The European Regional Development Funds represent one of the principle financial instruments of the EU cohesion policy.
The scope is to smooth out the inequalities between different levels of development of the European regions, and to improve the quality of life in the less developed regions.
Particular attention is addressed to the regions that present serious and permanents natural or demographical disadvantages, like in the regions with a very low density of population, island regions, as well cross-border regions and constituted by mountains.
To reach this goal, the Fund supports principally two ambits:
- Development and adjustment, structural of the regions in late development;
- Reconversion of the industrial declining regions
As well the Funds have two principal Policy Objectives:
- Investments in favour to growth and employment, finalized to strengthen the labour market and regional economies;
- European Territorial Cooperation, aimed at strengthening cross-border, transnational and interregional cooperation within the European Union.
The resources allocated to the first objective were divided between three different categories of regions:
- More developed regions with a per capita GDP of more than 90% of the EU average;
- Region in transition, with per capita GDP between 75% and 90% of the EU average;
- Less developed regions with a per capita GDP below 75% of the EU average.
Details of the management of ERDF funds are laid down in the partnership agreements, which are strategic documents drawn up by each Member State with the participation of the social and regional partners.
The financial instruments meet certain constraints:
- Must be refund;
- Are revolving, thus the funds repaid can be reinvested again in the same area;
- Are suitable for projects that are financially viable and generate sufficient income or savings to repay the support received;
- Are designed to attract co-investments from other sources, in particular in sector and areas where there is critical access to finance;
- May take the form of loans, guarantees or equity participation;
- May also support supply-side development by contributing to market development;
- May be used in addition to grants;
- May be managed by national or regional banks, by international organisations, such as the European Investment Bank or the European Investment Fund, by financial intermediaries and, in the case of loans and guarantees, by the Managing Authorities.
- Financial instruments can therefore contribute to a wide range of ERDF investment priorities. Those identified for 2021-2027 are:
- Smarter Europe by promoting innovative and intelligent economic transformation;
- Greener Europe, through the transition to clean energy sources, adaptation to climate change and risk management;
- More connected Europe, by strengthening regional mobility and connectivity;
- More social Europe through the implementation of the European pillar of social rights;
- Europe closer to its citizens, by promoting the sustainable and integrated development of urban, rural and coastal areas and local initiatives.
ERDF support focuses on a number of priority areas, following a principle known as Thematic Concentration, which for the next six years covers two Ops (Policy Objectives):
- PO1: a more competitive and smarter Europe;
- PO2: a more resilient and greener Europe, aimed at the transition to clean energy sources and a Net Zero Carbon Economy.
The regions and Member States will allocate different amounts of funds to each OP according to their level of development:
- All regions will allocate 30% of the funds to PO2. A further 8% of funds derived from local agreements will be devoted exclusively to urban development.
- The more developed regions will allocate 85% of the funds to PO1 and PO2.
- Transition regions will allocate at least 40% of their funds to PO1.
- The least developed regions will allocate 25% to PO1.
The rules for the ERDF for the period 2021-2027 shall be established by:
- A regulation on the ERDF and the Cohesion Fund;
- A regulation laying down specific provisions for the European Interregional Territorial Cooperation objective.
The new cohesion policy has also introduced a list of activities that cannot be supported by the ERDF, including the decommissioning or construction of nuclear power plants, airport infrastructure (except in the outermost regions) and certain waste management operations (for example, landfills).
During the 2021-2027 programming period, about 200,36 billion of euros will be allocated to the ERDF (including 8 billion of euros for European Territorial Cooperation and 1,93 billion of euros in special allocations for the outermost regions).
The least developed regions will be benefit from co-financing rates of up to 85% of the cost of projects.
Co-financing rates for transition regions and more developed regions will be up to 60% and 40% respectively.
