Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulation (EU) 2021/1057 establishing the European Social Fund + (ESF+) as regards specific measures to address strategic challenges

EXPLANATORY MEMORANDUM

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.

Aligning cohesion policy investments to new priorities

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.

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.

Eastern border regions

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.

Greater flexibility and simplification for accelerating investments

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.

amending Regulation (EU) 2021/1057 establishing the European Social Fund + (ESF+) as regards specific measures to address strategic challenges

Having regard to the Treaty on the Functioning of the European Union, and in particular Articles 164, 175, 177 and Article 322thereof,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national parliaments,

Having regard to the opinion of the European Economic and Social Committee ³ ,

Having regard to the opinion of the Committee of the Regions ⁴ ,

Acting in accordance with the ordinary legislative procedure,

Whereas:

1. Given the major geopolitical and economic events that have reshaped some of the Union’s strategic political priorities, it is necessary to provide for possibilities for Member States to address those strategic challenges and to refocus their resources to newly emerging priorities.

2. The White paper for European Defence – Readiness 2030 ⁵  paves the way for a true European defence union, including by suggesting to Member States to heavily invest into defence and the defence industry. In that regard, the Communication from the Commission - the Union of Skills of 5 March 2025 ⁶  (‘the Union of Skills Communication’) sets out actions to address skills gaps and shortages in the Union, also through the Pact for Skills Initiative referred to in that Communication, and its large-scale partnerships, including one on the defence ecosystem. Therefore, it is appropriate to include incentives for the ESF+ established by Regulation (EU) 2021/1057 of the European Parliament and of the Council ⁷ to facilitate the development of skills in the defence industry.

3. It is already possible to support the adaptation of workers, entrepreneurs and enterprises to change under the ESF+. In line with the decarbonisation measures proposed by the Communication from the Commission – the Clean Industrial Deal: A joint roadmap for competitiveness and decarbonisation of 26 February 2025 ⁸ and to further facilitate industrial adjustment linked to the decarbonisation of production processes and products, in the context of the objective of providing lifelong opportunities to regularly upskill and reskill people, as set out in the Union of Skills Communication, including through a newly proposed Skills Guarantee, the ESF+ should facilitate the skilling, job maintenance and job creation throughout the decarbonisation process by providing flexibilities to implementation.

4. It is already possible, under ESF+, to support investments contributing to the objectives of the ‘Strategic Technologies for Europe Platform’ (STEP) established by Regulation (EU) 2024/795 of the European Parliament and of the Council ⁹ which aims to strengthen the Union’s technological leadership. In order to further incentivise investments from the ESF+ in those critical fields, the possibility for Member States to receive a higher pre-financing for related programme amendments should be extended.

5. In order to enable Member States to carry out a meaningful reprogramming and focus resources on strategic Union priorities set out in recitals 2, 3 and 4 without causing further delays in implementation, it is appropriate to provide for further flexibilities. The mid-term review should serve as an opportunity to address emerging strategic challenges and new priorities therefore, Member States should benefit from additional time to complete the assessment of the outcome of the mid-term review and the submission of related programme amendments 

6. In order to accelerate the implementation of cohesion policy programmes and alleviate the pressure on national budgets and to inject the necessary liquidity for the implementation of key investments, an additional one-off pre-financing from the ESF+ should be paid for programmes. Because of the adverse impact of the Russian aggression in Ukraine, the pre-financing percentage should be further increased for certain programmes covering one or more NUTS2 regions bordering Russia, Belarus or Ukraine. In order to incentivise the re-programming towards key priorities in the context of the mid-term review, the additional pre-financing should only be available where a certain threshold for the reallocation of financial resources to specific crucial priorities is reached.

7. Furthermore, to take account of the time needed to refocus investments and to allow best use of available resources, the deadlines for the eligibility of expenditure and the decommitment rules should be adjusted for programmes carrying out a reallocation of resources to strategic priorities.

8. It should also be possible to apply a maximum co-financing rate of up to 100% to priorities in programmes covering one or more NUTS2 regions bordering Russia, Belarus or Ukraine, given the adverse impact of the Russian aggression on those regions.

9. Since the objectives of this Regulation, namely to address strategic challenges, refocus investments on critical new priorities and simplify and accelerate policy delivery, cannot be sufficiently achieved by the Member States but can rather be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve that objective.

10. Regulation (EU) 2021/1057 should therefore be amended accordingly.

11. [Given the urgent need to enable crucial investments in skills in the defence industry as well as in adaptation to change linked to decarbonisation in the context of pressing strategic geopolitical challenges, this Regulation should enter into force on the day following that of its publication in the Official Journal of the European Union,]

HAVE ADOPTED THIS REGULATION:

Article 1

Regulation (EU) 2021/1057 is amended as follows:

1. the following Article 5a is inserted:

‘Article 5a

Specific provisions linked to the implementation of ESF+ strand under shared management

1. In 2026, the Commission shall pay 4,5 % of the total support from the ESF+ as set out in the decision approving the programme amendment as additional one-off pre-financing. The one-off pre-financing percentage in 2026 shall be increased to 9,5% for programmes covering one or more NUTS2 regions bordering Russia, Belarus or Ukraine, provided the programme does not cover the entire territory of the Member State. Where, in a Member State, NUTS 2 regions bordering Russia, Belarus or Ukraine are included exclusively in programmes covering the entire territory of that Member State, the increased pre-financing set out in this paragraph shall apply to those programmes.

The additional pre-financing referred to in the first subparagraph of this paragraph shall only apply where reallocations of at least 15% of the financial resources of the programme to one or more dedicated priorities established in accordance with Articles 12a, 12c and 12d have been approved; provided that the request for a programme amendment is submitted by 31 December 2025.

The pre-financing due to the Member State which results from programme amendments pursuant to reallocation to the priorities referred to in the second subparagraph of this paragraph shall be counted as payments made in 2025 for the purposes of calculating the amounts to be de-committed in accordance with Article 105 of Regulation (EU) 2021/1060, provided the request for programme amendment was submitted in 2025.

2. By way of derogation from Article 63(2) and Article 105(2) of Regulation (EU) 2021/1060, the deadline for the eligibility of expenditure, the reimbursement of costs as well as for decommitment shall be 31 December 2030. That derogation shall only apply where programme amendments reallocating at least 15% of the financial resources of the programme to one or more dedicated priorities established in accordance with Articles 12a, 12c and 12d of this Regulation in the context of the mid-term review have been approved.

3. By way of derogation from Article 112 of Regulation (EU) 2021/1060, the maximum co-financing rate for priorities in programmes covering one or more NUTS2 regions bordering Russia, Belarus or Ukraine shall be 100 %. The higher co-financing rate shall not apply to programmes covering the entire territory of the Member State concerned, unless those regions are included only in programmes covering the entire territory of that Member State. The derogation shall only apply where reallocations of at least 15% of the financial resources of the programme to one or more dedicated priorities established in accordance with Articles 12a, 12c and 12d of this Regulation in the context of the mid-term review have been approved, provided that the programme amendment is submitted by 31 December 2025.

4. In addition to the assessment for each programme on the outcome of the mid-term review to be submitted in accordance with Article 18(2) of Regulation (EU) 2021/1060, Member States may resubmit a complementary assessment as well as related requests for programme amendments, taking into account the possibility for dedicated priorities in accordance with Articles 12a, 12c and 12d within 2 months of the entry into force of Regulation (EU) XXXX/XXXX [this Regulation]. The deadlines set out in Article 18 (3) of Regulation (EU) 2021/1060 shall apply.

2. in Article 12a(2), the first subparagraph is replaced by the following:

‘ In addition to the pre-financing for the programme provided for in Article 90(1) and (2) of Regulation (EU) 2021/1060, where the Commission approves an amendment of a programme including one or more priorities dedicated to operations supported by the ESF+ contributing to the STEP objectives referred to in Article 2 of Regulation (EU) 2024/795, it shall make an exceptional pre-financing of 30 % on the basis of the allocation to those priorities, provided that the programme amendment is submitted to the Commission by 31 December 2025. That exceptional pre-financing shall be paid within 60 days of the adoption of the Commission decision approving the programme amendment.’;

3. the following Articles 12c and 12d are inserted:

‘Article 12c

Support to the defence industry

1. Member States may decide to programme support to development of skills in the defence industry under dedicated priorities. Such dedicated priorities may support any of the specific objectives set out in Article 4(1), points (a) to (l).

2. Resources allocated to the dedicated priority as referred to in paragraph 1 shall not be taken into account when ensuring compliance with the thematic concentration requirements as set out in Article 7 of this Regulation.

3. In addition to the yearly pre-financing for the programme provided for in Article 90(1) and (2) of Regulation (EU) 2021/1060, the Commission shall pay 30% of the allocation to the dedicated priorities referred to in paragraph 1 of this Article as set out in the decision approving the programme amendment as exceptional one-off pre-financing.

That exceptional pre-financing shall be paid within 60 days of the adoption of the Commission decision approving the programme amendment in accordance with Article 24 of Regulation (EU) 2021/1060.

4. In accordance with Article 90(5) of Regulation (EU) 2021/1060, the amount paid as exceptional pre-financing shall be cleared from the Commission accounts no later than with the final accounting year.

In accordance with Article 90(6) of Regulation (EU) 2021/1060, any interest generated by the exceptional pre-financing shall be used for the programme concerned in the same way as the ESF+ and shall be included in the accounts for the final accounting year.

In accordance with Article 97(1) of Regulation (EU) 2021/1060, the exceptional pre-financing shall not be suspended.

In accordance with Article 105(1) of Regulation (EU) 2021/1060, the pre-financing to be taken into account for the purposes of calculating amounts to be decommitted shall include the exceptional pre-financing paid.

5. By way of derogation from Article 112 of Regulation (EU) 2021/1060, the maximum co-financing rate for dedicated priorities referred to in paragraph 1 of this Article shall be 100%.

Article 12d

Support to adaptation linked to decarbonisation

1. Member States may decide to programme support aiming at 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 dedicated priorities. Such dedicated priorities may support any of the specific objectives set out in Article 4(1), points (a) to (l).

2. For the purposes of paragraph 1 of this Article, the Member State shall submit a request for an amendment in accordance with Article 24 of Regulation (EU) 2021/1060. Where a Member State already has programmes which include one or more priorities fulfilling the conditions set out in paragraph 1 of this Article, the Member State shall submit a request to the Commission to consider the concerned priorities as dedicated priorities for the purposes of paragraph 1 of this Article.

3. In addition to the yearly pre-financing for the programme provided for in Article 90(1) and (2) of Regulation (EU) 2021/1060, the Commission shall pay 30% of the allocation to the dedicated priorities referred to in paragraph 1 of this Article as set out in the decision approving the programme amendment as exceptional one-off pre-financing.

   That exceptional pre-financing shall be paid within 60 days of the adoption of the Commission decision approving the programme amendment in accordance with paragraph 2 of this Article.

4. In accordance with Article 90(5) of Regulation (EU) 2021/1060, the amount paid as exceptional pre-financing shall be cleared from the Commission accounts no later than with the final accounting year.

   In accordance with Article 90(6) of Regulation (EU) 2021/1060, any interest generated by the exceptional pre-financing shall be used for the programme concerned in the same way as the ESF+ and shall be included in the accounts for the final accounting year.

   In accordance with Article 97(1) of Regulation (EU) 2021/1060, the exceptional pre-financing shall not be suspended.

   In accordance with Article 105(1) of Regulation (EU) 2021/1060, the pre-financing to be taken into account for the purposes of calculating amounts to be decommitted shall include the exceptional pre-financing paid.

5. By way of derogation from Article 112 of Regulation (EU) 2021/1060, the maximum co-financing rate for dedicated priorities referred to in paragraph 1 of this Article shall be 100%.’.

Article 2

This Regulation shall enter into force on the [day] following that of its publication in the Official Journal of the European Union.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Strasbourg,

LEGISLATIVE FINANCIAL AND DIGITAL STATEMENT

FRAMEWORK OF THE PROPOSAL/INITIATIVE3

Title of the proposal/initiative3

Policy area(s) concerned3

Objective(s)3

General objective(s)3

Specific objective(s)3

Expected result(s) and impact3

Indicators of performance3

The proposal/initiative relates to:4

Grounds for the proposal/initiative4

Requirement(s) to be met in the short or long term including a detailed timeline for roll-out of the implementation of the initiative4

Added value of EU involvement (it may result from different factors, e.g. coordination gains, legal certainty, greater effectiveness or complementarities). For the purposes of this section 'added value of EU involvement' is the value resulting from EU action, that is additional to the value that would have been otherwise created by Member States alone.4

Lessons learned from similar experiences in the past4

Compatibility with the multiannual financial framework and possible synergies with other appropriate instruments5

Assessment of the different available financing options, including scope for redeployment5

Duration of the proposal/initiative and of its financial impact6

Method(s) of budget implementation planned6

MANAGEMENT MEASURES8

Monitoring and reporting rules8

Management and control system(s)8

Justification of the budget implementation method(s), the funding implementation mechanism(s), the payment modalities and the control strategy proposed8

Information concerning the risks identified and the internal control system(s) set up to mitigate them8

Estimation and justification of the cost-effectiveness of the controls (ratio between the control costs and the value of the related funds managed), and assessment of the expected levels of risk of error (at payment & at closure)8

Measures to prevent fraud and irregularities9

ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE10

Heading(s) of the multiannual financial framework and expenditure budget line(s) affected10

Estimated financial impact of the proposal on appropriations12

Summary of estimated impact on operational appropriations12

Appropriations from voted budget12

Appropriations from external assigned revenues17

Estimated output funded from operational appropriations22

Summary of estimated impact on administrative appropriations24

24

Appropriations from external assigned revenues24

Total appropriations24

Estimated requirements of human resources25

Financed from voted budget25

Financed from external assigned revenues26

Total requirements of human resources26

Overview of estimated impact on digital technology-related investments28

Compatibility with the current multiannual financial framework28

Third-party contributions28

Estimated impact on revenue29

Digital dimensions29

Requirements of digital relevance30

Data30

Digital solutions31

Interoperability assessment31

Measures to support digital implementation32

Specify the effects which the proposal/initiative should have on the beneficiaries/groups targeted.

Specify the indicators for monitoring progress and achievements.

 a new action 

X a new action following a pilot project / preparatory action ¹⁰  

 the extension of an existing action 

 a merger or redirection of one or more actions towards another/a new action

X limited duration

•     financial impact from 2026 to 2029 for payment appropriations. No impact on commitment appropriations.

Shared management with the Member States

Comments

• Existing budget lines

In order of multiannual financial framework headings and budget lines.

•     The proposal/initiative does not require the use of operational appropriations

• The proposal/initiative requires the use of operational appropriations, as explained below

EUR million (to three decimal places)

EUR million (to three decimal places)

Commitment appropriations in EUR million (to three decimal places)

•     The proposal/initiative does not require the use of appropriations of an administrative nature

•     The proposal/initiative requires the use of appropriations of an administrative nature, as explained below

Considering the overall strained situation in Heading 7, in terms of both staffing and the level of appropriations, the human resources required will be met by staff from the DG who are already assigned to the management of the action and/or have been redeployed within the DG or other Commission services.

•     The proposal/initiative does not require the use of human resources

• The proposal/initiative requires the use of human resources, as explained below

Estimate to be expressed in full-time equivalent units (FTEs) ¹⁹

The staff required to implement the proposal (in FTEs):

Description of tasks to be carried out by:

Adaptation of SFC2021 Front-office could be required in order to handle the addition of the sectoral field information . The effort estimates to adapt the digital solution is in the range of 20m.d. to 40m.d. However, no budget is requested to implement the change: it will be covered under the SFC2021 Front-Office budget 2025 that covers the evolutive maintenance costs.

The proposal/initiative:

• can be fully financed through redeployment within the relevant heading of the multiannual financial framework (MFF)

•     requires use of the unallocated margin under the relevant heading of the MFF and/or use of the special instruments as defined in the MFF Regulation

•     requires a revision of the MFF

The proposal/initiative:

• does not provide for co-financing by third parties

•     provides for the co-financing by third parties estimated below:

Appropriations in EUR million (to three decimal places)

3.3.    Estimated impact on revenue 

• The proposal/initiative has no financial impact on revenue.

•     The proposal/initiative has the following financial impact:

  •     on own resources

  •     on other revenue

  •     please indicate, if the revenue is assigned to expenditure lines

EUR million (to three decimal places)

For assigned revenue, specify the budget expenditure line(s) affected.

Other remarks (e.g. method/formula used for calculating the impact on revenue or any other information).