Recovery assistance for cohesion and the territories of Europe (REACT-EU)
REACT-EU is a programme to repair the social and economic damage caused by the COVID-19 pandemic, and to prepare for a green, digital and resilient recovery. REACT-EU seeks to mobilise an additional EUR 47.5 billion from the structural funds for the years 2021 and 2022, and to increase flexibility in cohesion policy spending.
Legal basis
Articles 177 and 322 of the Treaty on the Functioning of the European Union (TFEU).
Regulation (EU) 2020/2221 of the European Parliament and of the Council of 23 December 2020 amending Regulation (EU) No 1303/2013 as regards additional resources and implementing arrangements to provide assistance for fostering crisis repair in the context of the COVID-19 pandemic and its social consequences and for preparing a green, digital and resilient recovery of the economy (REACT-EU).
Background
Since the onset of the COVID-19 pandemic, the slowdown of economic activity across the Union has caused considerable damage, in particular rising unemployment and a contracting economy. On 28 May 2020, the Commission proposed the REACT-EU package to mitigate the effects of the COVID-19 pandemic for the regions most hit by the crisis. It complements two earlier proposals, the Coronavirus Response Investment Initiative (CRII) and the Coronavirus Response Investment Initiative Plus (CRII+), which both amended the rules for Cohesion Policy spending. REACT-EU takes the form of targeted amendments to Regulation EU (No) 1303/2013, the Common Provisions Regulation, which is the legal framework governing the current Cohesion Policy programming period.
Commission proposal
Initially, the Commission proposed EUR 54.8 billion (in 2018 prices) in additional funds for the 2020-2022 period for the European Regional Development Fund (ERDF), the European Social Fund (ESF) and the Fund for European Aid to the most deprived (FEAD).
Out of this total amount, EUR 4.8 billion were to be made available in 2020 as a top-up to existing cohesion policy programmes, whereas the additional resources of EUR 50 billion for the 2021-2022 period would be provided through the European Recovery Instrument (NextGenerationEU).
For the ERDF and the ESF, additional funds would be made available under a new single, thematic objective called ‘fostering crisis repair in the context of the COVID-19 pandemic and preparing a green, digital and resilient recovery of the economy’ under the ‘Investment for growth and jobs’ goal.
For the ERDF, these additional resources were to primarily be used to support investments in products and services for health services, and to provide support in the form of working capital or investment support for SMEs, including operational and personnel costs, and health and safety measures.
For the ESF, the additional resources were to primarily be used to preserve jobs, including through short-time work schemes and support for the self-employed, job creation, in particular for people in vulnerable situations, support to youth employment measures, skills development, and to enhance access to social services of general interest, including for children.
Up to 4% of the additional resources available for programmes under the ERDF and the ESF may be allocated to technical assistance.
Funds were to be distributed among Member States on the basis of a Commission implementing decision and according to certain allocation criteria, which take into account Member States’ relative prosperity and the extent of the effects of the current crisis on their economies and societies. There is no breakdown by region, as is customary for cohesion policy.
The Commission proposed a high pre-financing rate (50%) to ensure that support is delivered quickly to the real economy. Moreover, additional support may be fully financed from the EU budget, without any need for national co-financing, which deviates from usual cohesion policy rules.
Council position
At the European Council Summit of 17-21 July 2020, EU Heads of State and Government endorsed a budget of EUR 47.5 billion for REACT-EU for the period 2021-2022, as part of the agreement on the European Recovery Plan. However, this is 5% below the Commission’s initial proposal. In line with the European Council’s guidelines, on 22 July 2020 the Council agreed on a partial mandate for negotiations with the European Parliament. The Council emphasised the need to invest more in culture and tourism, sectors severely hit by the pandemic. It also added a new provision allowing the adoption of temporary measures for the flexible use of funds in case of a future crisis.
Role of the European Parliament
The REACT-EU proposal aimed to amend the Common Provisions Regulation. It was adopted in accordance with the ordinary legislative procedure, which puts Parliament and Council on an equal footing. Parliament therefore had a vital role to play. Within Parliament, the Committee on Regional Development (REGI) took the lead on the file, and adopted its report on 7 September 2020. The report included a number of important amendments to the Commission’s proposal. In particular, it stressed the need to maintain the initial budget proposed by the Commission, despite the European Council’s cuts. It also recommended that investments be focused on: health and social infrastructure, health systems and services for all, including cross-border areas, the outermost regions, areas affected by industrial transition and depopulation, tourism and culture, youth employment and disadvantaged groups. In addition, it stressed the need to also use the additional funds for budgetary commitments in 2023 and 2024, going beyond the Commission’s 2022 deadline. The report also recalled that any derogations to normal cohesion policy spending rules could only be temporary in nature, and that democratic accountability principles must be safeguarded. At its plenary session in September 2020, Parliament confirmed the mandate to open interinstitutional negotiations with the Council on the basis of the Committee’s report. A political agreement was reached with the Council at the last trilogue meeting on 18 November 2020, taking into account many of Parliament’s key concerns, including the importance of supporting social cohesion and climate objectives in crisis recovery and the possibility to support the Youth Employment Initiative. The agreement also confirms the July decision of the European Council, setting the REACT-EU budget at EUR 47.5 billion for the 2021-2022 period, without additional cohesion funding for 2020. Parliament confirmed the agreement during its plenary session of 15 December 2020. The REACT-EU Regulation came into force on 24 December 2020.
In addition, on 12 April 2022 Parliament adopted a regulation to provide more pre-financing under REACT-EU. These additional funds should help Member States with the challenges posed by the exceptionally high number of people fleeing the war in Ukraine. They should also support Member States’ transition to a resilient economic recovery from the COVID-19 pandemic.
Frédéric Gouardères