The EU’s cohesion funds, the bloc’s financial instrument for reducing territorial disparities in its poorest regions, could be deployed to mitigate the impact of soaring energy prices, European Cohesion Commissioner Raffaele Fitto said in a letter to ministers on Thursday.
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“It is critical to ensure these readily available EU funds are fully deployed in time to benefit the regions and communities that need them most, particularly in the context of the current energy price developments,” reads the letter, seen by Euronews.
Fitto’s letter comes as several EU countries, including his own Italy, have been grappling with the economic fallout from the war in Iran, which has driven up energy costs across Europe and beyond by disrupting Gulf supply routes.
The letter specifically notes that member states and regions can already direct funding toward energy-related investments, “for instance, by scaling up existing measures to support families and businesses, reducing energy consumption.”
Fitto’s argument echoes Italian Prime Minister Giorgia Meloni, who last week sent a letter to European Commission President Ursula von der Leyen calling for energy security to be treated as a European strategic priority, and for the same fiscal flexibility recently extended to defense spending to apply to energy.
The Commission’s Executive Vice-President for Cohesion and Reforms belongs to Meloni’s ruling party, the right-wing Brothers of Italy.
As part of the mid-term review of EU cohesion policy, Fitto drove through amendments enabling member states and regions to redirect funds towards emerging challenges such as defence, decarbonization and affordable housing.
The energy crisis threat
In March, the European Commission announced that just under €35 billion in cohesion money had been redirected as a result. Defense spending proved particularly significant for EU countries on the eastern flank, with Poland repurposing more than €6 billion.
Fitto is now suggesting the same approach could be used to cushion the blow of the energy crisis – a threat particularly acute for energy-intensive economies with strong industrial bases, such as Italy and Germany.
The letter states that “cohesion policy funds have thus demonstrated their capacity to intervene in support of EU strategic priorities, including for energy.”
The EU cohesion budget for the 2021–2027 period stands at €392 billion. According to the European Commission’s own data, around €355 billion had been allocated to specific projects by the end of March, of which €100 billion had already been spent.
That leaves roughly €160 billion potentially available for reallocation, although the actual figure is likely lower, as governments and regions may have already issued invitations to tender for public projects.
Regardless, the volume of unspent cohesion money remains significant, largely owing to delays in finalizing programs and to the fact that EU countries largely prioritized spending from the post-pandemic recovery fund, which carried tighter deadlines.
Following Meloni’s letter, European Commissioner for Economy Valdis Dombrovskis said they were “currently looking at the policies, including fiscal policy options, to best address the crisis, including the use of existing flexibilities within our framework.”
Fitto’s letter is consistent with the idea of using existing flexibilities, since it stresses “the significant role which Cohesion Policy is called to play in addressing the current energy crisis and its impact on economic, social and territorial cohesion.”