Tying EU funding to sound economic governance

Grants from the various EU funds between 2014 and 2020 are being closely linked to the measures implemented nationally to ensure sound economic governance. Governments that fail to respect this link could find their EU funding suspended.

ACT

Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: Guidelines on the application of the measures linking effectiveness of the European Structural and Investment Funds to sound economic governance according to Article 23 of Regulation (EU) 1303/2013 (COM(2014) 494 final of 30.7.2014).

SUMMARY

WHAT DOES THE COMMUNICATION DO?

The communication explains how the Commission should implement some provisions of Article 23 of Regulation (EU) No 1303/2013. This Article requires that funding from the five European structural and investment funds, which is distributed to EU countries, must help to ensure sound economic governance. This is known as ‘macroeconomic conditionality’* and is designed to increase the effectiveness of the expenditure.

KEY POINTS

The regulation gives the Commission two new powers.

Firstly, it may ask a government to redirect its use of EU funds if it considers that particular economic problems require a modification of the country’s initial overall spending programme.

When doing so, the Commission will identify the programmes and priorities which should benefit from more financial resources and those that can make do with fewer.

If the government ignores the request, or fails to respond with appropriate measures, the Commission can recommend that part of the payments, potentially up to 50 % of each of the programmes concerned, from the EU funds, be suspended.

Secondly, the Commission will recommend that some EU funding is suspended if a country fails to comply with the EU’s economic governance rules, e.g. by running an excessive deficit or a major fiscal imbalance.

The actual level of funding that the Commission would propose suspending would be set so as to encourage the country concerned to comply with the original request. The Commission will take account of any special economic and social circumstances.

In both cases, EU governments (the Council of the European Union) would decide whether to approve or reject the suspension that the Commission proposes.

BACKGROUND

Previously, the link between EU finance and economic governance was limited to one fund: the Cohesion Fund. Now, it is extended to the other four funds (regional, social, agricultural and fisheries).

KEY TERMS

* Macroeconomic conditionality: funding is conditional on the country in question complying with the EU’s economic governance procedures.

RELATED ACTS

Regulation (EU) No 1303/2013 of the European Parliament and of the Council of 17 December 2013 laying down common provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural Development and the European Maritime and Fisheries Fund and laying down general provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund and the European Maritime and Fisheries Fund and repealing Council Regulation (EC) No 1083/2006 (OJ L 347, 20.12.2013, pp. 320-469).

last update 08.12.2014