EN

Brussels, 7.11.2005

SEC(2005) 1396

COMMISSION STAFF WORKING DOCUMENT

Annex to the:

ANNUAL REPORT OF THE COHESION FUND (2004)

{COM(2005) 544 final}

TABLE OF CONTENTS

1. General Context 16

1.1. Convergence and economic development in the beneficiary countries of the Cohesion Fund 16

1.1.1 Greece 16

1.1.2. Spain 16

1.1.3. Portugal 17

1.1.4. Cyprus 18

1.1.5. Czech Republic 18

1.1.6. Estonia 19

1.1.7. Hungary 20

1.1.8. Latvia 20

1.1.9. Lithuania 21

1.1.10. Malta 22

1.1.11. Poland 22

1.1.12. Slovakia 23

1.1.13. Slovenia 24

1.2. Conditionality 24

1.3. The accession of the ten candidate countries 25

2. Implementing Principles and Assistance Granted 26

2.1. Coordination with other Community policies 26

2.1.1. Competition 26

2.1.2. Environment 26

2.1.3. Transport 28

2.2. Coordination with the Structural Funds: the strategic reference frameworks (SRF) 29

2.2.1. Environment 29

2.2.2. Transport 34

2.3. Implementation of the budget, commitments and payments 38

2.3.1. Budget available 38

2.3.2. Implementation of the budget 39

2.3.3. Implementation of the budget for the previous period (1993-99) 43

3. The projects and measures adopted 43

3.1. Assistance from the Fund by Member State 43

3.1.1. Greece 43

3.1.1.1 Environment 44

3.1.1.2 Transport 45

3.1.2. Spain 46

3.1.2.1 Environment 47

3.1.2.2 Transport 52

3.1.3. Portugal 54

3.1.3.1. Environment 55

3.1.3.2. Transport 56

3.1.4. Cyprus 58

3.1.4.1. Environment 58

3.1.4.2. Transport 58

3.1.5. Czech Republic 58

3.1.5.1. Environment 58

3.1.5.2. Transport 60

3.1.6. Estonia 61

3.1.6.1. Environment 61

3.1.6.2. Transport 62

3.1.7. Hungary 62

3.1.7.1. Environment 63

3.1.7.2. Transport 64

3.1.8. Latvia 65

3.1.8.1. Environment 66

3.1.8.2. Transport 67

3.1.9. Lithuania 69

3.1.9.1. Environment 69

3.1.9.2. Transport 70

3.1.10. Malta 71

3.1.10.1. Environment 71

3.1.10.2. Transport 72

3.1.11. Poland 72

3.1.11.1. Environment 73

3.1.11.2. Transport 74

3.1.12. Slovakia 76

3.1.12.1. Environment 77

3.1.12.2. Transport 78

3.1.13. Slovenia 78

3.1.13.1. Environment 78

3.1.13.2. Transport 80

3.2. Technical assistance and studies 81

3.2.1 Technical assistance at the initiative of the Commission 81

4. Monitoring, controls and irregularities 81

4.1. Monitoring: committees and missions 81

4.1.1. Greece 81

4.1.1.1 Monitoring Committees 81

4.1.1.2. Monitoring missions 82

4.1.2. Spain 82

4.1.2.1. Monitoring Committees 82

4.1.2.2. Monitoring missions 82

4.1.3. Portugal 83

4.1.3.1. Monitoring Committees 83

4.1.3.2. Monitoring missions 84

4.1.4. Cyprus 84

4.1.4.1. Monitoring Committees 84

4.1.4.2. Monitoring missions 84

4.1.5. Czech Republic 84

4.1.5.1. Monitoring Committees 84

4.1.5.2. Monitoring missions 84

4.1.6. Estonia 85

4.1.6.1. Monitoring Committees 85

4.1.6.2. Monitoring missions 85

4.1.7. Hungary 85

4.1.7.1. Monitoring Committees 85

4.1.7.2. Monitoring missions 85

4.1.8. Latvia 85

4.1.8.1. Monitoring Committees 85

4.1.8.2. Monitoring missions 85

4.1.9. Lithuania 86

4.1.9.1 Monitoring Committees 86

4.1.9.2. Monitoring missions 86

4.1.10. Malta 86

4.1.10.1. Monitoring Committees 86

4.1.10.2. Monitoring missions 86

4.1.11. Poland 86

4.1.11.1. Monitoring Committees 86

4.1.11.2. Monitoring missions 86

4.1.12. Slovakia 87

4.1.12.1. Monitoring Committees 87

4.1.12.2. Monitoring missions 87

4.1.13. Slovenia 87

4.1.13.1. Monitoring Committees 87

4.1.13.2. Monitoring missions 87

4.2. Inspections and conclusions 88

4.2.1. Greece 88

4.2.2. Spain 88

4.2.3. Ireland 89

4.2.4. Portugal 89

4.2.5. New Member States 89

4.3. Irregularities and suspension of aid 90

5. Appraisal and evaluation 91

5.1. General 91

5.2. Examination and ex-ante appraisal of projects 92

5.3. Cooperation with the EIB when a project is considered 92

5.4. The programme of ex-post evaluation 93

6. Inter-institutional dialogue, information and publicity 97

6.1. Annual report for 2003 97

6.1.1. European Parliament 97

6.2. Information from the Member States 97

6.3. Commission measures on publicity and information 97

1. General Context

1.1. Convergence and economic development in the beneficiary countries of the Cohesion Fund

1.1.1 Greece

In spite of a less supportive international context, the economic activity continued to be buoyant in Greece in 2004. After picking up in 2003 at 4.7%, real GDP growth reached at 4.2% and real GDP per capita in PPS attained around 80% of the EU average. Growth in 2004 was driven by domestic demand, especially investment and public consumption. The general government deficit in 2004 is now estimated to have reached 6.1% of GDP, from 5.2% in 2003, and the debt ratio attains 110.5% of GDP, compared to 109.3% in 2003. The slippage from the 2004 deficit target of 5.2% of GDP reported in the 2005 Budget reflects tax shortfalls and expenditure overruns in the execution of the 2004 budget, on the top of those already unveiled in September 2004.

On 21 March 2005 Greece submitted a revised update of its stability programme, covering the period 2004-2007. According to the reference scenario of the programme, real GDP would grow at 2.9% in 2005 and 3.0% in 2006 and 2007. The budgetary strategy aims at reducing the deficit below the 3% of GDP reference value by 2006, as required by the Council in its notice under Article 104(9). Specifically, the deficit is expected to attain 3.7% of GDP in 2005, and would fall to 2.9% in 2006 and to 2.4% in 2007. Fiscal consolidation is based on a mix of revenue-enhancing measures and expenditure retrenchment, which should lead to high primary surpluses. The debt ratio is projected to decline to 109.5% in 2005 and then to 107.2% in 2006 and 104.7% in 2007. The primary surplus and high nominal GDP growth would be the main driving forces behind the projected path of debt reduction.

In its Opinion on the update on 12 April 2005, the Council noticed that, although the budgetary strategy of the Greek government is in line with the Council notice under Article 104(9), there are several risks to the budgetary outlook for 2005 and beyond, both on the revenue and expenditure sides. Should such risks materialise, the Greek authorities would need to implement additional measures in 2006, on top of those already announced, to effectively bring the deficit below 3% of GDP.

1.1.2. Spain

In 2004 real GDP grew by 2.7% , keeping real GDP per capita in PPS stable at around 93% of the EU average. Consumer price inflation grew by 3.1% on average. Compared with an initial balanced budget target for 2004, the budgetary position is now estimated to have been a deficit of 0.3% of GDP. This deviation from the initially balanced budget is the result of the inclusion of RENFE (the Spanish railway company) and RTVE (the Spanish public broadcaster) within the general government account, partially offset by higher than expected revenues. Additionally, the estimated debt-to-GDP ratio was 48.9% in 2004 compared to 51.4% in 2003.

Spain submitted the update of its stability programme, covering the period 2004-2008, in December 2004. The macro-economic scenario underlying the programme projects real GDP growth from 2.9% in 2005 to 3.0% for the rest of the period underpinned by strong domestic demand. The budgetary strategy of the Spanish authorities consists of maintaining a close-to-balance position over the economic cycle. The estimated deficit of 0.3% in 2004 is targeted to become a balanced budget in 2005, to be followed by small increasing surpluses reaching 0.4% of GDP in 2008. The primary surpluses are consistent with a steady decline in the debt ratio, which is projected to fall to 40% of GDP in 2008.

In its Opinion on the update of 8 March 2005, the Council considered the baseline macro-economic scenario in the programme as rather favourable. However, the budgetary projections were considered consistent with a position of close-to-balance in each year of the programme. Consequently, the Council considered that the budgetary stance provided a sufficient safety margin against breaching the 3% of GDP deficit threshold.

1.1.3. Portugal

After the recession had bottomed out in 2003, the economy picked up in 2004, with real growth at 1%, chiefly thanks to a turnaround in private consumption and investment. Increasing exports were insufficient to offset lively import growth, which led to a deterioration of the net external borrowing position to 6% of GDP. In 2004, real GDP per capita in PPS is estimated at 71% of the EU average. On the back of subdued growth, unemployment rose to 6.7% and inflation declined to an annual 2.5%. After a general government deficit of 2.8 per cent of GDP in 2003, Portugal benefited in May 2004 from an abrogation of the excessive deficit procedure that had been initiated in late 2002. In 2004, the government deficit stood at 2.9% of GDP: fiscal revenues were above target helped by a stronger-than-expected domestic demand recovery, but expenditure slippages held back fiscal consolidation. Since, without further measures, a deficit in excess of 3% of GDP would have ensued, and in order to bring the outturn below this reference value, the Portuguese authorities decided to raise 2.2% of GDP of revenue with the one-off transfer to the government of pension liabilities for four enterprises. Government debt stood at 61.9% of GDP, up from 60.1% in 2003.

The most recent update of the Portuguese stability programme, covering the period 2005-2007, was submitted on 23 December 2004 by the caretaker government. The macro-economic scenario presented in the programme projects an acceleration of real GDP growth to 2.4% in 2005 and further to 2.8% by 2007, driven by domestic demand. The programme targets a decline of the general government deficit ratio to 2.8% of GDP in 2005, 2.5% in 2006 and to 1.8% in 2007. Consolidation is planned to be driven by expenditure restraint, in particular by a reduction of the share of public consumption in GDP. However, since the planned expenditure restraint would be insufficient to keep the deficit below 3% of GDP in 2005 and 2006, temporary measures (on the revenue side) are planned to be implemented, with expected proceeds declining from 1.4% of GDP in 2005 to 0.7% in 2006 and 0.3% in 2007. According to the stability programme, the public debt ratio is expected to peak in 2005 at 63.1% of GDP, and to decline thereafter to 61.4% of GDP in 2007.

1.1.4. Cyprus

In 2004 real GDP strengthened to 3.6%, bringing real GDP per capita in PPS to nearly 85% of the EU average. Consumer price inflation fell back to 1.9%, after peaking at 4% in 2003. The 2004 deficit is estimated to have declined to 4.2% of GDP, down from 6.3% of GDP in 2003. The result, far below the target of 4.8% of GDP, is attributed to the successful impact of fiscal consolidation measures both on the expenditure and revenue side, in conjunction with a more domestic-demand based growth composition leading to extra tax revenues, and despite negative revenue effects linked to delays in the introduction of some measures initially planned for 2004 which are now to be implemented in 2005. Additionally, the debt-to-GDP ratio was clearly lower than targeted, at 71.9% of GDP.

The first update of the convergence programme, submitted in December 2004 and covering the period 2004-2008, reaffirms the fiscal consolidation strategy set out in the May 2004 convergence programme. It projects real GDP growth to pick up from 3.6% in 2004 to 4.3% on average over the rest of the programme period. Within this growth path, the general government deficit is to be reduced to below the 3% of GDP reference value in 2005 at 2.9% of GDP, and to further decline thereafter reaching 0.9% of GDP in 2008. The programme envisages both an increase in the revenue ratio and a decrease in the expenditure ratio. Since interest expenditure is projected to remain constant as a share of GDP, the path of the primary balance is similar to that of the overall balance, improving from -1.3% in 2004 to 2.5% at the end of the period. Improving primary balances, together with debt-reducing stock-flow adjustments (SFAs, reversing earlier debt-increasing SFAs in 2000-2003) are the main drivers of the relatively steep decline in the debt ratio, which is projected to reach 58.1% of GDP in 2008.

In its Opinion on the update of 8 March 2005, the Council considered the projections based on the so-called “central” scenario plausible. The risks to the budgetary projections in the update were considered as broadly balanced, while the planned deficit reduction for 2005 was judged challenging but increasingly feasible. In view of this risk assessment, the budgetary stance in the programme was deemed sufficient to reduce the deficit to below 3% of GDP by 2005 and to provide a sufficient safety margin against breaching this threshold with normal macroeconomic fluctuations from 2006 onward. It was however not sufficient to ensure that the Stability and Growth Pact’s medium-term objective of a budgetary position of close to balance is achieved within the programme period.

1.1.5. Czech Republic

Real GDP growth has been accelerating, reaching 4% in 2004. Real GDP per capita in PPS is estimated to be more than 70% of the EU average. In 2004, economic activity was driven mainly by net exports and investment. Inflation in 2004 was low, reaching 2.6%. The labour market was slow to react to the pick-up in economic activity. Employment continued to decline (-0.5%) and the rate of unemployment was 8.3%. Developments in public finances were better than expected. The general government deficit was 3% of GDP, far below the target of 5.2%. This was partly a result of stronger growth and partly a result of a change in the budgetary rules which made it possible for the first time to roll-over unspent funds from 2004 into 2005 (about 1% of GDP). Government debt stood at 37.4% of GDP in 2004.

The Czech Republic submitted the first update of its convergence programme, covering the period 2004-2007, on 1st December 2004. The baseline macroeconomic scenario presented in the programme expects real GDP growth to be 3.8% in 2004. In 2005, real GDP growth is forecast to reach 3.6% and to accelerate to 3.8% in 2007. The programme aims at reducing the deficit to below the 3% of GDP in 2008. The reduction in the general government deficit should be achieved mainly by a cut in the expenditure ratio which more than compensates the planned reduction in the revenue ratio.

In its Opinion on the updated convergence programme on 18 January 2005, the Council considered the overall macroeconomic scenario as plausible. The risks to the budgetary projections were assessed as broadly balanced. On the one hand, the macroeconomic scenario suggests that revenues could be better than expected and that expenditures could be lower than budgeted. On the other hand, important expenditure cuts, particularly regarding government consumption, still have to be adopted in order to meet expenditure ceilings in 2006 and 2007. In view of this risk assessment, the budgetary stance in the programme was considered sufficient to reduce the deficit to below 3% of GDP by 2008 as envisaged in the programme.

1.1.6. Estonia

Real GDP growth accelerated in 2004 to 6.2% year-on-year. Real GDP per capita in PPS as compared with the EU average increased to over 50%, continuing the rapid catching-up process. Estonia posted a higher-than-projected general government surplus of 1.8% of GDP in 2004, more than 1 percentage point above the original budget target. The deviation occurred due to stronger-than-budgeted real growth coupled with strict nominal expenditure ceilings. The country’s public debt level further declined to 4.8% of GDP at the end of 2004, which is the lowest in the EU-25.

The updated convergence programme of Estonia for the period 2004-2008 was submitted on 1 December 2004. The programme projects output growth to accelerate from 5.6% in 2004 to 5.9% in 2005 and remain close to 6% p.a. until 2008, implying an annual average growth of 5.9% over the entire programme period. The programme aims at achieving a budgetary surplus of 0.7% of GDP in 2004 (which was outperformed by over 1 percentage point, see above), and balanced budgets throughout the rest of the programme period.

On 17 February 2005 the Council examined the programme. The Council stated that the macro-economic scenario seems to reflect plausible assumptions and that the risks to the budgetary projections appear broadly balanced. The budgetary stance in the programme seems adequate to maintain the Stability and Growth Pact’s medium-term objective of a position of close-to-balance over the entire programme period. It also seems to provide a sufficient safety margin against breaching the 3% of GDP deficit threshold with normal macroeconomic fluctuations.

1.1.7. Hungary

After slowing down to about 3% in 2003, real GDP growth accelerated again in 2004. For 2004 as a whole, it is estimated to have reached 4%. Private consumption growth, which had bolstered GDP growth in recent years, more than halved due to a significant decrease in net disposable income, while exports rose strongly. GDP per capita in PPS is estimated to have reached close to 60% of the EU average. The revised 2004 deficit target [1]of 3.7% [2]of GDP was missed by 0.8 percentage points of GDP. Government debt stood at 57.6% of GDP in 2004.

The Hungarian authorities submitted the convergence programme update, covering the period 2004-2008, on 1 December 2004. The rather favourable macroeconomic scenario foresees real GDP growth gradually increasing to 4.6% in 2008. The renewed disinflation is projected to continue. After having missed the initial 2004 deficit target of the May 2004 programme, the update foresees a flattening of the previously frontloaded adjustment path. It keeps the target date by which to correct the excessive deficit at 2008. The deficit strategy would be mainly based on a decline in the interest burden, a strong decline in public investment in 2005, and structural reforms, partly still to be adopted.

In its Opinion on the convergence programme update on 18 March 2005, the Council considered the macroeconomic scenario as reflecting rather favourable growth assumptions. Although the adjustment path contained in the programme was considered appropriate to correct the excessive deficit by 2008, the fiscal stance in the programme did not appear to be sufficient to credibly implement this path.

1.1.8. Latvia

In 2004 real GDP growth was remarkably high 8.5%. GDP per capita in PPS reached around 46% of the EU average. Investments and private consumption were the driving factors for this remarkably strong growth performance, Buoyant export growth was outpaced by an even faster expansion of import growth, thus widening the already large external deficit. Inflation rose sharply in 2004 and reached 6.2% mainly due to higher regulated prices, and a sharp rise in healthcare costs. The general government deficit in 2004 is estimated to have been ¾% of GDP, considerably lower than the official target of 1.7%. The deviation results mainly from a higher-than-expected higher tax revenue and the out-performance of the social security sub-sector. Additionally, the debt-to-GDP ratio was very low (14.4% of GDP).

In December 2004 Latvia submitted its updated convergence programme covering the period 2004-2007. The update estimates GDP growth of 8.1% in 2004 and of 6.7% in 2005. For 2006 and 2007, GDP growth is set only slightly lower (6.5% in both years). The update aims at keeping the deficit below the 3% of GDP reference value in each year, with the general government budget deficit gradually falling from an estimated 1.7% of GDP in 2004 to 1.4% of GDP in 2007. Reflecting the impact of EU transfers and associated spending, both expenditure and revenues are projected to peak in 2005 and thereafter gradually to decline. The debt ratio is projected at 15% of GDP in 2007.

In its Opinion on the update on 8 March 2005, the Council considered the risks to the budgetary projections as broadly balanced. Furthermore, the Council warned that although the programme outlines a gradual consolidation path, this may provide an insufficient margin against breaching the 3% ceiling with normal macroeconomic fluctuations and is still some way from achieving the close-to-balance-or-surplus medium-term objective of the Stability and Growth Pact. It was noted that the budgetary strategy is sufficient to maintain the debt-to-GDP ratio at a very low level.

1.1.9. Lithuania

Lithuania’s strong growth in the last few years has placed the country on a steady convergence path with the EU. Real GDP per capita in PPS is estimated to be about 49% of the EU average in 2004. Output growth remained robust at 6.7% in 2004, although the pace of expansion slowed. As in previous years, domestic demand expanded more rapidly than GDP and continued to be the major driver for growth, fuelled by particularly strong investment and private consumption. A widening of the visible trade gap induced by robust domestic demand led to a further deterioration of the current account deficit to 8.3% of GDP, as estimated in the Commission services’ spring 2005 forecast. Following a deflationary period of nearly two years, prices started edging up in May 2004, to a large extent driven by tax alignments due to EU accession. The annual average inflation rate stood at 1.1% in 2004. Despite better-than-expected revenues, the general government deficit is estimated to have increased from 1.9% of GDP in 2003 to 2.5% in 2004, as expenditure increased significantly. The outcome was slightly better than planned in the budget for 2005. Government debt stood at 19.7% of GDP in 2004.

Lithuania submitted the first update of its convergence programme, covering the period 2004-2007, in January 2005. The macro-economic scenario envisages real GDP growth to decelerate to 6.2% on average over the period 2005-2007. The key budgetary objective defined in the update is to approach a cyclically balanced general government budget. The general government deficit is foreseen to remain at 2.5% of GDP in 2005 and to decline gradually thereafter to 1.5% in 2007. Consolidation is planned to be mainly achieved by an increase in the revenue ratio from a low base, with the expenditure side also contributing after 2005.

In its Opinion on the updated convergence programme on 8 March 2005, the Council considered the overall macroeconomic scenario as plausible, with the main risks to the budgetary projections stemming from uncertainty about the implementation of the budgetary measures announced in the programme. The budgetary stance in the programme was not considered to guarantee a safety margin against breaching the 3% of GDP deficit threshold with normal macroeconomic fluctuations and to ensure that a budgetary position of close to balance is achieved.

1.1.10. Malta

In 2004 real GDP grew by 1.5%, bringing real GDP per capita in PPS to nearly 74% of the EU average. Inflation attained 2.8%. The 2004 deficit is estimated to have declined to 5.2% of GDP, down from 10.6% of GDP in 2003. This is attributed to the successful impact of fiscal consolidation measures both on the expenditure and revenue side coupled with higher economic growth. The debt-to-GDP ratio was 75% of GDP in 2004.

Malta submitted the first update of its convergence programme, covering the period 2004-07, in December 2004. The update reaffirms the fiscal consolidation strategy set out in the May 2004 convergence programme. It projects real GDP growth to rise from 0.6% in 2004 to 2% on average over the rest of the programme period. Against this background, the general government deficit of 10.6% in 2003 was targeted to be reduced to 5.2% of GDP in 2004, followed by a further deficit reduction to below the 3% of GDP reference value in 2006 at 2.3% of GDP, and to 1.4% of GDP 2007 respectively. Budget consolidation is based on both an increase in the revenue ratio and, more significantly, a decrease in the expenditure ratio. The path of the primary balance is similar to that of the overall balance, improving from -1.4% in 2004 to 2.4% at the end of the period. These increasingly positive primary balances, together with debt-reducing stock-flow adjustments from privatization operations, are the main drivers to stabilize the debt ratio projected at around 70% of GDP by 2007.

In its Opinion on the update on 17 February 2005, the Council considered that the projections based on the so-called “central” scenario are plausible. The risks to the budgetary projections were considered as broadly balanced, while the planned deficit reduction for 2006 was judged as feasible. In view of this risk assessment, the budgetary stance in the programme was deemed sufficient to reduce the deficit to below 3% of GDP by 2006 and to provide a sufficient safety margin against breaching this threshold with normal macroeconomic fluctuations from 2006 onward. It was however not sufficient to ensure that the Stability and Growth Pact’s medium-term objective of a budgetary position of close to balance is achieved within the programme period.

1.1.11. Poland

In 2004, real GDP growth is estimated to have reached 5.3% against 3.8% in 2003, while real GDP per capita in PPS reached almost 50% of the EU average. At 4.8% of GDP, the general government deficit in 2004 is estimated to be considerably lower than the official target of 5.4%. The deviation results mainly from a better-than-expected implementation of the State budget due to higher tax revenue and the out-performance of the social security sub-sector and local government. The 2004 debt ratio turned out to be also lower compared to the target (43.6% of GDP against the forecast 45.9%).

In December 2004 Poland submitted its updated convergence programme covering the period 2004-2007. The macro-economic scenario underlying the convergence programme predicts a deceleration in real GDP growth from 5.7% in 2004 to 4.8% in 2006, , followed by a rebound to 5.6% in 2007. Throughout the forecast period, growth will be driven by domestic demand. The update targets a general government deficit of 3.9% of GDP in 2005, 3.2% in 2006 and 2.2% in 2006 including the contributions to the second-pillar pension scheme. The budgetary strategy builds its projections upon the government’s comprehensive public finance reform package, aiming at structural reforms on the expenditure and revenue sides. The debt ratio is projected to increase to 47.3% in 2007.

In its Opinion on the update on 17 February 2005, the Council considered the macroeconomic scenario as reflecting rather favourable growth assumptions. However, meeting the budgetary targets in the update was seen to be subject to a number of risks [3] among which an incomplete implementation of the public finance reform plan. Thus, based on the update and in the absence of additional savings measures, Poland might not be able to bring the deficit below 3% in the end year of the programme.

1.1.12. Slovakia

In 2004, real GDP growth accelerated to 5½%. Real GDP per capita in PPS reached some 52% of the EU average. Unemployment turned out at 18% and consumer price inflation amounted to 7½%, with adjustments in administered prices and indirect taxes contributing about 5¾ percentage points. The implementation of the budget 2004 reflected most of the government’s structural reform agenda for the current legislative period. Altogether, the budget deficit turned out significantly better than the 3.8% of GDP foreseen in the most recent convergence programme. However, the better outturn was mostly due to spending postponements, including related to co-payments for EU-funds. The general government deficit for 2004 is now estimated at 3.3% of GDP and the debt-to-GDP ratio at some 43%.

Slovakia submitted the first update of its convergence programme on 30 November 2004. The update covers the years 2004 to 2007 and projects real GDP expansion for this period at an average of 5%. Inflation is foreseen to drop rapidly to some 2½% in 2007. The update aims at reducing the fiscal deficit to the 3% of GDP reference value in 2007, but does not plan for any safety margin. The adjustment is back-loaded, even net of the impact resulting from the introduction of a funded pension pillar in 2005. Including this impact, all the adjustment in the headline and primary general government deficits is postponed to 2007.

The Council delivered its opinion on the update on 17 February 2005. It found that the programme’s growth assumptions were plausible and that the risks to the budgetary projections appeared broadly balanced. It stated that the update broadly confirmed the planned adjustment path of the previous programme in spite of a more favourable macroeconomic scenario and that it looked therefore less ambitious. It continued that, accelerating the deficit reduction, in particular in 2005, would help the implementation of Slovakia’s euro adoption strategy. It would also pave the way to attaining a sufficient safety margin against breaching the 3% of GDP Treaty reference value and eventually reaching a structural budgetary position of close to balance or in surplus.

1.1.13. Slovenia

The economy thrived in 2004. Driven by vigorous export expansion, output grew by 4.6% in real terms. Real GDP per capita in PPS reached around 80% of the EU average. Inflation decreased impressively, dropping from 5.7% in 2003 to 3.7% in 2004, as the inflationary pressures of the oil price hike and higher excise duties on tobacco were well contained. In 2004, public finances remained relatively sound with the general government deficit estimated at just below 2% of GDP and the gross debt accounting for roughly 29.5% of GDP.

The first update of the convergence programme, covering the period 2004-2007, was submitted in January 2005. The macro-economic scenario underlying the programme foresees real GDP to grow close to 4% while inflation settles below 3%. Slovenia’s budgetary strategy aims at achieving a budgetary position of close-to-balance as defined by the Stability and Growth Pact. However, this objective extends beyond the programme horizon as the general government deficit is projected to narrow to 1.1% of GDP by 2007. Moreover, most of the fiscal adjustment is postponed until the last year of the programme, as net budgetary inflows from the EU are expected to double with the new EU financial perspective 2007-2013, amounting to 0.8% of GDP.

In its Opinion on the update of the Slovene convergence programme, adopted on 8 March 2005, the Council regarded the budgetary consolidation strategy as having set plausible yet rather unambitious targets. The risks to the budgetary projections in the programme were considered as broadly balanced. The budgetary stance in the programme was deemed not consistent with the Stability and Growth Pact’s medium-term objective of a budgetary position of close to balance. The safety margin against breaching the 3% of GDP deficit threshold with normal macroeconomic fluctuations was seen as insufficient except for the final year of the programme.

1.2. Conditionality

The Council Regulation on the Cohesion Fund [4] sets conditions for financing by the Fund in relation to macro economic management. No new projects or, in the event of large projects, no new project stages can be financed if the Council, acting by a qualified majority on a recommendation from the Commission, finds that a Member State has not implemented its stability or convergence programme in such a way as to avoid an excessive deficit.

In 2004, seven recipient Member States under the Cohesion Fund, including six new Member States, were considered to have an excessive deficit.

For six new Member States concerned (the Czech Republic, Cyprus, Hungary, Malta, Poland and Slovakia), the Council decided on 5 July 2004 that they were in ixcessive deficit and recommended that this be corrected by 2005 (Cyprus), 2006 (Malta), 2007 (Poland and Slovakia) and 2008 (Czech Republic and Hungary), in line with the countries’ own convergence programmes submitted in May 2004. On 22 December 2004, the Commission concluded that all except Hungary had taken effective action in response to the Council recommendations so that no further steps under the EDP were necessary at the time. In January 2005, the Council concluded along the same lines. As regards Hungary, the Council established on 18 January 2005 that Hungary had not taken effective action in response to the Council recommendations and adopted on 8 March a new Council recommendation, requesting Hungary to take effective action by 8 July 2005 regarding additional measures to achieve the 2005 deficit target in line with the updated convergence programme (and confirming the deadline of 2008 for the correction of the excessive deficit).

The Council decided on 5 July 2004 that an excessive deficit existed in Greece and recommended that this be corrected by 2005. The Council decided on 18 January 2005 that Greece had taken no effective action in response to this recommendation and on 17 February adopted a decision giving notice to Greece to take measures to remedy the situation of excessive deficit and extending the deadline for the correction of the excessive deficit from 2005 to 2006. It recommended a rigorous implementation of the budget for 2005 as well as an additional adjustment of at least 0.6% of GDP in 2006, with a new update of the Greek stability programme to be submitted in 21 March 2005 and a deadline for taking the requested additional measures of 21 March. The Council reassessed the situation in Greece on 12 April 2005 on the basis of the Commission Communication of 12 April. It concluded that the Greek government is taking effective action in response to the Council notice.

1.3. The accession of the ten candidate countries

On accession on 1 May 2004, all 8 new Member States formerly benefitting from ISPA, together with Cyprus and Malta, met the criteria for eligibility.

Projects previously adopted under the ISPA financial instrument were automatically transformed into Cohesion Fund projects, and are since then governed by Cohesion Fund rules.

For 2004-06, €24 billion (current prices) was earmarked for structural assistance in the 10 countries acceding to the EU, of which over one third (€8.5 billion) has been allocated to the Cohesion Fund.

Table: Breakdown of CF allocations for the acceding countries 2004-06

Country | Mid-range allocations (€ million – 2004 prices) |

Kypros | 53.94* |

Ceska Republika | 936.05 |

Eesti | 309.03 |

Magyarország | 1 112.67 |

Latvija | 515.43 |

Lietuva | 608.17 |

Malta | 21.94 |

Polska | 4 178.60 |

Slovensko | 570.50 |

Slovenija | 188.71 |

Total | 8 495.04 |

* Including the Financial Instrument for Fisheries Guidance (FIFG)

2. Implementing Principles and Assistance Granted

2.1. Coordination with other Community policies

2.1.1. Competition

Council Regulation n°1164/94 setting up the cohesion Fund and Commission Regulation n°16/2003 on the eligibility of the expenditure of actions part-financed by the cohesion Fund specify that approval by the Commission of the proposed projects has to be carried out subject to the respect of the criteria guaranteeing compatibility with the Community rules of the field of competition.

Financial support from the Fund is essentially directed towards infrastructure projects for transport or environmental protection (treatment of water and waste management, solid waste). Provided the rules on public procurement are complied with, and free access to such infrastructure is guaranteed for all operators meeting the necessary technical and legal conditions, such assistance does not provide specific firms with any special advantage.

2.1.2. Environment

In agreement with Article 8 of Regulation (EC) n°1164/94, the projects co-financed by the Cohesion Fund must be consistent with the treaties, Community law and Community policies, including those concerning environment.

The cohesion Fund contributed to developing the implementation of environmental legislation, not only through the direct financing of infrastructures, but also by providing incentives encouraging the application of directives as part of the preconditions to the granting of support. This concerns thematic interventions such as solid waste and waste-water management and the environment impact assessment (EIA).

The new Member States have set water and solid waste management as important priorities for expenditures. Investments and infrastructure needs remain high in the majority of cases in fields such as solid waste and water (in particular urban waste-water treatment), but also in the fields of air quality and the effort to reduce industrial pollution. Support for environmental infrastructure under the Cohesion Fund is therefore important for the new Member States.

Drinking water

The Commission services took into account the provisions of Directive 2000/60/EC – Water framework Directive – in the appraisal of the co-financing applications.

Waste water

With regard to the urban waste water, the projects concerning waste-water treatment may be financed only at the suitable level (primary, secondary or tertiary according to the designation of the areas, respectively less sensitive, normal or sensitive), in accordance with Directive 91/271/EEC.

The Commission, in the appraisal of co-financing applications, also took account of the inclusion of the projects in integrated functional systems and of their integration into basin plans.

Environmental impact assessment

The requirement of the EIA procedure for the projects covered by Directive 85/337/EEC amended by Directive 97/11/EC, and the evaluation under Article 6 of Directive 92/43/EC "Habitats" made it possible to ensure a high environmental requirement compliance, the consultation of competent environmental authorities and the participation of the public. In some cases, minimization and compensation measures were implemented.

Waste

In the field of urban waste processing, the Commission evaluated the financing requests taking into account the policy and the legislation applicable for this sector.

The implementation of the national strategic Plans for the reduction of biodegradable urban waste in the dumping grounds made it possible to co-finance investments contributing substantially to the reduction in the methane emissions coming from the dumping grounds and contributing to the processing of waste, for example composting. These investments fulfill the requirements of Directive 1999/31/EC and the guidelines on waste hierarchy.

Climatic change

The examination of the environmental policy 2004 stresses that to help fight against the climatic change one must continue promoting the integration of the environmental aspects in the other policies, in particular in transport.

The most recent data on the emissions of greenhouse gases and the new convincing elements available concerning the potential breadth and the repercussions of the climatic change continue to be worrying. The emissions of greenhouse gases decreased slightly, but not sufficiently to place the EU15 on a linear pathway enabling it to achieve its Kyoto goals. On the whole, 12 of the 25 Member States recorded emissions higher than this linear pathway.

The most recent statistics show that the emissions of greenhouse gases from the transport sector continued to increase, almost reaching a level 22% above the levels of 1990 in the EU15 for 2002, the growth of the inland transports (in terms of ton/km and of passenger/km) still not being dissociated from GDP growth.

With the Communication on "the Strategy of the European Union for sustainable development", the Commission committed itself to give priority to infrastructure investments in public transports, railway, inland waterways, short distance maritime transport. In these circumstances, even though a trend towards better balance between transport modes was observed, the Cohesion Fund has to continue promoting and supporting projects strengthening this commitment.

Polluter pays principle

The projects financed under the Cohesion Fund made it possible to implement the polluter pays principle by the application of various aid levels. The application of the polluter pays principle will be soon strengthened by the application of Directive 2000/60/EC (Water Framework Directive). This Directive has been in force since 23 December 2003.

Partnership

The environmental monitoring of projects is also carried out by Member States. The competent authorities in the field of environment are associated to the project assessment by the means of consultations and by their participation in the monitoring committees.

2.1.3. Transport

In 2004, the Commission took 131 decisions on the financing of TENs-Transport projects totalling €661.7 million. Among these projects, we could mention PP3 (High-speed train south: Madrid-Barcelona-Perpignan-Montpellier and Madrid-Vitoria-Dax): which receives funds in the Spanish part also from the Cohesion Fund and that, in The Mediterranean branch, the section Madrid- Lleida was completed by 2004, or PP7 (Greek motorways), by the end of 2004 a substantial part of the Via Egnatia and Pathe motorway was completed. In Ireland, several TEN road projects (PP13: Ireland-UK- Benelux road link) are still under construction and co-financed by the Cohesion Fund and the TEN-T budget.

On 21st April 2004, the European Parliament and the Council adopted the modification of the Regulation nº 2236/95 laying down general rules for the granting of Community financial aid in the field of trans-European networks. It was published on 30th April and came into force on 20th May of the same year. The new regulation increases the Community co-funding rate from 10% up to 20% for the sections of the priority axes, which crosses borders or natural barriers. This rate should provide a greater incentive for implementation of projects including the setting up of public-private partnerships. These new rules should also allow multi-annual commitments, which would provide greater flexibility in the financial commitments to promoters of TEN-T projects.

The revised Decision on Community Guidelines for the development of the trans-European transport network was adopted by the European Parliament and the Council on 29 April 2004 (Decision No 884/2004/EC amending Decision No 1692/EC). The decision specified 30 priority projects of European interest with a cost of around € 225 billion. The Decision calls on Member States to give priority to these projects. It asks the Member States concerned to pay particular attention to these projects under the Cohesion Fund and more generally under the Structural Funds.

Following the accession of the new Member States on 1 May 2004 the Commission examined the infrastructure situation in the trans-European network, in particular the cost of the 30 priority projects and projects such as ERTMS and SESAME [5], and their financing. In the financial perspectives for the period 2007-2013, the Commission proposed an increase for the TENs and, at the same time, an increase in the maximum co-financing rate following publication in July 2004 ((COM) 475 – 2004) of its in-depth review of the TEN financial framework.

In the area of road safety the Commission proposed an EU wide 50% reduction of the number of deaths by 2010. Road safety should be incorporated in the design, construction and maintenance of infrastructure.

2.2. Coordination with the Structural Funds: the strategic reference frameworks (SRF)

2.2.1. Environment

Greece

The Strategic Reference Framework (SRF) for environment projects is described in a separate chapter of the Operational Program “Environment” of the Greek Community Support Framework 2000-2006. This Operational Program was approved by the Commission on 24 July 2001 (Decision E(2001) 1357). The SRF is a reference tool for interventions which aim at enhancing the compliance of the country with its obligations arising from the EU environmental legislation and at contributing to sustainable development.

The financial contribution of the Cohesion Fund focuses on some of the major needs of Greece in the field of drinking water, the treatment of urban waste water and the disposal of solid waste.

In relation to solid waste management, the overall action plan is based on the 2003 Revised National Solid Waste Management Plan which in turn is linked to Regional Management Schemes which have been subject to revision as well. The overall objective is the correct management of all categories of solid waste and, where necessary, the restoration of environmental conditions which have been polluted or otherwise degraded by waste. A planning has also been made for the treatment of urban waste water, in accordance with the requirements of Directive 91/271/EEC.

In 2004, the implementation of the SRF for environmental projects encompassed investments in the sectors of solid waste management, waste water treatment and the construction of a big water supply basing. In co-operation with the national authorities, efforts need to be concentrated on the realisation and completion of investments in the field of solid waste and waste water, so as to meet the requirements of the Community legislation.

Spain

The contents of each of the sectoral strategic frameworks were described in the Annual Report 2000 for the Cohesion Fund. The priority sectors for interventions to be financed through the Cohesion Fund for the Programming period 2000 – 2006 are : Water Supply ; Sewerage and Wastewater Treatment ; Municipal, Industrial and Hazardous Waste Management

The interventions are selected in the context of a coordinated strategic approach designed for each of the sectors selected identifying the main priorities for intervention. A coordinated approach is ensured with the interventions within the same sectors financed through the Structural Funds.

Portugal

The environment strategic framework for Portugal for 2000-06 states its main objectives as further development and completion of the basic environment infrastructure and providing the conditions needed for sustainable development, environmental protection and management of natural resources.

The coordination of Cohesion Fund with the Structural Funds is done by a strategic reference frameworks in the Community support framework, in particular through “reference framework ” in the transport and environment fields.

Following the Mid-term review exercise (MTR), this strategic framework was actualised. The MTR proposed to reinforce the coordination of the Cohesion Fund and the Structural Funds, in the context of this “reference framework”. In particular the regional programmes should give priority to the projects necessary at municipal level in order to complete the multimunicipal systems financed by the Cohesion Fund concerning water supply, urban waste water treatment and solid waste treatment.

In order to assure the adequate implementation and monitoring of these priority projects, a new measure was created in the 5 regional programmes of the main land, as well as in the Madeira Region.

Cyprus

The Cypriot Strategic Reference Framework is to address solid and hazardous waste, waste water treatment, air pollution and drinking water. However, the scarcity of funds available have made it necessary to focus on the two projects selected, i.e. respectively roads and waste.

Czech Republic

The strategic reference framework for environmental projects is described in a separate chapter of the Community Support Framework for the Czech Republic and of the Operational Programme Infrastructure (OPI) for the period 2004 – 2006 approved by the Commission on 21 June 2004 (Decision C(2004) 2325).

Priorities of both Cohesion Fund and OPI are to finance projects leading to the achievement of the standards laid down in the environmental legislation of EU.

The Cohesion Fund provides support to the large-scale environmental protection projects (more than €10 million) in the following fields: improvement of the quantity and quality of water (both drinking water and urban waste water treatment); waste management; air quality; elimination of old environmental burden.

Estonia

The Estonian authorities presented their strategic reference framework for the environment sector in 2003 which is the basis for assistance under the Cohesion Fund to all individual projects in the waste water, drinking water, solid waste and air sectors.

As regards the coherence with Structural Funds, there is a clear dividing line as all projects in the waste water and drinking water sector as well as all large-scale projects in the solid waste sector are co-financed by the Cohesion Fund. Due to the small size of projects in the waste water and drinking water sectors, several projects have been grouped according to the sub-river basin in which they are located.

Hungary

In 2003 the Hungarian Authorities presented the Strategic Reference Framework for the environment sector for the period 2004 to 2006, which is the basis for assistance under the Cohesion Fund to all individual projects in the waste water, drinking water and solid waste management sector.

With support of ERDF and CF by the year 2015 the wastewater of 85% of the inhabitants of Hungary shall be treated in waste water treatment plants. The target set for the drinking water sector is to provide drinking water to every inhabitant of Hungary according to the EU standards by 2009. For the Solid Waste sector the measures focus on waste selection with a view to rise the share of selected waste treatment from 3% to 40%. By 2009 all landfills should thereby meet the respective EU standards.

Latvia

The Latvian authorities presented the Reference Framework document for the Cohesion Fund in 2003. It consists of a general part and the Cohesion Fund Strategy Documents for the environment and transport sectors (2004-2006).

The Cohesion Fund Strategy Document for the environment is the basis for the selection of individual environmental projects in the priority sectors for assistance to be financed through the Cohesion Fund. For the 2004-2006 programming period the priorities for the environment sector are the following:

(1) improvement of the quality and supply of drinking water, and improvement of waste-water treatment;

(2) development of a solid waste management system;

(3) development of a hazardous waste management system;

(4) remediation of contaminated sites.

The selection of individual projects to be financed is co-ordinated with assistance from the Structural Funds by setting the minimum threshold of 2000 population equivalent for water services development activity under the Cohesion Fund, allowing small agglomerations (below 2000 p.e.) to benefit from ERDF. In order to ensure the completeness of regional waste management systems, the separated waste collection is defined as eligible activity under ERDF.

Lithuania

The Lithuanian authorities presented their National reference framework document for the period 2004-2006 in 2004. The document presents the main priority investments into the environmental sector using the Cohesion fund assistance.

The priority sectors for assistance to be financed through the Cohesion Fund for the 2004-06 programming period are: water supply and sewerage collection; sewerage and waste-water treatment; municipal, and hazardous waste management; air protection in relation to the environmental protection measures at Large Combustion Plants; technical assistance for project preparation.

Coherence between Structural Fund programmes and the Cohesion Fund priorities is relatively easy to ensure because of the concentration of Cohesion Fund assistance on a the heaviest investments while the Structural funds will mainly deal with the soft investments.

Lithuanian authorities introduced the new basin based water management approach while the whole territory of Lithuania is covered by 5 investment river basins containing 10 to 14 municipalities each. This forms the basis for further strengthening of water sector management in Lithuania. Since 2000 Lithuanian authorities introduced the new regional waste management approach, which is under implementation through ISPA and CF assistance. The regional system is based on the reduction of the number of the landfills in the regions to one regional landfill complying to relevant EU requirements and also on establishment of unified waste collection, transportation and accounting system. Lithuania plans to have 10 such systems- one in each region.

Malta

The Structural Funds and Cohesion Fund will, as a priority, assist compliance with environmental standards established in the relevant Community Directives, in particular with regard to waste management and water. The management and local disposal of solid, urban, industrial and hazardous waste, according to Community policy and legislation will be a high priority.

Only one project was submitted under the Cohesion Fund for assistance due to the limited resources available for the period 2004-2006. Funding will be directed to the development of Malta’s municipal solid waste treatment infrastructure which will follow the established hierarchy of principles: prevention of waste production and its harmful impact, recovery of waste by means of recycling, re-use or reclamation and safe final disposal – limited to waste for which no possibility of recovery exists. Contaminated sites such as old landfills and unauthorised discharges of waste constitute a considerable threat for the environment and for human activities. Malta plans to address these issues by introducing appropriate clean-up measures.

Poland

The Polish authorities presented the strategic reference framework for environment projects in 2003. This document is the basis for the selection of all the individual projects in the priority sectors for assistance to be financed through the Cohesion Fund. For the 2004-2006 programming period the priority sectors are: improvement of the quality of surface water, and improvement of the distribution and quality of drinking water; rationalisation of waste management and protection of soils; improvement of air quality; improvement of safety from flooding.

The selection of individual projects to be financed is also co-ordinated with assistance in the same priority sectors financed by the Structural Funds.

Slovakia

Slovakia transmitted to the Commission the final version of it Strategic reference framework 2004-2006 in March 2004. This strategy links the various community policies with the national policies in the transport infrastructure (Trans-European networks) and environment sectors, and ensures complementarity of interventions between Cohesion Fund and the Structural Funds.

In the environment sector, some short term priority objectives (up to 2006) have been designed to meet the urgent environmental needs that affect the population’s quality of life and the economic development of the regions.

Strategic objectives in the Environment sector :

Support for environmental infrastructure in Water management: Drinking water supply ; Collection and treatment of waste water ; Anti-flood protection.

Support for environmental infrastructure in Waste management: Waste incineration plants ; Support for integrated management of waste management ; Support for the creation of public-private partnership in waste management at the regional level.

Slovenia

The Environment Strategic Reference Framework for Cohesion Fund assistance focus on the implementation of Urban Waste Water Directive and Drinking Water Directive, mainly the construction and upgrading of sewer network and wastewater treatment facilities, protection of water resources, designated for potable water consumption, upgrading and construction of water supply network in water deficient areas. As for Waste Management the main objectives are the implementation of a national policy which implements the EU Waste Framework Directive.

These aims, already undertaken under ISPA are now continued under the Cohesion Fund.

2.2.2. Transport

Greece

The strategic reference framework (SRF) for transport projects in Greece had been approved in the context of the Operational Programs "Road axes, Ports, Urban development" and "Railways, Airports, Urban transport" in March and April 2001 respectively, and was updated in the context of the 2004 mid-term review of these programs. The SRF covers interventions by the Cohesion Fund and the ERDF, which mainly aim at:

a) the completion of the priority TEN road axes in Greece, i.e. the PATHE, EGNATIA and IONIAN axes, as well as the Korinthos – Tripoli – Kalamata/Sparti motorway,

b) the completion of the modernisation of the PATHEP railway axis, also part of the TEN, including its electrification and signalling systems and the construction of a freight railway line from the Ikonio port to the railway freight centre of Thriassio,

c) The modernisation of infrastructure of the ports at Igoumenitsa and Heraklion, as well as the construction of new port infrastructure at Lavrio, and

d) the modernisation of the air traffic control system in Greece.

In 2004 investment projects were approved for the electrification of sections of the Athens – Thessalonica railway and for the construction of a section of the Korinthos – Patras railway, on the basis of the Strategic Investment Plan for the railways adopted in 2003.

Spain

The Cohesion Fund interventions in 2004 continued to be implemented in accordance with the guidelines established within the strategic reference framework presented in 2000 by the Spanish authorities. Interventions continued to concentrate in high speed rail (44,7%) and in the ports (37,9%). In these two sectors, coordination with the Structural Funds went on in 2004. The case of the railway line Madrid – Valladolid must be stressed, where and ERDF financing was approved in 2004, for the financing of the electrification and signaling phase, thus supplementing the contributions approved under the cohesion Fund in 2002 and 2003 for other phases of the project. It is also advisable to point out the interventions in the ports, where the ERDF and the Cohesion Fund combined themselves to give a financial support for various ports (Cantabrian and Mediterranean coasts).

Although it is not envisaged in the short term to introduce changes in the strategic lines of the reference framework in Spain, the elaboration of the new strategic transport infrastructure plan by the Spanish government could require an update of the strategic framework.

Portugal

As well as adopting new projects, the work of the Cohesion Fund also concentrated on monitoring the implementation of projects approved in earlier years, of which railway projects, including Lisbon underground network projects, represented the greater share, both in number and in terms of volume of investment.

In this regard, particular attention continued to be paid to overall coordination, especially as regards investments part-financed by other Community sources, in order to secure maximum synergy in completing operational transport systems by 2006, as referred to in the reference framework for the Cohesion Fund approved in 2000.

The main strategic guidelines of the framework remained unaltered.

The projects adopted in 2004 follow these strategic guidelines, and aim to achieve the objectives laid down under this framework, in particular developing mobility and access to the outermost regions, including the autonomous regions (Madeira and Azores), in the interest of social development and national cohesion. Improving the quality of life in urban centres, in particular in metropolitan areas, is another objective planned and implemented, in particular by the project for the North/South route and by the enlargement of the underground network in Lisbon.

Finally, a strategy was pursued to provide Portugal with a national rail network, ensuring a package of services meeting market needs, for both goods and passenger transport, and which could attract potential traffic away from other, more expensive and less environmentally-friendly forms of transport.

Cyprus

The Cypriot Strategic Reference Framework for transport focuses on motorways, ports, airports. However, the scarcity of funds available have made it necessary to focus on the two projects selected, i.e. respectively roads and waste.

Czech Republic

As regard transport infrastructure, support from the Cohesion Fund is given to projects related with the modernisation and the development of the Trans-European Networks (TEN-T).

In the year 2004, the Commission adopted 4 projects of a total CF grant of €279.5 million (total budget: €577.8 million).

Three co-financed projects are related to the Highways sections: “R48 Tosanovice-Zukov”, “Motorway D1 Kromeriz West – East” and “Prague Ring Road - section 514” and one project concerns the railway project: “Cervenka - Zabreh na Morave”, each one of them forms a part of TEN-T corridors.

Estonia

The Estonian authorities presented their strategic reference framework for the transport sector in 2003. This document forms the basis for assisting individual projects in the road, rail, airport and port sectors. The Cohesion Fund focuses on projects which belong to the TEN-T (Trans-European Networks for Transport), whereas Structural Funds support projects which are complementary to the TEN-T. The major priority in the road sector is to finish the missing sections whithin Corridor I and IX.

Hungary

In 2003 the Hungarian Authorities presented the Strategic Reference Framework for the transport sector for the period 2004 to 2006, which is the basis for assistance under the Cohesion Fund to all individual projects in the rail, road and air traffic sector. The Cohesion Fund focuses on projects which belong to the TEN-T (Trans-European Networks for Transport), whereas Structural Funds support projects, which are complementary to the TEN-T network, cover the development of express roads and highways, the construction of by-pass roads and the development of regional airports. In the rail sector the main priority is to modernize the infrastructure along the Corridor V and VI.

Latvia

For the 2004-2006 programming period the priorities for the transport sector are the following:

Development of the TEN road network: Via Baltica and East - West road corridor improving the quality of infrastructure and traffic safety by increasing the bearing capacity of bridges and roads.

Modernisation of East-West railway corridor, envisaging increase of safety level and throughput capacity.

Construction of access roads to Ventspils and Liepaja ports, as well as improvement of traffic situation in Riga.

Infrastructure development of the International Airport “Riga” including the access road to the airport, extension of the current runway and modernisation of the runway lighting system.

Preparation of projects for 2007-2013 including the study of Rail Baltica project that envisages efficient railway traffic between the Baltic States and Western Europe.

The Latvian Authorities adopted a coherent and coordinated strategy for the transport sector, thus ensuring complementarity and avoiding any overlap between Cohesion Fund and ERDF-funded projects. Cohesion fund assistance is used solely for the TEN-T network while ERDF supports secondary networks outside the TEN-T network to ensure their connection with TEN-T, solve transport problems in urban areas and improve traffic safety.

Lithuania

The main investment from the Cohesion Fund will be associated with the modernisation and reconstruction of trans-European Transport Corridors I, IA, IXB, D and correlative transport nodes and links (the future TEN-T network).

Since large-scale projects (over €10 million) in the transport sector, related to the development of TEN-T, shall be financed from the Cohesion Fund, the SF Transport section includes measures necessary for receiving support from Structural Funds for regional-local development, i.e. they are intended to ensure good access to the trans-European corridors, to improve transportation from counties to industrial, business and tourism centres, to improve traffic conditions in towns, to reduce transport congestion, to improve transport infrastructure so that it meets needs of tourism and small and medium business development.

Malta

There are no natural inland waterways in Malta, therefore the only access to goods and services and means of individual mobility within the Maltese islands is by road. In fact around 90 % of road transport involves the use of motor vehicles for private, passenger and goods transport.

The recent growth in both private ownership of vehicles and goods transportation by road has become a cause of concern as it has caused more damage on the road network and emit higher levels of harmful exhaust. In this context the quality of Malta’s road infrastructure needs to be improved to bring it to a reasonable state of repair and to ease bottlenecks and general congestion.

The Structural Funds and Cohesion Fund have prioritised the upgrading of various stretches of TEN-T arterial tracts in both Malta and Gozo, mainly around the main international and national seaports and international airport. A group of projects was submitted for Cohesion Fund co-financing in 2004 upgrading a total of 5.8 km of roads in Malta and Gozo.

Poland

The Reference Framework document for the Cohesion Fund was a joint document for the Environment and the Transport sectors. The Polish Authorities adopted a coherent and coordinated strategy for the Transport sector, thus ensuring complementarity and avoiding overlaps between the Cohesion Fund funded projects and the projects funded under the Transport Operational programme.

This coordinated strategy for both the ERDF and the CF focused on the following priorities:

(1) balanced development of different transport modes;

(2) safer road infrastructure.

Under the Cohesion Fund, priority 1 of this strategy was implemented through the modernization of the TEN-T railway network and priority 2 of the integrated strategy was implemented through the construction of motorways and expressways on the TEN-T road network.

Slovakia

In the field of transport, the strategic reference framework 2004-2006 envisages in particular the development of road and rail transport infrastructures on the European corridors crossing Slovakia (corridors IV, GO and VI primarily). The projects supported under the operational Programme "basic Infrastructure" of the Structural Funds will make it possible to develop regional access to large corridors of the TEN.

Strategic objectives in the Transport sector:

- Road infrastructure: development of motorways on the TEN-T corridors: in the area of the capital Bratislava; on corridor V/A between Bratislava, Žilina and Poprad; on corridor VI between Čadca and the Polish/Slovak border; on other corridors in case of economically effective investment.

- Rail infrastructure: Renovation and modernisation of the international corridors IV, V, VI to comply with the technical parameters of tracks according to the AGC and AGTC treaties and to achieve operational speed of 160km/h on the corridor IV section Kuty-Bratislava-Sturovo and the corridor V/A section Bratislava-Zilina stretch and 120-140 km/h on the Zilina-Kosice section.

Slovenia

The national authorities have defined in 2003 a National Cohesion Strategy for the Transport sector which identifies the objectives of its transport strategies and the projects to be financed through the Cohesion Fund. It involves the country establishing itself as a maritime transit country within the European Union and market its geopolitical position at the crossroads of two important European corridors (Corridors V and X) along the existing southern border of the EU. An important role will be played by the port of Koper, and by logistics centres at the crossroads of these corridors in Koper, Ljubljana and Maribor.

To this end, bottlenecks on corridors must first be removed involving the completion of the motorway network, upgrading, modernisation and completion of the rail.

2.3. Implementation of the budget, commitments and payments

2.3.1. Budget available

In accordance with Article 4 of Regulation (EC) No 1164/94, as amended by Regulation (EC) No 1264/1999 (the Cohesion Fund Regulation), Cohesion Fund resources available for commitment in 2004 amounted to € 2 723 606 000 (1999 prices) for the 3 Member States of EUR15 (Greece, Spain and Portugal), and

€ 2 897 000 000 (1999 prices) for the 10 new Member States. As a result of its growth in GNI per head, Ireland is no longer eligible under the Cohesion Fund with effect from 1 January 2004. These amounts include technical assistance credits (€ 1 001 118 for the 3 “old” Member States, and € 1 500 000 for the 10 new Member States).

In accordance with the brackets for the allocation of resources by Member State laid down in Annex I to the Cohesion Fund Regulation, the indicative allocation of these appropriations by country for 2004 (in 1999 prices) is as follows:

EUR 3 |

Member State | Allocation |

| € million |

Spain | 1 680 878 607 |

Greece | 562 804 008 |

Portugal | 478 922 267 |

Technical assistance | 1 001 118 |

TOTAL | 2 723 606 000 |

EUR 10 |

Member State | Allocation |

| € million |

Cyprus | 18 257 000 |

Czech Republic | 316 681 000 |

Estonia | 104 565 000 |

Hungary | 376 433 000 |

Latvia | 192 089 000 |

Lithuania | 209 572 000 |

Malta | 7 414 000 |

Poland | 1 413 670 000 |

Slovakia | 192 974 000 |

Slovenia | 63 845 000 |

Technical Assistance | 1 500 000 |

TOTAL | 2 897 000 000 |

.

2.3.2. Implementation of the budget

Budget implementation in 2004, with indexation of the appropriations carried over, was as follows:

Implementation of commitments in 2004 (in euro)

Commitment appropriations | Initial | Movements | Final resources | Outturn | Cancelled | Carryovers 2005 |

2004 budget | 2 784 500 000 | 2 835 258 341 | 5 619 758 341 | 5 619 403 018 | 355 322 | 2 084 326 |

Appropriations carried over from 2003 | 3 377 996 | 0 | 3 377 996 | 3 377 996 | 0 | 0 |

Appropriations made available again | 7 413 307 | 0 | 7 413 307 | 7 413 307 | 0 | 0 |

Repayments | 0 | 0 | 0 | 0 | 0 | 0 |

Totals | 2 795 291 303 | 2 835 258 341 | 5 630 549 644 | 5 630 194 321 | 355 322 | 2 084 326 |

Under Article 7 of the Financial Regulation, appropriations not implemented at the end of the year are cancelled, unless the Commission adopts a specific decision to carry them over. The commitment appropriations were almost entirely used (99,96%) with only 2 084 326 € of the total being carried over to 2005.

Implementation of payments in 2004 (in euro)

Payment appropriations | Initial | Movements | Final resources | Outturn | Cancelled | Carryovers 2005 |

2004 budget | 2 641 600 000 | 134 811 585 | 2 776 411 585 | 2 642 101 718 | 134 309 867 | 0 |

Appropriations carried over from 2003 | 0 | 0 | 0 | 0 | 0 | 0 |

Appropriations made available again | 0 | 0 | 0 | 0 | 0 | 0 |

Repayments | 0 | 0 | 0 | 0 | 0 | 0 |

Totals | 2 641 600 000 | 134 811 585 | 2 776 411 585 | 2 642 101 718 | 134 309 867 | 0 |

A total of € 134.8 million of payment appropriations was transferred to the Cohesion Fund. Taking account of this transfer, some 95.16 % of the payment appropriations were implemented in 2004.

Implementation of the appropriations by country is shown in the following tables:

Budget implementation of appropriations in 2004 by Member State

Commitment appropriations 2004 (in euro)

Member State | Environment | Transport | Mixed | Total |

| Amount | % Envir. | Amount | % Transp. | Amount | Amount | % |

Spain | 724 068 354 | 42.6 | 977 541 835 | 57.4 | 1 101 600 | 1 702 711 789 | 30,3% |

Greece | 296 658 028 | 55.4 | 239 009 533 | 44.6 | - | 535 667 561 | 9,5% |

Portugal | 261 887 832 | 54.6 | 217 955 247 | 45.4 | - | 479 843 079 | 8,5% |

Cyprus | - | 0 | 18 257 000 | 100 | - | 18 257 000 | 0,3% |

Czech Republic | 171 710 713 | 54.2 | 144 816 038 | 45.8 | 371 280 | 316 898 031 | 5,6% |

Estonia | 65 595 930 | 62.1 | 31 561 105 | 37.9 | 8 539 200 | 105 696 235 | 1,9% |

Hungary | 188 216 500 | 50.0 | 188 216 500 | 50.0 | - | 376 433 000 | 6,7% |

Latvia | 80 196 588 | 42.2 | 102 876 822 | 57.8 | 6 892 365 | 189 965 775 | 3,4% |

Lithuania | 45 991 729 | 21.9 | 148 920 771 | 78.1 | 14 659 500 | 209 572 000 | 3,7% |

Malta | 7 418 000 | 100 | - | 0 | - | 7 418 000 | 0,1% |

Poland | 698 528 072 | 49.4 | 707 162 832 | 50.6 | 8 947 500 | 1 414 368 404 | 25,2% |

Slovakia | 125 556 724 | 65.1 | 67 417 276 | 34.9 | - | 192 974 000 | 3,4% |

Slovenia | 19 295 525 | 29.7 | 45 605 942 | 69.3 | 45 000 | 64 946 467 | 1,2% |

Technical Assistance | - | - | - | - | 4 381 678 | 4 381 678 | 0,1% |

Total | 2.685.123.995 | 48.2 | 2.889.340.901 | 51.8 | 44.938.123 | 5.619.403.018 | 100% |

Payment appropriations 2004 (in euro)

Figures for the new Member States refer only to payments for projects adopted under the Cohesion Fund as from 1 May 2004 (i.e. not taking into account pre-accession aid for ISPA projects). The second table below shows payments effected in 2004 in relation to ISPA projects adopted before accession.

Member State | Environment | Transport | Mixed | Total |

| Amount | % Envir. | Amount | % Transp. | Amount | Amount | % |

Spain | 1 052 792 007 | 54.3 | 886 931 978 | 45.7 | 3 084 | 1 939 727 070 | 73,4% |

Greece | 85 219 745 | 24.3 | 265 538 804 | 75.7 | 1100 | 350 759 649 | 13,3% |

Ireland | 8 179 679 | 31.6 | 17 669 517 | 68.4 | 0 | 25 849 196 | 1,0% |

Portugal | 123 130 259 | 38.9 | 193 354 445 | 6.1 | 0 | 316 484 704 | 12,0% |

Cyprus | 0 | - | 0 | - | 0 | 0 | - |

Czech Republic | 0 | - | 0 | - | 0 | 0 | - |

Estonia | 0 | - | 0 | - | 0 | 0 | - |

Hungary | 0 | - | 0 | - | 0 | 0 | - |

Latvia | 0 | - | 0 | - | 0 | 0 | - |

Lithuania | 0 | - | 3 719 306 | 100 | 0 | 3 719 306 | 0,1% |

Malta | 0 | - | 0 | - | 0 | 0 | - |

Poland | 0 | - | 2 486 700 | 100 | 0 | 2 486 700 | 0,1% |

Slovakia | 244 720 | 15.5 | 1 335 490 | 84.5 | 0 | 1 580 210 | 0,1% |

Slovenia | 0 | - | 0 | - | 0 | 0 | - |

Technical Assistance | 0 | - | 0 | - | 1 494 883 | 1 494 883 | 0,1% |

Total | 1 269 566 410 | 48.1 | 1 371 036 240 | 51.9 | 1 499 067 | 2 642 101 718 | 100% |

For the third year running, there was tendency in favour of projects in the transport sector, although in a less marked manner than in the two previous years.

New Member States – Payments made in 2004 related to former ISPA projects

Member State | Environment | Transport | Total |

| Amount | % Envir. | Amount | % Transp. | Amount |

Ceska Republika | 17 801 156 | 26.5 | 49 355 929 | 73.5 | 67 157 085 |

Eesti | 10 196 374 | 42.7 | 13 675 285 | 57.3 | 23 871 659 |

Latvija | 9 844 972 | 42.2 | 13 490 711 | 57.8 | 23 335 683 |

Lietuva | 3 948 533 | 27.5 | 10 395 195 | 72.4 | 14 343 728 |

Magyarorszàg | 25 960 588 | 71.9 | 10 122 098 | 28.1 | 36 082 686 |

Polska | 80 792 048 | 36.6 | 139 872 597 | 63.4 | 220 664 645 |

Slovenija | 6 024 627 | 78.9 | 1 611 175 | 21.1 | 7 635 802 |

Slovenska Republica | 17 390 376 | 46.6 | 19 933 084 | 53.4 | 37 323 460 |

Technical assistance | | | | | 68 076 |

TOTAL | 171 958 668 | 40.0 | 258 456 071 | 60.0 | 430 482 824 |

The following table shows total implementation in 2000-04 in each country (excluding technical assistance):

Implementation 2000-2004 by Member State (in euro)

Member State | Allocation 2000-04 | 2000 | 2001 | 2002 | 2003 | 2004 | Total |

Spain | 8 475 604 000 | 1 490 119 316 | 1 672 929 540 | 1 973 389 704 | 1 543 094 747 | 1 699 525 863 | 8 379 059 170 |

Greece | 2 330 354 000 | 206 359 009 | 467 400 382 | 335 157 938 | 529 459 151 | 535 667 561 | 2 074 044 041 |

Ireland | 584 614 000 | 169 624 664 | 115 000 000 | 182 661 340 | 117 322 580 | | 584 608 584 |

Portugal | 2 330 354 000 | 377 583 992 | 455 699 130 | 296 780 734 | 643 939 552 | 479 843 079 | 2 253 846 487 |

Cyprus | 18 257 000 | | | | | 18 257 000 | 18 257 000 |

Czech Republic | 316 681 000 | | | | | 316 526 751 | 316 526 751 |

Estonia | 104 565 000 | | | | | 97 157 035 | 97 157 035 |

Hungary | 376 433 000 | | | | | 376 118 570 | 376 118 570 |

Latvia | 192 089 000 | | | | | 183 073 410 | 183 073 410 |

Lithuania | 209 572 000 | | | | | 194 912 500 | 194 912 500 |

Malta | 7 414 000 | | | | | 7 418 000 | 7 418 000 |

Poland | 1 413 670 000 | | | | | 1 405 690 904 | 1 405 690 904 |

Slovakia | 192 974 000 | | | | | 192 974 000 | 192 974 000 |

Slovenia | 63 845 000 | | | | | 64 901 467 | 64 901 467 |

EUR4 | 13 720 926 000 | 2 243 686 981 | 2 711 029 052 | 2 787 989 716 | 2 833 816 030 | 2 715 036 503 | 13 291 558 282 |

2.3.3. Implementation of the budget for the previous period (1993-99)

Changes in 2004 in appropriations to be settled for 1993-99 were as follows:

Settlement in 2004 of commitments for the period 1993-99 (in euro)

Member State | Initial amount to be settled | Decommitments | Payments | Final amount to be settled |

Spain | 650 933 534 | 4 952 169 | 268 409 585 | 377 571 780 |

Greece | 424 708 187 | 86 288 597 | 29 744 454 | 308 675 136 |

Ireland | 51 096 704 | 0 | 4 037 714 | 47 058 990 |

Portugal | 139 854 914 | 5 852 657 | 23 728 888 | 110 273 369 |

Total | 1 266 593 339 | 97 093 423 | 325 920 642 | 843 579 275 |

Cohesion Fund commitments are made from differentiated appropriations. If all the projects are implemented in line with the decisions, an amount to be settled exists “automatically” because of the gap between the date of the decision and the date of payment of the balance (normally 4 to 5 years).

The major effort to clear outstanding appropriations on actions begun in 2000 was continued. Some 33.4 % of the outstanding appropriations existing at the beginning of the year were paid or subject to decommittment in 2004. By the end of 2004, outstanding appropriations had fallen to just 15 % of the annual budget of the Cohesion Fund (against over half at the end of 2002 and 39% at the end of 2003). A total of 50 projects were closed in 2004. This effort to reduce outstanding appropriations will be maintained in 2005 in partnership with the national authorities who are responsible for project implementation and the related payment claims.

3. The projects and measures adopted

3.1. Assistance from the Fund by Member State

3.1.1. Greece

In 2004 the Commission approved new Cohesion Fund grants for a total of 724 M€, of which 340 M€ were committed on the budget of 2004.

Taking into account 196 M€ in commitments for decisions adopted in previous years, the total amount of Cohesion Fund commitments for Greece in 2004 reached around 536 M€.

The following table shows the Cohesion Fund assistance approved in 2004 as well as the total amount committed:

| Total eligible cost (M€) | Total CF assistance (M€) | Commitments 2004* (M€) |

Environment | 596.504.907 | 428.836.257 | 296.658.028 |

Transport | 590.000.000 | 295.000.000 | 239.009.533 |

Total CF | 1.186.504.907 | 723.836.257 | 535.667.561 |

% Environment | 50% | 59% | 55% |

% Transport | 50% | 41% | 45% |

* including commitments based on the decisions taken in 2004 and in previous years

3.1.1.1 Environment

In the budget year 2004, the Cohesion Fund co-financed investments in the sectors of solid waste management, waste water treatment and the construction of a big water supply basing. The aim was to complete the cycle of assistance, filling the gaps in the existing systems so as to implement the agreed strategic reference framework.

The following decisions were approved in 2004:

ENVIRONMENT PROJECTS APPROVED IN 2004 |

CF Code | Project title | Total cost | CF grant | Committed |

2003GR16CPE019 | Solid waste management in Thessaly | 18.035.278 | 13.526.459 | 10.821.167 |

2004GR16CPE004 | Main sewage networks and water waste treatment plant in the Thriassion area | 62.071.260 | 27.932.067 | 22.345.654 |

2004GR16CPE005 | Secondary sewage networks of Eastern and Western section of Thriassion area | 66.500.001 | 49.875.001 | 39.900.000 |

2004GR16CPE003 | Waste compaction plant (SMA) Athens and neighbouring municipalities at Eleonas, Attiki | 15.261.970 | 11.446.477 | 9.157.182 |

2004GR16CPE001 | Construction of Phase A 2nd Landfill West Attika in Skalistiri of Phyli municipality | 53.345.000 | 40.008.750 | 32.007.000 |

2004GR16CPE002 | Landfill + Waste recycling and compost plant in Attika | 19.450.710 | 14.588.032 | 11.670.426 |

2004GR16CPE010 | Construction of Landfill at Mavro Vouno Grammatiko, Attiki | 21.450.410 | 16.087.808 | 12.870.246 |

2004GR16CPE009 | Water Supply of Patras from the rivers Piros and Parapiros , Phase B - Construction | 173.556.329 | 130.167.247 | 26.033.449 |

2004GR16CPE018 | Sludge drier unit waste processing centre at the Psittalia waste water treatment plant | 48.557.000 | 36.417.750 | 29.134.200 |

2004GR16CPE014 | National Database of Hydrological and Meteorological Information (Phase C) | 9.205.487 | 6.904.115 | 5.523.292 |

2004GR16CPE015 | Water supply - sewage and waste water disposal Municipality Eressou - Antissis | 22.100.000 | 16.575.000 | 13.260.000 |

2004GR16CPE012 | Waste management system in the Region of East Macedonia - Thrace | 25.179.379 | 18.884.534 | 15.107.627 |

2004GR16CPE006 | Solid waste management in the Prefecture of Aitoloakarnania | 22.842.659 | 17.131.994 | 13.705.595 |

2004GR16CPE011 | Solid waste management plants, Region of Central Macedonia - Giannitsa - Serres - Katerini | 18.287.823 | 13.715.867 | 10.972.693 |

2004GR16CPE008 | Solid waste management at the prefecture of Viotia | 10.131.495 | 7.598.621 | 6.078.897 |

2004GR16CPE007 | Solid waste management works Prefecture of Axaïa, West Greece | 8.951.000 | 6.713.250 | 5.370.600 |

| SUB-TOTAL | 594.925.801 | 427.572.972 | 263.958.028 |

Modified decisionWith grant increase |

97.09.61.005 | Construction of a reservoir and transportation pipeline for the water supply of the municipality of Alexandroupolis and of six neighbouring communities | 1.579.106 | 1.263.285 | 0 |

| SUB-TOTAL | 1.579.106 | 1.263.285 | 0 |

| GRAND TOTAL | 596.504.907 | 428.836.257 | 263.958.028 |

Sixteen new projects totalling 427.5 M€ of Cohesion Fund assistance were approved in 2004. Of this amount, 264 M€ were committed from the 2004 budget. In addition, the Commission issued one modification decision, which resulted to an increase of the Cohesion Fund grant by a total of 1.2 M€.

Furthermore, on account of decisions taken in previous years, an amount of 32.7 M€ was committed from the 2004 budget.

Finally, the Commission issued 9 modification decisions without any increase in the Cohesion Fund grant.

3.1.1.2 Transport

In 2004 the European Commission approved 2 new rail projects with a total of 295 M€ in Community assistance, of which 76 M€ were committed on the 2004 budget. The new grant decisions concern the electrification of the Athens-Thessaloniki double track railway line, B Phase, and of the single track railway section Inoi-Chalkida and the Construction of the new double track railway line Athens-Patras, section Kiato-Rododafni.

The following table shows the projects approved in 2004:

TRANSPORTPROJECTS APPROVED IN 2004 |

CF Code | Project title | Total cost (€) | CF grant (€) | Commitments |

2003GR16CPT004 | Electrification of the Athens-Thessaloniki double track railway line, B-phase, and of the single track railway section Inoi-Chalkida | 56.000.000 | 28.000.000 | 22.400.000 |

2004GR16CPT002 | Construction of the new double track railway line Athens-Patras, section Kiato-Rododafni | 534.000.000 | 267.000.000 | 53.650.000 |

| TOTAL | 590.000.000 | 295.000.000 | 76.050.000 |

Based on decisions taken in the previous years, an amount of 163 M€ has been committed in the 2004 budget for the transport sector.

In addition, the Commission issued 9 modification decisions without any increase in the Cohesion Fund grant.

3.1.2. Spain

The Commission adopted 65 new decisions granting a Cohesion Fund co-financing of €1,720 million including €1,702.7 million committed in 2004 (taking account of the carryovers). These commitments exceeded by €21.8 million the credit allocation for Spain this year, in order to avoid a loss of available budgetary resources not fully used by Greece.

These commitments of which 42.7% goes to the environment sector and 57.3% to the transport sector, correspond to new decisions adopted in 2004, to modifications and annual instalments of decisions adopted previously and to the final balances of projects to be closed.

A total of 60 modifying decisions were approved including 17 with increase in CF assistance.

The following table indicates the amount corresponding to each sector:

| Total eligible cost* (million €) | Total CF assistance* (million €) | Commitments 2004* (million €) |

Environment | 874 | 659 | 727 |

Transport | 1.651 | 1.061 | 975 |

Total CF | 2.525 | 1.720 | 1.702 |

% Environment | 34,6 % | 38,3 % | 42,7 % |

% Transport | 65,4 % | 61,7 % | 57,3 % |

* rounded figures

During 2004, €1,940 million were scheduled in payment appropriations and 28 files were closed and balanced.

3.1.2.1 Environment

The Cohesion Fund continued concentrating its financial support on the three priority sectors: water supply, cleansing and purification of waste-water, and solid urban, industrial and hazardous waste management. Preparatory studies necessary for the realisation of projects in the sector of water were also financed.

The contribution of the cohesion Fund by sectors shows that cleansing and purification of the waste-water continued receiving the main part of the resources, followed by water supply.

A total of 41 decisions for new projects were adopted which represent an assistance of €659 million including €727 million committed in 2004 (taking account of the commitment of the balances for projects to close). A total of 57 decision modifications have been adopted.

Sector | Total eligible cost (million €) | Total CF assistance (million €) | % of assistance | Commitments 2004 (million €) |

Water supply | 351,43 | 237,00 | 35,95 % | 238,33 |

Waste-water management | 402,00 | 325,59 | 49,39 % | 395,05 |

Solid waste | 116,49 | 93,19 | 14,40 % | 74,55 |

Technical assistance | 4,05 | 3,44 | 0,52 % | 2,75 |

Total | 873,97 | 659,22 | 100,00 | 710,68 * |

* To this amount €2.08 million must be added corresponding to appropriations carried over to the 2005 budget and concerning a modification with cost increase of a waste project in Andalusia.

Water supply

In 2004 the Community assistance for the projects concerning water supply amounted to €237 million, which account for 35,95% of the amount allocated to the environmental sector. Fourteen new decisions were adopted as well as four decision modifications on projects already adopted.

Water supplyProjects adopted in 2004 |

Project n° | Projet name | Total eligible cost (€) | CF assistance (€) |

2002-ES-16-C-PE-035 | Arteria aductora del campo de pozos del Guadarrama y Estación Tratamiento Agua Potable de Griñón | 77.890.648 | 46.734.389 |

2002-ES-16-C-PE-050 | Abastecimiento de agua potable a las comarcas de la Ribera- Parcial 2 | 15.127.394 | 12.101.915 |

2003-ES-16-C-PE-013 | Abastecimiento en Alcañiz, Calanda, Castelaserás y otros(Cuenca del Matarraña) | 7.179.867 | 6.102.888 |

2003-ES-16-C-PE-014 | Abastecimiento a Lérida y su comarca desde el embalse de Santa Ana (2ª fase) | 28.300.627 | 14.150.313 |

2003-ES-16-C-PE-026 | Abastecimiento de agua a Cantabria (Areas de Santander y Torrelavega | 59.149.606 | 38.447.244 |

2003-ES-16-C-PE-034 | Actuaciones en Estación tratamiento agua potable San Isidro- Valladolid | 9.732.009 | 7.785.607 |

2004-ES-16-C-PE-005 | Abastecimiento a poblaciones de Castilla y León:Valle de Esgueva 2ª fase ; Benavente y Valle del Tera | 36.257.148 | 23.567.146 |

2004-ES-16-C-PE-009 | Ampliación del abastecimiento de agua a la Mancomunidad de Algodor | 15.500.000 | 13.175.000 |

2004-ES-16-C-PE-013 | Abastecimiento Cuenca Hidrográfica del Guadalquivir - 2004 | 13.699.537 | 10.959.630 |

2004-ES-16-C-PE-018 | Abastecimiento a poblaciones de Castilla y León: Mancom. vecindad de Burgos y bajo Arlanza | 12.074.156 | 7.848.201 |

2004-ES-16-C-PE-022 | Mejora del abastecimiento de agua a los municipios costeros del extremo occidental de Asturias | 32.151.528 | 22.506.070 |

2004-ES-16-C-PE-023 | Mejora del abastecimiento de agua a Oviedo. Tramo Estación tratamiento agua potable de Cabornio-Depósito de El Cristo. | 15.495.737 | 9.917.272 |

2004-ES-16-C-PE-029 | Abastecimiento Cuenca Hidrográfica del Norte – 2004 | 7.359.126 | 5.887.301 |

2004-ES-16-C-PE-030 | Abastecimiento de aguas en la Cuenca Hidrográfica del Tajo- 2004 | 2.017.552 | 1.614.042 |

Waste-water treatment

The aid allocated to this sector in 2004 amounts to €402 million, i.e. 49% of the environment sector. Efforts focused, once again, on the implementation of Directive 91/271/EEC and on the implementation of the National and Regional Plans for the Cleansing and Purification.

Fifteen decisions were adopted for projects and groups of projects in the agglomerations located in the main catchment areas and ten amendment decisions of projects already adopted. These projects deal with the improvement of purification networks, the construction of collectors in several regions, the construction of purification and underwater outlets.

Waste-water treatmentProjects adopted in 2004 |

Projet n° | Project name | Total eligible cost (€) | CF assistance (€) |

2002-ES-16-C-PE-055 | Saneamiento Cuenca hidrográfica del Guadalquivir - 2002 - Grupo II | 22.873.279 | 18.298.623 |

2003-ES-16-C-PE-004 | Ampliación y mejora del saneamiento en la Cuenca hidrográfica del Jucar de la C. Valenciana-Grupo IV | 28.424.743 | 22.739.794 |

2003-ES-16-C-PE-012 | Saneamiento y colectores del término municipal de Elche | 10.869.452 | 8.695.562 |

2004-ES-16-C-PE-002 | Sistema de saneamiento del Alt Maresme Nord en los municipios Pineda del Mar y Torderá | 21.184.775 | 14.405.647 |

2004-ES-16-C-PE-008 | Saneamiento de León, Valladolid y Ponferrada 2004 | 16.837.397 | 13.469.918 |

2004-ES-16-C-PE-010 | Mejora de la depuración y vertido de Ferrol. EDAR de Cabo Prioriño (A Coruña) | 39.000.000 | 33.150.000 |

2004-ES-16-C-PE-011 | Colectores Norte (tramo III) y Norte-Sur en la Ciudad autónoma de Ceuta | 4.274.980 | 3.419.984 |

2004-ES-16-C-PE-014 | Colector interceptor General Santoña-Laredo-Colindres.Tramo Argoños-Santoña-Gama | 19.993.177 | 16.994.200 |

2004-ES-16-C-PE-015 | Colector interceptor General Santoña-Laredo-Colindres.Tramo Santoña-Laredo | 37.611.000 | 31.969.350 |

2004-ES-16-C-PE-016 | Colector interceptor General Santoña-Laredo-Colindres.Tramo Laredo-Colindres y Colector general de Laredo | 22.377.261 | 19.020.672 |

2004-ES-16-C-PE-017 | Mejora de la depuración y vertido de A Coruña: Emisario submarino de Bens | 20.200.000 | 17.170.000 |

2004-ES-16-C-PE-019 | Estación depuradora de aguas residuales de Lugo | 44.500.000 | 37.825.000 |

2004-ES-16-C-PE-020 | Emisario Subm. de Xagó para el saneamiento de Avilés,Castrillón, Corvera y Gozón | 23.800.000 | 15.470.000 |

2004-ES-16-C-PE-024 | Saneamiento de la Cuenca Hidrográfica del Tajo 2004 | 34.022.003 | 27.217.602 |

2004-ES-16-C-PE-028 | Colectores y estación depuradora de aguas residuales de Novelda y Monforte de Cid | 15.348.997 | 12.124.649 |

Waste

In order to implement the National Waste Plan approved in 2000 and the regional Plans approved for each Autonomous Community, the Spanish authorities submitted several projects in this sector.

In 2004, eight new decisions were adopted concerning waste management as well as two modification decisions of projects adopted previously. The total of assistance adopted for this sector amounts to €93 million, which accounts for 14% of the total of the environment sector.

Priority was given to urban solid waste projects, in particular to the closure of dumping grounds, to projects concerning sites for selective collecting and to waste treatment plants.

Solid wasteProjects adopted in 2004 |

Project n° | Project name | Total eligible cost (€) | CF assistance (€) |

2003-ES-16-C-PE-007 | Gestión de residuos en la Comunidad Autónoma de Andalucía - 2003 | 16.401.597 | 13.121.278 |

2003-ES-16-C-PE-021 | Plantas de clasificación y estaciones de transferencia- Andalucía -2003 | 13.151.000 | 10.520.800 |

2003-ES-16-C-PE-022 | Centros de acondicionamiento y puntos limpios-Andalucía -2003 | 25.097.000 | 20.077.600 |

2003-ES-16-C-PE-023 | Sellado de vertederos -Andalucía -2003 | 15.892.017 | 12.713.614 |

2003-ES-16-C-PE-033 | Gestión de residuos urbanos en la Comunidad Autónoma de Castilla y León | 15.188.114 | 12.150.491 |

2003-ES-16-C-PE-035 | Planta de vitrificación de cenizas de incineración de la planta de incineración de Melilla | 1.257.210 | 1.005.768 |

2004-ES-16-C-PE-003 | Planta de tratamiento de residuos urbanos de Alicante | 14.401.349 | 11.521.079 |

2004-ES-16-C-PE-031 | Gestión de residuos en Castilla la Mancha -Grupo 2004 | 2.900.232 | 2.320.186 |

Technical assistance - Preliminary studies

In 2004, four decisions concerning preliminary studies and technical assistance were approved totalling € 3 million of CF assistance, as well as one decision modification concerning technical assistance. These studies correspond to technical, economic and environmental studies necessary for the implementation of the projects.

Technical assistance – Preliminary studiesProjects adopted in 2004 |

Project n° | Project name | Total eligible cost (€) | CF assistance (€) |

2004-ES-16-C-PA-001 | A.T. para técnicas de teledetección con el objetivo de realizar una programación de las cuencas mediterráneas | 720.000 | 612.000 |

2004-ES-16-C-PE-004 | A.T. para el Estudio y redacción del proyecto de abastecimiento a poblaciones del alto Tiétar desde el Alberche | 1.392.000 | 1.183.200 |

2004-ES-16-C-PE-027 | Redacción del proyecto de abastecimiento de agua a núcleos de la cuenca del Matarraña | 388.590 | 330.301 |

2004-ES-16-C-PE-032 | Aplicación del análisis Delphi en las Cuencas Hidrográficas del Júcar y Segura | 650.000 | 552.500 |

3.1.2.2 Transport

In 2004, the Commission adopted a total of 24 new decisions in the transport sector, totaling a CF assistance of €1,061 million. 3 decision modifications were also adopted. The commitments corresponding to 2004 reached an amount of €975.5 million and correspond to new decisions adopted this year (608.8 M€), and to the annual instalments of decisions adopted previously (366.7 M€).

Distribution by mode of transport is shown in the following table.

Transport mode | Total eligible cost (Mio €) | CF assistance (Mio €) | % Co-financing | Commitments 2004 (Mio €) |

Roads | 217,2 | 184,6 | 13,1% | 93,1 |

Rail | 610,2 | 474,7 | 37,0% | 697,2 |

Ports | 823,7 | 402,0 | 49,9% | 185,2 |

TOTAL | 1.651,1 | 1.061,3 | 100,0% | 975,5 |

Rail network

In 2004, the cohesion Fund continued to ensure substantial financial support to investments for the high speed rail network. During this year, 14 new decisions were approved. Particularly important were the projects approved for the Madrid-Levante line, with 11 new decisions for a total amount of assistance of €349.0 million. For the Madrid-Barcelona line (three sections close to Barcelona), assistance for a total amount of €125.7 million was approved.

The works concerning the other projects approved in the previous years progressed normally, in accordance with the information received in the various monitoring Committees. However, some revisions of the work-timetable had to be carried out.

RAIL PROJECTS ADOPTED IN 2004 |

Project n° | Projet name | Total eligible cost (million €) | CF assistance (million €) |

2004-ES-16-C-PT-001, 002 et 003 | TGV Connexion Vallès - Sant Joan Despí and Ramal (new sections) | 173,9 | 125,7 |

2004-ES-16-C-PT-007 à 018 | TGV Madrid – Levant (several new sections) | 436,3 | 349,0 |

Total | | 610,2 | 474,7 |

Ports

The Cohesion Fund continued, in 2004, to give a significant financial support for the process of expansion and of improvement of seaports, thus meeting the Community guidelines for Trans-European Transport Networks (TEN-T). In supplement of the thirteen projects approved during the period 2000-2003, the Cohesion Fund granted assistance to eight new port projects: development or construction of new dams, in order to improve the safety of the harbour facilities and to increase the capacities of coastal traffic.

PORT PROJECTS ADOPTED IN 2004 |

Project n° | Projet name | Total eligible cost (million €) | CF assistance (million €) |

2003-ES-16-C-PT-015 | Puerto de Castellón | 28,7 | 14,2 |

2004-ES-16-C-PT-004 | Puerto de Tarragona | 45,2 | 22,6 |

2004-ES-16-C-PT-006 | Puerto de Santander | 23,9 | 9,6 |

2004-ES-16-C-PT-019 | Puerto de Sevilla | 142,8 | 62,8 |

2004-ES-16-C-PT-021 | Puerto de Gijón | 450,0 | 247,5 |

2004-ES-16-C-PT-022 | Puerto de Palma de Mallorca | 18,5 | 14,6 |

2004-ES-16-C-PT-023 | Puerto de Mahón | 17,6 | 10,5 |

2004-ES-16-C-PT-024 | Puerto de Valencia | 97,0 | 20,2 |

Total | | 823,7 | 402,0 |

Road network

The cohesion Fund continued, in 2004, to finance projects composing the main road Levante – France, initiated in 2000. Moreover, the Cohesion Fund also gave its support for the road project connecting the Cantabria with the Meseta, which makes this axis the main land transportation route between these two regions.

ROAD PROJECTS ADOPTED IN 2004 |

Project n° | Projet name | Total eligible cost (million €) | CF assistance (million €) |

2003-ES-16-C-PT-028 | Voie-express entre Cantabria et la Meseta | 153,3 | 130,3 |

2003-ES-16-C-PT-029 | Voie express entre Teruel et Sta Eulalia | 63,9 | 54,3 |

Total | | 217,2 | 184,6 |

3.1.3. Portugal

After having catch-up in 2003 the level of commitment execution to the overall allocation of credits for the period covered, the execution in 2004 did not present any special difficulty.

In 2004, the Commission approved 12 new environmental projects and 5 transport projects. These projects involve eligible investments of €1,003 million, for which assistance of €729 million was granted, of which €418 million was committed from the 2004 budget.

Following these commitments and including projects adopted in previous years which have an impact on the budget for 2004, the total commitments for the year were as follows:

Projects adopted in 2004 | Total eligible cost (€ million) | Total CF assistance (€ million) | 2004 commitments (€ million) |

Environment | 489.5 | 313.1 | 250.4 |

Transport | 513.9 | 416.0 | 168.0 |

Total | 1 003.4 | 729.1 | 418.4 |

% Environment | 48.8% | 42.9% | 59.8% |

% Transport | 51.2% | 57.1% | 40.2% |

Environment previous years | 1 389.8 | 949.3 | 11.4 |

Transport previous years | 1 594.9 | 1 185.4 | 50.0 |

Total | 2 984.7 | 2 134.7 | 61,4 |

3.1.3.1. Environment

As in the previous period, the priorities for assistance from the Fund in 2000-06 are waste-water treatment, the supply of drinking water and the treatment of urban waste.

In all, in 2004 the Commission adopted 12 new environmental projects, of which one was for integrated water-management (disposal and supply), three for waste-water disposal, two for water supplies, and six were for the treatment of urban solid waste.

The implementation of 2004 commitment appropriations for new environmental projects is shown in the following table:

Sector | Total eligible cost (€ million) | CF assistance (€ million) | % of assistance | 2004 commitments (€ million) |

Integrated water-management (disposal and supply) | 79.0 | 42.9 | 13.7% |