The European Commission is consulting the committee on the framework for a 'special support programme for peace and reconciliation in Northern Ireland and the border counties of Ireland'. It will provide funding and technical assistance for the area, and councils will be able to apply directly for funds for local projects.
William Beattie, chief executive of Dungannon DC, told the committee the initiative was in line with the role local government sees for itself in the peace process.
He stressed that economic decline had been caused by security measures such as sealing off town centres, as well as paramilitary attacks.
The committee has called for councils north and south of the border to twin jointly with other authorities in Europe.