Berlin, 3 June 2024
Dear Chair, dear Dr Hofreiter,
Honourable Members,
Many thanks for this invitation.
It is an honour to address this committee at such a special juncture to exchange on the Future of Cohesion Policy.
Europe faces a number of challenges, some of them truly existential: a security crisis, a competitiveness race, a climate emergency.
There is one pre-condition to be successful in addressing them all: to remain united.
None of the challenges we face can be overcome if we are divided, if there are major economic and social differences, if part of our regions and territories feel left behind.
This is why Cohesion is so important for Europe.
Lack of cohesion is a security risk as it can be easily exploited by the adversaries of Europe and of democracy; it is a drag in our productivity as part of our potential is not being used; it is a threat to our societies as it divides them between the haves and the haves-not; it is a danger to our democracies as it fuels extremism and radicalism.
Therefore, I truly believe that the future of the European project and our ability to successfully address the different challenges we are faced with hinges on strong Cohesion at the heart of the European integration project.
But a robust Cohesion policy is also about sound economics.
The recently published 9th Cohesion report provides a wealth of data showing Cohesion Policy’s significant contribution to Europe’s convergence.
The countries that joined the EU since 2004 have seen their GDP per head rise from 52% to 80% of the EU average. The gap has more than halved thanks in large part to Cohesion investments and support
In a longer-term perspective, each euro invested in Cohesion Policy is expected to generate 3 additional euros of GDP.
This is why the World Bank describes Europe as a convergence machine, and Cohesion Policy as its motor.
This benefits all of us. Increased trade, increased investment, and more supply chains, mean that by 2030, GDP per head will be around 1% higher for the EU as a whole.
As you know, all countries stand to benefit both directly, given that Cohesion is a policy for all regions, and indirectly, through the positive spillover effects.
And indeed, Cohesion policy has been an important instrument also for Germany’s own convergence and regional development path following Reunification.
Cohesion support to Germany increased massively to 9.4 billion euro in 1994-1999, from 2.4 billion euro in the preceding period. And in the current period of 2021-2027 Germany will receive 20 billion euros from Cohesion policy.
Throughout the years, from contributing to the successful completion of the ‘German Unification Traffic projects’, to strengthening innovation ecosystems and Mittlestand, catering for research and innovation facilities and jobs for thousands of researchers, Cohesion Policy has benefited Germany, just as other EU Member States.
I look forward to visiting Dresden tomorrow, the capital of “Silicon Saxony” and seeing in action how local ingenuity, smart specialisation focusing on innovation and optimal use of EU and national funding drive regional competitiveness.
German companies have also been particularly successful in benefitting from the trade and export opportunities opened up by regional growth all across Europe.
For instance, in my own country Siemens Mobility won the contract to upgrade the Lisbon Metro financed by European funds.
However, if convergence at national level has been a reality in Europe, there is still some way to go when it comes to the sub-national level.
The GDP per capita of the Eastern Länder stand at around 80% of the Western Länder.
Sizeable disparities in regional competitiveness within Germany as well as the rural-urban gap remain to be closed.
And zooming out – this is true not only for Germany, but for the whole of Europe, where regional disparities and areas of stagnation persist, hampering our growth.
Where the economic potential of different areas is not fully developed and exploited, this hinders overall European competitiveness on the global arena.
Cohesion policy is thus essential: by investing in infrastructure, innovation, digitalisation, skills and other key areas, it helps all regions, to increase their competitiveness, strengthen value chains and reap the benefits of the Single Market.
To quote Enrico Letta, following in the steps of Jacques Delors: “An effective Cohesion Policy… has always been, and will continue to be, a key condition for the success of the single market”.
Let me turn now to the evidence informing future Cohesion policy-making.
In the coming decades, EU growth will be shaped by 3 key transitions: green, digital and demographic. These bring new opportunities. For example, an estimated 2 million new jobs across Europe in the green economy: recycling, renewables and deep renovation.
The Green Deal Industrial Plan seeks to give a new impetus to European competitiveness. And here as well, Cohesion Policy must play a role giving a chance to all regions to be at the forefront of net-zero and strategic technologies, promoting a level-playing field.
But at the same time, these transitions require profound structural changes.
Digitalisation will force traditional firms to rapidly adapt – and that is not that easy.
The green transition will require new sectors and new skills as old ones disappear.
Instruments like the Just Transition Fund – which I launched at the beginning of this mandate – of which Germany is the second largest beneficiary, ensuring social fairness, supporting the most vulnerable regions and workers will remain relevant.
Having visited Brandenburg at the beginning of my mandate, I look forward to visiting Boxberg tomorrow, where JTF will help the transition to green hydrogen.
Finally, demographic changes mean that some regions are being held back by skill and labour shortages.
As you know, this is a particular threat in some East Länder, facing talent gaps.
Therefore, unless tackled, the existing challenges at the regional level can lead to prolonged stagnation, or what we call development traps.
And there is clear evidence that the length of time a region spends in a development trap, strongly correlates with higher euroscepticism in what we call the “geography of discontent” – or “the revenge of the places that do not matter”
So going forward, the structural interventions of Cohesion Policy will be needed more than ever.
How can we ensure that the Future Cohesion Policy remains effective in this task? This was the question that drove me to launch a broad reflection on the future of the policy. I was glad to receive many inputs from academic experts, Member States, regions and stakeholders, including from the German Länder.
While the debate is not closed there is a growing consensus on a number of issues. We need to retain the success factors of Cohesion Policy: this is a place-based policy, with a strong territorial development focus based on partnership and a multi-level governance model.
But we also need to introduce adaptations to modernise.
First, the policy must become even more tailored to the characteristics of each of Europe’s regions. Their starting point, the development traps they face and the impacts of these different challenges in each region will be very asymmetric. This is why one size does not fit all. Simplification is important, but it should not mean ‘nationalisation’. The policy needs to remain place-based.
Second, investments are a necessary but not sufficient condition for development. Hence, we need to consider how best to incorporate a stronger reform dimension into the Policy – reforms that target the levers of development, promoting productivity, innovation and skills, overcoming obstacles to growth. But I would like to underline that these reforms should be tailored to the specific needs and situation of each region and Member State. Moreover, strong emphasis on incentives, not sanctions, will promote better ownership of the reform agenda, as confirmed time and again by the success of the Technical Support Instrument, within the reform part of my portfolio.
Third, administrative capacity: simplification of the rules is not enough. A modern, well-equipped, skilled public administration is necessary to overcome the paradox of delivery where the regions that most need the investments also have the most difficulty in spending the money.
Fourth, we must embed more flexibility into the system to move from ad-hoc emergency solutions to in-built responsiveness to crisis and change. During the COVID-19 crisis, Cohesion Policy was instrumental in halting further deepening of disparities, and what we saw is a much faster rebound of the economy, including at the regional level, compared to the 2008 financial crisis, thanks to a truly European and different type of response.
So we will need a strong Cohesion Policy, and a strong EU budget, which goes beyond the 1% ceiling of the EU’s collective wealth. This is the only way to be able to deliver on existing needs and future challenges, to keep a Cohesion Policy to all regions, as well as to fulfil Europe’s promise, that whatever changes we face, we face them together, leaving no one behind.
It is in Germany’s own constitution to pursue equivalent living conditions between territories, and it is also enshrined in the EU treaties the objective to support convergence and balanced territorial development for a more competitive and resilient Union.
We have this shared objective in our common fundamental laws. This needs now to be made a reality through shared political will and joint action at European, national, and regional level. And I count on you to be an active part of this objective: to change people’s lives for the better.
Thank you. I look forward to our discussion.
Source – EU Commission