Danish comments on the Conclusions of the fifth report on economic, social and terri-

torial cohesion: the future of cohesion policy

Denmark warmly welcomes the fifth report on economic, social, and territorial cohesion. It istimely and pertinent that the Commission not only highlights the positive results achieved withthe support of the European cohesion policy but likewise asks about the core elements of thefuture cohesion policy. To this regard, Denmark acknowledges the importance of a regionalapproach as a complement to a European and national strategy in order to implement theEurope 2020 strategy. In light of the ongoing serious economic challenges which the EU isfacing, the importance of European policies generating sustainable growth and long term eco-nomic development is larger than previously.For more than two decades the European cohesion policy has helped to fund the economicand social development of European regions. The fifth cohesion report clearly confirms thatthe European cohesion policy can have a very positive influence on the economic and socialsituation of the recipient regions. Jobs have been created; important private and public invest-ments have been facilitated. At the same time, the cohesion report confirms that significantdifferences between various European regions remain. In light of the overall economic situa-tion, the European Union has to endeavour how toachieve more value for moneywithin all policyareas, including the cohesion policy. Ways of improving the cohesion policy and increasing itseffectiveness have to be identified. The report highlights different approaches in order to in-crease the effectiveness of the cohesion policy. To this regard Denmark wholeheartedly con-curs with the assessment of the report that “cohesion policy needs to cultivate a focus on per-formance”.It should be mentioned that the current note does not prejudice the Danish position as regardsto the multiannual financial framework.

Enhancing the European Added Value of Cohesion Policy

How could the Europe 2020 Strategy and cohesion policy be brought closer together atEU, national and sub-national levels?Should the scope of the development and investment partnership contract go beyondcohesion policy and, if so, what should it be?How could stronger thematic concentration on the Europe 2020 priorities be achieved?How could conditionalities, incentives and results based management make cohesionpolicy more effective?How could cohesion policy be made more results oriented? Which priorities should beobligatory?Denmark believes that the Europe 2020 strategy should be an important guide for the contentof the future cohesion policy. Focusing on smart, sustainable and inclusive growth is a correctanswer to the economic challenges of Europe. With the European cohesion policy aiming atfurthering long term economic growth and employment, the cohesion policy will be a naturalcontributor to the implementation of the Europe 2020 strategy bearing in mind the specificconvergence objective of cohesion policy, i.e. EU 2020 should guide how the structural and1

cohesion funds are spent, but not how they are distributed among regions and countries. Thelatter should continue to depend primarily on GDP-levels. Likewise, the Europe 2020 strategycould act as an insulation of the cohesion policy against mission creep due to the pursuit onobjectives which are not directly linked to cohesion. Instead, focusing on a limited number ofobjectives derived from the Europe 2020 priorities would constitute an important step towardsenhanced effectiveness and increased performance of the cohesion policy. Further, the Euro-pean cohesion policy should be able to react in a flexible manner to new challenges. For thispurpose it would be important to reinforce successful policies and avoid the continuation ofinefficient practices. Likewise, co-ordination with other relevant European polices needs to bestrengthened. Cohesion policy is but one vehicle to obtain the Europe 2020 priorities. Finally,Denmark would like to draw the attention towards the importance on combating and adaptingto climate change. Developments in the last years have clearly demonstrated the growing im-portance of this question; not only as a means to avoid significant costs but also as a growthdriver. To the extent that it furthers economic growth in a region or country already entitled toreceive means from cohesion policy, cohesion aid may be used to improve the energy infra-structure and increase energy efficiency. This is particularly relevant for the least prosperousmember states.The proposed investment partnership contracts can potentially be a decisive factor in improv-ing upon the results of the current cohesion policy. Denmark is ready discuss various ways ofdoing this, including the Commission’s proposal to link these contracts – where appropriate –with the results of the annual National Reform Programme cycle. In this sense the scope of thecontracts could also be extended. Ideally, this could significantly increase the accountability ofthe cohesion policy. Accountability for the effectiveness and efficiency with which structuralfunds are spent will be a key require-

Example of structural conditionality

ment in period of budgetary chal-Possible questions to raise could be to assess whetherlenges and a guiding principle for co-the capacity and location proposed are based on ahesion policy during the next pro-rigorous analysis of prioritised needs taking into ac-gramme period. Denmark thereforecount, e.g. the foreseen demographic development,supports the considerations of thethe trends and density of traffic, energy security,cohesion report on structural condi-population and necessary network factors such as thetionality. Implementing conditionalityexistence of enterprises, research institutions or fundswould happen in a series of consecu-for investment in related infrastructure (roads, pipestive steps: Hindrances towardsor other connectors) without which the effectivenessachieving economic and social cohe-of the investment proposed would be impaired. Itsion have to be identified. Based onshould also be clarified whether the planning docu-this analysis, the proposed condition-ments show that the proposed programme addressesality should encompass all the rele-the most urgent needs, e. g. in terms of reducingvant success factors. As a possibletravel time, congestion and emissions; improving en-way to implement this conditionalityergy efficiency; interconnecting infrastructure net-would be to yield to the Commissionthe necessary authority and the capac- works or getting the unemployed into work accordingto a proven method? Is the commercial potential ofity to screen whether proposed cohe-the innovative project properly demonstrated? Is itsion policy programmes are likely toclearly argued why there are no available funds onachieve their aim. Further, the Com-commercial conditions for the kind of operation con-cerned?2

mission should be enabled to enforce conditionality of direct relevance to the effectiveness ofstructural funds programmes. To ensure that the relevant preconditions for effectiveness andefficiency are verified, legal provision should be made to this effect, e.g. by identifying the mainpreconditions and the modalities for their verification in the regulations.For reasons of legal certainty the proposed competency of the Commission and the memberstates on the other hand should be determined as precisely as possible in the main regulation.In order to ensure proportionality and value for money it would be advisable to concentrateparticular efforts on larger programmes or programmes which previously have incurred prob-lems.Where appropriate, one might consider authorising the Commission to reinforce their assess-ments of larger programmes by the use of professional consultants, provided they are not sub-ject to any conflict of interests and have a proven track record in the field concerned. Further,for these consultants contractual incentive structure could be established which would be di-rectly linked to the achieved improvements in effectiveness and efficiency. To ensure a timelyimplementation for recipients, a predetermined maximum duration for the entire procedure,including a time span for possible dispute arbitration mechanisms, could be considered.In designing and assessing a proposed programme, it has to be demonstrated how the pro-gramme furthers or at least facilitates achieving economic and social cohesion and – whererelevant – the Europe 2020 objectives; as well as the mechanisms for generating EU-valueadded in terms of results that would not to the same degree have been achieved by regional ornational financing alone. For this purpose the aspirations of a programme have to be definedwith the necessary specificity such that it is possible with certainty to determine whether a pro-posed programme is indeed furthering economic and social cohesion and is focused on Europe2020. This process should also facilitate the concentration on a limited number of Europe 2020priorities, consequently enhancing the effectiveness of the proposed programmes.Denmark believes that the cohesion policy could become more result oriented – and therebymore efficient – by clearly defining the economic and social aims and aspirations of any cohe-sion programme, based on a needs analysis of the recipient region. These aims and aspirationsshould lead to agreeing upon tangible success indicators, both programme specific and from acommon list of core indicators; a process which has to happen in partnership between the re-cipient state and the Commission. The success or failure of a programme should continuouslybe monitored in comparison with the agreed indicators. Deviations from the foreseen valuesshould not only be subject to stringent analysis but also enable the recipient state to take therequired action to ameliorate the problems. To this regard, general priorities do not seem to berequired. Rather, the priorities of a given programme should correspond to the aims and aspira-tions of the particular programme.The greatest challenge for the cohesion policy remains to find ways to integrate and properlyincentivise performance and cost effectiveness into the decision-making processes. It has to bemade sure that lessons learned from Court of Auditors’ performance audits are translated intotangible improvements on the ground. The development of project relevant core outputs and

result indicators with a view to cost-effectiveness and integration into the decision makingprocess should be prescribed in the regulation and seen in this context. Such indicators shouldbe based on current data, well measured, relevant and last but not least feed back into the deci-sion-making process. Without greater transparency and accountability as regards to obtainedresults, effectiveness, and efficiency, the European cohesion policy ultimately runs the risk oflosing both legitimacy and public support.

Strengthening Governance

How can cohesion policy take better account of the key role of urban areas and of terri-tories with particular geographical features in development processes and of the emer-gence of macro-regional strategies?How can the partnership principle and involvement of local and regional stakeholders,social partners and civil society be improved?Denmark acknowledges the importance of urban areas and of territories with special featuresfor the overall growth of the whole EU area. For this reason Denmark supports the inclusionof urban questions in the framework of the current cohesion policy. If required, it is alreadytoday possible for recipient states to place special emphasis on support for urban areas whichface severe social and economic challenges. Member states can also decide to support selectedurban areas as regional or even national growth centres. Experiences show that micro zoning insupport of selected sub areas in a given region should be avoided. Consequently, Denmarkwould not be in favour of ring-fencing or earmarking means for urban purposes.Cohesion policy should be closely co-ordinated with the other EU-policies addressing regionalmatters. This co-ordination not only applies to a closer alignment of administrative matters, butalso regarding the content and programming of the various funds.It is the impression of Denmark that the partnership principle is working very well within thecurrent framework of the cohesion policy. Still, in establishing a viable partnership between theCommission, the recipient state and local and regional stakeholders, social partners and civilsociety, one has to take into account the specific situation, interests and capacity of the variouspartners. A standardised involvement of a certain number of local partners implies a risk ofweakening the concept of focus. Consequently, a standardised approach towards stakeholdersand partners seems in general unwanted. These considerations should also form the basis fordefining the role of the various actors and stakeholders in any cohesion policy programme.Where required, it might be helpful to monitor the performance of stakeholders and partners inorder to support them in conducting their functions.

A Streamlined and Simpler Delivery System

How can the audit process be simplified and how can audits by Member States and theCommission be better integrated, whilst maintaining a high level of assurance on expen-diture co-financed?

How could application of the proportionality principle alleviate the administrative bur-den in terms of management and control? Should there be specific simplification meas-ures for territorial co-operation programmes?How can the right balance be struck between common rules for all the Funds and ac-knowledgement of Funds' specificities when defining eligibility rules?How can financial discipline be ensured, while providing enough flexibility to design andimplement complex programmes and projects?A shift towards a stronger result orientation and the implementation of the Europe 2020 strat-egy does not imply that the financial controls and audit processes should be weakened. Notablyin times of limited resources, it is important to assure that tax payers’ money is well spent. Inorder to improve upon the record of financial control of the European cohesion policy, controlprocedures of member states and the Commission should also be subject to the aim of in-creased efficiency. The proportionality principle justifies the alleviation of administrative bur-dens in terms of management and control for management authorities with a proven trackrecord. Consequently, verification resources could be concentrated in areas where the biggestimprovement potential would be achieved. In practical terms, this implies that priority shouldbe given to the largest programmes and such programmes and regions where problems haveoccurred previously. Further, cohesion funding could also be available for strengthening thecapacity of national audit and managing authorities.Where ever possible – without violation the basic principles of sound financial management –cohesion policy should pursue a flexible approach as regard to administrative and managementprocedures. This approach should be based on the objectives of a given programme and theadministrative capacity of the managing authority. Administrative rules and guidelines shouldbe defined sufficiently broad, such that they can be applied by all programmes, including pro-grammes of territorial co-operation. Further, existing administrative rules and guidelines shouldbe subjected to the test of whether they facilitate or hinder the results oriented implementationof the Europe 2020 priorities and an increased efficiency. Notably, it has to be made sure thatrules and regulations do not deter dynamic and innovative programme partners such as SME’sor research institutions. Regulations which fail this test have to be amended accordingly. Also,Denmark believes that there still exists a large potential for simplifications whilst maintaining ahigh level of assurance on expenditure co-financed. At the same time, changes in the adminis-trative rules and guidelines should be kept to the necessary minimum in order to provide a basisof continuity and applying lessons learned. This is particular important for managing authoritieswith limited administrative capacity.It would be an important precondition for alleviating the administrative burden of cohesionpolicy to clearly define the aims and priorities of the various funds. Ideally, this would allow fordetermining common eligibility rules for the various funds without disregarding the specificcircumstances of the three different funds. Any deviation from this basic principle by establish-ing fund specific eligibility rules has to be well justified.Experiences from the current and past programming periods have underlined the importanceof maintaining financial discipline with the cohesion policy. Consequently, Denmark would5

oppose any measures with could undermine the aim of upholding financial discipline, includingcompromising the automatic de-commitment rule. It remains a challenge for many memberstates to design complex programmes such that they can be implemented as foreseen. How-ever, this problem is not solved by weakening financial discipline but by improving upon theadministrative and planning capacity of the implementing agencies to a sufficient degree. Tech-nical assistance should continue to be available for this purpose.

The Architecture of the Cohesion Policy

How can it be ensured that the architecture of cohesion policy takes into account thespecificity of each Fund and in particular the need to provide greater visibility and pre-dictable funding volumes for the ESF and to focus it on securing the 2020 objectives?How could a new intermediate category of regions be designed to accompany regionswhich have not completed their process of catching up?To the degree necessary in order to improve the effectiveness of the cohesion policy Denmarkis willing to look into possible adjustments of the architecture of the cohesion policy. This mayin particular include changes in order to facilitate the implementation of the Europe 2020 strat-egy. Still, the most important way to increase the visibility of the European cohesion policywould be to improve upon the results achieved by the support of the European cohesion pol-icy. All too often evaluation and reporting on cohesion policy focuses on money spent insteadof highlighting the underlying objectives and results of a given programme. Planning of andconsequently reporting on cohesion programmes should in principle be more output orientedthan hitherto.The EU’s cohesion policy should to a larger degree than today focus on the least developedregions and member states. Support to regions that do not qualify for convergence supportcould be reduced. However, Denmark understands the need for limited transitional aid for re-gions moving from a high to a low support regime within the cohesion policy. Compared withthe present systems for phasing in and phasing out a future transitional support could be re-duced as regards the level of support and the time-span, while continuing to provide sufficientbasis for supporting the economic and social development of regions of intermediate wealth. Itremains the primary responsibility of each member state to take adequate steps in order to fur-ther the process of catching up of the affected regions. By strengthening the performance fo-cus, monitoring and evaluation systems, adjusting programmes in accordance with the Europe2020 strategy and exchanging best practices and evaluation reports, it would in many regions ofintermediate wealth be possible to improve the effectiveness of the of cohesion policy. Therebybetter results could be generated without employing additional resources. Further, the fifth co-hesion report lacks any data which might justify the need to allocate additional resources forregions of intermediate wealth.The European Social Fund should continue to be an integrated part of the cohesion policy in amanner which ensures that the administrative set up for the funds still remains common,thereby allowing member states to establish common management systems for both funds.Furthermore, funding from the European Social Fund should – like the other funds –be allo-

cated primarily according to GDP. In this regard, it should be looked into ways of applyingmore updated data in order to avoid e.g. that structural fund allocations in 2020 are based onwealth levels which are 10-13 years old.The cohesion policy should continue to be the main instrument which promotes the overallharmonious development and convergence within the EU, notably by supporting the economicand social development in the Member States lagging behind. It is therefore important that thecohesion policy regulations allow in particular regions and member states lagging behind tospend their allocations in ways which help to enable them to compete on equal terms with therest of the EU, e.g. research support under heading 1A which should be allocated according toexcellence and not levels of wealth.