Economic Impact Under Scrutiny
The European Union’s flagship cohesion policy, designed to reduce regional inequalities, delivers limited economic returns according to new research emerging as Brussels prepares its most significant budget restructuring in over three decades. Analysis by Zareh Astryan, economics professor at Münster University, indicates that each euro spent through the €392 billion program generates only approximately €1 in additional GDP growth, the report states.
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Budget Overhaul Proposal
European Commission President Ursula von der Leyen has proposed merging regional development funds with agricultural subsidies, creating a combined €865 billion fund while halving specifically earmarked regional spending to €218 billion. This represents a major shift in the EU’s financial architecture, with cohesion funds currently accounting for about one-third of total EU spending under the existing seven-year budget cycle.
“Regions are close to the territory, they know the needs, and it will be fundamental to confirm this approach also for the future,” said Raffaele Fitto, commission vice-president in charge of cohesion, according to reports.
Divergent Economic Analyses
The research findings contrast with the EU’s own assessment, which suggests each euro spent through cohesion policy between 2014 and 2027 will generate €1.30 in additional GDP by 2030, nearly tripling by 2043. Astryan characterized the EU numbers as “very optimistic” in his analysis shared with the Financial Times.
Despite the modest GDP impact, the research identified that cohesion funds help attract between €2 and €3 of private investment for every euro spent, primarily in construction and real estate. However, analysts suggest this private investment tends to collapse when regions lose access to cohesion funding.
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Regional Dependence and Backlash
The proposed changes have triggered strong reactions from regions that depend heavily on EU funds. In eastern Slovakia’s Prešov region, cohesion funds account for approximately 80% of public investment, according to regional governor Milan Majerský.
“Without cohesion policy, we really wouldn’t be able to repair a large number of roads, bridges, schools, social facilities, hospitals, suburban bus transport,” Majerský stated. “Slovakia would not be able to function without EU funds.”
Mixed Long-Term Outcomes
Economists note that while cohesion funds have successfully upgraded infrastructure and supported employment across the EU’s periphery, their impact on productivity and innovation remains uneven. “On average, cohesion policy seems to have been effective in delivering growth for European regions, but that’s not the same for all of them,” said Ugo Fratesi, professor of regional economics at Politecnico di Milano.
Success stories exist, such as Murcia in southern Spain, where cohesion spending has transformed the local economy through infrastructure, agriculture and water management investments since Spain’s 1986 EU accession. Today, Murcia ranks among Spain’s fastest-growing regional economies, sources indicate.
Wealthier Members Seek Redirection
Officials from wealthier northern and western EU countries—the bloc’s main budget contributors—argue that cohesion spending has largely achieved its objectives and that resources should be redirected toward new priorities like defense, migration and industrial revival. A diplomat from a net-paying country noted that many recipient nations have economically converged, reducing the need for substantial cohesion support.
Meanwhile, other industry developments and market trends continue to evolve alongside these budgetary discussions.
Negotiation Battle Ahead
The cohesion fund debate is expected to dominate negotiations for the next multiannual financial framework starting in 2028. Members of the European Parliament have threatened to reject spending plans that cut funding for regions and farmers, setting the stage for contentious discussions.
“The current draft of the commission’s long-term EU budget satisfies no one and must be rewritten,” said Siegfried Mureșan, one of the lead budget negotiators. “Farmers, businesses and citizens are watching closely.”
As these crucial budget talks proceed, observers note parallel global economic tensions and related innovations in economic policy worldwide. The EU’s approach to regional development continues to be documented in official cohesion reports, while researchers explore recent technology applications in various fields.
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