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Additional opportunities for growth in Latvia: increased co financing rates in EU funds

Eugene Eteris, BC, Copenhagen, 02.08.2011.Print version
In the beginning of August, the European Commission agreed to provide additional contribution to some of the EU member states under severe economic difficulties. The six countries’ share in the EU supported projects, i.e. Greece, Ireland, Portugal, Romania, Latvia and Hungary will be significantly smaller than previously evaluated.

The additional co-financing measures would definitely help in economic recoveries for the mentioned states, if the projects are implemented properly. As the Commission explained in the press release, “these measures should make a significant contribution to getting some of the EU's most troubled economies back on track”. Besides, the business community in these states could get additional opportunities for growth.

 

Under the proposal, six countries would be asked to contribute less to projects that they currently co-finance with the European Union. The Commission makes available for Greece, Ireland, Portugal, Romania, Latvia and Hungary, supplementary EU co-financing, vital for growth and competitiveness-boosting projects in each one of these countries. As a result, they will have to find less national match-funding at a time when their domestic budgets are under considerable pressure and therefore programs that have not been executed so far for lack of national funding may be launched and inject fresh money in the economy.


Active member states’ position

The mentioned Commission steps represent a proposal which is sent to the European Parliament and the Council to adjust the current system of EU co-financing in cohesion, fisheries and rural development policies for Greece, Ireland, Portugal, Romania, Latvia and Hungary.

 

However, each member states involved would need to submit a request to benefit from this new system. The decision is expected to find a practical impact in early 2012.

 

Priorities in specific projects would go to initiatives focusing on growth and employment, such as retraining workers, setting up business clusters or investing in transport infrastructure.


Commission’s opinion

The President of the European Commission José Manuel Barroso stated in presenting the proposal: "These proposals are an exceptional response to exceptional circumstances. Accelerating these funds, combined with the financial assistance programs, demonstrate the Commission's determination to boost prosperity and competitiveness in the countries mostly hit after the financial crisis – thereby contributing to a kind of 'Marshall Plan' for economic recovery. This decision will inject essential funding into national economies, while reducing the pressure for the co-financing of the projects by the national budgets. I now call on the European Parliament and the Council to urgently approve the decision, in order to get money on the ground by early next year."


The essentials of the proposal

The Commission’s measure does not represent new or additional funding but it allows an earlier reimbursement of funds already committed under EU cohesion policy, rural development and fisheries. The EU contribution would be increased to a maximum of 95% if requested by a member state concerned. This should be accompanied by a prioritisation of projects focusing on growth and employment, such as retraining workers, setting up business clusters or investing in transport infrastructure. In this way the Commission expects to increase the level of budget execution, augmenting absorption and investments into new and existing projects, as well as the whole economy.

 

It concerns member states that have been most affected by the crisis and have received financial support under a program from the Balance of Payments mechanism for countries not in the Euro area (Romania, Latvia and Hungary) or from the European Financial Stabilisation Mechanism for countries in the Euro area (Greece, Ireland and Portugal).

 

The Commission will request that the Council and the European Parliament adopt the proposal in a fast-track legislative procedure by the end of 2011 to allow for the vital projects to get off the ground as soon as possible.

 

The proposed initiative, argued the Commission, has been an exceptional temporary measure, which would terminate as soon as the member states stop receiving support under the financial assistance programs.

 

To help with the absorption of the funds, the Commission is cooperating with the member states concerned to remove bottlenecks, strengthen their administrative capacity and accelerate implementation and spending on the ground.

 

In the specific case of Greece, the Commission has established a Task Force that will help it to implement the measures foreseen in the economic adjustment program and take all necessary steps to ensure a quicker EU funds’ absorption.

 

An expected maximal impact (in € mln) is assessed in the following way: 

 

= Total for the 6 member states the available amount is about € 2,9 billion.

= The biggest amounts will expected for Greece (879 mln), Romania (714 mln) and Portugal (629 mln);

= Hungary with 308 mln and Latvia with 255 mln are somewhere in the middle, followed up by Ireland with 98 mln euro in support.  

 

The following funds are expected to be of concern to the member states:


European Regional Development Fund (ERDF)

The ERDF aims at strengthening economic and social cohesion in the European Union. It addresses regional imbalances and supports programs on regional development, economic change, enhanced competitiveness and territorial cooperation throughout the Union. ERDF seeks to improve infrastructure, boost competitiveness, stimulate research and innovation and sustainable regional development. It invests in projects focusing on e.g. innovation and the knowledge economy, the environment and risk prevention, energy efficiency and the interconnectivity of transport and telecommunication.


Cohesion Fund (CF)

The Cohesion Fund focuses on transport and environment infrastructure, as well as on energy efficiency and renewable energy for those member states with a Gross National Income (GNI) lower than 90% of the EU average. It serves to reduce their economic and social shortfall, as well as to stabilise their economy. The Fund invests in projects developing trans-European transport and energy networks, supporting energy efficiency and the use of renewable energy and strengthening public transport.


European Social Fund (ESF)

The European Social Fund supports programs dedicated to achievement of higher levels of employment and social inclusion in the EU. It helps Member States make Europe's workforce and companies better equipped to face new global challenges. The Fund helps, for example, workers to acquire new skills or businesses to undergo changes.

 

European Fisheries Fund (EFF)

The European Fisheries Fund provides financial assistance to promote a sustainable balance between resources and fishing capacity of the EU fleet, to promote sustainable development of inland fishing, strengthen the competitiveness of the fisheries and aquaculture sectors, enhance the protection of the environment linked to the fisheries or aquaculture activities, encourage the sustainable development and improvement of the quality of life in areas with activities in the fisheries and aquaculture sectors.

 

European Agricultural Fund for Rural Development (EAFRD)

The European Agricultural Fund for Rural Development aims at strengthening the EU’s rural development policy. The Fund contributes to the following improvements: 1. the competitiveness of agriculture and forestry; 2. the environment and the countryside, and 3. the quality of life and the management of economic activity in rural areas. The Fund complements national, regional and local actions, which contribute to Community priorities.

 

For more information see:

= Financial Assistance Mechanisms and Balance of Payments (BoP) mechanism for non-Euro countries:  

http://ec.europa.eu/economy_finance/eu_borrower/balance_of_payments/index_en.htm

 

= European Financial Stabilisation Mechanism (EFSM) for Eurozone countries:

http://ec.europa.eu/economy_finance/eu_borrower/efsm/index_en.htm






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