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European Commissioner responsible for Regional Policy

"Cohesion policy response to the financial crisis"

Informal meeting of Ministers for Housing and Regional Development
Marseille, 26 November 2008

Dear Ministers, ladies and gentlemen,

  1. Introduction
  • The current economic slowdown is a complex process which combines the impact of the global financial crisis, cyclical adjustment but also reflects structural weaknesses of European economy. Mobilization of all available means at all levels – European, national, regional and local – in a well orchestrated way can help European economy to come out of the crisis strengthened. Cohesion policy plays an important role in this aspect. I would like to outline how cohesion policy can help Member States and regions in their efforts to overcome the negative effects of the financial crisis. Let me present to you the concrete steps the Commission proposed to accelerate the implementation of the cohesion programmes.
  1. Role of the cohesion policy in the current financial crisis
  • Cohesion policy invests in the real economy. With the overall budget of 347 billion euro for the 2007-2013 period, some 70% of this amount (or 250 billion euro) is allocated to Lisbon priorities. By investing in priority infrastructure, productive capacities of businesses and in human capital potential, cohesion policy boosts short term internal demands while preserving the sustainable focus in the medium term. In this way it can play an important role in restoring confidence in real economy.
  • Therefore in the current financial crisis and upcoming economic downturn, cohesion policy is powerful instrument of stability as it provides secure source of financing and as it invests into mid and long term strategies upon which the regional and local partners can rely.
  1. On our road to recovery we propose exploiting to the maximum the existing programmes to accelerate the implementation
  • Although the impact of the crisis will be differentiated across the Member States, it is clear that the delivery of the cohesion policy should focus on speeding up and facilitating the implementation of cohesion programmes.
  • The Commission proposes concrete actions that can speed up the implementation on the ground. Firstly, it wants to address the bottleneck and lack of capacities in launching major projects in EU-12. To this aim the Commission intends, together with EIB, to significantly expand the use of Jaspers facility. Therefore the Commission proposes an increase of 25% in its technical assistance capacity from 2009 onwards. This will raise the total number of experts to more than 70, available to assist Member States in the technical preparation of major projects.
  • Secondly, the Commission works closely with the EIB and EIF to assist Member States and regions in promoting entrepreneurship, through using fully the possibilities offered by the JEREMIE initiative. These possibilities enlarge the spectrum of financial engineering products for SMEs, including guarantee, debt and equity instruments. Furthermore, the Commission, in close partnership with the EIB group, encourages Member States to strengthen the business environment for micro-credits.
  • In order to facilitate and enhance implementation of both JEREMIE and JESSICA initiative, the Commission, in co-operation with the EIF and the EIB and the Member States, will launch early next year two specific networking platforms as a forum for exchange of information, guidance and good practice.
  • My services are also in close dialogue with the programme authorities to identify how the existing regulations can be further exploited to address the immediate needs. The current legal framework already provides important flexibility. For example, programme managers can adjust European contribution to projects (going even up to 100% of the Community contribution) - provided that they remain within the average co-financing rate set in the regulation and in the programmes for the whole programming period.
  • The Commission is also ready to examine the possible changes in priorities and objectives of operational programmes with a view to accelerate the spending in the areas with more growth potential. It would also be an occasion to simplify the delivery mechanism and the content of the programmes.
  • In relation to the programmes under the previous programming period 2000-2006, I am aware of serious liquidity problems in some cases which put at risk the delivery of the objectives set at the outset. In this context, the Commission has examined positively a possibility to extend the final eligibility date in cases in which there are significant changes in the socio-economic situation and the labour market, as established in the Regulation. The extension will be of maximum 6 months.
  1. Changes in the legislative framework
  • In parallel to exploring the possibilities under the existing legal framework, the Commission has adopted today a proposal for important amendments to legislative framework. These proposals shall facilitate faster mobilisation of the European resources with a view to ensure the maximum efficiency to our common goal for more growth and jobs.
  • These targeted changes in legislative framework relate to four main areas: 1) pre-financing to programmes (or advances), 2) intermediate payments to major projects and state aid schemes, 3) eligibility of expenditure and 4) the financial engineering instruments. I would like to explain you more in detail these modifications:
  • First, in order to increase cash flow to the national, regional and local authorities, the Commission proposes to modify Article 82 of General Regulation and increase pre-financing (advances) of the programmes co-financed by ERDF and ESF by 2% for EU 12 Member States in 2009. For EU-15 Member States, the Commission proposes to pay the third tranche of 2,5% in 2009. These steps would provide immediate cash flow of 6,3 billion euro in 2009 for public investments within the financial envelope agreed for each Member State for the 2007-2013 period. These resources - which will be available at the beginning of 2009 - should be rapidly transferred to the final beneficiaries.
  • Secondly, in order to accelerate the reimbursements of expenditure related to major projects, the Commission suggests deleting the provision in Article 78 of General Regulation. This provision foresaw expenditure for major projects to be declared only once the major project had been adopted by the Commission. Instead, the Commission proposes to allow also expenditure for major projects not yet adopted by the Commission to be declared and reimbursed. This will significantly reduce the financial burden for the beneficiaries of major projects. Naturally, the programme authorities will still have to ensure that the expenditure is compliant with all the Community and national rules.
  • As regards state aid, the Commission proposes to simplify the treatment of advances paid to the beneficiaries by suppressing the conditions in Article 78 of General Regulation stating that the advances cannot exceed 35% of the total amount of the aid. In practice it means that the state aid advances paid to the beneficiaries could reach 100% of the aid. This change shall help SME's – the primary beneficiaries of these schemes – meet the crunch on the credit market and maintain liquidity while carrying the projects for which the aid is granted. Clearly, the advances have still to be subject to a bank guarantee and they have to be covered by expenditure paid by beneficiaries in project within the eligibility period.
  • Thirdly, in response to the request of Member States, the Commission suggests to widen the possibilities in Article 56 of General Regulation and include an option to declare overhead costs on a flat rate basis for all the Funds. This step would also mean important simplification of financial management of projects and decrease unnecessary burden to beneficiaries.
  • Fourthly, the Commission proposes changes to the legal provisions relating to the financial engineering instruments in order to further facilitate the contracting with EIB and EIF. In addition, in-kind contributions could be declared as eligible expenditure in all cases, either where creating or contributing to a financial engineering instrument.
  • Lastly, next week the Commission will put forward another proposal for modifications of the legal provisions relating to ERDF, to enlarge scope of actions in energy efficiency and renewable energies in housing.
  1. Conclusions
  • I can assure you that you have our full support in finding the ways to optimise the allocation of resources in the existing programmes using the flexibilities provided under the current framework. I also strongly believe that the legislative changes proposed will facilitate the implementation of the programmes and boost so much needed public investments. I expect that the modifications will be adopted by the Council following the assent of the European Parliament before the end of the legislative term. In order to reach this objective I count on a very constructive co-operation between the Council, the European Parliament and the Commission.
  • The legal modifications which I have announced today aim to provide a helping hand in the recovery process and accelerate the implementation of the programmes and projects. I am sure that we all agree that our policy can bring tangible results only if guided by simple rules which – as I know from my daily contacts with the national and regional authorities – is currently not always the case. I therefore believe that we need to reflect further on how to make the delivery mechanisms of the European cohesion policy simpler. In the coming months, the Commission will come up with further proposals for more simplification and I can assure you that we will stay in close contact with you. For example, the meetings of COCOF in January and February next year will provide occasions to discuss and exchange views.

Thank you for your attention,

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