Cohesion funds sit at the centre of every serious conversation about European investment: nearly €376 billion, one programme cycle, and a single goal of narrowing the gap between Europe’s richest and poorest regions.
What cohesion funds are and why they exist
Cohesion policy accounts for almost one third of the EU’s total budget, with €392 billion allocated over seven years in the 2021 to 2027 period. That scale alone makes it one of the largest redistribution mechanisms in the world. The policy is designed to strengthen economic, social and territorial cohesion within the EU, aiming to promote job creation, business competitiveness, economic growth, social inclusion and sustainable development.
The system operates through 4 specific instruments: the European Regional Development Fund (ERDF), which invests in the social and economic development of all EU regions and cities; the Cohesion Fund (CF), which targets environment and transport in less prosperous countries; the European Social Fund Plus (ESF+), which supports jobs and social inclusion; and the Just Transition Fund (JTF), which helps regions most affected by the shift to climate neutrality.
How eligibility is decided
The rules that determine which region receives what level of funding are precise and data-driven. During the 2021 to 2027 period, eligibility is based on NUTS level 2 regions, split into 3 groups: less developed regions, where GDP per inhabitant is less than 75% of the EU average; transition regions, where GDP per inhabitant is between 75% and 100%; and more developed regions, where GDP per inhabitant is above 100%.
The bulk of cohesion funding is concentrated on less developed EU regions, with the goal of helping them to catch up and to reduce economic, social and territorial disparities. Most funds target regions where GDP per inhabitant is below 75% of the EU average. The Cohesion Fund specifically contributes to environmental and trans-European transport infrastructure, and it provides support to member states with a gross national income per capita below 90% of the EU-27 average.
Which regions receive the most
Geography and income level drive the allocation map. New member states, concentrated in Central and Eastern Europe, absorb about 55% of total cohesion resources. Since 2004, most funds have been allocated to Central and Eastern European regions and countries, which now receive substantially larger amounts than before.
In the majority of lagging regions, the largest project expenditure is dedicated to transportation and energy infrastructure. In most other regions, the major share goes to innovation and technological development, as well as business support including SMEs. The divergence matters for investors. A Polish logistics corridor and a Danish digital innovation hub may both receive EU money, but the source, the volume and the conditions differ significantly.
According to the European Commission’s Kohesio database, over 640,000 beneficiaries have implemented more than 1.8 million projects across the European Union since 2014. Almost all types of entities can apply, including public institutions at all levels, public companies, private firms, civil society organisations, clusters, research institutions and associations.
Expert perspective on convergence and returns
Research consistently shows that the return on cohesion investment is not uniform. Regions with a strong export base and smaller private and public capital endowments generate the highest return per euro spent. Modelling by the European Commission’s Joint Research Centre and DG REGIO shows that by 2030, each euro invested during the 2014 to 2020 and 2021 to 2027 funding programmes will have generated an additional €1.30, and the return is projected to nearly triple by 2043. The positive impact spreads beyond recipient regions through trade links with neighbouring economies. Reducing regional GDP disparities at EU level requires consistent, long-term commitment: the coefficient of variation measuring regional differences in GDP per capita is expected to decline by about 3% at the peak impact in 2030. The structural challenge remains significant, as green jobs represent 25% of employment in more developed regions but only 7% in less developed ones, which makes the transition a test of convergence as much as climate policy.
Investment and regional development perspective, EU cohesion policy research and modelling institutions
The mid-term shift: new priorities for the final years
The 2021 to 2027 cycle did not remain static. Cohesion policy’s built-in flexibility allows member states to adjust investment priorities, and in April 2025 the Commission proposed that member states and regions redirect investments toward new strategic priorities in response to the rapidly changing geopolitical landscape.
Since the adoption of that proposal in September 2025, the Commission approved amendments to 186 national and regional cohesion programmes in 25 member states. The reallocated funds represent almost 10% of cohesion policy’s total 2021 to 2027 budget. The breakdown is concrete: €15.2 billion went to boost competitiveness through critical technologies, innovation and skills development; €11.9 billion to strengthen defence industrial capabilities and military mobility; €3.3 billion to affordable and sustainable housing; and €3.1 billion to water resilience.
The reform also allows extra support for EU regions bordering Russia, Belarus and Ukraine, recognising their specific needs in a tense geopolitical environment. The countries that made the greatest use of the reprogramming flexibility, in absolute terms, were Poland, Italy, Spain, Portugal, Germany and Greece.
What the next budget cycle changes
The debate on cohesion funds after 2027 is already intense. On 16 July 2025, the European Commission set out proposals for the 2028 to 2034 EU budget, potentially triggering a major overhaul of how cohesion spending is structured. Compared to its predecessor, the new multiannual financial framework draft nearly doubles the overall budget, reaching almost €2 trillion.
Some analysts warn that less developed regions have stopped converging since the late 2000s, and in some cases are moving in the other direction again. Regions that rely only on cohesion funding but are not advanced enough to access competitive EU programmes risk becoming trapped in a middle-development position. In 2025, the European Investment Bank Group provided a record €42.8 billion in financing to cohesion regions, representing 48% of the Group’s total EU financing for the year.
Conclusion: why cohesion funds matter for investors and businesses
Cohesion funds are not just a social transfer tool. They shape infrastructure, digital capacity, skills and market access across more than half of the EU’s territory. For businesses operating across borders, understanding where cohesion funds flow is a direct signal of where investable capacity is building. The regions that absorb cohesion funds most effectively today become the supply chain partners, talent pools and consumer markets of the next decade. As the EU prepares a new budget cycle, cohesion funds will face pressure to do more with sharper targeting. Investors who follow that debate now will be better placed to act when the next allocation map is confirmed.
Discover more about cohesion funds
- EU Cohesion Policy, European Commission
- Cohesion policy benefits the EU’s economy and regions, Joint Research Centre, European Commission
- €34.6 billion in cohesion policy funds reallocated to address EU’s strategic priorities, European Sting
