COMMISSION STAFF WORKING PAPER EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT
Date: 2011-10-06
Institutions: European Commission
Subjects: Cohesion Fund, European Regional Development Fund, aid to undertakings, regional cooperation, regional development, regional disparity, trans-European network

EUROPEAN COMMISSION 

Brussels, 6.10.2011 
SEC(2011) 1139 final 

COMMISSION STAFF WORKING PAPER 

EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT 

Accompanying the document 

Proposal for a 
REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

on specific provisions concerning the European Regional Development Fund and the 
Investment for growth and jobs goal and repealing Regulation (EC) No 1080/2006 

and 

Proposal for a 
REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

on the Cohesion Fund and repealing Council Regulation (EC) No 1084/2006 

and 

Proposal for a 
REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 
on specific provisions for the support from the European Regional Development Fund to 
the European territorial cooperation goal 

{COM(2011) 614 final} 
{SEC(2011) 1138 final} 

{COM(2011)611 final} 
{COM(2011)612 final} 

 
 
  
 
 
 
 
 
 
 
EXECUTIVE SUMMARY 

This  is  the  Impact  Assessment  of  the  legislative  proposal  for  the  regulations  laying  down 
provisions  on  the  European  Regional  Development  Fund  (ERDF),  the  Cohesion  Fund  (CF) 
and the European Territorial Cooperation goal.   

It is part of a package of Impact Assessments which also includes the Impact Assessment of 
the European Regional Development Fund, the Cohesion Fund, the European Social Fund, the 
European Agricultural Fund for Rural Development and the European Maritime and Fisheries 
Fund covered by the Common Strategic Framework and laying down general provisions on 
the European Regional Development Fund, the European Social Fund and the Cohesion Fund 
and  repealing  Regulation  (EC)  No  1083/2006  (Common  provisions  regulation),  and  the 
Impact Assessment of the ESF Regulation. 

1. 

PROBLEM DEFINITION 

European regional policy has an important role to play mobilising local assets and focusing on 
the  development  of  endogenous  potential.  However,  as  the  Budget  Review  has  highlighted, 
the "EU budget should be used to finance EU public goods, actions that Member States and 
regions cannot finance themselves, or where it can secure better results".  

The IA focuses  exclusively on the  3  areas are where experience shows that adjustments are 
needed. 

1.1.  Support to enterprises 

Cohesion  policy  support  for  enterprises  has  produced  significant  results.  There  is  evidence 
that in 2000-2006 cohesion policy has contributed to creating at least 1 million gross jobs in 
supported  projects.  However,  the  policy  is  not  sufficiently  focused  on  SMEs  and  on 
innovation.  

In  the  case  of  SMEs,  access  to  finance  on  the  market  for  investments  is  particularly  a 
problem. The case for supporting large firms is different, as lack of access to finance typically 
does not apply to large enterprises. Empirical evidence shows that direct aid for SMEs is more 
effective,  while  "for  larger  companies  crowding  out  of  private  investment  may  prevail  over 
positive  effects."  The  funding  of  productive  investments  of  large  enterprises  where  public 
intervention is not necessary has led to criticisms that funding is given to firms which do not 
actually need it, and that the funding is therefore crowding out private investment instead of 
having added value.  

The focus of enterprise support varies between MS, with a strong investment support focus in 
some, and a strong emphasis on ‘softer’ measures such as innovation in others. However, in 
other MS support  which is not linked  to  innovation still has a  very  strong role. The current 
scope  of  the  ERDF  is  defined  too  broadly  and  allows  for  generic  business  support  for 
stimulating  entrepreneurship  in  all  sectors,  regardless  of  whether  a  market  failure  exists 
related to that sector, and irrespective of the sector’s contribution to growth and employment.  

Thus,  the  main  problem  with  the  current  scope  of  the  ERDF  is  that  the  scope  of  aid  to 
enterprises is defined too broadly and that the effectiveness and value added of aid to firms 
needs to be maximised.  

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1.2.  Support for investment in infrastructure 

The main issue which has been identified with respect to the scope of transport infrastructure 
funding in current cohesion policy is the lack of ability to ensure sufficient concentration on 
EU priorities. Although cohesion funding has focused on priorities as defined by the TEN-T 
guidelines, but not necessarily on those parts which were identified as largest European value 
added at the time of their definition. The challenge for cohesion policy will be to effectively 
contribute  to  the  identified  €30  billion  investment  needs  in  core  TEN-T  infrastructure  in 
Cohesion countries until 2020.  

In  addition,  as  the  improving  the  coordination  of  the  different  EU  instruments  in  TEN-T 
financing is important. To date the TEN-T programme has focused on soft measures such as 
the  financing  of  feasibility  studies,  and  the  Cohesion  Fund  has  focused  on  investment  in 
infrastructure. The issue of coordination has become particularly relevant as the scope of the 
Cohesion  Fund  as  defined  by  the  Treaty  covers  physical  investment  in  TEN-T,  which  the 
newly proposed Connecting Europe Facility will also finance. 

1.3. 

Territorial cooperation 

With regards to territorial cooperation, the added value of European territorial cooperation 
lies  in  the  fact  that  it  offers  possibilities  for  joint  action  which  are  needed  to  address 
challenges that increasingly cut across national/regional boundaries: 

• 

transboundary problems; 

•  sharing good practice; 

•  cooperation where there are economies of scale and critical mass; 

•  cooperation aimed at improving governance; 

•  cooperation on the EU’s external borders on issues related to safety and stability, and 

mutually beneficial relationships. 

The European Territorial Cooperation objective is financed by the ERDF, with a total budget 
of € 8.7 billion which accounts for 2.5 % of th e total 2007-13 allocation for cohesion policy. 

Despite  its  ability  to  address  the  range  of  issues  listed  above,  in  the  current  period,  there  is 
scope for improvement in European Territorial Cooperation programmes: 

• 

• 

lack of strategic focus resulting in broad intervention strategies which made it difficult 
to achieve clearly-identifiable impact; 

lack  of  effective  coordination  to  find  compromises  between  the  requirements  of  the 
EU Regulations and the legal frameworks of the involved Member States. 

1.4.  Justification for EU action 

EU  action  is  justified  both  on  the  grounds  of  the  objectives  laid  out  in  Article  174  of  the 
Treaty  and  on  the  subsidiarity  principle.  The  right  to  act  is  constituted  by  Article  3  of  the 
Treaty on European Union, which states that "[the Union] shall promote economic, social and 

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territorial  cohesion  and  solidarity  among  Member  States",  as  well  as  by  Article  175  of  the 
TFEU  which  explicitly  requests  the  Union  to  implement  this  policy  by  means  of  Structural 
Funds, and Article 177 which defines the role of the Cohesion Fund.  

2.  OBJECTIVES  

The general objective is defined in Article 176 of the TFEU, that the aim of the ERDF is "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". As stipulated in Article 177 of the Treaty, 
the aim of the Cohesion Fund is to finance "projects in the fields of environment and trans-
European networks in the area of transport infrastructure". 

Given  the  scope  of  this  IA,  the  specific  objectives  are  to  ensure  that  the  ERDF  and  the 
Cohesion Fund are spent in: 

•  an effective way; 

•  an efficient way; 

•  a way which provides a high European value added. 

The operational objectives relate to the individual issues discussed and are the following: 

•  Enterprise  support  to  ensure  that  investment  support  to  enterprises  contributes  to 
sustainable  growth  and  employment  and  that  support  for  innovation  contributes  to 
developing local and regional potential. 

• 

Infrastructure  investment:  to  ensure  that  there  is  a  sufficient  concentration  on 
European priorities. 

•  Territorial cooperation: to ensure that there is a sufficient focus on European priorities, 

with flexibility for MS and regions to choose thematic objectives.  

3. 

POLICY OPTIONS 

The different options have been included in the Impact Assessment to address the problem of 
scope  in  accordance  with  the  defined  objectives,  reflecting  alternatives  from  moderate 
adaptations of the current arrangements to more fundamental changes.  

3.1.1. 

Option 1 – No policy change 

•  The scope of the ERDF continues to be broad focusing on productive investment and 

development of endogenous potential. 

•  Direct aid is given primarily but not exclusively to SMEs. 

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3.1.2. 
R&D, innovation and key enabling technologies  

Option 2 – More targeted support to large enterprises focusing on 

•  Aid for general productive investment to create and safeguard jobs is limited to SMEs. 

•  Support  for  development  of  endogenous  potential  to  both  large  and  small  firms  by 

supporting regional and local development and research and innovation. 

3.1.3. 
for SMEs 

Option 3 – No grants to large firms; only loans and equity finance 

•  All  productive  investment  is  supported  through  non-grant  aid  through  innovative 

financing instruments. 

3.2. 

Scope of infrastructure support through the ERDF and Cohesion Fund 

3.2.1. 

Option 1 - Status quo  

•  The  ERDF  and  the  Cohesion  Fund  continue  to  finance  major  infrastructure  in  all 
regions of the EU, with funding concentrated in less developed regions. Funding from 
the Cohesion Fund is only available in poor MS. 

• 

• 

In less developed regions the focus is on both priority projects of European interest as 
identified by the new TEN-T framework, as well as on secondary infrastructure. 

In addition, the TEN-T programme continues to fund infrastructure projects with high 
EU added value in developed regions, concentrating in particular on soft interventions 
(e.g. feasibility studies, etc.) 

•  National operational programmes cover the infrastructure investments, with priorities 

being set at national level. 

3.2.2. 
Option  2  -  Enhanced  focus  on  European  priorities  in  major 
infrastructure investments in less developed regions and Connecting Europe 
Facility in more developed regions 

•  The  Cohesion  Fund  finances  infrastructure  investments  in  the  area  of  strategic 

European priorities. The fund is only available in poor MS. 

•  The ERDF would target projects of national and/or regional interest.  

•  Major infrastructure investments are covered by national programmes and  alignment 
of  investment  with  EU  priorities  is  ensured  through  a  binding  list  of  strategic 
investment projects to be realised until 2020, selected and negotiated with the Member 
States  and  included  in  the  Partnership  Contracts.  Funding  for  these  projects  will  be 
ringfenced.  

•  Ex-ante conditionalities in the area of strategic planning will accompany the focus on 

strategic investments in sustainable transport.  

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• 

Investments  of  national  and  regional  significance  would  be  prioritised  according  to 
their contribution to sustainability and their network contribution.  

•  The  dedicated  CEF  would  complement  cohesion  policy  investment  in  physical 
infrastructure,  not  only  soft  investments.  The  CEF  would  finance  infrastructure 
projects  with  high  EU  added  value.  € 10  billion  would  be  ring-fenced  inside  the 
financial allocation for the Cohesion Fund for the CCEF. 

3.2.3. 
Cohesion Fund  

Option 3 – Enhanced focus on national infrastructure through the 

•  The  Cohesion  Fund  finances  infrastructure  investments  in  the  area  of  strategic 

European priorities in the area of core and comprehensive TEN-T.  

•  The ERDF would target projects of national and/or regional interest. 

•  As in option 2, major infrastructure investments are covered by national programmes.  

•  The CEF would focus its investments in the more developed Member States only and 

finance infrastructure projects with high EU added.  

•  The  Cohesion  Fund  would  fund  projects  in  the  less  developed  Member  States  and 
therefore be geographically complementary to the CEF. There would be no transfer of 
€10 billion from the Cohesion Fund to the CEF.  

3.3. 

Territorial Cooperation 

3.3.1. 

Option 1 – No policy change 

•  Priorities for cooperation programmes would continue to be broadly defined.  

•  No  formal  link  would  be  established  between  cooperation  programmes  and 

Convergence/Competitiveness programmes. 

3.3.2. 
programmes 

Option 2 – Thematic concentration and strengthened link to other 

•  The  number  of  thematic  objectives  that  cross-border  and  transnational  cooperation 

could choose from would be limited in number.  

•  Cooperation aspects would be an integral part of the overall strategic framework.  

3.3.3. 

Option 3 – Integration of cooperation in the regional programmes 

•  No more separate Territorial Cooperation programmes. 

•  Cooperation activities would be carried out in the framework of the existing regional 

programmes which would include an opening to provide for cooperative action. 

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4.  COMPARING THE OPTIONS  

Scope of enterprise support funded by the ERDF 

Under the no policy change option, a relatively broad scope of intervention allows Member 
States sufficient flexibility to choose the areas of intervention that most meet their challenges, 
with  most  of  the  support  going  to  SMEs  and  RTDI.  However,  investment  support  for  large 
firms remains, which can lead to the crowding out of private investment by public funding.  

Under option 2, support to large companies would be limited to specific investments designed 
to  support  the  development  of  endogenous  potential  of  the  region,  notably  in  the  field  of 
innovation,  new  technologies  and  research.  cooperation  and  joint  initiatives  between  large 
firms, SMEs, and other institutions. Furthermore, under this option, there is scope to increase 
the  role  of  non-grant  based  instruments  especially  in  relation  to  investment  support  which 
generally  associated  with  lower  risk  and  involves  increased  deadweight  loss  compared  with 
investment  in  innovation  and  high  risk  activities.  These  measures  would  reduce  deadweight 
loss, but also reduce flexibility for MS. 

Under  Option  3,  prohibiting  grant-based  support  to  large  firms  increases  the  efficiency  of 
funding and greater leverage effects. However, innovative and research activities necessary to 
achieve  EU  headline  targets  may  be  discouraged  as  the  non-repayable  support  is  more 
effective  for  innovative,  R&D  intensive  projects  far  from  the  market.  A  move  from  non-
refundable to refundable forms of aid to large enterprises could also imply a significant rise in 
administrative costs for managing authorities.  

On the basis of improving the effectiveness of support, as well as its contribution to local and 
regional potential and growth and employment, Option 2 is the preferred option.  

Scope of infrastructure support through the ERDF and Cohesion Fund 

Under  the  no  policy  change  scenario,  the  benefits  which  EU  funding  for  infrastructure  has 
produced  would  continue.  However,  focused  on  European  network  priorities  would  remain 
suboptimal,  and  infrastructure investments in richer  regions would lead to efficiency losses. 
Without  coordination  between  cohesion  policy  and  the  CEF,  EU  funding  for  infrastructure 
would continued to be fragmented.  

Under  Option  2,  an  enhanced  focus  on  European  priorities,  the  CEF,  and  ringfencing 
€10 billion  from  the  Cohesion  Fund  would  enable   concentration  on  EU  priority  projects. 
However, this option reduces flexibility for MS and regions. 

Option 3 would allow for the focus on infrastructure investments to remain in Convergence 
regions, where basic infrastructure needs are the most. The main advantage of this option is it 
allows  Cohesion  countries  full  flexibility  to  address  regional  and  national  priorities  in  these 
regions. The main drawback of this option is the non sufficient concentration of the Cohesion 
Fund on core TEN-T projects. 

On  the  basis  of  EU  added  value  and  coordination  between  the  CEF  and  Cohesion  Fund, 
Option 2 is the preferred option. 

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Territorial cooperation 

Under  the  no  policy  change  option,  European  Territorial  Cooperation  programmes  have 
greater flexibility in choosing the policy areas they would like to address. However, an overall 
lack  of  strategic  focus  and  no  clear  definition  of  expected  programme  outputs  results. 
Furthermore,  this  option  makes  it  difficult  to  ensure  complementarity  with  other  EU 
programmes.  

Option 2 would more firmly align cooperation programmes with the Europe 2020 Strategy. It 
would  lead  to  an  improved  intervention  logic  within  the  programmes  resulting  from  the 
setting  of  programme  objectives  to  the  definition  of  expected  outputs  and  results. 
increased. 
Furthermore,  synergies  with  regional  operational  programmes  would  be 
Nevertheless, this option could lead to less flexibility in programme design.  

Option 3 would lead to increased synergies and benefit the regional programme by adding an 
EU dimension. Nevertheless, it would only allow for cooperation on specific projects, and not 
foster the long-term development of an integrated strategy for a cross-border or transnational 
territory.  There  would  also  be  a  risk  that  the  EU  dimension  would  be  neglected  in 
programming. Joint projects would be more difficult to develop without a support structure.  

On  the  basis  of  better  focus  on  European  priorities,  developing  a  clear  programme 
intervention logic and improved added value, Option 2 is the preferred option.  

5.  MONITORING AND EVALUATION  

The monitoring and evaluation systems for cohesion policy will be reinforced compared to the 
current  situation,  with  an  improved  focus  on  results  and  alignment  with  the  Europe  2020 
Strategy. In concrete terms, this would mean the following:  

•  Programmes would include a clear articulation of the changes sought, how this would 
contribute to the Europe 2020 targets, and how spending the resources on particular 
interventions  (outputs)  will  contribute  to  change  (results).  This  will  be  expressed  in 
output  and  result  indicators.  A  set  of  common  indicators,  aligned  with  EU2020 
objectives, will be used where relevant.  

•  Each  programme  would  include  a  performance  framework  fixing  quantified 
milestones  for  each  priority  axis,  established  on  the  basis  of  a  limited  number  of 
programme  indicators  in  order  to  provide  a  clear  indication  of  progress  towards 
delivery priorities linked to Europe 2020.  

•  These milestones for the performance framework would be proposed by the Member 

State and agreed between the Commission and the Member States.  

•  The  Partnership  Contract  would  contain  a  summary  of  the  milestones,  methodology 

and the key principles.  

The  performance  of  operational  programmes  would  be  monitored  regularly  on  the  basis  of 
the  set  of  programme  indicators.  Annual  Implementation  Reports  would  contain  reports  on 
outputs achieved compared to targets with analysis of reasons for under or over achievement 
of  targets.  Monitoring  Committees  would  reflect  on  the  need  for  any  changes  or  other 
initiatives to ensure that the programme stays on course. Results will be monitored also and 
reported  on  as  data  becomes  available  and  will  be  discussed  in  the  Monitoring  Committee 
and Annual Review meetings.  

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It is envisaged that there would be two formal review points to examine progress against the 
milestones  defined  in  the  performance  framework.  The  Commission  would  undertake  the 
first  review  of  progress  in  attaining  the  agreed  milestones  in  2017  on  the  basis  of  Annual 
Implementation Reports in relation to the absorption and outputs. A second review will take 
place in 2019. 

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