Questioning the Returns on Regional Development
As the European Union prepares for its most significant budget restructuring in over three decades, new economic research challenges the effectiveness of the bloc’s €392 billion cohesion policy. According to analysis by Zareh Astryan, economics professor at Münster University, each euro spent through this primary mechanism for reducing regional inequality generates merely €1 in additional GDP growth—a return that casts doubt on the program’s value proposition.
The timing of this research is particularly significant as European Commission President Ursula von der Leyen proposes merging regional development funds with agricultural subsidies, creating a combined €865 billion fund. This consolidation would grant member states greater spending discretion while halving specifically earmarked regional development funding to €218 billion. The proposal has ignited intense debate among EU member states and regions about the future direction of European solidarity mechanisms.
The Economic Impact Debate
Professor Astryan’s findings reveal a complex picture of cohesion funding effectiveness. While the funds help attract €2-3 in private investment for every public euro spent—primarily in construction and real estate—this investment tends to collapse when regions lose access to cohesion money. This dependency creates what economists call a “funding cliff effect” that could destabilize regional economies during transition periods.
The European Commission’s own projections present a more optimistic outlook, suggesting each cohesion euro spent between 2014-2027 will generate €1.30 in additional GDP by 2030, nearly tripling by 2043. However, Astryan characterizes these projections as “very optimistic,” noting they extend decades beyond the initial funding cycles. This debate over economic returns comes amid broader scrutiny of EU regional development funds as budget negotiations intensify.
Regional Dependence and Development Realities
In Europe’s less developed regions, cohesion funds represent far more than budget line items—they constitute essential infrastructure lifelines. Milan Majerský, regional governor of Prešov in eastern Slovakia, emphasizes that “without cohesion policy, we really wouldn’t be able to repair a large number of roads, bridges, schools, social facilities, hospitals, suburban bus transport.” In his region, cohesion funds account for approximately 80% of public investment, highlighting the critical dependency that has developed over decades.
This dependency extends beyond immediate infrastructure needs. As global economic pressures mount on developing economies worldwide, the stability provided by consistent EU funding has become increasingly valuable for peripheral European regions.
Success Stories and Structural Limitations
Murcia in southern Spain stands as a testament to cohesion policy’s transformative potential. Since Spain’s EU accession in 1986, targeted investments in infrastructure, agriculture, and water management have revolutionized this arid region’s economy. Murcia’s president Fernando López Miras acknowledges that the area’s current status as one of Spain’s fastest-growing regional economies is “undoubtedly thanks to the work that has been done with European funds over all these years.”
However, economists note significant variations in outcomes across regions. Ugo Fratesi, professor of regional economics at Politecnico di Milano, observes that “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.” The policy has demonstrated clear success in infrastructure development and employment support but delivered uneven results in productivity growth and innovation capacity—critical factors for long-term economic resilience.
The Geopolitical Context and Competing Priorities
Wealthier northern and western EU member states, which are net contributors to the EU budget, increasingly question the current cohesion spending model. Officials from these countries argue that many recipient nations have achieved significant economic convergence and that EU resources should be redirected toward emerging priorities like defense, migration management, and industrial revitalization.
A diplomat from a net-paying country noted that “a lot of countries have become richer in absolute terms but also in relative terms… this goes to show the robust economic development of these countries and lessens the amount of cohesion funds needed.” This perspective reflects growing concerns about shifting global investment patterns and their implications for European competitiveness.
Broader Implications for European Integration
The cohesion policy debate occurs against a backdrop of multiple crises affecting European stability. As climate-related infrastructure challenges intensify across the continent, the role of development funding in building resilience becomes increasingly critical. Similarly, concerns about supply chain vulnerabilities highlight the interconnected nature of European economic security.
Raffaele Fitto, commission vice-president for cohesion, maintains that “regions are close to the territory, they know the needs, and it will be fundamental to confirm this approach also for the future.” This perspective emphasizes the importance of localized decision-making in effective development planning.
Negotiation Dynamics and Political Stakes
The upcoming multiannual financial framework negotiations promise to be particularly contentious, with Members of the European Parliament threatening to reject any spending plan that significantly reduces funding for regions and farmers. Siegfried Mureșan, one of the lead budget negotiators, captured the prevailing sentiment, stating that “the current draft of the commission’s long-term EU budget satisfies no one and must be rewritten.”
As these critical discussions unfold, the fundamental question remains: Can the EU develop a budget framework that both addresses emerging challenges like defense and climate change while maintaining the solidarity mechanisms that have helped transform Europe’s economic landscape over the past three decades? The outcome will shape not only the bloc’s internal dynamics but its global competitiveness in an increasingly complex geopolitical environment.
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