New solutions in sight for project funding

The EU institutions are still holding talks aimed at working out a solution to the latest proposal for simplification of the Structural Funds, presented by the European Commission in July 2009. The main idea of the text was to abolish, in 2009 and 2010, the states’ co-funding obligation for projects receiving aid under the European Social Fund. The Council of Ministers rejects this possibility, however, so alternative solutions have to be found.

The fundamental aim of the idea of temporarily doing away with the co-funding obligation was to ease pressure on national budgets, which are already stretched to the breaking point because of the crisis. The idea is to keep from delaying the launch of projects that can be particularly useful during this difficult period. Although the means proposed failed to convince the Council, the objective remains valid: a way has to be found to cope with liquidity problems in the states, without which projects will be delayed. To try to break the deadlock and at the request of the Swedish EU Presidency, the Commission made two alternative proposals on which the institutions are now trying to work out a compromise.

The Commission proposes to pay additional advances to the states totalling an estimated €3.2 billion. The advances are a sort of prefinancing that allow early launch of the programmes. They are calculated as a percentage of the Structural Fund allocation, based on rules laid down in EU regulations. For 2009, for example, they should have totalled €5 billion but, because of the crisis, the institutions agreed a few months ago to put up additional advances of €6.25 billion (total of €11.25 bn). The Commission is now prepared to put up another €3.2 bn, which corresponds to 4% of the European Social Fund budget (€1.8 bn) plus 2% of the Cohesion Fund budget (€1.4 bn) for the states benefiting from this fund (EU12 plus Greece, Portugal and Spain). The idea has already been discussed in a Council working group and although the reaction was positive on the whole, the states tend to find the amounts in question too high. Some have proposed to limit the new advances to 2% of the ESF budget and 1% of the Cohesion Fund budget – thus halving the amounts proposed by the Commission – while others wish to limit the scope of the measures to the states whose economies have suffered most from the crisis (negative GDP growth of more than 10%, which would be the case for Romania, Hungary, Lithuania and Latvia).

The Commission’s other proposal is to make decommitment rules more flexible. The rules known as ‘N+2’ (for the EU15 less Portugal and Greece) and ‘N+3’ (for the EU12 + Portugal and Greece) provide that EU funds granted to a programme are lost if not used within two (or three) years following the year of approval. The Commission proposes to ‘merge’ the years 2007 and 2008 with respect to the states’ deadlines for the submission of payment requests. For the countries subject to the N+2 rule, that means that decommitment for 2007 will not occur before the end of 2010 (instead of 2009). For the N+3 countries, it will be end of 2011. In short, N+2 and N+3 would become N+3 and N+4 for the Commission’s aid approved in 2007. Here, too, the states seem to be reacting positively to the idea of more flexible decommitment rules although adaptation of the method proposed is not out of the question.

The European Parliament’s Regional Development Committee will review the progress of the talks at its meeting, on 4 November in Brussels.

The Commission proposes to pay additional advances to the states totalling an estimated €3.2 billion.