European Union Fund and Strategy 2020

Understanding how the funds work and European Strategy 2020

Pradeep Adhikari
Bachelor in Architecture (B. Arch., Nepal),
MSc, Advanced Urbanism, Summer Semester 2015
IFEU
Bauhaus University
Weimar

Image source: http://ec.europa.eu/social/main.jsp?catId=86

1. Abstract
Funding has been the strongest endeavor of European Union for regional development.
Over the various strategies adopted by European Commission, its attitude towards
investment for the development of region, has not changed. Indeed it has been even
more promising. This paper is an attempt to understand what are the various type and
traits of funds that EU has and how is the policy to insure proper governance of the fund

after EU2020 was promulgated. The paper highlights first about EU funding and then
about Strategy 2020 and finally tries to reflect how the funding are organized and
administered in relation to Strategy 2020.
2. Introduction
European Commission grants money to implement projects or activities in relation to
European Policy (European Commission 2009). Usually the funded projects are related
to humanitarian cause, environmental protections, consumer protections, energy issues,
research, education, health, etc. The fund for the project inside Europe is always a part
of total investments to a project. That means European Commission does not grant full
funding to a project. Thus, this fund is always provocative in term of policy governed by
EU and participation of more stakeholders to a project. European Commission chooses
the grant beneficiaries which can be private or public organizations or even individuals
according to the goals of the projects and capacity of the beneficiaries to implement the
project (2009). Also the grants enable a given operations to break even financially and
cannot lead to profit for their beneficiaries and only single grant is given for same action
(2009). EU funds the projects and programs on some specific areas, such as

Regional and Urban Development

Employment and Social Inclusion
Agriculture and Rural Development
Maritime and Fisheries Policies
Research and Innovation
Humanitarian Aid
(European Union 2015b)

3. Management of Funds
EU has tight control over the use of fund with respect to amount as well as the scope of
the funding. As there are lots of areas and projects which need this fund, the award of
the funds is done in transparent and accountable manner. That means EU cannot
award grants or fund for the projects on its own. It has some specific policy or strategy
on the basis of which it perform investment. E.g. Lisbon Strategy 2010, EU 2020 and so
on. Somehow, it is the responsibility of all 28 nations to ensure the proper use of fund.
After grants, funding is managed within the beneficiary nations, responsibility for
conducting checks and annual audits lie with national governments (European Union
2015b).
Funds (over 76%) are managed in partnership with national and regional authorities
through the system of "Shared Management", mainly through 5 big funds (structural
and investment funds)

ERDF- Regional and Urban Development

European Social Fund (ESF)- Social Inclusion and good governance
Cohesion Fund ( CF)- Economic convergence by less-developed regions
European Agricultural Fund for Rural Development (EAFRD)
European Maritime and Fisheries Fund (EMF)

Also, there are other categories of investment which are directly managed by EU.
These type of funds are usually in the form of Grants and Contracts. In these types
European Commission makes direct financial contributions in the form of grants in
support of projects or organizations which further the interests of the EU or contribute to
the implementation of an EU program or policy. Interested parties can apply by
responding to calls for proposals (European Commission 2015b). For contracts, there
are various institutions under EU which issue tender notice directly for various projects
that fall under the interests of EU or follow the EU Policies. They are:

European Parliament
Council of European Union
Court of Justice of EU
European Central Bank
European Court of Auditors
European Economic and Social Committee
Committee of the Regions
European Investment Bank
European Ombudsman
European Union Agencies and other bodies
Different types of beneficiaries can apply for different types of funds. For
example:

Small Business can apply for funds through grants, loans and
guarantees.
Non-Government and Civil Society Organizations can apply any funds
on non-profit basis, provided they follow EU policy.
Young People can apply for funds for educations and training; or some
youth development projects
Researchers: after 2014 EU can fund up to 80 billion Euros in
researches
Farmers and Rural Businesses can apply for direct grants.
(European Union 2015b)

Another important part to understand is to see how EU is funded by itself. EU

gets money from various sources. Followings are the main sources of funds for
European Union:
Small percentage of Gross National Income (.7%)
Small percentage of standardized Value-added tax (.3%)
Large share of import duties of non EU products. (countries that collects duty
retains small percentages)
Other revenue sources (tax and other deductions from EU staff remunerations,
bank interests, contributions from non EU countries to certain programs, late
payments and fines, etc.)
(European Union 2015a)

4. Strategy "Europe 2020"

Economic Crisis 2008 came as unprecedented downfall of European Economy in a
decade and led to the realization that the economy cannot proceed forward with the
same state of development when the unemployment rate in the region rose to double
digit. Banking sector was the first to be hit with the crisis and it looked to the
corresponding governments, ultimately dragging down the whole European region.
Governments had to borrow huge amounts to finance their budgets leading to huge
debts in the process and in the earlier days of crisis investors did not care enough to the
warning signs about the health of finances (European Commission 2014) leading the
crisis to new height. Some nations have to be dependent on the dept so severely that
they could not even coordinate any more with the common economic policies of using
single currency (Euro) in the Region (European Commission 2014). Public finances,
thus, had severe effects with deficits of 7% of GDP on average and debt reached at
over 80% of GDP (European Commission 2010).
Even after having years of strategic practice, 2008 crisis ruined all the progresses. For
example, GDP of the region fell down by 4%, industrial production dropped back to that
of 1990s and 23 million people (10% of the active population) became unemployed
(European Commission 2010). The crisis had actually exposed the structural
weaknesses of the regions mainly related to the increasing unemployment, decreasing
economic growth and increasing ageing population. Global challenges, on the other
hand, continually intimidated the regions. Emerging nations of the world are on one
hand, daunting Europe with economic growth and demographic advantages (growing
working population), on the other hands, could create opportunities for European market
to grow (European Commission 2010).

Eventually, in the form of "Europe 2020" European Union highlighted main three areas
to work on to move forward as well as to do away with the adversity of crisis. The three
main priorities are

Smart Growth
Sustainable Growth
Inclusive Growth

Unveiled in March 2010 by European Commission and approved in June 2010, this
'Europe 2020' Strategy has 3 priorities and 7 flagships. The interconnectedness of these
three priorities is believed to have integrated effects towards the overall development of
the region. This strategy has strong element of continuity relative to outlines and
objectives established in 2010 with Lisbon Strategy (Research Italy 2015). That is, it
puts renewed emphasis on three principal objectives of earlier program, increasing
competitiveness; improving the quality of employment market and creating more jobs;
and promoting development with increased support on research, education and
innovation (2015). There are mainly five principal indicators to assess progress and
extents of achieving objectives of the strategy (2015). They are:

Employment -(objective is to employ at least 75% of population of 20-64 years of

age.
Research and Innovation- (objective is to increase investment in R & D up to 3%
of European GDP with increased private investment)
Climate Change and Energy- (objective is to reduce Green House Gas Emission
by 20-30%, increase the share of renewable energy sources to 20% and
increase the efficiency of energy use by 20%)
Education- (objective is to increase the proportion of 30-34 years age group
young people getting university- level qualification by 40% and reduce early
school leaving rates to 10%)
Fight against Poverty- (objective is to reduce the number of population living
below corresponding national poverty threshold by 25%)

The progress in three priorities identified by Europe 2020 are catalyzed by seven
different flagship which function as guiding action and will perform in coordination to
national and European levels. Three flagship fall under priority Smart Growth. They are
'Innovation Union', 'Youths on Move' and 'Digital Agenda for Europe'. Two fall under
Sustainable Growth. They are 'Resource Efficient Europe' and 'Industrial Policy for
Globalization era'. Rest two flagships fall under Inclusive Growth. They are 'Agenda for
New Skills and Jobs' and 'European Platform against Poverty'. All the projects funded
by European Union are required to fall under at least one of the flagships. Indeed, those
projects can have objectives indicated by all flagships as well.

5. Funding and EU 2020

In the name of Horizontal Regulation, in regard to Cohesion Policy, European
Commission presented a general regulation for funds (2014-2020) in 2011. It sets out
some general programming criteria of the funds (Mirko Podda 2013). Its primary
focuses are strengthening partnership and multi-level governance; coordinating
Cohesion Policy with other developmental policies along with rural development;
defining priorities and key policies for investments, stressing on sustainable
development as horizontal principle for all funds; and most importantly, focusing on the
progress and results of investments (2013). These regulations are supposed to make
the priorities of strategy 2020 work together (reinforcing the priorities by each other).
Also, the approach of this regulation towards progress and results of the investments
done with structural funds has made this regional trade block more accountable towards
the strategy as well as the investments. Another step of European Commission towards
being accountable to EU 2020 is Common Strategic Framework (CSF) proposed in
March 2012. This framework coordinates all five funds under common guidance and
thus ensures greater impact for individuals and businesses. On the other hand it shifts
the current strategic guidelines by other policies like cohesion policy, rural development
policy and fisheries and maritime policy (Assembly of European Region 2012). It is
anticipated by EU as a tool to insure achievements of EU 2020.
These two intervention are good examples of EU's commitment towards EU 2020.
Horizontal Regulation has articulated 11 thematic objectives of the strategy from main
three priorities (Mirko Podda 2013). CSF takes them as cornerstones for structural
funds from 2014 to 2020 for the achievements of EU 2020 (European Commission
2015a). Those 11 thematic objectives are:

Enhance Research, technological development and innovation

Improve access, use and quality of information and communication technology.
Improve competitiveness of SMEs and Agricultural Sector.
Support transition towards low carbon economy in all sectors
Promote adaptation to climate change, prevention and risks mitigation.
Protect environment and promote efficient use of resources
Promote sustainable transport and removing bottlenecks in network
infrastructure.
Promote employment and supporting labor mobility.
Promote social inclusion and combating poverty.
Invest in education, skills and lifelong learning.
Improving institutional capacity and an efficient public administration.

These thematic objectives are more integrated and in simplified form than the objectives
that were defined earlier. Afterwards the investments are more channelized into the

specific types based upon the objectives of the projects in relation to strategy 2020. For
example, ERDF will invest on all those 11 thematic objectives and will focus on contexts
on which the business operate, particularly, infrastructure business service, ICT and
research. ERDF also invests on services to citizens in some specific sectors like
energy, online services,
education, infrastructure, health-and-social research,
accessibility and environmental quality (2013). Thus initially investments were done on
the basis of flagship of the strategy, while after 2012, the investments started to focus
on the thematic objectives and other specific sectors harnessing the progress and
direction towards EU 2020. Similarly European Social Fund (ESF) has its own sets of
thematic objectives to look at. They are employment and labor mobility; education, skills
and lifelong learning; social inclusion and fight against poverty and strengthening of
administrative capacity (2013). Similarly, European Agricultural Fund for Rural
Development (EAFRD) invests in compliance to ERDF and ESF but focuses on specific
sectors (Agriculture and Forestry) and territory. Cohesion Fund also complements to
ERDF and ESF but invests particularly on environmental and transport infrastructural
projects. Moreover, the investments have become more coordinated and complied to
the strategy after Horizontal Regulation and CSF.
Further European Commission has adopted some Regional Polices as well. To ensure
the proper governance of the funded projects and strategy 2020, Tiex Regio Peer 2
Peer is designed that shares expertise between the bodies that manages ERDF and
Cohesion Fund (European Commission 2015a). It finances for the Expert Missions in
which EU Member State Experts who can be sent to the other Member state institutions
for investigations and sharing of their expertise and good practice ideologies. For all the
EU funded projects 2014-2020, the contracting authorities and public bidders have to
make contract called Integrity Pact. This contract is supposed to prevent the corruption
and ensure the proper governance of project executions. Moreover, the commission has
set up a Task Force which mainly helps Member states spend as much funding as
possible. This in one way explores the alacrity of certain Member States (Region) to
progress making use of the available funds and creating more jobs, on the other way, it
also notifies the 'decommitment' of the particular MS or Region towards the EU Strategy
(European Commission 2015a). Task Force is more concerned over the countries
whose rate of fund absorption is significantly low (Bulgaria, Croatia, Czech Rep.,
Hungary, Italy, Romania, Slovakia and Slovenia).
6. Conclusion
Structural Funds in European Union went through various phases of strategies at
various time frames. The latest strategy that they adopted is Europe 2020 from 2010.
The challenge of the strategy itself is not only to do away with the recent economic
crisis, but also to establish the region globally with greater competence and

sustainability. The tools and policies that have been developed and improvised at
different times till now shows that, the whole region is anticipating well for the
achievements of the goals of the strategy. Thus the journey itself is not only about
making strategy to achieving the goals but also about learning and developing newer
tools and mechanisms to move further 2020. Of course, these tools and mechanisms
will sustain the development.

7. Sources
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European Commission (2009): Grants of European Union. Introduction to EU Funding.
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Mirko Podda (2013): Structural Funds 2014 2020 and Europe 2020 Strategy_Euromine
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