Progress Report on the Communication from the Commission on the impact of enlargement on Regions Bordering Candidate Countries Community Action for Border Regions
Date: 2002-11-29
Institutions: European Commission
Subjects: EU regional policy, European Region, action programme, economic consequence, enlargement of the Union, frontier region, trans-European network

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 29.11.2002
COM(2002) 660 final

PROGRESS REPORT

ON THE COMMUNICATION FROM THE COMMISSION
ON THE IMPACT OF ENLARGEMENT ON REGIONS BORDERING CANDIDATE
COUNTRIES

COMMUNITY ACTION FOR BORDER REGIONS

TABLE OF CONTENTS

1.

2.

2.1.

2.2.

2.3.

2.4.

2.5.

Introduction ........................................................................................................................ 3

State of implementation: new measures............................................................................. 5

Trans-European networks .............................................................................................. 5

Pilot Project on the Impact of Enlargement for the Border Regions ............................. 6

Networking measures in the framework of INTERREG ............................................. 10

Special support of 30 MEUR to border regions under INTERREG in 2002............... 11

Special Programme with the European Investment Bank (EIB) to support municipal

infrastructure projects in the border regions of candidate countries with the EU...... 12

3.

State of implementation: better co-ordination of existing policies .................................. 14

3.1.

3.2.

Improved co-ordination between Phare CBC and INTERREG................................... 14

Policy initiatives in the agricultural sector................................................................... 16

4. Conclusion........................................................................................................................ 17

2

1. 

INTRODUCTION

The  European  Commission  adopted  on  25  July  2001  an  action  plan  for  regions  bordering  on
applicant  countries  [COM(2001)  437].  Twenty-three  regions  in  Austria,  Finland,  Germany,
Greece and  Italy were involved.1 The analysis undertaken in this framework demonstrated that
most border regions receive substantial support from the Structural Funds under Objective 1 and
2 and through the Community Initiatives INTERREG, EQUAL, LEADER+ and URBAN. In the
period  2000-2006,  a  total  of  €  16  billion  are  availa ble  to  Objective  1  and  2  areas  adjacent  to
candidate countries. However, it also became evident that some specific problems, in particular
in the area of infrastructure and economic restructuring, persist.

Consequently,  the  Communication  of  the  Commission  of  25  July  2001  proposed  a  series  of
additional  actions  to  strengthen  economic  competitiveness  of  border  regions.  These  actions
include new measures as well as a better co-ordination of existing policies.

The new measures proposed by the Commission aimed at providing specific additional funding
to border regions  in the  area  of transport and  environmental infrastructure, small and medium-
sized enterprises (SME), networking activities as well as  youth exchanges. In detail, the  action
plan foresaw the following measures:

– 

– 

– 

1

EUR  150  million  were  earmarked  to  support  TEN-T  projects  at  the  borders  with
candidate  countries  in  the  period  2003-06,  EUR  50  million  of  which  shall  come  from
existing funds, not already committed. At the same time, the Commission proposed that
the  maximum  level  of  Community  support  for  specific  TEN-T  cross-border  projects
(including the above mentioned ones) should be raised from 10% to 20%;

Development  of  a  municipal  infrastructure  facility  in  co-operation  with  the  EIB  to
support  small-scale  municipal  infrastructure  projects  in  candidate  countries’  border
regions  with  the  EU  based  on  an  extra  allocation  of  EUR  35  million  in  2002  and  15
million in 2003 under the Phare Programme;

Additional support of EUR 15 million for actions that strengthen the competitiveness of
regions and economic sectors particularly affected by enlargement, in particular of small
and medium sized enterprises. These special actions are funded by budget line B5-3003
entitled  “Pilot  Project  on  the  Impact  of  Enlargement  for  the  Regions  Bordering  the
Candidate  Countries”  and  initiated  by  the  European  Parliament  for  the  period  2001-
2002 (i.e. EUR 10 million in 2001 and EUR 5 million in 2002);

Two of them are located in Finland: Uusimaa, Etelä-Suomi; eight in  Germany:  Niederbayern,  Oberpfalz,
Oberfranken,  Brandenburg,  Berlin,  Mecklenburg-Vorpommern,  Chemnitz,  Dresden;  six  in  Austria:
Burgenland,  Niederösterreich,  Wien,  Kärnten,  Steiermark,  Oberösterreich;  two  in  Italy:  Veneto,  Friuli-
Venezia  Giulia;  and  five  in  Greece:  Anatoliki  Makedonia  –  Thraki,  Kentriki  Makedonia,  Voreio  Aigaio,
Notio Aigaio, and Kriti.

3

                                                
– 

– 

Community  support  of  €  20  million  for  acti ons  encouraging  and  facilitating  co-
operation  in  border  regions  in  the  framework  of  the  INTERREG  programme  for
networks, information activities, support to project development etc.;

Allocation of an additional € 10 million of  Community support in the period 2003-2006
to  targeted  « people-to-people »  youth  exchanges,  voluntary  service  and  training  and
information  activities  in  border  regions,  within  the  framework  of  the  YOUTH
programme.

Overall financing under the action plan for the development of border regions proposed by the
Commission amounted to EUR 245 million, EUR 50 million of which were specifically reserved
for border regions in the applicant countries.

In autumn 2001, the budgetary authority subsequently agreed to allocate an additional 60 MEUR
to border regions in the 2002  and 2003 budgets  raising the total  funding for border regions on
both  sides  of  the  frontier  to  EUR  305  million.  The  additional  amount  of  €  60  million  made
available by the budgetary authority is split up as follows:

– 

– 

– 

special support of € 30 million to border regions  under  INTERREG in  2002 (deriving
from the flexibility instrument);

additional allocation of € 15 million to the a bove mentioned pilot project on the “Impact
of Enlargement for the Regions Bordering the Candidate Countries” in 2002;

additional  allocation  of  €  15  million  to  preparatory  measures  on  the  “Impact  of
Enlargement for the Regions Bordering the Candidate Countries” (budget line B5-3003)
in the 2003 budget.

In  addition  to  these  measures  providing  additional funding, the  action  plan  of  the  Commission
proposed  a  better  co-ordination  of  existing  policies  aimed  at  harmonising  different  European
policies more efficiently in order to take account of the particular needs of border regions.

In particular, the Commission envisaged an improved co-ordination between Phare CBC and the
INTERREG initiative. To this end, the Commission proposed

– 

– 

to modify the Phare-CBC Regulation by the end of 2002;

to examine the  possibilities of making  the  so-called  “principle of  territoriality”, which
only allows funding by INTERREG for those  projects  which  are  physically  located in
EU territory, less rigid in application.

Furthermore, the Commission encouraged Member States to undertake certain policy initiatives
in the agricultural sector. In this context, the Commission proposed:

– 

to re-focus existing rural development programmes to improve the competitiveness and
diversification of activities in border areas;

4

– 

to  use  the  LEADER+  programme  to  develop  cross-border  co-operation  between  rural
communities on both sides of the border.

Implementation  of  the  action  plan  is  monitored  by  a  special  Commission  working  group  for
border  regions  set  up  for  this  purpose.  The  working  paper  contains  the  first  progress  report  of
this working group. It describes the state of implementation of the measures outlined above.

2. 

STATE OF IMPLEMENTATION: NEW MEASURES

2.1. 

Trans-European networks

On  2  October  2001,  the  Commission  adopted  a  proposal  for  a  regulation  of  the  European
Parliament  and  of  the  Council  amending  Council  Regulation  (EC)  No  2236/95  laying  down
general rules for the granting of Community financial aid in the field of trans-European networks
[COM(2001)545final].

In line with its action plan for border regions, the Commission argued that cross-border projects
with candidate countries may prove difficult to be implemented due to financial constraints. The
Commission  therefore  considered  that  the  maximum  support  for  trans-European  transport
network  projects  which  fall  into  the  category  of  cross-border  rail  projects  crossing  natural
barriers  or  aiming  at  eliminating  clearly  identified  bottlenecks  at  borders  with  candidate
countries should be increased from 10% to 20%, in order to have a leverage effect and to attract
private investors in particular.

In order to complement  ISPA support for  candidate  countries,  the  Commission  also  concluded
that an additional financial assistance of EUR 100 million in the period 2003-2006 assigned to
the  TEN  budget  line  should  be  allocated  to  the  Member  States  to  be  used  towards  the  most
urgently  needed  improvements  related  to  cross-border  transport  infrastructure  with  candidate
countries. Therefore the financial framework should be increased  accordingly  within the 2000-
2006  financial  perspectives.  To  this  aim,  50  mio  €  of  the  current  TEN-T  budget  will  be
specifically devoted to these projects. This could be done in the framework of the revision of the
Indicative Multi-annual Programme established between Member States and the Commission for
the funding of TEN projects.

The  Council  as  well  as  the  European  Parliament  have  started  to  examine  the  Commission
proposal.  The  first  reading  of  the  EP  took  place  on  the  2nd  July  2002,  and  the  vote  of  the  EP
confirmed  its  support  to  the  Commission’s  proposal.  The  draft  regulation  has  not  yet  been
adopted  and  it  is  unlikely  that  the  process  of  its  adoption  will  be  completed  before  the  end  of
2002.

5

2.2. 

Pilot Project on the Impact of Enlargement for the Border Regions

Co-operation with ARGE launched in 2001

In 2001, the Commission awarded a grant of EUR 10 million to ARGE2 to support a wide scale
pilot project in favour of SMEs of EU border regions (“Growing together with Europe”). ARGE
is a network of 28 chambers of commerce from various Member States located in the EU regions
bordering the candidate  countries  and  therefore  represents  SMEs  in most of the border regions
specified  in  the  action  plan  of  the  Commission.  SME  from  a  border  region  not  represented
through a chamber of commerce of the ARGE network (e.g. Finland) may also benefit from the
activities of this pilot project and will be actively informed and involved by ARGE.

The pilot project aims at strengthening the competitiveness of SMEs in particular through 3 main
components : 1) information, 2) strategy development and implementation, and  3) cross-border
co-operation.  The  project  started  on  January  3,  2002.  Until  May  2002  a  complete  work
programme  was  established  for  each  region  and  publication  material  for  SMEs  had  been
finalised. A dedicated web-site has been developed and is available to SMEs since July 1, 2002.
Activities under all three components have started and will be implemented over a period of 40
months.

The project addresses the concerns of SMEs in labour intensive sectors likely to face increased
competition  from  enterprises  in  the  candidate  countries.  It  also  supports  medium-sized
businesses  in  capital  intensive,  innovative  sectors  likely  to  benefit  from  the  opening  of  new
growth markets. The available funds will be distributed according to the needs and priorities of
each region without fixed proportions. The concept foresees to address 144.000 SMEs, 25% of
which are located in each Austria, the new German Länder and Bavaria; 15% in Italy, and 5% in
each  Greek  and  Finnish  border  regions.  The  figures  per  country  are  indicative  and  based  on
number of population and SMEs.

The  project  stands  out  due  to  a  combination  of  central  project  management  and  decentralised
project implementation. On the one hand, selected regional co-ordinators from among the ARGE
members  provide  knowledge  on  particular  concerns  of  “their”  border  region.  They  can  also
provide their  know-how concerning activities  that have been organised by the  chamber(s) they
represent and which have proven to be particularly successful. Regional co-ordinators are also be
responsible  for  the  planning  and  the  implementation  of  measures  in  the  regions,  which  they
represent.  On  the  other  hand,  the  central  project  management  performed  by  ARGE  ensures
coherent and balanced implementation of measures.

The planning and implementation of activities is co-ordinated with the Euro Info Centres (EIC),
e.g. for information activities on the enlargement process or the set-up of co-operation networks
in the candidate countries.

2

Arbeitsgemeinschaft  der  Wirtschaftskammern  entlang  der  Grenzen  zu  den  mittel-  und  osteuropäischen
Beitrittsstaaten

6

                                                
Continuation of ARGE support in 2002

Throughout  the  budgetary  procedure  2002,  the  initial  proposal  of  the  Commission  of  EUR  5
million for 2002 was increased at the request of the European Parliament to EUR 20 million. For
the Programming of actions in 2002 the Commission took into account the request of the EP to
continue to put an emphasis on SME support.

In  this  context  the  Commission  has  decided  to  award  an  additional  grant  of  EUR  3  million  to
ARGE. The additional funds will be used to increase the level of information and qualification
measures for entrepreneurs and to equip a dedicated web-site developed under the current pilot
project with more products and services for SMEs of border regions than originally foreseen. In
particular, the additional funds will allow the creation of new web-based products for SMEs such
as company, traineeship and vocational training exchanges as well as an expert and information
database  providing  SMEs  with  online  access  to  local  experts  and  country/regional  profiles.  In
terms of training, funds will be used for the development of a coaching programme for SMEs to
help  them  implement  strategies  and  business  plans,  which  have  been  developed  under  the
project.

The Commission has decided to award this grant because of the Project’s direct reach to SMEs in
the  border  regions  and  its  particularly  innovative  approach  characterised  by  various  factors
including  synergies  through  networking  between  28  partner  chambers,  balanced  service  of
border  regions  and  result  orientation  of  activities  due  to  a  centralised  project  management,
advantages  of  know-how  of  sectors  and  problems  of  SMEs 
through  decentralised
implementation.

…and start of co-operation with EICs

In addition to the support granted to ARGE, the Commission published three calls for proposals
on July 20, 20023 for a total amount of EUR 15 million of which one call for proposals aims at
improving the competitiveness of SMEs in EU border regions by developing their trade relations
and industry links with SMEs in border regions of candidate countries or in non-border regions
of the current EU. The Commission will support the organisation and implementation of regional
partnership events for SMEs

– 

– 

– 

to  foster  co-operation  between  SMEs  to  help  them  establish  contacts,  networks  and
collaborative links with a view to establishing future business relations;

to stimulate transnational and cross-border activities of SMEs with a view to identifying
common  business  interests  and  market  opportunities  arising  from  the  enlargement
process;

to  give  SME  owners  and  managers  the  possibility  to  meet  providers  of  technical,
financial services and marketing assistance.

3 

OJ C 174 pp.13-17 of July 20, 2002

7

                                                
The overall amount available for this call for proposals, which is restricted to EICs, is EUR 7.5
million.

….with local and regional trade union organisations

The objective of the second call for proposals is to strengthen the competitiveness of regions and
economic sectors particularly affected by enlargement by addressing the needs of employees and
workers in the border region. Activities will focus on:

– 

– 

– 

information  and  knowledge  on  social  economic  effects  of  enlargement  to  especially
affected groups and organisations;

qualification  and  skills  enhancement  for  workers  and  employees  of  regions  and
economic sectors particularly affected by enlargement;

cross-border activities affecting the social lives of workers and employees with a view
to increase the cross cultural understanding.

The overall amount available for this call for proposals, which is restricted to local or regional
trade union organisations, is EUR 6 million.

…and with regional/local authorities and municipalities

The third call for proposals aims at strengthening the capacity of local and regional authorities in
the  EU  border  regions  to  adopt  strategies  and  action  plans  to  prepare  for  the  administrative
effects  of  enlargement..  To  achieve  this  objective,  the  grants  to  be  awarded  will  support  cross
border initiatives which

– 

– 

– 

– 

improve  the  collaboration  and  pooling  of  experience  between  local  and  regional
authorities;

intensify and consolidate cross border dialogue, and establish institutional relationships,
between  administrations  to  facilitate  the  integration  of  regions,  communities  and
citizens;

focus  on  institutional  and  administrative  capacity  building  including  developing
frameworks  for  operations  and  management,  needs  assessment,  human  resources,  and
service delivery;

equip  local  and  regional  authority  actors  with  the  skills  and  know-how  to  develop,
implement and manage the administrative and technical aspects of enlargement..

The overall amount  available  for  the call for  proposals,  which  is  restricted  to  local  or  regional
authorities, municipalities or association of municipalities, is EUR 1.5 million.

All  three  calls  for  proposals  have  been  restricted  to  well  defined  organisations  whose  main
mission  is  the  support  of  the  target  groups  in  the  intervention  areas  concerned  and  which  are

8

widely represented in the border regions and non-border regions of EU Member States. , A wide
range of organisations have been invited to form partnerships with the applicants.

All project proposals submitted to the Commission must also demonstrate complementarity with
local  or  regional  activities  promoting  border  regions  and  co-financed  under  European
Community  Programmes  or  Initiatives  (such  as  INTERREG).  Provisional  notification  date  of
results of the award process is likely to take place in December 2002.

Additional measures in favour of young people

…in the framework of the pilot project in 2002

Finally, € 2 million will be used to finance measures in favour of young people in border regions
according  to  the  sets  of  rules,  criteria  and  procedures  currently  applied  in  the  YOUTH
programme. The funds will, however, be executed in the framework of the pilot project (budget
line B5-3003). Consequently, the budget of the YOUTH programme (B3-1010) in 2002 will not
be affected by the activities foreseen for border regions.

The breakdown of funds decided by the Programme Committee for the YOUTH programme in
June  2002  is  based  on  the  population  of  the  regions  concerned.  Each  country  is  allocated  a
proportion of the total funds dedicated to cross-border co-operation according to the ratio of the
population of its regions concerned to the overall total population in all the regions concerned in
all  13  countries.  These  funds  will  be  awarded  in  accordance  with  the  existing  YOUTH
programme rules for decentralised activities at the 5 selection rounds scheduled in 2002, which
will  strongly  increase  the  cost  efficiency  and  visibility  of  cross-border  people-to-people  co-
operation. In the context  of  their  regular  reporting exercise scheduled  for  April 2003, YOUTH
National Agencies are required to present a separate financial and statistical reporting which will
clearly identify their 2002 cross-border activities.

The  Commission  has  invited  the  National  Agencies  of  all  countries  involved  to  present  cross-
border co-operation plans with a view to develop and implement projects and partnerships which
will  encourage  mobility,  initiative,  intercultural  learning  and  solidarity  between  young  people
and other citizens in border regions.

On  the  basis  of  these  work  plans,  National  Agencies  shall  grant  a  number  of  cross-border  co-
operation projects which all bear features of intercultural learning, active participation of young
people, trans-national mobility and co-operation similar to the ones of the following exemplary
youth exchange:

The  Finnish  YOUTH  National  Agency  has  granted  a  multilateral  youth  exchange  entitled
“COSMO”  which  involve  young  people  from  cross-border  regions  in  Finland,  Estonia  and
Germany.  The  project  aims  at  preventing  social  exclusion  and  increasing  the  knowledge  of
Europe amongst young people. The youngsters will learn things about the culture and customs in
other countries as well as get information on how to study and work abroad. During the  youth
exchange,  young  people  will  arrange  workshops  on  themes  of  European  interest  and  organise
intercultural  evenings  where  they  will  present  their  country  through  music,  food  and  games.
“olympic  games”  and  a  “city  adventure”  will  complement  the  intercultural  and  non-formal

9

learning  components.  Young  participants  have  been  actively  involved  in  preparing  and
organising the exchange as well as implementing the activity programme.

YOUTH  National  Agencies  shall  also  undertake  significant  information  activities  to  promote
cross-border co-operation to young people and all actors in the youth field (youth workers, youth
organisations, etc.) through contact-making seminars, study visits, training seminars, etc.

The  final  number  of  granted  youth  exchanges,  voluntary  services,  support  measures  (co-
operation,  training  and  information  activities)  as  well  as  information  activities  will  not  be
available before 30 April 2003 when YOUTH National Agencies deliver their 2002 financial and
statistical interim reports.

…in the framework of the YOUTH programme in the period 2003-2006

The additional allocation of € 10 million of Community support to the YOUTH  programme in
the  period  2003-2006  will  be  managed  according  to  the  same  decentralised  procedures.  The
Programme  Committee  for  the  YOUTH  programme  will  decide  in  November  2002  on  the
distribution of the 3 Mio Euro allocated to the budget line of the YOUTH programme (B3-1010)
for 2003.

2.3. 

Networking measures in the framework of INTERREG

In  its  action  plan  for  border  regions,  the  Commission  proposed  to  allocate  €  20  million  of
resources from paragraph 53 of the INTERREG III Guidelines for actions intended to encourage
and facilitate co-operation in border regions. The Commission subsequently decided to allocate
these funds to the strand C programmes of  INTERREG  III  and  to the  INTERACT programme
(i.e. INTERREG support programme) since both programmes are designed to provide financing
in favour of the type of actions indicated in the Commission communication.

This approach also benefits from the partnerships and management structures already established
for  the  implementation  of  INTERREG  III  C  and  INTERACT  programmes  and  thus  allows  a
more  rapid  use  of  the  funds  for  the  regions  concerned.  By  contrast,  the  preparation  of  a  new
specific  programme  would  have  involved  a  slow  and  burdensome  implementation  process  and
would have been less effective.

On the basis of the population living in the border regions in question, the Commission decided
to allocate € 12.3 million to the INTERREG III C East programme, € 2.2 million to INTERREG
III C North programme, and € 0.5 million to INTE RREG  III C South programme.  In  addition,
the Commission will allocate € 5 million to the INTERACT programme.

The additional funding has been added in the form of an additional priority in each programme
concerned. In the case of the INTERREG III C programmes, the operations foreseen under this
special priority include networks and individual co-operation  projects aiming  to encourage and
facilitate co-operation in border regions in order to strengthen their economic competitiveness. In
the case of INTERACT, the operations foreseen cover information actions, seminars, studies and
exchange  of  experience  on  horizontal  issues  for  INTERREG  programmes  and  on  their
complementarity with external policy instruments.

10

Lead partners have to be located in border regions with candidate countries. Co-operation with
partners located in candidate countries is encouraged. In the framework of the INTERREG III C
programmes concerned, an individual co-operation project must have at least three partners from
at  least  two  countries,  whereas  a  network  must  have  at  least  five  partners  from  at  least  three
countries.

Concerning the additional funds made available to the INTERREG III C programmes, the same
rates  of  contribution  from  the  ERDF  will  be  applied  as  envisaged  under  Article  29(3)  of  the
general  Regulation  on  the  Structural  Funds  (1260/1999).  As  for  INTERACT,  the  same
contribution rate will be applied as for equivalent measures under INTERACT.

The process of adopting the affected INTERREG III C programmes has been completed in May
2002.  The  adoption  of  the  INTERACT  programme  is  envisaged  for  the  beginning  of  autumn
2002.

2.4. 

Special support of 30 MEUR to border regions under INTERREG in 2002

On 21 November 2001, the European Parliament, the Commission and the Council agreed at a
Conciliation Committee meeting on the budget procedure 2002 that an additional amount of € 30
million  should  to  be  entered  under  heading  2  (Structural  Funds)  of  the  budget  for  regions
bordering candidate countries in order to finance specific  actions to support these  regions.  The
European  Parliament  adopted  the  2002  budget  on  13  December  2001  and  confirmed  the
commitment of € 30 million for border regions with  a special budget line (B2-1411) relating to
the INTERREG III initiative.

In  line  with  the  approach  taken  for  spending  the  €  20  million  for  networking  activities  in  the
framework  of  INTERREG  III  C  and  INTERACT,  the  Commission  decided  to  allocate  these
funds  to  already  existing  programmes  providing  the  scope  for  enhanced  cross-border  co-
operation.  Given  the  tight  timeframe  for  committing  the  additional  allocation  of  €  30  million,
such a solution once again appeared as the simplest and most pragmatic approach.

The Commission decided to allocate the additional funding to:

– 

– 

the 13 Strand A INTERREG programmes covering the borders with candidate countries
and thus directly concerned by enlargement as well as

to the Strand B INTERREG programme for the Baltic Sea Region.

The  borders  with  the  candidate  countries  are  covered  by  the  13  Strand  A  programmes  from
Greece/Cyprus in the South to Finland/Estonia in the North with the exception of the maritime
border  with  Latvia  and  Lithuania.  Although  these  two  countries  have  no  land  border  with  a
Member  State,  their  accession  will  also  have  an  impact  on  the  competitive  situation  of  some
regions of the Union similar to the accession of other candidate countries. Inclusion of the Strand
B Baltic Sea programme also responds to the European Parliament's concern about the maritime
border regions.

11

The  funds  have  been  distributed  to  the  14  programmes  concerned  following  an  objective  key,
which was the existing distribution of ERDF funds to the programmes (see annex).

Given the relatively small allocation per programme, the € 30 million have been allocated to one
common priority “ Special Support for Regions bordering the Candidate Countries” to be added
to the 14 programmes. Priority shall be given to projects in the following fields: strengthening of
transport  systems,  supporting  SME  particularly  affected  by  enlargement  as  well  as  supporting
training  and  inter-cultural  co-operation  actions  including  those  favouring  the  integration  of
different  language  and  cultural  groups.  Special  attention  shall  be  given  to  projects  in  the
transport and SME sectors directly linked to the improvement of environment.

Normal rules concerning the INTERREG IIIA and B programmes apply. In view of sound and
efficient  management,  one  single  Commission  decision  on  26  July  2002  amended  the  14
INTERREG  programmes  concerned.  All  commitments  were  validated  in  September  2002.
Member  States  were  invited  to  submit  beforehand  the  amended  financial  tables  for  the  14
programmes. It will be the task of the respective steering committees to commit these financial
means  to  concrete  projects  according  to  criteria  of  the  programme  complements  still  to  be
adjusted.

2.5. 

Special  Programme  with  the  European  Investment  Bank  (EIB)  to  support
municipal infrastructure projects in the border regions of candidate countries with
the EU

The Special EIB Programme has been developed in response to the lack of adequate small scale
infrastructure identified in the border regions of the candidate countries with the EU. Its overall
objective is to contribute to the social and economic development of these border regions and to
their integration with their neighbouring regions in the current EU Member States.

To this end, the Programme will increase the availability of small scale municipal infrastructure,
by increasing the  financial means available to municipalities and their public service  providers
through  a  combination  of  loans  from  EIB  resources  with  non-reimbursable  Phare  support.
Investments  will  take  due  account  of  available  regional  and  otherwise,  national  or  local
programming documents.

In 2002, € 35 million will be allocated from the Phare budget 2002 to the Facility according to
the Financing Proposal adopted by the Phare Management Committee on 27 September 2002.

The EIB intends to start the roll out of the Facility 2002 in Poland, which shares a large border
with  the  European  Union.  Additional  border  regions  of  other  Candidate  Countries  shall  be
covered  at  a  later  stage  under  this  Programme  (i.e.  border  regions  of  Bulgaria,  the  Czech
Republic,  Estonia,  Hungary,  Poland,  Slovenia,  and  Slovakia).  In  line  with  the  Commission’s
Action Plan for border regions, it is planned to continue funding of the Special EIB Programme
with an additional amount of up to €15 million from the 2003 Phare budget.

The  implementation  of  this  Programme  is  based  on  the  concept  of  a  Municipal  Infrastructure
Facility.  The  EIB  will  dedicate  funds  from  its  own  resources  and  thus  provide  a  global  loan
combined with a Phare grant to selected local participating banks. The overall ratio between the

12

EIB resources and the Phare allocation shall be equal or higher than 5/1. The EIB will provide at
least  €175  million  in  the  form  of  loans  and 
million in 2002.

the  Commission  will  provide  a  maximum  of  €35

The Commission entrusts the EIB with the implementation of this Programme and will conclude
a  Contribution  Arrangement  with  the  EIB  for  this  purpose  in  early  2003  providing  for  project
activities until 2009.

As  regards  the  practical  implementation  of  the  programme,  the  EIB,  in  first  step,  will  identify
and select local financial institutions in the border regions as partners, which have the capacity,
strength and interest to expand their operations to financing small infrastructure investments of
municipalities in a specific border region. The EIB will provide loans to these institutions, which
in  return  will  engage  in  lending  operations  to  municipalities  or  utilities  providing  a  public
service.  The  Phare  Contribution  will  be  used  to  pay  for  a  performance  and  service  fee  to
participating  local  banks  to  motivate  them  to  participate  in  the  Programme  and  to  cover
additional  costs  involved  i.e.  in  the  promotion  of  the  Facility  among  municipalities,  services
rendered  to  municipalities  to  prepare  loan  applications,  or  the  analysis  and  structuring  of
municipal  loans.  A  second  part  of  the  Phare  Contribution  will  be  used  to  partly  compensate
municipalities  or  municipal  service  providers  for  the  costs  of  their  investments  and  those
incurred in the selection and evaluation of these investments.

Before the EIB  may  sign  an  agreement  on  a  financial  package  including  the  EIB  loan  and  the
Phare grant (“the Project”) with a selected local financial institution, the EIB has to propose this
Project  to  the  Commission  for  approval.  In  the  Project  proposal,  the  EIB  will  inform  the
Commission  about  the  total  loan  amount  allocated  to  this  local  financial  institution  under  the
Facility  and  the  corresponding  Phare  Contribution.  Upon  approval,  the  EIB  will  sign  an
agreement with the local financial institution, which then becomes the Participating Bank under
this Programme.

The  Participating  Bank  will  engage  in  the  promotion  of  the  Facility  among  municipalities  and
aim at receiving loan applications for infrastructure investments that meet the eligibility criteria..
On the basis of a thorough  analysis of the applications, the Participating  Bank  will sign a loan
agreement with a municipality or utility company providing a municipal service (“Sub-Project”).
This loan agreement will include the allocation of a proportion of the Phare Contribution to the
municipality  or  municipal  service  provider.  Generally,  those  investments  are  eligible,  whose
costs do not exceed € 5 million.

All  investment  projects  shall  be  carried  out  in  compliance  with  the  relevant  Community
environmental legislation. The sum of the total value of the “Sub-Project”, the total value of the
Phare  Contribution  (Direct  Investment  Support)  in  favour  of  the  Promoter  and  any  other
European Community funds used by the Promoter for the financing of the Investment shall not
exceed 90% of the Investment costs. At operational level, the implementation of this Programme
will be monitored  through  progress reports  to  be  submitted by the  EIB  and  through  a  Steering
Committee composed of representatives of the Commission and the EIB.

13

3. 

STATE OF IMPLEMENTATION: BETTER CO-ORDINATION OF EXISTING POLICIES

With regard to the particular problems of border regions, the Commission expressed in the action
plan  its  intention  to  further  harmonise  co-ordination  between  Phare  CBC  and  INTERREG.  To
this end, the Commission announced the following measures:

3.1. 

Improved co-ordination between Phare CBC and INTERREG

Amendment of the PHARE CBC Regulation

On  the  assumption  that  enlargement  will  take  place  on  1st  January  2004,  the  2003  Phare
programming exercise will be the last one for the acceding countries. Given the short timeframe
of this scenario, the Commission envisages to only slightly adjust the Phare-CBC Regulation.

The experience gained since 1999 with the setting up of the Joint Programming Documents and
of  Joint  Committees  proves  there  is  still  scope  to  further  align  Phare-CBC  with  INTERREG,
namely the eligibility of actions. Taking stock of the innovations already introduced by the Phare
2000 Review, it seems worthwhile to proceed with this alignment.

The  only  modification  required  for  this  purpose  concerns  Article  5  of  the  Phare-CBC
Commission  Regulation  where,  by  deleting  the  final  sentence  of  paragraph  1,  the  current
differences between  actions  (a)  to  (i)  and  (j)  to  (n)  will  disappear.  As  a  result,  each  and  every
action will be eligible for Phare CBC mainstream or Phare CBC Small Project Fund (Article 5.2)
financing. This alignment of eligible actions under Phare CBC will bring more consistency with
the INTERREG approach.

These  amendments  were  adopted  by  the  Commission  on  6  September  2002,  which  allows  the
amended Phare CBC Regulation to be applicable for the Phare 2003 programming exercise.

Review of the PHARE Guidelines

The  Commission  has  also  worked  on  a  revision  of  the  Phare  Guidelines  2000-2006.  In  this
context, aspects of transnational and inter-regional co-operation have also been addressed.

Concerning the participation of candidate countries in INTERREG III B (transnational), such as
CADSES,  or  III  C  (inter-regional)  programmes,  the  Phare  Guidelines  reiterate  that  candidate
countries can continue to use, and even expand if they so wish, their Phare national programme
funds for this purpose.

In the Baltic Sea area, where a transnational approach is followed, PHARE-CBC will continue to
provide co-funding for INTERREG III B-type programmes.

The revised guidelines were adopted together with the PHARE CBC Regulation on 6 September
2002.

14

Application of the territorial principle

In its action plan for border regions the Commission also announced to examine the possibilities
of making the “principle of territoriality” less rigid in application. This means that currently only
projects or those parts of projects which are physically located in EU territory may be funded by
INTERREG.

After carefully examining this matter, the Commission has drawn the conclusion that the current
legislative framework clearly rules out the use of Structural Funds assistance outside the territory
of the European Union. The territorial principle must therefore continue to apply to investment
projects (e.g. sewage plants, bridges, technology centres, etc.). A less rigid interpretation of the
territorial principle approach is however feasible in the following cases:

Exceptions for technical assistance

Commission Regulation (EC) No 1685/2000 of 28 July 2000 (Point 2.1, second indent of rule No
11 in the Annex) laying down detailed rules for the implementation of Council Regulation (EC)
No  1260/1999  provides  that  expenses  for  participants  from  non-Community  countries  at
meetings  of  the  monitoring  committees  and  subcommittees  can  be  financed  from  the  relevant
technical  assistance  budget  where  the  chair  of  the  committee  involved  deems  their  presence
necessary for the effective implementation of the programme.

In  the  case  of  INTERREG  programmes,  their  steering  committees  can  be  regarded  as
subcommittees. Where INTERREG programmes involve non-Community countries, in particular
applicant countries, the presence of these countries' representatives can generally be considered
to be necessary for the effective implementation of the programme, given the rules of procedure
of  the  monitoring  and  steering  committees  (which  in  most  cases  have  already  been  decided),
which  establish  the  membership  of  these  representatives  from  outside  the  Union  and  the
requirement for decisions to be passed unanimously. This does not therefore need to be re-stated
in each and every invitation.

Exceptions for projects not eligible for technical assistance

As  regards  the  reimbursement  of  project-related  travel  and  subsistence  expenses  incurred  by
representatives  from  non-Community  countries,  the  Commission  considers  strand  A  projects  –
other than investment projects – run by promoters eligible for assistance on the EU side of the
border, certain expenses incurred by participants from applicant countries (travel and subsistence
costs,  attendance  fees  for  meetings,  seminars  and  language  courses,  etc.)  are  eligible  for
reimbursement  from  the  ERDF.  For  projects  of  strand  A  and  B,  with  a  view  to  ease  the  co-
operation  as  much  as  possible,  travel  and  subsistence  expenses  of  partners  or  participants
from third countries outside the EU can be eligible costs for an operation when the meeting or
seminar takes place in the EU and is part of an approved operation.

The travel and subsistence expenses by partners and participants from EU Member States on
parts of operations that take place in a third country and are vital for the success of the project as
a whole is also eligible for ERDF assistance.

15

Further possibilities of a more flexible interpretation of the territorial principle

In accordance with EC public procurement law, services or equipment used for implementing an
INTERREG project in the EU can also come from the "partner country" or other third countries
in question, according to general national, EU or international legislation on public procurement.

In  line  with  the  approach  described  above  concerning  the  eligibility  for  ERDF  assistance  of
certain  expenditure  incurred  by  participants  from  applicant  countries  on  projects  –  other  than
investment projects – some of the expenditure by participants from EU Member States on parts
of projects that take place in an applicant country and are vital for the success of the project as a
whole  is  also  eligible  for  ERDF  assistance  (travel  and  subsistence  costs,  fees  for  attending
meetings, seminars, work placements or language courses, etc.)

Eligibility of areas adjacent to border areas

In view of its unique  geographical  position in close  proximity  to  the  border  areas  of  Slovakia,
Hungary  and  the  Czech  Republic,  the  Commission  agreed  to  the  inclusion  of  Vienna  in  the
INTERREG  III  A  programmes  with  Hungary  and  the  Czech  Republic.  The  particular  role  of
Vienna  in  economic  relations  and  administrative  co-ordination  with  border  areas  of  candidate
countries  militated  in  favour  of  this  inclusion.  The  details  were  discussed  with  the  Austrian
authorities  and  set  out  in  a  modification  to  the  INTERREG  guidelines4,  after  consulting  the
neighbouring countries and taking into account the specific needs of the bordering Länder.

3.2. 

Policy initiatives in the agricultural sector

With  regard  to  re-orientating  existing  rural  development  programmes  to  improve  the
competitiveness  and  diversification  of  activities  in  border  areas,  it  is  still  premature  to  draw
conclusions in the absence of the mid-term evaluation of these programmes (planned by the end
of 2003). It should, however, be recalled that a number of border regions benefit from substantial
Objective  1  assistance  comprising  rural  development  measures  as  well  as  higher  co-financing
rates than other regions.

Implementation of the “trans-national co-operation” strand of LEADER +, which enables  local
action groups to launch projects with similar structures  of  another country (including applicant
countries), has  not  started  everywhere. The  selection  of  LEADER  groups  is  not  yet  completed
and programmes are not yet in their implementing phase. In addition, co-operation with applicant
countries  is  a  new  feature  of  LEADER  and  the  LEADER  groups,  which  give  priority  to  local
projects, have to identify their potential partners and to measure the added value of these projects
for  the  development  of  their  territory.  However,  certain  groups  of  local  action  have  already
initiated contacts.

4 

See OJ C 239 of 25 August 2001, page 4.

16

                                                
4. 

CONCLUSION

Enlargement is of particular importance to the border regions in the EU Member States.  It will
provide these regions with opportunities for increased integration, economic activity and growth.
Some specific problems in the area of infrastructure and economic restructuring still need to be
tackled, though.

In  combination  with  the  instruments  of  structural  policy  and  the  instruments  of  the  intensified
pre-accession  strategy  the  action  plan  of  the  Commission  of  July  2001  ensures  that  the  border
regions will receive sufficient support through a broad range of measures.

The report demonstrates that the Commission has made considerable progress in implementing
the Community Action for border regions. Project implementation is, however, still in its early
stage and the Commission is relying in this context, to a large extent, on the efforts of regional
and  local  partners  to  make  the  projects,  to  which  financial  means  have  been  committed,  a
success.

With  a  view  to  2003,  an  additional  allocation  of  €  15  million  to  preparatory  measures  on  the
“Impact  of  Enlargement  for  the  Regions  Bordering  the  Candidate  Countries”  (budget  line  B5-
3003) is foreseen. The following activities are envisaged:

–  continue with support measures for SMEs, particularly in the most affected business sectors

including the promotion of business cooperation and transfer of technical know-how;

–  consolidation  of  actions  for  workers,  such  as  advice  and  guidance  to  workers  in  social  and
labour legislation on both sides of the border and other information on the acquis in the area
of free movement of persons at the time of accession;

–  continue  with  measures  to  prepare  local  and  regional  public  administration  bodies  for
increased mobility and migration and help implement targeted social, cultural and educational
initiatives for their citizens.

In  addition,  the  Commission  will  continue  to  monitor  the  social  and  economic  impact  of
enlargement in border regions in order to further improve this Community Action.

17

Annex: Breakdown of 30 MEUR for border regions under INTERREG in 2002 (new budget line B2-1411)

13 A-STRAND PROGRAMMES + BALTIC SEA REGION B-STRAND PROGRAMME

Participating countries

Name  of  the  programme
covering  the  regions 
in
question

Total
expenditure

ERDF
allocation  (used
as weighting key)

Share  in
%

of
Distribution 
the 30 million on
programmes

Sum  of  ERDF
after
allocation 
top-up 
30
Meuro

of 

Finland/Estonia

South Coastal Line

 31,40

Germany/Poland

Mecklenburg-Poland

 110,98

Germany/Poland

Brandenburg-Lubuskie

 130,79

Germany/Poland

Saxony-Poland

Germany/Czech Rep.

Saxony-Czech Rep.

Germany/Czech Rep.

Bavaria-Czech Rep.

Austria/Czech Rep.

Austria-Czech Rep.

Austria/Slovakia

Austria-Slovakia

 61,11

 244,25

 127,64

 51,80

 52,50

18

 14,10

 83,09

 96,21

 42,68

1,5%

0,451

8,9%

2,657

10,3% 3,077

4,5%

1,365

 14,55

 85,74

 99,29

 44,05

 170,72

18,2% 5,459

 176,18

 63,82

 25,90

 26,25

6,8%

2,041

2,8%

0,828

2,8%

0,839

 65,86

 26,73

 27,09

Austria/Hungary

Austria-Hungary

Austria/Slovenia

Austria-Slovenia

Italy/Slovenia

Italy-Slovenia

 61,65

 54,52

 93,29

 30,82

 27,26

 43,20

3,3%

0,986

2,9%

0,872

4,6%

1,381

Greece/Bulgaria

Greece-Bulgaria

 259,28

 170,00

18,1% 5,436

Greece/Cyprus

Greece-Cyprus

Baltic Sea Region

Finland/Sweden/
Denmark/Germany/
Estonia/Lithuania/
Latvia/Poland

Totals

 80,21

 186,51

 47,00

 97,11

5,0%

1,503

10,4% 3,105

1 545,93

 938,17

100,0% 30,000

 31,81

 28,13

 44,58

 175,44

 48,50

 100,22

 968,17

+3,2%

19

20

21

22