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Tuesday, May 5, 2009

The EU cohesion policy: an efficient answer to the crisis

The cohesion policy will aid the European countries going through the crisis. The commissioner to regional policy and the commissioner to social affaires welcome the finalisation of an agreement by the Council and European Parliament in support of the Cohesion Policy package in response to the economic crisis.The comprehensive package includes a battery of measures, ranging from a massive cash injection in the form of additional advance payments from the Structural Funds to fast-track procedures to accelerate project implementation and the possibility for the EU to co-finance energy-efficiency improvements in housing. Member States have already received an additional €6.25 billion in advance payments - €4.5 bn from the European Regional Development Fund was paid out in mid-April, with a further €1.5 bn from the European Social Fund (ESF) soon after.


Giving Member States and regions a head start

At the end of 2008, the Commission proposed a series of changes to the regulations that govern the European Regional Development Fund (ERDF), the European Social Fund (ESF) and the Cohesion Fund. The European Parliament gave its green light to the legislative changes on 2 April. Today, Member States' Ministers, meeting in the Economic and Financial Affairs Council (ECOFIN), also approved the measures, which will take effect by the end of May.

The aim of the €6.25 billion cash injection in the 27 Member States is to stimulate project implementation and help protect and create new jobs. The additional advances bring the total of pre-payments to nearly €30 billion since 2007 (see the allocations by Member State in annex), which represents almost 9% of the total €347 billion Cohesion Policy budget for 2007-2013.The package comprises the following other changes:

* Possibility for immediate funding for “major projects” (those where total cost per project exceeds €50 million, or €25 million in the case of environment projects) without the need for prior approval by the European Commission. Around 900 major projects should be implemented between 2007 and 2013 throughout Europe, representing a total investment of €120 billion (from the ERDF and the Cohesion Fund).
* Simplification of the system for advances paid to beneficiaries under State-aid schemes. In practice, this means that State-aid advances paid to beneficiaries may now reach 100% of the amount considered.
* Simplification of the reimbursement system to reduce the administrative burden on beneficiaries and to speed-up payments. The Commission will now be able to reimburse basic overhead costs on a flat-rate basis or make lump-sum payments for small projects, for example supporting vulnerable groups.
* Facilitate management of financial engineering schemes (ERDF/ESF) combining grants and loans. JEREMIE (Joint European Resources for Micro to Medium Enterprises ) enables small and medium enterprises (SMEs), badly hit by the economic downturn, to access finance more easily. The European Investment Bank and the European Bank for Reconstruction and Development can help in the preparation of major projects through JASPERS (Joint Assistance in Supporting Projects in European Regions). Specific support will also be given to non-bank micro-credit providers, through the JASMINE initiative (Joint Action to support microfinance institutions in Europe).
* Possibility offered to all Member States to use ERDF funds (up to 4% of their allocation) for energy-efficiency improvements and renewable energy measures in housing. This means the EU can co-finance national or regional schemes to promote the installation of double glazing, wall insulation or solar panels. Previous legislation gave only new Member States limited possibilities to use support from the ERDF for housing.

In December, a further amendment was already agreed, stipulating that rules governing "revenue-generating projects" such as toll motorways should only be applied for ERDF and Cohesion Fund projects where total costs exceed €1 million.

Source  Financial engeneering

More information  EU press room

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