The Cohesion Fund implements the European Union’s Cohesion Policy intended to achieve economic and social convergence between the EU Member States.

The  EU’s Cohesion Policy  a Regional Policy that takes a comprehensive and broad perspective of European territory without regard to borders and tries to do what an economic planner would do if such a planner had to be trying to achieve cohesion and convergence within a single territory or nation: funds are siphoned off from affluent areas and are transferred to areas that are lagging behind in terms of economic development. Such funds are then used in the less-affluent regions to build capacity in areas that are deemed capable to enable such territories/regions to generate their own wealth and the mechanisms that make for the generation of that wealth.

This video gives an overview of the draft legislative package adopted by the European Commission which will govern the EU’s cohesion policy for 2014-2020. The new proposals are designed to reinforce the strategic dimension of the policy and to ensure that EU investment is targeted on Europe’s long-term goals for growth and jobs as enshrined in the “Europe 2020” Strategy.

Member States whose per capita Gross National Income (GNI) is below 90 % of the European average and which are running economic convergence programmes are eligible for the financing of projects through the Cohesion Fund and will receive 23.22 % of the resources allocated for the cohesion objective. Regions where per capita GNI has risen to above 90 % of the European average (due to the statistical effect of EU enlargement including more deprived regions) will benefit from transitional, specific and degressive financing.

The ceiling for the Cohesion Fund’s contribution to public expenditure co-financed in the Member States is set at 85 %. The remaining 15% need to be financed by the Member state itself.

The aim of the Cohesion Fund is to instigate, strengthen and align economic and social cohesion in the European Union (EU) with a view to promoting sustainable development and convergence in the level of development of the different regions and Member States. This objective contributes to achieving a stable macroeconomic environment across the whole of the EU and strengthens the efficacy of policies taken within the European Monetary Union framework.

The Cohesion Fund finances activities in the areas of:

  • the environment (within the priorities assigned to the Community’s environmental protection policy under the environment policy and action programme. In this milieu, the Fund may also be used in areas related to sustainable development and transport outside trans-European networks);
  • the trans-European transport networks, especially the priority projects of European interest.

Cohesion Fund assistance may be restricted and the European Council may:

  • decide that there is an excessive government deficit in a beneficiary Member State;
  • conclude that the Member State concerned has not taken effective action in response to a European Council recommendation, thereby making all or part of the commitments from the Fund for the Member State concerned liable to suspension.

Although eligibility is decided at the national level, Council Regulation (EC) No 1084/2006 of 11 July 2006 establishing a Cohesion Fund states that the following types of expenditure are not eligible for Cohesion Fund financing:

  1. interest on debt;
  2. the purchase of land for an amount exceeding 10 % of the total eligible expenditure for the operation concerned;
  3. housing;
  4. decommissioning of nuclear power stations; and
  5. recoverable value added tax.

The Commission Decision of 26 March 2007 amending Decision 2006/596/EC also sets out the Member States eligible for funding from the Cohesion Fund.

Applying for Cohesion Fund financing entails:

  1. Defining the project that is to be submitted for co-financing;
  2. Undertaking the necessary studies to investigate the viability of the project from different angles. This would usually include a Cost-Benefit Analysis (CBA) and at times an Environmental Impact Assessment (EIA);
  3. Filling in the Cohesion Fund application form on the basis of the findings of the CBA and – if it has been undertaken – the EIA.

This is further explained diagrammatically below.

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