Brussels - The EU commission on Thursday (6 October) proposed that from 2014 onwards, the bloc's structural funds for poorer regions be linked to strict budget deficit rules under the new economic governance legislation.
In line with the austerity-driven 'fiscal discipline' promoted by the EU's net contributors, the commission wants to be given the power to suspend the funding if a country pursues "unsound macro-economic policies" or has weak administrative capacity.
At the same time, the proposed €336 billion in the structural funds for 2014-2020 will be made more "flexible", allowing the commission to intervene and change priorities if the country is seen as getting them wrong.
"Cohesion policy has already contributed a lot to building prosperity in the EU. But given the economic crisis, it must now become a motor for growth and competitiveness. Our proposals will make EU funds work even harder," said EU regional policy commissioner Johannes Hahn.
He said the cut-off measure would be applied only as a "last resort" after a "long series of steps". At the same time, unused structural funds can be used as loan guarantees with the EU commission working with Greece to this end.
"There is no contradiction between these measures," Hahn claimed, when pressed by journalists to explain how cutting funding from financially troubled countries would help them "get back on track".
"The recently passed six pack [of EU economic governance legislation] raises the possibility to fine eurozone countries if they don't stick to deficit rules. So we discussed the theoretical possibility to use money as a final way to bring them back to the right way," the Austrian politician explained, adding that the cut-off measure would also apply to fisheries and rural development funding.
MEPs and regional representatives fiercely opposed the proposal, however.
"In these times of crisis, solidarity is the key (...) Our group will oppose any attempt to breach that solidarity. EU citizens should not be punished for the difficulties of their governments in reducing public deficits as proposed by the European Commission," said Italian Social Democrat MEP Patrizia Toia.
Her Green counterpart from Germany Elisabeth Schroedter also criticised the funds-cutting measure, which she said would "undermine the very essence of structural and cohesion funds."
And Mercedes Bresso, the chairwoman of the Committee of the Regions, an advisory EU body comprising of regional and local officials said that she is "firmly" opposed.
"It is irritating that the Commission ignored the strong opposition of the Committee of the Regions, the European Parliament and of the other concerned stakeholders on this point," she said.
"Withdrawing EU funding from an already ailing economy will only make matters worse. And this measure will punish regional and local authorities for the failures of their national governments", Bresso explained.
The centre-right group in the European Parliament approves the move, however.
"We are now at the starting point of a big debate on the future regional policy and of course there are elements of utmost importance for us to be defined and regulated," it said, citing "macro-economic conditionality" as one of them.
Member states and the European Parliament still have to agree on the new rules as well as the final figures for the seven-year budget.