MEPs approve cohesion funding reform to deal with 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 not affected

On Wednesday, Parliament has given its final green light to changes in EU cohesion and social funding in response to new challenges and EU priorities.

To mobilise funding to address new challenges amid geopolitical instability, the reform offers member states and regions the opportunity to channel funds into new objectives. These are defence industrial capabilities and military mobility, water resilience (including access to water), affordable and sustainable housing (where MEPs recently adopted a report calling for extra investment), decarbonisation, energy infrastructure (e.g. transmission and storage capabilities), and civil preparedness. On defence industry and military mobility funding, dual-use infrastructure (suitable for both civilian and military use) will be prioritised. Social funds may be used to support skills relating to civil preparedness, defence, cybersecurity, and decarbonisation.

To inject liquidity quickly into new priorities, spending (and investment in strategic technologies under the EU’s “STEP” platform) will be boosted by an additional 20% one-off pre-financing for amounts re-allocated in 2026 and by co-financing rates 10 percentage points higher than before (not exceeding 100%).

Extra support for Eastern border regions

When managing authorities reallocate at least 10% of programme resources to these new priorities, they can benefit from extra pre-financing of 1.5% of total cohesion fund support. This extra support rises to 9.5% for EU regions bordering Russia, Belarus and Ukraine, highlighting their unique security challenges and geopolitical significance.

To ensure cohesion policy maintains its focus on small and medium-sized enterprises and less favoured regions, the technology, defence and decarbonisation investments of large companies can only be supported in EU areas with lower-than-average gross domestic product per capita, and the focus of investments will remain on small and medium-sized enterprises. At the same time, so-called “Important Project of Common European Interest” can receive funding without regional income limitations. The regulation also makes clear that funds frozen under the Rule of Law Conditionality Regulation cannot be reallocated to new priorities.

The mid-term update to the EU’s current cycle of cohesion policy funding involving the European Regional Development Fund, the Cohesion Fund and the Just Transition Fund was adopted with 440 votes in favour, 168 against and 52 abstentions. MEPs also backed the review of European Social Fund+ with 453 votes to 149 and 59 abstentions.

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After the vote, rapporteur and REGI Committee Chair Dragoș Benea (S&D, Romania) said: “Cohesion policy is the foundational pillar of European solidarity. We are adjusting it to respond to current events and ensure flexibility, while maintaining its core values. Parliament has accepted defence as a new priority and are ensuring that Europe prioritises dual-use defence industry or military mobility investments. We also secured funding for civil preparedness, extended the scope of water resilience investment, and positioned affordable housing as a priority and made sure its scope also covers middle income families, and we limited support going to large companies. We will continue to promote fair and balanced development across all EU regions.”

EMPL rapporteur Marit Maj (S&D, Netherlands) added: "We stand for a Europe that defends its external safety and leaves no one behind. We have managed to safeguard the main mission of the ESF+, supporting the most vulnerable people and children, and helping smaller beneficiaries in civil society. We also made sure money allocated for the defence industry will be used for skills development in dual-use technologies and making sure people possess the skills they need to have a place in our society.”

Next steps

Once also adopted by the Council, the regulations will be published in the EU Official Journal and enter into force on the day after publication.