Proposal for a COUNCIL REGULATION (EC) laying down general provisions on the Structural Funds (98/C 176/01) COM(98) 131 final - 98/0090 (AVC)

(Submitted by the Commission on 19 March 1998)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Union, and in particular Article 130d thereof,

Having regard to the proposal from the Commission,

Having regard to the assent of the European Parliament,

Having regard to the opinion of the Economic and Social Committee,

Having regard to the opinion of the Committee of the Regions,

(1) Whereas Article 130a of the Treaty states that, in order to strengthen its economic and social cohesion, the Community shall aim at reducing disparities between the levels of development of the various regions and the backwardness of the least favoured regions, including rural areas; whereas Article 130b provides for that action to be supported through the Structural Funds, the European Investment Bank (EIB) and the other existing financial instruments;

(2) Whereas Article 19 of Council Regulation (EEC) No 2052/88 (1), as last amended by Regulation (EC) No 3193/94 (2) of 24 June 1988 on the tasks of the Structural Funds and their effectiveness and on coordination of their activities between themselves and with the operations of the European Investment Bank and the other existing financial instruments, requires the Council to re-examine that Regulation on the basis of a Commission proposal before 31 December 1999; whereas, in order to improve the transparency of Community legislation, it is desirable to bring together all the provisions concerning the Structural Funds into a single Regulation and to repeal Regulation (EEC) No 2052/88 and Council Regulation (EEC) No 4253/88 (3), as last amended by Regulation (EC) No 3193/94;

(3) Whereas, by virtue of Article 5 of Protocol No 6 on special provisions for Objective 6 in the framework of the Structural Funds in Finland and Sweden, attached to the Act of Accession of Austria, Finland and Sweden, the provisions of that Protocol should be re-examined before the end of 1999, simultaneously with Regulation (EEC) No 2052/88;

(4) Whereas in order to increase the concentration and simplify the operation of the Structural Funds the number of priority Objectives should be reduced as compared with Regulation (EEC) No 2052/88; whereas those Objectives should be redefined as developing and promoting the structural adjustment of regions whose development is lagging behind, economic and social conversion of areas facing structural difficulties and adapting and modernising policies and systems of education, training and employment;

(5) Whereas in its efforts to strengthen economic and social cohesion through the Structural Funds the Community also seeks to promote the harmonious, balanced and sustainable development of economic activities, a high degree of competitiveness, a high level of employment, equal opportunities for men and women and a high level of protection and improvement of the environment; whereas those efforts should in particular help to eliminate inequalities and promote equal opportunities for men and women and to integrate the requirements of environmental protection into the design and implementation of the action of the Structural Funds;

(6) Whereas the European Regional Development Fund (ERDF) is the primary contributor to attaining the objective of developing and promoting the structural adjustment of the regions whose development is lagging behind and economic and social conversion of areas facing structural difficulties;

(7) Whereas the tasks of the European Social Fund (ESF) should be adjusted in order to take account of and to implement the Community's strategy for employment;

(8) Whereas the structural aspects of the common fisheries policy have been integrated as a full structural policy under the rules governing the Structural Funds since 1993; whereas implementation should continue under the Structural Funds through the Financial Instrument for Fisheries Guidance (FIFG);

(9) Whereas the Community has undertaken a reform of the common agricultural policy which include structural and accompanying measures for promoting rural development; whereas in this context the Guidance Section of the European Agricultural Guidance and Guarantee Fund (EAGGF) should continue to contribute to attaining the priority objective of the development and structural adjustment of the regions whose development is lagging behind, by improving the efficiency of the structures of production, processing and marketing of agricultural and forest products and developing local potential in rural areas; whereas the EAGGF Guarantee Section should also contribute to attaining the priority Objective of economic and social conversion of areas facing structural difficulties, in accordance with Council Regulation (EC) No [. . . .] on Support for Rural Development from the European Agricultural Guidance and Guarantee Fund (EAGGF);

(10) Whereas the specific rules applicable to each Fund are to be set out in the implementing decisions adopted under Articles 43, 125 and 130e of the Treaty;

(11) Whereas the criteria for designating eligible regions and areas should be specified; whereas, to this end, it is appropriate that the identification of the priority regions and areas at Community level should be based on the common system of classification of the regions, referred to as the 'Nomenclature of Territorial Statistical Units (NUTS)` established by the Statistical Office of the European Communities in cooperation with the national institutes for statistics;

(12) Whereas regions whose development is lagging behind should be defined as those whose per capita GDP is less than 75 % of the Community average; whereas, in order to ensure an effective concentration of assistance, the Commission should apply this criterion strictly, using objective statistical data; whereas the most remote regions and areas with a very low population density covered by Objective 6 as set out in Protocol No 6 attached to the Act of Accession of Austria, Finland and Sweden for the period 1995-99 should also be covered by Objective 1 under this Regulation;

(13) Whereas the areas undergoing economic and social conversion should be defined as those which include areas undergoing socio-economic change in the industrial and service sectors, declining rural areas, urban areas in difficulty and depressed areas dependent on fisheries; whereas this assistance should be properly concentrated on the most seriously affected parts of the Community; whereas these areas should be designated by the Commission acting on a proposal from the Member States and in close concertation with them;

(14) Whereas, to ensure the Community nature of the operations of the Funds, the areas undergoing socio-economic change in the industrial sector and the declining rural areas should be designated on the basis of objective indicators defined at Community level; whereas, furthermore, the indicative population covered by this Objective in the case of the industrial areas should constitute about 10 % of the population of the Community, 5 % in the case of the rural areas, 2 % in the case of the urban areas and 1 % in the case of the fisheries areas; whereas, in order to ensure that each Member State makes a fair contribution to the overall effort towards concentration, the maximum possible reduction in population covered by Objective 2, set out in this Regulation, in 2006 shall not exceed one-third compared to the coverage under Objectives 2 and 5b, set out in Regulation (EEC) No 2052/88, in 1999, including areas receiving transitional support under Objective 1 which fulfil the Objective 2 eligibility criteria;

(15) Whereas, in the interests of efficient programming, the regions whose development is lagging behind where per capita GDP is less than 75 % of the Community average should be the same as the areas assisted by the Member States under Article 92(3)(a) of the Treaty; whereas, similarly, in accordance with the communication of the Commission to the Member States on regional policy and competition policy, the areas undergoing economic and social change should correspond as closely as possible to the areas assisted by the Member States under point (c) of Article 92(3) of the Treaty, and the areas that the Member States accordingly propose as eligible for assistance towards economic and social conversion should essentially only be those areas notified to the Commission under point (c) of Article 92(3) of the Treaty;

(16) Whereas the objective of adapting and modernising policies and systems of education, training and employment is to provide financial assistance in the regions and areas not covered by the other two priority objectives; whereas this objective should also provide a frame of reference to ensure consistency with all operations for human resources in a given Member State;

(17) Whereas the regions covered by a priority objective in 1999 which no longer satisfy the eligibility criteria should receive a gradually declining level of transitional support;

(18) Whereas there should be provisions for allocating shares of the available resources; whereas these resources should be allocated annually, with some two-thirds being concentrated on regions whose development is lagging behind, including those receiving transitional support;

(19) Whereas the Commission should work out indicative allocations for 90 % of the available commitment appropriations under each of the priority objectives, basing itself entirely on appropriate objective criteria; whereas the 10 % of appropriations not allocated in this way should be allocated by the Commission at the mid-term point;

(20) Whereas 5 % of the total commitment appropriations available should be devoted to the Community initiatives, 1 % to innovative schemes and to technical assistance;

(21) Whereas the appropriations available to the Structural Funds should be indexed on a flat-rate basis for programming purposes and, if necessary, a technical adjustment to that indexation should be made before 31 December 2003;

(22) Whereas the main principles of the 1988 reform of the Structural Funds should continue to govern the Funds until 2006; whereas, however, experience to date has demonstrated the need for improvements to make these principles simpler and more transparent; whereas effectiveness should in particular be regarded as a fundamental principle;

(23) Whereas, if the operations of the Structural Funds are to be effective and transparent, the responsibilities of the Member States and of the Community should be precisely defined; whereas those responsibilities should be specified for each stage of programming, monitoring, evaluation and supervision; whereas, in accordance with the principle of subsidiarity, and without prejudice to the powers vested in the Commission, implementing and monitoring assistance should be primarily the responsibility of the Member States;

(24) Whereas the action of the Community should be complementary to, or intended to contribute to, the action of the Member States; whereas in order to ensure significant added value, partnership should be strengthened; whereas this concerns the regional and local authorities, the other competent authorities, including those responsible for the environment and for the promotion of equality between men and women, the economic and social partners and other competent bodies; whereas all the partners be associated in the preparation, monitoring and evaluation os assistance;

(25) Whereas the programming process should be laid down from original conception to final beneficiary, and should be facilitated in the Member States by guidelines drawn up by the Commission setting out the Community's priorities for the operations of the Structural Funds;

(26) Whereas programming should ensure the coordination of the Structural Funds with one another and with the other existing financial instruments and the EIB; whereas that coordination extends to combining grants and loans;

(27) Whereas the activities of the Funds and the operations which they help to finance should be compatible with the other Community policies and comply with Community legislation; whereas specific provisions should be laid down in this field;(28) Whereas simpler criteria and detailed rules for the verification and implementation of the principle of additionality should be laid down;

(29) Whereas the system of programming should be simplified by fixing a uniform lifetime for programming of seven years; whereas to that end the forms and number of assistance schemes should be limited and should normally consist of a single integrated assistance for each region, by making single programming documents the norm for some of the priority objectives and by including major projects and global grants in the other forms of assistance;

(30) Whereas, in order to reinforce the integrated approach to development, steps should be taken - with due regard to the specific features of the regions concerned - to ensure consistency between the operations of the various Funds and the Community priorities, the strategy for employment, the economic and social policies of the Member States and the regional policies of the Member States;

(31) Whereas, in order to speed up and simplify programming procedures, the responsibilities of the Commission should be distinguished from those of the Member States; whereas, therefore, provision should be made for the Commission, acting on a proposal from the Member States, to adopt the strategies and development priorities that are to govern the programming as well as the size of the financial contribution from the Community, and the implementing arrangements linked to them while the Member States are to decide on their application; whereas the content of the various forms of assistance should also be specified;

(32) Whereas such decentralised implementation of the operations of the Structural Funds by the Member States should provide sufficient guarantees as to the details and quality of implementation, the results of operations and their evaluation and sound financial management and its supervision;

(33) Whereas the Commission, in association with the EIB where appropriate, should approve major investment projects whose financial volume exceeds a specified sum with a view to evaluating their impact and the proposed use of Community resources;

(34) Whereas there should be provision for operations of Community interest carried out at the initiative of the Commission to supplement those implemented under the priority objectives;

(35) Whereas these Community initiatives should concentrate on promoting cross-border, transnational and inter-regional cooperation, to be financed by the ERDF, rural development, to be financed by the EAGGF Guidance Section, and the development of human resources in the context of equal opportunities, to be financed by the ESF; whereas consistency should be ensured between operations of cross-border, transnational and inter-regional cooperation and operations under Council Regulation (EEC) No 3906/89 (4), as last amended by Regulation (EC) No 753/96 (5);

(36) Whereas the Structural Funds should provide support for studies, pilot projects and exchanges of experience in order to promote innovative approaches and practices through simple and transparent implementation;

(37) Whereas, in order to strengthen the leverage effect of Community resources by favouring as far as possible recourse to private sources of financing and to take better account of the profitability of the projects, the forms of assistance available from the Structural Funds should be diversified and the rates of assistance differentiated with a view to promoting the Community interest, encouraging the use of a wide range of financial resources and limiting the contribution of the Funds by encouraging the use of appropriate forms of assistance; whereas, to that end, reduced rates of intervention should be established in the case of investments in firms and infrastructure projects which generate substantial revenue; whereas for the purpose of this Regulation, substantial net revenue should be tentatively defined as revenue higher than at least 25 % of the total cost of the investment concerned;

(38) Whereas, in accordance with the principle of subsidiarity, the rules on eligible expenditure should be the relevant national rules where there are no Community rules, although they may be laid down by the Commission where they are clearly needed for the uniform and equitable implementation of the Structural Funds across the Community; whereas however, the starting and closing dates for the eligibility of expenditure should be defined and it should be stipulated that investment projects may not undergo major modification; that, consequently, in order to ensure the efficiency and durable impact of the Funds' interventions, all or part of the assistance from a Fund should remain attached to an operation only where its nature or its implementation conditions do not undergo a substantial modification which would result in diverting the assisted operation from its original objectives;

(39) Whereas the rules and procedures for making commitments and payments should be simplified; whereas to that end budget commitments should be made once a year in accordance with the multiannual financial perspective and with the financing plan for assistance whilst payments should be made in the form of an advance followed by the reimbursement of actual expenditure incurred; whereas, in accordance with established case-law, any interest earned on the advance payment should be regarded as resources for the Member State concerned, and in order to strengthen the impact of the Funds, it should be allocated to the same purpose as the advance payment itself;

(40) Whereas sound financial management should be assured by providing that expenditure is to be duly justified and certified, and by linking payments to compliance with essential responsibilities as to the monitoring of programming, financial controls and the application of Community law;

(41) Whereas, to ensure sound management of Community resources, improvements should be made to the forecasting and implementing expenditure; whereas to this end the Member States should regularly send the Commission their forecasts of the use of Community resources, and any delay in financial implementation should give rise to repayment of advances and to automatic decommitments;

(42) Whereas, throughout the transitional period from 1 January 1999 to 31 December 2001, all references to the euro should normally be read as references to the euro as a monetary unit as referred to in the second sentence of Article 2 of Council Regulation (EC) No . . ./98;

(43) Whereas one way of ensuring that the operations of the Structural Funds are effective is efficient monitoring; whereas monitoring should be improved and responsibilities in this field better defined; whereas, in particular, management functions should be distinguished from monitoring functions;

(44) Whereas there should be a single managing authority for each assistance, with defined responsibilities; whereas these responsibilities should primarily include collecting data on outcomes and reporting this data to the Commission, ensuring sound financial implementation, organising evaluations and complying with obligations relating to publicity and Community law; whereas accordingly there should be provision for regular meetings between the Commission and the managing authority to monitor the assistance;

(45) Whereas it should be stipulated that the Monitoring Committees are national bodies supervising assistance, checking on how it is being managed by the managing authority, ensuring compliance with its own guidelines and implementing rules and reviewing evaluations;

(46) Whereas indicators and annual reports on implementation are essential for monitoring and should be better defined so as reliably to reflect the progress of assistance schemes and the quality of programming;

(47) Whereas, in order to guarantee efficient and correct implementation, the obligations of the Member States should be laid down with regard to management systems and controls, the certification of expenditure and the prevention, detection and correction of irregularities and of infringements of Community law;

(48) Whereas, without prejudice to the Commission's responsibilities for financial control, cooperation between the Member States and the Commission in this regard should be improved, in particular through provision for regular consultations between the Member States and the Commission to consider the measures taken by the Member States and to permit the Commission to request corrective measures where necessary;

(49) Whereas the responsibility of the Member States for the pursuit and correction of irregularities and infringements, and that of the Commission where the Member States do not comply with their obligations, should be specified;

(50) Whereas the effectiveness and impact of the operations of the structural Funds depends on improved and more thorough evaluation; whereas the responsibilities of the Member States and the Commission in this regard and arrangements to ensure the reliability of evaluation should be laid down;

(51) Whereas assistance schemes should be evaluated with a view to their preparation and adoption, revisions at the mid-term point and assessment of their impact, and the evaluation process should be incorporated into the monitoring of assistance; whereas to this end the aims and content of each stage of evaluation should be defined, and the evaluation of environmental aspects and of the impact on equal opportunities for men and women should be improved;

(52) Whereas, on the basis of the mid-term evaluation and withholding part of the original appropriations as a reserve, it becomes possible to allocate supplementary funding which depends on the performance of assistance; whereas such allocations should be based on objective, simple and transparent criteria which reflect efficiency and the quality of management and financial execution;

(53) Whereas a report is to be presented every three years on the progress made towards economic and social cohesion, which should include an analysis of the situation of the regions of the Community and their economic and social development;

(54) Whereas, in the interests of a good working partnership and the proper promotion of Community assistance, the broadest possible information and publicity about it should be provided; whereas the authorities responsible for managing assistance should be responsible for this aspect and for keeping the Commission informed of measures taken;

(55) Whereas rules should be laid down for the operation of the committees called upon to assist the Commission in implementing this Regulation;

(56) Whereas detailed transitional provisions should be laid down to allow preparation of new programming immediately on entry into force of this Regulation and to ensure that assistance to Member States is not interrupted pending the production of regional development plans and assistance schemes in accordance with the new system,

HAS ADOPTED THIS REGULATION:

TITLE I GENERAL PRINCIPLES

CHAPTER I OBJECTIVES AND TASKS

Article 1 Objectives

Community action through the Structural Funds, the Cohesion Fund, the European Agricultural Guidance and Guarantee Fund (EAGGF) Guarantee Section, the European Investment Bank (EIB) and the other existing financial instruments shall support the achievement of the general objectives set out in Articles 130a and 130c of the Treaty. The Structural Funds, the EIB and the other existing financial instruments shall each contribute in appropriate fashion to the attainment of the following three priority objectives:

1. promoting the development and structural adjustment of regions whose development is lagging behind, hereinafter referred to as 'Objective 1`;

2. supporting the economic and social conversion of areas facing structural difficulties, hereinafter referred to as 'Objective 2`;

3. supporting the adaptation and modernisation of policies and systems of education, training and employment, hereinafter referred to as 'Objective 3`. This Objective shall provide financial assistance outside the regions or areas covered by Objectives 1 and 2 and provide a policy frame of reference for all measures to promote human resources in a national territory without prejudice to the specific features of each region.

In pursuing these Objectives, the Community, through the Funds, shall promote the harmonious, balanced and sustainable development of economic activities, and in particular the development of competitiveness and economic innovation, especially in small and medium-sized enterprises, the development of employment and human resources, the protection and improvement of the environment, and the elimination of inequalities, and the promotion of equality, between men and women.

Article 2 Means and tasks

1. For the purposes of this Regulation, 'Structural Funds` shall mean the European Regional Development Fund (ERDF), the European Social Fund (ESF), the European Agricultural Guidance and Guarantee Fund (EAGGF) Guidance Section and the Financial Instrument for Fisheries Guidance (FIFG), hereinafter referred to as 'the Funds`.

2. In accordance with Articles 39, 123 and 130c of the Treaty, the Funds shall contribute, each according to the specific provisions governing its operations, to the attainment of Objectives, 1, 2 and 3, as follows:

(a) Objective 1: ERDF, ESF, EAGGF Guidance Section and FIFG;

(b) Objective 2: ERDF, ESF and FIFG;

(c) Objective 3: ESF.

3. The EAGGF Guarantee Section shall also contribute to the attainment of Objective 2 in accordance with Regulation (EC) No . . . concerning the support from EAGGF to rural development.

4. Each Fund shall contribute to financing Community initiatives and to supporting innovative measures and technical assistance.

Technical assistance measures shall be carried out within the framework of the programming defined in Articles 12 to 26 or at the initiative of the Commission under Article 22.

5. The other resources of the Community budget which may be used to attain the Objectives referred to in Article 1 are in particular those allocated to other structural measures and to the Cohesion Fund.

The Commission and the Member States shall ensure that the operations of the Funds are consistent with other Community policies and operations, in particular in the areas of employment, equality between men and women, social policy and vocational training, the common agricultural policy, the common fisheries policy, transport and the trans-European networks and the incorporation of the requirements of environmental protection into the definition and implementation of the operations of the Funds.

6. The EIB shall cooperate in attaining the Objectives set out in Article 1, in accordance with the procedures laid down in its Statute.

The other existing financial instruments which may contribute, each according to the specific provisions governing its operations, to attaining the Objectives referred to in Article 1 include the European Investment Fund and the European Atomic Energy Community (Euratom) (loans, guarantees), hereinafter 'the other financial instruments`.

CHAPTER II GEOGRAPHICAL ELIGIBILITY FOR THE PRIORITY OBJECTIVES

Article 3 Objective 1

1. The regions covered by Objective 1 shall be regions corresponding to level II of the Nomenclature of Territorial Statistical Units (NUTS level II) whose per capita GDP, measured in purchasing power parities and calculated on the basis of Community figures for the last three years available, is less than 75 % of the Community average.

The most remote regions (the French overseas departments, the Azores, the Canary Islands and Madeira) and the areas eligible under Objective 6 for the period 1995-99 pursuant to Protocol No 6 to the Act of Accession of Austria, Finland and Sweden shall also be covered by this Objective.

2. The Commission shall draw up the list of regions covered by Objective 1 strictly in accordance with the first subparagraph of paragraph 1, without prejudice to Article 6(1).

This list shall be valid for seven years from 1 January 2000.

Article 4 Objective 2

1. The regions covered by Objective 2 shall be those areas facing structural problems of socio-economic conversion whose population or area are sufficiently substantial. They shall include areas undergoing socio-economic change in the industrial and service sectors, declining rural areas, urban areas in difficulty and depressed areas dependent on fisheries.

2. The Commission and the Member States shall seek to ensure that assistance is genuinely concentrated on the areas most seriously affected and at the most appropriate geographical level. The population of the areas referred to in paragraph 1 shall not exceed 18 % of the total population of the Community. Accordingly, the Commission shall lay down a population ceiling for each Member State on the basis of the following factors:

(a) the total population in the NUTS III areas of each Member State which meet the criteria referred to in paragraphs 5 and 6;

(b) the severity of the structural problems at national level in each Member State as compared with the other Member States concerned. Such severity shall be assessed on the basis of total unemployment and long-term unemployment outside the regions eligible under Objective 1;

(c) the need to ensure that each Member State makes a fair contribution to the overall concentration effort as defined in this subparagraph; the maximum reduction in the population covered by Objective 2, including the areas referred to in the second subparagraph of Article 6(1), shall not exceed one-third compared to the population covered by Objectives 2 and 5b as set out in Regulation (EEC) No 2052/88, in 1999.

The Commission shall provide the Member States with all the information it has available about the criteria set out in paragraphs 5 and 6.

3. Subject to the ceilings referred to in paragraph 2, the Member States shall propose to the Commission a list of significant areas representing:

(a) the NUTS level III regions, or the most seriously affected areas within each of these regions, which satisfy either the criteria set out in paragraph 5 or those set out in paragraph 6;

(b) the other areas most seriously affected under the other criteria set out in paragraphs 7, 8 and 9; for the application of these criteria, Member States may also take as a reference basis the specific realities influencing the actual activity rate or employment rate of the population.

The Member States shall provide the statistics and other information, at the most appropriate geographical level, which the Commission requires to evaluate these proposals.

4. On the basis of the information referred to in paragraph 3, the Commission, in close concertation with the Member Sate concerned, shall draw up the list of areas eligible under Objective 2 with due regard to national priorities without prejudice to Article 6(2).

The industrial and rural areas meeting the criteria in paragraphs 5 and 6 must contain at least 50 % of the population covered by Objective 2 in each Member State, except where duly justified by objective circumstances.

5. The industrial areas referred to in paragraph 1 shall represent or belong to a NUTS level III territorial unit which satisfies the following criteria:

(a) an average rate of unemployment over the last three years above the Community average;

(b) a percentage share of industrial employment in total employment equal to or greater than the Community average in any reference year from 1985 onwards;

(c) an observable fall in industrial employment compared with the reference year chosen in accordance with (b).

6. The rural areas referred to in paragraph 1 must represent or belong to a NUTS level III territorial unit which satisfies the following criteria:

(a) either a population density of less than 100 people per km2, or a percentage share of agricultural employment in total employment which is equal to, or higher than, twice the Community average in any reference year from 1985;

(b) either an average unemployment rate over the last three years above the Community average, or a decline in population since 1985.

7. The urban areas referred to in paragraph 1 shall mean densely populated areas which also meet at least one of the following criteria:

(a) a rate of long-term unemployment higher than the Community average;

(b) a high level of poverty, including precarious housing conditions;

(c) a particularly damaged environment;

(d) a high crime rate;

(e) a low level of education among the population.

8. The areas dependent on fisheries referred to in paragraph 1 shall mean coastal areas in which the number of jobs in the fisheries industry as a percentage of total employment is significant and which are facing structural socio-economic problems relating to the restructuring of the fisheries sector which result in a significant reduction in the number of jobs in that sector.

9. Community assistance may extend to areas whose population or area is significant which fall into one of the following categories:

(a) areas meeting the criteria set out in paragraph 5 which are adjacent to an industrial area, areas meeting the criteria set out in paragraph 5 which are adjacent to a rural area, areas which meet either the criteria set out in paragraph 5 or those set out in paragraph 6 which are adjacent to a region covered by Objective 1;

(b) rural areas with socio-economic problems arising from the ageing of the agricultural working population;

(c) areas facing or threatened by a high level of unemployment arising from an ongoing or planned restructuring of an activity of key importance for the agricultural, industrial or service sector.

10. Any one area may be eligible for assistance under only one of Objectives 1 or 2.

11. The list of areas shall be valid for seven years from 1 January 2000.

Where there is a serious crisis in a region, the Commission, acting on a proposal from a Member State, may amend the list of areas during 2003 in accordance with paragraphs 1 to 10 without increasing the proportion of the population within each region referred to in Article 12(2).

Article 5 Objective 3

The areas eligible for financing under Objective 3 shall be those not covered by objectives 1 and 2, without prejudice to Article 6(2).

Article 6 Transitional support

1. Notwithstanding Article 3, the regions covered by Objective 1 in 1999 under Regulation (EEC) No 2052/88 which are not referred to in the second subparagraph of Article 3(1) and Article 3(2) of this Regulation shall continue to receive support from the Funds under Objective 1 on a transitional basis from 1 January 2000 to 31 December 2005.

At the time of adoption of the list referred to in Article 3(2), the Commission shall draw up in accordance with Article 4(5) and (6) a list of the NUTS level II areas belonging to those regions which are to receive support from the Funds under Objective 1 on a transitional basis in 2006.

The areas of the regions not on the list referred to in the second subparagraph shall continue to receive in 2006 support from the ESF, FIFG and the EAGGF Guidance Section only, within the same form of assistance.

2. Notwithstanding Article 4, the regions covered by Objectives 2 and 5b in 1999 under Regulation (EEC) No 2052/88 which are not on the list referred to in Article 4(4) of this Regulation shall receive support from the ERDF, from 1 January 2000 to 31 December 2003, under Objective 2 under this Regulation, on a transitional basis.

Such areas shall receive support from 1 January 2000 to 31 December 2006 from the ESF under Objective 3 and from the EAGGF Guarantee Section under its support to rural development and it structural measures in the fisheries sector in all parts of the Community.

CHAPTER III FINANCIAL PROVISIONS

Article 7 Resources and concentration

1. The resources available for commitment from the Funds for the period 2000 to 2006 shall be EUR 218,4 billion at 1999 prices.

The annual breakdown of those resources is shown in the Annex.

2. A considerable proportion of budgetary resources shall be concentrated on the regions covered by Objective 1. The resources available for commitment for those regions shall be about two-thirds of the appropriations available to the Funds.

3. Using transparent procedures, the Commission shall make indicative breakdowns by Member State of 90 % of the commitment appropriations available for the programming referred to in Articles 12 to 18, taking full account, for Objectives 1 and 2, of one or more objective criteria similar to those covered by Regulation (EEC) No 2052/88, namely: eligible population, regional prosperity, national prosperity and the relative severity of the structural problems, especially the level of unemployment.

For Objective 3, the breakdown by Member States shall be based principally on the eligible population, the employment situation and the severity of the problems, such as social exclusion, education and training levels, and participation of women in the labour market.

These breakdowns shall distinguish allocations of appropriations to regions and areas benefiting from transitional support. These allocations shall be determined in accordance with the criteria referred to in the first subparagraph. The annual breakdown of these appropriations shall be degressive.

4. The 10 % of commitment appropriations not allocated under the indicative breakdown referred to in paragraph 3 shall be allocated at the mid-term point by the Commission in accordance with Article 43.

5. For the period referred to in paragraph 1, 5 % of the commitment appropriations for the Structural Funds referred to in paragraph 1 shall be devoted to funding the Community initiatives. 1 % of the appropriations referred to in paragraph 1 shall be devoted to funding innovative measures and technical assistance as defined in Articles 21 and 22.

6. For the purpose of their programming and subsequent inclusion in the Community budget, the sums referred to in paragraphs 1 and 2 shall be indexed as from 1 January 2000 at 2 % per year.

Indexation of the allocations for 2004 to 2006 shall be reviewed, if necessary, by 31 December 2003 at the latest for technical adjustment by the Commission on the basis of the latest economic information available. The difference relative to the initial programming shall be reallocated for inclusion in the sum referred to in paragraph 4.

CHAPTER IV ORGANISATION

Article 8 Complementarity and partnership

1. Community action shall complement or contribute to comparable national operations. They shall be drawn up in close consultations, hereinafter referred to as the 'partnership` between the Commission and the Member State, together with:

(a) the regional and local authorities and the other competent authorities;

(b) the economic and social partners;

(c) the other competent bodies.

Each Member State shall, within its own institutional, legal and financial system, choose and designate the most representative partners at national, regional, local or other level referred to in the first indent through as wide an association as possible, including where appropriate the bodies active in the field of environment and in the promotion of equality between men and women.

All the designated parties, hereinafter referred to as the 'partners` shall be partners pursuing a common goal.

2. The Member States shall ensure the association of each of the partners; such association shall cover all stages of programming at the appropriate territorial level. Partnership shall cover the preparation, financing, monitoring and evaluation of assistance.

3. In pursuance of the principle of subsidiarity, and without prejudice to the powers vested in the Commission, the implementation of assistance shall be primarily the responsibility of the Member States at the appropriate territorial level.

4. The Member States shall cooperate with the Commission to ensure that Community funds are used in accordance with the principle of sound financial management.

5. Each year, the Commission shall consult the European-level organisations representing the social partners about the structural policy of the Community.

Article 9 Programming and coordination

1. For the purposes of this Regulation:

(a) 'programming` means the organising, decision-making and financing process carried out in a number of stages to implement on a multiannual basis the joint action of the Community and the Member States to attain the Objectives referred to in Article 1;

(b) 'development plan` means the analysis of the situation prepared by a Member State in the light of the objectives referred to in Article 1 and the priority needs for attaining those Objectives, together with the strategy, the planned action priorities, their specific goals and the related indicative financial resources;

(c) 'Community support framework` means the document approved by the Commission following appraisal of the development plan submitted by a Member State and containing the strategy and priorities for action, their specific objectives, the contribution of the Funds and the other financial resources. This document shall be divided into priorities and implemented by means of one or more operational programmes;

(d) 'assistance` means the forms of assistance provided by the Funds, namely:

(i) operational programmes or single programming documents;

(ii) Community initiative programmes;

(iii) support for technical assistance and innovative measures;

(e) 'operational programme` means the document approved by the Commission to implement a Community support framework, composed of a consistent set of priorities which comprise multiannual measures and which may be implemented through recourse to one or more Funds, to one or more of the other existing financial instruments and to the EIB. An 'integrated operational programme` means an operational programme financed by more than one Fund;

(f) 'single programming document` means a single document approved by the Commission and containing the same information to be found in a Community support framework and operational programme;

(g) 'priority` means one of the priorities of the strategy adopted in a Community support framework or by way of assistance. To it is assigned a contribution from the Funds and other financial instruments and the relevant financial resources of the Member State and a set of specified targets;

(h) 'measure` means the means by which a priority is implemented over several years which enables operations to be financed. Any aid scheme under Article 92 of the Treaty or any aid granted by bodies designated by the Member States is defined as a measure;

(i) 'operation` means any project carried out by the final beneficiaries of assistance;

(j) 'final beneficiaries` means the bodies and public or private firms responsible for commissioning operations. In the case of aid schemes under Article 92 of the Treaty and in the case of aid granted by bodies designated by the Member States, the final beneficiaries are the bodies which grant the aid.

2. Coordination between the various Funds shall be carried out in particular through:

(a) the guidelines referred to in paragraph 4;

(b) the Community support frameworks;

(c) financial programming and the implementation of assistance;

(d) the monitoring and evaluation of assistance under an objective.

3. The Commission shall, in a manner consistent with the principle of partnership, ensure coordination of assistance from the different Funds among themselves and with the assistance from the EIB and other existing financial instruments.

In order to maximise the stimulus provided by the budget resources deployed, making use of appropriate financial instruments, the Community assistance provided in the form of grants shall be combined in an appropriate way with loans. This combination shall be determined in conjunction with the EIB when the Community support framework or single programming document is being drawn up. It shall take account of the balance in the proposed financing plan, the contribution from the Funds and the development goals pursued.

4. Before the submission of development plans and before the mid-term review referred to in Article 41, the Commission shall draw up guidelines setting out Community priorities for each of the Objectives referred to in Article 1. These guidelines shall be published in the Official Journal of the European Communities.

The Member States and the Commission shall take account of the guidelines at the various stages of programming.

Article 10 Additionality

1. In order to achieve a genuine economic impact, the appropriations of the Funds may not replace public or other equivalent structural expenditure.

2. In the Community support frameworks and single programming documents for Objective 1, the Commission and the Member State concerned shall determine the level of public or similar structural expenditure that the Member State is to maintain in all the regions covered by Objective 1 during the programming period.

In the single programming documents for Objectives 2 and 3, the Commission and the Member State concerned shall determine the level of expenditure on active labour market policy which the Member State is to maintain at national level during the period 2000-2006.

As a general rule, the average annual level of expenditure referred to in the first and second subparagraphs must be at least equal to the level achieved in the programming period covered by Regulation (EEC) No 2052/88.

3. Additonality shall be verified at three points during the programming period:

(a) an ex ante verification when the Community support frameworks and single programming documents are adopted, to provide a baseline for the whole programming period;

(b) a mid-term verification by 31 December 2003, following which the Commission and the Member State may agree to revise the level of structural expenditure to be attained if the economic situation has resulted in changes in public revenue or in employment in the Member State which diverge significantly from expectations at the time of the ex ante verification;

(c) a verification by 31 December 2005.

The Member State shall provide the Commission with appropriate information at the time when development plans are submitted and when the mid-term verification and the verification before 31 December 2005 are made.

Independently of those verifications, the Member State shall inform the Commission at any point during the programming period of developments likely to impair its ability to maintain the level of expenditure referred to in paragraph 2.

Article 11 Compatibility

Operations financed by the Funds or receiving assistance from the EIB or from another financial instrument shall conform to the provisions of the Treaty, to instruments adopted under it and to Community policies, in particular those concerning the rules on competition and especially those on State aid, on the award of public contracts, on environmental protection and improvement and on the elimination of inequalities and the promotion of equality between men and women.

TITLE II PROGRAMMING

CHAPTER I GENERAL PROVISIONS CONCERNING OBJECTIVES 1, 2 AND 3

Article 12 Geographical coverage

1. Regional development plans submitted under Objective 1 shall, as a general rule, cover a single region at NUTS level II. However, Member States may submit a general development plan for all their regions included in the list referred to in Article 3(2) and 6(1), provided that such plans comprise the features listed in Article 15.

2. Regional conversion plans submitted under Objective 2 shall normally comprise all the areas covered by Objective 2 in a single NUTS level II region, included in the list referred to in Article 4(4) and Article 6(2). Plans shall distinguish between operations in areas covered by Objective 2 and operations elsewhere and shall demonstrate that the operations are consistent with policies being carried out at regional level.

3. Development plans submitted under Objective 3 shall cover the whole territory of a Member State in respect of assistance outside the regions or areas covered by Objectives 1 and 2, and shall provide, for the whole of the national territory, a framework of reference for developing human resources without prejudice to specific regional circumstances.

Article 13 Duration and revision

1. Each development plan, Community support framework, operational programme and single programming document shall cover a period of seven years, without prejudice to Article 6.

The programming period shall begin on 1 January 2000.

2. Development plans, Community support frameworks, operational programmes and single programming documents shall be revised in accordance with this Chapter following the mid-term evaluation referred to in Article 41 and the allocation of the performance reserve referred to in Article 43.

They may also be similarly revised in the event of significant changes in the socio-economic situation and the labour market.

Article 14 Preparation and approval

1. The development plans for Objectives 1, 2 and 3 shall be drawn up by the national, regional or other authorities designated for this purpose by the Member State and submitted by the Member State to the Commission once the opinions of the partners have been secured.

Each partner shall express its opinion within a period of time consistent with the deadline set under the third subparagraph.

Unless otherwise agreed with the Member State concerned, development plans shall be submitted not later than three months after the establishment of the lists of eligible areas referred to in Article 3(2) and Article 4(4).

2. The Commission shall appraise the plans to determine whether they are consistent with the aims of this Regulation, including the framework of reference referred to in Article 1(3), with the guidelines referred to in Article 9(4), with other Community policies and with Article 40. The Commission shall take account of the arrangements taken to associate the partners and of their opinions issued during the consultations referred to in paragraph 1.

The Commission shall also appraise each Objective 3 plan submitted to determine whether the measures planned are consistent with the national plan to implement the European strategy for employment referred to in point (b) of Article 15(2).

3. On the basis of the development plans, the Commission shall draw up the Community support frameworks relating to Objective 1, in agreement with the Member State concerned and in accordance with the procedures laid down in Articles 47 to 50. The EIB shall be involved in the preparation of the Community support frameworks. The Commission shall take a decision on the contribution from the Funds not later than six months after receiving the relevant plan or plans provided they contain all the information referred to in Article 15.

The Commission shall appraise the proposed operational programmes for Objective 1 submitted by the Member States to determine whether they are consistent with the aims of the corresponding Community support framework and compatible with other Community policies. It shall adopt a decision on the contribution of the Funds in accordance with Article 27(1) and in agreement with the Member State concerned, provided that the proposals include all the information referred to in Article 17.

In order to expedite the examination of applications and the implementation of programmes, the Member States may include in their plans applications for financial contributions to operational programmes. When adopting its decision an a Community support framework, the Commission shall also approve, in accordance with Article 27(1), the operational programmes submitted at the same time as the development plans, provided that they include all the information referred to in Article 17.

Where Article 15(1) applies, the Commission shall adopt a single decision on a single programming document covering the points referred to in Articles 16 and 17 and the contribution of the Funds referred to in Article 27(1).

4. On the basis of the development plans, the Commission shall draw up the single programming documents for Objectives 2 and 3, in agreement with the Member State concerned and in accordance with the procedures laid down in Articles 47 to 50. The EIB shall be involved in the preparation of the single programming documents. The Commission shall take a single decision on the contribution of the Funds pursuant to Article 27(1), not later than six months after receiving the relevant plan providing it contains all the information referred to in Articles 16 and 17.

5. Within three months following the Commission decision approving an operational programme or single programming document, the managing authority shall adopt all supplementary programming information, with the agreement of the Monitoring Committee referred to in Article 34, which it shall send to the Commission within one month of the Commission's decision, in a single document, referred to hereinafter as the 'programming supplement`.

6. The Commission decisions on a Community support framework or single programming document shall be published in the Official Journal of the European Communities. At the request of the European Parliament, the Commission shall transmit to it these decisions and the Community support frameworks it has approved.

CHAPTER II CONTENT OF THE PROGRAMMING FOR OBJECTIVES 1, 2 AND 3

Article 15 Development plans

1. In the case of Objective 1, where the Community allocation is less than or does not substantially exceed EUR 1 billion, the Member States shall submit a plan as a single document containing the information referred to in paragraphs 2, 3 and 4 and in Article 17.

In the case of Objectives 2 and 3, the Member States shall likewise submit a plan as a single document containing this information.

In any case, the plans shall distinguish between the financial packages allocated to areas receiving transitional support and those allocated to the other areas covered by Objectives 1 or 2.

2. The plans submitted under Objectives 1, 2 and 3 shall take account of the guidelines referred to in Article 9(4) and the priorities expressed by the regions concerned, and shall include:

(a) quantified description of the current situation either with regard to disparities, gaps and potential for development in the regions covered by Objective 1, or in terms of conversion in the areas covered by Objective 2 or in terms of the development of human resources and employment polices in the Member State and the areas covered by Objective 3; the financial resources deployed and the main results of operations undertaken in the previous programming period with regard to the evaluation results available;

(b) a description of an appropriate strategy to attain the Objectives referred to in Article 1 and the priorities selected for the development and sustainable conversion of regions and areas, including rural areas, and the related development of human resources or the adaptation and modernisation of policies and systems for education, training and employment; the result of the ex ante evaluation referred to in Article 40;

In addition to those items listed, the plans submitted under Objective 3 shall ensure the overall consistency of the strategy for employment and development of human resources throughout the territory of the Member State concerned, with particular regard to the national plan for implementing the European strategy on employment; they shall contain a description of the main aims of that strategy and the main means of attaining them;

(c) an indication of the planned use of the financial contribution from the Funds, the EIB and the other financial instruments; in the case of Objective 1, this information shall be supplemented by an indicative overall financing table summarising the national public and private and Community financial resources allocated and corresponding to each priority adopted in the plan; the expected requirement for technical assistance;

(d) the results of the consultations carried out in accordance with Article 14(1) and the arrangements taken and provisions envisaged to involve the partners.

3. For regions covered by Objective 1, the development plans shall include all measures for economic and social conversion, the development of human resources having regard to the frame of reference referred to in point 3 of Article 1, and rural development.

Where a Member State is covered in its entirety by Objective 1, the development plan shall cover the items listed in the second subparagraph of point (b) of paragraph 2.

4. Member States shall indicate the particulars relating to each Fund, including the amount of the financial contribution requested and an outline of the operational programmes planned with particular regard to their specific aims and the main types of measure planned.

Article 16 Community support frameworks for Objective 1

1. Community support frameworks under Objective 1 shall provide coordination of all Commission structural assistance in the regions concerned, including, in accordance with point 3 of Article 1, assistance for the development of human resources, in particular where a Member State is covered in its entirety by Objective 1.

2. Each Community support framework shall include:

(a) a statement of the strategy and priorities for joint Community and national action, their specific objectives, quantified where they lend themselves to quantification, an evaluation of the expected impact in accordance with Article 40, together with information on their consistency with the Community guidelines referred to in Article 9(4) and economic policies, the strategy for employment and the development of human resources and, where appropriate, the regional policies of the Member State concerned;

(b) an indication of the nature and the duration of the operational programmes not decided at the same time as the Community support framework, including their specific aims and the priorities selected;

(c) an indicative financing plan specifying, in accordance with Articles 27 and 28, for each priority and each year the financial allocation envisaged for the contribution of each Fund, the EIB, the other financial instruments where they contribute directly to the financing plan concerned and total amount of eligible national public and private funding relating to the contribution of each Fund;

this financing plan shall distinguish the funding planned for the regions receiving transitional support;

without prejudice to the degressivity referred to in the third subparagraph of Article 7(3), the total contribution of the Funds planned for each year for each Community support framework shall be compatible with the relevant financial perspective;

(d) an ex ante verification of additionality in accordance with Article 10 and appropriate information concerning the transparency of the relevant financial flows, in particular from the Member State concerned to the beneficiary regions;

(e) the provisions for implementing a Community support framework shall include:

(i) designation by the Member State of a single authority or body responsible for managing the Community support framework as referred to in Article 33;

(ii) the definition and utilisation in cooperation with the Commission of compatible computer systems for management, monitoring and evaluation. These systems must ensure effective management and reliability of the information on implementation and results and comply with Articles 35, 41 and 42;

(iii) the planned arrangements for involving the partners;

(f) where appropriate, information on the resources required for measures to prepare, monitor and evaluate assistance.

Article 17 Operational programmes for Objective 1

1. As a general rule, assistance covered by a Community support framework for Objective 1 shall be provided in the form of an integrated operational programme for each region.

2. Each operational programme shall contain:

(a) the specific priorities of the operational programme, their consistency with the relevant Community support framework, their quantified specific targets, an evaluation of the impact expected in accordance with Article 40 and their consistency with the guidelines referred to in Article 9(4);

(b) a description of the measures planned to implement the priorities, including the information needed to check the compliance with aid schemes under Article 92 of the Treaty; where appropriate, the measures required to prepare, monitor and evaluate the operational programme;

(c) a financing plan specifying for each priority and each year, in accordance with Article 27, the financial allocation envisaged for the contribution of each Fund, the EIB, the other financial instruments and the total amount of eligible national public and private funding relating to the contribution of each Fund;

this financing plan shall distinguish the funding planned for the regions receiving transitional support.

without prejudice to the degressivity referred to in the third subparagraph of Article 7(3), the total contribution of the Funds planned for each year shall be compatible with the relevant financial perspective;

(d) the provisions for implementing an operational programme shall include:

(i) designation by the Member State of a single authority or body responsible for managing the operational programme as referred to in Article 33;

(ii) a description of the arrangements for managing the operational programme;

(iii) a description of the systems for monitoring and evaluation;

(iv) the definition and utilisation in cooperation with the Commission of compatible computer systems for management, monitoring and evaluation. These systems shall ensure effective management, reliability and availability of the information on implementation and results, and shall comply with Articles 35, 41 and 42;

(v) a definition of the rules on the mobilisation and circulation of funding to ensure that flows are transparent;

(vi) the specific measures for checking on the operational programme, including a definition of the roles of the parties;

(vii) the respective roles and responsibilities of the partners in monitoring and evaluating the operational programme.

3. The programming supplement shall contain:

(a) the measures implementing the corresponding priorities in the operational programme; their ex ante evaluation under Article 40; the relevant monitoring indicators in accordance with Article 35;

(b) definition of the types of final beneficiary of measures;

(c) the criteria for selecting the operations financed under each measure, including the method for appraising their viability in advance;

(d) the financing plan specifying, for each measure, in accordance with Articles 27 and 28, the financial allocation envisaged for the contribution of each Fund, the EIB, the other existing financial instruments and the amount of eligible national public and private funding relating to the contribution of the Funds; the percentage contribution of a Fund to a measure shall be determined in accordance with Article 28 and the total amount of community funds allocated to the priority concerned;

this financing plan shall distinguish the funding planned for the regions receiving transitional support;

(e) the measures planned to ensure adequate publicity for the operational programme in accordance with Article 45.

Where a number of partners are contributing to the finance of assistance at national, regional, local or other level, their respective commitments shall be the subject of an agreement among them designed to ensure that the funds are made available efficiently and in accordance with the plan for financing. This agreement shall be attached to the programming supplement.

Article 18 Single programming documents for Objectives 2 and 3

In accordance with the second subparagraph of Article 15(1), assistance under Objectives 2 and 3 shall take the form of single programming documents.

An Objective 2 single programming document shall provide coordination of all Community structural assistance, including assistance for the development of human resources and rural development, in the areas covered by Objective 2 within each region referred to in Article 12(2), and including areas receiving transitional support from the ERDF.

An Objective 3 single programming document shall provide coordination of all Community structural assistance for the development of human resources in the areas referred to in Article 5, including the areas receiving support from the ESF under the second subparagraph of Article 6(2).

CHAPTER III COMMUNITY INITIATIVES

Article 19 Content

1. The Community initiatives shall cover the following fields:

(a) cross-border, transnational and inter-regional cooperation intended to encourage the harmonious and balanced development and spatial planning of the European territory;

(b) rural development;

(c) trans-national cooperation on new means of combatting all forms of discrimination and inequalities in access to the labour market.

2. Programmes approved under the first two indents of paragraph 1 may cover areas other than those referred to in Articles 3 and 4.

Article 20 Preparation, approval and implementation

1. In accordance with the procedure referred to in Article 51, and after notifying them for information to the European Parliament, the Commission shall lay down guidelines describing, for each initiative, the aims scope and the appropriate method of implementation. Those guidelines shall be published in the Official Journal of the European Communities.

2. Each area referred to in Article 19(1) shall be financed by a single Fund, either the ERDF, the EAGGF Guidance Section or the ESF. The decision on the contribution of a Fund may amplify the scope of each Fund as defined in the Regulations specific to each Fund, but without broadening it, to include all measures required to implement the Community initiative programme concerned.

3. On the basis of proposals drawn up in accordance with the guidelines and the ex ante evaluation carried out in accordance with Article 40, the Commission shall decide on Community initiative programmes in accordance with Article 27.

4. The Community initiative programmes shall be revised by the Commission after the mid-term evaluation referred to in Article 41.

CHAPTER IV INNOVATIVE MEASURES AND TECHNICAL ASSISTANCE

Article 21 Innovative measures

1. At the initiative of the Commission, and subject to a ceiling of 0,7 % of their respective annual funding, the Funds may finance innovative measures at Community level. These shall include studies, pilot projects and exchanges of experience.

Such innovative measures shall contribute to the preparation of innovative methods and practices designed to improve the quality of assistance under Objectives 1, 2 and 3. They shall be implemented in a simple, transparent fashion and in accordance with the principles of sound financial management.

2. Each field for pilot projects shall be financed by one fund only. The decision on the contribution of a Fund may amplify the scope of each Fund as defined in the Regulations specific to each fund, but without broadening it, to include all measures required to implement the pilot project concerned.

Article 22 Technical assistance

At the initiative or on behalf of the Commission, and subject to a ceiling of 0,3 % of their respective annual allocation, the Funds may finance the preparatory, monitoring, evaluation and checking measures necessary for implementing this Regulation. These shall include:

(a) studies, including studies of a general nature, concerning the operations of the Funds;

(b) measures of technical assistance, the exchange of experience and information aimed at the partners, the final beneficiaries of assistance from the Funds and the general public;

(c) the installation, operation and interconnection of computerised systems for management, monitoring and evaluation.

Article 23 Approval of innovative measures and technical assistance

The Commission shall appraise applications for a contribution from the Funds under Articles 21 and 22 on the basis of the following details:

(a) a description of the proposed assistance, its scope, including geographical coverage, and specific aims;

(b) an ex ante evaluation;

(c) the bodies to be responsible for implementing the assistance and the beneficiaries;

(d) the timetable and financing plan, including contributions from any other source of Community finance;

(e) provisions to ensure efficient and correct implementation;

(f) any other information necessary to verify compatibility with the Community policies and with the guidelines referred to in Article 9(4).

The Commission shall approve the contribution of the Funds when this information enables it to appraise the application.

CHAPTER V DEFINITION OF MAJOR PROJECTS

Article 24 Definition

As part of any assistance, the Funds may finance expenditure in respect of major projects, namely those:

(a) which comprise an economically indivisible series of works fulfilling a precise technical function and which have clearly identified aims, and,

(b) whose total cost taken into account in determining the contribution of the funds exceeds EUR 50 million.

Article 25 Approval and implementation

1. During the implementation of assistance, where a Member State or managing authority proposes that the Funds contribute to a major project, it shall inform the Commission in advance and provide the following information:

(a) the body to be responsible for implementation;

(b) the nature of the investment and a description of it, its financial volume and location;

(c) the timetable for implementing the project;

(d) a cost-benefit analysis, including financial costs and benefits, and a risk analysis; for investments in infrastructure, an analysis of the socio-economic costs and benefits, including an indication of the likely rate of use;

(e) information on the economic viability of the project; in the case of investment in production facilities, the analysis shall include the market prospects in the sector concerned and an analysis of the likely return on the project;

(f) the direct and indirect effects on employment;

(g) information allowing an evaluation to be made of the environmental impact and the implementation of the precautionary principle and the principles that preventive action should be taken, that environmental damage should as a priority be rectified at source and that the polluter should pay, and compliance with the Community rules on the environment;

(h) information needed to assess compliance with competition rules, especially rules on State aid;

(i) in the case of investments in infrastructure, the foreseeable impact on the development or conversion of the region concerned, and the application of community rules on public contracting;

(j) an indication of the influence of the contribution of the funds on whether the project will be implemented;

(k) the financing plan and the total financial resources expected from the contribution of the Funds and any other source of Community finance.

2. The Commission shall appraise the project, consulting the EIB if necessary, in the light of the following factors:

(a) the type of investment planned and, where applicable, the revenue expected;

(b) the results of the cost-benefit analysis;

(c) the evaluation of the impact on the environment;

(d) consistency with the priorities in the corresponding assistance;

(e) compliance with other Community policies;

(f) the expected economic and social benefits, particularly in terms of employment, having regard to the financial resources deployed;

(g) the coordination of the financial instruments and the combination of assistance and loans referred to in the second subparagraph of Article 9(3).

3. Within three months of receipt of the information referred to in paragraph 1, the Commission shall confirm or amend the level of the Community contribution. If it considers that the project appears not to justify either part or all the contribution of the Funds, it may withhold part or all of that contribution.

CHAPTER VI GLOBAL GRANTS

Article 26 Global grants

1. In agreement with the Commission, a Member State or managing authority may decide to entrust to appropriate intermediaries, including local authorities, regional development bodies or non-governmental organisations, the implementation and management of part of the assistance, hereinafter referred to as a 'global grant`, and preferably one to assist local development initiatives.

In the case of Community initiative programmes and innovative measures, the Commission may decide to employ a global grant for all or part of the programme.

2. The intermediaries, who must provide guarantees of solvency and have the necessary administrative capability, shall be present or represented in the regions concerned, shall operate in the public interest and shall properly involve the socio-economic interests directly affected by the implementation of the planned measures.

3. The choice of a global grant shall appear in the corresponding decision on the contribution of the funds as a special implementing provision as defined in point (d) of Article 17(2). The procedures for the use of global grants shall be agreed between the managing authority and the intermediary body concerned.

In the case of Commission initiative programmes and innovative measures, the procedures for the use of global grants shall be the subject of an agreement between the Commission and the intermediary body concerned. The programming supplement shall not relate to that part of the single programming document for the assistance dealing with the global grant.

4. The procedures for the use of the global grant shall detail in particular:

(a) the measures to be implemented;

(b) the criteria for choosing beneficiaries;

(c) the conditions and rates of assistance from the Funds, including the use of any interest accruing;

(d) the arrangements for monitoring and evaluating the global grant;

(e) where applicable, any use of a bank guarantee, with the agreement of the Commission.

TITLE III CONTRIBUTIONS AND FINANCIAL MANAGEMENT BY THE FUNDS

CHAPTER I FINANCIAL CONTRIBUTIONS BY THE FUNDS

Article 27 Decision on a Funds contribution

1. Provided that all the requirements of this Regulation are fulfilled, the Commission shall adopt in a single decision the contribution of all the Funds, as a general rule within six months of receipt of the application for assistance. The decision shall distinguish clearly the regions and areas receiving transitional support.

A maximum contribution from the Funds shall be set for each priority in the assistance.

For any given period, a measure may not receive a financial contribution from more than one Fund at a time.

No operation may benefit simultaneously from a contribution from a Fund under Objectives 1, 2 or 3 and under a community initiative.

2. The contribution of the Funds to operational programmes undertaken in implementing a Community support framework shall be consistent with the financing plan laid down in the corresponding Community support framework concerned.

3. In implementing measures, the contribution of the Funds may take one of the following forms: non-repayable direct assistance (hereinafter referred to as 'direct assistance`), repayable assistance, an interest-rate subsidy, a guarantee, an equity holding, a venture-capital holding or another form of finance.

Assistance repaid to the managing authority or to another public authority shall be reallocated to the same purpose.

Article 28 Differentiation of the rates of contribution

1. The contribution of the Funds shall be differentiated in the light of the following:

(a) the gravity of the specific problems, in particular of a regional or social nature, to be tackled by the assistance;

(b) the financial capacity of the Member State concerned, taking into account in particular its relative prosperity and the need to avoid excessive increases in budget expenditure;

(c) the importance attaching to the assistance and the priorities from the Community viewpoint, as referred to in the second paragraph of Article 1, in particular for the elimination of inequalities, and the promotion of equality, between men and women and for the protection and improvement of the environment, principally through the application of the precautionary principle, of the principle of preventive action, and the polluter-pays principle;

(d) the importance attaching to the assistance and priorities from the regional and national viewpoint;

(e) the particular characteristics of the type of assistance and priority concerned;

(f) the optimum utilisation of financial resources in the financing plans, including the combination of public and private resources, and the use made of appropriate financial instruments in accordance with Article 9(3).

2. The contribution from the Funds shall be calculated in relation to either the total eligible cost of, or the total public or similar eligible expenditure (national, regional or local, and Community) under each assistance.

3. The contribution of the funds shall be subject to the following ceilings:

(a) a maximum of 75 % of the total eligible cost and, as a general rule, at least 50 % of eligible public expenditure in the case of measures carried out in the regions covered by Objective 1. Where the regions are located in a Member State covered by the Cohesion Fund, the Community contribution may rise, in exceptional and duly justified cases, to a maximum of 80 % of the total eligible cost and to a maximum of 85 % of the total eligible cost for the most remote regions and for the outlying Greek islands which are under a handicap due to their distant location;

(b) a maximum of 50 % of the total eligible cost and, as a general rule, at least 50 % of eligible public expenditure in the case of measures carried out in areas covered by Objective 2 or Objective 3.

The contribution of the Funds shall comply with the ceilings on the rate of aid and on combinations of aid set in the field of State aid.

4. Where the assistance concerned entails the financing of revenue-generating investments, the contribution from the Funds to these investments shall be determined in the light of their intrinsic characteristics, including the size of the gross self-financing margin which would normally be expected for the class of investments concerned in the light of the macroeconomic circumstances in which the investments are to be implemented, and without there being any increase in the national budget effort as a result of the contribution by the Fund.

The contribution of the Funds shall be subject to the following limits:

(a) in the case of investment in infrastructure generating substantial revenue:

(i) 40 % of the total eligible cost in the regions covered by Objective 1, which may be increased by not more than an extra 10 % in the Member States covered by the Cohesion Fund;

(ii) 25 % of the total cost in the areas covered by Objective 2;

(iii) these rates may be increased by an amount obtained by using forms of finance other than direct assistance, provided that this increase does not exceed 10 % of the total eligible cost;

(b) in the case of investments in firms:

(i) 35 % of the total eligible cost in the regions covered by Objective 1;

(ii) 15 % of the total eligible cost in the areas covered by Objective 2;

(iii) in the case of investments in small and medium-sized businesses, these rates may be increased by an amount obtained by using forms of finance other than direct assistance, provided that this increase does not exceed 10 % of the total eligible cost.

5. References in paragraphs 3 and 4 to the regions and areas covered by Objective 1 and 2 shall also be construed as references to regions or areas receiving transitional support under Article 6(1) and 6(2) respectively.

6. The measures carried out on the Commission's initiative referred to in Articles 21 and 22 may be financed at a rate of 100 % of the total cost. The measures carried out on behalf of the Commission referred to in Article 22 shall be financed at a rate of 100 % of the total cost. The rates in this Article shall apply to technical assistance measures within the framework of programming and the Community initiatives.

Article 29 Eligibility

1. Expenditure in respect of operations shall be eligible for a contribution from the Funds only if these operations form part of the assistance concerned.

2. Expenditure may not be considered eligible for a contribution from the Funds if it has been paid by the final beneficiary before the date on which the application for assistance reaches the Commission. That date shall constitute the starting date for the eligibility of expenditure.

The final date for the eligibility of expenditure shall be laid down in the decision to grant a contribution from the Funds. It shall relate to payments made by the final beneficiaries. It may be extended by the Commission at the duly justified request of the Member State in accordance with Articles 13 and 14.

3. The relevant national rules shall apply to eligible expenditure except where, as necessary, the Commission lays down common rules on the eligibility of expenditure in accordance with the procedures referred to in Articles 47 to 51.

4. The Member States shall ensure that an operation shall retain the contribution from the Funds only if that operation does not undergo a substantial modification:

(a) affecting its nature or its implementation conditions or giving to a firm or a public body an undue advantage;

(b) and resulting before the end of a period of five years, as the case may be, either from a change in the terms of ownership in an item of infrastructure or a cessation or change of location in a productive activity.

Where such a change occurs, Article 38 shall apply.

CHAPTER II FINANCIAL MANAGEMENT

Article 30 Budget commitments

1. Budget commitments of Community funds shall be made on the basis of the decision to grant a contribution from the Funds.

2. Commitments in respect of assistance to be carried out over a period of two or more years shall, as a general rule, be effected annually. The first commitment shall be made when the Commission lays down its decision approving the assistance. Subsequent commitments shall be effected as a general rule by 30 April each year.

The Commission shall automatically decommit any part of a commitment for which it has not received an acceptable payment application by the end of the second year following the year of commitment or by the end of the deadline for the transmission of the final report referred to in Article 36(1); the contribution from the Funds to that assistance shall be reduced by that amount.

3. For assistance to be carried out over a period of less than two years, the total amount of the contribution from the Funds shall be committed when the Commission adopts its decision granting a contribution from the Funds.

Article 31 Payments

1. Payment by the Commission of the contribution from the Funds shall be made, in accordance with the corresponding budget commitments, to the national, regional or local authority or body designated for the purpose in the application submitted through the Member State concerned (the 'paying authority` for the purposes of this Article).

Payments shall relate to the earliest commitment made under Article 30.

Payment may take the form of advances, interim payments or payments of the final balance. Interim payments and payments of the balance shall relate to expenditure actually paid out, which must correspond to payments effected by the final beneficiaries, supported by receipted invoices or accounting documents of equivalent probative value.

As a general rule, the Commission shall make interim payments within no more than two months from receipt of an acceptable application.

The paying authority shall ensure that final beneficiaries receive payment of their contribution from the Funds as quickly as possible and in full. No deduction, retention or further specific charge which would reduce these amounts shall be made.

2. When the first commitment is made, the Commission shall pay an advance to the paying authority. This may not exceed 10 % of the contribution of the Funds to the operation in question. The payment may be subdivided if necessary over several budget years depending on the availability of budget funds.

Throughout the lifetime of assistance, the paying authority shall use the advance to disburse the Community contribution to expenditure actually paid and declared to the Commission in accordance with paragraph 3.

All or part of the advance shall be repaid by the paying authority if no payment application is sent to the Commission within 18 months of its decision to grant a contribution from the Funds.

Any interest earned on the advance payment shall be allocated to the form of assistance concerned.

3. Interim payments shall be made to reimburse expenditure actually paid under the Funds as certified by the paying authority. Such payments shall relate to measures contained in the programming supplement and the financing plan for the assistance and shall be subject to the following conditions:

(a) the programming supplement containing all the information specified in Article 17(3) has been presented to the Commission;

(b) the annual implementation report for the previous year containing all the information specified in Article 36 has been transmitted to the Commission by the required deadline;

(c) the information required to carry out the mid-term evaluation of the assistance referred to in Article 41 has been transmitted;

(d) decisions taken by the managing authority and the Monitoring Committee are consistent with the total amount of the contribution from the Funds granted to the priorities concerned;

(e) action has been taken within the time laid down in response to requests for adjustments as referred to in Article 33(3) or the requests for corrective measures as referred to in Article 37(4);

(f) no suspension of payments under the first subparagraph of Article 38(2) has been decided, and no decision to launch an infringement procedure under Article 169 of the Treaty has been taken by the Commission, concerning the measure within the assistance in question.

The Member State and the designated authority shall be informed immediately if one of these conditions is not fulfilled and they shall take the necessary steps to remedy the situation.

Member States shall ensure, as far as possible, that applications for interim payments are presented to the Commission in batches three times a year, the last application being presented no later than 31 October.

Applications for interim payments shall distinguish, for each priority, the expenditure incurred in regions and areas receiving transitional support.

The combined total of the payments referred to in paragraph 2 and in this paragraph which are made in respect of an assistance shall not exceed 95 % of the contribution from the Funds to that package.

4. The final balance of the assistance shall be paid if:

(a) the paying authority submits to the Commission, within six months of the deadline for payment laid down in the decision granting a contribution from the Funds, a certified statement of expenditure actually paid;

(b) the final report on implementation has been submitted to and approved by the Commission;

(c) the Member State has sent the Commission the statement referred to in the sixth indent of Article 37(1).

The final payment of the balance may no longer be corrected at the request of the Member State if the designated authority has not sent an application to the Commission within nine months from the date of transfer of the final balance.

5. The Member States shall designate the authorities empowered to issue the certificates and declarations referred to in paragraphs 3 and 4.

6. No later than 30 April of each year the Member States shall send the Commission their updated forecasts of applications for payment for the current year and the year following.

7. The Commission shall lay down appropriate payment procedures for innovative measures referred to in Article 21 and the measures referred to Article 22.

Article 32 Use of the euro

Commission decisions, commitments and payments shall be denominated and carried out in euros in accordance with the arrangements to be drawn up by the Commission under the procedures referred to in Articles 47 to 51.

TITLE IV EFFECTIVENESS OF ASSISTANCE FROM THE FUNDS

CHAPTER I MONITORING

Article 33 Management by the designated authority

1. The authority or body designated by the Member State to manage assistance, hereinafter referred to as the 'managing authority` for the purposes of this Regulation, shall be responsible for the efficiency and correctness of overall management and implementation, and in particular:

(a) for setting up a system to gather financial and statistical information on implementation and monitoring indicators as referred to in Article 35 and for making these available in accordance with arrangements agreed with the Commission;

(b) for preparing the financing plan for the assistance, in particular including details of the funds made available by the partners contributing to the financing under an agreement as referred to in the second subparagraph of Article 17(3);

(c) for installing and using compatible computer systems for management, monitoring and evaluation which will ensure effective management and the reliability and availability of the information referred to at (a) and which comply with Articles 35, 41 and 42;

(d) for drawing up and submitting to the Commission the annual implementation report and, where appropriate and without prejudice to Article 31, the payment applications;

(e) for organising, together with the Commission, the mid-term evaluation referred to in Article 41;

(f) for ensuring that other bodies taking part in the management and implementation of the assistance maintain either a separate accounting system or an adequate accounting code for all transactions relating to the package;

(g) for ensuring the correctness of operations financed under the assistance, particularly by implementing internal controls in keeping with the principles of sound financial management and acting on any conclusion or recommendations made under paragraph 3 of this Article or under Article 37(4);

(h) for ensuring compliance with other Community policies; in the context of the application of Community rules on the award of public contracts, notices sent for publication in the Official Journal of the European Communities shall specify those projects in respect of which a contribution from the Funds has been applied for or granted;

(i) compliance with the obligations concerning information and publicity referred to in Article 45.

2. With the agreement of the Monitoring Committee, the managing authority may, if necessary, adapt the programming supplement, without changing the total amount of the contribution from the Funds granted to the priority concerned nor its specific targets. It shall inform the Commission of its decision within one month.

Amendments to the contents of the decision on the contribution of the Funds shall be decided by the Commission, in agreement with the Member State concerned, after the Monitoring Committee has delivered its opinion.

3. The Commission and the managing authority shall review the main outcomes of the previous year at least once a year, particularly when the annual implementation report referred to in Article 36 is presented, in accordance with arrangements to be defined by common accord with the Member State and the managing authority concerned.

After this review, the Commission shall make comments or recommendations addressed to the Member State and the managing authority. Where relevant, these shall be accompanied by requests for adjustments aimed at improving the quality or effectiveness of the monitoring or management of the assistance and, where applicable, to implement the conclusions formulated under Article 37(4). The managing authority shall adapt the programming supplement accordingly in line with paragraph 2, within a period of time laid down by the Commission. If necessary, the assistance in question shall be reviewed in accordance with Articles 12, 13 and 14.

Article 34 Monitoring Committees

1. Each Community support framework or single programming document and each operational programme shall be supervised by a Monitoring Committee.

Monitoring Committees shall be set up by agreement between the designated managing authority and the partners. The partners shall seek to ensure balanced participation of women and men.

The Monitoring Committees shall be set up within no more than three months of the decision on the contribution of the Funds.

The acts of the Monitoring Committee shall be the legal responsibility of the Member State.

2. A representative of the Commission and, where appropriate, of the EIB, shall participate in the work of the Committees in an advisory capacity.

The representatives of all the partners which contribute to the financing of the assistance and, in the case of human resources, the representatives of the other partners, shall have the right to vote when the Committee adopts its decisions. The representatives of the other partners shall serve in an advisory capacity.

The Monitoring Committee shall be chaired by a representative of the managing authority.

3. The Monitoring Committee shall satisfy itself as to the effectiveness and quality of the implementation of assistance in order to attain the specific objectives and the Objectives referred to in Article 1. To that end:

(a) it shall discuss the strategic guidelines and priorities for assistance, ensuring their consistency with the guidelines referred to in Article 9(4), with the economic, social and, where appropriate, regional policies of the Member State, with the frame of reference referred to in Article 1(3) and with the Community policies;

(b) it shall examine the results of implementation, particularly achievement of the quantified targets set for the different measures and the mid-term evaluation referred to in Article 41.

4. The Monitoring Committee may propose to the managing authority any adjustment or review of the assistance likely to expedite attainment of the Objectives referred to in Article 1. Such adjustments shall be made in accordance with Article 33(2).

Article 35 Monitoring indicators

1. The managing authority and the Monitoring Committee shall carry out monitoring by reference to physical and financial indicators specified, in particular, in the programming supplement on the basis of the Commission's proposals on methodology. The indicators shall relate to the specific character of the assistance concerned, its objectives and the socio-economic, structural and environmental situation of the Member State and shall take account, where appropriate, of the existence of regions or areas receiving transitional support. These indicators shall include, in particular, those used for allocating the reserve referred to in Article 43.

2. The monitoring indicators shall be arranged and quantified in such a way as to show, for the assistance in question:

(a) the specific quantified targets for the measures and priorities, and their mutual consistency;

(b) the stage reached in the priorities and measures in terms of physical implementation, results, and impact;

(c) the progress of the financing plan.

Where the nature of the assistance permits, the statistics shall be broken down by sex. The financial and physical indicators shall be broken down in accordance with a regional and sectoral nomenclature proposed by the Commission.

3. Major projects shall be the subject of separate financial and progress indicators designed to take account of their specific characteristics.

Article 36 Annual implementation report

1. For all multiannual assistance, the designated managing authority shall submit a progress report to the Commission within six months of the end of each full calendar year of implementation. A final report shall be submitted to the Commission at the latest six months of the final date of eligibility.

For all assistance to be implemented over a period of less than two years, the authority designated for the purpose by the Member State shall submit a report to the Commission within six months of the last payment made by the paying authority.

The report shall be examined and approved by the Monitoring Committee before it is sent to the Commission.

2. All annual and final implementation reports shall contain at least the following information:

(a) a description of the context in which the assistance is being implemented, in particular the main socio-economic trends, consistency with other national, regional or sectoral policies and the frame of reference referred to in point 3 of Article 1 and the mutual consistency of assistance from the different Funds and other financial instruments;

(b) the progress in the implementation of priorities, measures and operations, when the assistance takes such a form, for each of the Funds, priorities and measures, in relation to their specific targets, with a quantification of the physical indicators and indicators of results and impact referred to in Article 35;

(c) the financial implementation of the assistance, summarising for each measure the expenditure actually paid out by the paying authority and payments received from the Commission and quantifying the financial indicators referred to in Article 35; financial implementation in the areas transitional support shall be presented separately in respect of each priority;

(d) the steps taken by the managing authority and the Monitoring Committee to ensure the quality and effectiveness of implementation, in particular:

(i) the monitoring and supervision of operations;

(ii) the use made of technical assistance;

(iii) the evaluation systems set up, especially the results and the gathering of the information needed for monitoring;

(iv) the reliability of the management system;

(v) the action taken on the recommendations, the requests for adjustments made under Article 33(3) or the requests for corrections made under Article 37(4);

(vi) the measures taken to ensure publicity for the assistance in accordance with Article 45;

(e) the steps taken to ensure compliance with other Community policies;

(f) a separate section, where appropriate, on the progress and financing of major projects.

CHAPTER II FINANCIAL CONTROL

Article 37 General provisions

1. The financial control of assistance shall be, in the first instance, the responsibility of the Member States. To that end, the measures they take shall include:

(a) verifying that management and supervision arrangements ha