Commission’s regional aid plans receive short shrift

Advance payments to five countries get approval as member states are given more time to spend funds.

The European Commission has been over-ruled by national governments over which countries should receive advance payments of EU regional aid. Member states’ ambassadors to the EU have approved advance payments totalling €775 million for Hungary, Romania, Latvia, Lithuania and Estonia.

The Commission had proposed making advance payments to 15 EU states from the European Social Fund (ESF) and the Cohesion Fund, totalling around €3 billion. This was opposed by some governments as being too broad. The Swedish government, which holds the rotating EU presidency, was asked to propose a narrower list of beneficiaries.

Financial woes

All five countries that are in line for advance payments have suffered acute liquidity problems during the financial crisis. Latvia, Hungary and Romania are receiving emergency balance-of-payments support from the EU and the International Monetary Fund, while gross domestic product in Lithuania and Estonia has fallen by more than 10% this year.

Sweden’s revised proposal needed to attract unanimous backing from the Council because the Commission formally opposed the amendment, believing that it deviated too far from the original. A spokesman for Pawel Samecki, the European commissioner for regional policy, said that the Commission had opposed the proposal because it would provide advance payments to too few member states.

In July, in response to the economic crisis, the Commission proposed temporarily suspending the rules requiring governments to co-finance projects supported by the ESF, one of the three main regional aid funds. That proposal received short shrift from national governments, with some arguing that it would lead to spending on dubious projects, and others arguing that it would have little positive impact on the economy. The Commission subsequently made a revised proposal for advance payments.

The texts will now be forwarded to the European Parliament, which is expected to give its verdict early in the new year.

Member states also agreed to give themselves more time to spend regional aid money. EU rules normally require annual allocations to be spent within three years (four years for Portugal, Greece and the 12 countries that have joined the EU since 2004) or returned to the EU budget. Spain had stood to lose hundreds of millions of euros in unspent funds at the end of this year; France and Italy also stood to lose substantial sums. Member states agreed on a series of six, staggered deadlines for spending money allocated to them in 2007, with a final deadline of 2013.

A Commission spokesman said that, while the legislation was under discussion, no steps would be taken to reclaim money from the 2007 allocations that remained unspent. He said the Commission was sympathetic to the difficulties governments face because of the economic crisis. “We are not going to cut off vital aid at precisely the wrong time,” he said.