Explanatory Memorandum to COM(2025)164 - Amendment of Regulation (EU) 2021/1057 establishing the European Social Fund + (ESF+) as regards specific measures to address strategic challenges - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2025)164 - Amendment of Regulation (EU) 2021/1057 establishing the European Social Fund + (ESF+) as regards specific measures to ... |
|---|---|
| source | COM(2025)164  |
| date | 01-04-2025 |
1. CONTEXT OF THE PROPOSAL
• Reasons for and objectives of the proposal
The mid-term review of cohesion policy presents an opportunity for Member States to redirect 2021-2027 resources towards investment in defence capabilities, for the competitiveness, preparedness and strategic autonomy of the EU and in other emerging priorities, including clean industrial deal objectives by submitting corresponding programme amendments to the Commission. Strengthening these dimensions requires having people with the right skills. In the current demographic context, increasing skills and labour shortages are a main impediment for growth and economic adjustment. Investing in skills development and labour mobility is top priority.
The framework for cohesion policy investments in people set out in the European Social Fund Plus (ESF+) regulation is not sufficiently aligned with these new priorities. The exceptional challenges the Union is confronted with requires additional focus, flexibility and a reinforcement of incentives. The proposed adjustments will help steer reprogramming towards emerging priorities and will support speeding up implementation. This proposal sets out adjustments to the ESF+ regulation to achieve these objectives.
Contents
- Aligning cohesion policy investments to new priorities
- Adaptation of workers, enterprises and entrepeneurs to change contributing to decarbonisation and resilience of production capacities
- Defence and security
- Eastern border regions
- Greater flexibility and simplification for accelerating investments
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- Defence
- Adaptation of workers, enterprises and entrepeneurs to change contributing to decarbonisation of production capacities
- Facilitating the refocusing of resources by Member States
In recent years, geopolitical dynamics have been marked by profound uncertainty, necessitating a fundamental re-evaluation of the EU’s strategic autonomy. These shifts are unfolding alongside the green, social, and technological transitions, which are rapidly reshaping the world around us. The challenges posed by these simultaneous transformations were comprehensively analysed in the report on the “Future of European Competitiveness”, published in September 2024. The report underscores the urgent need to close the innovation gap, align decarbonisation efforts with economic competitiveness, and reduce external dependencies by diversifying supply chains and investing in critical sectors.
In response, several major initiatives have already been launched to enhance the EU’s economic resilience and strategic autonomy. These include the “Strategic Technologies for Europe Platform” (STEP), which aims to strengthen Europe’s technological leadership; “REPowerEU", designed to reduce reliance on external energy sources and accelerate the green transition; to complete interventions already underway via cohesion policy programmes and the “Recovery and Resilience Facility” (RRF), to support structural changes in Member States and regions as well as to enhance their resilience.
As the EU’s main investment instrument within the Multiannual Financial Framework (MFF), cohesion policy plays a crucial role in supporting these priorities. It drives targeted investments that contribute to economic, social and territorial cohesion while at the same time addressing emerging challenges. It contributes to Europe’s economic transformation, including through innovation, strengthening competitiveness. However, the regulatory framework governing the 2021-2027 cohesion policy funds was drafted, negotiated and adopted before the series of major geopolitical and economic events that have since reshaped some of the EU’s strategic political priorities.
Similarly, the Partnership Agreements and the national and regional cohesion policy programmes were developed and approved within this same timeframe, hence reflecting the priorities set at the time. Given the evolving global and regional context, the 2025 mid-term review presents a critical opportunity to assess their implementation and the effectiveness of their contribution to the evolving priorities. This review will help determine the extent to which cohesion policy programmes can directly and swiftly respond to rapidly changing political, economic and social realities.
At the same time, it has become evident that the early implementation of the 2021-2027 cohesion policy programmes has faced challenges which have not been conducive to a swift uptake and rapid disbursement of the funds, leading to delays in their implementation compared to previous programming periods. These delays come at a time when strong and accelerated investment is essential to support economic resilience and competitiveness.
Against this backdrop, the Commission is proposing targeted amendments to Regulation (EU) 2021/1057. These changes aim to adjust investment priorities with the evolving economic, societal, environmental and geopolitical context while at the same time introducing greater flexibility and incentives to facilitate and encourage the rapid deployment of much-needed resources. By refining the 2021-2027 cohesion policy framework, the EU can ensure that its investment mechanisms remain agile and responsive, enabling a more effective response to current and future challenges.
In order for Member States to make effectively use of the possibilities provided in this proposal, they are proposed to be allowed to re-submit their mid-term review proposal by 2 months after the entry into force of the present proposal for amendment to Regulation (EU) 2021/1057. Any programme amendment that would be carried out pursuant to the new priorities and flexibilities, shall be without prejudice to the application of any measures adopted under Regulation 2020/2092 and to the compliance by relevant programmes with the priorities under Article 15 of Regulation 2021/1060. In this context the Commission will closely monitor the conformity of the programmes with the requirements of relevant EU law.
Adaptation of workers, enterprises and entrepeneurs to change contributing to decarbonisation and resilience of production capacities
Faced with high energy costs, fierce global competition and significant threats to the rules-based international order governing international trade, European industries need the adjust. They need workers with the right skills set, the definition of which is rapidly evolving. Ensuring that workers have access to obtaining the right skills through re- and upskilling measures and supporting mobility of (high skilled) workers between industries, as structural change is taking place at an unprecedented pace, requires immediate action.
Europe’s competitive strength lies in its people. Our human capital is key to the EU’s prosperity, its economic resilience to increasing our productivity growth, and to fostering cohesion. The EU's workforce must have the necessary skills to support the growing defence industry, strengthening Europe’s preparedness and security, as well as the transition to a low-carbon economy, including skills in clean technologies, digitalisation, and entrepreneurship. The Clean Industrial Deal 1 outlines concrete actions to turn decarbonisation into a driver of growth for European industries.
In the face of unprecedented geopolitical instability, the European Union must now make crucial decisions to ensure its security. To guarantee its own defence deterrence, and security, Europe must be prepared to enter a new era by significantly increasing its support for the development of the defence capabilities and the competitiveness of the EU defence industry. This effort will enable the Union to address the short-term urgency of supporting Ukraine while ensuring the continent’s long-term stability.
The Commission has proposed to the European Council an immediate response plan — REARM Europe — amounting to EUR 800 billion, by activating all available financial levers to swiftly and significantly support investment in European defence capacities. Among these levers, the Union budget can further contribute to this collective effort through a new dedicated defence instrument and the strengthening of the European Defence Industry Programme (EDIP).
To complement these tools and further incentivise Member States to directly support defence investments, it is essential that cohesion policy funding can be swiftly mobilised. These investments will reinforce the resilience and EU competitiveness while promoting regional development and growth. They will also tackle the dual challenge faced by the Union’s regions bordering Russia, Belarus and Ukraine: strengthening security while revitalising their economies.
The right skills are crucial to an effective defence capacity. The capacity of the defence industry to recruit skilled workers, and re- and upskill workers, is a sine qua non for the ability to ramp up production in a very short timeframe. The Union of Skills sets out actions to address skills gaps and shortages in Europe. The Commission will also develop a Skills Guarantee pilot. This scheme will offer workers involved in restructuring processes, or at risk of unemployment, the opportunity to develop further their careers in another company or another sector. This is particularly important in the present circumstances. Furthermore, the Pact for Skills, has established a large-scale partnership on the defence ecosystem 2 . Through skills forecasting, it supports collective anticipation of the skills gaps Europe will face, taking into account industry skills needs and demographic skills forecasts for the next five to ten years. It aims to upgrade upskilling and reskilling programmes to make them more attractive by better engaging and developing talent and improving its retention.
In this context, the ESF+ will actively facilitate the development of skills in the defence industry by providing additional flexibilities to implementation, including increased pre-financing, exemption from the calculation of thematic concentration as well as increased level of co-financing.
Given the challenges of the Eastern border regions since the Russian aggression against Ukraine, programmes under the Investment for jobs and growth goal with NUTS 2 regions that have borders with Russia, Belarus or Ukraine, should benefit from the possibility of a one-off 9.5% pre-financing of the programme allocation in 2026 and a 100% Union financing.
Halfway in the 2021-2027 programming period, the level of payments claimed by the Member States to the Commission is low, owing to a combination of factors: the late adoption of the regulations governing the policy; the need to face successive crises from the COVID-19 pandemic to the war against Ukraine, and to the energy crisis; the pressure to close the previous programming period; and the priority given to implement the instruments of NGEU, given their shorter implementation timeframe. All this has in turn put a strain on the administrative capacities of Member States’ authorities to design and quickly deliver investments. Notwithstanding a rapid acceleration experienced over last year with project selection just above 40% of the allocations, cohesion policy implementation should rapidly pick up pace in a context where the Union is facing a range of new challenges requiring rapid responses. The Commission therefore proposes a set of measures aiming at further enhancing the flexibility and simplification of the use of cohesion policy support for accelerating investments:
–To avoid that programme implementation is delayed because of national budgetary constraints, and to expand the financial capacity Member States to address the newly emerging challenges, the Commission proposes to provide a one-off 4.5% pre-financing provided from the ESF+ in 2026 to all programmes that reallocate at least 15% of their resources for the new priorities and STEP in the context of the mid-term review process.
–The pre-financing percentage is proposed to be increased to 9.5% in 2026 for programmes covering one or more NUTS2 regions bordering Russia, Belarus or Ukraine acknowledging the specific challenges these regions have face since the Russian aggression in Ukraine.
–To avoid that the risk of delays and corresponding loss of funds reduces willingness to undertake programme amendments and to ensure the proper implementation of the operations concerned, the Commission proposes to extend the time limit for using the ESF+ resources and extend the end date for eligibility by an additional year. This flexibility is proposed to be made available only for programmes that proposed amendments resulting in reallocation of at least 15% of the resources for the new priorities and STEP in the context of the mid-term review exercise, once approved.
• Consistency with existing policy provisions in the policy area
The proposal is consistent with the objectives followed by the cohesion policy funds as well as with the latest Commission communication on a reform agenda for Cohesion policy and is limited to a targeted amendment of Regulation (EU) 2021/1057. Consistency with other Union policies
The proposal is limited to a targeted amendment of Regulation (EU) 2021/1057 and maintains consistency with other Union policies.
2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY
• Legal basis
The proposal is based on Articles 164, 175, 177 and 322 of the Treaty on the Functioning of the European Union.
• Subsidiarity (for non-exclusive competence)
The proposal to encourage Member States to further align their cohesion policy programmes to addressing strategic challenges and to refocus resources to new priorities while ensuring greater flexibility to accelerate implementation, requires amendments to Regulation (EU) 2021/1057. The same result cannot be achieved through actions at national level.
• Proportionality
The proposal aims at incentivising Member States to further align their cohesion policy programmes to addressing strategic challenges and refocus resources to new priorities as well as providing greater flexibility for accelerating investments. The measures do not go beyond what is necessary to achieve these goals.
• Choice of the instrument
A Regulation is the appropriate instrument as it provides directly applicable rules for the support.
3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS
• Ex-post evaluations/fitness checks of existing legislation
• Stakeholder consultations
• Collection and use of expertise
• Impact assessment
An impact assessment has been carried out to prepare the proposal for Regulation (EU) 2021/1057. The limited and targeted changes do not require a separate impact assessment.
• Regulatory fitness and simplification
• Fundamental rights
4. BUDGETARY IMPLICATIONS
The proposal concerns cohesion policy programmes from the 2021-2027 period and will result in additional pre-financing to be paid under the ESF+ in 2026. This additional pre-financing will lead to frontloading of payment appropriations to 2026 compared to a no policy-change scenario and is budgetary neutral over the 2021-2027 period. Based on the estimated uptake of the proposal as well as taking into account payment forecasts and implementation shifts , the net budgetary impact is estimated to EUR 500 million that will be included in the draft budget 2026.
The possibility to apply for an increased Union financing rate for investments under the dedicated priorities and for programmes covering Eastern border regions will also lead to a partial front-loading of payments, followed by lower payments at a later stage as the overall envelope is unchanged. The actual impact will highly depend on the Member States’ uptake.
The proposed modification does not require changes in the Multiannual Financial Framework annual ceilings for commitments and payments as per Annex I to Council Regulation (EU, Euratom) 2020/2093.
5. OTHER ELEMENTS
• Implementation plans and monitoring, evaluation and reporting arrangements
The implementation of the measure will be monitored and reported upon in the framework of the general reporting mechanisms established in Regulation (EU) 2021/1060.
• Explanatory documents (for directives)
• Detailed explanation of the specific provisions of the proposal
The proposal involves the amendment of Regulation (EU) 2021/1057 as regards the ESF+ in order to address strategic challenges and allow for Member States to refocus their resources to new priorities.
It allows for a focused support to development of skills in the defence industry under a dedicated priority that benefits from further flexibilities that include an increased pre-financing on the allocation of the priority, exemption from the calculation of amounts towards thematic concentration and an increased level of co-financing. Nevertheless, such flexibilities are conditioned to reallocating a minimum amount of the programme resources to new priorities.
Adaptation of workers, enterprises and entrepeneurs to change contributing to decarbonisation of production capacities
It allows for a focused support to skilling, up-skilling and re-skilling with a view to adaptation of workers, enterprises and entrepeneurs to change contributing to decarbonisation of production capacities.under a dedicated priority that benefits from further flexibilities that include an increased pre-financing on the allocation of the priority and increased level of co-financing. Nevertheless, such flexibilities are conditioned to reallocating a minimum amount of the programme resources to new priorities.
In order that the Member State could effectively make use of the new priorities and flexibilities, Member States will be allowed to re-submit their assessment to the mid-term review accompanied by a request for programme amendment to establish any of the newly introduced dedicated priorities.
To help accelerate the implementation of the ESF+, all programmes that establish any of the newly introduced dedicated priorities and STEP and reallocate at least 15% of their resources, would receive an additional one-off pre-financing of 4.5% on the basis of their amended programme budget.
Given the challenges of the Eastern border regions since the Russian aggression against Ukraine, programmes financed by the ESF+ with NUTS 2 regions that have borders with Russia, Belarus or Ukraine, should benefit from the possibility of a one-off 9.5% pre-financing and a 100% Union financing. Where the corresponding programme covers the entire territory of the Member State, these financial flexibilities should only apply if the programme covering the entire territory of the Member State is the only programme in the Member State that includes the concerned NUTS 2 regions.
In addition, the end-date for eligibility of expenditure is extended by one additional year for all cohesion policy programmes where programme amendments establishing any of the newly introduced dedicated priorities and reallocating at least 15% of the financial resources of the programme to those priorities have been approved.