EUROPEAN COMMISSION Strasbourg, 29.5.2018 SWD(2018) 282 final COMMISSION STAFF WORKING DOCUMENT



IMPACT ASSESSMENT

Accompanying the document Proposals for a



REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

on the European Regional Development Fund and on the Cohesion Fund



on a mechanism to resolve legal and administrative obstacles in a cross-border context



on specific provisions for the European territorial cooperation goal (Interreg) supported by the European Regional Development Fund and external financing instruments

{COM(2018) 372 final}

{SEC(2018) 268 final}

{SWD(2018) 283 final}



Table of Contents 1.Introduction: Political and legal context 1.1.Scope and context 1.2.Lessons learned from previous programmes 2.The objectives 2.1.Challenges for the programmes of the next MFF 2.2.Objectives 3.Programme structure and priorities 3.1.Subsidiarity and added value of the ERDF and CF 3.2. Policy options29 3.3. Simplifying and consolidating the priority objectives39 3.4. Coherence and synergies with other policies52 4.Delivery mechanisms of the intended funding59 4.1.Programming: flexibility for emerging needs, return to "n+2"59 4.2.Enabling conditions and governance60 4.3.Simplification62 4.4.Financial instruments ("FIs"): simplification and streamlining66 4.5.Performance, flexibility and simplification: conclusions on the new system of priorities and delivery68 5.How will performance be monitored and evaluated?69

5.1.Monitoring69 5.2.Evaluation74 1.Lead DG(s), Decide Planning/CWP references76 2.Organisation and timing76 3.Consultation of the Regulatory Scrutiny Board (RSB)76 4.Evidence, sources and quality78 Figures, maps and tables Figure 1 - ERDF planned spending by key priorities 2014-20 (EUR bn) Figure 2 - CF Planned spending, 2014-20 (EUR bn) Figure 3 - Impact of 2021-2027 ERDF and CF programmes on GDP, 2030 Figure 4 - ERDF and CF as % of public investment, 2015-2017 Figure 5 - Thematic concentration increases under the preferred option Figure 6 – Impact of the options on EU GDP Figure 7 - GDP impact of the preferred option 3, 2030 and 2040 Figure 8 - Impact of 2020-2027 RTD programmes on EU-27 GDP, 2020-2035 Figure 9 - What do you see as the main benefit of the performance framework?

Map 1 - ERDF eligibility 2014-20 Map 2 - Cohesion Fund eligibility 2014-20 Map 3 - Impact of 2020-2027 regional policy programmes on GDP, 2030 Map 5 - Risk factors linked to globalisation and technological change Map 6 - Regional distribution of FP7 expenditure Map 7 – RTD component of 2020-2027 ERDF: impact on regional GDP, 2030 Table 1 – ERDF and CF envelope for 2021-27 Table 2 - EU and national contributions to the ERDF, 2014-20 (euro billion) Table 3 - EU and national contributions to the CF and ERDF, 2014-20 (euro billion) Table 4 - Evaluation lessons: what was addressed in 2014-20, what remains? Table 5 - Links between challenges and policy proposals Table 6 - Firms supported and jobs created 2014-20 Table 7 – Comparison of key features of baseline and options Table 9 - % impact on GDP 2030 and 2040 31 Table 10 - Thematic concentration thresholds 36 Table 11 - EU and national contributions to the ERDF and CF, 2014-20 (euro billion) 37 Table 12 - Proposed priorities in the new period with target indicators 43

Table 13 - The complementary roles of FP9, COSME and ERDF 51 Table 14 - Main monitoring data collected for ERDF and CF 2014-2020 68 Table 15 - Evaluations planned by Member States 2014-2020 73 Glossary Term or acronym Meaning or definition AMIF Asylum and Migration Fund CEF Connecting Europe Facility CF Cohesion Fund Cohesion Policy CF, ERDF and ESF COSME EU programme for competitiveness of SMEs CPR Common Provisions Regulation. Will provide common regulations for all shared management funds (including ESI Funds and AMIF) DEP Digital Europe Programme DG REGIO Directorate General for Regional and Urban Policy EAFRD European Agricultural Fund for Rural Development EMFF European Maritime and Fisheries Fund ERDF European Regional Development Fund ESF European Social Fund ESI Funds European Structural and Investment Funds – the collective name for CF, EAFRD, EMFF, ERDF and ESF ETC European Territorial Cooperation ("Interreg") EU European Union EU-13 All Member States that joined the EU since 2004 FI Financial Instrument. In the context of ERDF and CF this will typically be loan, equity or guarantee. FP7 and 9 7th and 9th EU Framework Programmes for Research and Innovation GDP Gross Domestic Product GNI Gross National Income IA Impact Assessment ICT Information and communication technology MFF Multi-annual Financial Framework OPs Operational Programmes – individual regional or national programmes for the ERDF. QUEST Macroeconomic model, used to model impact of ERDF and CF RIS3 Research and Innovation Strategies for Smart Specialisation RSB Regulatory Scrutiny Board Rhomolo Macroeconomic model, used to model impact of ERDF and CF TEN-E, TEN-T Trans-European Energy and Transport Networks TO Thematic Objective 1.Introduction: Political and legal context 1.1.Scope and context "What should the future EU budget focus on? First, reducing economic and social divergences between and within Member States is crucial for a Union that aims for a highly competitive social market economy" (Reflection paper on EU finances) On 2 May 2018, the European Commission adopted its proposals for a new Multiannual Financial Framework (MFF) for 2021-2027. Under these proposals , the European Regional Development Fund (ERDF) and Cohesion Fund (CF) will have a budget of EUR 273 billion over the period. This impact assessment report reflects the decisions of the MFF proposals and focuses on the changes and policy choices which are specific to the ERDF and CF. The mission of the ERDF and CF is laid down in the treaties (see box below): economic, social and territorial cohesion. This means reducing regional and national disparities across a broad range of themes: innovation, competitiveness, jobs, environment, transport, education and health infrastructure. It also means cross-border co-operation and sustainable urban development. The ERDF and CF are key investment policies in the EU Budget, equivalent in the 2014-20 programme period to 8.5% of government capital investment in the EU, rising to 41% for the EU-13. Both funds contribute to achieving EU objectives, including jobs, growth and investment, digital single market and Energy Union. The Treaty basis Article 174 of The Treaty on the Functioning of the European Union: "The Union shall develop and pursue its actions leading to the strengthening of its economic, social and territorial cohesion. In particular, the Union shall aim at reducing disparities between the levels of development of the various regions and the backwardness of the least favoured regions". Article 176: The European Regional Development Fund is intended to help to redress the main regional imbalances in the Union through participation in the development and structural adjustment of regions whose development is lagging behind and in the conversion of declining industrial regions. Article 177: A Cohesion Fund set up in accordance with the same procedure shall provide a financial contribution to projects in the fields of environment and trans-European networks in the area of transport infrastructure.

There will be common rules for shared management funds – the Common Provisions Regulation (CPR). This convergence of rules will enhance coherence and synergies among the Funds. The CPR will therefore cover the following funds: ·ERDF and CF – the subject of the current impact assessment ·ESF+: European Social Fund + ·EMFF: European Maritime and Fisheries Fund ·AMIF: Asylum and Migration Fund ·ISF: Internal Security Fund ·BMVI: Border Management and Visa Instrument The other funds have their own impact assessments. This impact assessment satisfies the requirements of the Financial Regulation in respect of preparing an ex-ante evaluation. ERDF and CF total 273 000 European Regional Development Fund (ERDF) 226 308 ·Investment for growth and jobs 215 172 ·European territorial cooperation 9 500 ·Outermost regions and sparsely populated areas 1 637 Cohesion Fund (CF) 46 692 ·of which contribution to CEF Transport 11 285 ERDF – regional development, economic transformation, territorial co-operation The ERDF was set up in 1975 and provides financial support for regional development, economic change and transformation, and territorial cooperation. All EU regions are eligible (see Map 1 ). Resources are distributed so that the highest aid intensity is in the less developed regions (see Table 2 ). EU amount National cofinancing total funding % EU amount Less developed 130.3 36.2 166.5 78% More developed 32.3 29.6 61.9 52% Northern sparsely populated and outermost regions 1.6 1.0 2.5 62% Transition 25.4 10.9 36.3 70% Interreg 9.8 3.3 13.1 75% Total ERDF 199.4 80.9 280.3 71% Less developed regions: those with GDP/head < 75% of the EU 27 average

Transition region: GDP/head between 75% and 90% of the EU 27 average

Eligibility for this period was calculated with UK but without Croatia

Source: ESI fund Open Data Platform - https://cohesiondata.ec.europa.eu/ (February 2018)





Source: ESI fund Open Data Platform - https://cohesiondata.ec.europa.eu/ (September 2017) In line with its broad overall mission (see treaties, above), the ERDF tackles a wide variety of investment priorities, covering the full range of economic, social and territorial cohesion (see Figure 1 ). But in line with the priority for structural adjustment and economic conversion, nearly half of the money (45%) is invested in smart growth – research and innovation, ICT and SME support. A further quarter (28%) is invested in various environmental measures, notably the transition to the low carbon economy. Three noteworthy priorities are cross-border, transnational and inter-regional co-operation, the outermost regions and Northern sparsely populated regions. CF – transport and environmental infrastructure in poorer countries Since 1994, the Cohesion Fund has supported environmental measures and trans-European transport and energy networks – particularly high-priority projects of European interest. The Cohesion Fund may also be used to finance the priorities of the EU's environmental protection policy. Investment is divided relatively evenly between transport and energy projects on the one hand and environmental projects (including energy projects) on the other (see Figure 2 ). Eligible countries are referred to in this report as Cohesion Countries (see Map 2 ). These are Member States with a Gross National Income (GNI) per inhabitant below 90 % of the EU average, i.e. the 13 Member States that have joined the EU since 2004, as well as in Greece and Portugal.

Source: ESI fund Open Data Platform - https://cohesiondata.ec.europa.eu/ (September 2017) EU amount National cofinancing total funding % EU amount CF 63.3 12.1 75.4 84% ERDF 199.4 80.9 280.3 71% total 262.7 93.1 355.7 74% Source: ESI fund Open Data Platform - https://cohesiondata.ec.europa.eu/ (February 2018) Shared management – a key feature in assessing added value and delivery reforms The ERDF and CF are delivered under shared management. Programmes are not run directly by the Commission, instead they are implemented in partnership with the Member States. The principles and priorities of Cohesion Policy are distilled through a process of discussion between the Commission and Member States. But day to day management is in the hands of managing authorities appointed by the Member States. A managing authority may be a national ministry, a regional authority, a local council, or another public or private body that has been nominated and approved by a Member State. They are responsible for efficient management and implementation of a programme.

1.2.Lessons learned from previous programmes The ex post evaluation of the ERDF and CF for 2007-13 found a wide range of achievements across the fields of economic, social and territorial cohesion, including: ·400 000 SMEs were financially supported and this support led directly to the creation of 1.1 million jobs. Although this is only 2% of firms in the EU, support focussed on strategic enterprises – in the manufacturing sector, an estimated 15% of small firms and over a third of medium sized firms received financial support. ·Transport bottlenecks were removed, travel times reduced and urban trams and metros supported, often with substantial environmental benefits such as reduced local air pollution. This included the construction of 4900 km of roads, mostly motorways (of which 2400 km on the TEN-T). It also included the construction or upgrading to necessary standards of 2600 km of TEN-T railway. ·The ERDF and CF also made a significant contribution to the environment: a substantial number of landfill sites which did not comply with EU standards were closed down while in the Czech Republic, Hungary, Lithuania, Poland and Slovenia, as well as Croatia, the proportion of waste which was recycled was increased by over 10 percentage points. ·Investment in social infrastructure led to the modernisation of schools and colleges in Portugal, benefiting 300 000 children and young people as well as the upgrading of schools and healthcare facilities in Poland for 1.9 million people. ·Despite the relatively small funding intensity of Interreg cross-border programmes (EUR 20 per head of population), by end 2013 they had funded over 6800 projects in policy areas which are EU priorities. These included the creation and expansion of economic clusters, centres of excellence, high education and training centres, cooperation networks between research centres and cross-border advisory services for enterprises and business start-ups and joint management across borders of natural resources, including sea and river basins. Economic transformation and flexibility Economic transformation is a treaty mandate of the ERDF (see section 1) and has been a key mission since its inception. The evaluation noted that the 2007-13 programmes were implemented in the context of a deep global economic and financial crisis. This strongly influenced business opportunities and the private investment climate. It also influenced public finances and the capacity of governments to invest. It was crucial for the ERDF to respond to the crisis. Programmes were adapted, EU cofinancing rates increased and eligibility rules changed to finance working capital – this last change enabled firms to remain in business and to maintain employment. The need for economic transformation and a move up the value chain was a key theme in SME support. A major result of support was helping SMEs withstand the effects of the crisis by providing credit when other sources of finance had dried up. It enabled SMEs to invest in modernising or expanding plant and equipment. Moreover, many programmes used ERDF support not just to survive the crisis, but to experiment and innovate. Lessons for the content of the policy Some of the key lessons were linked to the importance of the local business environment and innovation ecosystem, helping regions move up the value chain. For example: ·Support to large enterprises needs to be very selective, targeting firms which match the structure of the regional economy and can make links to local enterprises, research centres and universities. The most effective strategy to attract large enterprises is not financial incentives but improving local conditions such as the local business environment, transport and communication networks, the skills of the local workforce, the social amenities available and so on. This avoids a wasteful subsidy race. ·Support to SMEs should focus more on helping dynamic SMEs grow, on smart specialisation strategies and facilitating regions to move up the economic chain, rather than trying to maintain the economy of the past (see box on economic transformation). Other lessons for scope and content included: ·Past ERDF and CF investments in the waste and water sectors mean that fewer Member States still need work to achieve the acquis requirements. ·It is questionable whether the ERDF should continue to finance road building, except in the EU13. Similarly airport investments have tended to perform poorly – only in the outermost regions can a strong case be made.

·Conversely, there is a strong case for investing in local and urban transport networks, even when they are not part of the TEN-T. Lessons for delivery 1. The need to have the flexibility to respond to emerging needs. The adaptation of programmes to the economic crisis was one of the success stories in 2007-13 (see box above) and should be built upon. 2. Simplification: the need to reduce the administrative burden. This was a key and repeated finding. A narrow majority of stakeholders (55%) thought the administrative burden of project application and implementation too high in relation to funding, with overcomplex management, control and audits systems. This was the source of administrative uncertainty, as well as project delays – 62% of those interviewed considered that the complexity of internal administrative rules and procedures caused delays in project selection, especially in the EU12 countries. Complexity was a particular issue in EU15 countries where the funding was relatively smaller, suggesting a need for proportionality. 3. The need for a greater focus on results, not just spending. There was a strong focus on investing the money, delivering projects and generating outputs. However, very few 2007-13 programmes had a "focus on results" – setting clear goals for changes at the level of the region, selecting projects accordingly and tracking progress towards those goals. Examples included: ·A lack of monitoring of the results sought. For example, all 9 of the financial instrument case study programmes had a rationale of promoting productivity, innovation and other aspects of business quality, but only 1 programme (the NE of England) actually monitored this – the others monitored spending and jobs created. This lack of strategic tracking meant that projects were often selected more for ability to absorb funding in a given year than for their contribution to the objectives of the programme. ·Evaluations which focus on process, not results. The evaluation of the delivery system found that, in the evaluations conducted by Members States and Managing Authorities, there was a predominance of process evaluations (44%) and monitoring-type evaluations (44%) over impact evaluations (22%). Although the lack of impact evaluations was partly explained by early delays in implementation, this is still imbalanced. 4. The potential of financial instruments. The evaluation found that these have the potential to be a more efficient means of funding investment in some policy areas, but the inexperience of many implementing bodies led to delays in implementation. A further challenge is spreading financial instruments beyond enterprise support, where over 90% of 2007-13 financial instrument funding was concentrated. Addressing the lessons learned The ex post evaluation of 2007-13 was completed in 2016, while the 2014-20 period was prepared from 2011 onwards. It was therefore not possible to directly feed evaluation results into the 2014 reform. Many of the lessons were already clear in implementation and have to some extent been addressed ( Table 4 ). However, in most cases, while something has been done, the situation continues to evolve and there is a need to build on previous work. Two clear particularly clear cases where the challenge is ongoing: the need to respond flexibly to the challenge of economic transition and the need to simplify and reduce the administrative burden. Lesson Addressed in 2014-20? Priorities, e.g. economic transition (moving SMEs up the value chain), local and urban transport Partially. E.g. smart specialisation strategies provide a focus on moving up the value chain. Focus on high value added sectors and interregional cooperation will be reinforced post-2020 (see section 3.3 and Table 11 ). Negative priorities, such as support for large enterprises, airports. Partially. Large enterprise support was restricted to innovation themes in 2014-20. These issues are further addressed post-2020 with a list of negative priorities and exclusions (section 3.3). Flexible programming for emerging needs (including economic transition) The ad hoc system of reprogramming worked reasonable well in 2007-13, so this issue was not formally addressed. But post-2020, the challenges of globalisation and migration will be addressed in the thematic priorities (see section 3.3 and Table 11 ). Flexibility more generally will be addressed by proposals for post-2020 (see section 4.1). Simplification: reducing the administrative burden Partly addressed via a range of elements (including single audit principle and simplified cost options), estimated to have reduced the administrative burden on final beneficiaries by 9-14%. Further simplification is however necessary. These issues are discussed in detail in section 4.3. A focus on results, not just spending These issues were addressed through the result orientation and performance framework of 2014-20. This will be developed further post-2020 by a common set of result indicators (see section 5). Broadening the use of financial instruments Addressed. The use of financial instruments was broadened in 2014-20 and more guidance given. However more remains to be done to make these instruments accessible, simpler to administer and with more legal certainty (see 4.4).

2.The objectives 2.1.Challenges for the programmes of the next MFF

In this section we summarize the main challenges and problems for post-2020 ERDF and CF based on recent Council, Parliament and Commission reflections, as well as stakeholder feedback from the public consultation. While the comments cover many issues, the twin ongoing challenges identified in the evaluation lessons – responding flexibly and innovatively to the challenge of economic transition, simplification and reduction of the administrative burden – are a recurrent theme. Challenges related to scope, priorities and coherence with other policies In the recent public consultation, respondents identified reduction of regional disparities as the most important challenge (94% of respondents considered it as very or rather important), followed by reducing unemployment (92%). Promoting economic growth in the EU, transition to low-carbon economy, fostering research and innovation and social inclusion were also regarded as key challenges. The respondents considered these challenges to be successfully addressed by Cohesion Policy. On the other hand, there are some other challenges which respondent considered to be only to some extent or not at all addressed by Cohesion Policy, such as globalisation, common values and sound economic governance and reforms. The Council set out a view of Cohesion Policy which is forward looking, flexible and innovative: "Cohesion Policy post-2020 must therefore be a proactive, forward looking policy, which is sufficiently flexible to address new challenges and facilitate the development of innovative solutions throughout the EU, while continuing to provide a stable and predictable investment and cooperation framework to reduce the disparities between the levels of development of the various regions." Likewise, the European Parliament stresses that Cohesion Policy post-2020 should remain the main investment policy of the European Union covering all EU regions, in order to tackle complex socio-economic challenges. It underlined that beyond the goal of reducing the disparities between levels of development and enhancing convergence as enshrined in the Treaty, Cohesion Policy should focus on the achievement of the EU’s broad EU political objectives. The Reflection Paper on EU finances details this as: ·Addressing a broad range of economic and social disparities. Reducing economic and social divergences between and within Member States is crucial for a Union that aims for a highly competitive social market economy. ·Geographic targeting of funding which goes beyond GDP: "the current system of allocation of the funds could be revised. New criteria could be added, for instance linked to the challenges Europe faces, from demographics and unemployment to social inclusion and migration, from innovation to climate change." ·Tackling the impact of globalisation. While the benefits of globalisation are widely spread, the costs are often localised. Recent evidence suggests that many regions across Europe are much more likely than others to be exposed to sudden shocks; ·The low carbon economy: Shift towards new, sustainable growth models that combine economic, social and environmental considerations in a holistic and integrated way. This includes investment in low carbon energy generation, transmission and distribution, in energy efficiency, climate resilience, environmental protection and will help the EU contribute to the sustainable development goals. Further key challenges identified in other EU recent documents include: ·Boosting the research, innovation and competitiveness potential of European regions, as a this is the only sound basis for sustainable growth; ·Increasing interregional cooperation and overcoming obstacles to cross-border interactions of people and firms; ·The challenges of urban areas where congestion, unemployment, poverty, inflow of migrants are concentrated; these challenges require an integrated, tailor-made approach (“Pact of Amsterdam”); ·Challenges faced by EU outermost regions (see box). Box: the outermost regions of the EU Article 349 of the TFEU Treaty acknowledges the special characteristics of the outermost regions and affords them a special status. In October 2017, the President of the Commission launched a new strategy for these regions. The outermost regions face serious challenges. Their remoteness, small size, vulnerability to climate change and (for most of them) insularity represent permanent constraints on development. Most of them need to invest in basic infrastructure - such as roads, water and waste management facilities - and their economy depends largely on imports. All this brings additional costs to their companies, which are primarily SMEs. As a result, GDP per capita is much lower than the EU average, and unemployment is critically high, above 40% in the young population. The new strategy aims at better tackling these challenges, developing smart specialisation strategies to build on areas such as the blue economy, renewable energy, cooperation with neighbours and innovation in traditional sectors such as fisheries and agri-food, as well as supporting the young people. Better air and maritime transport links and better digital connectivity are crucial. In order to overcome these challenges, the main issue is prioritisation of the resources of the ERDF and CF on the right geographic and thematic objectives (see section 3). The Council stated that "thematic concentration" on innovation, SMEs and green growth while essential, must be balanced against other needs in the Member States or region: "Thematic concentration … contributing the most to reaching the targets of the Europe 2020 Strategy… however, a balance must be maintained between the predefined requirements for concentration on a limited number of thematic areas and the needs of Member States, including the flexibility to respond during the programming period to specific national and regional development challenges". Another challenge is policy coherence among EU instruments. The European Parliament underlines the need to ensure better synergies and communication between and about the ESI Funds and other Union funds and programmes, including EFSI, and to facilitate the implementation of multi-fund operations. The Reflection Paper stressed that coherence between EU funds is needed to ensure that they all support EU objectives and facilitate reforms in Member States…. Rules and conditions applying in the same policy area should be aligned. There is also evidence of competition and crowding out effects between EU programmes.

Challenges related to the delivery system In the public consultation, stakeholders were asked about the main obstacles to achieving the objectives of Cohesion Policy. Complex procedures were considered by far the most important obstacle, followed by heavy audit and control requirements, lack of flexibility, difficulty to ensure financial sustainability and late disbursements/delays in payments. In other words, several issues related to complexity and administrative burden, as well as the need for flexibility and for sustained funding. The Council, Parliament and the Reflection Paper on EU finances identified the following main challenges regarding delivery: 1) Flexibility: the challenge is to make ERDF and CF "more flexible to face new challenges, for example through an unallocated capacity". The recent migration crisis has shown the need for rapid reaction in the face of a new pan-European challenge. 2) Simplification: the Council considers that “the amount and complexity of rules introduced for the 2014-2020 programming period remain a challenge for beneficiaries and Member States. Complex and extensive rules are one of the main causes for errors and contribute to delays under cohesion policy” . The European Parliament highlights the need to simplify the Cohesion Policy’s overall management system at all governance levels, facilitating the programming, management and evaluation of operational programmes, in order to make it more accessible, flexible and effective.;. 3) Governance: the European Parliament considers that there must be a balanced link between Cohesion Policy and economic governance processes in the European Semester and that this link should be reciprocal; is of the opinion that a greater recognition of the territorial dimension would be beneficial for the European Semester. According to the Council, "While the fulfilment of ex-ante conditionalities sometimes requires significant time and resources to implement legislative changes or complex reforms, they have a positive effect on the overall investment environment, the strengthening of administrative capacity and good governance in many Member States." 4) The use of financial instruments: the Council called on the Commission to “create better conditions for the combination of grants and financial instruments and simplify the implementation of financial instruments by bringing the rules closer to usual financial market practices”. Expected impacts If the ERDF and CF continue as at present, GDP in the EU is expected to be almost 0.4% higher in 2030 as a result of the interventions. The impact is the highest in the main beneficiaries of the policy. For example, at the end of the implementation period, GDP in Croatia and Poland is expected to be 3.2% higher thanks to the ERDF and CF investments while in Lithuania and Slovakia, it is around 3.0% higher. On average, the impact in the EU-13 is around 2.7% in 2030. The impact of cohesion policy is particularly high in the regions which are the main beneficiaries (see Map 3 ). By the end of programme implementation (2030), GDP in Észak-Magyarország and Észak-Alföld (Hungary) is expected to be more than 8% higher than in a scenario without regional policy. In the non-cohesion countries ("EU-14" in Figure 3 ), the impact of ERDF and CF is smaller but positive for all Member States. This is because the effect of higher taxes to finance the investment concerned is more than compensated by the long term boost in trade with (now richer) net recipient countries. At the regional level, all regions benefit, with the smallest impact in 2030 found in Nordjylland (Denmark) and corresponds to around 0.01% of GDP. Source: QUEST A useful measure is the impact per euro spent – the ratio between the cumulated impact on GDP up to a given year and the cumulated amounts spent up to the same year. Five years after the end of the programming period, the impact per euro spent is expected to be around 2.9 euros in the EU-27. Since this impact occurs over a period of 17 years, it corresponds to an annual average return of around 7%. This represents good value for money in the public sector but a little below returns on private investments – only to be expected when a policy has other goals (redistributive, social or environmental) than simply the highest return. The above results are in line with impacts of previous modelling work, which suggested similar impacts (an extra 3% on the GDP of cohesion countries for each period). They are also in line with counterfactual econometric models which, by comparing regions with different rates of assistance (notably the richest less developed regions with the poorest more developed regions, since these are similar) have tended to produce estimates of between ½ and 1 % extra on growth per year, therefore 3.5%-7% extra GDP over the period.

2.2.Objectives The general objective remains that defined in the Treaty: economic, social and territorial cohesion, reducing disparities between the levels of development of the various regions. This general objective will comprise 5 policy objectives (see section 3.2 and Table 11 ): 1.A smarter Europe - innovative and smart industrial transformation 2.A greener, low carbon Europe - clean and fair energy transition, green and blue investment, circular economy, climate adaptation and risk prevention 3.A more connected Europe - mobility and regional ICT connectivity 4.A more social Europe - implementing the European Pillar of Social Rights 5.Europe closer to citizens – sustainable and integrated development of urban, rural and coastal areas through local initiatives Progress towards these policy objectives will be measured: ·On a 3 yearly basis though the Cohesion Report, which examines a broad range of economic, social and territorial indicators at the national, regional and other levels, as well as by regular progress reports. ·By a series of common output and (for the first time in the ERDF and CF) common result indicators. These will be established at the level of the programmes and aggregated to the European level. The indicators are set out in Table 11 , and further details on monitoring and evaluation in section 5. To rise to the challenges set in the previous chapters, we are proposing a number of policy responses falling into two categories (see

Table 5 ): 1.For the content and priorities of the ERDF and CF. A key proposal to reinforce economic transition – smart growth and a transition to the digital and low carbon economy. These proposals will be tackled in section 3 on the programme structure and priorities. 2.For the delivery systems of the policy. Arguably the majority of our proposals, including more flexible programming, better links with governance and an increased use of financial instruments. These proposals will be tackled in section 4 on the delivery system.



Challenges (section 2.2) Policy response Regional disparities remain in terms of a broad range of economic, social and territorial themes. Moreover, sustained and sustainable growth requires a transition to an innovative and low carbon economy – this is a challenge for most regions. While smart growth and a transition to the low carbon economy should be the main focus, other themes should still be addressed. In addition to the challenges faced by lagging regions, there are specific challenges and opportunities for the outermost regions, sustainable urban development and cooperation. A reinforced focus on the thematic priorities of smart growth (including a transition to the digital economy) and the transition to the low carbon economy, while maintaining investment in other sectors in less developed countries (section 3.3) Geographic coverage which continues for all regions, including specific provisions for outermost regions, sustainable urban development and European territorial cooperation (3.2) There should be better co-ordination and synergies between different EU policies. Clearer demarcation of roles with other policies, better alignment of rules, notably within the ESI Fund family (3.4) Globalisation, economic transition, migration and other emerging needs mean that programmes need to respond quickly More flexible programming, including a "5+2" system where the last 2 years are only programmed at the end (4.1) Shortcomings in administrative capacity and institutional quality are often key obstacles to economic, social and territorial progress. A strengthened and streamlined process of ex ante conditionalities, better links to the European Semester (4.2) Excessive complexity, high administrative costs/burdens, delays in implementation Various simplification measures, including simpler payment systems and more proportionality in audit (4.3) High complexity and low take up of financial instruments Promoting financial instruments by simplifying their use, possibility to use budgetary guarantees via InvestEU (4.4)

3.Programme structure and priorities 3.1.Subsidiarity and added value of the ERDF and CF An important point in assessing subsidiarity: the funds are delivered through shared management (see section 1). This means that the European Commission is a partner at the strategic level, including programming and financing. But day to day management is vested in national and regional managing authorities. In other words, for elements where there is high EU added value (this will be developed further below) the EU level retains a key role. But in other areas (day to day running, the selection and management of projects, first level audit, etc) the regional and national levels run the programmes. There is already an element of subsidiarity baked into the very nature of the ERDF and CF. The framework we are using to assess subsidiarity and EU added value Subsidiarity and EU added value are complementary principles: ·Subsidiarity is the principle that "The EU should not take action unless it is more effective than action taken at national, regional or local level". ·EU added value is the criterion for determining exceptions to this rule "There is a clear value added when action at European level goes further than national efforts could" EU added value "requires consideration of the value and improvements which are caused by the EU rather than another party taking action" (our emphasis). In other words, it is not primarily a judgement of the absolute value of ERDF and CF actions (for this, see the elements on evaluation), but rather on the relative value of action at the European level. The better regulations guidelines identify 3 potential sources of EU added value: ·Effectiveness: where EU action is the only way to get results to create missing links, avoid fragmentation, and realise the potential of a border-free Europe. ·Efficiency: where the EU offers better value for money because externalities can be addressed, resources or expertise can be pooled, an action can be better coordinated. ·Synergy: where EU action is necessary to complement, stimulate, and leverage action to reduce disparities, raise standards, and create synergies. This can notably include the promotion of EU goals and policy priorities. Effectiveness: where EU action goes further in getting results That ERDF and CF activities can only be delivered by EU action is relatively easy to demonstrate for poorer countries and regions. In many countries, Cohesion Policy represents around 50% (or more) of public investment – these member states would not have the financial capacity to carry out such investments otherwise ( Figure 4 ). Even in the poorer regions of richer countries, Cohesion Policy can represent a significant fraction of public investment. Note: Government capital expenditure is the sum of General Government gross fixed capital formation plus capital transfers, adjusted for any abnormal transfers to banks and other companies. Source: Open data platform, Eurostat - Government statistics Moreover, and as the EU finance paper notes, the nature of the policy is "a redistribution (coupled with the financing and provision of public goods) through cohesion policy, which promotes economic convergence as well as social and territorial cohesion". In a Europe where the more and less developed regions are so unevenly distributed between countries, such a redistribution has to be organised at a level higher than the national one. However, there is also evidence of EU added value in more developed member states and regions. There are effects in terms of innovation and SME support which would not happen without the ERDF. That added value can be demonstrated in these sectors is noteworthy since, as was noted in section 2 above, this is where most of the ERDF money is invested in more developed regions. For example, smart specialisation strategies (RIS3) would not exist in most regions, whether more or less developed, nor would they be maintained, without the ERDF: ·RIS3 hardly existed before they were promoted within Cohesion Policy, and in 60% of cases the programmes had an ex ante conditionality to develop or improve the plan in 2014. As the 7th Cohesion Report notes "Since smart specialisation became one of the ex-ante conditionalities for the ESI Funds, over 120 smart specialisation strategies have been formulated through partnership, multi-level governance and a bottom-up approach. EUR 65.8 billion are available to support these strategies from the ERDF (and EAFRD), in addition to national and regional funding." ·70% of managing authorities and regional actors believe that these are "a paradigm shift in innovation policy governance" and about 50% of respondents indicate that recent launches of new policy programmes and measures can be attributed to RIS3 (only 10% feel there is no influence of RIS3 on new policy measures).

·Significantly in terms of establishing EU added value, the benefits are seen to be highest in the Nordic countries, Austria, Germany, Benelux and France. In fact the highest satisfaction was found in Denmark, Sweden and Finland where 80% are sure that the benefits outweigh the costs (and none feel costs outweigh benefits) and 85% believe the process is still gaining momentum. Furthermore, there is a stabilisation effect at the SME level which has been noted in all regions. The ex post evaluation of the ERDF and CF found that a major result of support was helping SMEs withstand the effects of the crisis, providing credit when other sources of finance had dried up: The ERDF "played a role in helping firms survive the crisis." "The evaluation found that a major result of support was helping SMEs withstand the effects of the crisis by providing credit when other sources of finance had dried up… this enabled firms to remain in business and to maintain employment… a deep recession may force too much restructuring, too quickly and that the evaluation does show that support prevented significant job losses in the medium term." Finally, as the ex post evaluation noted "Interreg is the only policy instrument in its field. It is therefore crucial for ensuring continuity and linkages of common projects across borders and (for transnational and EU wide programmes) across the EU". The reflection paper on EU finances further noted "Cross-border programmes have transformed border areas, helping to remove sources of conflict and create new economic opportunities." Added value and the public consultation In the public consultation, three quarters of respondents considered that Cohesion Policy programmes effectively add value to a large or a fairly large extent in comparison to what Member States could achieve alone. The elements of added value most frequently identified were cross-border cooperation, higher financial support than from national resources, contribution to reducing regional disparities, policy innovativeness, high institutional standards of this policy. See Annex 2 for further details. Efficiency: where the EU offers better value for money For Cohesion Policy, this is notably when resources or expertise can be pooled or an action can be better coordinated. The ex post evaluation of the ERDF and CF found a variety of examples of this: ·In various fields, the multi-annual programming and strategic approach of ERDF provided a focus for interventions over a medium term period. ERDF support proved decisive for early identification, better financial planning and complementarity of projects. In particular, the evaluation of transport found that Cohesion Policy pushed Member States towards long term strategic planning. ·This stable framework led to institutional learning and increased professional capacity of actors involved in planning and implementing the interventions in several sectors. ·The various learning platforms such as INTERACT (support for co-operation), URBACT (for urban programmes) and ESPON (spatial planning) provide a possibility of pooling expertise. Transnational programmes under Interreg tackle specific common problems through collaboration, joint research or exchange of experience and best practice. ·The development of monitoring and evaluation systems. The exchange of experience and quality control function of the European level (more in section 5) represents a key source of EU added value. Moreover, as the Cohesion Report found, there are significant potential spillovers across national and regional boundaries: investments in innovation and SMEs in one region or country can (but do not always) spill over borders. There is a role for the EU level to ensure that such spillovers do not lead to underinvestment and indeed that investments are designed in such a way as to maximise spillovers. This latter point is a rationale for regional co-operation on smart specialisation strategies. Synergy and the promotion of EU goals and policy priorities The ERDF and CF contribute to broader EU policy priorities and goals. This is firstly in terms of growth – and cushioning the adverse economic and social effects of economic downturns. The reflection paper on EU finances recognised this by saying "Investments made under Cohesion Policy in one region or Member State contribute to macroeconomic stability and increase the growth potential of the Union as a whole." The 7th Cohesion Report found that in the long-run, these spill-over benefits represent a substantial share of the total impact of the policy on the non-cohesion counties economies. By 2030, the impact of the 2007-2013 programmes is estimated to be around 0.36% of GDP in non-cohesion countries, of which around a third (0.11%) is due to spillovers from spending in cohesion countries. This effect is particularly pronounced for Austria and Germany because of trading links. In Austria, more than half the impact of the policy is due to investment in the cohesion countries.

It also serves as a stabilising factor over the macroeconomic cycle: "The EU budget has some stabilising effects for some Member States, notably due to its stability over 7 years, which provides a constant level of investment independent of the economic cycle" Secondly, the ERDF and CF contribute to other EU priorities. The ex post evaluation found that "Cohesion Policy enabled budget limited public authorities to meet EU policy goals even during the financial crisis. For example it funded infrastructure for water and waste management to ensure timely compliance with the relevant EU Directives. Further, it provided incentives for significant shifts in the EU13 and Convergence regions in the South of EU15 in the disposal of waste away from landfills and towards recycling in line with the EU policy." Thirdly, the ERDF and CF address important structural challenges. The ex ante conditionalities for reform and other links to structural reform will be further outlined in section 4 below, but 60% of the respondents to the public consultation on the ex post evaluation of the ERDF and CF said that the ERDF and CF "have provided crucial support to structural reforms of labour market, transport, environment, energy, education and social policies and programmes". Fourth, the ERDF and CF encourage modernisation of administration. This includes peer to peer and integrity pacts on fair public procurement as well as ex-ante conditionalities on public procurement and state aid (including training plans). Finally, they deliver tangible results in areas which matter to European citizens. The opening lines of the reflection paper say "The EU budget helps to deliver on the things that matter for Europeans". Helping regions adapt to the challenge of globalisation, supporting 1.1 million SMEs in the 2014-20 period with 420 000 new jobs as a result, tackling urban poverty – all these are priorities for citizens. It should be noted (see Table 6 ) that many of these results are particularly evident outside the cohesion countries. Moreover, the delivery system via local partnerships – and especially for community led local development – represents a crucial form of outreach to local people and the local level which is unusual at the European level. FIRMS: All firms Direct jobs created Cohesion countries 260 000 150 000 Other Member States 840 000 270 000 Total EU 1 100 000 420 000 For context, cohesion country programmes focus on a wide range of actions, whereas programmes outside these countries focus far more on SMEs and jobs

Source: open data platform 3.2. Policy options The budget of 273 billion represents a real term reduction of around 10%. For making this reduction there are essentially 3 broad options: 1.A more or less equal cut across the board – all themes, regions and Member States face similar reductions. 2.A cut which focusses geographically (e.g. support is maintained in the less developed, "cohesion" countries, but cut elsewhere). 3.A scenario which focusses on those themes with the highest EU added value and evidence for impact (e.g. innovation) and reduces funding for those of lower priority (e.g. transport). For this reason, four detailed scenarios are considered. A baseline (the current situation) plus one representing each of the three choices above: ·Baseline. The "status quo", i.e. a continuation of the current regional and thematic allocations (the only change being the removal of the UK). This scenario is not realistic for a variety of reasons, including: the reduced cohesion policy envelope; the relative GDP of different countries has changed (and therefore the distribution between them has changed). Nevertheless, it is useful as a baseline and for comparison purposes. ·Option 1: Reductions across the board, both thematically and geographically. The reduction is applied in the same proportion everywhere. This option also includes (of course) an updating of the regional and national allocations in line with changes in GDP/head. In other words, the same method (see box on Berlin method) for allocation, but using the latest data and a smaller budget. ·Option 2: Geographic concentration – current levels of expenditure are maintained in cohesion countries, the reduction falls entirely on more developed countries. Within each category of country (more or less developed), funding is distributed according to the usual method, using the latest data. This scenario is a development of scenarios presented for reflection by the Commission in February.

·Option 3: Thematic concentration – this is the same geographic allocation as option 1, but the thematic focus on innovation, SMEs and the environment is increased. This will preserve a critical mass of spending in these areas, while the cut will tend to focus on infrastructure (notably transport). This is the preferred option. Box: The Berlin method and financial allocation The 1999 Berlin council set a method for financial allocation of cohesion policy, including ERDF and CF. The method is based mostly on regional GDP/head, with input from other indicators such as national GNI and population. While the exact application has evolved, the basic method has remained the same for nearly two decades. The Berlin method is familiar to – and understood by – key stakeholders. Retaining the method brings stability in a time of change. It also responds to the requests of various stakeholders – including Council and respondents to the public consultation – to maintain the principles of distribution of funding (see section 2.1 and annex on public consultation). Baseline Option 1 Option 2 Option 3 ERDF and CF envelope Current -10% -10% -10% Geographic allocation … Current method, using data available when the allocation was made Current method, updated data Expenditure maintained in EU-13, cut in more developed countries. Within categories, distribution by current method, updated data. Current method, updated data Thematic allocation Current Current Current Concentration on innovation, SMEs and environment Includes the UK? Neither as contributor nor beneficiary Neither as contributor nor beneficiary Neither as contributor nor beneficiary Neither as contributor nor beneficiary See text for more explanations The distinctive feature of option 3 is the increased focus on innovation, broadband and SME support (i.e. the new priority objective 1 – see section 3.3) in option 3. The thematic concentration criteria of this option mean that spending in these fields goes from around 30% of total ERDF and CF to around 46% at the EU level. Percentage of spending in the new PO1, former TOs 1-3: innovation, broadband, SME support Source: DG Regional and urban policy, based on reporting by Member States The impact of the various options on EU GDP is similar – and positive – over time. The baseline scenario (not unexpectedly) has the initial advantage in terms of impact, since it represents roughly 10% more money. Interestingly however, in the long term, option 3 of thematic concentration has greater impact – investment in innovation and SMEs has a greater long term impact. Source: Quest. The impact by country depends on factors such as the volume of funding, as well as its thematic distribution. In 2030 (i.e. just after the end of spending), the scenarios have a roughly equal impact for the EU27 as a group: the cohesion countries do best under option 2, while the more developed countries do best under options 1 and 3. However, in the long term, there is a tendency for cohesion and non-cohesion countries to do better under option 3, because of the greater long term impact of this option.

Baseline Option 1 Option 2 Option 3 2030 EU-27 0.37 0.34 0.34 0.34 Cohesion countries 2.01 1.69 2.01 1.74 Non-cohesion countries 0.14 0.15 0.10 0.14 2040 EU-27 0.42 0.39 0.37 0.46 Cohesion countries 2.14 1.81 2.15 2.35 Non-cohesion countries 0.17 0.18 0.12 0.19 Source: Quest – highlight indicates the option (other than baseline) with the highest impact for those countries Source: Quest Pros and cons of the various options Option 1 (similar cuts across the board) has two key advantages: simplicity and a sense of fairness. It is relatively easy to apply and does not disturb the balance between various sectors and different partners. Moreover, it also recognises that all regions continue to have needs in a changing economy, and that these needs cover a broad range of sectors. However, in the context of a significant reduction in real budget, it can hardly be said to represent a strategic decision. Moreover, experience shows the importance of targeting and critical mass – both evaluations and experience have tended to drive a certain amount of thematic concentration, especially in smaller programmes. For these programmes in particular, in order to be effective with a smaller budget it is necessary to have some kind of concentration, whether geographic or thematic. Finally, the world has changed over the years since the last period was prepared. The challenges of globalisation and technology, migration and the environment have intensified – it would be odd to maintain the same geographic and thematic focus. Option 2 (geographic concentration) has several clear advantages: ·The mission of the ERDF and CF is to support regions and countries with the greatest economic, social and territorial needs – this option has a tight focus on cohesion countries where these needs are greatest. ·Demonstrable EU added value (see section 3.1). This focusses on Member States which can least afford to pay for such measures (the effectiveness argument), who have the lowest institutional capacity and therefore the most potential to learn (the efficiency argument) and where regions tend to be furthest from EU goals and priorities, such as in environmental standards (synergy argument). ·Redistribution of resources from the most to least developed regions. EU policy stimulates growth in the latter ones (at least in the short term, through multiplier effects), which fosters regional convergence. However, while all of the above arguments demonstrate the need to focus support on cohesion countries, none of them is an argument against some support in non-cohesion countries. And in fact, in all the scenarios the bulk of the investment would remain in cohesion countries. Moreover, there are also strong arguments for continued support outside of cohesion countries, including: ·The needs of these regions, including emerging needs such as globalisation and economic transition, including to the low carbon economy (for more details, see arguments for option 3 below). ·Added value arguments. This includes innovation and SME support and smart specialisation strategies, much of which would not happen without the ERDF. It also includes cross-border spill-over effects, as well as the linkages and knowledge exchange between lagging and leading regions (for more details, see arguments for option 3 below and added value section 3.1). Finally, in the public consultation and elsewhere, very few stakeholders expressed support for reducing the proportion of spending outside cohesion countries – there seems to be a strong consensus in favour of the current balance, with a focus on cohesion countries but significant spending elsewhere. Even the less developed Member States themselves are not in favour of this option (“Cohesion Policy should remain the policy for all EU regions with special attention to the less developed ones”).





Option 3 (thematic concentration) – the preferred option In this scenario, support is maintained in those themes and sectors which have the highest added value and where evidence of impacts are strongest. For less developed regions, a case can be made for public investments across the board and administrative modernisation. But for more developed regions, it makes sense to concentrate funds on research and innovation, digitalisation, smart transformation and transition to a low carbon economy – indeed arguments for continuing support to all regions apply mostly to these themes of intervention, as well as to cooperation and sustainable urban development: ·The challenges of globalisation and economic transformation increasingly affect many regions across the EU, including both richer and less developed ones. In today's fast moving economy, few regions can be said to be beyond risk (and indeed, most regions have at least one of the key risk factors – see Map 4 ). This requires constant investments in the productive base to keep up the pace. ·ERDF support is a key factor behind the development of smart specialisation strategies in the EU; the added value of these strategies is considered to be highest in the Nordic countries, Austria, Germany, Benelux and France. ·The contribution to EU priorities, such as structural reforms, climate change, low-carbon economy and the creation of jobs: 2/3 of the jobs created by the ERDF and CF, and 3/4 of the SMEs supported, are outside of the cohesion countries. ·Environmental challenges such as air and marine pollution, climate adaptation and disaster risk management challenges are still present throughout the EU, in both developed and poorer regions, and often have a cross-border element. ·Urban deprivation and sub-regional pockets of poverty are often found in more developed regions (and are in fact more concentrated in rich metropolitan regions). ·Migration is another European challenge, with its impacts concentrated in some, usually more developed, regions. EU support to the integration of migrants and refuges is necessary as a sign of European solidarity in all regions. This is in line with academic literature which underlines that various groups of regions face different challenges and require dedicated policy support. For the most advanced EU regions and countries, regional policy funds must sustain Europe’s world-class regions in the face of global competition and support them in moving up the technology-quality ladder. For the medium level regions, regional policy must help overcome their “middle income trap”, which involves being too expensive for some activities but not innovative or productive enough for others, including investments to reinforce the knowledge base as well as knowledge transfer. For the less developed EU regions, investment support is needed to overcome their manifold existing barriers to productivity. This option is also in line with requests from stakeholders, including the Council which supported greater thematic concentration on innovation, SMEs and green growth while retaining a place for other needs: "Thematic concentration … contributing the most to reaching the targets of the Europe 2020 Strategy… however, a balance must be maintained between the predefined requirements for concentration on a limited number of thematic areas and… the flexibility to respond during the programming period to specific national and regional development challenges". This flexibility will be provided by a change to the current system, determined at the regional level. The calculation will be simplified and thresholds established at the national level (see Table 9 ) – this makes sense since fiscal capacity (and therefore considerations of added value in policy objectives 3-5) is mostly determined at the national level. As can be seen in Figure 6 , these thresholds affect many member states, and the proportion of spending on smart growth will go from around 30% at present to 46% of ERDF and CF in the future. Type of region Smart growth Green and low carbon growth GNI/head in PPS < 75% of EU average 40% 60% GNI/head in PPS 75% - 100% 50% 70% GNI/head > 100% of EU average 60% 80% Smart growth corresponds to the new PO1, green and low carbon to the new PO2

See section 3.3 for more details Reducing cofinancing rates EU cofinancing rates increased – and national cofinancing rates decreased – in the 2007-13 period. This was a response to the financial crisis, to maintain essential investments in a time of tight public budgets (see



Table 10 ). Historic levels of EU cofinancing were lower – 50% for the more developed regions, and less than 75% for the less developed ones.

EU amount National cofinancing total funding % EU amount CF 63.3 12.1 75.4 84% ERDF less developed regions 130.3 36.2 166.5 78% ERDF transition regions 25.4 10.9 36.3 70% ERDF Interreg 9.8 3.3 13.1 75% Northern sparsely populated and outermost regions 1.6 1.0 2.5 62% ERDF more developed 32.3 29.6 61.9 52% Less developed regions: those with GDP/head < 75% of the EU 27 average

Transition region: GDP/head between 75% and 90% of the EU 27 average

Source: ESI fund Open Data Platform - https://cohesiondata.ec.europa.eu/ (February 2018) EU cofinancing will return to at least historic levels. This is to promote "ownership" as well as to make the reduced EU contribution go further. Cofinancing rates would be determined at national level, rather than by region or fund – this makes sense since it is at the national level that fiscal capacity is determined. It also enables financing flexibility within a country. 3.3. Simplifying and consolidating the priority objectives There will be a consolidation of the 11 thematic objectives of 2014-2020 programming period into 5 objectives (see Table 11 for the objectives and indicators and the box below for excluded activities). The strength of the current division is that, because of the 11 way split, it is analytical and provides a good level of detail on financial allocations. However, there have been various signs that a lower level of disaggregation would be more practical: ·The ex post evaluation noted that the distinction between innovation and SME support is often artificial and sometimes caused confusion at the programme level for those tasked with classifying spending. ·Many measures are natural complements – SME support, R&D and IT is an obvious example, but so are various forms of social spending. Being able to put them into one priority axis as one objective would make it easier for programmes to (1) put complementary measures together, exploiting synergies and (2) move funding flexibly between measures in a given priority, according to needs. ·For reporting, the distinction between various forms of social spending is not easy to communicate. The same is also true for the various forms of environmental support and business/innovation support. The last point is particularly telling, since fine grained reporting is the main advantage of the 11 way division. But in practice, reporting (eg in the ex post evaluation or cohesion report) often merged the thematic objectives into broader categories, thus negating this main advantage. The 5 way division therefore represents a simplification in classification and reporting, as well as the opportunity to be flexible and exploit policy synergies within the new objectives. The objectives are expected to be common across the CPR, but here we discuss them in the context of the ERDF and CF. Excluded activities The list of thematic priorities includes a list of "negative priorities" or excluded activities. These fall into 2 broad categories: 1.Activities which have been evaluated as having low impact or a low cost benefit ratio or return on investment. Notable examples are support to large enterprises and to regional airports (except those in the outermost regions). For further information, see section 1.2 on evaluations and lessons learned. 2.Activities which are not in line with EU priorities. Notable examples are landfill and fossil fuels (for their negative impact on the environment) and tobacco (fore the negative impact on health). The first policy objective is “A Smarter Europe. ERDF support in this field is currently divided between three thematic objectives: strengthening research and innovation, ICT and SME competitiveness. This breakdown is artificial as the three are closely related: post-2020 they will be combined in one priority. The “Smarter Europe” priority objective will reinforce and expand smart specialisation, digitalisation, regional and local innovation and entrepreneurial ecosystems. It will also incorporate the human capital aspects of innovation and entrepreneurship and be based on smart specialisation strategies. Since 2014, the ERDF programmes have been based on a smart specialisation approach. Member States and regions have developed over 120 smart specialisation strategies which enable, through a bottom-up and partnership approach, to prioritise public research and innovation investments for the economic transformation of regions. A recent communication on this topic confirms the contribution of smart specialisation to promoting innovation-oriented growth at regional level. It also identifies directions for future, including the need to scale-up interregional innovation projects.

The promotion of interregional innovation projects via smart specialisation platforms is a key tool in promoting EU-wide value chains as well as the diffusion of innovation across borders. Since 2015, three Thematic Smart Specialisation Platforms have been set up to foster inter-regional cooperation in the field of energy, agri-food and industrial modernisation. Around 100 regions take part in 20 partnerships covering issues ranging from smart sensor systems in agri-food to innovative textile, from industry 4.0 to solar energy. Building on these experiences, the Commission is testing approaches for scaling-up post-2020. The approach in "Smarter Europe" is complementary to other EU instruments such as FP9 since it focusses on regional relevance, i.e. local capacity, local ecosystems and local uptake, while FP9 focusses on European excellence (for more, see section 3.4 on coherence and synergies below). The second priority objective is “A green and low carbon Europe” covering support to the low carbon and climate resilient economy, including energy efficiency, renewable energy, smart grids and reinforced efforts to engage citizens and communities in the energy transition. ERDF and CF support in this area is important for achieving goals of the new 2030 policy framework on energy and climate. Transition to clean energy provides new business opportunities, cleaner environment and health benefits for citizens. At the same time, it also requires significant changes in Europe's economies. It comes with a social cost linked to the move away from traditional sectors (e.g. coal) and a need for significant investment in electricity generation, networks and energy efficiency, estimated at some EUR 200 billion annually in the next decade. Due to the existing market failures, support from the EU budget remains necessary for a part of this investment. In particular, EU support is frequently needed to untapped energy efficiency potentials. The effects of energy transition and climate change are unevenly dispersed in the EU. A number of regions in Poland, Czech Republic and Germany face challenges in their energy transition, due to large volumes of solid fuel production and the high share of solid fuels (primarily hard coal and lignite) in their electricity generation mix. Climate change affects all EU regions but to varying degrees, with the south of Europe most severely affected. The potential for wind and ocean energies is higher in coastal regions and for solar energy in the southern regions. They also represent a sustainable solution for energy-self-sufficiency in many island and outermost regions. For these reasons, targeted measures from the ERDF will be needed post-2020 in all regions. Different local circumstances often do not allow for one-size-fits-all solutions. Cohesion policy offers placed-based solutions and is particularly well suited to mobilise the relevant energy transition actors on the ground. A greener Europe also covers investment in environmental infrastructure, circular economy, blue economy and climate change adaptation. Environment is one of the two CF fields of intervention set in the Treaty. There remain gaps to comply with the acquis in the waste, water, seawater, air quality and nature areas, especially in less developed Member States and regions. For instance, total needs for sewerage collection systems and treatment plants under the Urban Waste Water Treatment directive are estimated at EUR 49 billion. And Member States will have to invest in the transition towards a circular economy as outlined in the Circular Economy Action Plan (and in its related initiatives for example the Communication Waste to Energy, the European Strategy for Plastics in the Circular economy, etc.) and to reach the more ambitious recycling targets set by the newly EU waste legislation. In fact, it is important that any future investments under all priority objectives, but notably in infrastructure with lifecycles of significantly over 20 years, must be resilient to protect assets and infrastructure from climate risks (including sea-rise levels or heavy storm events) if we are to avoid damage to infrastructure or lock-ins. This could build on strengthened climate-proofing guidance for major projects, covering both climate resilience and greenhouse gas emission reductions, applied also to other relevant programmes and financial instruments. The third policy objective is “A more Connected Europe” covering investment in European, national and regional transport networks and digital connectivity. Investment in trans-European transport networks (TEN-T) is one of two fields of intervention of the Cohesion Fund. However, support from the ERDF for regional transport infrastructure is also needed, especially in less developed regions, in order to fulfil the existing gaps in regional networks, improve links to the TEN-T and TEN-E network, and to deploy low-carbon transport systems and technologies. Digital connectivity has become one of the decisive factors for closing economic, social and territorial divides. The digitisation of European industry but also the modernisation of sectors like healthcare, education and public administration depend on networks. Connectivity creates new markets and a growth environment for SMEs, supports the modernisation of local economies and increases the capacity of labour market to adapt to new challenges even in disadvantaged areas. Digital solutions like e-health and smart mobility not only improve lives of citizens but also significantly reduce the costs of such services, depending however on the universal access to high capacity digital networks. The fourth policy objective is “A more social Europe”. While this policy objective is covered mainly by ESF investment, the ERDF will continue providing support to social, health and educational infrastructure and to integration of migrants (see section 3.4 for complementarities with other EU policies in this field). The fifth new policy objective is “Europe closer to citizens”. This new policy objective will cover sustainable and integrated development of urban, rural and coastal areas through local initiatives. This would give enhanced visibility to urban issues and deliver on the Amsterdam pact. Previously spread (somewhat artificially) across various themes, this consolidation places citizens' needs at the heart of the investments. It also enables integrated approaches, influenced by local and urban authorities. Interreg post-2020 Building on the success of previous Interreg programmes (see above), we are proposing an evolution along the following lines: ·Crossborder programmes should change from primarily managing and distributing funds toward acting as institutions of exchange, facilitating cross-border activity and being a centre for strategic planning. ·The addition of co-operation outside the EU. This will take the form of (1) a specific strand for outermost regions (2) the incorporation of current IPA/ENI funding to support enlargement and cooperation with neighbourhood countries. Interreg will continue to be able to draw on all of the priority objectives (where appropriate) and although funded by ERDF will be covered in an ETC regulation. European cross-border mechanisms The impact and European added value of Interreg programmes are well recognised (see main text). However, in many cases cross-border barriers (especially in relation to health services, labour regulation, local public transport and business development) stem from differences in administrative practices and national legal frameworks. In fact, it has been estimated that if 20% of existing legal and administrative obstacles across internal EU borders were addressed, border regions would gain 2% in GDP. These administrative obstacles are difficult for programmes to address alone, requiring decisions beyond programme structures. Therefore in 2015 the Luxembourg Presidency and several Member States explored the use of one Member State's rules in a neighouring Member State. The Commission proposes to facilitate such solutions with an "off-the-shelf" legal instrument. Since the action is voluntary and optional, being used (or not) at the initiative of Member States concerned, it respects subsidiarity and proportionality. It also has no cost incidence for the EU budget. The instrument offers two options: a European Cross-Border Commitment ("ECBC") (which itself enables derogation from normal rules) or a European Cross-Border Statement ("ECBS") (signatories undertake formally to legislate to amend normal rules). The mechanism will: ·Remain voluntary: Member States have the option to select the mechanism or use other effective mechanisms to resolve legal border barriers. ·Focus on intra-EU land borders, while allowing Member States to also apply the mechanism to maritime and external borders. Cover joint projects for any item of infrastructure with impact in a cross-border region or any service of general economic interest provided in a cross-border region. Under each objective, it is possible to invest in administrative capacity to deliver that policy objective. As noted in the ex post evaluation and 7th Cohesion Report, ERDF and CF is not only about money, but also about know-how and good governance. This is a long term investment and should be a priority for cohesion policy post-2020, including such actions as: ·Peer to peer learning, exchange of good practices. ·Professionalization of fund management, development of competencies. ·Public procurement: guidance, studies, exchange of good governance practices, strategic procurement. ·State aid: training, seminars, expert support. ·Anti-fraud and anti-corruption, including integrity pacts.

·These are common priorities across the CPR – in some cases (notably 4.1 and 4.2) other funds will lead, with ERDF or CF as support only. ·Within each specific objective, it is possible to support operations in favour of (a) improving institutions and governance and (b) cooperation with partners outside the programme area. ·In the context of shared management, targets will be set by managing authorities Policy Objective Specific Objective Common output indicators Common result indicators 1. A smarter Europe - innovative and smart industrial transformation 1.1 Enhancing innovation capacity RCO 01 - Enterprises supported (of which: micro, small, medium, large)

RCO 02 - Enterprises supported by grants

RCO 03 - Enterprises supported by FIs

RCO 04 - Enterprises with non-financial support

RCO 05 - Start-ups supported

RCO 06 - Researchers working in supported research facilities

RCO 07 - Research institutions participating in joint research projects

RCO 08 - Nominal value of research and innovation equipment

RCO 10 - Enterprises cooperating with research institutions RCR 01 - Jobs created in supported entities

RCR 02 - Private investments matching public support (of which: grants, FIs)

RCR 03 - SMEs introducing product or process innovation

RCR 04 - SMEs introducing marketing or organisational innovation

RCR 05 - SMEs innovating in-house

RCR 06 - Patent applications submitted to EPO

RCR 07 - Trademark and design applications

RCR 08 - Public-private co-publications 1.2 Reaping the benefits of digitalisation for citizens, companies and governments RCO 12 - Enterprises supported to digitise their products and services

RCO 13 - Digital services and products developed for enterprises

RCO 14 - Public institutions supported to develop digital services and applications RCR 11 - Users of new public digital services and applications

RCR 12 - Users of new digital products, services and applications developed by enterprises

RCR 13 - Enterprises reaching high digital intensity

RCR 14 - Enterprises using public digital services 1.3 Enhancing growth and competitiveness of SMEs RCO 15 - Capacity of incubation created RCR 16 - High growth enterprises supported

RCR 17 - 3-year old enterprises surviving in the market

RCR 18 - SMEs using incubator services one year after the incubator creation

RCR 19 - Enterprises with higher turnover 1.4 Developing skills for smart specialisation, industrial transition and entrepreneurship RCO 16 - Stakeholders participating in entrepreneurial discovery process

RCO 17 - Acquisition of know-how for smart specialisation and industrial transition (million euro) RCR 24 - Staff supported to gain know how for smart specialisation and industrial transition

RCR 25 - Value added per employee in supported SMEs 2. Low carbon and greener Europe - clean and fair energy transition, green and blue investments, circular economy, climate adaptation and risk prevention 2.1 Promoting energy efficiency measures RCO 18 - Households supported to improve energy performance of their dwelling

RCO 19 - Public buildings supported to improve energy performance

RCO 20 - District heating network lines newly constructed or improved RCR 26 - Annual final energy consumption (of which: residential, private non-residential, public non-residential)

RCR 27 - Households with improved energy performance of their dwellings

RCR 28 - Buildings with improved energy classification (number) (of which: residential, private non-residential, public non-residential)

RCR 29 - Estimated GHG emissions

RCR 30 - Enterprises with improved energy performance 2.2 Renewable energy through investments in generation capacity RCO 22 - Additional production capacity for renewable energy (of which: electricity, thermal) RCR 31 - Total renewable energy produced (of which: electricity, thermal)

RCR 32 - Capacity for renewable energy connected to the grid/ operational 2.3 Smart energy systems - smart grids low and medium voltage and related storage RCO 23 - Digital management systems for smart grids RCR 33 - Users connected to smart grids

RCR 34 - Roll-out of projects for smart grids 2.4 Climate change adaptation, risk prevention and disaster resilience RCO 24 - New or upgraded disaster monitoring, warning and response systems

RCO 25 - Coastal strip, river banks and lakeshores, and landslide protection newly built or consolidated to protect people and property

RCO 26 - Green infrastructure built for adaptation to climate change

RCO 27 - National/ regional/ local strategies addressing climate change adaptation

RCO 28 - Areas covered by protection measures against forest fires RCR 35 - Population benefiting from flood protection measures

RCR 36 - Population benefiting from forest fires protection measures

RCR 37 - Population benefiting from protection measures against natural disasters (other than floods and forest fires)

RCR 38 - Estimated average response time to disaster situations 2.5 Water efficiency RCO 30 - Length of new or consolidated pipes for household water connections

RCO 31 - Length of sewage collection newtorks newly constructed or consolidated

RCO 32 - New or upgraded capacity for waste water treatment RCR 41 - Population connected to improved water supply

RCR 42 - Additional population connected to at least secondary waste water treatment

RCR 43 - Water losses

RCR 44 - Waste water properly treated 2.6 Circular economy - investments in waste and resource efficiency RCO 34 - Additional capacity for waste recycling RCR 46 - Population served by waste recycling facilities and small waste management systems

RCR 47 - Waste recycled

RCR 48 - Recycled waste used as raw materials

RCR 49 - Waste recovered 2.7 Green infrastructure in urban environment and reduced pollution RCO 36 - Surface of green infrastructure in urban areas

RCO 37 - Surface area of habitats supported to attain a better conservation status (of which: NATURA 2000, other)

RCO 38 - Surface area of rehabilitated land

RCO 39 - Systems for monitoring air pollution installed RCR 50 - Population benefiting from measures for air quality

RCR 51 - Population benefiting from measures for noise reduction

RCR 52 - Rehabilitated land used for green areas, social housing, economic or community activities 3. A more connected Europe - Mobility and regional ICT connectivity 3.1 Digital connectivity RCO 41 - Additional households with broadband access of very high capacity

RCO 42 - Additional enterprises with broadband access of very high capacity RCR 53 - Households with broadband subscriptions of at least 100 Mbps

RCR 54 - Enterprises with broadband subscription of at least 100 Mbps 3.2 Road TEN-T and regional and local mobility RCO 43 - Length of new roads supported - TEN-T

RCO 44 - Length of new roads supported - other

RCO 45 - Length of roads reconstructed or upgraded - TEN-T

RCO 46 - Length of roads reconstructed or upgraded - other RCR 55 - Users served by improved road traffic

RCR 56 - Time savings due to improved road traffic 3.3 Rail TEN-T (and inland waterways?), intermodal regional RCO 47 - Length of new rails supported - TEN-T

RCO 48 - Length of new rails supported - other

RCO 49 - Length of rails reconstructed or upgraded - TEN-T

RCO 50 - Length of rails reconstructed or upgraded - other

RCO 51 - Length of new or upgraded inland waterways - TEN-T

RCO 52 - Length of new or upgraded inland waterways - other

RCO 53 - Railways stations and facilities - new or upgraded

RCO 54 - Intermodal connections - new or upgraded RCR 57 - Length of ERTMS equipped railways in operation

RCR 58 - Annual number of passengers on supported railways

RCR 59 - Freight transport on rail

RCR 60 - Freight transport on inland waterways 3.4 Sustainable multimodal urban mobility RCO 55 - Length of tram and metro lines- new

RCO 56 - Length of tram and metro lines- reconstructed/ upgraded

RCO 57 - Environmentally friendly rolling stock for public transport

RCO 58 - Dedicated cycling infrastructure

RCO 59 - Alternative fuels infrastructure (refuelling/ recharging points)

RCO 60 - Cities and towns with new or upgraded digitised urban transport systems RCR 62 - Annual passengers of public transport

RCR 63 - Annual users of new/ upgraded tram and metro lines

RCR 64 - Annual users of dedicated cycling infrastructure 4. A more social Europe - European Pillar of Social Rights 4.1. Well-functioning labour markets and welfare systems RCO 61 - Annual unemployed persons served by enhanced facilities for employment services RCR 65 - Job seekers using annually the services of the employment services supported 4.2 Socio-economic integration and marginalised communities, migrants and disadvantaged groups RCO 63 - Capacity of temporary reception infrastructure created

RCO 64 - Capacity of rehabilitated housing - migrants and refugees

RCO 65 - Capacity of rehabilitated housing - other RCR 66 - Occupancy of temporary reception infrastructure built or renovated

RCR 67 - Occupancy of rehabilitated housing - migrants and refugees

RCR 68 - Occupancy of rehabilitated housing - other 4.3 Reducing inequalities - access to education and training RCO 66 - Classroom capacity of supported childcare infrastructure (new or upgraded)

RCO 67 - Classroom capacity of supported education infrastructure (new or upgraded) RCR 70 - Annual number of children using childcare infrastructure supported

RCR 71 - Annual number of students using education infrastructure supported 4.4 Equal opportunities - health care and social services RCO 69 - Capacity of supported health care infrastructure

RCO 70 - Capacity of supported social infrastructure (other than housing) RCR 72 - People with access to improved health care services

RCR 73 - Annual number of persons using the health care facilities supported

RCR 74 - Annual number of persons using the social care facilities supported

RCR 75 - Average response time for medical emergencies in the area supported 5. Europe closer to citizens - integrated urban and territorial development 5.1 Integrated social, economic, cultural and environmental development and security in urban areas RCO 74 - Population covered by strategies for integrated urban development

RCO 75 - Integrated strategies for urban development

RCO 76 - Collaborative projects

RCO 77 - Capacity of cultural infrastructure supported RCR 76 - Stakeholders involved in the preparation and implementation of strategies of urban development

RCR 77 - Tourists/ visits to supported sites

RCR 78 - Users benefiting from cultural infrastructure supported 5.2 Integrated social, economic, cultural and environmental development, including for rural and coastal areas RCO 80 - CLLD strategies for local development Horizontal - Implementation Administrative capacity and efficiency RCO 95 - Staff financed by ERDF and Cohesion Fund RCR 91 - Average time for launch of calls, selection of projects and signature of contracts

RCR 92 - Average time for tendering (from launch of procurement until signature of contracts)

RCR 93 - Average time for project implementation (from signature of contract to last payment)

RCR 94 - Single bidding for ERDF and Cohesion Fund interventions Horizontal - ETC ETC indicators RCO 81 - Participants in cross-border mobility initiatives

RCO 82 - Participants in joint actions promoting gender equality, equal opportunities and social inclusion

RCO 83 - Joint strategies/ action plans developed or implemented

RCO 84 - Joint pilot activities implemented in projects

RCO 85 - Participants in joint training schemes

RCO 86 - Joint administrative or legal agreements signed

RCO 87 - Organisations cooperating across borders

RCO 88 - Projects across national borders for peer-learning to enhance cooperation activities

RCO 89 - Projects across borders to improve multilevel governance

RCO 90 - Projects across national borders leading to networks/clusters RCR 79 - Joint strategies/ action plans taken up by organisations at/after project completion

RCR 80 - Joint pilot activities taken up or up-scaled by organisations at/after project completion

RCR 81 - Participants completing joint training schemes

RCR 82 - Legal or administrative obstacles addressed or alleviated

RCR 83 - Persons covered by joint agreements signed

RCR 84 - Organisations cooperating across borders 6-12 months after project completion

RCR 85 - Participants in joint actions 6-12 months after project completion

RCR 86 - Stakeholders/ institutions with enhanced cooperation capacity beyond national borders 3.4. Coherence and synergies with other policies The common provisions regulation (CPR) covering the ESI Funds family has created a convergence of rules which has already borne fruit. However, a recent study shows that the stakeholders still see many overlaps in EU funding of various policy areas, especially between ESI funds and other EU instruments. The study also notes a high degree of (perceived) complexity of the funding portfolio of EU instruments and differences of rules and processes between funds. The study recommendations include: ·Further alignment of rules with other ESI funds. ·Clearer demarcation of roles with related thematic areas such as FP9, COSME, CEF, Digital Europe, LIFE and AMF. There will be a common set of rules for ESI Funds, in a defined set of areas such as programming and financial management (in a successor to the CPR, "common provisions regulation"). This will include many of the general proposals for delivery set out in chapter 4, notably as regards simplification. Common rules should continue to allow investments combining complementary aspects such as investment in people (financed by the ESF+) and in social infrastructure (financed by the ERDF). Overlaps within the ESI Funds family create a situation of competition between funds ("double guichet") and represent a source of additional complexity for final beneficiaries. The following demarcation lines have been agreed: ·Investments in large infrastructures, including for broadband, could be solely supported by ERDF, while the EAFRD and EMFF would still support small infrastructures with a clear local relevance. ·Business development in rural and coastal areas will move to the ERDF, except where it is linked to agricultural and forestry production or farm household income (for the EAFRD) or to complementary activities related to fishing or aquaculture (EMFF). ·In rural areas, nature conservation action (Natura 2000) will be dealt with exclusively by EAFRD. However, to avoid gaps the ERDF will still be able to finance this outside rural areas (and notably in peri-urban areas). A key challenge, given the focus on smart specialisation, is coherence with the FP9 programme and COSME. In the current 2014-20 period, Horizon 2020 is investing EUR 77 billion on research and innovation, and the ERDF some 41 billion. COSME is the EU programme for competitiveness of SMEs, with a budget of EUR 2.3 billion. While many initiatives have been implemented in the current period at all levels (strategic, programming, operational) to improve synergies and complementarities, for the post-2020 period there is still much un-exploited and under-exploited R&I potential across the EU. The differentiation will be "European excellence" (the goal of FP9), "competitiveness" (COSME) and "regional relevance” (the goal of the ERDF). FP9 European excellence – the generation and exploitation of new knowledge. This is usually in a few key regions – although the situation is evolving, just 4 regions received 20% of FP7 in 2007-13 and 50% of the money was spent in regions representing just one-sixth of the population. FP9 will continue to focus on leading edge research and innovation, strengthening the European Research Area and reforms to the research and innovation system. COSME Competitiveness, promoting the uptake of specific solutions for larger groups of SMEs. COSME will focus on competitiveness of enterprises, of SMEs, making strategic use of SME intermediaries such as clusters. ERDF Regional relevance – diffusion of existing knowledge and technology to places that need it, embedding it locally via smart specialization strategies. The Rhomolo model estimates that ERDF investment in RTD will have a similar impact to FP9 (both around 0.15% of EU GDP in 2030 – see chart and FP9 IA) but precisely in those regions where FP7 had the least impact (see Map 5 and Map 6 ). ERDF will invest via smart specialization strategies in the diffusion and adaptation of knowledge and technology to all regions in Europe. These broader smart specialization strategies, including improvement of local innovation systems, will become an ex ante conditionality in the new period. All 3 funds will work together to enable the flow of knowledge, facilitating transnational co-operation, partnership in international research and innovation networks. Complementarities will also be reinforced through an alignment of relevant rules. The "seal of excellence" (SOE) concept will be reinforced and projects which cannot, due to lack of budget be funded by FP9, may be picked up by ESIF funds and funded under the same conditions (including for state aids) as FP9.

Source: RHOMOLO Trans-European transport networks projects will continue to be financed from the Cohesion Fund via both shared management and the direct implementation mode under the Connecting Europe Facility (CEF). EUR 11 billion of the Cohesion Fund will be transferred to the CEF for this purpose. Co-ordination with the CEF will include: ·A simple demarcation, where the CEF will focus in particular on the core network and the ERDF and CF on ensuring that the comprehensive network, including ensuring regional and local access to the network. ·Alignment of approaches, including alignment of eligibility criteria, coherent conditionality and a clear view on the project pipeline across multiple instruments. ·Maximising synergies between transport, energy and telecommunications sectors, to promote smart, low-emission and safe mobility (e.g. energy infrastructure, alternative-fuels, connected and autonomous vehicles) which should be deployed in pan-European way. ·In the area of broadband, reinforced ERDF support to ensure the rollout of digital networks in view of covering all territories throughout the EU, including rural, isolated, and sparsely populated areas. The ERDF would focus on areas where more severe market failures are observed and where higher intensity grants are required to render the network deployment viable. CEF would cover areas where milder market failures are encountered to render a network deployment viable. CEF would also support strategic digital projects, for example the deployment of 5G corridors. The new Digital Europe Programme focuses on deployment and capacity building in key digital areas at European level, in order to promote global competitiveness through digital transformation. All five areas covered (cybersecurity, digital transformation of industry, digital transformation of Services of Public Interest, high performance computing and advanced digital skills) have a clear regional impact. An alignment will be made with EU initiatives in this field, such as the Digitising European Industry initiative , necessary to complete the digital single market; and with eGovernment Action Plan and Tallinn Ministerial Declaration on eGovernment, both related to the modernisation of public administration and digital transformation. Synergies will be ensured with the LIFE programme for Environmental and Climate Action, in particular through LIFE strategic integrated projects, to optimise the uptake of funds supporting environmental investments. ERDF and CF may fund activities that complement LIFE projects, as well as by promoting the wider use of solutions, methods and approaches validated under LIFE (inter alia, including investments in green infrastructure, energy efficiency, eco-innovation, ecosystem-based solutions, and the adoption of related innovative technologies). Regarding migration-related challenges, all Cohesion Policy Funds will address long-term needs linked to integration, while the Asylum and Migration Fund will focus on shorter term needs. AMIF will mainly support actions in the early stage of integration and with a focus on 3rd country nationals, while the ERDF will target more general longer term measures, notably development of infrastructures, social housing and measures touching entrepreneurship. The ESF will complement these investments with softer long term integration measures. On security, synergies will be sought on the protection and securisation of public spaces, transport hubs and other critical infrastructure, cybercrime and the prevention of radicalisation. The Internal Security Fund (ISF) will mainly focus on supporting information exchange and operational cooperation between law enforcement authorities. In relation to infrastructure, the ISF will support immediate security needs and innovative actions which do not require heavy investments. The ERDF may invest in security infrastructure in regeneration of deprived communities. The ERDF may complement border management interventions under the integrated border management fund (IBMF) with infrastructure for border crossing points (eg transport facilities including roads). Finally, EU macro-regional and sea basin strategies, which aim at better coordination of policies and funds in a specific geographical area, represent an effective tool for increasing coherence and synergies with other policies.



4.Delivery mechanisms of the intended funding 4.1.Programming: flexibility for emerging needs, return to "n+2" The shared management system of the ERDF and CF is based on a programme agreed between the Member State and the Commission at the beginning of the period. In the current 2014-20 period, this programme allocates funding by priority for the full 7 years. There is a trade-off between stable long term planning (a foundation of ERDF and CF success, smart specialisation strategies being a notable example) and the flexibility to respond to new developments and emerging needs. Although there is some flexibility in the current system – for example the ability to