What will be the new members' "break even point"? 

Whereas the New Member States' (NMS) contribution to the EU budget constitutes a "definite" item of expenditure, whereas a large proportion of the EU funds they will receive are conditioned, on the one hand to the implementation of projects and, on the other, to national cofinancing*. The "net position" of the NMS will thus partly depend on their absorption capacity. Furthermore, cofinancing will impose an additional budgetary constraint. Thus, what volume of projects will the NMS have to implement in order at least to balance the transfers of funds to and from the EU? What is the amount of cofinancing necessary for a full mobilisation of the European funds?

Using the distribution of payment appropriations provided by the "Financial Framework for Enlargement 2004-2006"**, it is possible to estimate an absorption ratio for conditioned funds, which balances in and out flows with the EU budget (table below and methodology opposite): for the NMS as a whole, this "break even point" would be reached with a utilisation rate of approximately 14%, which would be equivalent to € 3 bn of projects. This rate, which may seem low, varies from one country to another, according to the weight of the various kinds of funds, in particular the "special cash flow facilities and temporary budgetary compensations" negotiated in Copenhagen. Thus, it is possible that this "break even point" will be higher over the 2006-2013 period: without these funds, it would stand at around 34%.

The question of cofinancings is important because even if they do not necessarily encumber the States' budgets in their entirety, they will still weigh upon public spending and therefore on the budgets. Should all the conditioned funds be used, the cofinancing would reach € 4.3 bn for all the 10 countries, which is approximately 0.3% of their GDP. A limited charge, after all.

These financial transfers are lower than the identified investment needs, in particular for infrastructure and the environment (1.5% and 2.3% of GDP over 15 and 20 years respectively). The private sector, IFIs and the banks will thus be invaluable for their expertise and financing capacities. Collaboration between local authorities in the EU15 and the NMS could also help to ensure the efficient use of EU funds.

enlargement website of DREE