State Secretary Sven Giegold at the 9

Sven Giegold, State Secretary at the Federal Ministry for Economic Affairs and Climate Action:

Thank you for the opportunity to be part of the first panel debate at this year’s cohesion forum.

I greatly appreciate this meeting with experts from all Member States, representing different levels of government as well as academia. And who could say no to an invitation to my old dear colleague Elisa – now our Commissioner for Cohesion.

The Federal Ministry for Economic Affairs and Climate Action is Germany’s national coordinator for cohesion policy. Administration in our country is based particularly on a multi-level approach: it’s the regions that have the responsibility for the strategies and investments on the ground.

Our administrative structure is different from many other Member States because we have a federal rather than a centralized system. My ministry is a policy coordinator for regional policy but also a mediator between the German federal states and the European institutions. This includes undertaking the strategic implementation of the European Structural Funds and leading the debate for the next cohesion funding period.

We advocate that the EU Structural Funds guide regions in making their strategic investments to enable citizens all over Europe to participate in sustainable economic growth.

Less developed regions need to catch up with stronger ones. This is essential for the EU and its single market to function well. Cohesion policy is also politically and economically a necessary enabling condition of a stronger and more integrated common market from which we all profit.

As the European Union is facing increased global competition and enormous geopolitical challenges, there is a key need for further European integration and a better performing, future-oriented single market. To ensure that the EU is broadly supported, socially just and economically successful, we need to continue to pursue a strong cohesion policy.

The 9^th Cohesion Report points out impressive achievements in convergence. But there are persistent disparities and risks. Above all, there are numerous regions that have stagnated in their development despite having received substantial amounts of European funding for many years.

For us, the 9^th Cohesion Report places the focus on four key areas of action: a greater impact of investment, a clear focus on transition, a more effective link with structural reforms and the persisting need for simplification.

1. Greater impact

There is a remarkable tension between the constraints of the European budget and growing expectations about what the EU should do.

We have to cope with diverse prior need for action at the same time. As a general comment on the EU budget: In my view, we should not limit ourselves to the expenditure side but focus also on making further progress on introducing new own resources for the EU, building upon the steps taken over the past years.

Regardless of this separate issue, we have to face it without naivety, that we have to refocus priorities in view of outstanding challenges like transition and enlargement. But we should not play this off against Cohesion Policy. Realism demands that money spent for cohesion will more and more often have to fulfil several functions even if Tinbergen would not have loved this. But, first and foremost, we must stand for an efficient use of European Structural Funds. The principle of co-financing is key in order to set incentives for the most effective projects based on local knowledge. Furthermore, co-financing creates incentives for member states to prioritize investment spending, even if the benefits will only materialize in the electoral cycles to come.

As of today, there is an enormous number of studies at regional programme level evaluating the performance of cohesion policy. At the same time, we lack a systematic overarching and long-term impact analysis at macro-level looking at added European value.

In order to ensure the effectiveness of investments, we need reliable evaluation designs that make it possible to compare results systematically. This will also help us to ensure that no region falls behind in the transition process and to mitigate the risk of development traps.

To put it quite frankly: we have to prove how effective we are in macro terms and do this even better. Otherwise, cohesion policy cannot prove to fulfil the mandate of the Treaty.

In Germany, we are running a research project that will for the first time extensively evaluate the impact of ERDF investments using state-of-the-art counterfactual methods. This will contribute towards enabling a more evidence-based discussion.

2. Focus on transition

We have to strengthen Europe’s global sustainable competitiveness by implementing and further developing the Green Deal as driver for growth and innovation. A successful transition will be key for the future success of our economy. Some of the regions which were strong in the past are now lagging behind, and many regions are not sufficiently prepared for the challenges of transition.

This is why we want to insist that the green, digital and demographic transitions are at the heart of cohesion policy, and this is also the legitimacy for a strong cohesion budget.

We need more binding strategies at regional level. For example, smart specialisation strategies should be enhanced to tackle regional transition needs even more effectively through targeted investments.

Furthermore, we should allow people to participate in investment strategies and projects at local level. Community-led development and integrated territorial approaches should be strengthened. We are open to discussing incentives or quotas and supporting capacity-building at local level.

3. Structural reforms

For effective investments, we need a supportive investment environment.

This means above all a strong rule of law conditionality and effective measures against fraud and corruption. Sufficient leverage to incentivise structural reforms is equally important.

If macroeconomic policies and institutions show deficits, investments of European Structural Funds may not lead to economic development. The insights of the 9th Cohesion report must have consequences for the design of cohesion policy.

With the European Semester, we have an instrument to identify specific reform needs for each member state. But in the past, implementation of these reforms has been lagging behind.

The Recovery and Resilience Facility introduced a new policy mix of reforms and investments. In this way, the RRF strengthened people and political actors that wanted to support such reforms but had not been able to prevail in the political landscape so far.

We are open to learning from the performance-based approach and to understanding whether milestones and targets are feasible to make cohesion policy more effective and less complicated.

But we should also speak about the strengths and weaknesses of the European Semester and the RRF.

For example, the reasoning is unclear why the European Commission prohibited Germany in its investment recommendation in the 2019 European Semester to invest in renewable energies using ERDF funding. And in view of the RRF, I am not at all convinced why the Italian super bonus made it through Commission’s tests although it allowed compensation of expenses of up to 110 per cent.

In my view, it is most of all important that we do not abandon the strengths of cohesion policy – first and foremost the place-based approach, shared management, national co-financing and the multi-level system.

And finally, a closer link between cohesion policy and structural reforms must not delay or deny investments for citizens and enterprises at a regional level if the central state fails to implement structural reforms.

4. Simplification

Cutting unnecessary red tape is one of the most important tasks for the next Commission and this is particularly relevant for cohesion policy, as absorption of funding is lagging even more behind.

For the next funding period, we want to focus on the perspective of the recipients and facilitate the application and implementation of European Structural Funds. This should apply especially for smaller recipients.

And with a view to regions that have performed well, we should apply less controls and allow more subsidiarity. But this also means we need to take more stringent measures when it comes to programmes that perform less well. This should apply in particular for the prevention of fraud and corruption.

For the Commission, it will be a difficult task to better differentiate between Member States and regions. But if we agree on predefined standards in the legislative framework, this should be feasible.

Thank you for your attention.