EU funds and the EIB
Structural and cohesion funds
With €347bn allocated for the 2007-2013 period, the structural and cohesion funds represent more than a third of the EU's budget. Just over half of the total – €177bn – is available for the ten new member states in CEE. These countries have been receiving EU funds since 2000, but the annual volume has more than doubled since 2007. Their governments will have to add further billions of euros from their own budgets, as the EU only pays up to 85% of each funding programme.
The current changes in the EU regulations will allow for acceleration and advance payments from EU funds to ensure the availability of financial resources during the economic crisis – although member states will still have to pay back the required co-financing at a later stage within the 2007-2013 framework. The funds can be used for all types of projects: transport infrastructure, sewage treatment plants, new technologies for enterprises, research, education, etc. The candidate countries such as Croatia and Macedonia receive much less – but still significant – pre-accession funding from the EU.
Source: European Commission, 2008
European Investment Bank
The EIB is the EU’s public bank, and it lends money on favourable terms to projects that are supposed to support EU policy objectives. The EIB provides loans to EU member countries and often also co-finances projects in tandem with the structural and cohesion funds. With a total annual portfolio of over €56bn in 2007, the EIB will increase its disbursements in 2009, up to €70bn. The EIB plans to increase its lending in CEE countries (with a focus on the EU-12) in the following priority sectors: energy, climate change and infrastructure.
Problems with the absorption of EU funding
According to the EU Court of Auditors, in previous years cohesion policy projects accounting for €42 bn were the most affected by errors. The Court’s audit for 2007 budget showed that at least 11% of the structural and cohesion funds should not have been paid at all due to error. Irregularities in accounting, however, are only part of the problem and it is far from certain that the remaining billions were effectively spent.
In Bulgaria, a very critical report by the European Commission on the EU funds spending highlighted that “the situation is serious”. This report pointed to a 2008 report from the EU's Anti-Fraud Office (OLAF) which has evidence of cases of conflict of interest and fraud, that subsequently led to the putting on hold of pre-accession funding and jeopardised the implementation of the Bulgarian Operational Programme Transport.
In Poland, Bankwatch research has showed that indicative lists of major projects to be financed by EU money – both at the national and regional level – were often the result of arbitrary political choices. Projects which undergo the competition procedure are chosen according to a score given by experts. However, there have been concerns about the independence of these experts in some competitions, as they are often at the same time hired as consultants by institutions or companies applying for EU funding.
In the Czech Republic, a striking statement in September 2008 on the private interests behind transport planning was made by then prime minister Mirek Topolánek during a hearing in the Czech parliament last September. Topolánek did not shy away from stating that the decision on a motorway connection between Brno and Vienna – a project in potential need of EU money – will satisfy two interested lobby groups.