EU Cohesion Policy: Regional Development, Structural Funds, and Economic Convergence

EU Cohesion Policy: Regional Development, Structural Funds, and Economic Convergence

1. Introduction: Cohesion as a Constitutional and Economic Objective of the European Union

The European Union is a single economic and political system composed of territories with substantially different economic structures, demographic conditions, infrastructure, institutional capacities, and levels of prosperity. Some regions are highly industrialised, technologically advanced, and deeply integrated into international markets. Others face persistent unemployment, limited transport connections, population decline, weak public services, or the consequences of industrial restructuring. These differences create a fundamental challenge for European integration: the benefits of the internal market and economic cooperation cannot be considered evenly distributed simply because Member States participate in the same legal and economic framework.

EU cohesion policy addresses this problem through a system of investment, financial redistribution, regional planning, and institutional cooperation. Its purpose is to strengthen economic, social, and territorial cohesion by reducing disparities between regions and supporting development in areas facing structural disadvantages.

Cohesion policy is therefore more than a regional subsidy programme. It is an expression of the Union’s commitment to balanced development. It recognises that the functioning of the internal market, the free movement of goods, services, capital, and persons, and the broader process of economic integration can produce unequal territorial effects. Investment in infrastructure, education, employment, innovation, environmental protection, and institutional capacity is intended to help regions participate more effectively in the common European economy.

The legal foundation is found principally in Articles 174–178 of the Treaty on the Functioning of the European Union (TFEU). These provisions establish the Union’s responsibility to pursue economic, social, and territorial cohesion and provide the legislative basis for the Structural Funds and other regional development instruments.

The principal funding framework for the 2021–2027 programming period is established by Regulation (EU) 2021/1060, commonly known as the Common Provisions Regulation (CPR), together with the specific regulations governing the European Regional Development Fund, the European Social Fund Plus, the Cohesion Fund, and the Just Transition Fund.

Cohesion policy also has a direct practical significance for national economies. In Member States with substantial regional development differences, EU funding can represent a major source of public investment. Its effectiveness, however, depends not only on the amount of money allocated but also on administrative capacity, sound project selection, transparent procurement, effective implementation, and measurable long-term results.

2. Legal Foundations: Articles 174–178 TFEU

The constitutional basis of EU cohesion policy is Title XVIII of Part Three of the TFEU, entitled Economic, Social and Territorial Cohesion.

Article 174 TFEU: The Objective of Cohesion

Article 174 establishes the fundamental objective of the policy. The Union must develop and pursue actions intended to strengthen economic, social, and territorial cohesion and reduce disparities between the levels of development of its regions.

The provision expressly identifies territories requiring particular attention, including:

• Rural areas.
• Areas affected by industrial transition.
• Regions suffering from severe and permanent natural or demographic disadvantages.
• Northern regions with very low population density.
• Island, cross-border, and mountainous regions.

The provision is important because it recognises that regional disadvantage is not necessarily caused by poor economic policy or insufficient investment alone. Geography, demographic structure, remoteness, and the historical organisation of economic activity may create obstacles that ordinary market mechanisms cannot adequately overcome.

A mountainous region, for example, may face higher infrastructure costs than a densely populated urban centre. An island economy may experience additional transport expenses and difficulties attracting investment. A former industrial region may possess a skilled workforce and existing infrastructure but lack viable replacement industries following the closure of major employers.

Article 174 therefore supports a differentiated approach. Cohesion policy is not based on the assumption that every region requires identical intervention. Rather, the nature and intensity of support should reflect the particular development conditions of each territory.

Article 175 TFEU: Shared Responsibility

Article 175 extends the principle beyond the administration of specific funds.

Member States must conduct and coordinate their economic policies in a manner that contributes to cohesion. The Union’s policies and actions, including the implementation of the internal market, must also take cohesion objectives into account.

This establishes an important relationship between regional development and other areas of EU law. Cohesion is not exclusively the responsibility of regional authorities or the institutions administering structural funds. It is a broader objective that should inform the design and implementation of Union policies.

Article 175 also identifies the Structural Funds, the European Investment Bank, and other financial instruments as mechanisms for achieving cohesion. It requires the Commission to report periodically on progress in economic, social, and territorial cohesion.

The provision thus combines a general policy obligation with specific financial instruments and monitoring responsibilities.

Articles 176–178 TFEU: Institutional and Legislative Framework

Article 176 defines the European Regional Development Fund’s purpose: correcting the main regional imbalances within the Union through participation in the development and structural adjustment of regions whose development is lagging behind, as well as in the conversion of declining industrial regions.

Article 177 provides the legislative basis for determining the tasks, priority objectives, and organisation of the Structural Funds. The European Parliament and the Council act through the ordinary legislative procedure after consulting the Economic and Social Committee and the European Committee of the Regions.

Article 178 provides the basis for implementing decisions concerning the European Regional Development Fund.

Taken together, these provisions create a treaty framework in which cohesion policy is a recognised Union objective, implemented through legislation, financial instruments, and cooperation between European, national, regional, and local authorities.

3. The Meaning of Economic, Social, and Territorial Cohesion

The three dimensions of cohesion are closely related, but they address different aspects of regional development.

Economic Cohesion

Economic cohesion concerns differences in productivity, income, employment opportunities, investment, and productive capacity.

A region with low productivity and limited industrial diversification may struggle to attract private investment. Its businesses may face higher transport costs, weaker access to technology, and difficulties recruiting specialised employees. These conditions can reinforce each other, creating a cycle in which limited investment reduces productivity and low productivity discourages further investment.

Cohesion policy attempts to interrupt this cycle by supporting infrastructure, research, innovation, business development, digital connectivity, and economic diversification.

Economic cohesion does not require all regions to develop identical economic structures. A rural region may pursue sustainable agriculture, tourism, or specialised manufacturing, while an urban region may concentrate on advanced services, research, and technology. The objective is to improve the capacity of each territory to generate sustainable economic activity.

Social Cohesion

Social cohesion concerns differences in living conditions, employment opportunities, access to education, social inclusion, and the availability of essential services.

Economic growth does not automatically eliminate social disadvantage. A region may attract investment while certain groups remain excluded from employment or lack access to adequate education, healthcare, housing, and social protection.

The European Social Fund Plus (ESF+) plays a particularly important role in this dimension. It supports employment, vocational education, skills development, social inclusion, and measures addressing poverty and disadvantage.

Social cohesion also has a relationship with the European Pillar of Social Rights. The Union’s regional development instruments seek to support more inclusive labour markets and improve opportunities for people whose circumstances limit their participation in economic and social life.

Territorial Cohesion

Territorial cohesion recognises that geography and spatial organisation influence the opportunities available to individuals and businesses.

A person’s access to employment, education, healthcare, transport, and digital infrastructure may depend heavily on where that person lives. Remote rural communities, island territories, mountainous areas, border regions, and declining industrial towns may face disadvantages that cannot be measured solely by average income.

Territorial cohesion therefore supports integrated planning across different geographical levels. It encourages cooperation between neighbouring municipalities, regions, and Member States, particularly where infrastructure, environmental systems, labour markets, or economic activity extend across administrative borders.

The three dimensions reinforce each other. Better transport infrastructure can improve economic competitiveness, increase access to employment, and reduce the isolation of remote communities. Investment in education can improve social inclusion while also strengthening the productive capacity of a region.

4. The Architecture of Cohesion Policy

The 2021–2027 framework is based on a group of European funds operating under common financial and administrative rules.

The principal funds are:

1. The European Regional Development Fund (ERDF).
2. The European Social Fund Plus (ESF+).
3. The Cohesion Fund.
4. The Just Transition Fund (JTF).

The European Maritime, Fisheries and Aquaculture Fund also falls within the Common Provisions Regulation for relevant shared-management provisions, although it has a distinct sectoral purpose.

These instruments have different functions, but they operate within the broader objective of strengthening economic, social, and territorial cohesion.

The European Regional Development Fund

The ERDF is one of the principal instruments for reducing regional economic disparities.

Under Regulation (EU) 2021/1058, it supports investment in infrastructure, productive activity, research, innovation, digitalisation, energy efficiency, environmental protection, and sustainable urban development.

Its principal areas of intervention include:

• Research and innovation infrastructure.
• Support for small and medium-sized enterprises.
• Digital technologies and connectivity.
• Energy efficiency and renewable energy.
• Sustainable transport and urban development.
• Environmental protection and climate adaptation.
• Economic diversification in regions undergoing structural change.

The ERDF operates through both the Investment for Jobs and Growth goal and the European Territorial Cooperation goal, commonly known as Interreg.

Its function is not simply to finance construction projects. It also seeks to improve the productive capacity and competitiveness of regions by supporting innovation, enterprise development, and the transition towards more sustainable economic structures.

The European Social Fund Plus

The ESF+ is the Union’s principal instrument for investing in people.

Established by Regulation (EU) 2021/1057, it combines several earlier funding instruments and supports employment, education, vocational training, social inclusion, and measures addressing poverty.

Its interventions include:

• Improving access to employment.
• Supporting young people entering the labour market.
• Developing vocational and professional skills.
• Improving education and training systems.
• Supporting disadvantaged groups.
• Promoting equal opportunities.
• Strengthening social inclusion.
• Addressing material deprivation through the relevant assistance framework.

The ESF+ reflects the principle that regional development cannot be achieved through physical infrastructure alone. A region may receive investment in roads, industrial facilities, or digital networks, but its long-term development also depends on the skills, opportunities, and social conditions of its population.

The fund consequently connects regional economic policy with employment and social policy.

The Cohesion Fund

The Cohesion Fund is designed to support Member States whose gross national income per capita is below 90% of the EU average, calculated according to the applicable allocation methodology.

Its purpose is to reduce economic and social disparities by financing major investments in environmental infrastructure and trans-European transport networks.

Its areas of intervention include:

• Water supply and wastewater treatment.
• Waste management.
• Environmental infrastructure.
• Climate-related investment.
• Energy efficiency and renewable energy.
• Sustainable transport.
• Trans-European transport infrastructure.

Unlike the ERDF, which is organised primarily around regional development, the Cohesion Fund operates at Member State level and focuses on countries meeting the relevant economic eligibility criterion.

Its investments can have significant cross-border and European effects. Transport corridors, for example, connect national economies and facilitate the movement of goods and people throughout the internal market.

The Just Transition Fund

The Just Transition Fund was established by Regulation (EU) 2021/1056 as part of the European Green Deal’s response to the economic and social consequences of the transition towards climate neutrality.

The transition away from carbon-intensive industries may create substantial difficulties for regions dependent on coal mining, conventional energy production, or other activities facing structural decline.

The JTF supports territories particularly affected by this transition. Its purpose is to help them diversify their economies, create employment opportunities, retrain workers, and address environmental damage associated with industrial activity.

Its interventions may include:

• Economic diversification and support for new businesses.
• Investment in research and innovation.
• Reskilling and upskilling of workers.
• Assistance for jobseekers.
• Restoration of industrial sites.
• Investment in clean energy and sustainable technologies.
• Measures supporting communities affected by the transition.

The fund is based on the recognition that environmental transformation must be accompanied by social and economic measures. A climate-neutral economy cannot be achieved sustainably if the costs of transition are concentrated in particular communities without adequate support.

5. The Five Policy Objectives for 2021–2027

Regulation (EU) 2021/1060 establishes five broad policy objectives that guide the use of the principal cohesion funds.

A More Competitive and Smarter Europe

The first objective concerns innovation, research, technological development, and the digital transformation of regional economies.

Investment may support research institutions, technology transfer, digital infrastructure, business innovation, and the development of small and medium-sized enterprises.

The underlying principle is that regional competitiveness increasingly depends on the ability to generate, adopt, and commercialise knowledge.

A Greener, Low-Carbon Europe

The second objective supports the transition towards a climate-neutral and environmentally sustainable economy.

It includes investment in renewable energy, energy efficiency, the circular economy, climate adaptation, environmental protection, sustainable urban mobility, and the management of environmental risks.

The objective connects cohesion policy with the Union’s wider climate and environmental legislation.

A More Connected Europe

The third objective focuses on transport and connectivity.

It supports investment intended to improve mobility within and between regions, including sustainable transport infrastructure and connections to wider European networks.

Connectivity is important not only for trade but also for access to employment, education, public services, and economic opportunities.

A More Social and Inclusive Europe

The fourth objective supports the implementation of the European Pillar of Social Rights through employment, education, social inclusion, and access to services.

It is particularly relevant to regions where unemployment, skills shortages, poverty, or demographic decline limit development.

A Europe Closer to Citizens

The fifth objective promotes integrated and sustainable territorial development through local initiatives.

It recognises that development strategies designed exclusively at national level may fail to reflect the particular needs of individual communities.

Local authorities, regional organisations, civil society, and other stakeholders can therefore participate in designing and implementing territorial development strategies.

These five objectives provide a common policy structure while allowing programmes to respond to different regional circumstances.

6. Regional Classification and the Allocation of Financial Support

One of the central mechanisms of cohesion policy is the classification of regions according to their relative level of economic development.

For the 2021–2027 programming period, regions under the Investment for Jobs and Growth goal are generally classified into three categories according to their GDP per capita in purchasing power standards, measured against the EU-27 average.

Less Developed Regions

These are regions with GDP per capita below 75% of the EU-27 average.

They receive the highest intensity of cohesion support because they face the greatest structural development challenges.

Transition Regions

These are regions with GDP per capita between 75% and 100% of the EU-27 average.

They occupy an intermediate position. Their economies may have achieved substantial development but continue to require support for productivity, competitiveness, and structural transformation.

More Developed Regions

These are regions with GDP per capita above 100% of the EU-27 average.

They remain eligible for cohesion policy support, although the intensity and priorities of funding differ.

This classification is important because cohesion policy is not exclusively a mechanism for transferring resources from wealthier Member States to poorer ones. It also supports development within Member States where prosperous metropolitan areas coexist with disadvantaged rural, industrial, or peripheral territories.

The allocation methodology takes account of several factors, including regional prosperity, population, unemployment, and other indicators relevant to the applicable fund and programming rules.

Co-Financing and the Principle of Shared Financial Responsibility

Cohesion policy generally operates through co-financing. EU resources contribute to the cost of eligible projects, while national, regional, public, or private resources provide the remaining financing.

Under Article 112 of Regulation (EU) 2021/1060, the maximum EU co-financing rates for the Investment for Jobs and Growth goal vary according to regional classification.

For the principal categories, the maximum rates are generally:

• 85% for less developed regions.
• 60% for transition regions.
• 40% for more developed regions.

A higher rate of up to 70% applies to certain transition regions that were classified as less developed in the previous programming period. A rate of up to 50% applies to specified more developed regions with particular previous-period classifications.

The Cohesion Fund can generally finance up to 85% of eligible expenditure.

These are maximum rates, not automatic entitlements. The applicable rate is determined through the relevant programme and priority arrangements.

Co-financing serves several purposes. It encourages national and regional authorities to take financial responsibility for projects, promotes the selection of investments that reflect genuine public priorities, and limits the extent to which EU funding replaces domestic expenditure.

However, it can also create difficulties for authorities with limited fiscal capacity. A region may have access to substantial EU allocations but lack the resources needed to provide its share of project financing.

The legal framework therefore attempts to balance financial responsibility with the objective of directing greater support towards regions with weaker economic capacity.

7. Programming, Partnership, and Multi-Level Governance

Cohesion policy is not administered through a single central European authority selecting and executing every project.

Its implementation is based principally on shared management between the European Commission and the Member States.

The Common Provisions Regulation establishes the general framework for programming, financial management, monitoring, audit, and control.

Partnership Agreements

Member States prepare partnership agreements setting out their overall strategy for using the relevant EU funds.

These agreements identify national development priorities, the principal challenges to be addressed, the funds to be used, and the relationship between proposed investments and Union policy objectives.

The Commission assesses and approves the agreements within the applicable legal framework.

Operational Programmes

Funding is translated into operational programmes or, where applicable, other programme structures established under the relevant regulations.

Programmes identify priorities, specific objectives, types of intervention, financial allocations, performance indicators, and arrangements for implementation.

A programme may focus on a particular region, several regions, or a national policy area.

Managing Authorities

Member States designate managing authorities responsible for administering programmes.

Their responsibilities may include:

• Selecting operations for support.
• Ensuring that funded activities comply with applicable rules.
• Providing information to beneficiaries.
• Monitoring implementation.
• Maintaining appropriate management systems.
• Reporting progress to the Commission.

The precise institutional structure differs between Member States. A managing authority may be a national ministry, regional administration, or another designated public body.

Monitoring Committees

Monitoring committees supervise programme implementation and provide a forum for institutional and stakeholder participation.

They examine progress, review implementation difficulties, and consider matters affecting programme performance.

Their composition reflects the partnership principle, which encourages the involvement of relevant public authorities, economic and social partners, and civil society organisations.

The Partnership Principle

Article 8 of Regulation (EU) 2021/1060 requires Member States to organise partnerships involving relevant regional, local, urban, and other public authorities, economic and social partners, and civil society bodies.

The principle is important because regional development programmes are more likely to respond to actual territorial needs when those affected by investment decisions have an opportunity to participate.

Partnership does not transfer the formal legal responsibilities of managing authorities to private or civil society organisations. Rather, it creates a structured form of consultation and cooperation within the programme framework.

8. Territorial Development and the Role of Local Authorities

Cohesion policy increasingly recognises that regional development requires integrated territorial strategies rather than isolated infrastructure projects.

Article 28 of Regulation (EU) 2021/1060 provides for territorial instruments, including integrated territorial investments and community-led local development.

Integrated Territorial Investments

Integrated Territorial Investments (ITIs) allow funding from different priorities or programmes to be combined in support of a territorial strategy.

For example, a metropolitan area may require simultaneous investment in public transport, urban regeneration, energy efficiency, education, and employment.

An ITI can coordinate these interventions around a common territorial objective rather than treating them as unrelated projects.

Community-Led Local Development

Community-led local development places local actors at the centre of identifying development needs and designing strategies.

Local action groups can bring together public authorities, businesses, community organisations, and other stakeholders.

The approach is particularly relevant in rural and smaller communities, where local knowledge may be essential to identifying viable economic opportunities.

Sustainable Urban Development

Article 11 of Regulation (EU) 2021/1058 requires at least 8% of the ERDF allocation at national level under the Investment for Jobs and Growth goal to be allocated to sustainable urban development, implemented through the relevant territorial instruments.

This reflects the importance of cities as centres of economic activity, employment, innovation, transport, and public services.

Urban development policy also needs to address challenges such as housing affordability, social exclusion, congestion, pollution, and the regeneration of disadvantaged neighbourhoods.

9. Interreg and European Territorial Cooperation

Regional development challenges frequently extend beyond national borders.

Transport systems, river basins, environmental protection, labour markets, energy networks, and economic clusters may involve several Member States or neighbouring territories.

The European Territorial Cooperation objective, commonly known as Interreg, supports cooperation across these boundaries.

Interreg is financed principally through the ERDF and operates under the Common Provisions Regulation and the specific rules in Regulation (EU) 2021/1059.

Its principal strands include:

• Cross-border cooperation.
• Transnational cooperation.
• Interregional cooperation.
• Cooperation involving the outermost regions and relevant partner territories.

Cross-border programmes may support cooperation between neighbouring regions in different Member States. Transnational programmes address broader geographical areas and common challenges. Interregional programmes facilitate the exchange of experience and cooperation between regions that may be geographically distant.

Interreg is important because national borders do not necessarily correspond to the geographical boundaries of economic, environmental, or social problems.

A river pollution problem, for example, may require coordinated action by several countries. Similarly, a cross-border labour market may depend on transport connections, compatible administrative arrangements, and cooperation between public employment services.

Interreg therefore gives territorial cohesion a distinctly European dimension.

10. Financial Management, Eligibility, and Control

The financial scale of cohesion policy requires a detailed system of management and control.

The Common Provisions Regulation establishes rules governing the eligibility of expenditure, programme implementation, financial corrections, audit, and the responsibilities of national and European authorities.

Eligibility of Expenditure

EU funding may be used only for activities and expenditure that satisfy the applicable legal and programme requirements.

A project must fall within the scope of the relevant fund, contribute to an approved programme objective, and comply with the applicable eligibility conditions.

Expenditure must also respect relevant rules on public procurement, State aid, environmental protection, fundamental rights, and other applicable EU law.

The fact that a project serves a public purpose does not automatically make its expenditure eligible for EU reimbursement.

Management and Control Systems

Member States must establish management and control systems capable of ensuring that programme expenditure is lawful, regular, and properly documented.

The system involves designated managing authorities, accounting functions, audit authorities, and the Commission.

The division of responsibilities is intended to ensure that expenditure is checked at several stages rather than relying exclusively on retrospective review.

Audit and Financial Corrections

Where expenditure is found to be irregular or incompatible with EU requirements, the relevant authorities may be required to apply financial corrections.

A correction may involve withdrawing an amount from EU financing, recovering funds from a beneficiary, or adjusting programme accounts.

The purpose is to protect the Union budget and ensure that EU funds are used according to the conditions under which they were granted.

Financial corrections do not necessarily establish that a criminal offence has occurred. An administrative irregularity, an ineligible expense, and fraud are legally distinct matters, even though they may arise from the same project.

Where evidence indicates suspected criminal conduct, the matter may also be referred to the competent national or European authorities.

The broader framework for protecting the Union’s financial interests, including the roles of OLAF and the European Public Prosecutor’s Office, is examined separately in the article on EU financial control and anti-fraud mechanisms.

11. Fundamental Rights, Rule of Law, and Enabling Conditions

Cohesion funding is not legally isolated from the Union’s constitutional framework.

The use of EU financial resources must comply with the Treaties, the Charter of Fundamental Rights where applicable, and the general principles of EU law.

Regulation (EU) 2021/1060 includes enabling conditions designed to ensure that certain institutional and legal requirements are satisfied before relevant expenditure is supported.

These conditions concern matters such as effective application of the Charter, public procurement, State aid, and the implementation of applicable strategic and regulatory frameworks.

The Charter’s relevance is particularly important where programmes involve public administration, access to services, social inclusion, employment, data processing, or the treatment of individuals and communities.

The Rule of Law Conditionality Regulation

Regulation (EU, Euratom) 2020/2092 establishes a general regime for protecting the Union budget where breaches of the principles of the rule of law in a Member State affect or seriously risk affecting the sound financial management of the EU budget or the protection of the Union’s financial interests in a sufficiently direct way.

The mechanism is not a general procedure for sanctioning every rule-of-law problem. Its application requires the specific relationship with the Union budget established by the Regulation.

The Court of Justice upheld the Regulation in its judgments of 16 February 2022:

• Case C-156/21, Hungary v Parliament and Council.
• Case C-157/21, Poland v Parliament and Council.

The judgments confirmed that the conditionality mechanism is distinct from the procedure under Article 7 TEU and can operate where its specific legal conditions are satisfied.

This is particularly relevant to cohesion policy because weaknesses in judicial protection, public procurement, anti-corruption systems, or the effective investigation of misuse of public funds may undermine the proper use of EU resources.

The principle is straightforward: access to EU funding is governed not only by the existence of an approved development project but also by the legal and institutional conditions required for responsible management of the Union budget.

12. The 2025 Mid-Term Review: New Strategic Priorities

The 2021–2027 cohesion framework has been amended to respond to changing economic, environmental, and geopolitical circumstances.

The mid-term review led to the adoption of Regulation (EU) 2025/1914, which amended the ERDF, Cohesion Fund, and Just Transition Fund framework.

A separate legislative amendment addressed the European Social Fund Plus.

The reform reflects the recognition that the original programming priorities must remain capable of responding to new strategic challenges during the funding period.

The amended framework creates additional opportunities to direct cohesion resources towards several areas.

Competitiveness and Strategic Technologies

The reform encourages investment in industrial competitiveness, technological development, and strategic capacities.

The objective is to strengthen the ability of European regions to participate in emerging industrial and technological sectors.

Defence, Security, and Civil Preparedness

The amended framework permits support for specified investments connected with defence capabilities, security, and civil preparedness, including relevant dual-use infrastructure and industrial capacities.

This represents a significant development in the relationship between cohesion policy and the Union’s strategic priorities.

It does not transform cohesion policy into a general defence budget. Funding remains subject to the specific objectives and eligibility conditions established by the amended legislation.

Affordable and Sustainable Housing

The reform also recognises the growing importance of housing affordability.

Housing shortages and high costs can affect labour mobility, social inclusion, regional attractiveness, and the ability of workers to access employment.

The amended framework therefore creates additional opportunities for investment in affordable and sustainable housing within the applicable programme rules.

Water Security and Resilience

Secure access to water and sustainable water management have become increasingly important in the context of climate change, drought, industrial demand, and pressure on natural resources.

The reform supports investment in water infrastructure, sustainable management, and resilience.

Energy Transition and Decarbonisation

The amended framework reinforces the role of cohesion funding in supporting the transition towards a cleaner and more resilient economy.

Investment may support energy systems, industrial transformation, and measures intended to reduce the economic and social consequences of decarbonisation.

Eastern Border Regions

Regions bordering Russia, Belarus, and Ukraine face particular challenges arising from geopolitical instability, disrupted economic connections, security pressures, and the consequences of Russia’s war against Ukraine.

The reform provides greater scope to address the specific needs of these territories.

The mid-term review illustrates an important feature of cohesion policy: although its long-term objective remains reducing regional disparities, the instruments can be adapted to emerging European priorities.

The challenge is to maintain the policy’s territorial and redistributive purpose while allowing sufficient flexibility to respond to new circumstances.

13. Cohesion Policy and the 2028–2034 EU Budget

The next Multiannual Financial Framework (MFF) will shape the future of cohesion policy after the 2021–2027 programming period.

On 16 July 2025, the European Commission presented its proposal for the 2028–2034 long-term EU budget. The proposed framework amounts to almost €2 trillion in current prices.

The Commission has proposed a more integrated budget structure, including National and Regional Partnership Plans intended to bring together several funding instruments under a more coherent national and regional investment strategy.

The proposal seeks to simplify access to EU funding, improve flexibility, and align expenditure more closely with the Union’s strategic priorities.

For cohesion policy, this raises important institutional and political questions.

First, the future system must preserve the commitment to economic, social, and territorial cohesion established by Article 174 TFEU.

Second, greater integration of funding instruments must not weaken the role of regional and local authorities in identifying development needs.

Third, flexibility must be balanced against the need for predictable long-term investment. Infrastructure, education, research, and industrial transformation require planning horizons that cannot always be reconciled with short-term political priorities.

Fourth, the future framework must maintain effective safeguards for transparency, accountability, partnership, and sound financial management.

The Commission’s proposal for a new ERDF and Cohesion Fund framework is contained in COM(2025) 552. It is a legislative proposal for the 2028–2034 period, not a replacement for the rules currently governing the 2021–2027 programmes.

As of November 2026, the 2028–2034 framework remains subject to the legislative and budgetary process. The existing legal framework therefore continues to govern the current programming period, as amended by legislation already adopted.

The debate over the next MFF is particularly significant because it concerns the future balance between national flexibility, regional autonomy, European strategic priorities, and the traditional redistributive function of cohesion policy.

14. Bulgaria and the Practical Importance of Cohesion Policy

Bulgaria provides a useful example of the practical importance of cohesion funding for a Member State with substantial regional development differences.

For the 2021–2027 period, Bulgaria benefits from approximately €10.7 billion in EU cohesion policy funding under the Investment for Jobs and Growth goal, with national co-financing bringing the total planned financing to approximately €12.9 billion.

The funding supports programmes involving regional development, innovation, employment, education, environmental protection, transport, and the transition away from carbon-intensive economic activity.

The scale of this investment demonstrates the importance of cohesion policy for public investment in Bulgaria.

However, the availability of funding does not guarantee that regional disparities will automatically disappear.

Several structural challenges influence the effectiveness of cohesion investment:

• Significant differences in economic development between Sofia and many other regions.
• Demographic decline and population ageing.
• Emigration and shortages of skilled labour.
• Unequal administrative capacity among municipalities.
• Difficulties in preparing and implementing complex investment projects.
• Risks associated with public procurement and institutional accountability.
• Limited private investment in certain territories.

These challenges illustrate why the effectiveness of cohesion policy cannot be assessed solely by the amount of money allocated or absorbed.

A municipality may successfully complete a publicly financed road or building project, but the wider development impact depends on whether the investment improves access to employment, strengthens economic activity, or provides a sustainable public benefit.

For Bulgaria, the central question is therefore not merely how much EU funding can be spent, but how effectively it can be converted into durable improvements in productivity, public services, regional competitiveness, and quality of life.

15. Measuring Results: Economic Convergence and Policy Effectiveness

Cohesion policy is intended to produce measurable improvements in regional development.

Its effectiveness is therefore assessed through indicators relating to economic performance, employment, infrastructure, education, environmental conditions, and social inclusion.

Economic Convergence

Economic convergence generally refers to a reduction in differences between the levels of economic development of regions or Member States.

One frequently used indicator is GDP per capita expressed in purchasing power standards.

This allows comparisons that take account of differences in price levels between countries.

However, GDP per capita is not a complete measure of regional prosperity. It does not directly show how income is distributed, whether employment is secure, whether public services are accessible, or whether economic growth is environmentally sustainable.

Output and Result Indicators

Cohesion programmes use indicators to measure both immediate outputs and broader results.

Output indicators may record kilometres of improved roads, the number of businesses receiving support, the capacity of renewable energy installations, or the number of people participating in training.

Result indicators seek to measure the effects of those interventions, such as increased employment, improved energy performance, greater business productivity, or improved access to services.

The distinction is important. Completing a project is not the same as achieving its intended development impact.

A training programme may enrol thousands of participants, but its effectiveness depends on whether participants acquire useful skills and improve their employment prospects.

Similarly, constructing a transport facility does not automatically establish that regional accessibility or economic competitiveness has improved.

Evaluation and Accountability

The Common Provisions Regulation provides for monitoring, evaluation, and performance assessment.

Member States and the Commission must examine whether programmes are being implemented effectively and whether the interventions contribute to their stated objectives.

Evaluation should identify not only successful projects but also implementation failures, inefficient spending, and weaknesses in programme design.

The ultimate purpose is to determine whether EU financial support produces additional public value rather than merely replacing expenditure that would have occurred in any event.

16. Structural Challenges and Criticism of Cohesion Policy

Despite its importance, cohesion policy faces persistent difficulties.

Administrative Complexity

The system involves detailed eligibility rules, procurement requirements, financial reporting, monitoring, and audit procedures.

These safeguards are necessary to protect public resources, but excessive complexity can discourage smaller beneficiaries and disadvantage municipalities with limited administrative capacity.

Simplification must therefore be pursued without weakening transparency or control.

Uneven Absorption Capacity

Some Member States and regions have difficulty converting allocations into completed projects.

The causes may include insufficient technical expertise, delays in procurement, weak project preparation, institutional instability, or difficulties securing national co-financing.

Low absorption can result in delayed investment and, in some circumstances, the loss or reallocation of available resources under the applicable rules.

Political Influence and Project Selection

Public investment decisions may be influenced by political considerations rather than objective development priorities.

This creates risks of regional favouritism, weak project selection, conflicts of interest, and inefficient spending.

Transparent selection criteria, independent audit, public access to programme information, and effective judicial remedies are therefore essential.

Limited Long-Term Impact

Not every funded project produces sustainable development.

Infrastructure may be constructed without adequate maintenance funding. Business support may benefit firms that would have invested anyway. Training may fail to correspond to actual labour-market demand.

The central challenge is to ensure that expenditure produces lasting economic and social benefits.

The Tension Between Redistribution and Competitiveness

Cohesion policy must balance two related objectives.

One is redistribution: directing more support towards regions facing the greatest development challenges.

The other is competitiveness: ensuring that investments improve productivity, innovation, and the Union’s overall economic position.

These objectives are not necessarily contradictory, but they can create difficult choices when funding is limited.

Investment in a less developed region may produce substantial social and territorial benefits even if its immediate economic return is lower than an equivalent investment in a highly developed region.

A coherent cohesion policy must therefore evaluate projects within the broader objective of balanced European development, rather than treating short-term financial returns as the only measure of success.

17. The Relationship Between Cohesion Policy and Other EU Policies

Cohesion policy operates alongside several other areas of EU law and economic governance.

Its relationship with the internal market is particularly important. The removal of barriers to trade and investment can create new opportunities, but the benefits may concentrate in regions that already possess strong infrastructure, skilled labour, and access to capital.

Cohesion investment seeks to strengthen the capacity of less developed regions to participate in the internal market.

There is also a close relationship with EU competition law and State aid rules. Regional development funding must comply with the relevant legal conditions governing public support to undertakings. Cohesion objectives do not create a general exemption from State aid control.

Environmental law is equally important. Projects financed through cohesion funds must comply with applicable environmental requirements, including the relevant rules on environmental assessment and nature protection.

The relationship with EU economic governance is also significant. Cohesion programmes may complement national reform priorities and public investment strategies, although their legal and financial structures remain distinct from the economic coordination mechanisms discussed in the article on Economic and Monetary Union.

Finally, cohesion policy is connected with the Union’s social policy objectives through employment, education, skills development, and social inclusion.

It is therefore best understood as a cross-cutting investment framework rather than an isolated regional policy.

18. Key Takeaways

• EU cohesion policy seeks to strengthen economic, social, and territorial cohesion by reducing disparities between regions.
• Its principal treaty foundation is found in Articles 174–178 TFEU.
• Article 174 identifies the Union’s objective of reducing regional disparities and supporting disadvantaged territories.
• Article 175 establishes the broader responsibility of the Union and Member States to contribute to cohesion.
• The principal 2021–2027 funding instruments include the ERDF, ESF+, Cohesion Fund, and Just Transition Fund.
• Regulation (EU) 2021/1060 establishes the Common Provisions Regulation governing the principal shared-management funds.
• The five policy objectives concern competitiveness and innovation, environmental sustainability, connectivity, social inclusion, and integrated territorial development.
• Regional classification influences the allocation and intensity of EU financial support.
• Cohesion funding generally operates through co-financing and shared management between the Commission and Member States.
• Partnership, monitoring, audit, and financial control are essential elements of programme implementation.
• Interreg supports cross-border, transnational, and interregional cooperation.
• Regulation (EU) 2025/1914 introduced important amendments to the cohesion framework in response to emerging strategic priorities.
• The Commission’s proposed 2028–2034 budget would introduce a more integrated approach to EU funding, but it should not be confused with the law currently governing the 2021–2027 period.
• The effectiveness of cohesion policy depends not only on the absorption of funds but also on the long-term economic and social results achieved.

19. Frequently Asked Questions

1. What is EU cohesion policy?

EU cohesion policy is the Union’s principal framework for reducing economic, social, and territorial disparities between regions. It supports investment in infrastructure, employment, education, innovation, environmental protection, and regional development.

2. What is the legal basis of cohesion policy?

Its principal legal foundation is found in Articles 174–178 TFEU. These provisions establish the Union’s objective of strengthening cohesion and provide the basis for the Structural Funds and related legislative instruments.

3. What are the main EU cohesion funds?

The principal funds for the 2021–2027 period are the European Regional Development Fund, European Social Fund Plus, Cohesion Fund, and Just Transition Fund.

4. What is the difference between the ERDF and the Cohesion Fund?

The ERDF primarily supports regional development, innovation, infrastructure, business competitiveness, and environmental investment. The Cohesion Fund supports eligible Member States with gross national income per capita below 90% of the EU average, particularly through environmental and trans-European transport investment.

5. Who is eligible for cohesion funding?

Eligibility depends on the particular fund, programme, priority, and project conditions. Public authorities, businesses, research institutions, educational organisations, civil society bodies, and other entities may receive support where the applicable rules permit it.

6. Why are regions classified as less developed, transition, or more developed?

The classification reflects regional GDP per capita in purchasing power standards compared with the EU-27 average. It helps determine the allocation and intensity of financial support.

7. Does cohesion funding cover 100% of a project?

Generally, no. Cohesion funding operates through co-financing, meaning that EU support covers a proportion of eligible expenditure and the remaining amount must be financed through other eligible sources. Certain special arrangements and incentives may provide different rates under specific legal conditions.

8. What is Interreg?

Interreg is the European Territorial Cooperation framework. It supports cooperation between regions across national borders and between territories facing shared economic, environmental, or social challenges.

9. Can cohesion funding be suspended because of rule-of-law problems?

Yes, where the conditions of the relevant legal mechanisms are satisfied. Regulation (EU, Euratom) 2020/2092 allows protective measures where breaches of the rule of law affect or seriously risk affecting the sound financial management of the EU budget or the protection of its financial interests in a sufficiently direct way.

10. What changed in the 2025 mid-term review?

The 2025 reform introduced additional flexibility and new investment possibilities relating to competitiveness, defence and security, affordable housing, water resilience, energy transition, and challenges facing eastern border regions.

11. Is the 2028–2034 cohesion framework already in force?

No. The Commission presented proposals for the next Multiannual Financial Framework in July 2025, including a proposed new framework for regional development funding. Those proposals remain subject to the EU legislative and budgetary process.

12. Does cohesion policy guarantee that poorer regions will become as wealthy as richer regions?

No. It provides financial and institutional support intended to reduce development disparities, but convergence depends on many factors, including productivity, education, investment, governance, demographics, infrastructure, and the capacity to implement sustainable economic strategies.

20. Conclusion: Cohesion as an Instrument of European Integration

EU cohesion policy reflects a central principle of European integration: a common economic and legal framework cannot achieve its full potential if substantial parts of the Union remain structurally disadvantaged.

The internal market creates opportunities through the free movement of goods, services, capital, and persons. Yet the capacity to benefit from those freedoms depends partly on infrastructure, education, institutional quality, access to investment, and regional economic conditions.

Cohesion policy seeks to address these differences through a combination of financial support, regional planning, institutional cooperation, and long-term investment.

Its importance extends beyond the redistribution of financial resources. It connects economic development with social inclusion, territorial planning, environmental transformation, and the ability of public institutions to deliver effective services.

The policy also illustrates the complexity of governing a Union composed of diverse national and regional economies. European institutions establish common objectives and financial rules, while Member States and regional authorities remain central to the selection and implementation of projects. This arrangement requires cooperation, accountability, and a continuing balance between European priorities and local development needs.

The effectiveness of cohesion policy should ultimately be judged not by the amount of money allocated or spent, but by whether it creates lasting improvements in economic opportunity, institutional capacity, social conditions, and territorial connectivity.

In that sense, cohesion is not simply a financial objective. It is one of the practical foundations of a Union intended to develop as an integrated economic and political community.

21. Primary Legal Sources and Further Reading

Treaties

• Article 174 TFEU – Economic, Social and Territorial Cohesion
• Article 175 TFEU – Responsibilities and Instruments for Cohesion
• Articles 176–178 TFEU – European Regional Development Fund and Legislative Framework

Principal Regulations

• Regulation (EU) 2021/1060 – Common Provisions Regulation
• Regulation (EU) 2021/1058 – European Regional Development Fund and Cohesion Fund
• Regulation (EU) 2021/1057 – European Social Fund Plus
• Regulation (EU) 2021/1056 – Just Transition Fund
• Regulation (EU) 2021/1059 – European Territorial Cooperation (Interreg)
• Regulation (EU, Euratom) 2020/2092 – Rule of Law Conditionality Mechanism
• Regulation (EU) 2025/1914 – Mid-Term Review of Cohesion Policy

Institutional Sources

• European Commission – Cohesion Policy
• European Commission – Cohesion Open Data Platform
• European Parliament – Economic, Social and Territorial Cohesion
• European Committee of the Regions
• European Commission – EU Budget 2028–2034
• European Commission – Proposal COM(2025) 552 on the ERDF and Cohesion Fund for 2028–2034