MEPs ignore Bulgaria’s bitterness on project co-financing

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Bulgaria, the poorest EU country,  feels cheated by by a new proposal to be adopted by the Council on 12 December, under which six member states will be able to co-finance projects at a much lower percentage than the rest of the bloc.

“We are not in a position to block this legislation,” a senior Bulgarian diplomat told EURACTIV, only one day after the European Parliament voted in favour of the new proposal.

“Countries which maintain a strict financial discipline should not be punished and those that do not maintain the discipline should not be rewarded,” said the diplomat, stressing that Bulgaria will keep its position “in principle”. 

The European Commission proposed last summer to increase the EU co-financing in cohesion, fisheries and rural development policies for countries that have received financial assistance under the balance of payments support mechanism (Romania, Latvia and Hungary) or under the European Financial Stability Facility (Greece, Ireland and Portugal).

This does not offer the six countries more money, but it enables them to “actually implement” some EU projects that would otherwise never be put in place, because of the inability of the countries to provide the remaining funds needed in the co-financing process.  In practice, Brussels has increased its co-financing rate by 10 percentage points. 

For example, Brussels will provide a maximum of 95% project financing in the case of Greece – from a previous 78% . The Greek government would not need to provide the 15% usually requested to member states, but only up to 5% of the cost of a project. In Ireland, the co-financing rate of the EU was only 50% and it will increase until a maximum of 60%, given its regions are richer and more competitive already.

According to an EU source, the deal that will be officially agreed between the ministers from all EU countries has already been struck and little if any is expected to change by 12 December. “A change of the situation is not envisaged soon, but Bulgaria keeps its position also for the next multi-annual financial framework and for the future,” the diplomat added.

Bulgaria criticised the move as it did not understand why those countries which did spend the allocated EU funds were “punished” by not being offered the 95% co-financing alternative.

EU funds are seen as a gold mine by new entrants in the EU, such as Romania and Bulgaria, according to EU sources. Despite the potential lying under the “mountain of money”, as a Romanian saying would put it, Romania continues to have the lowest fund absorption rate in the EU. “In some member states it was hard for countries to get projects done because there was a liquidity problem,” an EU official said.

Although Bulgaria is the poorest EU country, it is excluded from the beneficiaries because its macroeconomic indicators are stable.

Commenting on the adoption of the law by the EP, president of the European Commission, José Manuel Barroso said: "Today we have taken an important step on the path to European recovery. I am glad that the Parliament acted so quickly and agreed to our proposal. This measure is Europe's expression of solidarity with and support for Member States implementing painful economic adjustment programmes. They currently do not have much space for investing in growth and jobs. Our measure will inject into those economies funding essential for boosting their competitiveness and employment."

Dnevnik, the EURACTIV partner in Bulgaria, quoted Prime Minister Boyko Borissov as saying that he is strongly against any support given to the bailout countries by reducing the ratio of national financing for EU-sponsored projects.

To the contrary, those who needed to be stimulated are those who respect the financial discipline, Borissov said. "If this ratio is to be lowered, then it should be lowered for all countries."

MEP Danuta Hübner (EPP, Poland), rapporteur and Regional Development Committee chair, said that "the Parliament wants this derogation to apply as soon as possible". “Swift actions to help those hit hard by the crisis have been our priority. A temporary rise in co-financing ceilings will not affect total EU regional funding in the Member States but will allow funds to be concentrated on completing some projects and thus reduce the pressure on national budgets,” Hübner said.

The European Commission agreed last July to increase the co-financing rates for EU funds in the attempt to boost economic recovery in the EU 27-bloc.

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 these countries.

As a result, they will have to find less national matching funding at a time when their domestic budgets are under considerable pressure and therefore programmes that have not been executed so far for lack of national funding may be launched and inject fresh money in the economy.

  • 12 December 2011: TTE (Transport) Council is expected to adopt the European Commission's proposal on the co-financing rules addressing Greece, Ireland, Portugal, Romania, Latvia and Hungary. 
  • 1 January 2014:  Co-financing conditions for the six countries end, new multi-annual financial framework starts.

 

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