Europe in need of coherent and effective investment framework

Costas Mavrides is opposed to the creation of a close link between fiscal objectives and cohesion policy.

By Costas Mavrides

21 Apr 2015

Cohesion policy has played an important role in mitigating the effects of the financial, economic and social crises and had a positive impact on all Europe's regions. The role of the policy has also been noticeable in its closing of the public and private investment gap, especially in the countries most affected by the crisis. 

Furthermore, investment in cohesion has provided stability to regions by ensuring the flow of funding when national public and private investments were reduced or even ceased. However, due to the economic crisis and austerity measures, regional, economic and social disparities have widened, while employment and competitiveness rates of several member states has worsened, particularly in southern peripheral countries.

The level of investment in the United States in 2014 is close to pre-crisis levels, yet this is not the case in Europe where investment remains significantly lower than before. European policies are therefore expected to preserve growth-enhancing investment, particularly by promoting education, research and innovation, green energy, modernisation of transport and environmental infrastructure, as well as the deployment of broadband. Cohesion policy is now expected to maximise its potential for stimulating investment to enhance growth and jobs.

According to the sixth cohesion report, cohesion policy has become the main source of public investment in the union. Its structure has been accommodated in the Europe 2020 strategy - it being the main instrument for smart, sustainable and inclusive growth. In line with this approach, the €315bn

European fund for strategic investment (EFSI) is expected to foster public investment towards mobilising private funding.

In the opinion, prepared on behalf of parliament's economic and monetary affairs committee, I stress the interdependence of cohesion policy with the EU's other investment initiatives and call on the commission to create a coherent and effective investment framework.


According to the commission, investment funded by cohesion policy will not deliver on its growth and jobs objectives without sound fiscal and economic policies. Therefore, the commission introduced macroeconomic conditionality, which makes cohesion funding dependent on the country's compliance with economic governance procedures. 

Essentially, should a country fail to take measures recommended under the instruments of macroeconomic coordination, its EU funds could be suspended. Given such conditionality, the 'investment clause' was included as part of the preventive arm of the stability and growth pact (SGP) in order to allow member states in adverse economic circumstances and in a context of increasing public investment to temporarily deviate from their medium-term budgetary objective or their required adjustment path.

However, I firmly believe that the investment clause should be symmetrically extended to the corrective arm of the SGP, as asymmetry prevents the application of this clause for countries under the excessive deficit procedure.

Although, I support better governance and efficiency in cohesion policy, I strongly oppose creating a close link between fiscal objectives and cohesion policy. Such a close link dilutes the purpose of the policy. Cohesion funding should primarily be used where it matters most; the least prosperous regions and not necessarily aiming for the best return. 

The application of macroeconomic conditionality sanctions would be detrimental to the solidarity element of cohesion. After all, cohesion policy has been the most visible expression of solidarity within the EU and this must not change. Efficiency and solidarity must be two sides of the same coin.

Therefore, the commission needs to ensure that the effectiveness of the EFSI is not compromised by macroeconomic policies. In addition, the full and formal involvement of parliament in the future governance structure of the fund is critical. As an opinion rapporteur, instead of sanctioning member states,

I propose exempting the national co-financing of the EFSI from SGP deficit calculations to free up resources for investment and speed up expenditure procedures, especially in countries hit most by the crisis and those under financial assistance programmes.

Finally, I stress that the EFSI should aim at labour intensive projects, which seek to create quality employment in the EU, notably by taking proper account of the financing needs in countries most affected by the crisis. Additionally, direct support to promote solid growth and sustainable development of micro, small and medium-sized enterprises, in regions with the greatest impact in terms of closures, should be a priority.