Proposal for a Council Regulation establishing a Cohesion Fund
Date: 2004-07-14
Institutions: European Commission
Subjects: Cohesion Fund, economic and social cohesion, enlargement of the Union, environmental policy, trans-European network, transport network

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 14.7.2004 
COM(2004) 494 final 

2004/0166 (AVC) 

Proposal for a 

COUNCIL REGULATION 

establishing a Cohesion Fund 

(presented by the Commission) 

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EXPLANATORY MEMORANDUM 

The Cohesion Fund is enshrined in article 161, paragraph 2, of the treaty, with the objective of 
contributing  financially  to  interventions  in  the  field  of  the  environment  and  the  trans-
European networks. 

Regulation (EC) No 1164/94 established the Cohesion Fund, and, for the first time, provided a 
framework  for  its  implementation.  This  regulation  was  subsequently  complemented  by 
Regulations (EC) No 1264/99 and (EC) No 1265/99. 

Following  the  Union’s  enlargement  on  May  1st  2004,  the  Cohesion  Fund  applies  to  the  10 
new Member States until the end of 2006, as well as to the three Member States eligible at the 
end of the 2000-2006 period (Greece, Portugal and Spain).  

Regulation (EC) n° […] lays down the general provisions for the functioning of the structural 
funds  and  the  Cohesion  Fund  for  the  programming  period  2007-2013.  It  envisages  that  the 
Cohesion Fund contributes to the convergence of less developed Member States and regions 
through financial participation in the operational programmes of this convergence objective. 
Under  the  reform  of  the  implementation  system  of  cohesion  policy,  Cohesion  Fund 
interventions  are  integrated  into  the  multi-annual  programming  of  the  structural  funds, 
including major projects. The reform was announced in the third cohesion report, which was 
adopted by the Commission in February 2004. While maintaining the fundamental principles 
which  underlie  the  value  of  the  policy  (multi-annual  programming,  partnership,  evaluation, 
shared  management),  this  reform  provides  a  balance  between  an  increased  strategic 
component, and a simplification of the implementation system. Simplification notably occurs 
through the reduction in the number of funds, simplified programming, a clarification of the 
roles  of  the  Commission  and  the  Member  States  in  terms  of  financial  management  and 
control,  and  by  adapting  the  implementation  modalities  to  reflect  the  intensity  of  the 
community contribution.  

In  the  field  of  trans-European  transport  networks,  actions  financed  by  the  Cohesion  Fund 
must follow the guidelines for these networks, which were adopted by the Council in revised 
decision (EC) 1692/96. 

In  the  environmental  field,  the  Cohesion  Fund  contributes  to  achieving  the  Union’s  policy 
objectives envisaged under article 174 of the treaty. 

An  extension  of  the  domains  of  intervention  is  justified  by  the  accession  of  new  Member 
States on May 1 2004, all of which are eligible to the Cohesion Fund, and which face new and 
important  financing  needs.  Thus  the  Cohesion  Fund  can  also  finance  actions  in  support  of 
sustainable development, where these have a clear environmental dimension, such as energy 
efficiency  or  renewable  energy.  Beyond  the  trans-European  transport  networks,  this  also 
allows  for  financing  of  rail,  navigable  maritime  and  river  waterways,  multi-modal  transport 
actions and their inter-operability, road and air traffic management, clean urban transport, and 
communal transport. This extension of the domain of interventions is in accordance with the 
corresponding  provisions  in  the  treaty,  and  is  in  line  with  the  priorities  decided  by  the 
European Council in Lisbon (March 2000) and Gothenburg (June 2001). 

The  aim  of  this  regulation  is  to  specify  the  tasks  of  the  Cohesion  Fund,  and  its  specific 
application,  in  particular  regarding  the  conditionality  of  assistance  and  the  fields  of 
intervention of the Fund. 

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Member States benefiting from the Cohesion Fund must conform to the conditions set out in 
the treaty regarding convergence  programmes and  those regarding excessive  deficits for the 
Member States participating in economic and monetary union. Assistance under the Cohesion 
Fund  is  conditional  upon  the  satisfaction  of  these  conditions.  If  the  Council  decides,  on  the 
basis  of  a  Commission  proposal,  that  an  excessive  deficit  exists  and  that  the  Member  State 
concerned  has  not  taken  effective  action,  the  payment  will  be  suspended,  effective  from 
January  1  of  the  following  year.  The  suspension  ceases,  when  the  Council  decides,  on  the 
same  basis,  that  the  Member  State  concerned  has  taken  the  measures  necessary  to  allow  a 
return to a situation that is in accordance with the Treaty and with the Council decisions. 

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2004/0166 (AVC) 

Proposal for a 

COUNCIL REGULATION 

establishing a Cohesion Fund  

THE COUNCIL OF THE EUROPEAN, 

Having regard to the Treaty establishing the European Community, and in particular Article 
161(2) thereof, 

Having regard to the proposal from the Commission1, 

Having regard to the assent of the European Parliament2, 

Having regard to the opinion of the European Economic and Social Committee 3, 

Having regard to the opinion of the Committee of the Regions4, 

Whereas: 

(1) 

(2) 

Regulation  (EC)  No  […]  laying  down  general  provisions  on  the  European  Regional 
Development Fund, the European Social Fund and the Cohesion Fund5, establishes the 
framework for the action of the Structural Funds and the Cohesion Fund. It fixes, in 
particular,  the  objectives,  the  principles  and  the  rules  concerning  partnership, 
programming,  evaluation  and  management.  It  is  therefore  necessary  to  specify  the 
mission  of  the  Cohesion  Fund  in  relation  to  this  new  framework  and  to  the  purpose 
assigned to it in the Treaty and to repeal, for the sake of clarity, Council Regulation 
(EC) No 1164/94 of 16 May 1994 establishing the Cohesion Fund6. 

Trans-European  network  projects  financed  from  the  Cohesion  Fund  must  fit  the 
guidelines for these networks adopted by the Council and the European Parliament. In 
order to concentrate the efforts, priority shall be given to projects of European interest 
as defined in Decision No 1692/96/EC of the European Parliament and the Council of 
23  July  1996  on  Community  guidelines  for  the  development  of  the  trans-European 
transport network 7. 

1 
2 
3 
4 
5 
6 
7 

OJ C […], […], p. […]. 
OJ C […], […], p. […]. 
OJ C […], […], p. […]. 
OJ C […], […], p. […]. 
OJ L […], […], p. […]. 
OJ L 130 of 25.5.1994, p. 1, Regulation as last modified by the Accession Act of 2003.  
OJ L 228 of 9.9.1996, p. 1 

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(3) 

(4) 

(5) 

(6) 

The  Community  may,  through  the  Cohesion  Fund,  contribute  to  action  in  pursuit  of 
the  Community’s  environmental  policy  objectives  specified  in  Article  174  of  the 
Treaty. Under Article 175(5) of the Treaty and without prejudice to the principle that 
the polluter should pay, the Council can decide, in the case of measures on the basis of 
paragraph 1 of that Article which are deemed to involve disproportionate costs for the 
public  authorities  of  a  Member  State,  that  the  measure  is  to  be  aided  from  the 
Cohesion Fund. 

Granting of assistance from the Cohesion Fund must take due account of the priorities 
of the enlarged Union, in particular those set by the Göteborg European Council on the 
environment in the interests of sustainable development. 

Regulation (EC) No […] provides that eligibility of expenditure is to be established at 
national level, with certain exceptions, for which it is necessary to lay down specific 
provisions.  The  exceptions  concerning  the  Cohesion  Fund  should  therefore  be  laid 
down. 

Conditionality provisions in the granting of financial assistance will continue to apply 
in  conjunction  with  the  fulfilment  of  the  conditions  of  economic  convergence  as  set 
out  in  article  104  of  the  Treaty  and  the  need  for  sound  government  finances.  In  this 
respect,  Member  States  participating  in  the  Economic  and  Monetary  Union  are  to 
implement  stability  programmes  and  non  participating  Member  States  convergence 
programmes, as defined in Council Regulation (EC) n° 1466/97 of 7 July 1997 on the 
strengthening  of  the  surveillance  of  budgetary  positions  and  the  surveillance  and 
coordination  of  economic  policies,  leading  to  the  fulfilment  of  the  conditions  of 
economic convergence referred to in article 104 of the Treaty. 

HAS ADOPTED THIS REGULATION: 

Article 1 

Creation and purpose of the Cohesion Fund 

1. 

2. 

3. 

A  Cohesion  Fund  (hereinafter:  the  Fund)  is  hereby  set  up  for  the  purpose  of 
strengthening the economic, social and territorial cohesion of the Community in the 
interests of promoting sustainable development. 

The  Fund  shall  contribute  to  the  financing  of  programmes,  which  support  the 
objectives set out in the Treaty. 

The  Fund  is  governed  by  the  provisions  of  Regulation  (EC)  No  […]  and  by  the 
provisions of this Regulation. 

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Article 2 

Scope of assistance 

Assistance  from  the  Fund  shall  be  given  in  the  following  areas  ensuring  an  appropriate 
balance  and  according  to  the  investment  and  infrastructure  needs  specific  to  each  Member 
State receiving assistance: 

1) 

2) 

3) 

trans-European transport networks, in particular priority projects of European interest 
as identified by Decision No 1692/96/EC; 

achievement of the objectives of Article 174 of the Treaty falling within the priorities 
assigned  to  the  Community  environmental  protection  policy  under  the  policy  and 
action programme on the environment; 

areas that can be developed on a sustainable basis and clearly present environmental 
benefits, namely energy efficiency and renewable energy and, in the transport sector 
outside  the  trans-European  networks,  rail,  river  and  sea  transport,  intermodal 
transport systems and their interoperability, management of road and air traffic, clean 
urban transport and public transport. 

Article 3 

Rules on eligibility of expenditure 

The following expenditure shall be ineligible: 

1) 

2) 

3) 

4) 

5) 

1. 

2. 

VAT; 

interest on debt; 

the purchase of land for an amount exceeding 10% of the total eligible expenditure 
for the operation concerned; 

housing; 

decommissioning of nuclear power stations. 

Article 4 

Conditions applying to access to Fund assistance 

Assistance from the Cohesion Fund shall be conditional on the following rules. 

If the Council: 

a) 

has  established  in  accordance  with  Article  104(6)  EC  that  excessive 
government deficit exists in a beneficiary Member State, and 

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b) 

has  decided  in  accordance  with  Article  104(8)  EC  that  the  Member  State 
concerned,  in  response  to  a  Council  Recommendation  issued  under  Article 
104(7) EC has not taken effective action or that the action taken has proven to 
be inadequate, 

it  decides  to  suspend  either  the  totality  or  part  of  the  financial  assistance  from  the 
Fund  for  the  Member  State  concerned  with  effect  from  1st  January  of  the  year 
following the decision. The suspension concerns the commitments. 

3. 

4. 

The Council decides to lift the suspension of the financial assistance from the Fund if 
it  establishes  that  the  Member  State  concerned  has  taken  the  necessary  corrective 
action.  The  Commission  proceeds  to  the  re-budgetisation  of  the  commitments 
suspended. 

The  Council  takes  the  decisions  referred  to  in  paragraphs  2  and  3  on  a  qualified 
majority on a proposal from the Commission. 

Article 5 

Transitional provisions 

This  Regulation  shall  not  affect  neither  the continuation  nor  the  modification,  including  the 
total  or  partial  cancellation,  of  operations  approved  by  the  Commission  on  the  basis  of 
Regulation (EC) No 1164/94, applicable before entry into force of this Regulation. 

Applications made under Regulation (EEC) No 1164/94 shall remain valid. 

Article 6 

Repeal 

Regulation (EC) No 1164/94 is hereby repealed with effect from 1 January 2007. 

References to Regulation (EC) No 1164/94 shall be construed as reference to this Regulation. 

Article 7 

Review 

The  Council  shall  review  this  Regulation  by  31  December  2013  at  the  latest  in  accordance 
with Article 161 of the Treaty. 

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Article 8 

Entry into force 

This Regulation shall enter into force on the twentieth day following that of its publication in 
the Official Journal of the European Union. 

It shall apply from 1 January 2007. 

This Regulation shall be binding in its entirety and directly applicable in all Member States. 

Done at Brussels, […]. 

For the Council 
The President 
[…] 

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