EN    EN EN 
 
EN    EN  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 15.9.2009 
SEC(2009) 1159 final 
  
COMMISSION STAFF WORKING DOCUMENT 
accompanying the 
 
ANNUAL REPORT ON THE COHESION FUND (2008) 
  
[COM(2009) 465 final]
 
EN 2   EN TABLE OF CONTENTS 
1. General Context ........................................................................................................... 5 
1.1. Convergence and economic development in the beneficiary Member States.............. 5 
1.1.1 Greece ................................................................................................................... ....... 5 
1.1.2. Spain................................................................................................................... .......... 5 
1.1.3. Portugal ................................................................................................................ ........ 6 
1.1.4. Cyprus .................................................................................................................. ........ 7 
1.1.5. Czech Republic .......................................................................................................... .. 8 
1.1.6. Estonia................................................................................................................. ......... 9 
1.1.7. Hungary................................................................................................................. ..... 10 
1.1.8. Latvia.................................................................................................................. ........ 11 
1.1.9. Lithuania ............................................................................................................... ..... 11 
1.1.10. Malta .................................................................................................................. ........ 12 
1.1.11. Poland................................................................................................................. ........ 13 
1.1.12. Slovakia............................................................................................................... ....... 14 
1.1.13. Slovenia............................................................................................................... ....... 15 
1.2. Conditionality............................................................................................................ . 16 
2. Financial execution of th e 2000-2006 period in 2008 and closure of projects .......... 17 
2.1. Payments made in 2008 for projects  adopted under the 2000-2006 period............... 17 
2.2. Outstanding commitments from the 2000-2006 period ............................................. 18 2.3. Closure of projects from the 2000-2006 period ......................................................... 19 3. The implementation of the 2000-2006 projects by Member States ........................... 21 3.1. Greece .................................................................................................................... .... 21 
3.1.1. Environment............................................................................................................. .. 21 
3.1.1. Transport ............................................................................................................... ..... 21 
3.2. Spain..................................................................................................................... ...... 22 
3.2.1 Environment and transport......................................................................................... 22 3.3. Portugal .................................................................................................................. .... 23 
3.3.1. Environment............................................................................................................. .. 23 
3.3.2. Transport ............................................................................................................... ..... 24 
 
EN 3   EN 3.4. Cyprus .................................................................................................................... .... 24 
3.5. Czech Republic .......................................................................................................... 24  
3.5.1. Environment............................................................................................................. .. 24 
3.5.2. Transport ............................................................................................................... ..... 25 
3.6. Estonia................................................................................................................... ..... 25 
3.6.1. Environment............................................................................................................. .. 25 
3.6.2. Transport ............................................................................................................... ..... 25 
3.7. Hungary................................................................................................................... ... 26 
3.7.1. Environment............................................................................................................. .. 26 
3.7.2. Transport ............................................................................................................... ..... 26 
3.8. Latvia.................................................................................................................... ...... 27 
3.8.1. Environment............................................................................................................. .. 27 
3.8.2. Transport ............................................................................................................... ..... 27 
3.9. Lithuania ................................................................................................................. ... 27 
3.9.1. Environment............................................................................................................. .. 27 
3.9.2. Transport ............................................................................................................... ..... 28 
3.10. Malta .................................................................................................................... ...... 28 
3.10.1 Environment............................................................................................................. .. 28 
3.10.2. Transport .............................................................................................................. ...... 28 
3.11. Poland................................................................................................................... ...... 29 
3.11.1. Environment............................................................................................................ ... 29 
3.11.2. Transport .............................................................................................................. ...... 29 
3.12. Slovakia................................................................................................................. ..... 30 
3.12.1. Environment............................................................................................................ ... 30 
3.12.2. Transport .............................................................................................................. ...... 30 
3.13. Slovenia................................................................................................................. ..... 30 
3.13.1. Environment............................................................................................................ ... 30 
3.13.2. Transport .............................................................................................................. ...... 31 
4. Monitoring, inspections, financial corrections and irregularities............................... 31 
4.1. Monitoring: committees and missions ....................................................................... 31 4.1.1. Greece .................................................................................................................. ...... 31 
 
EN 4   EN 4.1.2. Spain................................................................................................................... ........ 31 
4.1.3. Portugal ................................................................................................................ ...... 33 
4.1.4. Cyprus .................................................................................................................. ...... 33 
4.1.5. Czech Republic .......................................................................................................... 33 
4.1.6. Estonia................................................................................................................. ....... 33 
4.1.7. Hungary................................................................................................................. ..... 34 
4.1.8. Latvia.................................................................................................................. ........ 34 
4.1.9. Lithuania ............................................................................................................... ..... 34 
4.1.10. Malta .................................................................................................................. ........ 35 
4.1.11. Poland................................................................................................................. ........ 35 
4.1.12. Slovakia............................................................................................................... ....... 35 
4.1.13. Slovenia............................................................................................................... ....... 36 
4.2. Audits and financial corrections................................................................................. 36 4.2.1. Greece .................................................................................................................. ...... 39 
4.2.2. Spain................................................................................................................... ........ 39 
4.2.3. Portugal ................................................................................................................ ...... 40 
4.2.4. Cyprus .................................................................................................................. ...... 40 
4.2.5. Czech Republic .......................................................................................................... 41 
4.2.6. Estonia................................................................................................................. ....... 41 
4.2.7. Hungary................................................................................................................. ..... 41 
4.2.8. Latvia.................................................................................................................. ........ 42 
4.2.9. Lithuania ............................................................................................................... ..... 42 
4.2.10. Malta .................................................................................................................. ........ 43 
4.2.11. Poland................................................................................................................. ........ 43 
4.2.12 Slovakia................................................................................................................ ...... 44 
4.2.13 Slovenia................................................................................................................ ...... 44 
4.3. Irregularities notified by the Member States.............................................................. 44 5. Evaluation .................................................................................................................. 45 
6. Information and publicity........................................................................................... 45 6.1. Information to/from the Member States..................................................................... 45 
6.2. Commission measures on publicity and information................................................. 46 
 
EN 5   EN 1. G ENERAL CONTEXT  
1.1. Convergence and economic development in the beneficiary Member States 
1.1.1 Greece 
In 2007 GDP per capita in PPS reached 94.8% of the EU-27 aver age. In 2008 real 
GDP growth decelerated to 2.9% reflecting heightening economic uncertainty in the wake of the global economic and financial crisis, that led to weakening private 
consumption and more importantly, declin ing investment. The external deficit 
declined somewhat, but rema ined still high, at above 12%  of GDP in 2008, compared 
with 14% of GDP in 2007 and 11.5% of GDP  in 2006. Due to expenditure overruns 
and to a lesser extent, revenue shortfalls, the general government deficit increased to 
5% exceeding the estimation included in the January 2009 stab ility programme by 
1.25 of a percentage point of GDP. The debt -to-GDP ratio increased by almost three 
percentage points, and reached 97.75% in 2008. 
The Greek government submitted its update of  the stability and growth programme 
on 30 January 2009 and an addendum on 6 February 2009. The macroeconomic 
scenario underlying the programme envisages that real GDP growth will fall from 
3% in 2008 to 1.1% in 2009 be fore picking up again to 1.75% on aver age over the 
programme period. In the medium term, the programme aims at reducing the general 
government deficit from 3.7% in 2009, to 3.2% of GDP in 2010 and 2.6% by 2011. Based on a significantly less favourable growth  scenario, with real GDP contracting 
by almost 1% in 2009, as well as a prudent  assessment of the fiscal consolidation 
measures announced for 2009, the Commission services' spring 2009 forecast foresees the general government deficit in  2009 to remain at 5% of GDP. Under a 
no-policy-change assumption, the deficit is projected at 5.75% of GDP in 2010.  
In its Opinion on the stability programme of 10 March 2009, the Council noted that 
the programme envisages reducing the budget deficit over the medium term, but falls 
short to address the structural imba lances of the Greek economy timely and 
effectively and reverse the upward trend of public debt. Although the consolidation 
strategy beyond 2009 relies on permanent expe nditure restraint and increasing tax 
revenues, the programme does not spell out concrete measures to back the planned 
budgetary adjustment in 2010 and 2011 fully. Strengthening the fiscal consolidation 
path would be paramount to achieve sound and sustain public finances in Greece. 
Moreover, the structural nature of the factors underlying competitiveness losses and the widening external imbalances urgent ly requires the implementation of bold 
structural reforms. In the long term, th e level of debt which remains among the 
highest in the EU, coupled with the projected increase in age-re lated spending, will 
also challenge the long term sust ainability of public finances. 
1.1.2. Spain 
In 2007, Spain's GDP per capit a in PPS attained 105.4% of  the EU-27 average in 
2007. In 2008, GDP growth slowed sharpl y to 1.2%, reflecting both the global 
economic downturn and a marked correcti on in the construction sector. The sharp 
deceleration in domestic demand was atte nuated by government consumption, which 
accelerated and grew at more than 5%. The annual inflation rate rocketed to just 
 
EN 6   EN above 4% in 2008 on the back of higher oil and food average prices. The rapid 
deterioration of the economic situation unde rmined also public  finances, turning 
previous surpluses into a deficit. For 2008, the general government deficit reached 
3.8% of GDP, compared with  an original target of a surplus 1.2% of GDP. The 
deviation from the target stems mainly from the much lower GDP growth and 
expenditure slippages.  
The latest update of the stability programme submitted on 30 January 2009 and 
covering the period 2008-2011, targets governme nt deficits of 5.8% of GDP in 2009, 
4.8% in 2009 and 3.9% of GDP  in 2011. These figures re st on the programme's 
assumptions that GDP will decline by 1.6%  in 2009 and grow by 1.2% and 2.6% in 
real terms in 2010 and 2011 respectively. In line with the European Economic Recovery Plan, Spain has adopted a sizeable  stimulus package, particularly in 2009, 
including a November 2008 stimulus packag e (slightly 1 % of GDP) aiming mostly 
at fostering public investment. Accordi ng to the Commission services' spring 2009 
economic forecasts, the government deficit is projected to reach 8.5% of GDP in 
2009 and, on the basis of the no-policy change assumption, 9.75% of GDP in 2010. 
The more marked deterioration in public  finances in the Commission service's 
forecasts result, notably, from a significan tly sharper contraction of growth in the 
forecast and a gloomier labour market outlook.  
In its Opinion the stabilit y programme of 10 March 2009, the Council noted that "the 
sharp slowdown of economic activity and some discreti onary measures led to a 
deficit above 3% of GDP in 2008, after a prolonged period in which the Spanish 
public finances were close to balance or in surplus. […] Spain is invited to: (i) implement the 2009 fiscal policy as planne d in line with the European Economic 
Recovery Plan and within the framework of the Stability and Growth Programme, 
while avoiding a further deterioration of pub lic finances in 2009, and carry out with 
determination significant structural consolidation in 2010 and beyond, backing it up 
with measures; (ii) improve the long-term  sustainability of public finances by 
implementing further measures aimed at  curbing the increase in age-related 
expenditure; (iii) ensure that fiscal consolidation measures are also geared towards enhancing the quality of the public finances as planned in the light of the needed adjustment of existing imbalances." 
1.1.3. Portugal 
Portugal’s GDP per capita in PPS attained  76.1% of the EU-27 average in 2007. In 
2008, GDP stagnated in real terms, after growing by 1.9% in 2007, as the result of 
marginally declining investment and exports, with the latter reflecting visibly the fall 
in external trade in late 2008. The infl ation rate was 2.7% in 2008 after 2.4% in 
2007. According to the March 2009 Excessive Deficit Procedure notification, the general government deficit came out at 2.6%  of GDP in 2008, which coincides with 
the outturn of 2007 (but the budgetary execution of 2008 benefited from deficit-
reducing one-off operations worth over 0.75%  of GDP, whereas similar operations 
had yielded only 0.1% of GDP in 2007). The 2008 outturn compares with an original 
target of 2.4% of GDP set in 2008 Budget La w. The deviation from the target stems 
mainly from the much lower GDP growth (2.2% in the Budget)  and, to a lesser 
extent, expenditure slippages. This more than offsets a positive base effect thanks to the better-than-expected 2007 budgetary execu tion by some 0.5% of GDP. The debt-
to-GDP ratio was at 66.4% in 2008 up from 63.5% in 2007. 
 
EN 7   EN The most recent update of the stability programme of Portugal was submitted on 30 
January 2009 and covers the period 2008-2011. The upd ate targets government 
deficits of 3.9% of GDP in 2009, 2.9%  in 2009 and 2.3% of GDP in 2011. The 
programme hinges on the assumption that GDP will decline by 0.8% in 2009 and grow by 0.5% and 1.3% in volume terms in  2010 and 2011 respectivel y. In line with 
the European Economic Recovery Plan ( EERP), Portugal implemented a stimulus 
package for 2009 representing 1.25% of GDP ( 0.8% of GDP to be financed out of 
the national budget and the rest through EU funds). The package adds to other discretionary measures of sm aller size. According to the Commission services' spring 
2009 economic forecasts, the government deficit is projected to reach 6.5% of GDP in 2009 and, on the basis of the no-policy change assumption, 6.7% of GDP in 2010. 
The differences between the national ta rgets and the Commission forecasts result 
from the sharper recession foreseen in the la tter, where GDP is projected to contract 
by 3.7% in 2009 and by 0.8% in 2010. 
In its Opinion on the update of the st ability programme of 10 March 2009, the 
Council noted that "the programme aims at a significant temporary fiscal impulse in 
2009 in line with the EERP. The programme rightly plans the resumption of fiscal 
consolidation as soon as the economy rec overs. Yet, economic growth may underpin 
fiscal consolidation by less than e nvisaged in the programme." The Council 
mentioned also the need to strengthen fi scal sustainability. The Council invited 
Portugal to "implement the 2009 fiscal pol icy as planned, while avoiding a further 
deterioration of public finances in 2009 a nd carry out with determination the planned 
adjustment in 2010 and beyond" and to "fur ther strengthen the budgetary framework 
and ensure that fiscal consolidation m easures continue to be geared towards 
enhancing the quality of the public finances in the light of the needed adjustment of 
the existing imbalances." 
1.1.4. Cyprus 
In 2007 Cyprus' GDP per capita in PPS reac hed 90.8% of the EU-27 average. In 
2008 real GDP growth decelerated follo wing the global economic downturn, to 
3.7%. Activity was almost exclusively dr iven by dynamic domestic demand, while 
net exports posed a drag on growth. The de teriorating external environment had an 
adverse effect on exports, particularly t ourism. On the other hand, imports, driven by 
buoyant domestic demand, continued growing dynamically. This, coupled with high commodity prices, particularly oil, led to a historically high external deficit, which reached 18.25% of GDP. The general government surplus is estimated to have fallen to 1% in 2008 from 3.4% of GDP in 2007. This decline mainly reflected revenue 
shortfalls, due to subdued act ivity in the housing and real estate sector as well as 
reduced corporate profitability. It also re flected expenditure ove rruns, partly due to 
the drought and the expenses associated with  maintaining water supplies, as well as 
to social cohesion measures. The 2008 surp lus is nonetheless above the target of 
0.5% of GDP set in the 2007 stability pr ogramme, benefiting from higher-than-
expected revenue, lower interest payments  and a positive base effect from 2007. The 
debt-to-GDP ratio declined in 2008 by a bout 10.25 percentage points of GDP to 
about 49%. Average inflation reache d 4.4% in 2008 due to buoyant domestic 
demand and high commodity prices, especially for oil and food.  
The Cypriot government submitted its latest  update of the Stability and Growth 
Programme on 13 February 2009. The m acroeconomic scenario underlying the 
 
EN 8   EN programme envisages that real GDP growth  will decelerate from 3.8% in 2008 to 
2.1% in 2009, before recovering to an average rate of almost 3% over the rest of the 
programme period. Due to slower growth and lower revenue, the update targets a 
deficit of 0.75% of GDP in 2009. Based on a markedly less favourable growth 
scenario, with real GDP growing at 0.25%  in 2009, the Commission services spring 
2009 forecast projects a higher fi scal deficit, at almost 2% . This projection takes into 
account additional revenues from the rece ntly adopted pension reform and an 
announced extra-budgetary package of social  measures, not incorporated in the 
official projections. On a no-policy-change ba sis, the deficit is projected to edge up 
to 2.5% of GDP in 2010, due to an incr ease in current primary expenditure. 
The Council adopted its opinion on the Stabil ity programme of Cyprus on 27 April 
2009. The overall conclusion is that fiscal st ance in 2009 will be expansionary due to 
the adoption of signifi cant stimulus measures in 2009  in line with the European 
Economic Recovery Plan. In the subsequent  years covered by the programme (until 
2012), the fiscal balance is projected to continue worsening. The implied fiscal 
loosening does not appear justified in vi ew of the relatively  good economic prospects 
for Cyprus and the existence of a large ex ternal imbalance. Moreover, against the 
background of a sharp deterioration in  the global economic environment, the 
budgetary strategy is subject to significant downside  risks, as the macroeconomic 
scenario is based on favourable growth assu mptions. In the light of the high external 
imbalances, maintaining prudent policies and strengthening fisc al sustainability 
should be a major priority. Therefore, c ontrolling current expenditure and avoiding 
pro-cyclicality represents a major challe nge for the fiscal policy in Cyprus. In 
addition, fostering the quality of public fi nances is also important in order to 
underpin a smooth adjustment of the economy in  the light of the imbalances it faces. 
1.1.5. Czech Republic 
Czech GDP per capita in PPS reached 80.2% of the EU-27 average in 2007. The 
Czech economy grew by 3.2% in real term s in 2008. Growth decelerated toward the 
end of the year with a cont raction in output in the four th quarter driven by falling 
external demand. Annual infl ation rose to 6.3% on aver age in 2008, due partly to 
administrative measures, while declining st eeply to 3.3% in Dece mber year-on-year. 
The general government deficit in 2008 was 1.5% of GDP compared to an estimated 
deficit of 1.2% in the November 2008 conve rgence programme. The slightly poorer 
outturn was mainly due to a shift in re venues from tobacco excise duty from 2008 to 
2007. 
The Czech Republic submitted its latest convergence programme, covering the 
period 2008-2011 on 20 November 2008. The macro-economic scenario underlying 
the programme estimated real GDP growth at  3.7% in 2009 rising gradually to just 
above 5% of GDP in 2011. These projections  reflect the programme’s early date of 
submission; the latest Ministry of Finan ce forecast foresees negative growth in 2009. 
Exports and investment will be particularly badly affected by a sharp fall in external 
demand. The main aim of the budgetary  strategy is to achieve budgetary 
consolidation toward the end of the pr ogramme period. The programme targeted a 
deficit of 1.6% of GDP in 2009 d eclining to 1.5% of GDP in 2010. The 
Commission’s spring forecast predicts that the deficit will be 4.3% of GDP in 2009 
and 4.9% of GDP in 2010, against projecte d growth of -2.7% of GDP in 2009 and 
0.3% of GDP in 2010. The large discrepanc y between the program me’s targets and 
 
EN 9   EN the Commission’s spring forecast is mainly due to a much poorer macroeconomic 
outlook and the impact of fiscal stimulus  measures in 2009 approved after the 
convergence programme was submitted.  
In its Opinion on the convergence program me update on 10 March 2009, the Council 
concluded that that there are risks to the budgetary projecti ons, in particular in view 
of favourable growth assumptions, and that  concerns remain regarding long-term 
fiscal sustainability due to a rapidl y ageing population. The Council invited the 
Czech Republic to implement the budgetary plans in 2009, including stimulus measures, carry out consolidation in 2010 with specific measures for reducing 
expenditure in 2010-2011 and continue with the necessary pension and health care 
reforms, in order to improve the long -term sustainability of public finances. 
1.1.6. Estonia 
The period of high economic growth that help ed Estonia to reach a GDP per capita in 
PPS of 67.9% of EU average in 2007 peaked  early in that year. 2008 marked an 
abrupt reverse, with the economy contrac ting by 3.6%. The reversal of the cycle was 
increasingly aggravated by the deepening gl obal financial crisis. With confidence 
plummeting and banks becoming increasingl y cautious in their lending decisions, 
domestic demand contracted by 7.4% in 2008, while a sharp contr action of external 
demand in late 2008 exacerbated the downturn. Inflation remained high throughout the year, at 10.6% for the year as a whole. A reversal of tr end also took place in 2008 
with regards to public finances, as the gene ral government posted a deficit of 3.0% of 
GDP, following six years of nominal surp luses. The outcome was considerably 
worse than the surplus ta rget of 1.3% set in the November 2007 convergence 
programme, due to a sharp contraction of revenue caused by declining economic activity and despite the a doption of a restrictive s upplementary budget in mid-2008. 
The December 2008 update of the convergence programme projects real GDP to 
decline by 3.5% in 2009, returning to a pos itive growth path in 2010 and accelerating 
to around 5% in 2011-2012. The programme e nvisages a moderation in previously 
high imbalances in line with the declining economic activity, with inflation set to 
reach low single digit levels in 2009 and 2010, partly due to wage moderation, and 
the external deficit shrinki ng to pre-boom levels. Fiscal  policy is planned to be 
restrictive. The policy is geared in th e short term towards restoring market 
confidence and keeping the general government deficit within the Treaty reference value, given the authorities' euro adop tion objective. The programme targets a 
budgetary deficit of 1.7% of GDP in 2009, ag ainst the 3.0% defici t expected in the 
Commission services' spring forecast. The de terioration in the fiscal outlook, despite 
the adoption of several consolidation measur es in February and April 2009, is due to 
a considerable downward revision to the macroeconomic outlook. The budgetary 
deficit is expected to increase to 3.9% of GDP in 2010 in the Commission services' 
forecast, under a no-policy-change assumption. In the medium term, the goal of the programme is to achieve a structural surplus. 
In its Opinion of 10 March 2009, the Council concl uded that Estonia,  while facing a 
severe economic downturn following years of  above-potential grow th, is planning a 
restrictive fiscal stance from 2009 until 2011 an d that this is an appropriate response 
in light of the existing imbalances. The Council invited Estonia to implement the 
consolidation of public finances in the short term, ensure keeping the general 
 
EN 10   EN government deficit below 3% of GDP and ta ke the necessary measures to underpin 
the consolidation in the medium term, as  well as to reinforce the medium-term 
budgetary framework, particularly by improving expenditure planning and 
efficiency. To support the adjustment  of the economy and to strengthen 
competitiveness, the Council also invited Es tonia to implement prudent public sector 
wage policies. 
1.1.7. Hungary 
In 2007, Hungary's GDP per capita in PPS r eached 62.6% of the EU -27 average. In 
2008, GDP grew only by 0.5%, due to the dece leration of both external and domestic 
demand in view of adverse global econom ic environment, external financing 
shortages and deteriorating income expect ations, while inflation decreased to an 
annual average of 6%. As a response to the external market financing shortages, the 
IMF and the EU granted financial assistan ce of € 20 billion to Hungary. Due to the 
continuation of the fiscal consolidati on programme, the budget deficit was 3.4% of 
GDP in 2008, substantially lower than the budgeted target (4%).  The debt-to-GDP 
ratio increased from 65.8% in 2007 to 73% in 2008, chiefly due to the reserve build-
up financed from the international financia l assistance in respons e to the financial 
crisis. Given the sizeable macroeconomic  and public finance imbalances, the 
Government did not adopt fiscal stimulus  measures, in line with the European 
Economic Recovery Plan. 
The December 2008 convergence programme se t a general government deficit target 
of 2.6% of GDP (lower than the previous target of 3.2% of GDP). In view of the 
significant deterioration in the 2009 gr owth outlook (from -1 % to -3.3%), the 
Government revised its deficit target sl ightly to 2.9% of GDP, while adopting 
additional corrective measures of ar ound 0.7% of GDP. Following a further 
deterioration of GDP growth, the aut horities announced additional corrective 
measures of 1% of GDP so as to respect the revised official ta rget. The Commission 
services' spring forecast projects a somewh at higher deficit of 3.4% of GDP for 2009, 
chiefly due to the fact that not all th e measures announced by the new government on 
19 April were detailed enough to be incorporated in the forecast. For 2010, the Commission services' forecast, on the ba sis of a no-policy-change assumption, 
projects a deficit of 3.9% of GDP. 
In its Opinion on the convergence program me update of 10 March 2009, the Council 
noted that, in spite of distinct improve ments in its high imbalances, Hungary has 
been particularly exposed to the financial crisis and thus had to limit the financing 
need of the government. The programme fore sees a continuation of the front-loaded 
consolidation strategy. Howeve r, the deficit reduction pa th was deemed subject to 
risks, especially due to the markedly favourable macroeconomic assumptions underlying the programme. The Council ther efore invited Hungary to maintain 
adequate buffers and take the necessary measures to bring the budget deficit below the 3% of GDP threshold in 2009; ensure  the full implementation of the fiscal 
responsibility law; continue expenditure  moderation through further structural 
reforms; strengthen financial market regulat ion and supervision; and in view of the 
level of debt and the increase in age-rela ted expenditure, further improve the long-
term sustainability of public finances. 
 
EN 11   EN 1.1.8. Latvia 
After having reached a level of GDP per capita in PPS amounting to 57.9% of the 
EU average in 2007, Latvia's real GDP sh rank by 4.6% in 2008. The global financial 
crisis amplified the shock of the reversal  of Latvia's own lending and real estate 
boom by tightening credit availability and c onditions, reinforcing the steep decline of 
domestic demand over the course of 2008. The concomitant downturn in Latvia's 
main export markets has hit the relatively small tradable sector, already weakened by 
huge domestic cost increases over the previ ous years. Inflation in 2008 rose to an 
average of 15.3% (10.1% in 2007). The Ap ril 2009 Excessive Deficit Procedure 
notification indicates a budget deficit of 4.0%  of GDP for 2008, a far weaker outturn 
than the target surplus of 0.7% of GDP se t in the initial budget, reflecting both a 
significantly worsened economic envir onment and substantially higher-than-
budgeted expenditures, including  an increase in social tr ansfers. The debt-to-GDP 
ratio increased to 19.5% in 2008 from 9.0% in 2007.  
Following Latvia's applications for international financial assistance and its 
associated adoption of a medium-ter m economic and budgeta ry stabilisation 
programme in December 2008, a revised update  of Latvia’s convergence programme 
covering the period 2008-2011 was submitted on 14 January 2009. The main goal of 
the medium-term budgetary strategy in th e programme is to fulfil Maastricht 
budgetary criteria in 2011, with planned gene ral government deficits of around 5% of 
GDP in 2009 and 2010 and below 3% in  2011. The macroeconomic scenario 
underlying the programme projects a contra ction of real GDP in 2009 by 5% and by 
a further 3% in 2010, before a slightly  positive growth in 2011. The Commission 
services' spring 2009 forecast, however, projects that under a no-policy change assumption the general government deficit could reach above 11% of GDP in 2009 
and 13% of GDP in 2010, while GDP is expe cted to contract by around 13% in 2009 
and around a further 3% in 2010. 
In its March 2009 opinion on the convergen ce programme, the Council concluded 
that Latvia is facing a severe economic downturn following year s of above-potential 
economic growth and that therefore the budgetary outco mes in the programme are 
subject to significant downside risks. The pl anned restrictive fisc al stance from 2009 
until 2011 is considered an appropriate res ponse in light of existing imbalances. The 
Council invited Latvia to submit to Parlia ment by the end of March 2009 the details 
of the supplementary budget adopted on 12 December 2008 and to take further measures if needed to achieve a genera l government deficit no higher than 5.3% of 
GDP in 2009 and continue the targeted fiscal consolidation thereafte r. It also invited 
Latvia to implement public sector nominal wage reductions rigor ously to facilitate 
the alignment of whole-economy wages w ith productivity, thereby improving cost 
competitiveness, and to strengthen fiscal  governance and transparency, by improving 
the medium-term budgetary framework and reinforcing Ministry of Finance spending controls. It further invited a strengtheni ng of the supply side of the economy by 
wide-ranging structural reforms and by making efficient use of available EU 
structural funds. 
1.1.9. Lithuania 
In 2008 Lithuania's GDP per capita in PPS r eached 60.6% of the EU average, while 
real GDP in 2008 grew by 3.0%. Economic ac tivity decelerated from the beginning 
 
EN 12   EN of the year and declined sharply by the e nd of the year, when the domestic slowdown 
was reinforced by the deepening global fi nancial crisis and contracting export 
demand. Whereas private consumption sti ll held up reasonably, investment fell 
significantly, mostly as a consequence of the end of the real estate boom. Inflation in 
2008 rose to an average of 11.1% (5.8% in 2007). The April 2009 Excessive Deficit 
Procedure notification indicates a budge t deficit of 3.2% of GDP for 2008, a 
substantially weaker outturn than the targ et deficit of 0.5% of GDP, reflecting both 
revenue-decreasing measures such as dire ct tax reductions and substantially higher-
than-budgeted expenditures, including an  increase in social transfers and a 
substantial rise in public sector wages. The debt-to-GDP ratio declined to 15.6% in 
2008 from 17.0% in 2007.  
The January 2009 update of Lithuania’s c onvergence programme covers the period 
2008-2011. The central budgetary strategy in the programme is to achieve a medium-term objective (MTO) of a general government  structural deficit of 1% of GDP by 
2010. From a planned deficit of 2.1% of GDP  in 2009 the general government deficit 
is projected to narrow further in 2010 and to be in balance in 2011, while the macroeconomic scenario underlying the progr amme projects a sh arp contraction of 
real GDP by 4.8% in 2009 and a further sm all decline by 0.2% in 2010, before a 
recovery to growth of 4.5% in 2011. Th e Commission's spring forecast projects a 
5.4% of GDP deficit for 2009. The differe nce is explained by a markedly less 
favourable macroeconomic outlook, despite su bstantial consolidation efforts by the 
government. The Commission's spring foreca st expects real GDP to contract by 
11.0% in 2009 and by a further 4.7% in 2010. Th e budget deficit is expected to rise 
further to 8.0% of GDP in 2010 in the Commission's forecast, under a no-policy-change assumption. 
In its March 2009 Opinion on the convergence programme, the Council concluded 
that Lithuania is currently facing a severe contraction in  domestic demand following 
years of above-potential economic growth and therefore the budgetary outcomes in 
the programme are subject to significant dow nside risks, with the headline deficit 
possibly exceeding the 3% of GDP th reshold in 2009 and 2010. The planned 
restrictive fiscal stance from 2009 until 2011 is considered an appropriate response in 
the light of existing imbalances. The C ouncil invited Lithuania to implement 
measures needed to achieve the budgetary target in 2009 by prioritising expenditures and to continue targeted fiscal consolid ation in the medium-term, as well as to 
strengthen fiscal governance and transp arency, by enhancing the medium-term 
budgetary framework and reinforcing expend iture discipline. To  facilitate the 
alignment of whole-economy wages with productivity and to strengthen cost 
competitiveness, the Council also invited Li thuania to implement public sector wage 
restraint. 
1.1.10. Malta 
In 2007, Malta's GDP per capita in PPS reached 77.4% of the EU-27 average. Real 
GDP growth decelerated to 1.6% in 2008, dow n from 3.8% in the previous year. 
While private consumption was very st rong, investment and exports shrank 
markedly, as the effects of the global dow nturn started hitting the Maltese economy. 
The general government deficit increased to  4.7% in 2008, higher th an the target of 
1.2% set in the November 2007 update of the stability programme. The difference 
primarily reflects higher-than-planned expendi ture by 3 percenta ge points of which 
 
EN 13   EN 0.8 percentage point is due to a one-off deficit-increasing measure related to early 
retirement schemes given to Malta Shipya rds employees and 1.3 percentage points 
are due to the reclassification of the sh ipyards in the general government sector. 
Expenditure was also adversely affected as a result of both higher compensation of 
employees and energy subsidies given to households. 
The December 2008 update of the stabilit y programme is based on a significantly 
favourable macroeconomic outlook, projecti ng GDP growth to accelerate from 2.2% 
in 2009 to 2.5% in 2010. In contrast, the Commission's spring 2009 forecast, expects GDP to contract by almost 1% in 2009 before recovering moderately by 0.2% in 
2010. According to the programme, the deficit is targeted to fall to 1.5% of GDP in 
2009, whereas the Commission's spring 2009 fo recast projects a deficit of 3.6% of 
GDP. The deviation is mostly accounted for by the significantly more favourable 
macroeconomic scenario of the programme. The budget for 2009 introduced some measures to support the economy in respons e to the European Economic Recovery 
Plan, within a broader consolidation effo rt. These include higher public investment 
on infrastructure and the environment, s upport to the tourism industry and SMEs and 
a widening of personal income tax bands . Under the customary no-policy-change 
assumption, the deficit is projected to d ecline marginally to 3.25% of GDP in 2010 
according to the spring forecast. 
In its Opinion of 10 March 2009, the Counc il noted that, following a breach of the 
3% of GDP deficit reference value in  2008, the December 2008 stability programme 
envisaged a return to budgetary consolid ation from 2009 onwards. There were risks 
to the achievement of the deficit and de bt targets stemming from the favourable 
macroeconomic scenario, the reliance on volatile revenue, the possibility of 
expenditure slippages and the lack of information on the consolidation measures in the outer years. The Council invited Malta to  resume fiscal consolidation so as to 
bring the deficit below 3% of GDP in 2009 and ensure that the general government 
debt ratio was reduced accordingly. Malta was also invited to strengthen the 
medium-term budgetary framework and enhan ce the efficiency and effectiveness of 
public spending. 
1.1.11. Poland 
In 2007, Poland’s GDP per capita in PPS atta ined 53.7% of the EU-27 average. In 
2008 growth started to decelerate due to de teriorating external demand and lower 
investment activity and r eal GDP in 2008 grew by 4.9%. Unemployment continued 
to fall and reached roughly 7% in 2008. The general government deficit increased strongly to 3.9% of GDP in 2008 from 1.9% in 2007, well above the initial targets. 
Besides slower growth, this result stems mainly from both lower-than-expected revenues and expenditures execu ted above the planned levels. The debt-to-GDP ratio 
increased to 47.1% in 2008.  
According to the most recent update of  the convergence programme the general 
government deficit was expected to reach 2.5% of GDP in 2009, despite the planned 
rise in public investment, a personal inco me tax reform and a reduction of the tax 
burden for businesses. In the April 2009 fi scal notification the government revised 
the expected deficit to 4.6% of GDP owi ng partly to a further slowdown in growth. 
Nonetheless, the new target for 2009 remains lower than the deficit of about 6.5% of GDP projected in the Commission's spri ng 2009 forecast. The difference stems 
 
EN 14   EN mainly from less favourable growth assumpti ons in the spring forecast According to 
the Commission services, GDP is expected to  contract by 1.4% in 2009. The Polish 
authorities may also anticipate some corr ective measures, to be included in an 
amended budget, which are not yet publically known. For 2010, the Commission 
projects, under the "no policy change" assumption, that the general government 
deficit will further deteriorate to more than 7% of GDP. 
In its Opinion of 10 March 2009 on the convergence programme update, the Council 
concluded that given the optimistic GDP growth forecasts, the budgetary outcomes projected in the programme were subjec t to downside risks, according to the 
Commission's forecasts, throughout the whol e period covered by the current update. 
In addition, for the outer years, the pla nned spending restraint would have to be 
backed up with specified measures, as appr opriate. In view of the above assessment, 
Poland was invited to implement the 2009 fiscal plans, including the stimulus 
measures in line with the European Economic Recovery Plan and the framework of 
the Stability and Growth Programme, while avoiding to breach the reference value, 
as targeted by the Government; back up the consolidation strategy for 2010 and 2011 
with specific deficit-reducing measures ; and reinforce the budgetary framework 
through better control over expenditure, in cluding the swift im plementation of the 
amended public finance act and performance budgeting. 
1.1.12. Slovakia 
Slovakia's GDP per capita in PPS reached 67.0% of the EU-27 average in 2007 while 
economic growth decelerated to 6.4% in 2008 from 10.4% recorded in 2007. Against 
the background of strong employment grow th, unemployment fell significantly to 
9.5% in 2008 from roughly 11% in the pr evious year. In 2008, annual inflation 
averaged 3.9% compared with 1.9% in 2007. The increase in annual inflation was 
mainly driven by rising food and energy pri ces in the first half of 2008. According to 
the April 2009 EDP notification, the 2008 ge neral government deficit was 2.2% of 
GDP, just below the initial target of 2.3 % of GDP fore seen in the November 2007 
update of the convergence programme. The better-than-expected  budgetary outturn 
in 2008 was the outcome of the revenue-i ncreasing measures implemented in 2008 
(e.g. broadening of the corporate and pers onal income tax ba se, increase in the 
maximum ceiling on social contributions), wh ich offset the shortfall in revenues due 
to worsening economic conditions.  
Slovakia submitted its stability programm e on 30 April 2009, covering the period 
2008-2012. The macro-economic scenario underl ying the programme projects that 
real GDP growth will decelerate from  6.4% in 2008 to 2.4% in 2009, before 
rebounding to 3.6% in 2010. Growth should be  mainly driven by domestic demand, 
in particular private consumption and fixed investment. The general government 
deficit is projected to in crease from 2.2% of GDP in 2008 to 3.0% of GDP in 2009 
and decline to 2.9% of GDP in 2010, reflect ing slower growth as well stimulus and 
structural measures adopted in line with the European Economic Recovery Plan of 
0.4% of GDP. These measures are aimed at boosting internal demand, improving the 
business environment and alleviating the im pact of the crisis on labour markets. 
According to the Commission's 2009 spring fo recast, the general government deficit 
is set to widen more markedly to 4 .7% of GDP in 2009 and, under the no-policy 
change assumption, to 5.4% of GDP in  2010. The difference in the budgetary 
projections stems mainly from the mu ch weaker macroeconomic outlook for 2009 
 
EN 15   EN and 2010 in the Commissions' forecast, whic h expects GDP growth to contract by 
2.6% in 2009 and slightly rebound by 0.7% in 2010. 
In its Opinion of 7 July 2009 on the stability programme, the Council noted that the 
budgetary projections underlying the progr amme are based on markedly favourable 
macroeconomic assumptions and the risks to the budgetary targ ets are therefore 
clearly negative. The envisaged expansi onary fiscal stance  in 2009, including the 
stimulus measures, was deemed appropriate  and in line with the European Economic 
Recovery Plan and within the framework of the Stability and Growth Pact, especially 
in view of an ensuing competitiveness ch allenge. The Council invited Slovakia to 
implement the planned anti-crisis measures  and ensure consolidation as of 2010, 
which would be backed up by concrete expe nditure measures and further supported 
by the introduction of binding expenditure  ceilings for the general government. 
Finally, in order to preserve the long-term  sustainability of public finance in the 
context of an ageing population, the Counc il recommended Slovakia to continue 
reforming the concerned pillar of the pension system and avoid undermining the 
stability of the fully-funded pension pillar. 
1.1.13. Slovenia 
In 2007, Slovenia's GDP per capita in PPS r eached 89.2% of the EU -27 average. As 
a highly open economy Slovenia was strongly affected by the globa l downturn in the 
second half of 2008 and real GDP growth  slowed to 3.5% in 2008 from 6.8% in 
2007. Inflation picked up markedly, averaging 5.5% in 2008. The general 
government balance recorded a deficit of 0.9% of GDP in 2008, which is the same as 
the target set in the end-2007 upda te of the stability programme. 
The macroeconomic scenario underlying the April 2009 update of the stability 
programme projects real GDP to fall by 4%  in 2009, followed by a mild recovery of 
1% in 2010. The Commission services' spri ng 2009 forecast projects real GDP to 
drop by 3.4% in 2009, followed by a modest positive growth of 0.7% in 2010. The update of the stability  programme targets a deficit of 5.1% of GDP, including also as 
yet unspecified measures. Taking into account, as usual, only fully specified 
measures, the Commission services' spring 2009  forecast projects a deficit of 5.5% of 
GDP. The government has responded to the cris is with two stimulus packages in line 
with the European Economic Recovery Pl an. A wage subsidy for shorter working 
hours as well as subsidies and tax allowan ces for investment and R&D, estimated by 
the government to cost around 1% of GDP, are the main measures in 2009. In addition, companies benefit from tax relief decided earlier, namely a one percentage 
point cut in the corporate income tax rate and the phasing-o ut of the payroll tax from 
1 January 2009. The Commission services’ spri ng forecast expects a further increase 
in the deficit in 2010 on a no-policy change basis, to 6.5% of GDP. 
On 7 July 2009, the Council adopted an opi nion on the updated stability programme 
of Slovenia. The overall conclusion is that fiscal policy in Slovenia will be expansionary in 2009 in line with the Eu ropean Economic Recovery Plan. At the 
same time, as the room for fiscal ma noeuvre is constrained by the long-term 
sustainability challenge, consolidation m easures to help finance the stimulus 
measures have been adopted. The programme plans a return to fiscal consolidation, 
with improvements in the primary structural balance in 2010 and, to a lesser extent, 2011, but the deficit is not foreseen to be  brought below the 3% of GDP reference 
 
EN 16   EN value by 2011. The budgetary strategy is s ubject to downsize risks, as economic 
growth could be lower than projected. In a ddition, it might be difficult to reverse the 
stimulus measures and expenditure overruns  cannot be excluded. Although the debt 
ratio is low (albeit increasing rapidly), Slove nia is assessed to be at high risk with 
regard to the long-term sustainability of public finances due to the significant 
projected budgetary impact of ageing. The Council invite d Slovenia to: (i) implement 
the stimulus measures in 2009; (ii) start re versing the fiscal stim ulus as planned in 
the programme in 2010 and implement a si gnificant consolidati on thereafter; (iii) 
improve the long-term sustainability of pub lic finances by further reforming the 
pension system. 
1.2. Conditionality 
Article 6 of the Council Regulation (E C) No 1164/94 which governs the Cohesion 
Fund for projects approved prior to th e end of 2006 attaches budgetary policy 
conditions to the disbursements by the Fund. It provides that "no new projects or, in 
the event of important projects, no new project stages shall be financed by the Fund in a Member State in the event of the Council, acting by a qualified majority on a 
recommendation from the Commission, findi ng that the Member State […] has not 
implemented [its stability or convergence programme] in such a way as to avoid an 
excessive deficit".  
At the end of 2008 one Member State elig ible for support under the Cohesion Fund 
(Hungary) remained in the excessive defici t procedure (EDP), which, according to 
the aforementioned Regulation, may under cert ain conditions be associated with the 
suspension of transfers from the Fund. Ther e was however no need to adopt such a 
measure since the Coun cil, on the basis of available information, decided that the 
Hungarian government had acted in a ma nner consistent with its recommendation. 
As noted in the previous a nnual report, the Counc il decided to abrogate the EDP for 
Slovakia, Portugal, Poland and the Czech Republic in July 2008. 
Hungary entered EDP immediately upon accession in 2004, based on a general 
government deficit of 5.9% for 2003. Since the n, Hungary's failure to take effective 
action in response to Council  recommendations has been noted on two occasions, in 
January 2005 and in November 2005. Since Hungary is not a member of the euro 
area, it has a specific derogation from the a pplication of further steps of the EDP. In 
July 2007, the Council issued a new set of  recommendations under Article 104(7) of 
the treaty
1. On neither of these occasions did the Commission recommend a 
suspension of Cohesion Fund commitments to the Council. In July 2009 the Council 
decided, in view of the econom ic crisis, to issue a new deadline of 2011 to put an end 
to the excessive deficit in accordance with Article 107(7). 
                                                 
1 Treaty establishing the European Community, Article 104 on excessive government deficits. 
 
EN 17   EN 2. F INANCIAL EXECUTION OF THE 2000-2006  PERIOD IN 2008  AND CLOSURE OF 
PROJECTS  
2.1. Payments made in 2008 for proj ects adopted under the 2000-2006 period 
In 2008 there were 15 Member States (12 new Member States and Greece, Portugal 
and Spain) eligible to the Cohesion Fund in which proj ects were co-financed by the 
Fund under the 2000/04-2006 period. Since 1 January 2004, Ireland is no longer 
eligible. Bulgaria and Romania became e ligible for the Cohesion Fund with their 
accession on 1 January 2007.  
Given that all commitments for the C ohesion Fund projects financed under 2000-
2006 programming period have been execu ted by 31 December 2006, the financial 
resources available for the Cohesion Fund in 2008 were made only of payment appropriations.  
The 2008 initial budget amounted to € 1,937 million. However, the submission pace 
of payment requests quickly required reinforcements in terms of payment 
appropriations. The Director ate General for Regional Polic y requested increases of 
payment appropriations for a total amount of around € 553 million. The increase of the credits was the result of  an overall good performance of Member States and in 
particular for four beneficiary Member Stat es that exceeded their forecasts, namely 
Slovenia, Slovakia, Lithuania and Estonia.  
As far as the ex-ISPA budget lines are concer ned, at the end of the year, the situation 
resulted in 100 % execution rate of  the available appropriations.  
At the end of 2008, the averag e absorption rate (payments vs. commitments) of all 
current beneficiary countries for both th e Cohesion Fund and former ISPA projects 
was 66.3 %. Bulgaria presents the lowest  absorption rate (39.8 %), whereas Malta 
shows the highest absorption rate at 79.8 %.  The other Member States range from 
50.9 % to 76.1 % of the decided amount.  
Table 1 presents the overall payments im plementation in 2008 (including technical 
assistance) for the Cohesion Fund and the ex-ISPA payments: 
Table 1: Implementation of the Cohesion Fund and ex-ISPA payments in 2008 (Euro) 
Payment 
Appropriations Initial Movements Final 
Resources Outturn Cancelled Carryovers 
2009 
Cohesion Fund 1.936.747.200 + 250.000.000 
+ 300.000.000 
+ 2.779.418 2.489.526.618 2.489.299.691 - -
Ex-ISPA 650.000.000 -100.000.000 
-10.000.000 540.000.000 531.454.029  
TOTAL 2.586.747.200 +442.779.418 3.029.526.618 3.020.753.720 - -
Table 2 shows the level of payments in 2008 for each Member State. The payments 
done in the framework of the ex-ISPA cont ribution are included, as they have all 
been turned into Cohesion Fund projec ts at the date of the accession. Main 
 
EN 18   EN beneficiary Member States are Spain among the EU-3 Member States, Poland in the 
EU-10 Member States and Romania in the EU-2 Member States.  
Table 2: Payments made in 2008 to Coh esion Fund and ex-ISPA projects per Member 
State (including technical assistance) 
Environment Transport Technical 
Assistance TOTAL 
Member State 
Amount % Amount % Amount Amount % of  
total EU 15 
Greece 81.235.894 40,7% 11 5.853.539 58,0% 2.518. 623 199.608.056 6,6% 
Portugal 121.124.899 62,3% 73.149.733 37,6% 181.537 194.456.170 6,4% 
Spain 401.570.546 62,3% 242.969.772 37,7%  644.540.318 21,3% 
EU 3 603.931.339 58,1% 431.973.044 41,6% 2.700.160 1.038.604.543 34,4% 
Cyprus 5.814.955 65,0% 3.134.086 35,0%  8.949.040 0,3% 
Czech Republic 86.699 .762 50,3% 84.954.613 49,3 % 633.784 172. 288.158 5,7% 
Estonia 38.398.994 54,6% 29.140.155 41,4% 2.765.566 70.304.714 2,3% 
Hungary 40.777.254 51,3% 36.533.591 46,0% 2.110.617 79.421.462 2,6% 
Latvia 64.544.604 64,5% 32.774.486 32,8% 2.746.852 100.065.942 3,3% 
Lithuania 114.458.156 62,2% 61.109.392 33,2% 8.370.251 183.937.800 6,1% 
Malta 5.212.565 99,4%  0,0% 29.765 5.242.331 0,2% 
Poland 528.130.703 67,3% 247.053.953 31,5% 9.419.180 784.603.837 26,0% 
Slovakia 82.362.076 53,1% 71.696.734 46,3% 927.381 154.986.191 5,1% 
Slovenia 22.326.262 45,3% 26.911.481 54,7%  49.237.743 1,6% 
EU 10 988.725.331 61,4% 593.308.491 36,9% 27.003.396 1.609.037.218 53,3% 
Bulgaria 30.643.656 57,3% 6.944.044 13,0% 15.863.224 53.450.924 1,8% 
Romania 180.683.377 56,5% 122.030.336 38,2% 16.947.321 319.661.035 10,6% 
EU 2 211.327.034 56,6% 128.974.380 34,6% 32.810.545 373.111.959 12,4% 
TOTAL 1.803.983.704 59,7% 1.154.255.915 38,2% 62.514.101 3.020.753.720 100,0% 
2.2. Outstanding commitments from the 2000-2006 period 
At the end of 2008, the outstanding commitments ( "reste à liquider", RAL) 
corresponding to the 2000-2006 period (inclu ding two new Member States: Bulgaria 
and Romania) amounted to € 11.77 billion, down from 2007 (€ 14.80 billion). The 
2000-2006 regulatory framework for commitment s and payments implies a relatively 
 
EN 19   EN large stock of outstanding commitments. Th ey are equal to th e amount corresponding 
to almost three years of commitments. 
Table 3: Cohesion Fund and ex-ISPA accepte d amounts in 2000-2006 (including RAL) 
Country Net Committed 
(until 12/2008) Paid  
(until 12/2008) RAL  
as at 31/12/2008 
Greece 2.503.744.174 2.450.738.235 1.152.286.728 
Spain 11.788.531.423 9.838.026.775 3.094.434.304 
Ireland 573.575.321 570.010.223 55.745.185 
Portugal 3.156.539.424 2.427.127.170 1.077.862.318 
EU 4 18.022.390.343 15.285.902.403 5.380.328.535 
Cyprus 54.014.695 31.793.262 22.221.433 
Czech Republic 1.228.077.241 796.786.963 431.290.278 
Estonia 427.034.848 289.151.602 137.883.246 
Hungary 1.482.597.185 780.102.018 702.495.167 
Latvia 713.862.336 499.522.087 214.340.249 
Lithuania 846.449.583 559.974.524 265.380.251 
Malta 21.966.289 17.529.702 4.436.587 
Poland 5.634.539.614 2.871.741.538 2.762.798.076 
Slovakia 766.250.297 539.212.844 227.037.453 
Slovenia 254.198.103 162.579.583 91.618.520 
EU 10 11.428.990.190 6.548.394.123 4.859.501.260 
Bulgaria 879.941.333 350.021.546 529.813.137 
Romania 2.043.037.858 1.040.128.078 1.002.599.040 
EU 2 2.922.979.191 1.390.149.624 1.532.412.177 
TOTAL 32.374.359.723 23.224.446.150 11.772.241.972 
2.3. Closure of projects from the 2000-2006 period 
During 2008, 49 Cohesion Fund and ex-ISPA pr ojects were closed, representing 
around € 750 million of payments. At the end of 2008, the total number of closed CF 
projects for the 2000-2006 period (includi ng ex-ISPA projects) reached 216 and the 
number of projects remaining open decr eased to 976 out of 1.192 projects. Table 4 
provides information on the projects closed until the end of 2008 per Member States.  
 
EN 20   EN Table 4: Number of CF projects closed until the end of 2008 (including ex-ISPA) 
Projects closed as of end 2008 
Country Total 
number 
of CF 
projects Number 
of 
Projects Total Paid in 
Euro Number of 
open 
projects as 
of end 2008 
Greece 124 34 886.825.780 90 
Spain 407 80 2.363.473.998 327 
Ireland 10 3 250.368.797 7 
Portugal 109 24 580.082.620 85 
EU 4 650 141 4.080.751.195 509 
Czech Republic 58 14 192.671.263 44 
Estonia 37 14 75.086.815 23 
Cyprus 2 0 0 2 
Latvia 46 10 44.331.604 36 
Lithuania 51 9 82.084.499 42 
Hungary 47 10 11.153.890 37 
Malta 3 0 0 3 
Poland 130 5 27.825.974 125 
Slovenia 28 6 55.213.444 22 
Slovakia 39 4 6.880.841 35 
EU 10 441 72 495.248.330
 369 
Bulgaria 38 1 950.121 37 
Romania 63 2 1.794.822 61 
EU 2 101 3 2.744.943 98 
TOTAL 1.192 216 4.578.744.468 976 
 
EN 21   EN 3. T HE IMPLEMENTATION OF THE 2000-2006  PROJECTS BY MEMBER STATES  
3.1. Greece 
3.1.1. Environment 
The solid waste management interventi ons are based on the 2003 National Solid 
Waste Management Plan which in turn is  linked to Regional Management Schemes. 
The strategic objective is the appropriate in tegrated management of urban solid waste 
and, where necessary, the rehabilitation of po lluted or degraded areas. A similar plan 
has been drawn up for the collection and treatment of urban waste water, in 
accordance with the requiremen ts of Directive 91/271/EEC. 
Progress is noted in particular in relati on to those Cohesion Fund projects that 
concern waste water treatment plants and closure of illegal landfills. The rate of performance of the environment projects di ffers per sector. While the waste water 
treatment projects are relatively well advan ced, solid waste infrastructure, drinking 
water and nature protection projects, and in  particular large pr ojects such as the 
construction of dams, are seriously delaye d. Close monitoring and accelerated efforts 
are required in order to ensure that they are completed and put into operation within the timeframes set. One of the main problems in the implementation of projects 
presenting a very low absorption remains in pa rticular in the field of infrastructure 
works for solid waste management in Attiki region. 
However, it should be noted that delays in  the implementation of projects may also 
occur due to social reactions, in particul ar as regards waste management projects. 
Furthermore, the implementation of projects may also be linked to the application of 
a number of requirements deriving from re levant Directives and reflected in the 
specific terms of the funding decisions. Since 2002, Cohesion Fund decisions include 
certain specific clauses whose fulfilment, in a number of cases, is a precondition for 
the execution of either the advance or interim and final payments. These specific terms ensure that the projects co-finan ced are sustainable and comply with the 
requirements of the Community environmenta l legislation. These specific terms can 
be divided into those of an administrativ e nature (e.g. setting up of a solid waste 
management body or of an agency to manage  the operation of a dam), and those of a 
legal or technical character (e.g. the comple tion of the legal framework relating to the 
solid waste management or certain actions considered necessary for the integrated 
management of solid waste). The timely and efficient application and implementation of these requirements are di rectly related to the implementation of 
the projects concerned. 
Modification requests in th e field of the environment received by December 2007 
were treated in 2008. Very few remain pendi ng, mainly because there is a need to 
update environmental terms or there are pending legal proceedings. These 
modification decisions concerned mainly the ex tension of the final da te of eligibility, 
the adaptation of the physical object and the financing plan. 
3.1.1. Transport 
The strategy for transport projects seek s to develop the following corridors and 
projects: 
 
EN 22   EN – the priority trans-European (TEN) road axes in Greece, i.e. the PATHE, EGNATIA 
and IONIAN axes, as well as the Korinthos – Tripoli – Kalamata / Sparti motorway; 
– the modernisation of the PATHE railway axis, also part of the TEN, including its 
electrification and si gnalling systems, and construction of a freight railway line from 
the Ikonio port to the railwa y freight centre of Thriassio; 
– the infrastructure facilities of Igou menitsa and Iraklion ports including the 
construction of new port infrastructure at Lavrio; 
– the airports of Thessaloniki and Irakli on and the air traffic control system in 
Greece; and 
– public transport infrastructures in Attica and Thessaloniki, such as metro, tramway, 
and bus transport. 
In 2008, two modification requests for tran sport projects were processed. These 
modifications mainly concern the extensi on of the final date of eligibility, the 
adaptation of the physical object and the financ ing plan. It is clear that the transport 
projects are progressing better than the envi ronment projects with motorway projects 
being particularly well advanced. 
3.2. Spain 
3.2.1 Environment and transport 
Activity in 2008 was limited to physica lly following up and financially auditing 
ongoing projects, accompanied by interim payments to projects depending on progress recorded, closure of finalised projec ts and adjustments to reflect the reality 
of the situation on the ground, through amen dments to the Commission Decisions 
granting Community aid. 
Altogether, 12 projects were closed in  2008, all from the period 2000-2006. Almost 
all (11 of them) were environment projec ts. The outstanding commitments in respect 
of these projects stood at € 3.1 billion. This represents a 17% reduction in the 
outstanding commitments associated  with the Cohesion Fund for 2008. 
In addition, in order to cr eate wider awareness and a better understanding of the 
"Guidelines on the Closure of Cohe sion Fund and Ex-ISPA Projects 2000-2006" 
adopted by the Commission in April 2008 (S EC (2008)415), a seminar was held in 
Madrid on 16 and 17 October 2008, attended by over 300 par ticipants. This provided 
an opportunity to remind the players involved in the cl osure of projects of the 
deadlines and the regulato ry requirements involved in  the closure procedure. 
As regards amendments to project decisi ons, 29 amending deci sions were approved 
in 2008. Of these, 18 concerned the environm ent sector and 11 the transport sector. 
In general, the amendments  involved extending the projects' scheduled completion 
dates, often accompanied by modifications, mostly minor, to the physical object of 
the projects. The amendments had no impact on the total eligible cost of projects or 
on the level of Comm unity assistance. 
 
EN 23   EN The inclusion of some flexibility in th e rule for amending 2000-2006 Cohesion Fund 
decisions was presented to the Member Stat es in February 2008. As a result, a total 
of 69 amendment requests were sent by the Spanish authorities, the vast majority 
(65) relating to environment project s. They are still under examination. 
As regards interim payments and payment of balances, 184 payment requests were 
received, with a total of € 644.5 million pa id out. This is less than in 2007 and 
significantly less than in 2006, when th e total payouts were, respectively, € 742.6 
million (for 229 payment requests) and € 1 283 million (for 255 payment requests), which reflects the decreasing number of open projects. 
Finally, the Commission services, in comp liance with Commission Regulation (EC) 
No 621/2004 of 1 April 2004 concerning information and publicity measures, were very attentive to measures aimed at increa sing the visibility of  projects and raising 
public awareness on the role of the European Union. In particular, given its economic and social impact and the amount of money invested, the national authorities took 
care to emphasise in 2008 the role the Community has played in financing port 
infrastructures in Spain. 
In this framework, a press conference was held in Madrid on 15 December, in the 
presence of the Spanish Secretary of State for Transport and representatives from the 
Commission, to publicise the Community's involvement in providing and improving 
port infrastructures in Spain. Indeed, European  co-financing for this type of transport 
infrastructure over the period 2000-2006 was considerable, representing € 2 157 
million in eligible costs through the co-fin ancing of 22 projects, with € 1 169 million 
having been provided through the Cohesion Fund. 
3.3. Portugal 
3.3.1. Environment 
According to the environment strategic reference framework for Cohesion Fund 
interventions under the 2000-2006 period, the priority sect ors financed by the Fund 
are "Water Supply", "Sewerage and Wast ewater Treatment" and "Urban Waste 
Management". 
The strategic reference framework was upda ted in the mid-term review exercise 
conducted in 2004, which emphasized the need for reinforcing coordination between the Cohesion Fund and Structural Funds. In  this context, the regional programmes 
have also focused on projects that contribu te to the accomplishment of the municipal 
systems of water supply, urban waste water treatment and solid waste treatment, in 
the latter case with a particular emphasi s in the development of recycling and the 
reduction of landfills. The integrated water networks in the areas of Minho-Lima and Vale do Ave and the waste treatment syst em in Madeira are worth mentioning, in 
view of the overall financial s upport involved from the Cohesion Fund. 
Seventeen amending decisions were adopted during the year, generally to adjust the 
final specifications of projects, mostly in  order to include new elements and/or 
amending others, and to extend the date  of projects' completion. In 2008, four 
environmental projects were closed. 
 
EN 24   EN 3.3.2. Transport 
As for the environment sector, transport infrastructure development under the 
Cohesion Fund is programmed within a st rategic reference framework for the 2000-
2006 period, in coordination with the Tran sport and Accessibilities Operational 
Programme, and notably its priority axis 1 relating to the TEN-T network. 
The projects under implementation contribu te to the development of the Trans-
European Transport Network and enhan ce the multimodal articulation amongst the 
various means of transport in place, in line with the objectives of the strategic reference framework. The ongoing investments in railway infrastr uctures, upgrading 
the north-south railway axis and northern and southern links fr om Portugal to Spain 
are of particular importance in this context. Other important areas are the 
enlargement of the harbours in Madeira and Açores and the development of the 
underground networks in Lisbon and Porto. 
Four amending decisions were adopted during the year which related to adjusting the 
projects' description and exte nding the dates of completion. 
3.4. Cyprus 
The Cohesion Fund allocation for Cyprus amounts to approximately € 54 million. 
Two projects are co-financed by the F und: one transport project (upgrade of 
Limassol motorway) and one environmenta l project (solid waste management 
covering the regions of Larnaka-Ammochostos). 
In the framework of the partnership with the Cypriot Authorities and in order to 
ensure sound financial management of C ohesion fund projects, both projects were 
surveyed. The transport project is advancing satisfactorily, with an absorption rate of 
more than 80%. 
Concerning the environment project, it is to  be underlined that its implementation 
was delayed, due to reactions from the resi dents of nearby municipa lities, resulting in 
the relocation of part of the pr oject. In view of this situ ation and the subsequent slow 
absorption, this project was subject to a sp ecific technical mee ting with the Cypriot 
Authorities in December. An updated modi fication request, including the extension 
of the eligibility date, is expected  to be submitted to the Commission. 
3.5. Czech Republic 
3.5.1. Environment 
The implementation of the Cohesion fund proj ects in the sector of environment is 
progressing well. Out of 38 projects approved in 2000-2006 programming period, 
five were closed during the year and th e closure procedure was launched for three 
other projects. Most of the ongoing projects are in the final stage of implementation. 
In 2008, the Commission received five reque sts for modification of the Commission 
decision. By the end of the year, two amending decisions were adopted. One 
modification concerned the corr ection of technical errors in the text and the second 
one the extension of the elig ibility end date (which is also the reason for the other 
already submitted modifications). 
 
EN 25   EN In order to help the Czech authorities to cope with the fulfilm ent of the specific 
condition on private operator s in the water sector in serted in most of 2004-2006 
Commission decisions, the Commission d ecided to make use of the technical 
assistance. The assignment started in September 2008 and should be achieved by 
May 2009. 
3.5.2. Transport 
In the sector of transport, the progress of the implementation is well advanced for 
most of the projects. In 2008, one project was closed. At the same time, the closure 
procedure was launched for another tran sport project in 2008. One modification 
request for technical assistance in the tr ansport sector was approved in 2008. This 
modification concerned the extension of the e ligibility end date and an update of the 
indicative list of projects. 
3.6. Estonia 
3.6.1. Environment 
Due to the overheating of the construction market, cost overruns were observed (on 
average 217% since 2006). Up  to end 2007, the implementation of projects was 
delayed by these cost increases. For severa l projects, the implementing bodies were 
not able to accept tender results in 2007 due to too high prices and possible cartel 
agreements. The situation reversed in 2008 and this enabled to go forward with the 
projects. Estonia planned an extra EEK 720 mi llion to be financed out of the State 
budget for the years 2007 and 2008 in or der to cover these cost overruns. 
The Commission approved one modification decision c oncerning a technical 
assistance project for preparation and management of the Cohesion Fund. The 
decision consisted in extending the eligibility  end date and modifying the list of sub-
projects and their cost without any m odification of the project's total cost. 
Delays in the progress of project implementation were mainly due to delays in the 
design and/or construction, and/or to cost overruns. 
The Estonian authorities had some difficulties in meeting the requirements of cost-
benefit analysis during the closure proce ss of projects. Consequently, closure of 
environment projects took between six mont hs and one year. In the meantime, the 
Estonian authorities decided to take measur es to improve their compliance with cost-
benefit analysis. Nevertheless, at the end of  2008, nine projects were closed and two 
were under the process of being closed. 
3.6.2. Transport 
Works on all transport projects have started on the ground. Three modification 
requests were submitted in 2008 in the transport sector. They concerned "Tallinn-Tartu-Võru-Luhamaa road Vaida-Aruvalla  section and Puurmanni junction"; 
"Eastern extension of Muuga harbou r", and "Jõhvi-Tartu-Valga road". 
Technical assistance has helped prepare transport infrastruc ture projects for 
implementation in the 2007-2013 program ming period. The use of the JASPERS 
facility enabled a better preparation of ma jor projects to be submitted in future.  
 
EN 26   EN By the end of 2008, seven projects (includi ng two technical assistance projects) were 
closed. Among the closures, one technical as sistance project that  did not reach its 
objectives was identified. The Estonian au thorities agreed to correct the final 
payment request accordingly. 
3.7. Hungary 
3.7.1. Environment 
In 2008, further progress towards the co mpletion of ongoing projects was observed 
and the first projects adopted in 2000 and 2001 are in their final stage of 
implementation. In spite of the initially sl ow development, projects adopted in the 
last years of the 2000-2006 programming period show in general an improved 
performance. 
A number of projects in the solid waste sect or show significant cost overruns due to 
the underestimation of initial  budget for the rehabilitati on of landfills, which were 
non-compliant with the European and nationa l legislations. Most of these projects 
were modified and their scope reduced. Th e rehabilitation work s which were taken 
out from the 2000-2006 period, will be carried out in the 2007-2013 period. 
In the case of two solid waste projects (North-East Pest and North Balaton) 
notoriously lagging behind, the contracting rate improved significantly in 2008 (58% 
and 92% respectively). These projects are now on track and will be completed by the 
end of 2010. 
Waste water projects are mostly faced with cost savings, which shall be used within 
the projects by the end of 2010 for financing additional elements in line with the 
initial project objectives. The savings with in the biggest ongoing environment project 
– the Budapest Central Municipal Wast ewater Treatment Works and Collector 
Systems – amount to € 63 million. Due to th e financial corrections to the main 
contract, additional € 62 million are likely to be replaced with new elements within the framework of the current modification request. 
The Győr wastewater project and two technica l assistance projects (Zagyva-Tarna 
river basin management plan; Preparati on of Ex-ISPA projects) were closed. 
Closure documentation for two projects (M iskolc waste and Szeged wastewater) 
were submitted to the Commission in the fourth quarter of the year. Their closure procedure is ongoing. 
3.7.2. Transport 
The projects' implementation con tinued at an increased pace, due to the fact that four 
modification decisions were  adopted by the Commission. 
Cost overruns were encountered in a number of rail projects, but the necessary funds 
to cover overruns in the ra ilways projects were made av ailable from national sources 
at the end of 2008. 
In several projects public proc urement problems have led to  the re-launch and review 
of a number of contracts. This caused seri ous delays and puts certain projects at risk 
 
EN 27   EN of not completing all elements by the curr ently foreseen eligib ility end date. In 
certain projects important works contracts have still not been contracted. 
Problems related to land acquisition are pr esent in a number of projects. While in 
some cases the outstanding issues are purel y procedural, there are instances where 
work is being delayed because of this. 
No transport projects were closed or ar e in the process of being closed. Four 
modification requests (three rail projects; one road project) were received in the 
fourth quarter of the year. 
3.8. Latvia 
3.8.1. Environment 
Closure payments for two projects were effected: "Solid waste management in 
Ziemeļvidzeme region" and "Technical assist ance for environmental projects". 
The Commission also adopted four modifyi ng decisions for the following projects:  
"Development of Water Services in R ēzekne City"; "Technical assistance for 
projects for water services development in  Latvian municipalities"; "Development of 
Water Services in Daugavpils, Stage II"; "Technical assistance for the environment 
sector in Latvia". The modifications mainly  concerned an extensi on of the eligibility 
en date; adjustment to some of the phys ical indicators and c onsequently to the 
description of the pr ojects; inclusion of additional components. 
3.8.2. Transport 
Closure payments for three projects were effected: "Improvement of Via Baltica road 
from Gauja to Lilaste", "Improvements of links to Via Baltica (Airport Access Road 
and a related section on A10" and "E67 Via Baltica, section Ķekava – Iecava". 
The Commission also adopted four modifyi ng decisions for the following projects: 
"Riga Airport: Runway extension an d lightning system reconstruction"; 
"Modernization of the signalling system in Latvia"; "Technical Assistance for 
Transport Sector in Latvia"; "Technical Assi stance to Ministry of Transport". As for 
environment projects, the modifications mainly concerned the extension of the 
eligibility end da te; adjustments of some of the phys ical indicators; the inclusion of 
additional components. 
3.9. Lithuania 
3.9.1. Environment 
The closure procedure for two environment pr ojects was successfully finalised at the 
beginning of 2008; the closure of a thir d project was initiated in July 2008. 
Four modifying decisions, related to the ex tension of the end date  and adjustment of 
monitoring indicators, were  adopted. In addition, nine modification requests were 
 
EN 28   EN received in the last quarter of the year, of which the majority concern cost overruns 
and the extension of the eligibility end date. 
3.9.2. Transport 
Four projects were closed before 2008. In  2008, the closure procedures were initiated 
for two transport projects, of which one wa s successfully comple ted; the closure of 
the second project was fi nalised in January 2009. 
Lithuania also submitted four modification requests for transport projects. All of 
them were infrastructure projects. The modifications included the extension of 
eligibility end dates and adjustments to the physical monitoring indicators. 
3.10. Malta 
3.10.1 Environment 
The project "Upgrading of Sant' Antnin wast e treatment facilities" aims at reducing 
the negative environmental impact of the wa ste cycle, which is of utmost importance 
for the Malta main island due to  its very high population density. 
The Commission decision was modified on 13 August 2008 with the result that a 
new mechanical treatment plant will be bu ilt instead of upgrad ing the existing one. 
An extension of the eligibility end da te until 31 December 2010 was also included. 
The project is progressing well. The material  recycling facility has been completed; 
the acceptance certif icate for the final handover was issued in May 2008. 
3.10.2. Transport 
The project "Restoration and upgrading of sections of TEN-T" consists in the 
upgrading of three lots of the TEN-T networ k in Malta and Gozo (St. Paul's Bay by-
pass, Civil Aviation Avenue in Luqa and M ġarr Road in G ħajnsielem in Gozo) in 
order to reduce travel time, accident ra tes, transport costs and facilitate 
competitiveness in the transport of goods. 
The Commission decision was modified on 17 October 2008, covering transfer of 
funds between the project sections and extending the eligibility end date until 31 
March 2010. 
The project is physically complete. Furthe r savings have arisen and an additional 
modification request to include  further section(s) of th e TEN-T network is awaited. 
Technical Assistance  
The project aims at preparing the envi ronment projects pi peline for 2007-2013 
(mechanical biological waste treatment plan ts and storm water master plan). The 
Commission decision was modified on 30 July 2008 in order to take into account the 
delays in the identification of potential s ites for the waste treatment plant and the 
need to comply with obligations arising from Directive 2001/42/EC. In addition, the 
deadline for the eligibilit y of expenditure was extended until 31 December 2010. 
 
EN 29   EN 3.11. Poland  
In 2008, the Commission adopted fourteen amending decisions granting assistance 
from the Cohesion Fund – eigh t in the environment sector and six in the transport 
sector. In addition, the Commission a dopted eight modifying decisions. The 
modifications mostly concerned the physical scope and/or the elig ibility end date of 
the projects, as well as the increase of  the threshold for interim payments. 
A substantial number of proj ects will be finalised in 2010, which means that the bulk 
of closures can be expected in 2011. Nume rous projects in both sectors indicated 
significant cost overruns which in total re present approximately 1/3 of the Cohesion 
Fund allocation for Poland. 
In 2008, the Commission authorised pa yments amounting to € 784.6 million. 
3.11.1. Environment 
The level of contracting was over 100% of  the originally estimated costs for 
environment projects, taking into account  the cost overruns. The physical and 
financial progresses aggregated for the sect or were about 55% and 50% respectively. 
About one third of projects reached the thre shold for interim payments at the end of 
the year. 
At the end of the year, unlike for tran sport projects, ther e were still some 
environment projects for which the nati onal authorities were still seeking for 
appropriate solutions to finance cost overruns. Seven environment projects were 
subject to pending environmenta l impact assessments (EIA). 
One closure was ongoing for an environment project. 
3.11.2. Transport 
The level of contracting was over 100% of th e originally estimated costs for transport 
projects, taking into account  the cost overruns. The physi cal and financial progress 
aggregated for the sector was about 57% ( both physical and financial) for roads and 
62% (both physical and financial) for railw ays. Almost half of transport projects 
reached the threshold for interim payments. 
At the end of the year, three transport projects were still subject to pending 
environment impact assessments (EIA). 
The closure procedures for 3 investment projects were ongoing. In the sector of 
transport, the national authorities managed to secure the additional financing for all projects concerned by cost overruns. 
Technical assistance 
One closure was ongoing and another one wa s initiated for tec hnical assistance 
projects. 
 
EN 30   EN 3.12. Slovakia 
3.12.1. Environment 
Significant progress in financial and physical implementation was recorded in the 
majority of environment projects. Rela tively few projects remain problematic: 
Galanta, Samorin, Home Kysuce, and Velky Krtis water sector projects. In the case 
of these projects the Slovak authorities we re advised to draw  up action plans to 
monitor progress closely and identify steps to  be taken to ensure their completion by 
the end of 2010. 
Ten modification decisions were adopted  (Komárno, Kosice, Humenne, Trnava, 
Piestany, Zvolen, Zilina WWT P, Poprad, TA Regional water companies, and TA 
water sector). The modifications concerned mainly the extension of eligibility end 
dates to take account of dela ys incurred in particular dur ing the earlier procurement 
stage, and the adjustment of physical i ndicators. Cost overruns are a growing 
problem in a number of projects, with fi nal beneficiaries ( public water sector 
companies) having to fund the additional costs. 
Three water sector infrastructure projects were completed in 2008 (Nitra, Považská 
Bystrica, and Martin) plus one technical assistance project. The quality of final 
reports was generally consider ed to be insufficient and fi nal payments were therefore 
interrupted pending improvements. Weaknesses related in particular to the project 
descriptions, statements on achievement of project objectives, and demonstration of 
financial sustainability. 
3.12.2. Transport 
All contracting within the transport projects had already been completed in 2007 
(with some minor exceptions) and physi cal implementation further advanced 
satisfactorily during 2008. As for environmen t, the Slovak author ities were advised 
to draw up an action plan for the main  problematic transport project: Mengusovce-
Janovce motorway, which has suffered implementation delays, cost increases and design changes. 
The first transport project "Moderni sation of rail track Bratislava Ra ča-Tmava 
(section Bratislava-Ra ča-Šenkvice)" was closed and two other projects (one road 
infrastructure and one for technical assistance) were submitted for closure. The road project in question relates to the Bratislava-Vienna Port Bridge. 
3.13. Slovenia 
3.13.1. Environment 
In line with the Strategic Reference Fram ework for the Cohesion Fund, the main aim 
for assistance from the Cohesion Fund and former ISPA during the period 2000-2006 was to assist municipalities and regions  in improving drinki ng water supplies, 
sewerage networks and wastewater treatmen t (a total of 12 projects in the water 
sector) and waste management (4 projects). 
In 2008, after several years marked by dela ys in public procurement, the last 
contracts for works were successfully c oncluded. As many projects are set up as 
 
EN 31   EN design and build, the actual construction lagg ed several months behind the date of 
contract signature. However, those proj ects which entered th e construction phase 
steadily progressed both phys ically and financially. 
Four projects in the water sector complete d already in 2007 yet remain to be closed. 
Construction and/or trial ope ration on one further water pr oject and one in the waste 
sector were finished as well. In complian ce with the relevant procedures, closure of 
these projects is expected in 2009. 
3.13.2. Transport 
The national authorities have defined in  2003 a National Cohesion Strategy for the 
Transport sector which identifies the objec tives of its transport strategies and the 
projects to be financed. It involves th e country establishing itself as a maritime 
transit country within the European Union and market its geopolitical position at the 
crossroads of two importan t European corridors (Cor ridors V and X) along the 
existing southern border of the EU. To this end, bottlenecks on corridors must first be removed involving the completion of  the motorway network, upgrading, 
modernisation and completion of the rail network and the increase of the range of logistical services. 
The Cohesion Fund co-finances six railway and two motorway projects. In early 
2008 one motorway and one railway project were closed, while construction on the 
second motorway project was finished. After reported delays due to public 
procurement in previous years, railway pr ojects (except partially one) were fully 
contracted and marked progress in works as well as in payments executed. The 
closure of remaining transport projects  is expected in the beginning of 2010. 
4. M
ONITORING , INSPECTIONS , FINANCIAL CORRECTIONS AND IRREGULARITIES  
4.1. Monitoring: committees and missions 4.1.1. Greece 
One major technical meeting took place in June in Brussels with the managing 
authority of the Cohesion Fund and DG RE GIO to review and monitor the progress 
of all projects. Three other technical mee tings took place in At hens to ensure the 
close monitoring, indentify th e critical issues, boost furt her the implementation and 
identify actions that will ensu re total absorption of funds by 2010. 
No monitoring missions for ongoing pr ojects were carried out in 2008. 
4.1.2. Spain 
The monitoring committee met in Madrid on 24 April. In preparation for the meeting 
the national authorities submitted inform ation sheets outlining the implementation 
situation as at 31 December 2007 in respect of all the deci sions (single projects or 
groups of projects) still ongo ing. From these information sheets the managing 
authority, in partnership with the Commissi on services, selected 50 projects which, 
by virtue of their particul ar situation, were subject to specific monitoring and 
 
EN 32   EN analysis by the Committee during its sessions. At the meeting the Commission 
services highlighted three points: 
- It was underlined that, although some fl exibility was introduced in the revised 
guidelines on the amendment of Cohesion Fund projects, there was no automatic entitlement to further modifications; request s still have to meet the conditions laid 
down in the guidelines; the eligibility end date of 31 December 2010 was also 
confirmed. 
- The Guidelines on the Closure of C ohesion Fund Projects were adopted by the 
Commission on 4 April. The Co mmission services invited the Spanish authorities to 
organise a seminar on this question, which was subsequently held in Madrid in 
October. 
- The third point concerned the recurring problem of th e recovery of VAT amounts 
concerned by the Court of Justice judg ment of 16 October 2005. The Commission 
services urged the Spanish authorities to e ffect these recoveries without delay, even 
if this means leaving open the cases aff ected by tax inspections or legal appeals. 
Finally, the Commission se rvices mentioned Commi ssion Regulation (EC) No 
621/2004 of 1 April 2004 concerning publicit y measures. They pointed out the 
obligation to take effective information and publicity measures so as to increase the 
visibility of Cohesion Fund projects and raise public awareness on the role the 
European Union is playing through its Cohesion policy. 
Technical and follow-up missions  
On 28 November a technical meeting was held in Madrid between the managing 
authority, the certifying authority a nd DG REGIO to a ddress the problems 
encountered in the day-to-day management  of projects and possible measures for 
solving them. Three main topics were discu ssed, namely delays in the examination of 
modifying requests; difficulties encounter ed during the closure of projects; 
organisation of the "information and public ity" day concerning port infrastructures. 
In addition, two follow-up missions took place in 2008. The first was a visit to 
Pamplona on 19 February, concerning project  "Actuaciones en materia de residuos 
urbanos en la Comunidad Foral de Navarra " (Urban waste management measures in 
Navarra). The object of the visit was to ex amine alternative waste treatment solutions 
to that proposed in the decision adopted in 2001, as a court decision had brought the 
infrastructure works to a halt. 
The second, on 20 May, was a visit to projec t "Actuaciones de Sumi nistro de Agua y 
Abastecimiento a poblaciones ubicadas en la Cuenca Hidrográfica del Río Guadiana: 
Comarca del Andévalo" (Water supply to populations living in the Guadiana river 
basin, district of Andévalo), to check how the project was progressing on the ground. 
The visit was decided upon as a result of the Member State having applied for a 
second amendment to extend the period of eligibility. The inspectors were able to obtain clarification from th e project leaders on the di fficulties encountered in 
implementing the project and to evaluate the " force majeure " arguments put forward 
by the project managers. 
 
EN 33   EN 4.1.3. Portugal 
The two monitoring committee meetings co ncentrated on the follow-up of the 
implementation of the projects and the so lution to the problems encountered. Both 
meetings were held in Lis bon, on 26-27 May and on 25 November. 
The May monitoring committee reviewed approximately half of the ongoing projects 
and those approaching closure. It also examined the prospects for implementation 
during the rest of the period. It was pr eceded by a technical meeting between the 
Cohesion Fund national authoriti es and the Commission, in order to discuss the main 
outstanding issues. 
The November monitoring committee mee ting focused on projects or types of 
projects with particular problems or outstanding issues, as identified by the 
Commission and/or the Member  State. General questions  were also discussed, 
notably the perspectives for completion of open projects or groups  of projects in the 
two full years still available. It was also  preceded by a technical meeting between the 
Cohesion Fund national author ities and the Commission. 
During the year, several projects were visi ted by the Commission services in order to 
take note of their state of progress and, in certain cases, to discuss with the national 
authorities technical or legal problems which have arisen. 
4.1.4. Cyprus 
Technical meetings took place in  June and December. Progress in the 
implementation of the two Cypriot projec ts was presented, while other technical 
issues related to monitoring and reporting were also addressed. 
4.1.5. Czech Republic 
In general, two Cohesion Fund monitori ng committee meetings are organised each 
year. Due to heavy workload at the end of 2007, the second 2007 monitoring committee took place on 15-16 January 2008. Further monitoring committees took 
place on 24-25 June and on 9-10 Decembe r. Discussions were organised on a 
project-by-project basis us ing the monitoring sheets and giving substantial time to 
the national authorities, beneficiaries and the Commission to clarify any outstanding 
issues. Issues of general character were discussed in the Core Group meeting with 
the national authorities. 
In the course of the year, the Czech Cohesion Fund managing authority further 
improved the monitoring of the implementa tion of projects allowing for a better 
overview of the progress on the ground. 
4.1.6. Estonia 
One monitoring committee was held in 2008 covering implementa tion, quality of 
spending, financial progress and publicity actions. Furthermore, a contract of 
confidence was signed on 12 February be tween the Commission and the national 
audit authority. The compliance assessment of  the monitoring and control system for 
the Operational Programmes 2007-2013 has not been completed in 2008.  
 
EN 34   EN Situation regarding lags in the implementati on has been followed on a constant basis. 
The Commission highlighted mainly the need to learn from the past and try to improve and build on existing experien ce for the 2007-2013 programming period. 
Issues relating to the Cohesion Fund unde r the 2007-13 period were covered in the 
two Monitoring Committees held in April. 
4.1.7. Hungary 
Four Cohesion Fund monitoring committee meetings (two for each sector – 
environment and transport) were held in Budapest, on 8-10 Apr il and 29-31 October. 
All adopted projects were reviewed a nd overall presentations were provided. 
The monitoring committee meetings were conducted in the fo rm of technical 
discussions on a project-by-project basis, giving sufficient time to each final beneficiary to present th e progress of each project. 
4.1.8. Latvia 
Two monitoring committees took place in Ri ga, on 11 April and on 7 October. The 
meetings were used for the monitoring and assessment of the progress in implementation as well as for discussi ons on any problem encountered and on 
horizontal issues such as  financial execution, publicit y, technical assistance. 
During the April meeting, the impact of co st increases on projects was discussed and 
the Latvian authorities reported on the st eps taken to combat inflation. In both 
meetings problematic projects were clos ely monitored: i.e. "Track renovation on 
stages of the East-West rail corridor in Latvia", "Modernisation of rail signalling systems" and "Development of the district  heating supply system in Ventspils". On 
10 April, the Commission representatives  visited the project "Solid Waste 
Management in the Maliena Region" and obs erved planned admini strative, financial 
and technical checks performed by the Ministry of Environment.  
On 7 October, the Commission representativ es visited two projects: "Modernisation 
of the signalling system" on the upgrading of  the Latvian East-Wes t railway corridor; 
and "Hazardous waste management in Latvia , Stage I" for the establishment of a 
national Hazardous Waste Management System. 
4.1.9. Lithuania 
Two monitoring committee meetings took place, on 21-23 April and 6-7 November. 
The committee examined the progress reports submitted by the national authorities and discussed the implementation of all ex-ISPA and Cohesion Fund projects and 
how to accelerate their implementation. In addition, an ad-hoc monitoring committee 
meeting was held on 28-29 July to addre ss the amendment of certain environment 
projects having encountered significant cost overruns. 
Two technical missions took place in February  for on-site visits, meetings with the 
final beneficiaries, discussions on the implementation and closure of projects, 
preparation of applications for major projects, support from JASPERS (Joint 
Assistance in Supporting Projects in Eur opean Regions), and foreseen publicity 
measures. 
 
EN 35   EN 4.1.10. Malta 
The monitoring committee meetings for all three Cohesion Fund projects were held 
on 23 May and 16 October. Annual progress reports were submitted for all three projects. 
A monitoring mission on the project "Upgr ading of Sant' Antnin waste treatment 
facilities" took place on 21 May. 
4.1.11. Poland 
Two monitoring committees were held, on 27 June and 12 December. The meetings 
were preceded by meeting of working groups  for the environment sector and the 
transport sector.  
The meetings were dedicated to the revi ew of the progress in implementation of 
individual projects. Beside s that, a number of horizonta l issues were discussed, 
namely: payment rate and financial forecas ts, cost overruns, EIA conditions, closure 
forecast, modifications of projects in terms of scope and timeline, delays in implementation, and compliance with the "M+2 4" and "M+12" rules. The review of 
end dates revealed that a subs tantial number of projects will be finalised only in 2010 
which means that the bulk of closures can  be expected in 2011. Numerous projects 
indicated substantial cost ove rruns which in total represen t approximately 1/3 of the 
Cohesion Fund allocation for Poland. The sect or of transport secured the additional 
financing for all concerned projects. In the environment sector, there was a limited 
number of projects for which the nati onal authorities were still seeking for 
appropriate solutions. These cases were closely monitored in both monitoring 
committees. A special attention was paid to the monitoring of seven projects with 
pending EIA conditions. No projects breach ing the M+24 and M+12 rules have been 
recorded. 
No Cohesion Fund monitoring missions were carried out during the year. 
4.1.12. Slovakia 
Two monitoring committee meetings were he ld, in Bratislava (March) and Nitra 
(October). The monitoring committees reviewed  the state of progr ess of all ongoing 
ex-ISPA and Cohesion Fund projects. R ecommendations were made to improve 
reporting on physical indicator s, identification of legal and technical problems in 
implementation, and on audit findings. Attentio n focused in particular on projects at 
risk of not being completed by the end of 2010, for which the Slovak authorities have 
now drawn up action plans. 
In addition, key horizontal issu es were discussed: privati zation of water companies; 
cost overruns; closure of projects; quality of final reports; and the need to identify 
lessons learned from the 2000-2006 period to be applied in future major projects. 
Site visits to the Kosice and Humenne wa ter sector projects t ook place in April, 
during which the proposals for modification were discussed and progress on the ground was observed. In addition, site visi ts to the Komárno WWTP project was 
undertaken during the March m onitoring committee, and to two additional projects on 
 
EN 36   EN the occasion of the Octobe r committee: Nitra WWTP (c ompleted project under 
closure procedure) and Gala nta (problematic project). 
The representatives of the Commission also participated in two audit missions in 
April (follow-up systems audit for the Cohesion Fund) and in November (retrospective verification of public procurement). 
4.1.13. Slovenia 
One monitoring committee meeting was he ld, on 25 November. It focused on the 
ongoing implementation of projects, delays in public procurement, cost overruns, 
project closure and publicity. The meeting in cluded a detailed review of all ongoing 
environment and transport projects as well as a discussion on payments and payment forecasts. The Commission in particular highlighted the necessity to further 
accelerate the implementation of project s where substantial delays occur. 
One project visit was carried out in the framework of the monitoring committee. The 
three visited environment projects (one in  the water sector and two in the waste 
sector) showed satisfactory progress. 
4.2. Audits and financial corrections 
2008 was a year of overlap between the management of the final stage of 
implementation of the 2000-2006 programming period including the preparation for 
its closure, and the opening of the 2007- 13 programming period. The management 
and control environment in place in 2008 was th erefore meant to address both risks 
related to the preparation for closure of past programmes and projects and the risks 
of set up of management and contro l systems in the new programmes. 
Audit work for Programming period 1994-1999 - EU 4 (Greece, Ireland, Portugal, 
Spain): 
The Cohesion Fund closure enquiry con cerning the period  1994-1999 covered 10% 
of Cohesion Fund projects representing 20%  of the co-financed expenditure during 
this period. The fieldwork was finalised in 2003 and th e main deficiencies found 
were insufficient management verifications resulting in ineligible expenditure and breaches of public procurement rules. Fina ncial correction procedures resulting from 
the closure enquiry were concluded duri ng 2008, except for three remaining projects 
(two in Spain, one in Portugal) which will be finalised in 2009. 
Audit work for Programming period 2000-2006  - EU 14 (EU 10 + EU 4): 
For EU-14 Member States in 2008, four audit missions were carried out which 
focused on the follow-up of previous aud it recommendations. In  addition, five 
missions for the review of winding-up bodies were performed in order to verify the 
preparation of Member States for closure a nd to identify and mitigate related risks. 
In 2008, DG Regional Policy examined winding up declarations submitted for the 
closure of 2000-2006 Cohesion Fund projects , of which 60 (representing 5% of all 
projects) related to  Spanish projects. 
 
EN 37   EN Other audit work for the programming period 2000-2006 included the examination of 
the annual control report s received under Article 12 of Regulation No. 1386/2002. 
By the end of 2008, the majority of reports ha d been analysed, and replies sent to the 
Member States with observations and, where necessary, requests for additional 
information in order to be able to draw as much assurance as possible from the results of national audit work. Furthermore, a number of national system audit reports were received in 2008. 
The last of the annua l bilateral coordination meetings  with the Directorate General 
for Regional Policy for the year 2007 wa s held in February 2008. As 2008 was a 
transitional year, it was deci ded to reschedule the bilatera l coordination meetings for 
2008 to the first half of 2009. Bilateral meeti ngs are held annually with national audit 
authorities to exchange information on th e implementation of audit work and to 
discuss progress on sample checks and follow-up of audit findings. The meetings in 2009 will cover issues c oncerning both programming periods 2000-2006 and 2007-
2013. 
Impact of controls 
Financial corrections 
In the exercise of its supervisory role, DG Regional Policy has implemented a policy 
of suspending interim payments and applying  financial corrections as soon as it is 
established that there are serious deficienci es which put at risk the reimbursements of 
Funds made to Member States. It also esta blished a revised manua l of procedures to 
streamline the internal arrangements for the adoption of susp ension and correction 
decisions. 
Where, after due verifications, the Commissi on finds that the expenditure certified in 
an interim payment application is linked to a serious irregular ity and not immediate 
remedial action is taken by the Member State, the formal suspension of payments procedure is launched. During 2008 DG RE GIO adopted for the Cohesion Fund one 
suspension decision concerning Bulgaria in  relation to two pr ojects in the road 
sector. 
Financial corrections totalling € 92.7 m illion were made in 2008 as follow-up to 
audits by the Commission or the Court or Au ditors or to OLAF enquiries. Of this 
total, € 38.2 million related to project s of the 1994-99 programming period and  
€ 54.5 million to the 2000-2006 period. The corrections were either applied by formal Commission decisions (€ 66.2 m illion) or were accepted by the Member 
States without the need for a decision (€ 26.5 million). 
Four financial correction d ecisions related to Cohesion Fund projects in the 1994-
1999 programming period were adopted for an  amount of € 31.5 million and nine for 
the 2000-2006 programming period for an amount of € 34.7 million. 
Of the € 26.5 million of corrections accepted by the Member States € 6.7 million 
related to 1994-1999 and € 19.8 million to  2000-2006. These are implemented by 
deduction from payment claims or from  the balance payable at closure. 
 
EN 38   EN Table 5 illustrates the amount of fina ncial corrections by Member State and 
programming period. 
Table 5: Cohesion Fund financial corrections in 2008 by period and country (in EUR) 
Member State Cohesion Fund TOTAL 
 Period 
2000-2006 Period 
1994-1999  
Greece  23,405,436 5,674,477  29,079,913 
Spain  19,927,164 32,483,151  52,410,315 
Ireland  - - - 
Portugal  11,062,188  - 11,062,188  
EU 4 63,259,764 38,157,628 92,552,416 
Cyprus  - - - 
Czech Republic  - - - 
Estonia  125,073  - 125,073  
Hungary  - - - 
Latvia  - - - 
Lithuania  65,833 - 65,833  
Malta  - - - 
Poland  123 - 123 
Slovenia  - - - 
Slovakia  - - - 
EU 10 191,029 - 191,029 
Bulgaria  6,156 - 6,156  
Romania  - - - 
EU 2 6,156 - 6,156 
TOTAL 54,591,973 38,157,628 92,749,601 
. 
Management and Control systems  
In the Directorate General's Annual Activ ity Report for 2008, for the functioning of 
the management and control systems ( 2000-2006), an unqualified opinion, signifying 
that there are no material deficiencies in key elements of the system, was given for 
the Cohesion Fund systems in seven Member  States (Cyprus, Estonia, Hungary – 
 
EN 39   EN transport sector, Latvia, Malta, Portuga l and Slovenia) corresponding to 15.45% of 
payments made in 2008 as a proportion of total payments for the Cohesion Fund. 
For ten Member States, representing 84.55%  of CF payments made in 2008, the 
opinion was qualified, signifying the existence of  material deficiencies in key system 
elements. This concerned Bulgaria, the Czech Republic, Greece, Hungary 
(environment sector), Ireland, Lithuania, Po land, Romania, Slovaki a and Spain. In all 
cases the impact of the deficiencies was judged to be moderate, except for the road 
sector in Bulgaria. 
For the road sector in Bulgaria the opi nion was qualified with the impact of the 
material deficiencies affecting key elemen ts of the system being judged significant. 
Accordingly, a reservation was made for the road sector in Bulgaria in the 
Directorate General's Annual Activity report for 2008. The Commission suspended 
payments to the Bulgarian road sector projects between July 2008 and May 2009 for this reason. 
4.2.1. Greece 
In 2008, DG Regional Policy carried out two audit missions for the Cohesion Fund in 
Greece. For both audits a qualified opini on was given with possible financial 
implications after the contradi ctory procedure. As concerns  audit work from previous 
years, three open audit missions carried out in 2007 were closed in 2008 or early 
2009 without financial corrections. Fourteen  winding up declarations for projects' 
closure were examined in 2008. 
In 2008, one important financial correction decision was taken relating to systemic 
irregularities in the public procurement procedure for both closed projects and 
projects under implementation. 
In the Annual Activity Report of 2008 a qualif ied opinion with moderate impact and 
no reservation was given to the Cohesion F und in Greece as each project is audited 
by the national authorities (EDEL) at least once before closure and as the 
Commission examines the winding-up declarati ons before the closure of projects on 
an individual basis and any irregular expe nditure can be identified and deducted at 
closure of each project. 
4.2.2. Spain 
No audits on Cohesion Fund were carried  out by the Commission in Spain in 2008. 
As to the follow-up of previous missions, DG Regional Policy concluded the financial correction procedures for eleven projects during the y ear 2008 with a total 
corrected amount of € 52.4 million. 
60 winding-up declarations for the closure of  Spanish projects were analysed during 
the year and, as a result, irregular expe nditure declared to the Commission were 
detected, mainly related to public pr ocurement procedures  and certain VAT 
eligibility issues. 
In the Directorate General's Annual Activ ity Report for 2008 for the functioning of 
the management and control systems (2000- 2006), a qualified opini on with moderate 
impact was given for the Cohesion Fund in Spai n as a result of ma terial deficiencies 
 
EN 40   EN affecting key elements of the systems. Ho wever, no reservation was proposed as the 
Directorate General concluded that it obtai ns reasonable assurance for payments and 
the financial risk to the Community budget is  mitigated by the fact that the winding-
up declarations are assessed before the closur e of projects on an individual basis and 
any irregular expenditure can therefore be identified and deducted at closure of each project. Also, the maximum interim payments  prior to closure are capped at 80% of 
the Community contribution. 
4.2.3. Portugal 
In 2008, no missions were carried out by DG Re gional Policy in Portugal as regards 
Cohesion Fund. However, the European Cour t of Auditors audi ted one project in 
Portugal in the context of their DAS  2007 enquiry, with findings on public 
procurement issues. 
As to the follow-up of previous missions, DG Regional Policy concluded the 
financial correction procedures for six proj ects and launched new financial correction 
procedures for two other projects in 2008. The financial corrections concluded for 
the six projects amounted to € 10 212 814, of which only € 720 731 was enforced 
through a Commission Decision and the rema ining corrections were accepted and 
executed by the Portuguese authorities th emselves. The audits done by DG Regional 
Policy in regard to five other projects were closed without financial corrections. 
At the request of DG Regional Policy, th e winding-up body carried out a specific 
enquiry in 2007 on the implementation of c ontrol procedures for the period from 1 
January 2005 onwards. The conclusions of th at enquiry revealed that the risks in 
respect of public procurement were mitigated as the national authorities implemented new control procedures following an action plan carried out in 2005. On the basis of 
that enquiry, together with the conclu sions drawn from Commi ssion audits and the 
analysis of national aud it strategy, DG Regional Policy signed on 22 January 2008 a 
contract of confidence with  "Inspecção-Geral de Finanç as" (Portuguese winding-up 
body and audit authority) coveri ng the Cohesion Fund and ERDF. 
In 2008, DG Regional Policy analysed nine winding-up declarations for closure of 
Portuguese Cohesion Fund projects. 
In the Directorate General's Annual Activ ity Report for 2008, for the functioning of 
the management and control systems ( 2000-2006), an unqualified opinion was given 
for the Cohesion Fund in Portugal. 
4.2.4. Cyprus 
One audit mission was carried out by DG Regional Policy in 2008 in Cyprus 
reviewing the work of the winding up body for ERDF and CF . There were no 
outstanding issues concerning CF from prev ious years' audits to follow-up in 2008 
and no financial corrections were carried out in 2008. No projects were closed in 
2008 in Cyprus. 
Based on the positive results of the review of  the winding up body, of the positive 
conclusions from other audit missions carried out in Cyprus, as we ll as of the desk 
work carried out, a contract of confid ence for ERDF and Cohesion Fund was signed 
 
EN 41   EN between the Commission and the Cypriot Inte rnal Audit Service (as the audit body in 
Cyprus) on 17 December. 
In accordance with the above there was an unqualified opinion with no reservations 
for Cohesion Fund expenditure in Cyprus in the Directorate General's 2008 Annual 
Activity Report. 
4.2.5. Czech Republic 
In 2008 in the context of the Action Plan to strengthen the Commission supervisory 
role in the management of structural act ions, the Commission se rvices requested the 
Czech authorities to carry out an exercise of retrospective verifications of Cohesion 
Fund projects with the aim to determining the extent and potential systemic character 
of previously detected audit findings in the area of public procurement. The final 
report on this exercise was due in January 2009. 
The Commission services carried out two audit missions for Cohesion Fund in the 
Czech Republic in 2008. The Commission servic es also closed one previous audit by 
opening a financial correction procedure fo r infringement of public procurement 
rules concerning a railway project. Eight winding-up declarations for closure of 
Czech projects were examined in 2008 by DG Regional Policy and as a result one 
financial correction was proposed on an environment project before closure. 
In the Directorate General's Annual Activ ity Report for 2008, for the functioning of 
the management and control systems ( 2000-2006), an unqualified opinion was given 
for the Czech Republic as the winding-up declarations are assessed before the closure of projects on an indi vidual basis and any irregular  expenditure can therefore 
be identified and deducted at closure of each project. 
4.2.6. Estonia 
On the basis of audit work carried out in 2006 and 2007, a contra ct of confidence 
was signed in 2007 between the DG Regiona l Policy and Estonia covering the 
Cohesion Fund and ERDF. 
No missions were carried out in Estonia in 2008. However, some follow-up work on 
an audit mission carried out in 2006 was done  resulting in closure of all findings 
without financial correction. Additionally  four winding-up declarations were 
examined in the context of cl osure of Estonian projects. 
In accordance with the above there was an unqualified opinion with no reservations 
for Cohesion Fund expenditure in Estonia in the Directorate General's 2008 Annual 
Activity Report. 
4.2.7. Hungary 
The Directorate General's 2008 Annual Activity Report for the Cohesion Fund in 
Hungary contained an unqualified opinion for the transport sector and a qualified 
opinion for the environmental sector. The latter qualified opi nion was linked to a 
 
EN 42   EN reservation originating from a significant public procurement-related finding2 
identified during the project audit of the Budapest Wastewater Treatment Plant in 
November 2007. 
Considering financial impact of irregular procurement procedure, one audit mission 
was carried out by DG Regional policy in  2008 as an extension to audit work 
executed in 2007. Based on the work pe rformed, it was concluded that the 
management and control systems function effectively, and that they are in 
compliance with Community legislation, in particular, with EU and national public 
procurement rules. A second audit missi on carried out in Hungary in 2008 by DG 
Regional Policy focused on the review of  the work performed by the winding-up 
body in the context of ERDF progra mmes and CF projects closure. 
Three winding-up declarations related to  closure of Cohesion Fund Technical 
Assistance projects, were examined in the course of 2008. 
4.2.8. Latvia 
DG Regional Policy did not carry out any C ohesion Fund audit missions in Latvia in 
2008. However, findings from previous missions were followed up and during 2008 
the Latvian authorities took corrective action,  in particular in the field of public 
procurement procedures by issuing new gui delines and reviewing and correcting all 
non-compliant supplementary contracts. 
One financial correction procedure was launched by the DG Regional Policy in 2008 
for the project "Solid Waste Management in  the Region of Sout h-Latgale" due to 
irregularities detected in public procurement procedures. 
The case by case assessment of closure d eclarations by DG Regional Policy and the 
actions undertaken by the Latvian Authoritie s to address the risks identified in the 
Cohesion Fund management and control sy stems were considered to provide 
adequate assurance that all irregularities will  be detected and corrected before closure 
of projects. Accordingly, there was an unqualified opinion with no reservations for 
the Cohesion Fund in Latvia in the Di rectorate General's 2008 Annual Activity 
Report. 
4.2.9. Lithuania 
DG Regional Policy carried out one audit mi ssion in Lithuania in 2008 on Cohesion 
Fund projects. The main findings related to  cost increases, tendering issues and the 
IT monitoring system. DG Regional Policy  and the Lithuanian winding-up body 
(NAO) are supervising closely the follow up of these issues. 
All Cohesion Fund audits fr om previous years are cl osed, with one financial 
correction procedure of € 0.7 million launched in 2008 relating to public 
procurement issues. In addition, one complaint on a public procurement procedure concerning Lithuania was handled by DG In ternal Market in 2008 concluding that 
the public procurement procedure in question was irregular. As the project linked to 
                                                
 
2 A financial correction of 25% on the contract c oncerned was accepted by the Member State in 2009. 
 
EN 43   EN the contract in question was co-financed by the Cohesion fund, the follow-up of this 
case, including possible financial correc tions, will be done by DG Regional Policy. 
Three winding-up declarations in the cont ext of closure process of Lithuanian 
Cohesion Fund projects, were exam ined by DG Regional Policy in 2008. 
In the Directorate General's 2008 Annual Activity Report a qualified opinion with 
moderate impact was given for the Cohesion  Fund in Lithuania on the basis of the 
above material deficiencies affecting key el ements of the systems in Lithuania. No 
reservation was proposed, as the DG is able to exercise a close management of each 
CF project and check in detail the risk areas at closure, and because the maximum 
interim payments prior to closure are ca pped at 80% of the Community contribution 
for CF projects. 
4.2.10. Malta 
No audit missions or financial correction procedures for Cohesion Fund were carried 
out in 2008 for Malta by DG Regional policy. One previous audit mission carried out 
in 2007 did not give rise to  any significant findings. 
Accordingly, there was an unqualified opini on with no reservations for the Cohesion 
Fund in Malta in the Directorate Ge neral's 2008 Annual Activity Report. 
4.2.11. Poland 
In 2007 and 2008 the Polish authorities undert ook to implement a remedial action 
plan to ensure that all bodies in charge  of carrying out public procurement checks 
apply financial corrections when irregular ities are detected, and to revise their 
methodology for public procurement checks in order to ensure an adequate level of 
checking. The Action Plan was closed in March 2009 by DG Regional Policy. 
In 2008, DG Regional Policy lifted the reserv ation given in its Annual Activity 
Report in 2007 for the Cohesion Fund in Pola nd as the systemic deficiencies in the 
area of public procurement had been identif ied during previous audit work and the 
Commission services are in a position to check during the assessment of individual winding-up declarations whether the inelig ible expenditure resulting from these 
deficiencies have been identified and corrected by the Po lish authorities. 
No new audit missions were carried out by DG Regional Policy on Cohesion Fund 
projects in 2008. All previous systems and project audits have been closed. Most 
important systemic findings were followe d up within the Action Plan for Poland 
which was closed in March 2009. The only missions remaining open are two public procurement audits with findings on discrimi natory selection crit eria, direct awarding 
of additional works/services, and modification of terms of contract after the contract 
award. The findings were accepted by the Po lish authorities during the follow-up of 
the Action Plan, and the financial corr ections will be finalised during 2009. 
In 2008, DG Regional Policy examined fi ve winding-up declarations for Polish 
projects. 
 
EN 44   EN 4.2.12 Slovakia 
Two audit missions concerning Cohesion Fund were carried out by DG Regional 
Policy in Slovakia in 2008: The first one  was a follow-up audit to verify the 
implementation of previous recommendations  and to audit selected projects. The 
second audit mission focused on verifying the quality of the retros pective review of 
public procurement procedures in the C ohesion Fund and ERDF projects, which was 
carried out by the Slovak Managing Authorities at Commission request. 
In 2008, financial correction procedures were initiated for two Cohesion fund 
projects due to public procurement issu es. One winding-up declaration and two 
annual control reports were examined in  2008. An annual audit coordination meeting 
between the Commission and the Slovak audit bodies was held in Brussels. 
A qualified opinion with moderate impact was expressed on Cohesion Fund Slovakia 
in the Directorate General's 2008 Annual Ac tivity Report. The main reason for the 
qualification was shortcomings detected in  the management verifications in public 
procurement. The seriousness of the qualification was downgraded from 2007 and 
the reservation expressed in 2007 was lifte d in 2008 due to the mitigating measures 
adopted by the Slovak authorities in 2008 (retrospective review of public 
procurement). 
4.2.13 Slovenia 
Following the positive results of audit work ca rried out in previous years, a contract 
of confidence was signed with Slovenia in February. No Cohesion Fund audit 
missions were carried out by DG Regional Policy in Slovenia in 2008. However, 
follow up work continued for previous missions  resulting in the closure of one audit 
mission. No financial corrections proced ures are ongoing or envisaged for the 
Cohesion Fund in Slovenia. 
In 2008, other audit work included the ex amination of the a nnual control report 
under Article 12 of Regulation (EC) No 1386/2002 and several system audit reports 
from the Budget Supervision Office, and part icipation in the annua l co-ordination of 
controls meeting with national audit body. Annual summary for 2008 confirmed the 
information available from other reports. Moreover, three winding up declarations 
submitted for the closure of three 2000-2006 projects were examined in 2008 with no major remarks.
 
Accordingly, there was an unqualified opini on with no reservations for Cohesion 
Fund expenditure in Slovenia in the Di rectorate General's 2008 Annual Activity 
Report. 
4.3. Irregularities notified by the Member States 
In 2008, the Member States communicated to the Commission, in accordance with 
Regulation (EC) No 1831/94, 140 notifications  of irregularities  involving a total 
affected amount of € 56,328,911 in respect of  co-financed projects. Out of this 
amount, € 19,768,042 has been recovered, and the remaining amount is to be recovered. The Member States reporting th e majority of cases are Spain, Portugal, 
Hungary and Greece (64, 21, 13 and 12 respectively). Spain reported more than 46% 
 
EN 45   EN of the total of the cas es and 44% of the involved amount. However, it is to be pointed 
out that Ireland, with three notifications relating to  the 1994-1999 period, stands on 
the second highest level in terms of amount involved, followed by Lithuania. 
The number of notifications shows an incr ease, with a radica l decrease of the 
involved amount, compared to the previous year. The main types of irregularities 
reported are ineligible expenditure, and infr ingements to public procurement rules. 
These two typologies cover almost 75% of all cases reported. However, the 
Lithuanian authorities repor ted two cases of "suspended fraud". The involved amount 
concerning both cases is yet to be calculated.  
5. E VALUATION  
The Commission and the Member States carry out appraisal and evaluation of all co-
financed projects. The projects to be  financed by the Fund are adopted by the 
Commission in agreement with th e beneficiary Member States. 
Each request for assistance is accompanied by a cost-benefit analysis (CBA) of the 
project. The CBA has to demonstrate that the socio-economic bene fits in the medium 
term are proportionate to the financia l resources mobilised. The Commission 
examines this CBA on the basis of the princi ples set out in the guide for cost-benefit 
analysis. The guide, first published in 2003, was updated in 2008 to  incorporate the 
development of Community policies, fina ncial instruments and the new regulatory 
framework under which major projects will be financed during the 2007-2013 
programming period. 
In 2008, the Commission continued to assist  Member States through actions of 
capacity building aiming to improve the c onsistency of the ex-ante financial and 
economic analysis of the projects. As a result, the Guide rapidly achieved a wider 
circulation, both within civil servants in Member States and candidate countries as 
well as within the staff of financial inst itutions and consultants involved in the 
preparation and evaluation of major projec ts. A printed version of the Guide was 
therefore published, providing methodologica l guidance to project promoters in the 
Member States and candidate countries, while  serving as a refere nce to Commission 
officials involved in the appraisal of major projects. 
In addition, the Commission carries out ex-pos t evaluation on samples of projects co-
financed by the Cohesion Fund. The la st evaluation was published in 2005 and 
looked at a sample of 200 projects implemented over the 1993-2002 period. The next 
ex-post evaluation will be launched in the last quarter of 2009 and will look at a 
sample of both Cohesion Fund and ISPA  projects implemented during the 2000-2006 
period. 
6. I NFORMATION AND PUBLICITY  
6.1. Information to/from the Member States 
As indicated in the annual report for 2007, i ssues concerning the Cohesion Fund are, 
as from 1 January 2007, dealt within the Coordination Committee of the Funds 
(COCOF, according to Regulation (EC) No 1083/2006). 
 
EN 46   EN Apart from issues of common interest fo r ERDF and Cohesion Fund, some issues of 
specific interest for the C ohesion Fund were presente d or discussed during the 
following meetings of the COCOF: 
February: Revised Guidelines for the amendment of Cohesion Fund projects 2000-
2006. 
April: Guidelines on the closure of C ohesion Fund and Ex-ISPA projects 2000-2006, 
which were adopted by the Commi ssion on 4 April (No (SEC(2008)415). 
6.2. Commission measures on publicity and information 
As regards the Commission measures on information and publicity, the focus in 2008 
was on implementation of the publicity requirements for the 2007-2013 period. One 
of the biggest challenges was the examina tion of compatibility of the communication 
plans, as requested by Commission Re gulation (EC No 1828/2006. Out of the 272 
communication plans submitted to the Commission by managing authorities 
(communication plans could cover one or more Operational Programmes, and thus 
cover Cohesion Fund jointly with other funds), 212 were deemed compliant in 2008 (78%). 
INFORM - a network of communication offi cers responsible for implementation of 
the information and publicity rules for ER DF and Cohesion Fund met for the first 
time in June. The second meeting took place in November. At each meeting around 130 communication officers exchanged experi ence and views on the practical aspects 
of their work. Both meetings provided opportunity for enhanced cooperation with 
Commission Representations, Europe Direct network, as well as with DG 
Employment, Social Affairs and Equal Opportunities. 
DG Regional Policy published a  "Review of EU Cohesi on Policy Communication 
Plans 2007-2013 - Activities of national and regional managing authorities in the 
field of communication", wh ich was carried out in th e second half of 2008. The 
review, materials from the INFORM meeti ngs, as well as various information and 
publicity tools prepared for both Cohesi on Fund and ERDF, are available at a 
dedicated website
3. 
                                                 
3 http://ec.europa.eu/regional_policy/country/commu/index_en.cfm?nmenu=1