EUROPEAN COMMISSION

Brussels, 28.5.2020

COM(2020) 452 final

2018/0197(COD)

Amended proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

on the European Regional Development Fund and on the Cohesion Fund

EXPLANATORY MEMORANDUM

1.CONTEXT OF THE PROPOSAL

•Reasons for and objectives of the proposal

The European economy suffered a profound and unprecedented exogenous shock with the COVID-19 pandemic. The economy is contracting and unemployment is rising; the uncertainty of the situation to follow may lead to slower recovery. The initial responses to the crisis largely depended on national and regional capacities, which differ to a large extent across Member States and regions, due to the diverse economic structures and fiscal space. Such differences may result in asymmetric recovery and contribute to increasing regional disparities, which can in turn undermine the single market, the financial stability of the Eurozone and the solidarity of our Union.

The spread of the coronavirus across countries has prompted many governments to introduce unprecedented measures to contain the pandemic such as businesses being shut down temporarily or widespread restrictions on travel and mobility, and led to increased uncertainty on the financial markets. This in turn may lead to sharp declines in the level of output in many economies with severe social consequences. It may pose significant challenges for public finances in the years to come, which in turn may limit public investment necessary for the economic recovery.

The Commission is proposing to harness the full power of the EU budget to mobilise investment and frontload financial support in the crucial first years of recovery. These proposals are based on two pillars. On the one hand, an emergency European Recovery Instrument which will temporarily boost the financial firepower of the EU budget by using the headroom in the EU budget to raise additional financing on the financial markets. On the other hand, a reinforced multiannual financial framework for 2021-2027. The Commission is proposing to strengthen key programmes through the European Recovery Instrument to channel investment quickly to where it is needed most, reinforce the single market, step up cooperation in areas such as health and crisis management, and equip the Union with a budget tailor-made to drive the long-term transition to a more resilient, greener, and digital Europe.

The present proposal belongs to the second pillar mentioned above. It is crucial to ensure a swift recovery of the EU economy in the aftermath of the COVID-19 pandemic, while fulfilling the Treaty objective of promoting convergence and reducing disparities. This requires tailor-made actions in the context of national and regional economies. Cohesion policy investments need to play a leading role in ensuring a recovery for all paving the path for economic development over longer term. When providing support, particular emphasis needs to be put on the regions most affected by the crisis and which are less equipped to bounce back.

•Consistency with existing policy provisions in the policy area

•Consistency with other Union policies

2.LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY

•Legal basis

•Subsidiarity (for non-exclusive competence)

•Proportionality

•Choice of the instrument

3.RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS

•Ex-post evaluations/fitness checks of existing legislation

•Stakeholder consultations

•Collection and use of expertise

•Impact assessment

•Regulatory fitness and simplification

•Fundamental rights

4.BUDGETARY IMPLICATIONS

5.OTHER ELEMENTS

•Implementation plans and monitoring, evaluation and reporting arrangements

•Explanatory documents (for directives)

•Detailed explanation of the specific provisions of the proposal

It is proposed to amend the proposal for a Regulation COM(2018) 372 of 29 May 2018 as follows:

(1)Article 2(1)(a)(iii) is modified so that the title of the specific objective covers job creation;

(2)Article 2(1)(d)(ii) is modified to ensure support to fostering resilience for distance and on-line education and training;

(3)Article 2(1)(d)(iv) is modified so that the title of the specific objective covers resilience of health systems;

(4)a new specific objective related to culture and tourism is added as a new point (v) in Article 2(1)(d);

(5)in Article 4(1), a new subparagraph is added to ensure the eligibility of critical supplies necessary to strengthen health or disaster resilience;

(6)Article 6(1)(d) is modified so as to allow the ERDF to support undertakings in difficulty where temporary State aid measures in response to specific circumstances are established;

(7)a new Article 11a is added to allow for temporary measures allowing for a targeted extension of the scope of the ERDF, such as working capital in SMEs in the form of grants, as well as for a derogation from the requirements of thematic concentration and minimum allocation for sustainable urban development in case of exceptional and unusual circumstances in the context of the Stability and Growth Pact;

(8)Annex I is modified to allow for using output and result indicators related to tourism and culture outside policy objective 5.

2018/0197 (COD)

Amended proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

on the European Regional Development Fund and on the Cohesion Fund

Commission proposal COM(2018) 372 is amended as follows:

(1)the following recital (7a) is inserted:

“(7a) With small and medium enterprises (SMEs) being the backbone of the European economy, the ERDF should continue to support the development of SMEs by enhancing their growth and competitiveness. Additionally, taking into account the potentially profound impact of the COVID-19 pandemic or any potentially crisis situations arising in the future having an impact on businesses and employment, the ERDF should support the recovery from that crisis through supporting job creation in SMEs.”;

(2)the following recital (10a) is inserted:

“(10a) In order to strengthen the preparedness for distance and online education and training in a socially inclusive manner, the ERDF should in its task of improving access to inclusive and quality services in education, training and life long learning notably contribute to fostering resilience for distance and online learning. The efforts to ensure the continuity of education and training during the COVID-19 pandemic have revealed important shortcomings in the access to the necessary ICT equipment and connectivity by learners from a disadvantaged background and in remote regions. In this context, the ERDF should support making available the necessary ICT equipment and connectivity, thus fostering the resilience of the education and training systems for distance and online learning.”;

(2)the following recital (10b) is inserted:

“(10b) In order to strengthen the capability of public health systems to prevent, quickly respond to, and recover from health emergencies, the ERDF should also contribute to the resilience of health systems. Additionally, as the unprecedented COVID-19 pandemic has revealed the importance of immediate availability of critical supplies to provide an effective response to an emergency situation, the scope of support of the ERDF should be broadened to allow for the purchase of supplies necessary for strengthening the disaster resilience and for strengthening the resilience of health systems. When purchasing supplies to strengthen the resilience of health systems, these should be consistent with and not go beyond the national health strategy and ensure complementarities with [the Health Programme], as well as the rescEU capacities under the Union Civil Protection Mechanism (UCPM).”;

(3)the following recital (10c) is inserted:

“(10c) In order to be able to support the regional economies strongly dependent on the tourism and cultural sectors, a dedicated specific objective should be provided for. This would allow to exploit the full potential of culture and tourism for an economic recovery, social inclusion and social innovation, without prejudice to the possibilities to provide support from the ERDF to those sectors under other specific objectives.”;

(4)recital 21 is replaced by the following:

“(21) At the same time, it is important to clarify those activities which fall outside the scope of the ERDF and the Cohesion Fund, including investments to achieve the reduction of greenhouse gas emissions from activities listed in Annex I to Directive 2003/87/EC of the European Parliament and of the Council(*) in order to avoid duplication of available financing, which already exists as part of that Directive. The ERDF and the Cohesion Fund should also not support undertakings in difficulty as defined in Commission Regulation (EU) No 651/2014(**), unless authorised under temporary State aid frameworks established to address exceptional circumstances. In addition, it should be explicitly set out that the overseas countries and territories listed in Annex II of the TFEU are not eligible for support from the ERDF and the Cohesion Fund.

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(*) Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC (OJ L 275, 25.10.2003, p. 32).

(**) Commission Regulation (EU) No 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty (OJ L 187, 26.6.2014, p. 1).”;

(5)the following recital (27a) is inserted:

“(27a) In order to allow for a rapid response to exceptional and unusual circumstances as referred to in the Stability and Growth Pact that may arise during the programming period, temporary measures should be provided for to facilitate the use of the support from the ERDF in response to such circumstances. Furthermore, the implementing powers in relation to the temporary measures for the use of the Funds in response to exceptional and unusual circumstances should be adopted without committee procedures given that the scope of application is determined by the Stability and Growth Pact and limited to the measures set out in this Regulation.”;

(6)in Article 2, paragraph 1 is amended as follows:

(a)in point (a), point (iii) is replaced by the following:

“(iii) enhancing growth and competitiveness of SMEs and job creation in SMEs;”;

(b)point (d) is amended as follows:

(i) point (ii) is replaced by the following

“(ii) improving access to inclusive and quality services in education, training and lifelong learning through developing infrastructure, including by fostering resilience for distance and on-line education and training;”;

(ii)    point (iv) is replaced by the following:

“(iv) ensuring equal access to health care and fostering resilience of health systems;”;

(iii)    the following point (v) is added:

“(v) enhancing the role of culture and tourism in economic development, social inclusion and social innovation;”;

(7)in Article 4 (1), the following subparagraph is added:

“In order to contribute to the specific objective under PO 2 set out in point (b)(iv) of Article 2(1) and to the specific objective under PO 4 set out in point (d) (iv) of that Article, the ERDF shall also support the purchase of supplies necessary for strengthening the resilience of health systems and for strengthening disaster resilience.”;

(8)in Article 6 (1), point (d) is replaced by the following:

(d) undertakings in difficulty, as defined in Article 2(18) of Commission Regulation (EU) No 651/2014, unless authorised under a temporary State aid framework established to address exceptional circumstances;”;

(9)the following Chapter IIa is inserted:

“CHAPTER IIa

Temporary measures in response to exceptional and unusual circumstances

Article 11a

Temporary measures for the use of the ERDF in response to exceptional and unusual circumstances

Where the Council after [date of entry into force of this Regulation], has recognised the occurrence of an unusual event outside the control of one or more Member States which has a major impact on the financial position of the general government or a severe economic downturn for the euro area or the Union as a whole referred to in the tenth subparagraph of Article 5(1), the fourth subparagraph of Article 6(3), the tenth subparagraph of Article 9(1) and the fourth subparagraph of Article 10(3) of Regulation (EC) No 1466/97(*) or the occurrence of unexpected adverse economic events with major unfavourable consequences for government finances referred to in Articles 3(5) and 5(2) of Regulation (EC) No 1467/97(**), the Commission may, by way of an implementing decision and for the period defined in that decision:

(a)extend the scope of support of the ERDF, by way of derogation from Article 4, in order to support measures that are strictly necessary to respond to such exceptional or unusual circumstances, in particular through financing of working capital for SMEs in the form of grants;

(b)reduce thematic concentration requirements and minimum allocation requirements established for sustainable urban development, by way of derogation from Article 3 and Article 9(2).

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(*) Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies (OJ L 209, 2.8.1997, p. 1).

(**) Council Regulation (EC) No 1467/97 of 7 July 1997 on speeding up and clarifying the implementation of the excessive deficit procedure (OJ L 209, 2.8.1997, p. 6).”;

(10)Annex I is amended in accordance with the Annex to this proposal.

Done at Brussels,