EIRP Proceedings, Vol 9 (2014)

EU Funding for 2014-2020 – Upcoming

Opportunities and Challenges

Gabriela Marchis¹

Abstract: The new philosophy of community development under the aegis of Europe 2020 strategy requires increased coordination and better interconnection between European financial instruments available for 2014-2020 programming period. The desire of the EU to be cohesive and unitary face a large spectrum of complex and correlated challenges such as: globalization; climate change; technological transformation; aging and demographic change and etcetera. These challenges together with the polyvalence of the integration process (deepening - widening - enlargement) determines the orientation of European Structural and Investment funds to integrated, multi-sectorial and multi-dimensional solutions. In this context, in order to increase the effectiveness and efficiency of European policies, the review, management and optimization of the European budget is crucial. This paper attempts to demonstrate the appropriateness structure of the EU budget and the extent to which this budget is a supporter and a guarantor of economic development of the EU as a whole, and of each individual Member State. This research examines how the EU budget manages to counter the financial crisis and analyses the aspects that can be improved and the prospects for the next period.

Keywords: EU budget review; economic growth; ESI funds; Europe 2020; multiannual financial framework

JEL Classification: F36; O52; F63; O40; E61

1. Introduction

The upcoming programming period 2014-2020 brings a lot of novelty in the EU funding “jungle”, and being acquainted with the “key rules of the game”, will enable the achievement of socio-economic development, contributing in this way to the increase of convergence among Member States. This paper is organized in 3 main directions, as follows:  EU strategy for smart, sustainable and inclusive growth – Europe 2020;  Multiannual Financial Framework for 2014-2020 and  European Structural and Investment funds.

This practical research paper shows the harmonized pattern of upcoming funding, being addressed to all levels of public administrations in charge of or involved in the design, development and implementation of projects, subject to compliance with European funds. Also, it will be of particular interest to NGOs, associations, university departments and consultants that are planning to apply for EU calls for proposal.

2. EU Strategy for Smart, Sustainable and Inclusive Growth – Europe 2020

Europe 2020 is the European Union’s 10-year growth strategy. The main objectives of this Strategy refer to:  employment (ensuring 75% of the 20-64 year-olds to be employed);  R&D (getting 3% of the EU’s GDP to be invested in R&D);  climate change and energy sustainability (limiting greenhouse gas emissions by 20% or even 30%, compared to 1990 levels; creating 20% of energy from renewables and increasing by 20% of our energy efficiency);  education (reducing the rates of early school leaving below 10% with at least 40% of 30-34–year-olds completing third level education);  fighting poverty and social exclusion (ensuring 20 million fewer people are at risk of poverty and social exclusion).

Each EU country has adopted its own national targets in each of these areas. Hence, Romania targets, in accordance with Europe 2020 Strategy are:  70% employment rate;  investing up to 2% of GDP in R&D;  reduction of CO₂ emission by 19%;  creating 24% of energy from renewables and reduction of energy consumption by 10%;  reducing the level of early school leaving below 11.3%;  at least 26.7% of 30-34–year-olds completing tertiary education;  reduction of population at risk of poverty or social exclusion with 580000.

The main priorities of Europe 2020 strategy are:

• smart growth, which means the improvement of EU’s performance in education (encouraging people to learn and upgrade their skills) research & innovation (development of new products and services that generate jobs in order to address social challenges) and digital society (stimulating people learn how to use information and communication technologies);

• sustainable growth refers to improve the use of resources in a more efficient and sustainable manner, developing new green technologies and new production methods that are more eco-friendly and also it involves to influence the consumer preferences, by raising their awareness on the importance of preserving and protecting the environment with the aim of making well-informed choices;

• inclusive growth concerns the modernisation of labour markets and welfare systems, by helping people of all ages to get employed, through investment in their education.

All these priorities are inter-correlated and are directly linked to the 5 targets described above. In order to respond to these priorities and to achieve the 6 strategic objectives of Europe 2020 strategy, a set of financial and technical instruments was designed both at communitarian and national level.

The equivalence between technical instruments available in for 2007-2013 and 2014-2020 programing period is outlined in the diagram below.

Figure 1. The equivalence between EU programmes (2007-2013 vs. 2014–2020)

Part of the EU financial support is reflected by the Multiannual Financial Framework for 2014-2020.

3. The Multiannual Financial Framework for 2014-2020

As an expression of European political priorities, the Multiannual Financial Framework (MFF) reflects the maximum annual amounts (ceilings) which the EU may spend in different political fields (headings) in the upcoming seven years: 2014 – 2020.

Hence, the MFF is just a budgetary planning tool and not the EU budget for the next 7 years. Its role is to provide a global image on EU spending over a long enough period of time, in order to have a good perspective on the EU investment in the framework of financial programming and budgetary discipline.

The MFF is divided into six categories of expenditure (headings) corresponding to different areas of EU activities (figure 2).

Figure 2. The structure of 2014–2020 MFF

Source: http://europa.eu/rapid/press-release_MEMO-13-1004_en.htm

The MFF details the maximum annual amount that the EU can commit. The value of commitments in the MFF 2014-2020 is presented in table 1 and it is shown schematically in the diagram below.

Table 1 Financial Framework 2014-2020

Commitments in EUR million (current prices)

Figure 3. Financial Framework 2014-2020

As it may be observed, the most relevant headings are:

 Smart and inclusive growth, whose maximum commitments represent 47% of the total, includes cohesion policies which get three quarters of the amount. Areas in the other sub-heading include research & innovation, infrastructure, Erasmus, space and SMEs (Maftei & Negruț, 2011).

 Sustainable growth: natural resources with total commitments up to 39% of the MFF, three quarters of which being devoted to market-related expenditure and direct payments in agriculture. Other policies include rural development as well as environment and climate action.

Table 2. Financial Framework Comparisons 2007-2013 vs. 2014-2020

Commitments in EUR million (2011 prices)

Headings	MFF 2007-2013	MFF 2014-2020
Competitiveness for growth and jobs	91541	125614
Economic, social and territorial cohesion	355248	325149
Sustainable Growth: Natural Resources	420682	373179
Security and citizenship	12396	15686
Global Europe	56815	58704
Administration	56503	61629
Compensation	991	27
TOTAL	994176	959988

A comparative overview of MFF shows that the commitments for 2014-2020 programming period decreased, demonstrating that the current MFF was born in times of crisis and it is too early to talk about the crisis and its effects in the past tense. (Figure 4)

The MFF 2014-2020 was designed in line with the EU political priorities in order to cope with the crisis’ effects but these are still reflected by the current situation in the EU, even if some signs of economic recovery are visible.

Figure 4. Financial Framework Comparisons 2007-2013 vs. 2014-2020

The novelty for MFF 2014-2020 consists in the new flexibility measures that have been introduced in addition to special instruments (such as: the Emergency Aid Reserve; the European Union Solidarity Fund; the Flexibility Instrument; the European Globalization Adjustment Fund) that ensures EU flexibility under certain conditions to deal with unforeseen events.

Figure 5. The new flexibility measures in MFF 2014-2020

Source: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2006:139:0001:0017:EN:PDF

4. The European Structural and Investment Funds

For 2014-2020 programming period, the European Structural and Investment Funds (also called ESI Funds) will ensure the growth of the entire Community in accordance to the EU specific political objectives in order to achieve the 10^th year communitarian strategy – Europe 2020.

Therefore, the ESI funds will play an important role in the achievement of smart, sustainable and inclusive growth. For the 2014-2020 programming period, the pattern of ESI funds is designed as follows: the European Regional Development Fund (ERDF), the European Social Fund (ESF) and the Cohesion Fund will function under de aegis of European Cohesion Policy, the European Agricultural Fund for Rural Development (EAFRD) remain under the umbrella of Common Agricultural Policy, and the European Maritime and Fisheries Fund (EMFF) will offer the financial support for EU Maritime and Fisheries Policy. “The European Commission proposed new rules for the use of the financial instruments during 2014-2020. In contrast to the 2007-2013 programming period, the rules for the financial instruments are non-prescriptive in regards to sectors, beneficiaries, types of projects and activities that are to be supported. As a result, the Member States and the managing authorities may use financial instruments in relation to all thematic objectives covered by Operational Programmes and for all European Funds. The financial instruments may be combined with other forms of support, in particular with grants, in order to solve the particular problems of different regions.” (Ionescu, 2014, p. 76)

4.1. Principles of ESI Funds

In order to have a clear perception of the rules that governs the use of EU financial instruments for the new programming period and how these address the challenges that have been faced in the current programming period, we need to comprehend the principles of European Union support for the ESI funds.

Hence, ESI funds must be used by all Member States legally and consistently and in accordance with the principle of sound financial management. In the context of the EU’s effort to increase economic, territorial and social attention is given to the need to ensure complementarity and consistency of intervention by ESI funds and to respect the principles of proportionality and equality in all stages of implementation of ESI funds.

In order to optimize the contribution of ESI funds in the implementation of EU strategy for smart, sustainable and inclusive growth, but also in the achievement of the overall objective of economic, social and territorial concentration of these funds, it is required the concentration on a limited number of thematic objectives, common to all Member States. This task is particularly difficult in the context of economic, social, territorial, political, administrative, cultural diversification, which characterizes the European Union. For this reason, also for the programming period 2014-2020 was considered appropriate to establish a Common Strategic Framework designed to facilitate designing the strategic guiding principles in the programming process at national and regional level. This Common Strategic Framework shall ensure coordination of sectorial and territorial EU intervention through ESI funds, and coordination with other relevant EU policies and instruments in accordance with the goals and objectives of the Europe 2020 strategy and also to address the challenges of territorial diversity at EU level. Basically, it is necessary the integrated use of ESI funds in order to meet as closely as, the horizontal principles, as well as, the cross political objectives active at EU level.

Summarizing, the principles that governs the European Union support through ESI funds are:

• partnership and multi-level governance;

• compliance with union and national law;

• promotion of equality between men and women and non-discrimination;

• sustainable development.

5. Conclusions

EU financial support (especially ESI funds) plays an important role in achieving the Europe 2020 strategy for smart, sustainable and inclusive growth and therefore requires an overview of financing needs to focus efforts and maximizing effectiveness.

Understanding the principles, procedures and practices in the use of funds ESI is fundamental to policy makers both in the design of strategies and directions for development and implementation phase of development policies. Basically, it is necessary to identify those correlation measures between the effectiveness of ESI funds with the good economic governance.

In the programming of ESI funds, there is the need to coherence between the Common Strategic Framework and the Partnership Agreements. On the other hand, the coordination of ESI funds in conjunction with other existing financial instruments and the contribution of the European Investment Bank funds management ensure predictability and focus them towards the achievement of Europe 2020 objectives.

Therefore, the performance of ESI funds and of others EU financial instruments is determined by the quality of the development and implementation of programs in each Member State and of the scale of the program in relation with the gross domestic product of the state. Thus, each Member State is responsible for channeling of ESI funds, ensuring that the effectiveness of expenditure is supported by sound economic policies.

ESI funds support takes many forms: grants, prizes, repayable assistance, financial instruments, or a combination thereof. Thus, each Member State has extended opportunities to choose the most appropriate form of support to meet identified needs.

6. References

European Commission (2014). The Multiannual Financial Framework explained. Retrieved from http://ec.europa.eu/budget/mff/introduction/index_en.cfm#flexibility, 07.02.2014.

European Union (2013). General budget of the European Union for the financial year 2013. The figures. Luxembourg: Publications Office of the European Union.

European Union (2013). Multiannual financial framework 2014-2020 and EU budget 2014. The figures. Luxembourg: Publications Office of the European Union.

European Union (2014). Cohesion Policy 2014-2020. Panorama Inforegio, No.48 (Winter 2014), pp.1-48. Luxembourg: Publications Office of the European Union.

Ionescu R.V. (2014). Regional Sustainable Development under the Crisis’ Impact, Saarbrücken, Germany: LAP LAMBERT Academic Publishing.

Maftei, Jana & Negruţ, Vasilica (2011). Quality Improvment and Simplification of National Rules in SMEs, in Euroeconomica, no. 5 (30)/2011, pp. 75-79.

Official Journal of the European Union (2006) Inter-institutional Agreement between the Parliament, the Council and the Commission on budgetary discipline and sound financial management (2006/C 139/01) Retrieved from http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2006:139:0001:0017:EN:PDF, 15.02.2014.

Official Journal of the European Union (2013) Regulation (EU) No 1287/2013 of the European Parliament and of the Council of 11 December 2013 establishing a Programme for the Competitiveness of Enterprises and small and medium-sized enterprises (COSME) (2014 - 2020) and repealing Decision No 1639/2006/EC Retrieved from http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:347:0033:0049:EN:PDF, 20.02.2014.

Official Journal of the European Union (2013) Regulation (EU) No 1300/2013 of the European Parliament and of the Council of 17 December 2013 on the Cohesion Fund and repealing Council Regulation (EC) No 1084/2006 Retrieved from http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:347:0281:0288:EN:PDF, 20.02.2014.

Official Journal of the European Union (2013) Regulation (EU) No 1301/2013 of the European Parliament and of the Council of 17 December 2013 on the European Regional Development Fund and on specific provisions concerning the Investment for growth and jobs goal and repealing Regulation (EC) No 1080/2006 Retrieved from http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:347:0289:0302:EN:PDF, 20.02.2014.

Official Journal of the European Union (2013) 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 Retrieved from http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:347:0320:0469:EN:PDF, 20.02.2014.

Official Journal of the European Union (2013) Regulation (EU) No 1304/2013 of the European Parliament and of the Council of 17 December 2013 on the European Social Fund and repealing Council Regulation (EC) No 1081/2006 Retrieved from http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:347:0470:0486:EN:PDF, 20.02.2014.

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