Opinion of the Committee of the Regions on the Sixth Progress Report on economic and social cohesion

(2010/C 175/02)

I.   POLICY RECOMMENDATIONS

THE COMMITTEE OF THE REGIONS:

Introduction

1.   welcomes the 6th Progress report on economic and social cohesion that focuses on creativity and innovation aiming at helping the Union to emerge faster and stronger from the economic crisis. It shows which factors can boost creativity and innovation in all regions of the EU. The CoR welcomes also the synthesis that is provided on the debate on Territorial Cohesion after the launch of the Green Paper last year;

2.   notes that the world is in the throes of a major financial and economic crisis. The public authorities and financial institutions, struggle to cope with the issues. Companies and enterprises, large and small are in financial difficulties. Men and women across the continent see homes and jobs put at risk; others see their employment prospects vanish. The economic and social outlook in the short and medium term is not good: unemployment, business closures as well as drop in both national and local budget revenues and less room for manoeuvre in public finances;

3.   recognises that Climate Change is a real threat to the lives of many people and species around the world, and immediate action needs to be taken at all levels to minimise the rise in temperature. At the same time, Climate Change also presents an important opportunity to do things differently to the benefit of the environment, society and the economy;

4.   understands that this current situation that we find ourselves in is considerably different to that in which the parameters for the 2007 -2013 program were established. However more than half of the current programming period remains before new programmes begin in 2014. Whilst the CoR accepts that the function of cohesion policy is to set and deliver on long term strategic goals, the CoR also believes that some benefit could be gained from small changes now to mitigate the impact the current economic and financial crisis is having upon its member states and local and regional authorities and to aid recovery. The CoR believes that this can be done within the current strategic aims of the policy;

5.   understands that there will not be a full mid-term review of the current programming period, therefore it is important to build on the opportunity presented in the 6th Cohesion Progress Report to take advantage of best practice that have been established to date. It is an opportunity to look at how European Structural Funds are working in local and regional areas and at how they can be better used. Given the growing concerns that are emerging about the very future of EU Cohesion Policy, this input needs to be used to provide a strong message through to the 5th Cohesion report, due out in autumn 2010 for the discussion on the future programming period post 2013 and which, in line with Article 175 of the new Treaty on the Functioning of the European Union, will from now on address economic, social and territorial cohesion;

6.   recognises that Territorial Cohesion Policy which the new Treaty sets as a new EU Objective, needs also to relate to the Lisbon Agenda. The review of the Agenda in 2010 provides yet another opportunity for the EU to assess what the successes have been and where greater flexibility is needed to enable Member States and, particularly, local and regional authorities to successfully implement programmes which will have a real direct impact on the citizens’ well being and opportunities. It will also provide an opportunity to better incorporate climate change issues into the future direction of the EU, not least through a revision of the earmarking mechanism for the Structural Funds in line with the new goals of the new Lisbon strategy;

7.   is disappointed that in the case of the 6th Progress Report on Cohesion, an analysis of the current economic and environmental conditions is sadly missing. It neglects to put the current situation in the context of the worst economic crisis since the Great Depression and fails to take important decisions to mitigate the effects of Climate Change. Crucially it does not look at the impact on our regions, towns and cities and the people within them;

8.   considers that the territorial impact of EU innovation policies needs to be analysed more effectively, in order to identify and promote the best European measures to support investment in innovation at local and regional level. The competitiveness of the regions as drivers of sustainable growth can only be achieved through smart public investment in innovation both in manufacturing and, above all, in the service sector;

9.   has written this Opinion to seek to address the problems not from the perspective of international solutions, but from the perspective of regions, cities and towns, and the men and women who live in them;

The current situation in Local and Regional Economies

10.   understands that indigenous enterprises, which grow organically in a city or a region, contribute an area's strength and economic stability. Such enterprises - whether SMEs, social enterprises or community-based initiatives - can catalyse the regeneration of an area. Yet, before these businesses can grow, interventions on the economic, environmental and social conditions such as improving skills, implementation of various development programmes, reducing the causes of deprivation and investing in public infrastructure need to be in place for businesses to thrive;

11.   also recognises the importance of inward investment into a community. Regions and local communities work to attract investment from businesses, bring in skilled workers and also have a role in retaining those who already live or have studied in the region. This means looking at the economic and social challenges of that area and define how to address them in order to then be able to benefit from the unique offer of their region and to be able to exploit whatever comparative advantages they have in job offers, housing, education and quality of life;

12.   acknowledges that the analysis of the situation in the various categories of regions (convergence, transition and competitiveness and employment) made by the Commission in the Sixth Progress report reflects the different socio-economic situation of the three kinds of regions, particularly as regards their capacity for creativity, innovation and entrepreneurship. Both the current economic crisis and the range of variables that impact on regional development potential (demographics, accessibility, capacity for innovation, etc) are factors that highlight the existence of important data that should be taken into account when assessing local and regional economies and shaping an effective cohesion policy. This calls for the inclusion of new indicators to supplement GDP per capita for classifying regions with a view to the post-2013 programming period;

Territorial Cohesion

13.   welcomes the report in the 6th Progress Report on the responses to the Green Paper on Territorial Cohesion, which has had a significant input by local and regional authorities. According to the 6th Progress Report, the goal of Territorial Cohesion is to encourage the harmonious and sustainable development of all territories by enabling them to build on their territorial characteristics and resources. This also requires land planning providing for the necessary transport and communication links to ensure efficient flow of goods, services and capital. The CoR also emphasises the message that no two regions are identical and each have a unique offer to make in reaching their full potential;

14.   given the broad support for this new territorial goal and in the light of the current economic situation, nonetheless laments the lack of specific proposals for the future development and application of territorial cohesion during the current and upcoming programming period;

15.   notes that Territorial Cohesion is more important under the Lisbon Treaty as Territorial Cohesion has become a political objective of the EU and a third dimension of Cohesion Policy. The CoR therefore reiterates what it said in its opinion on the Green Paper on Territorial Cohesion, namely that, following ratification of the Lisbon Treaty, a White Paper on Territorial Cohesion should be published to outline more precisely how this goal will be integrated and made practicable across all EU policies;

16.   maintains that, in terms of Territorial Cooperation, the programmes need to be based on addressing common challenges and providing EU added value, building on the programme's current experiences and outcomes. The added value will be gained through working with local and regional authorities, wider functional areas, sharing a land or sea area or thematic challenge across two or more Member States. A number of pilot projects bringing together functional economic areas crossing two or more member states could be developed and supported in this programming period in order to help develop a more strategic approach going forward. The CoR looks forward to inputting into the 2010 revision of the regulation on the European Grouping for Territorial Cooperation (EGTC), drawing on experiences of local and regional authorities;

Integrating Innovation and Creativity in Cohesion Policy

17.   believes that the aim of any Cohesion policy review must be to learn from what has succeeded, not to perpetuate what is failing. Therefore, Cohesion Policy must itself be creative and innovative, and take advantage of the knowledge and experiences of local authorities, cities and regions and to inform our learning for now as well as the future;

18.   understands that innovation and creativity are not wholly owned by leading companies or higher education institutions. Local and regional authorities also need to create and innovate, and enable creativity and innovation. Structural Funds are a tool to help them to do this. However, more flexibility is needed to enable the use of these funds to be speedily allocated and to focus not just on high growth, or higher level skills, but on encouraging entrepreneurship across a range of areas. This will enable local people who see an opportunity to create a new business, to access the advice and guidance needed to make the next step;

19.   acknowledges the progress of the European Institute of Innovation and Technology, yet sees it as a tool mainly for leading companies and research institutions. As innovation and creativity need to be encouraged across the EU by all levels of governance and by EU citizens, the CoR recommends that the European Commission look into setting up and is willing to a Virtual Network of Creativity and is willing to be involved in shaping its content. This would - like many EU Open Learning Networks - be open to all, with advice, support and access both to venture capital and technical services. All relevant local and regional authorities beside central public bodies, as well as the private sector, all ordinary men and women, with ideas, experience and imagination will have the opportunity and ability to put their ideas to a wider network;

20.   recognises that innovators and inventors need to feed off similar people and groups and get encouragement from them. A Virtual Network of Creativity would help develop that - producing 'innovation champions’ as well as providing mentoring and expertise. The benefit of the virtual nature is that it would enable those in island, outermost, rural, mountainous and sparsely populated areas, which may be far from university campuses, to benefit from access to expert advice, education and knowledge; access also to entrepreneurial support and financial guidance; to develop as a virtual, if not actual, community;

21.   believes that creativity and innovation is also needed in the current programme to best meet the challenges of sustainability and Climate Change. Energy efficiency drives at local and regional level, not only have the potential to reduce emissions, but also to create new ‘green collar’ jobs and businesses, providing secure, long term employment and enhancing skills, which EU Cohesion Policy should support. Some regions have carbon reduction targets already established in their programmes and the good practice of this can be rolled out for the remainder of this programming period;

22.   considers that what is required is a partnership of equals representing public or private sector; an approach that encourages regional and local innovation and participation that is inclusive, not exclusive. The place of partnership, whether public/private, or public/public, both within the same governance level as well as between the governance levels, cannot be overstated in this regard; local and regional authorities and their partners are the potential solutions to the innovation gap if supported to be so;

23.   declares that now is the time to be innovative and creative and allow local and regional authorities the opportunity to put their expertise and knowledge to the fore. For examples culture and tourism, are by their essence driven locally and regionally, with the potential to generate employment and investment. Whether as European Capitals of Culture, or as cultural centres in their own right, many European cities and regions have demonstrated the efficacy of these policy sectors in developing an attractive and distinctive image and fresh employment potential, which can also draw in new investment;

Simplifying management to improve effectiveness and control

24.   welcomes the simplification measures taken to date and encourages further discussion with stakeholders to see where other adjustments can be made for this programming period. CoR believes that excess financial management and control cripples Cohesion Policy and can make it counter-productive, as project sponsors move away from the policy because of the heavy financial compliance and control burdens. Although the CoR recognises the importance of stringent financial control of public money, it should not force regional and local authorities to become risk adverse, avoiding innovative and creative programmes for fear of failure or claw back. Management must also be simplified, preventing reinvention and ensuring, through clear, precise provisions, a stable, precise legal framework for each programming period;

25.   believes that funding that is unspent due to N+2 should not be returned to the Commission and then repatriated to the Member State, but instead those monies could be used for regionally based Venture Capital or Seed Capital Funds, or the Commission's European Globalisation Adjustment Fund. Another suggestion is a European Climate Change Adjustment Fund to help finance local projects designed to enable the various economic sectors to adapt to current or future environmental constraints. These adaptation measures might include reskilling projects or schemes to help the affected workers move into environmentally sustainable occupations. They might also include restructuring programmes for environmentally unviable businesses. The monies allocated to the Venture Capital Fund via the EIB could offer SMEs, social enterprises and community-based initiatives access to finance for both the short term and growth, which, in the current economic situation has become difficult to obtain. In any case, the N+2 rule should be made more flexible, in view of the objectives pursued by cohesion policy and the effects of cyclical economic changes on public finances and private investment;

26.   also maintains that an additional simplification will be achieved through the Commission analysing Member State's audit procedures and seeing if ‘contracts of confidence’ can be reached to avoid duplication in auditing procedures. This should not be a question of strengthening monitoring, but first and foremost a question of avoiding mistakes, prevention and assessing outcomes. The principle of proportionality of regulations on small projects should be applied to reduce burdens;

Greater and better knowledge; a look to the future …

27.   acknowledges the pilot schemes that will be put in place by the Commission, beginning in 2011, for introducing additional indicators that go beyond GDP. The CoR has argued in various Opinions for the development of new indicators to make it possible to take better account of territorial disparities in public policy in general and cohesion policy in particular;

28.   encourages the exchange of experience between European regions and the development of clusters for innovation and eco-innovation, which could significantly help to prevent these activities from being concentrated only in certain regions and to reduce the gaps between regions;

29.   recognises that there is too little sharing of this information and building on what has already been successful. This is why the CoR has successfully launched the European Entrepreneurial Region aiming at sharing good practices and awarding the best strategy for the economic development of an Entrepreneurial Region in the EU. The CoR also welcomes initiatives like InfoRegio and RegioStars awards; however a more user-friendly database of projects, preferably going wider than Regional Policy funds, would enable learning to take place. An interactive database, inspired by some commercial website or social networking tools would be beneficial to all;

30.   recognises that the lack of data now, where data in relation to the financial situation and its effect on local and regional authorities is two or more years old, will affect the delivery of the programmes, slow flexibility of response and limit needed changes to internal regulations;

31.   believes that the allocation of Structural Funds solely on the basis of GDP masks the real economic picture in the regions and ignores the increase in pockets of deprivation in Member States where GDP is high;

32.   believes that further simplification of combining ERDF, ESF and rural development programmes should be looked at. A one-stop-shop approach could be the starting point to consider this. This could enable regions to take better advantage of funding opportunities and to programme needs based services i.e. the combination of ERDF & ESF to up-skill and provide work for potential employees;

33.   believes that the future Cohesion Policy must apply a more flexible approach allowing cities and regions to develop programmes based on their needs of their regions and local communities, instead of attempting to fit needs to top-down frameworks. This means programmes should be built on regional strategies which have been widely consulted with all stakeholders;

34.   believes that the development of strategies at macro level, e.g. the EU Strategy for the Baltic Sea Region, must contribute to enhancing the role of the local and regional level in the implementation of EU policy more generally; the Committee also proposes that development of new strategies be continued in other geographical areas, with sufficient backing from the countries involved and the European institutions;

35.   proposes that the drive for energy efficiency of buildings and transport should become an essential part of cohesion funding, as a required pillar of permitted EU funded development;

Recommendations

36.   The CoR suggests that a White Paper on Territorial Cohesion could be a useful approach and asks the European Commission what they plan to do with the 400 responses to the Green Paper on Territorial Cohesion in order to support the concept and implementation of territorial Cohesion in the future policies of the EU;

37.   reiterates the need for cohesion policy to continue beyond 2013 as an instrument for European Union development that is ever more vital, not least following the severe economic crisis that has hit Europe. Demands, to this end, that the fifth Cohesion Report reaffirm its support for an ambitious Cohesion Policy with a strong place-based approach that in accordance with article 174 of the Lisbon Treaty should be geared towards promoting economic, social and territorial cohesion, and that is available not only to regions that are lagging behind but to all EU territories to address existing economic and social disadvantages and to exploit its territorial assets;

38.   requests the European Commission to put in place a user-friendly database of best practice across different areas of public policy (e.g. support for innovation, support for inclusion, climate measures). This is a key area of technical assistance across all EU funded programmes to enable real exchange and building on best practice;

39.   points out that some regions are promoting innovative and environmental initiatives which actively promote enterprise whilst acknowledging the need for programmes to be sustainable both socially and environmental. Furthermore, it is essential to enable local and regional authorities to learn best practice from other Member States (1);

40.   accepts that consideration should be given to the use of alternative indicators other than GDP, but notes that these have not yet been agreed at EU level and are not available for the NUTS-II level. The CoR therefore supports the European Commission's proposal in its Communication GDP and beyond to produce a report on the further development of European indicator models in 2012 at the latest;

41.   calls upon the European Commission to continue to look at how implementation can be better simplified and facilitated. This may be in ways of internal working and may not always require changes to the regulations. Simple measures to provide clear interpretation and unambiguous guidance to all managing authorities would help to avoid unnecessary delays and difficulties in implementing the programmes. Publishing the implementation guidance notes that are agreed within the Commission-Member States Coordination Committees would also be useful in that regard; in any case, it would be very useful if regulatory texts used the same terminology and provisions relating to management in the different periods, as it is natural and logical for these not to change;

42.   recommends that any unspent N+2 and N+3 from a region be retained for regionally-based venture capital of seed capital funds for the express purpose of setting up SME support projects for innovation and development, or for the Commission's European Globalisation Adjustment Fund, or a future Climate Change Adjustment Fund;

43.   recommends that all programmes should have access to current good practice in reducing the carbon footprint of implementing ERDF, ESF and Rural Development programmes so that others can build this into their programmes to address our common climate change challenge. Future programming will need to look at how Structural Funds are moving not only to current Lisbon targets but to a Europe-wide Low Carbon Economy, with best practice in zero-carbon programmes;

44.   recommends that the European Commission look into setting up a Virtual Network of Creativity and is willing to be involved in shaping its content;

45.   recommends that Cohesion Policy is remodelled, so that the subsidiarity principle applies at local and regional level, not simply at Member State level;

46.   invites the Commission to apply proportionality to administrative procedures as well in its next programming period, so that the documentation it requests is commensurate with the sums provided, in order to cut red tape.

(1)  The CoR notes with interest the following projects: www.train2000.org.uk/wiced - A world leading example of enterprise and innovation. The Women's International Centre for Economic Development (W.I.C.E.D) The project provides support to and promotes female entrepreneurship in Liverpool. http://www.deaca.dk/ - Danish example: Enterprise and the environment. Regional Centres for Business Development invested roughly EUR 42 million in 2007 to support 28 projects. These span from supporting the development of sustainable energy, bio fuel and biomasses to supporting hands-on energy saving projects. Examples of energy saving projects are intelligent energy management in growth houses in South Denmark Region whereby energy consumption in test growth house has been cut by 50 %. http://www.nwdacarboncalculator.com - Environmental sustainability – ‘the Carbon calculator’ enables programme coordinators in the North West Region of England to identify the impact of their initiative has upon the environment, specifically the level of CO2 emissions. http://www.goeast.gov.uk/goeast/european_funding/project_case_studies/ - Environmental sustainability - The East of England region encourages the identification and dissemination of innovative forms of project design and delivery. http://www.em-lyon.com/english/emlyon/who/index.aspx - Entrepreneurship - EMLYON (France) is a European Business School devoted to lifelong learning for entrepreneurial and international management.