Proposals for the Cohesion Policy 2014-2020

The Commission has published its proposals which will frame cohesion policy for 2014-2020. The first part of the proposal sets out common rules governing the European Regional Development Fund, the European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural Development (EAFRD), and the European Maritime and Fisheries Fund (EMFF). The second part sets out common rules governing the three main funds delivering the objectives of cohesion policy: the European Regional Development Fund (ERDF), the European Social Fund (ESF) and the Cohesion Fund (CF).

When adopted, the legislation package will establish a common strategic framework for the ERDF, ESF, CF, the EAFRD and EMFF. A Partnership Contract will be agreed between the Commission and each EU Member State, bringing together all the country’s commitments to delivering European objectives and targets. Before funds are paid out, authorities will have to demonstrate that satisfactory strategic, regulatory and institutional frameworks are in place to ensure the funds are used effectively. The release of additional funds will be dependent on performance. Deficiencies in macroeconomic policy (excessive budget deficits, etc.) will lead to suspension of the cohesion financing. Procedures will be simplified and computerised where possible. Eligibility rules for EU funding instruments will be harmonised.

 

 

Why the Structural Funds Don’t Work Properly in Bulgaria

The Open Society Institute Sofia has issued a report that outlines the main causes for the poor performance of Structural Funds in Bulgaria (summary in English here). The Structural Funds are the main instruments of the EU regional and cohesion policy. However, new Member States from Eastern Europe, and Bulgaria in particular, face significant difficulties in using those funds in their regional development.

Three problems are outlined in the report:

• Deficits in the national programming of EU funds for the financial period 2007–2013;
• Poor implementation of the principle of partnership with representatives of the civic sector in the national management of the Structural Funds;
• Deficits of the regional planning in Bulgaria.

These findings are significant, since they put in doubt the implementation of the next EU multiannual financial framework in Bulgaria. The absorption capacity is clearly very low, and specific measures must be provisioned to avoid repeating the mistakes. The European Commission usually focuses its criticism on the institutional capacity of the Bulgarian administration and the quality of the management structures. But this report clearly indicates that the problem is much deeper and starts with the programming and planning stages.

 

 

Public Consultation on the Future of the Cohesion Policy

The Commission is opening a public consultation on the future of cohesion policy. In its conclusions of the fifth report on economic, social and territorial cohesion the Commission has outlined the main ideas for reform that will be discussed during the consultation. This is a very important exercise in the policy development phase.

The main topics:

1. A new strategic programming approach for cohesion policy, consisting of:

– common strategic framework (CSF) adopted by the Commission translating the targets and objectives of Europe 2020 into investment priorities, and

– a development and investment partnership contract which, based on the common strategic framework, would set out the investment priorities, the allocation of national and EU resources between priority areas and programmes, the agreed conditionalities, and the targets to be achieved.

2. Increasing thematic concentration – Member States and regions should concentrate EU and national resources on a small number of priorities responding to the specific challenges that they face.

3. Strengthening performance through conditionality and incentives – specific binding conditionality in the areas directly linked to cohesion policy would be agreed with each Member State and/or region.

4. Improving evaluation, performance and results – setting of clear and measurable targets and outcome indicators, using impact evaluations.

5. Supporting use of new financial instruments.

6. Introducing a third dimension: territorial cohesion – whether the regulatory architecture of cohesion policy should allow greater flexibility in organising operational programmes in order to reflect the nature and geography of development processes better.

7. Reinforcing partnership – supporting active inclusion, fostering social innovation, developing innovation strategies or designing schemes for regeneration of deprived areas.

8. Financial management – output- or results-based elements for disbursement of the EU contribution, simplified methods of reimbursement.

9. Reducing the administrative burden – alignment of rules on eligibility of expenditures across policy areas, financial instruments and funds.

10. Financial discipline.

11. Financial control – review the procedure for ex-ante assessment of the management and control systems.

12. The architecture of cohesion policy – including regions currently eligible under the ‘convergence’ objective but whose GDP would be higher than 75% of the Union average according to the latest statistics.

Excessive Deficit May Prompt Suspension of Regional Aid?

The European Commission considers suspending structural funds for states which are regularly in breach of the EU’s stability and growth pact. An additional criterion being considered is a public debt ratio above 60% of GDP. The Commission also plans to deepen and broaden budgetary surveillance in the future.

I can follow the logic of the Commission in desiring to impose a budget discipline in the EU, but I am particularly worried about Bulgaria. As we already know, there probably will be an excessive deficit procedure against Bulgaria for 2009 and possibly for 2010. True, the gross public debt is relatively small. But even now we face substantial problems in using the structural funds. Any further restriction or suspension of regional aid by the Commission can be devastating for a country that simply is not competitive enough on the EU markets.

Progress Report on Structural Actions

The European Commission has presented a progress report on the implementation of its action plan to strengthen the shared management of the EU structural and cohesion funds.

The report summarizes common errors in the management of EU funds on national level:

• contracts awarded without following the correct tender procedure;
• inadequate documentation to support expenditure (lack of audit trail);
• inaccurate calculation of overheads;
• application of incorrect co-financing rate;
• overestimated payment claims.

Commission Reports on EU Funds in Bulgaria and Romania

We now have the European Commission reports on the status of implementation of EU funds in Bulgaria and Romania until 31 July 2009.

Bulgaria has received 488 million Euro out of the total 1,36 billion Euro allocation for 2004-2006 – or a 36% success rate. The advance payments under the 2007-2009 budget amount to 828,7 million Euro. However, Bulgaria has not received interim payments due to the rejection of the compliance assessments of the Management and Control System submitted by Bulgaria in 2008 and 2009 for all operational programs. The only interim payments are from the European Agricultural Fund for Rural Development (EAFRD). A major recommendation for Bulgaria is to improve the management capacity of implementing structures.

Romania has received 1,89 billion Euro for 2004-2006 out of 2,97 billion Euro allocation, or a 63% success rate. The advance payments under the 2007-2009 budget amount to 2,42 billion Euro. Romania has also received 94 million Euro interim payments for the operational programs. A major recommendation for Romania is to revise the national legal framework for public procurement.