EU, less cohesion and more defence?

According to the European Commission, cohesion policy should invest more in defence companies and infrastructure useful for military purposes. However, the decision is up to national and regional authorities

The defence sector enters the European Union cohesion policy: to recover more funds, and increase the spending capacity of the member states in an increasingly central field.

The mid-term review of the cohesion policy for the period 2021-2027 presented on 1 April by the European Commission potentially introduces some substantial innovations in this policy, which makes up for about a third of the entire EU budget. It too is now associated with the general trend of increasing support for military spending in Europe.

Defence is one of the five new priorities indicated by the von der Leyen cabinet for the spending of cohesion funds in the second half of the 2021-2027 cycle. They range from support for companies operating in the defence sector to the construction of infrastructure useful for military purposes.

However, cohesion funds cannot be used for the actual purchase of weapons, as warned by the European Commissioner for Cohesion and Reforms Raffaele Fitto when presenting the revision proposal  that, in the hopes of the Commission, should be operational by the beginning of next year. "Cohesion will continue to offer solutions tailored to the needs of different territories", assured Fitto during the presentation press conference.

The new priorities of cohesion

The Commission's proposal would imply the modification of two specific European regulations (relating to the European Regional Development Fund and the Just Transition Fund).

The revision of the cohesion policy programmes - which are designed and managed by individual states or territories - will eventually happen "on a voluntary basis and respecting the differences between territories". In short, it will be up to the authorities of the various countries and regions to decide whether or not to adopt the new priorities: "It is a free choice, it has nothing to do with pseudo-centralisation", Fitto defended himself, alluding to the allegations of wanting to push for greater centralisation of the management of cohesion funds.

Among the five new priorities, in addition to the one relating to defense, there is one that aims to give greater support to large European companies operating in critical sectors such as strategic technologies, through increased investment in research and innovation.

Another priority aims to double European funding dedicated to affordable housing. Member States will be able to mobilise private and public funding for this purpose using a new financial instrument established jointly with the European Investment Bank.

The last two new priorities proposed focus on improving water resilience – for example through initiatives to digitise infrastructure or mitigate the impacts of drought and desertification – and on supporting the energy transition, in particular through the promotion of energy interconnectors, transmission systems and charging infrastructure.

According to European Commission Vice-President Fitto, "time is of the essence for those who want to seize this opportunity". After the European Parliament and the Council have discussed the Commission's proposals, the states and regions concerned should submit their amendments to the ongoing cohesion programmes within two months of the entry into force of the revised legislation, and the Commission will assess them within a further two months.

The entire process should be concluded "by the end of 2025", according to Fitto.

Focus on defence

In the press conference to present the new spending priorities, Raffaele Fitto did not want to provide any indications on what the proposal that the European Commission is about to present for the next EU budget, which will cover the seven-year period 2028-2034, will include: "It is not appropriate to talk about it now, at this time we want to adapt existing resources to current needs".

Cohesion policy already supports investments related to security and defence that are considered in line with the objectives of greater economic, social and territorial cohesion in Europe.

These are mainly funding for the development of technologies and infrastructures that can be useful for both civilian and military purposes (such as transport networks), and support for production capacities, the requalification of industries, the improvement of skills and the strengthening of supply chains.

According to the new proposal, cohesion funds may also be used to pursue two new objectives, in particular with regard to the European Regional Development Fund (ERDF). One will allow funds to be diverted to improve the production capacities of companies "regardless of their size and location", as EU officials specify.

The other will focus on the construction of military transport infrastructure, particularly in the regions close to the EU's eastern border.

The lever of EU funding

The mid-term review of cohesion policy does not make additional resources available, but simply suggests – and encourages – a different allocation of funds available to each national or regional programme.

While the authorities responsible for individual programmes will be free to decide whether or not to invest more in the new priorities proposed by the European Commission, "better financing conditions and greater flexibility" will be offered to those who choose to move in the suggested direction, explained Vice-President Fitto.

The incentives put on the table by the Commission concern in particular the provision of pre-financing and the amount of co-financing covered by Brussels. In practice, while cohesion projects usually receive pre-financing from the EU amounting to 6% of their budget, projects aligned with the new strategic priorities will be able to benefit from a pre-financing of 30%, to which an additional 4.5% will be added for projects falling within programmes that will shift at least 15% of their total amount towards these priorities.

In addition, national and regional authorities – who usually contribute their own resources to the implementation of the various projects – will be able to ask the EU to cover up to 100% of the amount of individual projects.

Regions located along the eastern border of the Union will be granted "special treatment", which translates into a possible additional pre-financing of 9.5% for programmes that will allocate at least 15% of their total funds to the new strategic priorities.

"We are offering the possibility to adapt the [cohesion] programmes to the needs that have changed since the programmes were defined in 2021-2022," Fitto stressed regarding the consequences of Russian aggression against Ukraine: "For some peripheral regions the world has changed since then and they face disproportionate challenges."

This material is published in the context of the project "Cohesion4Climate" co-funded by the European Union. The EU is in no way responsible for the information or views expressed within the framework of the project; the sole responsibility for the content lies with OBCT.