Cohesion funding: deal on mid-term update responding to new challenges

Funding can be channelled to new priorities such as defence industrial capacity, military mobility, affordable housing and water resilience

Dual-use investments suitable for civilian and military use to be prioritised

Decarbonisation, strategic technologies and energy interconnectors also included

Rule of law conditionality for funding

Parliament and Council teams have reached an agreement on new priorities for and modifications to the current cycle of EU cohesion funding.

Negotiators from Parliament and the Danish Council Presidency have agreed provisionally on a mid-term update to the EU’s current cycle of cohesion policy funding, which aims to reduce regional inequalities through the European Regional Development Fund, the Cohesion Fund and the Just Transition Fund.

The changes will offer member states and regions more flexibility to channel funds into new objectives, namely defence industrial capabilities and military mobility, water resilience, affordable housing, decarbonisation, strategic technologies, and energy infrastructure. The reform also allows for extra support for EU regions bordering Russia, Belarus and Ukraine, highlighting their special needs in a tense geopolitical environment.

To inject liquidity quickly into the new priorities, it was agreed that this spending can benefit from i.a. co-financing rates 10 percentage points higher than normal and of 20% one-off pre-financing for amounts re-allocated in 2026.

Investment in civil preparedness and dual-use infrastructure

MEPs secured several adjustments to the new priorities. According to the agreement, civil preparedness investments will be eligible for support, and dual-use infrastructure (suitable for both civilian and military use) will be prioritised when funding the defence industry and military mobility. When it comes to affordable housing, sustainability of the housing stock will be taken into account, and water resilience priorities will be aligned with the European water resilience strategy, including investments in irrigation and desalination.

To ensure that cohesion policy maintains its focus on small and medium-sized enterprises and less favoured regions, it was agreed that the strategic technology investments of large companies can only be supported in EU areas with lower-than-average gross domestic product per capita.

The agreement also includes language on rule of law conditionality, ensuring that funds frozen because of breaches of EU values cannot be reallocated to the new priorities.

Background

In parallel, the Employment and Social Affairs Committee is discussing similar proposals in the context of the European Social Fund +.