and Monetary Union, the Commission announced the intention to create a new reform delivery tool for the period after 2020, to support the implementation of national reforms identified within the European Semester process of economic policy coordination, and the rollout of a pilot (through the amendment of the Common Provisions Regulation) to test that idea already during the current programming period. In this context, the Commission decided to organise technical workshops in each Member State. The purpose of the workshops was two-fold: to collect Member States' views and interest in the pilot of the reform delivery tool; and to gather ideas on the design of the future reform delivery tool and possible type of reforms that could benefit from this instrument. The feedback received from the Member States on the reform deliver tool was included in the Impact Assessment as stakeholder consultation. •Collection and use of expertise N/A •Impact assessment The proposal is supported by an Impact Assessment. The impact assessment considered the option that the current ongoing Union programmes would continue in the post-2020 period in its present form. In a context of an unchanged European Semester process, the SRSP would continue to provide technical support to the Member States under the current limited financial resources and the Union funds would remain the only Union investment instruments providing financing for the implementation of some structural reforms and providing encouragement to some reforms through the existing linkages between the Union funds and the European Semester.

The existing instruments at Union level have not managed to provide sufficient incentives to substantially accelerate the undertaking and the pace of implementation of structural reforms. As a result, they have not managed to reduce vulnerability to shocks; nor do they provide targeted support for the implementation of reforms in the non-euro-area Member States. The Commission is therefore proposing a new instrument at Union level, which provides for the continuation of the SRSP, and adds financial incentives for encouraging the implementation of structural reforms through the envisaged reform delivery tool. In addition, a dedicated instrument targeting reforms in non-euro-area Member States, which have taken demonstrable steps towards adopting the single currency, is to be established to offer additional support for the implementation of reforms in prospective euro-area Member States and multiply the positive effects for non-euro-area Member States and the euro area as a whole. For this purpose, demonstrable steps would consist of a formal letter from the government of the Member State concerned to the Commission stating its clear commitment to join the euro area within a reasonable and defined timeframe and presenting a credible time-bound roadmap, after consultation with the Commission, for implementing concrete measures to prepare for successful participation in the euro area, including steps to ensure full alignment of its national legislation with the requirements under Union law (including the Banking Union). The impacts of the Programme will mainly depend on the reforms that Member States propose and implement in the context of the reform delivery tool, or on the type of support that they will ask for and make use of in the framework of the technical support instrument. Overall, the Programme is expected to benefit Member States' economies, strengthen resilience to shocks and also bring positive spillovers to other Member States. It is therefore expected to generate, in the longer term, positive impacts for economic growth across the Union, and improve national fiscal positions and debt-to-GDP ratios. The Programme is also expected to have a positive effect on employment by stimulating job creation across the Union. That effect can be generated, for example, through reforms of the labour market, in particular those increasing the skills and qualifications of the labour force and the adaptation of skills to market needs. The Programme can also have positive effects on income distribution, active labour market policies, social inclusion and social protection, by fostering the realisation of the European Pillar of Social Rights. It can also support reforms in the public administration at large, and the fight against tax evasion and corruption, which severely affect citizens and businesses, and undermine good governance and economic development. The Programme is expected to bring advantages in terms of low administrative burden. Financial contributions from the reform delivery tool will be disbursed in the form of financing not linked to cost, thus minimising administrative and transaction costs, both for the Commission and for the Member States. In order to minimise administrative burden of the reform delivery tool and provide for simplification, monitoring of implementation of milestones and targets will be carried out within the European Semester process. Administrative procedures related to the three technical support instruments will remain very light – e.g. as regards the technical support instrument, the submission of requests will remain simple and the required information will be limited to a minimum. The Regulatory Scrutiny Board reviewed the draft impact assessment and delivered a positive opinion with reservations on 22 May 2018. The issues raised by the Regulatory Scrutiny Board were addressed in the revised version of the Impact Assessment Staff Working Document. The rationale and adequacy of the allocation key of the reform delivery tool has been explained (also with an example). The scope of the reform delivery tool was further clarified. The impact assessment was also further developed to evaluate co-financing and partial frontloading as an alternative delivery mechanism. Clarifications were also provided regarding potential risks associated with this mechanism (in terms of moral hazard, volume, and suspension, cancellation and recovery procedures). A specific annex in the Impact Assessment Staff Working Document further details the changes made following the Regulatory Scrutiny Board’s opinion. •Regulatory fitness and simplification The proposal is not linked to the regulatory fitness and simplification exercise and does not have any costs of compliance for small and medium-sized enterprises or any other stakeholders. The Programme will be implemented via an electronic platform, which will be available for the Commission services and the Member States. •Fundamental rights The proposal has a positive effect on the preservation and development of Union fundamental rights, assuming that the Member States request and receive support in related areas. For example, support in areas such as migration, labour markets and social insurance, healthcare, education, the environment, property, public administration and the judicial system can support Union fundamental rights such as dignity, freedom, equality, solidarity, citizens' rights and justice. 4.BUDGETARY IMPLICATIONS The financial envelope for the implementation of the Programme for the period 1 January 2021 to 31 December 2027 shall be EUR 25 billion (in current prices). The indicative distribution of the aforementioned shall be: (i) up to EUR 22 billion for the reform delivery tool; (ii); up to EUR 840 million for the technical support instrument and (iii) up to EUR 2.16 billion for the convergence facility, of which up to EUR 2 billion for the financial support component and up to EUR 160 million for the technical support component. Where, by the end of 2023, an eligible Member State under the convergence facility has not taken demonstrable steps to adopt the single currency within a given time-frame, the amount available for that Member State under the financial support component of the convergence facility will be transferred to the reform delivery tool. The Commission will adopt a decision to that effect after having heard the position of the Member State concerned. The legislative financial statement provides the appropriate explanations on the financial envelope. 5.OTHER ELEMENTS •Implementation plans and monitoring, evaluation and reporting arrangements In order to monitor the performance of the Programme in delivering the specific objectives defined in Article 6 of the Regulation, some key performance indicators have been identified and will be collected periodically. The set of indicators has been defined at level of individual support actions in order to collect the appropriate micro-data to be aggregated at Programme level and the data will be collected by the Commission on the basis of a dedicated tool for monitoring - broken down by Member State and by policy area. As regards the financial contributions (allocated under the reform delivery tool and under the financial support component of the convergence facility), specific output, result and impact indicators will be defined in each reform commitment plan agreed with the Member States, so that the completion of the milestones and targets will be set as a condition for receiving the financial contribution. For that purpose, Member States will include, in their annual reporting on progress, evidence on the progress made towards milestones and targets, and provide the Commission with access to the underlying data, including administrative data where relevant. As regards the technical support instrument, specific result and impact indicators will be defined in relation to the concrete projects, with baselines and targets, in order to monitor the progress made towards the final targets and to evaluate the impact of the implemented reforms. Those indicators will also be deployed under the technical support component of the convergence facility.

A mid-term evaluation and an ex-post evaluation will be carried out for each instrument with a view to assessing the effectiveness, efficiency, relevance, coherence and Union added value of the three instruments, aggregating the results into a cross-cutting evaluation of the overall Programme. Evaluations will be carried out in line with paragraphs 22 and 23 of the Interinstitutional Agreement of 13 April 2016, where the three institutions confirmed that evaluations of existing legislation and policy should provide the basis for impact assessments of options for further action. Evaluations will include lessons learned to identify any deficiencies and/or problems or any potential to further improve the actions or their results and help maximise their exploitation and impact. Evaluations will be carried out in a timely manner to feed into the decision-making process. The mid-term evaluation of the Programme will be performed once sufficient information is available about its implementation, but no later than four years after the start of the programme implementation. At the end of the implementation of the Programme, but no later than four years after the end of the period of application of the Regulation, a final evaluation of the Programme will be carried out by the Commission. The Commission will communicate the conclusions of the evaluations accompanied by its observations, to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions. •Explanatory documents (for directives) N/A •Detailed explanation of the specific provisions of the proposal The Reform Support Programme is made up of three separate complementary instruments: (a) the reform delivery tool, which will provide financial incentives to Member States for the purpose of implementing structural reforms identified in the European Semester process (Chapter II); (b) the technical support instrument, which will support, with technical measures, Member States to carry out institutional, administrative and growth-sustaining structural reforms (Chapter III); and (c) the convergence facility for euro-area membership support, which will provide additional support, both technical and financial, to Member States, whose currency is not the euro and which have taken demonstrable steps towards adopting the single currency within a given time-frame (Chapter IV) (Article 3). The general objective of the Programme is the enhancement of cohesion, competitiveness, productivity, growth, and employment. For that purpose, it should provide financial incentives for addressing challenges of a structural nature, and should help to strengthen the administrative capacity of the Member States insofar as their institutions and economic and social sectors are concerned (Article 4). Specific objectives of the Programme are set for each instrument of the Programme (Article 5). With regard to the reform delivery tool, they should consist of fulfilling concrete milestones and targets set out in relation to the completion of reform commitments, which would trigger the release of the financial incentives. With regard to the technical support instrument, they should consist of supporting the efforts of the national authorities in improving their administrative capacity to design, develop and implement reforms, including through exchange of good practices, appropriate processes and methodologies and more effective and efficient human-resources management. Those objectives should be pursued in all Member States, including - in the context of the convergence facility - those whose currency is not the euro and which have stated clear commitment and taken demonstrable steps towards adopting the single currency within a given time-frame. For the three instruments, the scope of the application is a broad range of policy domains that include areas related to public financial and asset management, institutional and administrative reform, business environment, product, service and labour markets, education and training, sustainable development, public health, education and the financial sector (Article 6). The overall financial envelope for the implementation of the Programme for the period 2021-2027 will be EUR 25 billion; this will be indicatively distributed among the three instruments as follows: EUR 22 billion for the reform delivery tool, EUR 840 million for the technical support instrument and EUR 2.16 billion for the convergence facility. In accordance with provisions contained in Regulation (EU) [CPR successor], Member States may request the transfer of up to 5% of programme financial allocations from the ERDF, the ESF+, the Cohesion Fund or the EMFF to this Programme. Transferred resources shall be implemented in accordance with the rules of this Programme and for the benefit of the Member State concerned (Article 7). The Commission proposals for the 2021-2027 Multiannual Financial Framework set a more ambitious goal for climate mainstreaming across all EU programmes, with an overall target of 25% of EU expenditure contributing to climate objectives. The contribution of this programme to the achievement of this overall target will be tracked through an EU climate marker system at an appropriate level of disaggregation, including the use of more precise methodologies where these are available. The Commission will continue to present the information annually in terms of commitment appropriations in the context of the annual draft budget. To support the full utilisation of the potential of the programme to contribute to climate objectives, the Commission will seek to identify relevant actions throughout the programme preparation, implementation, review and evaluation processes. The reform delivery tool The type of structural reforms eligible for funding under the reform delivery tool will cover reforms aimed at addressing challenges identified in the context of the European Semester of economic policy coordination, including those challenges identified in country-specific recommendations (Article 8). Maximum amounts by Member State will be established. Those amounts should be calculated on the basis of the population of each Member State (Article 9). The allocation of funds under the reform delivery tool to the Member States will be made in stages. In the first stage lasting twenty months, half (EUR 11 billion) of the overall financial envelope of the reform delivery tool will be made available to Member States, during which they could receive up to their maximum allocation by submitting proposals for reform commitments. In the subsequent stage lasting until the end of the Programme (the second stage), a system of periodic calls will be set out by the Commission to allocate the remaining half (EUR 11 billion) of the overall financial envelope of the instrument, plus the unused amounts from the previous stage. Under each call of the second stage, all Member States will be invited to submit reform proposals concurrently, and could be awarded their maximum financial contribution on the basis of their reform proposals. It is important to underline, at the outset, that the first call organised by the Commission during the second stage will be for an amount corresponding to the remaining half of the overall financial envelope of the instrument (i.e. EUR 11 billion), plus any unused amounts from the first stage of the allocation. Further calls would be organised by the Commission only where the overall financial envelope had not been fully used. In that respect, the Commission would adopt and publish an indicative calendar of the further calls to be organised, and should indicate, at each call, the remaining amount of the overall envelope, which would be available under the call (Article 10). That approach responds to the need to provide transparency to the outside world about the amount and timing of such calls. The proposal for reform commitments will be presented by the Member State together with its national reform programme, in the form of a separate annex. That separate annex could be submitted together with the national reform programme or at a different point in time.

The Member States themselves should identify the reforms among the challenges raised in the context of the European Semester and propose a detailed set of measures for their implementation, which should contain appropriate milestones and targets and a timetable for implementation over a period no longer than three years (Article 11). The proposal for reform commitments might be amended only once in the duration of the Programme, with such amendments being permitted if they are justified by objective circumstances (Article 13). The Commission will assess the nature and the importance of the reform commitments proposed by the Member States and will determine the amount to be allocated on the basis of, transparent criteria. The Commission should take into account the substantive elements provided by the Member States and assess: (i) whether the reform commitments proposed by the Member States are expected to effectively address the challenges identified in the context of the European Semester, (ii) whether they represent a comprehensive reform package, (iii) whether they are expected to strengthen the performance and resilience of the national economy, (iv) and whether their implementation is expected to have a lasting impact in the Member State. In addition, the Commission should also assess (v) whether the internal arrangements proposed by the Member States, including the proposed milestones and targets, and the related indicators, are expected to ensure an effective implementation of the reform commitments during a maximum period of three years (Article 11). The Economic Policy Committee of the Council dealing with the European Semester may provide an opinion on the proposals for reform commitments as submitted by Member States (Article 11). The reform commitments to be implemented by the Member State will be determined by means of an implementing act (Commission decision) (Article 12). Appropriate guidelines are set out in an Annex to the Regulation, to serve as a basis for the Commission to assess - in a transparent and equitable manner - the proposals for reform commitments put forward by the Member States and to determine the financial contribution in conformity with the objectives and any other relevant requirements laid down in this Regulation. A rating system for the assessment of the proposals for reform commitments is established to that effect (Article 11, in conjunction with Annex II). The Member State concerned will report regularly within the European Semester process on the progress made in the achievement of the reform commitments. The national reform programmes are to be used as a tool for reporting on progress towards reform completion (Article 14). Provisions on durability of the reforms (minimum five years after the payment of the financial contribution), on budget commitments and payments as well as on suspension, cancellation and recovery of funds unduly paid are also laid down (Articles 15 and 16). The technical support instrument The technical support instrument under the Programme should continue to support the implementation of reforms undertaken at the initiative of the Member States, reforms in the context of economic governance processes or actions related to the implementation of Union law and Union policy priorities and reforms in relation to the implementation of economic adjustment programmes. The instrument should also provide technical support for the preparation and implementation of reforms to be undertaken under the other Programme instruments. The Commission will analyse the requests for support on the basis of urgency, breadth and depth of the problems identified, support needs in respect of the policy area concerned, analysis of socioeconomic indicators and general administrative capacity of the Member State. Based on that analysis and taking into account the existing measures and actions financed by other Union funds or Union programmes, the Commission will come to an agreement with the Member State on the priority areas for support, the objectives, an indicative timeline, the scope of the support measures to be provided and the estimated global financial contribution, to be set out in a cooperation and support plan (Article 19). The type of actions eligible for financing under the technical support instrument will include, among others, expertise related to policy advice and/or change, formulation of strategies and reform roadmaps, as well as to legislative, institutional, structural and administrative reforms; the provision of experts, including resident experts; capacity building and related supporting actions at all governance levels, also contributing to the empowerment of civil society (Article 18). Member States should have the possibility of contributing, on a voluntary basis, to the budget of the technical support instrument under the Programme by transferring resources to it. The additional voluntary transfers may consist of contributions from programmed resources under the Union funds, transferred in accordance with the provisions of Regulation (EU) [successor of CPR] (Article 21). The Commission will adopt work programmes in order to implement the technical support instrument under the Programme, by way of implementing acts, setting out the measures for the provision of technical support and all the elements required under the Financial Regulation (Article 23). The convergence facility An eligible Member State under the convergence facility should be a Member State that has taken demonstrable steps to adopt the single currency within a given time-frame. For that purpose, demonstrable steps would consist of a formal letter from the government of the Member State concerned to the Commission stating its clear commitment to join the euro area within a reasonable and defined timeframe and presenting a credible time-bound roadmap, after consultation with the Commission, for implementing concrete measures to prepare for successful participation in the euro area, including steps to ensure full alignment of its national legislation with the requirements under Union law (including the Banking Union). The type of actions financed under the convergence facility for euro-area membership support will include both technical and financial support actions (in addition to those already available under the two other instruments of the Programme) relevant for preparing for euro-area participation (Article 25 and Article 30). The financial and technical support components carried out under the convergence facility should follow the same rules and implementation process as the other instruments under the Programme. A few additional rules are added as regards eligibility of reforms and actions with respect to the other two instruments. Those additional rules refer to fixing the maximum indicative allocation and to the proposals for reform commitments, requests for technical support, and the related assessment process. In addition, the Commission will also assess the relevance of the proposed reform commitments and the requested technical support in terms of preparing for participation in the euro area (Article 27 and Article 31). Other provisions Provision on communication activities vis-à-vis the European Parliament and the Council and vis-à-vis the general public are set out for the various instruments (Articles 17 and 20) as well as provisions on complementarity (Article 33), monitoring (Article 34), annual reports (Article 35) and evaluation (Article 36). 2018/0213 (COD) Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the establishment of the Reform Support Programme

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION Having regard to the Treaty on the Functioning of the European Union, and in particular the third paragraph of Article 175 and Article 197(2) thereof, Having regard to the proposal from the European Commission, After transmission of the draft legislative act to the national parliaments, Having regard to the opinion of the European Economic and Social Committee, Having regard to the opinion of the Committee of the Regions, Acting in accordance with the ordinary legislative procedure, Whereas: (1)In accordance with Articles 120 and 121 of the Treaty on the Functioning of the European Union ('the Treaty'), Member States are required to conduct their economic policies with a view to contributing to the achievement of the objectives of the Union and in the context of the broad guidelines that the Council formulates. The coordination of the economic policies of the Member States is therefore a matter of common concern. (2)Article 175 of the Treaty provides, inter alia, that Member States should coordinate their economic policies in such a way as to attain the objectives on economic social and territorial cohesion set out in Article 174. (3)At Union level, the European Semester of economic policy coordination is the framework to identify national reform priorities and monitor their implementation. Member States develop their own national multiannual investment strategies in support of those reform priorities. Those strategies should be presented alongside the yearly National Reform Programmes as a way to outline and coordinate priority investment projects to be supported by national and/or Union funding. They should also serve to use Union funding in a coherent manner and to maximise the added value of the financial support to be received notably from the programmes supported by the Union under the European Regional Development Fund, the Cohesion fund, the European Social Fund, the European Maritime and Fisheries Fund and the European Agricultural Fund for Rural Development, the European Investment Stabilisation Function and InvestEU, where relevant. (4)The economic and financial crisis has shown that developing sound and resilient economies and financial systems built on strong economic and social structures helps Member States to respond more efficiently to shocks and recover more swiftly from them. The implementation of structural reforms is among the Union’s policy priorities because such reforms seek to set the recovery on a sustainable path, unlock the growth potential, strengthen the adjustment capacity and support the process of upward convergence. Pursuing structural reforms can also contribute to strengthening economic and social cohesion, boosting productivity and investment and creating good conditions for sustainable growth and employment in the Union. (5)Structural reforms can contribute to achieving a high degree of resilience of domestic economies and sustainable convergence among Member States, which is crucial for successful and smooth participation in the Economic and Monetary Union. That high degree of sustainable convergence is particularly important for Member States, whose currency is not the euro, in their process of preparation to join the euro area. (6)The degree of implementation of structural reforms in the Member States is still not sufficient across the Union. Experience with the implementation of the economic policy coordination mechanism under the European Semester shows that, in general, the implementation of structural reforms has been slow and uneven and that national reform efforts should be reinforced and incentivised. (7)Regulation (EU) 2017/825 of the European Parliament and the Council established the Structural Reform Support Programme (SRSP) for the period 2017 to 2020, with a budget of EUR 142 800 000. The SRSP was established to strengthen the capacity of Member States to prepare and implement growth-sustaining administrative and structural reforms, including through assistance for the efficient and effective use of the Union funds. Technical support under that programme is provided by the Commission, upon request from a Member State, and can cover a wide range of policy areas. Initial experience with the SRSP has shown a demand for technical support in the order of four times (in 2017) and five times (in 2018) its annual available budget. (8)Other Union instruments and programmes also provide a significant contribution to improving conditions underpinning certain investments in Member States, which can be conducive to or be part of such reforms. In particular, the Union Funds covered by Regulation (EU) No YYY/XX of the European Parliament and of the Council [CPR] link investment to enabling conditions (formerly known as ex-ante conditionalities), foresee a macroeconomic governance mechanism and may finance costs of structural reforms linked to investments in policy areas relevant for cohesion policy. However, currently, no instrument foresees direct financial support that provides incentives for the Member States to implement reforms in all policy areas, in response to challenges identified in the European Semester. Moreover, there is currently no instrument providing specific and targeted financial and technical support to Member States whose currency is not the euro in their efforts to implement reforms that are relevant for joining the euro area. (9)The Commission's Communication of 6 December 2017, part of a package of initiatives to deepen the Economic and Monetary Union, proposed to create a reform delivery tool and a convergence facility as new budgetary instruments. The objective of such instruments was to strengthen resilience of domestic economies and unleash positive spillover effects across Member States by providing incentives for the implementation of structural reforms that contribute to those objectives and are essential for the stability of the Economic and Monetary Union. (10)Against that background, it is necessary to strengthen the current framework for the provision of support to Member States by offering direct financial support, alongside technical support. To that end, a new Reform Support Programme ('the Programme') should be established to provide effective incentives to step up the implementation of structural reforms in the Member States. The Programme should be comprehensive and should also benefit from the experience gained by the Commission and the Member States from the use of the other instruments and programmes. The Programme should also continue the actions and the mode of operation of the SRSP, since they have been proven very useful, and have been appreciated by Member States, for strengthening the administrative capacity of national authorities in various policy domains. The Programme should also include targeted support for reforms in Member States whose currency is not the euro and which have taken demonstrable steps towards adopting the single currency within a given time-frame. (11)In order to allow for the provision of the different types of support needed and to cater for the specificity of each component, three separate but complementary instruments should be set out within the framework of the Programme, namely a reform delivery tool, a technical support instrument, and a dedicated convergence facility for supporting preparation for euro-area membership. (12)The types of financing and the methods of implementation under this Regulation should be chosen on the basis of their ability to achieve the specific objectives of the actions and to deliver results, taking into account, in particular, the costs of controls, the administrative burden, and the expected risk of non-compliance. This should include consideration of the use of lump sums, flat rates and unit costs, as well as financing not linked to costs as referred to in Article 125(1) of the Financial Regulation.

(13) The Programme's overall objective is the enhancement of cohesion, competitiveness, productivity, growth, and employment. For that purpose, it should provide financial incentives for addressing challenges of a structural nature, and should help to strengthen the administrative capacity of the Member States insofar as their institutions and economic and social sectors are concerned. (14)Specific objectives should be set for each instrument of the Programme. With regard to the reform delivery tool, they should consist of fulfilling concrete milestones and targets set out in relation to the completion of reform commitments, which would trigger the release of the financial incentives. With regard to the technical support instrument, they should be to assist national authorities in their endeavours to design and implement reforms, by taking into account good practices and lessons learned from peers. Those objectives should be pursued in all Member States under those two instruments and, in the context of the convergence facility, by those Member States whose currency is not the euro and which have taken demonstrable steps towards adopting the single currency within a given time-frame. (15)In order to ensure that the reforms supported by the Programme address all the key economic and societal areas, both financial support and technical support under the Programme should be provided by the Commission, upon request from a Member State, in a broad range of policy domains, which include areas related to public financial and asset management, institutional and administrative reform, business environment, the financial sector, markets for products, services and labour, education and training, sustainable development, public health and social welfare. (16)This Regulation lays down a financial envelope for the Programme, which is to constitute the prime reference amount, within the meaning of the Interinstitutional Agreement on budgetary discipline, on cooperation in budgetary matters and on sound financial management, for the European Parliament and the Council during the annual budgetary procedure. An appropriate indicative allocation of the overall amount of the budget should be set out for each of the three instruments of the Programme, and should be established at levels that are commensurate with their general and specific objectives and the corresponding needs. (17)In order to cater for additional needs under the Programme, Member States should have the possibility to transfer to the budget of the Programme resources programmed in shared management under the Union funds, in accordance with the procedure thereof. Transferred resources should be implemented in accordance with the rules of this Programme and should be used for the benefit of the Member State concerned. (18)Reflecting the importance of tackling climate change in line with the Union's commitments to implement the Paris Agreement and the United Nations Sustainable Development Goals, this Programme will contribute to mainstream climate actions and to the achievement of an overall target of 25 % of the EU budget expenditures supporting climate objectives. Relevant actions will be identified during the Programme's preparation and implementation, and reassessed in the context of the relevant evaluations and review processes. (19)With regard to the reform delivery tool, it is necessary to identify the types of reforms that should be eligible for financial support. To ensure their contribution to the objectives of the Programme, the eligible reforms should be those addressing the challenges identified in the context of the European Semester of economic policy coordination, including those proposed to address the country-specific recommendations. (20)In order to ensure a meaningful incentive for Member States to complete structural reforms, it is appropriate to establish a maximum financial contribution available for them under the instrument for each stage of allocation and under each call. That maximum contribution should be calculated on the basis of the population of Member States. To ensure that the financial incentives are spread throughout the whole period of application of the Programme, the allocation of funds to the Member States should be made in stages. In the first stage lasting twenty months, half (EUR 11 000 000 000) of the overall financial envelope of the reform delivery tool should be made available to Member States, during which they could receive up to their maximum allocation by submitting proposals for reform commitments. (21)In the interest of transparency and efficiency, in the subsequent stage lasting until the end of the Programme, a system of periodic calls should be set out by the Commission to allocate the remaining half (EUR 11 000 000 000) of the overall financial envelope of the instrument, plus the amounts unused from the previous stage. Simple procedures should be organised to that effect. Under each call, all Member States should be invited to submit reform proposals concurrently, and could be awarded their maximum financial contribution on the basis of their reform proposals. In the interest of transparency, the first call organised by the Commission during the second stage should be for an amount corresponding to the remaining part (EUR 11 000 000 000) of the overall financial envelope of the instrument. Further calls should be organised by the Commission only where the overall financial envelope has not been fully used. The Commission should adopt and publish an indicative calendar of the further calls to be organised, and should indicate, at each call, the remaining amount of the overall envelope, which is available under that call. (22)It is necessary to establish a process for the submission of proposals for reform commitments by the Member States, and the content thereof. With a view to ensuring the expediency of procedures, a Member State should submit the proposal for reform commitments together with its national reform programme, but in the form of a separate annex, which may also be submitted at a different point in time. While participation in the Programme is voluntary, Member States experiencing excessive imbalances should be particularly encouraged to come forward with reform proposals under the reform delivery tool, which address the problems that led to such excessive imbalances. (23)In order to ensure the ownership of and a focus on relevant reforms, the Member States should identify the reform commitments in response to challenges identified in the context of the European Semester (including those challenges identified in country specific recommendations) and propose a detailed set of measures for their implementation, which should contain appropriate milestones and targets and a timetable for implementation over a maximum period of three years. Close cooperation between the Commission and the Member States should be sought and achieved throughout the process. (24)The Commission should assess the nature and the importance of the reform commitments proposed by the Member States and should determine the amount to be allocated on the basis of transparent criteria. To that effect, it should take into account the substantive elements provided by the Member States and assess whether the reform commitments proposed by the Member States are expected to effectively address challenges identified in the context of the European Semester, whether they represent a comprehensive reform package, whether they are expected to strengthen the performance and resilience of the national economy and whether their implementation is expected to have a lasting impact in the Member State where relevant by strengthening the institutional and administrative capacity of the Member State concerned. In addition, the Commission should assess whether the internal arrangements proposed by the Member States, including the proposed milestones and targets, and the related indicators, are expected to ensure effective implementation of the reform commitments during a maximum period of three years. (25)Appropriate guidelines should be set out, as an annex to this Regulation, to serve as a basis for the Commission to assess - in a transparent and equitable manner - the proposals for reform commitments put forward by the Member States and to determine the financial contribution in conformity with the objectives and any other relevant requirements laid down in this Regulation. In the interest of transparency and efficiency, a rating system for the assessment of the proposals for reform commitments should be established to that effect. (26)In order to contribute to the preparation of high quality proposals and assist the Commission in the assessment of the proposals for reform commitments submitted by the Member States and in the assessment of the degree of their achievement, provision should be made for the use of peer counselling and expert advice. In addition, the Council for Economic Policy Committee of the Council dealing with the European Semester, in consultation, where appropriate, with relevant Treaty-based committees, should be able to provide an opinion on the proposals for reform commitments as submitted by Member States. In the interest of simplification, the reporting by Member States on the progress made in the implementation of reform commitments should be made within the framework of the European Semester. (27)For the purpose of simplification, the determination of the financial contribution should follow simple criteria. The financial contribution should be the total maximum indicative amount if the reform commitments proposed by the Member State fully meet the criteria for assessment, and should be half the maximum indicative amount if the reform commitments proposed by the Member State meet those criteria only in a satisfactory manner. No financial contribution should be awarded to the Member State if the proposal for reform commitments does not satisfactorily address the assessment criteria. (28)To foster the stability of the reform commitments, a Member State should have the possibility to amend the reform commitments only once within the period of implementation, where objective circumstances justify such a course of action. (29)For the purposes of transparency, the reform commitments adopted by the Commission should be communicated to the European Parliament and the Council and communication activities should be carried out by the Commission as appropriate. (30)For reasons of efficiency and simplification in the financial management of the instrument, the Union financial support to reform commitments should take the form of a financial contribution not linked to cost, as referred to in Article 121(1)(e) of the Regulation (EU, Euratom) YYY/XX of the European Parliament and of the Council (the 'Financial Regulation') under direct management. (31)For the purpose of sound financial management, specific rules should be laid down for budget commitments, payments, suspension, cancellation and recovery of funds. Payments should be based on a positive assessment by the Commission of the implementation of the reform commitments by the Member State. Suspension and cancellation of the financial contribution should be possible when the reform commitments have not been implemented in a satisfactory manner by the Member State. To ensure a sustainable impact of the reforms after they are implemented, a reasonable period defining the durability of the reforms after the payment of the financial contribution should be established. A period of five years should be considered to be a reasonable minimum to be applied. Appropriate contradictory procedures should be established to ensure that the decision by the Commission in relation to suspension, cancellation and recovery of amounts paid respects the right of Member States to provide observations. (32)With regard to the technical support instrument, Member States have increasingly taken up technical support under the SRSP, beyond initial expectations. Almost all Member States have requested support under the SRSP and requests are distributed across all policy areas covered by that programme. For that reason, the main features of the SRSP should be maintained, including the actions eligible for financing under the technical support instrument.

(33)The technical support instrument under the Programme should continue to support, the implementation of reforms undertaken at the initiative of the Member States, reforms in the context of economic governance processes or actions related to the implementation of Union law, and reforms in relation to the implementation of economic adjustment programmes. It should also provide technical support for the preparation and implementation of reforms to be undertaken under the other Programme instruments. (34)In line with the rules and practice already existing under the SRSP, a light process for the submission of requests for technical support should be established. Respecting the overarching principle of equal treatment, sound financial management and transparency, appropriate criteria for the analysis of the requests submitted by Member States should be laid down. Those criteria should be based on the urgency, the severity and extent of the problems, as well as on the support needs identified in respect of the policy areas where technical support is envisaged. (35)The content of the cooperation and support plans detailing the measures for the provision of technical support to Members States should also be specified. To that end, the technical support measures envisaged and the related estimated global financial contribution should take into account the actions and activities financed by Union funds or Union programmes. (36)For the purposes of accountability, transparency and to ensure visibility of the Union action, subject to certain conditions that protect sensitive information, the cooperation and support plans should be provided to the European Parliament and the Council and communication activities should be carried out by the Commission as appropriate. (37)Provisions on the implementation of the technical support instrument should be laid down, in particular the management modes, the forms of funding for the technical support measures and the content of work programmes, which should be adopted by way of implementing acts. In view of the importance of sustaining the efforts of Member States in pursuing and implementing reforms, it is necessary to allow for a co-financing rate for grants of up to 100% of the eligible costs. To allow for a rapid mobilisation of technical support in case of urgency, provision should be made for the adoption of special measures for a limited period of time. To that effect, a limited amount of the budget within the work programme of the technical support instrument should be set aside for special measures. (38)The convergence facility should aim at providing both financial support and technical support to Member States (in addition to that already available under the two other instruments of the Programme), whose currency is not the euro and which have taken demonstrable steps towards adopting the single currency within a given time-frame, with a view to helping them prepare for membership in the euro area. To that effect, "demonstrable steps" should consist of a formal letter from the government of the Member State concerned to the Commission stating its clear commitment to join the euro area within a reasonable and defined timeframe and presenting a credible, time-bound roadmap, after consultation with the Commission, for implementing concrete measures to prepare for successful participation in the euro area, including steps to ensure full alignment of its national legislation with the requirements under Union law (including the Banking Union). (39)The instrument should be made up of two different components, which should aim to provide increased financial incentives for Member States that are embarking on and completing relevant structural reforms for joining the euro area, and should also aim to offer additional and targeted technical support for the design and implementation of such reforms. (40)In the interest of consistency and simplification, the financial and technical support components carried out under the convergence facility should follow the same rules and implementation process as the other instruments under the Programme. Therefore, relevant provisions relating to the reform delivery tool and the technical support instrument under the Programme should also apply to the relevant components of the convergence facility, complemented by certain specific rules. (41)As regards eligibility of reforms and actions, there should be some additional rules on fixing the maximum indicative allocation, and on the proposals for reform commitments, requests for technical support, and the related assessment process. In particular, under the financial support component of the convergence facility, an additional financial contribution should be available for allocation to the eligible Member States over and above the financial contribution to be allocated under the reform delivery tool, which should be granted in return for additional reforms undertaken by the Member State concerned. (42)In order to ensure an efficient and coherent allocation of funds from the Union budget and to respect the principle of sound financial management, actions under the Programme should be consistent with and be complementary to ongoing Union programmes, whilst avoiding double funding for the same expenditure. In particular, the Commission and the Member State should ensure, in all stages of the process, effective coordination in order to safeguard the consistency, coherence, complementarity and synergy among sources of funding, including technical assistance thereof. (43)Pursuant to paragraphs 22 and 23 of the Inter-institutional agreement for Better Law-Making of 13 April 2016, there is a need to evaluate this Programme on the basis of information collected through specific monitoring requirements, while avoiding overregulation and administrative burdens, in particular on Member States. These requirements, where appropriate, should include measurable indicators, as a basis for evaluating the effects of the Programme on the ground. (44)An independent mid-term evaluation, looking at the achievement of the objectives of the Programme, the efficiency of the use of its resources and its added value should be carried out. An independent ex-post evaluation should, in addition, deal with the long-term impact of the Programme. (45)The reform commitments to be implemented by the Member States, the determination of the financial contribution from the budget of the Programme allocated to them, and the work programmes for the implementation of technical support should be established. In order to ensure uniform conditions for the implementation of this Regulation, implementing powers should be conferred on the Commission. (46)Horizontal financial rules adopted by the European Parliament and the Council on the basis of Article 322 of the Treaty on the Functioning of the European Union apply to this Regulation. These rules are laid down in the Financial Regulation and determine in particular the procedure for establishing and implementing the budget through grants, procurement, prizes, indirect implementation, and provide for checks on the responsibility of financial actors. Rules adopted on the basis of Article 322 TFEU also concern the protection of the Union's budget in case of generalised deficiencies as regards the rule of law in the Member States, as the respect for the rule of law is an essential precondition for sound financial management and effective EU funding. (47)In accordance with the Financial Regulation, Regulation (EU, Euratom) No 883/2013 of the European Parliament and of the Council, Council Regulation (Euratom, EC) No 2988/95,Council Regulation (Euratom, EC) No 2185/96 and Council Regulation (EU) 2017/1939, the financial interests of the Union are to be protected through proportionate measures, including the prevention, detection, correction and investigation of irregularities and fraud, the recovery of funds lost, wrongly paid or incorrectly used and, where appropriate, the imposition of administrative sanctions. In particular, in accordance with Regulation (EU, Euratom) No 883/2013 and Regulation (Euratom, EC) No 2185/96, the European Anti-Fraud Office (OLAF) may carry out administrative investigations, including on-the-spot checks and inspections, with a view to establishing whether there has been fraud, corruption or any other illegal activity affecting the financial interests of the Union. In accordance with Regulation (EU) 2017/1939, the European Public Prosecutor's Office (EPPO) may investigate and prosecute fraud and other criminal offences affecting the financial interests of the Union as provided for in Directive (EU) 2017/1371 of the European Parliament and of the Council. In accordance with the Financial Regulation, any person or entity receiving Union funds is to fully cooperate in the protection of the Union’s financial interests, to grant the necessary rights and access to the Commission, OLAF, the EPPO and the European Court of Auditors and to ensure that any third parties involved in the implementation of Union funds grant equivalent rights to the Commission, OLAF, the EPPO and the European Court of Auditors. (48)Since the objectives of this Regulation cannot be sufficiently achieved by the Member States alone, but can rather be better achieved at Union level, the Union may adopt measures in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Regulation does not go beyond that which is necessary to achieve that objective (49)This Regulation should not affect the continuation and modification of support measures approved by the Commission on the basis of Regulation (EU) 2017/825 or any other Union act applying to that assistance by 31 December 2020. Measures approved under Regulation (EU) 2017/825 should therefore remain valid. To that effect, a transitional provision should also be laid down, HAVE ADOPTED THIS REGULATION: CHAPTER I

General provisions

Article 1

Subject matter This Regulation establishes the Reform Support Programme (‘the Programme’). It lays down the objectives of the Programme, the budget for the period 2021 – 2027, the forms of Union funding and the rules for providing such funding. Article 2

Definitions For the purposes of this Regulation, the following definitions apply: 1.‘technical support’ means measures that help Member States to carry out institutional, administrative and growth-sustaining structural reforms, including measures that help Member States, whose currency is not the euro, to prepare for participation in the euro area; 2.‘financial support’ means a financial contribution to a Member State for the purpose of the implementation of structural reforms identified in the context of the European Semester process in accordance with Article 2-a of Council Regulation (EC) No 1466/97, and for the purpose of implementation of reforms that are relevant for preparation for participation in the euro area; 3.‘national authority’ means one or more public authority at the level of government, including those at regional and local levels[, as well as Member State organisations pursuant to [Article 2(42)] of the Financial Regulation, cooperating in a spirit of partnership in accordance with the Member States' institutional and legal framework; 4.‘Union funds’ means the funds covered by Regulation (EU) YYY/XX of the European Parliament and of the Council [CPR successor]; 5.‘international organisation’ means an organisation within the meaning of Article 156 of the Financial Regulation, and organisations assimilated with such an international organisation pursuant to that Article; and 6.‘eligible Member State’, under the convergence facility, means a Member State, whose currency is not the euro and which has taken demonstrable steps towards adopting the single currency within a given time-frame, in its preparation to join the euro area. Demonstrable steps shall consist of a formal letter from the government of the Member State concerned to the Commission stating its clear commitment to join the euro area within a reasonable and defined timeframe and presenting a credible time-bound roadmap, after consultation with the Commission, for implementing concrete measures to prepare for successful participation in the euro area, including steps to ensure full alignment of its national legislation with the requirements under Union law (including the Banking Union). Article 3

Structure of the Programme The Programme shall be made up of the following instruments: (a)the reform delivery tool; (b)the technical support instrument; and (c)the convergence facility for euro-area membership preparation. Article 4

General objectives The Programme shall support the following general objectives, in all Member States: (a)to contribute to addressing national reform challenges of a structural nature aimed at improving the performance of the national economies and at promoting resilient economic and social structures in the Member States, thereby contributing to cohesion, competitiveness, productivity, growth and employment; and (b)to contribute to strengthening the administrative capacity of the Member States in relation to challenges faced by institutions, governance, public administration, and economic and social sectors.

Article 5

Specific objectives 1.To achieve the general objectives set out in Article 4, the Programme shall have specific objectives, which shall be pursued in close cooperation with the Member States concerned. 2.The Programme has the following specific objectives: (a)as regards the reform delivery tool, the Programme shall provide Member States with financial incentives with a view to achieving the milestones and targets of the structural reforms as set out in the reform commitments entered into by Member States with the Commission. (b)as regards the technical support instrument, the Programme shall support the efforts of the national authorities in improving their administrative capacity to design, develop and implement reforms, including through exchange of good practices, appropriate processes and methodologies and a more effective and efficient human resources management; (c)as regards the convergence facility for euro-area membership preparation the Programme shall: (i) provide financial incentives to eligible Member States to help them achieve the milestones and targets of reforms that are relevant for preparation for euro-area participation, as set out in the reform commitments entered into by Member States with the Commission; and (ii) support the efforts of national authorities of eligible Member States in improving their administrative capacity to design, develop and implement reforms relevant for preparation for euro-area participation, including through exchange of good practices, appropriate processes and methodologies and more effective and efficient human resources management. Article 6

Scope The general and the specific objectives set out in Articles 4 and 5 shall refer to policy areas related to cohesion, competitiveness, productivity, research and innovation, smart, sustainable, and inclusive growth, jobs and investment, and in particular to one or more of the following: (a)public financial and asset management, budget process, debt management and revenue administration and policies aimed at combating tax evasion; (b)institutional reform and efficient and service-oriented functioning of public administration and e-government, including, where appropriate, through the simplification of rules, effective rule of law, reform of the justice systems and reinforcement of the fight against fraud, corruption and money laundering; (c)business environment, including for small and medium-sized enterprises, re-industrialisation, private sector development, product and service markets, investment, public participation in enterprises, privatisation processes, trade and foreign direct investment, competition and public procurement, sustainable sectoral development and support for research and innovation and digitisation; (d)education and training, labour market policies, including social dialogue, for the creation of jobs, digital skills, the fight against poverty, the promotion of social inclusion, social security and social welfare systems, public health and healthcare systems, as well as cohesion, asylum, migration and border policies; (e)policies for implementing climate action, mobility, promoting energy and resource efficiency, renewable energy sources, achieving energy diversification and ensuring energy security, and for the agricultural sector, fisheries and the sustainable development of rural areas; and (f)financial sector policies, including: the promotion of financial literacy, financial stability, access to finance and lending to the real economy; and production, provision and quality monitoring and reporting of data and statistics. Article 7

Budget 1.The financial envelope for the implementation of the Programme for the period 2021-2027 shall be EUR 25 000 000 000 in current prices. 2.The indicative distribution of the amount referred to in paragraph 1 shall be: (a)up to EUR 22 000 000 000 for the reform delivery tool;

(b)up to EUR 840 000 000 for the technical support instrument; (c)up to EUR 2 160 000 000 for the convergence facility, of which: (i) up to EUR 2 000 000 000 for the financial support component; and (ii) up to EUR 160 000 000 for the technical support component. Where, by the 31 December 2023, under the convergence facility, a non-euro-area Member State has not taken demonstrable steps to adopt the single currency within a given time-frame, the maximum amount available for that Member State under the financial support component of the convergence facility pursuant to Article 26 shall be reallocated to the reform delivery tool referred to in point (a) of the first subparagraph of this paragraph. The Commission shall adopt a decision to that effect after having given the Member State concerned the possibility to present its observations within a period of two months of the communication of its conclusions. 3.The financial envelope for the Programme may also cover expenses pertaining to preparatory, monitoring, control, audit and evaluation activities, which are required for the management of the Programme and the achievement of its objectives, in particular studies, meetings of experts, information and communication actions, including corporate communication of the political priorities of the Union, in so far as they are related to the objectives of this Regulation, expenses linked to IT networks focusing on information processing and exchange, including corporate information technology tools, and all other technical and administrative assistance expenses incurred by the Commission for the management of the Programme. Expenses may also cover, under each of the three instruments referred to in Article 3, the costs of other supporting activities such as quality control and monitoring of technical support projects on the ground and the costs of peer counselling and experts for the assessment and implementation of structural reforms. 4.Resources allocated to Member States under shared management may, at their request, be transferred to the Programme. The Commission shall implement those resources directly in accordance with point (a) of Article 62(1) of the Financial Regulation or indirectly in accordance with point (c) of that Article. Where possible those resources shall be used for the benefit of the Member State concerned. CHAPTER II

Reform Delivery Tool Article 8

Eligible reforms Pursuant to the objectives set out in point (a) of Article 4 and point (a) of Article 5(2), structural reforms eligible for financing under the Programme shall be those reforms aimed at addressing challenges identified in the context of the European Semester of economic policy coordination. Article 9

Maximum financial contribution Annex I lays down a maximum financial contribution available for each Member State out of the overall envelope of the reform delivery tool referred to in point (a) of Article 7(2). Such a maximum financial contribution is calculated for each Member State using the criteria and methodology set out in that Annex, based on the population of each Member State. Such a maximum financial contribution shall be available for allocation to each Member State, in part or in full, at each stage and call of the allocation process set out in Article 10. Article 10

Allocation process and calls 1.The allocation process of the maximum financial contribution available for each Member State, referred to in Article 9, shall take place in stages and calls. For each stage and at each call, Member States may propose to receive up to the full amount of the maximum financial contribution, referred to in Article 9, to fulfil reform commitments proposed in accordance with Article 11. 2.For a period of twenty months from the date of application of this Regulation, the Commission shall make available for allocation EUR 11 000 000 000, which represents 50% of the overall envelope referred to in point (a) of Article 7(2). Each Member State may propose to receive up to the full amount of the maximum financial contribution, referred to in Article 9, to fulfil reform commitments proposed in accordance with Article 11. 3.For the period starting after the end of the period referred to in paragraph 2, the Commission shall make available for allocation EUR 11 000 000 000, which represent the remaining 50% of the overall envelope for the reform delivery tool referred to in point (a) of Article 7(2), plus the amount that has not been allocated in accordance with paragraph 2, on the basis of calls organised and published under the reform delivery tool. The first call shall be for allocating EUR 11 000 000 000. 4.Where, after the first call referred to in paragraph 3, the available overall envelope referred to in point (a) of Article 7(2) has not been fully allocated pursuant to paragraphs 2 and 3, the Commission shall organise further calls. To that effect, it shall adopt and publish an indicative calendar of the further calls to be organised in that period, and shall indicate, at each call, the remaining amount of the overall envelope referred to in point (a) of Article 7(2). 5.Should the remaining amount referred to in paragraph 4 not be sufficient to cover the financial contributions to Member States having submitted a proposals under a call, as determined in accordance with Article 12, the allocations to the Member States concerned shall be adjusted proportionally i