EU budget for recovery: Questions and answers on REACT-EU, cohesion policy post-2020 and the European Social Fund+
What is REACT-EU and how does it involve cohesion policy?
REACT-EU stands for Recovery Assistance for Cohesion and the Territories of Europe and is an initiative that continues and extends the crisis response and crisis repair measures delivered through the Coronavirus Response Investment Initiative and the Coronavirus Response Investment Initiative Plus. It will contribute to a green, digital and resilient recovery of the economy.
The REACT-EU package includes €55 billion of additional funds that will be made available to the 2014-2020 European Regional Development Fund (ERDF) and the European Social Fund (ESF) as well as the European Fund for Aid to the Most Deprived (FEAD). These additional funds will be provided in 2021-2022 from Next Generation EU and already in 2020 through a targeted revision to the current financial framework.
Is the €55 billion “fresh money”?
Yes. REACT-EU will add fresh additional resources to existing cohesion policy programmes and will not go at the expense of any other programme or of resources foreseen for future years. These resources are therefore additional to the existing 2014-2020 envelopes and on top of the proposed envelopes for the 2021-2027 period.
In order to ensure that these amounts will be made available quickly to satisfy the needs in the real economy, it is proposed that the additional funding in 2020 be made available through a targeted revision to the 2014-2020 financial framework.
What challenges will REACT-EU address?
REACT-EU will provide additional funding for the most important sectors that will be crucial to lay the basis for a sound recovery. This will involve investment to support job maintenance, including through short-time work schemes and support for the self-employed. The funds can also be used to support job creation and youth employment measures, to health care systems and the provision of working capital and investment support for small and medium-sized enterprises. Such support will be available across economic sectors, including for the much-affected tourism and culture sectors. The additional support will also serve to invest in the European Green Deal and digital transition, as an enhancement to the significant investment in those areas that is already taking place through EU cohesion policy.
Member States will be able to decide themselves how exactly to channel the funds. Maximum flexibility, as proposed under the Coronavirus Response Investment Initiative and Coronavirus Response Investment Initiative Plus packages, will be maintained and they will be able to either direct them to crisis-repair measures through the European Regional Development Fund (ERDF) or the European Social Fund (ESF), or support the most vulnerable parts of the society, under the Fund for European Aid to the most deprived (FEAD).
How will these resources be distributed among Member States?
The REACT-EU funding will be distributed among Member States taking into account their relative prosperity and the extent of the effects of the current crisis on their economies and societies, including on youth unemployment.
How fast will the REACT-EU funding be mobilised for investments through cohesion policy programmes?
In order to tackle the impact of the coronavirus pandemic, Member States need urgent access to financial support. The Commission proposes that 50% of REACT-EU additional resources for the year 2020 is paid to Member States as pre-financing immediately, following the approval of the programme(s) or programme amendment(s) concerned. Member States and regions are encouraged to use this pre-financing to provide advance payments to beneficiaries in order to strengthen their financial liquidity. It is also proposed that annual pre-financings in the following years are paid in respect of the additional resources allocated to programmes. The very generous EU-financing rate of up to 100% will also contribute to a fast roll-out of this additional funding.
How will the 100% financing work?
The Commission proposed today that the additional resources under REACT-EU may be used to finance eligible expenditure up to 100% from the EU budget. In order to allow for this possibility, it is necessary that these resources are programmed under one or more new dedicated priority axes or, where appropriate, under a new dedicated operational programme.
Cohesion policy in the 2021-2027 long-term EU budget
What is new for cohesion policy under the revamped proposal for the next long-term EU budget compared to the 2018 proposal?
The focus of the EU cohesion policy in 2021-2027 remains the economic competitiveness through research and innovation, digital transition as well as the European Green Deal agenda and the promotion of the European Pillar of Social Rights.
The new proposal reinforces support for the preparedness of health systems and ensures better exploiting of the potential of culture and tourism. At the same time, it provides support to workers and to measures addressing youth unemployment and child poverty.
In addition, Member States will have additional flexibility, compared with the current programming period, to transfer resources among the funds at any point in time of the programming period. The proposal also introduces further flexibility to enable the phasing of smaller operations, which will give Member States more time to complete such operations not finished under the 2014-2020 programmes.
The Commission also proposes to introduce a fully-fledged crisis-response mechanism for future crisis to allow for temporary measures for the use of the funds in response to exceptional and unusual circumstances. The mechanism can be promptly invoked should further shocks strike the Union in the coming years. The Commission would have the possibility to introduce temporary measures to help address such exceptional and unusual circumstances.
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