A Modernised Cohesion Policy: 2025 Mid-Term Review

The European Commission published last month its mid-term review of EU cohesion policy to address the emerging challenges facing Europe’s regions and thus reassess the EU’s strategic autonomy, resilience and preparedness for the future. The required changes, as set out in the mid-term review, are put in the broader context of the ongoing ecological, social, and technological transitions which are rapidly transforming the world around us.

Flagged and examined initially in the Draghi report on the ‘Future of European Competitiveness’, published in September 2024, the emerging challenges facing the EU have been translated into policy priorities. Draghi stresses, among other things, the importance and urgency of closing the innovation gap, strengthening economic competitiveness with decarbonisation as a growth opportunity, and reducing external dependencies by diversifying supply chains and investing in climate resilience, domestically produced green energy, and critical sectors.

In this context, cohesion policy, as the EU’s main investment instrument under the Multiannual Financial Framework, plays a key role in translating these priorities into tangible actions on the ground, supporting regions and communities to adapt, thrive, and contribute to a more resilient and competitive Europe. This update is especially relevant for the entrepreneurship and innovation support actors of the pan-European EU|BIC community, as it opens new avenues to align innovation support with emerging EU objectives, particularly in areas such as the energy transition, competitiveness, and territorial cohesion.

Building on this, the mid-term review introduces targeted reforms to ensure cohesion policy remains fit for purpose in a rapidly evolving context marked by geopolitical shifts and the green and digital transitions. For the EU|BICs who inherently hold strong cooperative ties with their regional government bodies, these reforms translate into practical advantages: new strategic funding opportunities, streamlined procedures, and stronger integration within the innovation ecosystems.

Structure of the Work Programme & Updates, and Amendments 

Although the regulatory framework governing the 2021–2027 cohesion policy funds was drafted, negotiated, and adopted between 2019 and 2021, before the series of major geopolitical and economic events reshaped some of the EU’s strategic priorities, the Commission launched a broad consultation process. This involved Member States, regional and local authorities, and aimed to gather their views on current policy needs and how cohesion policy could be adapted.

Discussions were held in Member States and Brussels with representatives of national governments, regions, including the outermost regions, cities, and non-urban areas such as islands. In addition, the Commission worked with the European Parliament and the European Committee of the Regions.

As a result of these consultations, the mid-term review can, firstly, integrate new EU priorities into the 2021-2027 cohesion programmes and, secondly, accelerate investment by simplifying processes. To achieve this twofold objective, it will be necessary to amend the regulations governing cohesion policy funds, which are contained in the legislative proposal accompanying the communication issued by the European Commission.

Amendments to the Cohesion policy

These amendments address the policy areas most urgent as highlighted by various stakeholders during the consultations mentioned above. Key new features include:

A stronger focus on innovation, strengthening competitiveness and decarbonisation  

The Commission’s Competitiveness Compass sets out a clear roadmap for strengthening European competitiveness. In this context, the mid-term review of cohesion policy opens up new avenues to support innovation, especially in strategic sectors such as decarbonisation, digitalisation and net-zero technologies.

In this context, key measures are proposed such as increased support for innovative and scalable SMEs, more flexibility to finance large companies in strategic projects, reinforced participation in Important Projects of Common European Interest (IPCEI),  Strategic Technologies for Europe Platform (STEP) and programmes such as InvestEU and boosting talent with new training and re-skilling opportunities.

Defence and Security 

The new geopolitical environment calls for a focus on the resilience of our economies, preparedness, and defence capabilities, as well as reducing our dependencies. The European Commission has thus proposed the REARM Europe plan, which could mobilise up to 800 billion euros over four years to strengthen European defence and support Ukraine. Part of this investment would come from existing instruments such as the EU budget and SAFE (150 billion).

Cohesion policy already contributes to this effort, funding dual-use technologies, improvements in military mobility, defence innovation and key energy projects. These investments not only strengthen security but also boost industrial and technological ecosystems in European regions.

In response to the European Council’s call to accelerate defence investment, the European Commission proposes that projects financed through reallocated EU funds in this area benefit from enhanced support. Specifically, such projects would receive 30% pre-financing in 2026 and benefit from a 100% EU co-financing rate, removing the need for national or regional contributions. This aims to fast-track the implementation of defence-related initiatives across the Union.

Affordable housing

To encourage greater investment in affordable housing through cohesion policy, the Commission proposes that funding reallocated to this priority receive 30% pre-financing in 2026 and benefit from a 100% EU co-financing rate.

Member States and regions are urged to double current allocations for affordable housing under the 2021–2027 programmes, make use of financial instruments such as the upcoming pan-European Investment Platform, and streamline local planning procedures to accelerate project delivery. Support should also align with the principles of the New European Bauhaus, ensuring housing is sustainable, inclusive, and accessible.

Water resilience 

Protecting and restoring water and marine ecosystems is vital for water quality, quantity, and broader societal resilience. Water infrastructure is as critical as energy systems for competitiveness, quality of life, food security, and defence. With rising risks from floods, droughts, and cyberattacks, the EU must move from reactive to proactive water management. Although nearly €13 billion is being invested in water services under the 2021–2027 cohesion programmes, greater public and private efforts are needed.

To this end, the Commission proposes a new specific objective on secure water access, sustainable management, and resilience, alongside 30% pre-financing and 100% EU co-financing for reallocated investments in 2026. Member States and regions are urged to enhance water body restoration, nature-based solutions, water efficiency, digitalisation, and compliance with EU water legislation.

Energy transition  

The Commission is boosting EU competitiveness through the Clean Industrial Deal, Competitiveness Compass, and Affordable Energy Action Plan, with decarbonisation and circularity at the core. Over €15 billion is already allocated for clean and efficient energy in the 2021–2027 programmes. 

To accelerate industrial decarbonisation, especially for Innovation Fund projects with a Sovereignty Seal, the Commission proposes 30% pre-financing in 2026 and 100% EU co-financing. 

Member States are urged to increase support for clean-tech, grid modernisation, EV charging, energy efficiency, and hydrogen, while also reinforcing climate adaptation, industrial transformation, and citizen-led energy initiatives. 

Eastern Border regions

The EU’s Eastern border regions, neighbouring Russia, Belarus, and Ukraine, face the dual challenge of boosting security and recovering economically from the impacts of Russia’s war against Ukraine. 

Through the mid-term review, cohesion policy funds can be redirected to support defence and economic recovery in these areas. To incentivise this shift, the Commission proposes enhanced support: 100% co-financing, a 9.5% pre-financing boost in 2026, and 30% pre-financing for reallocated funds, provided that at least 15% of the programme is redirected to new priorities like STEP, defence, housing, water resilience, or energy transition. 

Measures to simplify access and reduce administrative burden for SMEs   

The goal is to ensure that cohesion policy supports the achievement of its objectives, drawing on both the capacity of public administration and the private sector in the implementation of policies and investments that can be mobilised through cohesion policy. Simplifying access can speed up and facilitate the collection of cohesion funds.

What’s next?  

On 6 May, Committee of the Region members of the Commission for Territorial Cohesion Policy and EU Budget (COTER) discussed the current state of Cohesion Policy programmes, the need to reduce inequalities between urban and rural areas, and the territorial impact of the green and digital transformation of the mobility system. Participants rejected any attempt to centralise cohesion policy and defended fundamental principles such as shared management, multilevel governance and the territorial approach. They called for more flexible rules and less bureaucracy, especially for changes proposed after the official deadline, which could place an additional burden on regional authorities.

The urban-rural divide was also addressed, emphasising that cohesion policy is key to ensuring equal access to basic services in rural areas. In addition, poverty in mobility was discussed, with concern about inequalities arising from the transition to green and digital mobility, especially in remote regions. More EU support, tailored approaches and greater regional involvement in national plans were called for. Finally, Vasco Alves Cordeiro (Chair of COTER) criticised the mid-term review for failing to provide new resources for the new priorities and called for bold action to ensure a strong and long-term cohesion policy.

The final goal is to complete the reprogramming process under the mid-term review as quickly as possible, and no later than the end of 2025, so that Member States, regions, and local authorities can begin implementing the revised programmes from 2026 onwards, during the second half of the current Multiannual Financial Framework (MFF) period.

At EBN, we will continue tracking these developments and providing timely insights to our members.

What is an EU|BIC?

EU|BICs (European Business and Innovation Centres) are quality-certified organisations that support startups, SMEs, and entrepreneurs by providing the highest level of business and innovation services, with a mission to drive regional sustainable economic development.

EU|BICs use the best possible actions to create thriving startups and SMEs, taking real steps to ensure that their innovation and business support services (e.g. including (university-linked) incubation, acceleration, mentorship, access to markets, lab-to-market, internationalisation, and access to capital) are most advantageous to their clients and their regions.

EU|BICs are key orchestrators of regional innovation ecosystems, connecting various stakeholders such as startups, SMEs, research organisations, government bodies, and private sector entities.

With over 170 members, the global EU|BIC community is a trusted partner for regional and national governments to align local innovation ecosystem output to solve local-global challenges.