The reform bet: can cohesion policy do more than invest?

April 2026

Something significant is changing in the logic of EU cohesion policy. For decades, it has been about investment, such as funding infrastructure, supporting capacity development and strengthening innovation systems. Yet, despite substantial spending over several decades, territorial disparities persist and are widening in some places.

The EU's proposal for the next programming period (2028–2034) signals a change of direction. Under the proposed regulation, cohesion policy will be embedded in National and Regional Partnership Plans, replacing hundreds of programmes with a single, integrated framework for each Member State. These plans are expected to combine investments with reforms, and funding will increasingly be linked to the achievement of pre-agreed milestones and targets rather than simply reimbursing expenditure.

This reflects a broader change in delivery logic. The Commission aims for a model based on 'delivery against pre-agreed targets and milestones', arguing that it improves coherence, accountability, and value for money. Crucially, the Commission also highlights that this model provides a clearer framework for embedding reforms alongside investments, thereby increasing the EU’s leverage to address structural bottlenecks. In other words, a reform can be a pre-agreed target or milestone that triggers payments.

This suggests a repositioning: cohesion policy is no longer primarily an investment policy. It is becoming a reform-and-investment policy.

The question is whether such a reform-driven approach can actually strengthen territorial cohesion.

Why reforms matter for territorial development

The logic behind the shift is based on the insight that good governance is important. Investments alone often fail to deliver lasting impact when underlying systems are weak. Many regional challenges are not simply due to a lack of funding, but to institutional and regulatory constraints.

These include fragmented governance systems, administrative complexity, weak coordination across policy areas, and persistent regulatory barriers, all of which limit the effectiveness of investments and reduce their long-term impact.

A reform-driven approach promises to address these root causes. By linking funding to changes in governance, regulatory frameworks, or coordination mechanisms, cohesion policy could transition from addressing symptoms to tackling structural issues.

But what would this look like from a territorial perspective?

What becomes possible: insights from Sweden

Recent analytical work on Sweden provides concrete examples of how reforms could support regional development.

Accelerating wind power. Improving the efficiency and predictability of permit processes has emerged as an area of reform in Sweden's regional development and green transition agenda. One particularly contentious issue is the expansion of wind power, where the permit process is not only administratively burdensome, but also politically sensitive at the municipal level. Currently, municipalities hold a de facto veto over wind power projects through their planning powers. While this supports local democratic accountability, it has resulted in frequent rejections and long delays, hindering the achievement of national targets for the deployment of renewable energy. The key issue is that the burden and conflicts of wind farms are concentrated at a local level, whereas the tax benefits go to the national treasury. This means that there are few incentives for municipalities to pursue the case.  Discussed reforms include incentives that could offset local burdens, increase local acceptance, and align municipal interests with national climate objectives. Reforming how benefits are distributed is not just an efficiency question; it is a question of whether peripheral and rural regions can be willing partners in the transition, or whether they are simply asked to absorb its costs.

Risk sharing for large-scale industrial investments. The risks to municipal finances in the wake of the green industrial transition are insufficiently considered when it comes to major investments in green industries, e.g. green steel, hydrogen and battery production. Green, energy-intensive industries usually need significant initial investment in public infrastructure in the host regions, as well as long lead times and exposure to volatile global markets (as we explored in an earlier blog post on re-industrialisation (Opens in a new window)). Regions and municipalities often have to invest in grid upgrades, ports, roads, housing, skills and planning capacity long before a plant becomes operational — if it ever does. These commitments are often irreversible. If projects are delayed, scaled down, or abandoned, regions and municipalities may be left with stranded assets and weakened public finances. However, the economic returns of such investments are only partially regional or municipal. Capital income largely accrues to national or international investors. In many countries, corporate taxation is mostly captured at the national level. Climate mitigation, strategic autonomy and supply-chain resilience are European public goods. The result is a structural asymmetry. Regions bear a disproportionate amount of risk, while the benefits diffuse upwards and outwards. This situation requires reforms to ensure that regions and local areas are willing to host Europe’s transition infrastructure. Without reforms that rebalance this equation, the green industrial transition risks deepening the very divides that cohesion policy aims to narrow.

Rethinking governance through functional areas. Functional geographies, such as labour markets, reflect how people live and work, as well as how economic systems function. They often offer a more meaningful basis for planning and regional development than administrative borders (as we explored in an earlier blog post on functional areas (Opens in a new window)). Indeed, many of Sweden’s most pressing regional development challenges and opportunities span county boundaries. However, collaboration across counties remains particularly challenging in many areas, including public transport, planning and coordination. Even LEADER areas report administrative obstacles when trying to operate across jurisdictional lines. These limitations restrict the ability of regional governance to align with the lived geographies of individuals and businesses, potentially leading to inefficiencies and reduced policy impact. This is another example of where governance reforms could help ensure that policies respond effectively to territorial dynamics. Governance reforms that allow planning and coordination to follow functional geographies are therefore not a technical adjustment. They are a precondition for territorially coherent policy.

These examples illustrate a broader point. A reform-driven cohesion policy is about more than just adding conditions to funding. It implies a shift:

• from financing projects to shaping framework conditions

• from addressing infrastructure gaps to addressing systemic bottlenecks.

• from distributing resources to influencing how territorial systems function.

This opens up new possibilities. It enables cohesion policy to address critical issues for regional development that have traditionally been difficult to tackle through investment alone.

What to watch out for

At the same time, the shift raises questions that must be addressed in future National and Regional Partnership Plans.

• Centralisation. Reforms are often designed at a national level. There is a risk that regional priorities will be subordinated to national agendas, thereby weakening the territorial dimension.

• Uneven capacities. Regions differ in their ability to design and implement reforms. Those with stronger administrative capacity may benefit more, which could potentially reinforce disparities.

• Performance pressures. Linking funding to results may favour reforms that are easier to implement and measure, meaning that more complex territorial challenges receive less attention.

• Governance complexity. While new approaches, such as functional areas, can improve policy alignment, they can also complicate accountability and coordination.

A conditional opportunity

So, can a reform-driven cohesion policy boost territorial cohesion?

The answer is yes, but not automatically.

Reforms open up new ways to address territorial challenges. They can improve fairness, enable participation in major transitions and ensure that policies align with real economic geographies. In doing so, reforms have the potential to strengthen regional development in ways that investment alone cannot.

However, this potential depends on how reforms are designed and implemented. If they are primarily shaped by national priorities, overlook territorial diversity or reward only regions that are already well-equipped to deliver, they may undermine the very cohesion they aim to promote.

Therefore, the real challenge is not whether cohesion policy should support reforms. Rather, it is about ensuring that reforms remain territorially grounded.

In the coming period, cohesion policy will not only fund projects, but also increasingly shape systems. Whether this leads to stronger or weaker territorial cohesion depends on one key question:

Can the reform agenda be aligned with the realities, needs, and capacities of Europe’s diverse regions?

This is the issue on which the debate should focus.

 by Kai Böhme

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