Resilience against water-related challenges, housing improvements, and defense are some of the priorities for which the European Commission called on member states to redirect EU regional funds during their midterm review on Tuesday. However, the commission made it clear that financing weapons would not be permissible under this initiative.
The purpose of this evaluation is to assess the performance, effectiveness, and efficiency of approximately €370 billion in funding for the 2021-2027 planning phase, which constitutes a substantial part of the European Union’s multiannual financial framework.
Historically, these funds aim to decrease economic, social, and territorial imbalances among EU regions by backing investments in infrastructure and innovation.
Nevertheless, following the program's approval in 2022, global conditions have changed, introducing fresh difficulties for various areas.
Commission Executive Vice President Raffaele Fitto, responsible for cohesion policy, emphasized that adjusting the distribution of these funds to address new priorities is crucial. "This proposal offers a means to utilize and tailor these resources to meet our updated objectives," he stated.
Now, member countries are being urged to redirect portions of their cohesion funds from 2021 through 2027 towards five critical sectors: boosting competitiveness alongside decarbonization efforts, strengthening defense capabilities, providing more affordable housing options, enhancing water resilience, and facilitating the shift toward cleaner energy in every European Union region.
Not a method for financing the EU's rearmament
The possible reallocation of resources towards defense sparked debate Among EU countries and local administrations before the formal unveiling of the proposal.
Initially suggested theories about these funds potentially being redirected towards defense expenditures have been partly substantiated, since this marks the first instance where the Commission has entertained the idea of employing regional funds for defense-associated projects.
Currently, such investments are mostly restricted to dual-use technologies and infrastructure, such as transport networks.
“We propose that member states and regions can use cohesion funds to support certain defence actions,” Fitto said.
However, the proposal’s impact on the defence sector remains limited. It would only allow member states and regions to use existing funds to enhance productive capacities in defence enterprises and build resilient infrastructure to improve military mobility.
“This has nothing to do with the purchase of weapons. I want to emphasise this because otherwise, we risk discussing things that do not correspond to the truth,” he added.
Water resilience and affordable housing
Another major focus of the Commission’s proposal is addressing the housing investment gap by providing financial incentives for member states and regions to direct funding toward affordable housing.
The objective is to significantly increase cohesion policy resources allocated to affordable housing over the coming years. “In all my meetings with mayors and ministers, housing was a priority, and it is important to push in this direction,” Fitto said.
Member states and regions will be able to leverage public and private financing to expand affordable housing supply through the forthcoming pan-European Investment Platform for affordable and sustainable housing.
Water resilience is another area where the Commission is proposing enhanced measures. The European Regional Development Fund (ERDF) objectives have been revised to support investments that secure water access, promote sustainable water management, and strengthen water resilience.
This includes improving water efficiency, increasing digitisation of water infrastructure, and mitigating the impacts of drought and desertification, while ensuring compliance with the Urban Wastewater Treatment Directive.
Freedom for countries
Member countries can choose to reallocate their cohesion funds towards the European Union’s key strategic objectives or keep their present funding levels unchanged.
"It is a voluntary option for member states, not a ruling enforced by the Commission," Fitto clarified during a press briefing.
To promote reallocation, the Commission is providing improved financial terms and increased flexibility. As an illustration, funds redirected towards these strategic goals will receive an extra initial advance of 30% in 2026 and have the option for full EU funding coverage.
Countries and areas must provide their suggested changes to the cohesion programs within two months after the updated laws take effect.
The Commission will evaluate these amendments and work together with national and regional authorities to implement the updated programs.
It is anticipated that the reprogramming process will conclude by the end of 2025, enabling the new programs to be put into effect starting in 2026.
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