EN Official Journal of the European Union C 303/94

Opinion of the European Economic and Social Committee on the ‘Communication from the Commission — Investing in jobs and growth — maximising the contribution of European Structural and Investment Funds’

(COM(2015) 639 final)

(2016/C 303/13)

Rapporteur: Dimitris DIMITRIADIS

On 14 December 2015, the European Commission decided to consult the European Economic and Social Committee, under Article 304 of the Treaty on the Functioning of the European Union, on the:

Communication from the Commission — Investing in jobs and growth — maximising the contribution of European Structural and Investment Funds

(COM(2015) 639 final).

The Section for Economic and Monetary Union and Economic and Social Cohesion, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 14 April 2016.

At its 517th plenary session, held on 25 and 26 May 2016 (meeting of 25 May), the European Economic and Social Committee adopted the following opinion by 182 votes to 1 with 1 abstention.

1. Conclusions and recommendations

1.1 The European Economic and Social Committee (EESC) welcomes the new approach under Article 16(3) of the Common Provisions Regulation (1) of summarising and presenting the results of negotiations between Member State (MS) authorities and their partners in order to provide an overview of the main achievements of this process. The EESC believes that this offers the necessary starting-point for assessing and monitoring the effective and efficient use of the scarce resources available for the financial period 2014-2020 and for better monitoring of performance and progress towards achieving indicator targets.

1.2 The EESC supports the efforts of the European Commission to maximise the impact of the European Structural and Investment Funds (ESIFs) and supports the view that this should be the top priority in the post-crisis period. However, it warns that there is a particular need, both at EU and at MS level, to improve simplification for beneficiaries, and for more precise targeting to meet their needs.

1.2.1 In this regard, the EESC calls for closer involvement of and cooperation between the social partners and stakeholders in the work of the High Level Group of Independent Experts on Monitoring Simplification for Beneficiaries of the European Structural and Investment Funds (2), and calls on the Commission to ensure more effective and transparent communication on the composition and work of the high level group. The EESC is convinced that the social partners and other stakeholders could contribute to the identification of both good and bad practices, and help in introducing simplification options in their MS.

1.3 The EESC welcomes the new ESIF regulations (3) as they establish thematic concentration and focus on possible ways of mitigating the negative effects of the crisis. The EESC particularly appreciates the new instruments and approaches such as the Youth Employment Initiative (YEI), the European Alliance for Apprenticeships and the new fund to combat poverty (4).

1.4 At the same time, the EESC expresses its concern about issues that are still unclear in the Regulations shaping the use of the ESIFs.

1.4.1 The EESC warns that whenever the decisions and risks involved are passed on to the MS, there is a high probability that they will adopt too conservative an approach to avoid possible sanctions from the Commission, thereby preventing a large proportion of eligible beneficiaries from accessing the ESIFs.

1.4.2 The EESC calls for simplified procedures for group exemptions from the state aid rules for organisations representing disabled people and groups of beneficiaries in vulnerable positions.

1.5 The EESC praises the Commission for taking a step forward in adopting the European Code of Conduct on Partnership (5), which governs the involvement of the social partners and other stakeholders at all stages of programming, as well as their participation in both the decision-making process and the implementation and monitoring of ESIFs.

1.6 On the other hand, the EESC has some concerns about the way these regulations and the new instruments and approaches are applied in the MS, as the different practices employed at national level place the social partners in an unequal position. For example, the European Code of Conduct on Partnership is not fully implemented and respected by all MS: the social partners are not adequately recognised in the implementation of the YEI and the importance of their joint action is not fully recognised by all MS, which is reflected in the failure to tap their potential for coping with the negative effects of the crisis, better managing industrial change and creating jobs and growth. The EESC proposes to the Commission that legal and practical measures to guarantee full implementation of the partnership principle and the code of conduct be adopted by no later than the end of 2016 and that more specific provisions and measures be put in place to avoid these different practices at national level.

1.7 The EESC calls for a mid-term review of the regulations governing investment through the ESIFs and especially of those concerning state aid (6), since these generate the greatest amount of uncertainty — for both the MS and beneficiaries — and are the main source of the risk of financial correction. This should be part of the Commission communication and proposal for a Council regulation on the mid-term review of the Multiannual Financial Framework (MFF) 2014-2020. The EESC urges the Commission to maintain the course set out in the Political Guidelines of the Juncker Commission (7), which state that the ‘investment environment has to be improved and fund absorption needs to be strengthened’.

1.8 Public procurement is another area of uncertainty and constant problems, and the EESC expresses its regret that during the last 10 years no workable solution, valid for all MS, has been found that provides for a highly transparent, swift and efficient way of choosing subcontractors when the ESIFs are used. The specific national regulations on public procurement add further complexity to this area.

1.9 The EESC believes that the EU funds should be used chiefly not only to achieve the targets of Europe 2020 but also for more investments in the real economy. The Commission should introduce quantified evaluation of the effectiveness and efficiency of the contribution of funds already invested.

1.10 Last, but not least, the EESC urges the Commission to devote more effort to extending the coverage of the Small Business Act at national and regional levels and to oblige the MS to implement it, especially when it comes to ESIF investment.

2. Background and legislative basis

2.1 Article 16(3) of the Common Provisions Regulation (8) tasks the Commission with summarising and presenting the results of negotiations between MS authorities and their partners, in order to provide an overview of the main achievements of this process.

2.2 The efforts of the Commission to maximise the impact of the ESIFs and to improve simplification for beneficiaries are also reinforced by the creation of the High Level Group (9) monitoring simplification for ESIF beneficiaries.

2.3 New ESIF regulations (10) were adopted to provide better regulation for the current programming period and to establish thematic concentration. The Commission, in close cooperation with the MS and the social partners, has developed new instruments and approaches such as the Youth Employment Initiative (YEI), the European Alliance for Apprenticeships and the new fund to combat poverty (11).

2.4 The Commission adopted the European Code of Conduct on Partnership (12), which governs the involvement of the social partners and other stakeholders at all stages of programming and their participation in both the decision-making process and the implementation and monitoring of ESIFs.

3. General comments on ESIF investments in today’s socio-economic context

3.1 ESIFs as a key driving force of economic and social cohesion and source of public investment

3.1.1 During a time of crisis, it is natural for the role of the ESIFs to be growing, especially in the MS that are most affected by the crisis. Nevertheless, the ESIFs should by no means replace public and especially private investment, but rather must create the conditions for boosting such investment. The EESC calls upon the Commission and the MS to continue their efforts to improve private investment and the business environment, as already outlined in relation to the third strand of the Investment Plan for Europe (13) and the European Fund for Strategic Investments, which will become a major development tool only if they can work with the ESIF. The Commission should assess how the fund's investments affect private investments and calculate the co-efficient of the push effect in the real sector.

3.1.2 The EESC regrets that the current communication only deals with the outcome of the negotiations for the current programming period and does not summarise and build on lessons learned from the past. It is necessary for the Commission to analyse carefully the real impact of investing EU funds during the previous programming period and to draw very specific conclusions regarding the positive and negative experiences as a starting-point for adding value to the investment process.

3.1.3 The EESC has the impression that although the Commission communication emphasises ‘investing in jobs and growth’ in the title, the text of the document lacks any special focus on employment and job creation. The EESC recommends that the Commission give more attention to the impact of different policies on promoting employment and reducing unemployment, in order to assess whether and to what extent invested funds have had a real impact on the labour market.

3.2 Framework for more effective ESIFs

3.2.1 As already stated in recent opinions (14), the EESC is of the view that the outdated and extremely broad definition of SMEs means that using this term leads to an overly wide policy focus which impedes the delivery of specific and tangible results. Moreover, unless more precise segmentation criteria are applied, the reporting of results achieved is misleading, since according to the current definition SMEs account for 98 % of European businesses. Using such broad segmentation criteria makes it impossible to gather and process information with a view to assessing the real improvement in the situation for the different groups of vulnerable companies that are important to creating and maintaining jobs and badly need support in doing so — e.g. micro-businesses and companies in remote and rural areas. Such companies, even if they are not innovative, highly competitive or sophisticated, nevertheless make a valuable contribution to regional development and cohesion.

3.2.1.1 The EESC strongly calls for an immediate update of the definition of SMEs so as to ensure greater clarity, for a distinction to be drawn between different categories of SMEs in order to better target their needs and expand and diversify the sources of information for them, and for improved coordination of the sources and methods of gathering information about various SMEs and the methods of processing and analysing statistical data between MS.

3.2.2 The widely advocated use of financial instruments is being undermined by many cases of misuse due to a lack of information and effective monitoring at MS level. For example, financial instruments designed to provide low-interest loans to SMEs in many cases do not reach those SMEs that lack financing but instead are used by well-financed SMEs to further decrease their financing costs. The same goes for financial guarantees for SMEs. In most cases, this situation is not even recognised due to a lack of adequate assessment mechanisms and of a system for collecting feedback from end-users.

3.2.3 The efforts of the Commission to improve simplification for beneficiaries are commendable, but simplification should not be carried out without the participation of end beneficiaries. In this regard, it is a pity that the methods used by the MS for receiving feedback from beneficiaries are too bureaucratic and targeted too broadly. In most cases these fail to explore in depth the real cause of the problems and therefore fail to deliver workable solutions. The Commission should bear in mind that SMEs have different needs: easier access to finance, greater access to accompanying measures, coaching and mentoring, etc.

3.2.4 One of the main obstacles companies face is the lack of proper and timely information. The Commission constantly states that information must be complete and affordable, and that all procedures should be transparent but effectual. In this regard, the Commission itself has made access to funding opportunities rather complicated. Businesses, especially micro and small enterprises, should know where to search for information about the various programmes and projects that are supported directly by the Commission. Whilst central information portals for all operational programmes and financial instruments are available in the MS, there should be such a portal at EU level as well.

3.2.4.1 The information provided should be user-friendly to ensure efficient communication and so that it is fully understood by all relevant participants in the funding process. The EESC calls on the Commission to try to avoid complicated call guidance and give a chance to projects with high potential prepared by companies themselves, not by professional application writers. The EESC strongly recommends that the Commission assess the work of its European contact office and to take urgent measures where there is inefficiency, as the officers often provide different, confusing and consequently unclear information, which is sometimes even contradictory.

3.2.5 The EESC strongly recommends that the Commission develop and establish a user-friendly portal that provides a brief description of all funding options at EU level and links to the webpage of each individual programme. The Commission has already gained valuable experience with the TED portal, which is user-friendly and provides a lot of information.

3.2.6 The same applies to reporting on projects that have already been approved or even completed. The Commission has no public, summarised statistics on projects already approved for financing by countries under the individual programmes. The information is incomplete and is fragmented across various electronic formats.

3.2.7 There should be detailed analysis of the impact of projects implemented during the previous programming period, including the failures and the extent to which the funds invested contributed to achieving the European objectives. There is no assessment of the effect of ESIFs on SMEs and of their contribution to boosting competitiveness. Often MS and the Commission forget that the main generator of new jobs is SMEs and that they need more and better targeted support.

3.2.8 The EESC is concerned about the extent to which the auditors working at the Commission are adopting the simplification of procedures and costs. Often an overly formal, administrative approach can be observed, which indicates that the auditors need more practical experience of the audited sector. The EESC therefore recommends detailed communication about the simplification procedures between experts in the different DGs and Commission auditors, as rules for spending the funding are quite often interpreted differently.

3.2.9 The EESC also strongly recommends introducing simplified cost options under the ESF. For example, under Article 14(1), the task of defining simplified cost options is delegated by the Commission to the MS, which is inappropriate (15) According to the guidelines for applying simplified cost options under Article 14(1), the MS express their opinions about defining the simplified cost based on their research and then the Commission adopts a delegated act, which, however, unnecessarily complicates the procedure and undermines the discretion given to the MS. A solution would be for the Commission to define standard scales of unit costs and lump sums for typical European Social Fund (ESF) activities, the calculation of which would not be subject to audit.

3.2.10 The EESC believes that it would be useful to further reduce indicators in the operational programmes (OPs). The introduction of common indicators was a good starting point, but certain OPs still have a large number of specific indicators, some of which were artificially introduced by the Commission during the negotiation process. The EESC is of the view that the focus when monitoring OPs should be shifted away from specific indicators towards common indicators, as this will allow for better comparison between single OPs in different MS.

3.2.11 The EESC would welcome greater use of outcome (as opposed to output) indicators across the ESIFs and would also encourage a focus on the discrete contribution of the ESIFs to growth and the development of environmental indicators to capture the new cross-cutting emphasis on the environment.

3.2.12 The EESC welcomes in principle the fact that more flexibility and room for manoeuvre are offered to beneficiaries by local development tools (such as Integrated Territorial Investment and Community-Led Local Development) (16). However, the EESC wonders to what extent these instruments can really be used on the ground, given their high complexity and the lack of clarity as to practical arrangements and the division of funding, tasks and responsibilities between the different operational programmes.

4. Expected achievements of the ESIF programmes

4.1 R&I, ICT and SME development

4.1.1 The EESC insists as far as research and innovation (R&I) is concerned that the international economic and technological environment and trends should be observed and monitored very closely and taken directly into consideration when shaping specific action at EU level, and that this information should then be passed on to MS level. In addition, since developments unfold extremely rapidly in these areas, it is necessary to design a framework that offers a very high degree of flexibility so that measures can be adapted.

4.1.2 It is necessary for the Commission to consider exactly what type of incubators and technological centres were set up during the last programming period and how sustainable they have been, and to determine exactly what results were achieved through their contribution to R&I in the EU — by comparison with the main global competitors — before continuing to support these arrangements. There are many concerns about the added value of incubators and technology centres for promoting R&I and about the transparency of their funding in general. The EESC calls for in-depth analysis and measurement of investments vs benefit at operational level, and as regards return on investment, added value and sustainable outputs.

4.1.3 The EESC strongly supports the efforts to promote the digital single market and the quoted achievements, which are estimated to affect 14,6 million households and 18,8 million people. However, it would be useful to know whether these figures relating to households and people are based on a proper analysis, including actual percentages of total European households and population. The EESC cannot gauge whether or not the support envisaged for companies will be sufficient to guarantee the achievement of these goals, and therefore calls on the Commission to carry out a thorough impact assessment, which should also include indicators of improvement in terms of more and better jobs and of European citizens' welfare and living standards. Digitalisation of services does not necessarily mean that the jobs created are decent and of good quality. The lack of in-depth research into the impact of digitalisation on the labour market jeopardises the achievement of the Europe 2020 goals. The EESC has already expressed its concerns about digitalisation and its influence on social security systems in recent opinions (17).

4.1.4 The EESC considers the proportion of SMEs supported and the expected number of jobs created to be totally inadequate and would like to see stronger achievements in this regard. The Committee calls on the Commission to establish European benchmarks and to closely assess and monitor the performance of the MS against these.

4.1.5 The EESC has some concerns about the way funding is allocated between companies for programmes directly funded by the Commission, as companies in certain MS are obviously in a better position. For example, according to official statistics a total of 36 732 eligible proposals were submitted under Horizon 2020. The first 100 calls break down as follows: 29 794 full proposals in single-stage calls, 5 617 outline proposals in the first stage of the two-stage calls, and 1 321 full proposals in the second stage of the two-stage calls. However, most of the applications came from the five biggest MS: the United Kingdom, Italy, Germany, Spain and France. These are countries with a large number of approved projects, while other countries have very low success rates. The EESC therefore strongly recommends that a thorough analysis of this situation be carried out soon, and that measures be developed and implemented to improve the dissemination of information and promote equal access and ensure geographical balance.

4.1.6 The situation is the same with the large-scale projects and with the appointed evaluators, where there is a much lower participation rate among the new MS. This explains why some countries have a poor innovation profile: they have no access to fresh funding coming directly from the EU. This issue should be addressed promptly and efficiently.

4.2 Environment, climate change, energy and transport

4.2.1 The EESC welcomes the estimated contribution to energy efficiency, but would like these estimates to be expressed in relative terms so as to have a clearer picture of the overall achievement of the goals relating to environmental protection and combating climate change.

4.2.2 The communication notes that six MS plan to use around EUR 2 billion for smart electricity and gas infrastructure. The question is whether the Commission has made sure that these plans create synergies and added value at EU level, as opposed to being uncoordinated.

4.2.3 The EESC draws attention to the lack of methodology, analysis and assessment of how effective renewable energy sources are and how using them tackles climate change. It is not clear whether climate change is due to pollution from the use of conventional energy sources, to industrial production or to increased car traffic and the gases this emits into the environment. The introduction of alternative energy sources may adversely affect economic growth because the energy produced is costlier. Win-win solutions need to be sought to avoid this.

4.2.3.1 In order to address this issue of competitiveness, the EESC recommends that the Commission carry out an analysis of the real impact of using renewable energy sources and the degree of pollution produced by each conventional source. Funding allocated to combat climate change can thus be targeted more effectively, for example to develop new technologies for clean cars at low cost and with a high degree of safety.

4.3 Employment, social inclusion and education

4.3.1 The EESC observes with great regret that there is still no coherent and integrated policy on migration and management of refugee flows. The thousands of young people and children entering European territory over the past 2 years have led to a situation where there is a high risk of people falling below the EU poverty line. Instruments and policies in this area also vary across the different MS.

4.3.2 The EESC views the integration of refugees as an important and urgent policy matter, but regional policy and regional funds are not enough to tackle this complex challenge: a specific policy and funds need to be introduced.

4.3.3 There has been a long delay in implementing the YEI. The EESC has always encouraged active involvement of civil society in this work, we continue to urge in particular that the MS should include youth organisations and youth services in delivering the YEI. The EESC believes that further analyses are needed in order to determine the reasons for the YEI’s slow start. As youth unemployment is a serious problem for the labour markets of many EU countries, the Commission should ensure more efficient implementation of the YEI. A possible solution is to further extend the deadline set in Article 22(a) of Regulation No 779/2015. The guideline for verification was adopted by the Commission on 17 September 2015, which does not allow sufficient time for the MS to adopt their management structures to meet the deadline.

4.3.4 The Commission should establish a special web portal for implementation of the YEI and show statistics for the targets already achieved. The EESC recommends that the Commission collect information from the MS, as 2 years have already passed since the initiative was launched.

4.3.5 The EESC believes that the Commission should be conscious of the fact that inactive young people are not a homogeneous group and therefore require different levels of support and intervention to fully participate in education, training and employment. All this should be in line with the actual needs of the respective labour market, so as to ensure better prospects for future employment. To this end, the EESC recommends more involvement of young people and their organisations, in close cooperation with potential employers and their respective organisations in the implementation of the YEI and a move away from purely administrative approaches that do not allow flexibility in YEI national action plans.

4.3.6 Education is the key to the future economic growth and development of the MS, and to increasing the competitiveness of the EU among other world markets. The lack of high-qualified workers in all MS has very serious negative effects. Moreover, the gap between supply and demand is concentrated in several sectors — engineering, high technologies, telecommunications, etc. The EESC believes that the growing gap between labour market realities and the education system will create specific structural obstacles to production in the next 10 to 15 years. The EESC recommends that funding for education should be more focused on increasing the attractiveness and quality of vocational education/training courses and that reforms be undertaken to ensure that education is more effectively geared to labour market needs and is in accordance with the needs of MS for different professions, disciplines, sectors and industries. The Commission should invest more in adult education too as adults make up the largest group of unemployed and employed people and they need advanced skills and to update their knowledge, especially in new technologies.

4.4 Strengthening institutional capacity and efficient public administration

4.4.1 Functional analyses should be carried out in each MS with the aim of strengthening the institutional capacity of public authorities, and a European platform for exchanging information should be set up. Reforms of public administration and judicial systems in the MS must be preceded by an impact assessment for funding spent during the previous programming period.

4.4.2 The EESC is concerned that during the 2007-2013 programming period the Commission implemented a form of ex-post conditionality. The new measures introduce ex-ante conditionality during the current programming period, assessing whether the conditions necessary for the effective implementation of funds are in place before investment commitments have been determined, as well as a more contentious form of macroeconomic conditionality. In the latter case, allocation of funding is conditional on national governments and regions already having strong economic growth, well-organised administrations and high-quality public services. The Commission reserves the right to suspend funding if these preconditions are not fulfilled.

4.4.3 The EESC considers simplification to be one of the most important factors for success in implementing the programme. Although there are sufficient incentives within the regulatory framework for this programming period to speed up the process, there is still room for more tailored support from the Commission to the MS. The Commission's view regarding the acceptability of different practices should be expressed more clearly, in order to help those MS with less experience make use of the different options for simplification (for example, simplified cost options), so that there can be more confidence in the end results. The EESC is concerned about the fact that the communication mentions 750 ex-ante conditionalities to be met by the MS (18).

5. European territorial cooperation/INTERREG

The EESC strongly recommends that the Commission establish more non-GDP indicators for measuring quality of life and quality of economic growth.

5.1 The EESC has concerns regarding how effective the programmes will be with local and regional authorities still in debt, albeit the increase in public debt stems mainly from the activities of the central authorities. This means that some regions or municipalities are excluded from financing.

5.2 The ESIF regulation is quite conservative and sets legal limits on reprogramming the existing partnership agreements. This approach is somewhat impractical and will be unworkable if another crisis occurs. The burdensome procedures hamper flexibility in the application of the ESIFs and could impede achievement of the Europe 2020 objectives.

5.3 Territorial cooperation programmes should be more widely open to local authorities, by applying the principles of administrative division of the individual MS less strictly. This is because many communities falling under the authority of administrative municipalities or areas may not participate in calls independently because they have to obtain the approval of a higher authority. This hinders the development of small communities in mountainous areas in particular.

6. Country fiches

6.1 The Commission should be more assertive in monitoring the implementation of recommendations in individual MS and not least in ensuring their promotion and a commitment to the process in other MS. All of these recommendations should be implemented with greater involvement of the social partners. It is noteworthy that in recent years there has been a growing level of dissatisfaction with the ongoing reforms in many countries. Reforms are often imposed without taking into consideration the traditions of different nations. The legislation adopted at European level is implemented very liberally in some MS and very conservatively in others. That is why greater ownership is needed on the part of social stakeholders.

6.2 The MS face a very complicated procedure for reprogramming that will lead to more red tape, since it entails the same requirements as preparing a partnership agreement (performance indicators, conditions, etc.), which means involving more experts and agreeing to additional expenditure. Burdening current employees with too many additional obligations can make them less effective in their work — the opposite of the desired effect.

6.3 The social partners and other stakeholders represented on the monitoring committees of the OPs often complain about the power of the national administration when decisions are made, and about the pressure to present financial figures instead of focusing on real improvements. They also complain about the lack of cost-benefit analysis.

Brussels, 25 May 2016. The President of the European Economic and Social Committee Georges DASSIS

(1) Regulation (EU) No 1303/2013.

(2) Commission Decision of 10 July 2015, C(2015) 4806 final.

(3) OJ L 270, 15.10.2015, p. 1; OJ L 347, 20.12.2013, p. 289; OJ L 347, 20.12.2013, p. 259; OJ L 347, 20.12.2013, p. 259; OJ L 347, 20.12.2013, p. 487.

(4) COM(2012) 727 final; COM(2013) 144 final; OJ C 120, 26.4.2013, p. 1; OJ L 72, 12.3.2014, p. 1.

(5) OJ L 74, 14.3.2014, p. 1.

(6) OJ L 352, 24.12.2013, p. 1; OJ L 204, 31.7.2013, p. 11; OJ L 248, 24.9.2015, p. 9.

(7) https://ec.europa.eu/priorities/publications/president-junckers-political-guidelines_en.

(8) See footnote 1.

(9) The group is charged with identifying both good and bad practices, and helping to disseminate simplification possibilities among Member State authorities. Its work will contribute to the achievements of the general objectives of better regulation and the ‘budget focused on results initiative’, COM(2015) 639, p. 6.

(10) See footnote 2.

(11) See footnote 3.

(12) See footnote 4.

(13) An Investment Plan for Europe, COM(2014) 903 final.

(14) Green Paper on Building a Capital Markets Union; Access to finance for SMEs; Family Business in Europe as a source of renewed growth and jobs.

(15) Article 14(1) of Regulation (EU) No 1304/2013 states ‘In addition to the options referred to in Article 67 of Regulation (EU) No 1303/2013, the Commission may reimburse expenditure paid by Member States on the basis of standard scales of unit costs and lump sums defined by the Commission’.

(16) Community Led Local Development (CLLD).

(17) OJ C 13, 15.1.2016, p. 40.

(18) Communication from the Commission on Investing in jobs and growth — maximising the contribution of European Structural and Investment Funds, COM(2015) 639 final, p. 14.