Commission staff working document accompanying the annual report on the Cohesion Fund (2008) [COM(2009) 465 final]
Date: 2009-09-15
Institutions: European Commission
Subjects: Cohesion Fund, activity report

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 15.9.2009 
SEC(2009) 1159 final 

COMMISSION STAFF WORKING DOCUMENT 

accompanying the 

ANNUAL REPORT ON THE COHESION FUND (2008) 

[COM(2009) 465 final]

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TABLE OF CONTENTS 

1. 

General Context ........................................................................................................... 5 

1.1. 

Convergence and economic development in the beneficiary Member States.............. 5 

1.1.1  Greece .......................................................................................................................... 5 

1.1.2.  Spain............................................................................................................................. 5 

1.1.3.  Portugal ........................................................................................................................ 6 

1.1.4.  Cyprus .......................................................................................................................... 7 

1.1.5.  Czech Republic ............................................................................................................ 8 

1.1.6.  Estonia.......................................................................................................................... 9 

1.1.7.  Hungary...................................................................................................................... 10 

1.1.8.  Latvia.......................................................................................................................... 11 

1.1.9.  Lithuania .................................................................................................................... 11 

1.1.10.  Malta .......................................................................................................................... 12 

1.1.11.  Poland......................................................................................................................... 13 

1.1.12.  Slovakia...................................................................................................................... 14 

1.1.13.  Slovenia...................................................................................................................... 15 

1.2. 

Conditionality............................................................................................................. 16 

2. 

2.1. 

2.2. 

2.3. 

3. 

Financial execution of the 2000-2006 period in 2008 and closure of projects .......... 17 

Payments made in 2008 for projects adopted under the 2000-2006 period............... 17 

Outstanding commitments from the 2000-2006 period ............................................. 18 

Closure of projects from the 2000-2006 period ......................................................... 19 

The implementation of the 2000-2006 projects by Member States ........................... 21 

3.1. 

Greece ........................................................................................................................ 21 

3.1.1.  Environment............................................................................................................... 21 

3.1.1.  Transport .................................................................................................................... 21 

3.2. 

Spain........................................................................................................................... 22 

3.2.1 

Environment and transport......................................................................................... 22 

3.3. 

Portugal ...................................................................................................................... 23 

3.3.1.  Environment............................................................................................................... 23 

3.3.2.  Transport .................................................................................................................... 24 

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3.4. 

3.5. 

Cyprus ........................................................................................................................ 24 

Czech Republic .......................................................................................................... 24 

3.5.1.  Environment............................................................................................................... 24 

3.5.2.  Transport .................................................................................................................... 25 

3.6. 

Estonia........................................................................................................................ 25 

3.6.1.  Environment............................................................................................................... 25 

3.6.2.  Transport .................................................................................................................... 25 

3.7. 

Hungary...................................................................................................................... 26 

3.7.1.  Environment............................................................................................................... 26 

3.7.2.  Transport .................................................................................................................... 26 

3.8. 

Latvia.......................................................................................................................... 27 

3.8.1.  Environment............................................................................................................... 27 

3.8.2.  Transport .................................................................................................................... 27 

3.9. 

Lithuania .................................................................................................................... 27 

3.9.1.  Environment............................................................................................................... 27 

3.9.2.  Transport .................................................................................................................... 28 

3.10.  Malta .......................................................................................................................... 28 

3.10.1  Environment............................................................................................................... 28 

3.10.2.  Transport .................................................................................................................... 28 

3.11. 

Poland......................................................................................................................... 29 

3.11.1.  Environment............................................................................................................... 29 

3.11.2.  Transport .................................................................................................................... 29 

3.12. 

Slovakia...................................................................................................................... 30 

3.12.1.  Environment............................................................................................................... 30 

3.12.2.  Transport .................................................................................................................... 30 

3.13. 

Slovenia...................................................................................................................... 30 

3.13.1.  Environment............................................................................................................... 30 

3.13.2.  Transport .................................................................................................................... 31 

4. 

Monitoring, inspections, financial corrections and irregularities............................... 31 

4.1. 

Monitoring: committees and missions ....................................................................... 31 

4.1.1.  Greece ........................................................................................................................ 31 

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4.1.2.  Spain........................................................................................................................... 31 

4.1.3.  Portugal ...................................................................................................................... 33 

4.1.4.  Cyprus ........................................................................................................................ 33 

4.1.5.  Czech Republic .......................................................................................................... 33 

4.1.6.  Estonia........................................................................................................................ 33 

4.1.7.  Hungary...................................................................................................................... 34 

4.1.8.  Latvia.......................................................................................................................... 34 

4.1.9.  Lithuania .................................................................................................................... 34 

4.1.10.  Malta .......................................................................................................................... 35 

4.1.11.  Poland......................................................................................................................... 35 

4.1.12.  Slovakia...................................................................................................................... 35 

4.1.13.  Slovenia...................................................................................................................... 36 

4.2. 

Audits and financial corrections................................................................................. 36 

4.2.1.  Greece ........................................................................................................................ 39 

4.2.2.  Spain........................................................................................................................... 39 

4.2.3.  Portugal ...................................................................................................................... 40 

4.2.4.  Cyprus ........................................................................................................................ 40 

4.2.5.  Czech Republic .......................................................................................................... 41 

4.2.6.  Estonia........................................................................................................................ 41 

4.2.7.  Hungary...................................................................................................................... 41 

4.2.8.  Latvia.......................................................................................................................... 42 

4.2.9.  Lithuania .................................................................................................................... 42 

4.2.10.  Malta .......................................................................................................................... 43 

4.2.11.  Poland......................................................................................................................... 43 

4.2.12  Slovakia...................................................................................................................... 44 

4.2.13  Slovenia...................................................................................................................... 44 

4.3. 

Irregularities notified by the Member States.............................................................. 44 

5. 

6. 

6.1. 

6.2. 

Evaluation .................................................................................................................. 45 

Information and publicity........................................................................................... 45 

Information to/from the Member States..................................................................... 45 

Commission measures on publicity and information................................................. 46 

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1. 

GENERAL CONTEXT 

1.1. 

Convergence and economic development in the beneficiary Member States 

1.1.1  Greece 

In 2007 GDP per capita in PPS reached 94.8%  of the EU-27 average. In 2008 real 
GDP growth decelerated to 2.9% reflecting heightening economic uncertainty in the 
wake  of  the  global  economic  and  financial  crisis,  that  led  to  weakening  private 
consumption  and  more  importantly,  declining  investment.  The  external  deficit 
declined somewhat, but remained still high, at above 12% of GDP in 2008, compared 
with 14% of GDP in 2007 and 11.5% of GDP in 2006. Due to expenditure overruns 
and to a lesser extent, revenue shortfalls, the general government deficit increased to 
5%  exceeding  the  estimation  included  in  the  January  2009  stability  programme  by 
1.25 of a percentage point of GDP. The debt-to-GDP ratio increased by almost three 
percentage points, and reached 97.75% in 2008. 

The Greek government submitted its update of the stability and growth programme 
on  30  January  2009  and  an  addendum  on  6  February  2009.  The  macroeconomic 
scenario  underlying  the  programme  envisages  that  real  GDP  growth  will  fall  from 
3% in 2008 to 1.1% in 2009 before picking up again to 1.75% on average over the 
programme period. In the medium term, the programme aims at reducing the general 
government deficit from 3.7% in 2009, to 3.2% of GDP in 2010 and 2.6% by 2011. 
Based on a significantly less favourable growth scenario, with real GDP contracting 
by  almost  1%  in  2009,  as  well  as  a  prudent  assessment  of  the  fiscal  consolidation 
measures  announced  for  2009,  the  Commission  services'  spring  2009  forecast 
foresees  the  general  government  deficit  in  2009  to  remain  at  5%  of  GDP.  Under  a 
no-policy-change assumption, the deficit is projected at 5.75% of GDP in 2010.  

In its Opinion on the stability programme of 10 March 2009, the Council noted that 
the programme envisages reducing the budget deficit over the medium term, but falls 
short  to  address  the  structural  imbalances  of  the  Greek  economy  timely  and 
effectively and reverse the upward trend of public debt. Although the consolidation 
strategy  beyond  2009  relies  on  permanent  expenditure  restraint  and  increasing  tax 
revenues, the programme does not spell out concrete measures to back the planned 
budgetary adjustment in 2010 and 2011 fully. Strengthening the fiscal consolidation 
path  would  be  paramount  to  achieve  sound  and  sustain  public  finances  in  Greece. 
Moreover, the structural nature of the factors underlying competitiveness losses and 
the  widening  external  imbalances  urgently  requires  the  implementation  of  bold 
structural  reforms.  In  the  long  term,  the  level  of  debt  which  remains  among  the 
highest in the EU, coupled with the projected increase in age-related spending, will 
also challenge the long term sustainability of public finances. 

1.1.2.  Spain 

In  2007,  Spain's  GDP  per  capita  in  PPS  attained  105.4%  of  the  EU-27  average  in 
2007.  In  2008,  GDP  growth  slowed  sharply  to  1.2%,  reflecting  both  the  global 
economic  downturn  and  a  marked  correction  in  the  construction  sector.  The  sharp 
deceleration in domestic demand was attenuated by government consumption, which 
accelerated  and  grew  at  more  than  5%.  The  annual  inflation  rate  rocketed  to  just 

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above  4%  in  2008  on  the  back  of  higher  oil  and  food  average  prices.  The  rapid 
deterioration  of  the  economic  situation  undermined  also  public  finances,  turning 
previous  surpluses  into  a  deficit.  For  2008,  the  general  government  deficit  reached 
3.8%  of  GDP,  compared  with  an  original  target  of  a  surplus  1.2%  of  GDP.  The 
deviation  from  the  target  stems  mainly  from  the  much  lower  GDP  growth  and 
expenditure slippages.  

The  latest  update  of  the  stability  programme  submitted  on  30  January  2009  and 
covering the period 2008-2011, targets government deficits of 5.8% of GDP in 2009, 
4.8%  in  2009  and  3.9%  of  GDP  in  2011.  These  figures  rest  on  the  programme's 
assumptions that GDP will decline by 1.6% in 2009 and grow by 1.2% and 2.6% in 
real  terms  in  2010  and  2011  respectively.  In  line  with  the  European  Economic 
Recovery Plan, Spain has adopted a sizeable stimulus package, particularly in 2009, 
including a November 2008 stimulus package (slightly 1 % of GDP) aiming mostly 
at  fostering  public  investment.  According  to  the  Commission  services'  spring  2009 
economic  forecasts,  the  government  deficit  is  projected  to  reach  8.5%  of  GDP  in 
2009 and, on the basis of the no-policy change assumption, 9.75% of GDP in 2010. 
The  more  marked  deterioration  in  public  finances  in  the  Commission  service's 
forecasts  result,  notably,  from  a  significantly  sharper  contraction  of  growth  in  the 
forecast and a gloomier labour market outlook.  

In its Opinion the stability programme of 10 March 2009, the Council noted that "the 
sharp  slowdown  of  economic  activity  and  some  discretionary  measures  led  to  a 
deficit  above  3%  of  GDP  in  2008,  after  a  prolonged  period  in  which  the  Spanish 
public  finances  were  close  to  balance  or  in  surplus.  […]  Spain  is  invited  to:  (i) 
implement  the  2009  fiscal  policy  as  planned  in  line  with  the  European  Economic 
Recovery  Plan  and  within  the  framework  of  the  Stability  and  Growth  Programme, 
while avoiding a further deterioration of public finances in 2009, and carry out with 
determination significant structural consolidation in 2010 and beyond, backing it up 
with  measures;  (ii)  improve  the  long-term  sustainability  of  public  finances  by 
implementing  further  measures  aimed  at  curbing  the  increase  in  age-related 
expenditure;  (iii)  ensure  that  fiscal  consolidation  measures  are  also  geared  towards 
enhancing  the  quality  of  the  public  finances  as  planned  in  the  light  of  the  needed 
adjustment of existing imbalances." 

1.1.3.  Portugal 

Portugal’s GDP per capita in PPS attained 76.1% of the EU-27 average in 2007. In 
2008, GDP stagnated in real terms, after growing by 1.9% in 2007, as the result of 
marginally declining investment and exports, with the latter reflecting visibly the fall 
in  external  trade  in  late  2008.  The  inflation  rate  was  2.7%  in  2008  after  2.4%  in 
2007.  According  to  the  March  2009  Excessive  Deficit  Procedure  notification,  the 
general government deficit came out at 2.6% of GDP in 2008, which coincides with 
the  outturn  of  2007  (but  the  budgetary  execution  of  2008  benefited  from  deficit-
reducing  one-off  operations  worth  over  0.75%  of  GDP,  whereas  similar  operations 
had yielded only 0.1% of GDP in 2007). The 2008 outturn compares with an original 
target of 2.4% of GDP set in 2008 Budget Law. The deviation from the target stems 
mainly  from  the  much  lower  GDP  growth  (2.2%  in  the  Budget)  and,  to  a  lesser 
extent, expenditure slippages. This more than offsets a positive base effect thanks to 
the better-than-expected 2007 budgetary execution by some 0.5% of GDP. The debt-
to-GDP ratio was at 66.4% in 2008 up from 63.5% in 2007. 

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The most recent update of the stability programme of Portugal was submitted on 30 
January  2009  and  covers  the  period  2008-2011.  The  update  targets  government 
deficits  of  3.9%  of  GDP  in  2009,  2.9%  in  2009  and  2.3%  of  GDP  in  2011.  The 
programme  hinges  on  the  assumption  that  GDP  will  decline  by  0.8%  in  2009  and 
grow by 0.5% and 1.3% in volume terms in 2010 and 2011 respectively. In line with 
the  European  Economic  Recovery  Plan  (EERP),  Portugal  implemented  a  stimulus 
package  for  2009  representing  1.25%  of  GDP  (0.8%  of  GDP  to  be  financed  out  of 
the  national  budget  and  the  rest  through  EU  funds).  The  package  adds  to  other 
discretionary measures of smaller size. According to the Commission services' spring 
2009 economic forecasts, the government deficit is projected to reach 6.5% of GDP 
in 2009 and, on the basis of the no-policy change assumption, 6.7% of GDP in 2010. 
The  differences  between  the  national  targets  and  the  Commission  forecasts  result 
from the sharper recession foreseen in the latter, where GDP is projected to contract 
by 3.7% in 2009 and by 0.8% in 2010. 

In  its  Opinion  on  the  update  of  the  stability  programme  of  10  March  2009,  the 
Council noted that "the programme aims at a significant temporary fiscal impulse in 
2009  in  line  with  the  EERP.  The  programme rightly  plans  the  resumption  of  fiscal 
consolidation as soon as the economy recovers. Yet, economic growth may underpin 
fiscal  consolidation  by  less  than  envisaged  in  the  programme."  The  Council 
mentioned  also  the  need  to  strengthen  fiscal  sustainability.  The  Council  invited 
Portugal  to  "implement  the  2009  fiscal  policy  as  planned,  while  avoiding  a  further 
deterioration of public finances in 2009 and carry out with determination the planned 
adjustment in 2010 and beyond" and to "further strengthen the budgetary framework 
and  ensure  that  fiscal  consolidation  measures  continue  to  be  geared  towards 
enhancing the quality of the public finances in the light of the needed adjustment of 
the existing imbalances." 

1.1.4.  Cyprus 

In  2007  Cyprus'  GDP  per  capita  in  PPS  reached  90.8%  of  the  EU-27  average.  In 
2008  real  GDP  growth  decelerated  following  the  global  economic  downturn,  to 
3.7%.  Activity  was  almost  exclusively  driven  by  dynamic  domestic  demand,  while 
net exports posed a drag on growth. The deteriorating external environment had an 
adverse effect on exports, particularly tourism. On the other hand, imports, driven by 
buoyant domestic demand, continued growing dynamically. This, coupled with high 
commodity  prices,  particularly  oil,  led  to  a  historically  high  external  deficit,  which 
reached 18.25% of GDP. The general government surplus is estimated to have fallen 
to  1%  in  2008  from  3.4%  of  GDP  in  2007.  This  decline  mainly  reflected  revenue 
shortfalls,  due  to  subdued  activity  in  the  housing  and  real  estate  sector  as  well  as 
reduced  corporate  profitability.  It  also  reflected  expenditure  overruns,  partly  due  to 
the drought and the expenses associated with maintaining water supplies, as well as 
to  social  cohesion  measures.  The  2008  surplus  is  nonetheless  above  the  target  of 
0.5%  of  GDP  set  in  the  2007  stability  programme,  benefiting  from  higher-than-
expected revenue, lower interest payments and a positive base effect from 2007. The 
debt-to-GDP  ratio  declined  in  2008  by  about  10.25  percentage  points  of  GDP  to 
about  49%.  Average  inflation  reached  4.4%  in  2008  due  to  buoyant  domestic 
demand and high commodity prices, especially for oil and food.  

The  Cypriot  government  submitted  its  latest  update  of  the  Stability  and  Growth 
Programme  on  13  February  2009.  The  macroeconomic  scenario  underlying  the 

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programme  envisages  that  real  GDP  growth  will  decelerate  from  3.8%  in  2008  to 
2.1% in 2009, before recovering to an average rate of almost 3% over the rest of the 
programme  period.  Due  to  slower  growth  and  lower  revenue,  the  update  targets  a 
deficit  of  0.75%  of  GDP  in  2009.  Based  on  a  markedly  less  favourable  growth 
scenario, with real GDP growing at 0.25% in 2009, the Commission services spring 
2009 forecast projects a higher fiscal deficit, at almost 2%. This projection takes into 
account  additional  revenues  from  the  recently  adopted  pension  reform  and  an 
announced  extra-budgetary  package  of  social  measures,  not  incorporated  in  the 
official projections. On a no-policy-change basis, the deficit is projected to edge up 
to 2.5% of GDP in 2010, due to an increase in current primary expenditure. 

The Council adopted its opinion on the Stability programme of Cyprus on 27 April 
2009. The overall conclusion is that fiscal stance in 2009 will be expansionary due to 
the  adoption  of  significant  stimulus  measures  in  2009  in  line  with  the  European 
Economic Recovery Plan. In the subsequent years covered by the programme (until 
2012),  the  fiscal  balance  is  projected  to  continue  worsening.  The  implied  fiscal 
loosening does not appear justified in view of the relatively good economic prospects 
for  Cyprus  and  the  existence  of  a  large  external  imbalance.  Moreover,  against  the 
background  of  a  sharp  deterioration  in  the  global  economic  environment,  the 
budgetary  strategy  is  subject  to  significant  downside  risks,  as  the  macroeconomic 
scenario is based on favourable growth assumptions. In the light of the high external 
imbalances,  maintaining  prudent  policies  and  strengthening  fiscal  sustainability 
should  be  a  major  priority.  Therefore,  controlling  current  expenditure  and  avoiding 
pro-cyclicality  represents  a  major  challenge  for  the  fiscal  policy  in  Cyprus.  In 
addition,  fostering  the  quality  of  public  finances  is  also  important  in  order  to 
underpin a smooth adjustment of the economy in the light of the imbalances it faces. 

1.1.5.  Czech Republic 

Czech  GDP  per  capita  in  PPS  reached  80.2%  of  the  EU-27  average  in  2007.  The 
Czech economy grew by 3.2% in real terms in 2008. Growth decelerated toward the 
end  of  the  year  with  a  contraction  in  output  in  the  fourth  quarter  driven  by  falling 
external  demand.  Annual  inflation  rose  to  6.3%  on  average  in  2008,  due  partly  to 
administrative measures, while declining steeply to 3.3% in December year-on-year. 
The general government deficit in 2008 was 1.5% of GDP compared to an estimated 
deficit of 1.2% in the November 2008 convergence programme. The slightly poorer 
outturn was mainly due to a shift in revenues from tobacco excise duty from 2008 to 
2007. 

The  Czech  Republic  submitted  its  latest  convergence  programme,  covering  the 
period 2008-2011 on 20 November 2008. The macro-economic scenario underlying 
the programme estimated real GDP growth at 3.7% in 2009 rising gradually to just 
above 5% of GDP in 2011. These projections reflect the programme’s early date of 
submission; the latest Ministry of Finance forecast foresees negative growth in 2009. 
Exports and investment will be particularly badly affected by a sharp fall in external 
demand.  The  main  aim  of  the  budgetary  strategy  is  to  achieve  budgetary 
consolidation  toward  the  end  of  the  programme  period.  The  programme  targeted  a 
deficit  of  1.6%  of  GDP  in  2009  declining  to  1.5%  of  GDP  in  2010.  The 
Commission’s spring forecast predicts that the deficit will be 4.3% of GDP in 2009 
and 4.9% of GDP in 2010, against projected growth of -2.7% of GDP in 2009 and 
0.3% of GDP in 2010. The large discrepancy between the programme’s targets and 

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the  Commission’s  spring  forecast  is  mainly  due  to  a  much  poorer  macroeconomic 
outlook  and  the  impact  of  fiscal  stimulus  measures  in  2009  approved  after  the 
convergence programme was submitted.  

In its Opinion on the convergence programme update on 10 March 2009, the Council 
concluded that that there are risks to the budgetary projections, in particular in view 
of  favourable  growth  assumptions,  and  that  concerns  remain  regarding  long-term 
fiscal  sustainability  due  to  a  rapidly  ageing  population.  The  Council  invited  the 
Czech  Republic  to  implement  the  budgetary  plans  in  2009,  including  stimulus 
measures,  carry  out  consolidation  in  2010  with  specific  measures  for  reducing 
expenditure  in  2010-2011  and  continue  with  the  necessary  pension  and  health  care 
reforms, in order to improve the long-term sustainability of public finances. 

1.1.6.  Estonia 

The period of high economic growth that helped Estonia to reach a GDP per capita in 
PPS  of  67.9%  of  EU  average  in  2007  peaked  early  in  that  year.  2008  marked  an 
abrupt reverse, with the economy contracting by 3.6%. The reversal of the cycle was 
increasingly  aggravated  by  the  deepening  global  financial  crisis.  With  confidence 
plummeting  and  banks  becoming  increasingly  cautious  in  their  lending  decisions, 
domestic demand contracted by 7.4% in 2008, while a sharp contraction of external 
demand in late 2008 exacerbated the downturn. Inflation remained high throughout 
the year, at 10.6% for the year as a whole. A reversal of trend also took place in 2008 
with regards to public finances, as the general government posted a deficit of 3.0% of 
GDP,  following  six  years  of  nominal  surpluses.  The  outcome  was  considerably 
worse  than  the  surplus  target  of  1.3%  set  in  the  November  2007  convergence 
programme,  due  to  a  sharp  contraction  of  revenue  caused  by  declining  economic 
activity and despite the adoption of a restrictive supplementary budget in mid-2008. 

The  December  2008  update  of  the  convergence  programme  projects  real  GDP  to 
decline by 3.5% in 2009, returning to a positive growth path in 2010 and accelerating 
to  around  5%  in  2011-2012.  The  programme  envisages  a  moderation  in  previously 
high  imbalances  in  line  with  the  declining  economic  activity,  with  inflation  set  to 
reach low single digit levels in 2009 and 2010, partly due to wage moderation, and 
the  external  deficit  shrinking  to  pre-boom  levels.  Fiscal  policy  is  planned  to  be 
restrictive.  The  policy  is  geared  in  the  short  term  towards  restoring  market 
confidence  and  keeping  the  general  government  deficit  within  the  Treaty  reference 
value,  given  the  authorities'  euro  adoption  objective.  The  programme  targets  a 
budgetary deficit of 1.7% of GDP in 2009, against the 3.0% deficit expected in the 
Commission services' spring forecast. The deterioration in the fiscal outlook, despite 
the adoption of several consolidation measures in February and April 2009, is due to 
a  considerable  downward  revision  to  the  macroeconomic  outlook.  The  budgetary 
deficit is expected to increase to 3.9% of GDP in 2010 in the Commission services' 
forecast, under a no-policy-change assumption. In the medium term, the goal of the 
programme is to achieve a structural surplus. 

In its Opinion of 10 March 2009, the Council concluded that Estonia, while facing a 
severe economic downturn following years of above-potential growth, is planning a 
restrictive fiscal stance from 2009 until 2011 and that this is an appropriate response 
in  light  of  the  existing  imbalances.  The  Council  invited  Estonia  to  implement  the 
consolidation  of  public  finances  in  the  short  term,  ensure  keeping  the  general 

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government deficit below 3% of GDP and take the necessary measures to underpin 
the  consolidation  in  the  medium  term,  as  well  as  to  reinforce  the  medium-term 
improving  expenditure  planning  and 
budgetary  framework,  particularly  by 
efficiency.  To  support 
to  strengthen 
competitiveness, the Council also invited Estonia to implement prudent public sector 
wage policies. 

the  adjustment  of 

the  economy  and 

1.1.7.  Hungary 

In 2007, Hungary's GDP per capita in PPS reached 62.6% of the EU-27 average. In 
2008, GDP grew only by 0.5%, due to the deceleration of both external and domestic 
demand  in  view  of  adverse  global  economic  environment,  external  financing 
shortages  and  deteriorating  income  expectations,  while  inflation  decreased  to  an 
annual average of 6%. As a response to the external market financing shortages, the 
IMF and the EU granted financial assistance of € 20 billion to Hungary. Due to the 
continuation of  the  fiscal  consolidation programme, the budget deficit was 3.4% of 
GDP  in  2008,  substantially  lower  than  the  budgeted  target  (4%).  The  debt-to-GDP 
ratio increased from 65.8% in 2007 to 73% in 2008, chiefly due to the reserve build-
up  financed  from  the  international  financial  assistance  in  response  to  the  financial 
crisis.  Given  the  sizeable  macroeconomic  and  public  finance  imbalances,  the 
Government  did  not  adopt  fiscal  stimulus  measures,  in  line  with  the  European 
Economic Recovery Plan. 

The December 2008 convergence programme set a general government deficit target 
of  2.6%  of  GDP  (lower  than  the  previous  target  of  3.2%  of  GDP).  In  view  of  the 
significant  deterioration  in  the  2009  growth  outlook  (from  -1%  to  -3.3%),  the 
Government  revised  its  deficit  target  slightly  to  2.9%  of  GDP,  while  adopting 
additional  corrective  measures  of  around  0.7%  of  GDP.  Following  a  further 
deterioration  of  GDP  growth,  the  authorities  announced  additional  corrective 
measures of 1% of GDP so as to respect the revised official target. The Commission 
services' spring forecast projects a somewhat higher deficit of 3.4% of GDP for 2009, 
chiefly due to the fact that not all the measures announced by the new government on 
19  April  were  detailed  enough  to  be  incorporated  in  the  forecast.  For  2010,  the 
Commission  services'  forecast,  on  the  basis  of  a  no-policy-change  assumption, 
projects a deficit of 3.9% of GDP. 

In its Opinion on the convergence programme update of 10 March 2009, the Council 
noted  that,  in  spite  of  distinct  improvements  in  its  high  imbalances,  Hungary  has 
been  particularly  exposed  to  the  financial  crisis  and  thus  had  to  limit  the  financing 
need of the government. The programme foresees a continuation of the front-loaded 
consolidation  strategy.  However,  the  deficit  reduction  path  was  deemed  subject  to 
risks,  especially  due  to  the  markedly  favourable  macroeconomic  assumptions 
underlying  the  programme.  The  Council  therefore  invited  Hungary  to  maintain 
adequate buffers and take the necessary measures to bring the budget deficit below 
the  3%  of  GDP  threshold  in  2009;  ensure  the  full  implementation  of  the  fiscal 
responsibility  law;  continue  expenditure  moderation  through  further  structural 
reforms; strengthen financial  market  regulation and supervision; and in view of the 
level  of  debt  and  the  increase  in  age-related  expenditure,  further  improve  the  long-
term sustainability of public finances. 

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1.1.8.  Latvia 

After  having  reached  a  level  of  GDP  per  capita  in  PPS  amounting  to  57.9%  of  the 
EU average in 2007, Latvia's real GDP shrank by 4.6% in 2008. The global financial 
crisis  amplified  the  shock  of  the  reversal  of  Latvia's  own  lending  and  real  estate 
boom by tightening credit availability and conditions, reinforcing the steep decline of 
domestic  demand  over  the  course  of  2008.  The  concomitant  downturn  in  Latvia's 
main export markets has hit the relatively small tradable sector, already weakened by 
huge  domestic  cost  increases  over  the  previous  years.  Inflation  in  2008  rose  to  an 
average  of  15.3%  (10.1%  in  2007).  The  April  2009  Excessive  Deficit  Procedure 
notification indicates a budget deficit of 4.0% of GDP for 2008, a far weaker outturn 
than  the  target  surplus  of  0.7%  of  GDP  set  in  the  initial  budget,  reflecting  both  a 
significantly  worsened  economic  environment  and  substantially  higher-than-
budgeted  expenditures,  including  an  increase  in  social  transfers.  The  debt-to-GDP 
ratio increased to 19.5% in 2008 from 9.0% in 2007.  

Following  Latvia's  applications  for  international  financial  assistance  and  its 
associated  adoption  of  a  medium-term  economic  and  budgetary  stabilisation 
programme in December 2008, a revised update of Latvia’s convergence programme 
covering the period 2008-2011 was submitted on 14 January 2009. The main goal of 
the  medium-term  budgetary  strategy  in  the  programme  is  to  fulfil  Maastricht 
budgetary criteria in 2011, with planned general government deficits of around 5% of 
GDP  in  2009  and  2010  and  below  3%  in  2011.  The  macroeconomic  scenario 
underlying the programme projects a contraction of real GDP in 2009 by 5% and by 
a  further  3%  in  2010,  before  a  slightly  positive  growth  in  2011.  The  Commission 
services'  spring  2009  forecast,  however,  projects  that  under  a  no-policy  change 
assumption the general government deficit could reach above 11% of GDP in 2009 
and 13% of GDP in 2010, while GDP is expected to contract by around 13% in 2009 
and around a further 3% in 2010. 

In  its  March  2009  opinion  on  the  convergence  programme,  the  Council  concluded 
that Latvia is facing a severe economic downturn following years of above-potential 
economic  growth  and  that  therefore  the  budgetary  outcomes  in  the  programme  are 
subject to significant downside risks. The planned restrictive fiscal stance from 2009 
until 2011 is considered an appropriate response in light of existing imbalances. The 
Council invited Latvia to submit to Parliament by the end of March 2009 the details 
of  the  supplementary  budget  adopted  on  12  December  2008  and  to  take  further 
measures if needed to achieve a general government deficit no higher than 5.3% of 
GDP in 2009 and continue the targeted fiscal consolidation thereafter. It also invited 
Latvia  to  implement  public  sector  nominal  wage  reductions  rigorously  to  facilitate 
the  alignment  of  whole-economy  wages  with  productivity,  thereby  improving  cost 
competitiveness, and to strengthen fiscal governance and transparency, by improving 
the medium-term budgetary framework and reinforcing Ministry of Finance spending 
controls.  It  further  invited  a  strengthening  of  the  supply  side  of  the  economy  by 
wide-ranging  structural  reforms  and  by  making  efficient  use  of  available  EU 
structural funds. 

1.1.9.  Lithuania 

In 2008 Lithuania's GDP per capita in PPS reached 60.6% of the EU average, while 
real GDP in 2008 grew by 3.0%. Economic activity decelerated from the beginning 

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of the year and declined sharply by the end of the year, when the domestic slowdown 
was  reinforced  by  the  deepening  global  financial  crisis  and  contracting  export 
demand.  Whereas  private  consumption  still  held  up  reasonably,  investment  fell 
significantly, mostly as a consequence of the end of the real estate boom. Inflation in 
2008 rose to an average of 11.1% (5.8% in 2007). The April 2009 Excessive Deficit 
Procedure  notification  indicates  a  budget  deficit  of  3.2%  of  GDP  for  2008,  a 
substantially weaker outturn than the target deficit of 0.5% of GDP, reflecting both 
revenue-decreasing measures such as direct tax reductions and substantially higher-
than-budgeted  expenditures,  including  an  increase  in  social  transfers  and  a 
substantial rise in public sector wages. The debt-to-GDP ratio declined to 15.6% in 
2008 from 17.0% in 2007.  

The January 2009 update of Lithuania’s convergence programme covers the  period 
2008-2011. The central budgetary strategy in the programme is to achieve a medium-
term objective (MTO) of a general government structural deficit  of 1% of GDP  by 
2010. From a planned deficit of 2.1% of GDP in 2009 the general government deficit 
is  projected  to  narrow  further  in  2010  and  to  be  in  balance  in  2011,  while  the 
macroeconomic  scenario  underlying  the  programme  projects  a  sharp  contraction  of 
real  GDP  by  4.8%  in  2009  and  a  further  small  decline  by  0.2%  in  2010,  before  a 
recovery  to  growth  of  4.5%  in  2011.  The  Commission's  spring  forecast  projects  a 
5.4%  of  GDP  deficit  for  2009.  The  difference  is  explained  by  a  markedly  less 
favourable  macroeconomic  outlook,  despite  substantial  consolidation  efforts  by  the 
government.  The  Commission's  spring  forecast  expects  real  GDP  to  contract  by 
11.0% in 2009 and by a further 4.7% in 2010. The budget deficit is expected to rise 
further  to  8.0%  of  GDP  in  2010  in  the  Commission's  forecast,  under  a  no-policy-
change assumption. 

In  its  March  2009  Opinion  on  the  convergence  programme,  the  Council  concluded 
that Lithuania is currently facing a severe contraction in domestic demand following 
years  of above-potential economic growth and therefore the budgetary outcomes in 
the  programme  are  subject  to  significant  downside  risks,  with  the  headline  deficit 
possibly  exceeding  the  3%  of  GDP  threshold  in  2009  and  2010.  The  planned 
restrictive fiscal stance from 2009 until 2011 is considered an appropriate response in 
the  light  of  existing  imbalances.  The  Council  invited  Lithuania  to  implement 
measures needed to achieve the budgetary target in 2009 by prioritising expenditures 
and  to  continue  targeted  fiscal  consolidation  in  the  medium-term,  as  well  as  to 
strengthen  fiscal  governance  and  transparency,  by  enhancing  the  medium-term 
budgetary  framework  and  reinforcing  expenditure  discipline.  To  facilitate  the 
alignment  of  whole-economy  wages  with  productivity  and  to  strengthen  cost 
competitiveness, the Council also invited Lithuania to implement public sector wage 
restraint. 

1.1.10.  Malta 

In 2007, Malta's GDP per capita in PPS reached 77.4% of the EU-27 average. Real 
GDP  growth  decelerated  to  1.6%  in  2008,  down  from  3.8%  in  the  previous  year. 
While  private  consumption  was  very  strong,  investment  and  exports  shrank 
markedly, as the effects of the global downturn started hitting the Maltese economy. 
The general government deficit increased to 4.7% in 2008, higher than the target of 
1.2%  set  in  the  November  2007  update  of  the  stability  programme.  The  difference 
primarily  reflects  higher-than-planned  expenditure  by  3  percentage  points  of  which 

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0.8  percentage  point  is  due  to  a  one-off  deficit-increasing  measure  related  to  early 
retirement  schemes  given  to  Malta  Shipyards  employees  and  1.3  percentage  points 
are  due  to  the  reclassification  of  the  shipyards  in  the  general  government  sector. 
Expenditure was also adversely affected as a result of both higher compensation of 
employees and energy subsidies given to households. 

The  December  2008  update  of  the  stability  programme  is  based  on  a  significantly 
favourable macroeconomic outlook, projecting GDP growth to accelerate from 2.2% 
in 2009 to 2.5% in 2010. In contrast, the Commission's spring 2009 forecast, expects 
GDP  to  contract  by  almost  1%  in  2009  before  recovering  moderately  by  0.2%  in 
2010. According to the programme, the deficit is targeted to fall to 1.5% of GDP in 
2009,  whereas  the  Commission's  spring  2009  forecast  projects  a  deficit  of  3.6%  of 
GDP.  The  deviation  is  mostly  accounted  for  by  the  significantly  more  favourable 
macroeconomic  scenario  of  the  programme.  The  budget  for  2009  introduced  some 
measures  to  support  the  economy  in  response  to  the  European  Economic  Recovery 
Plan,  within  a  broader  consolidation  effort.  These  include  higher  public  investment 
on infrastructure and the environment, support to the tourism industry and SMEs and 
a  widening  of  personal  income  tax  bands.  Under  the  customary  no-policy-change 
assumption, the deficit is projected to decline marginally to 3.25% of GDP in 2010 
according to the spring forecast. 

In its Opinion of 10 March 2009, the Council noted that, following a breach of the 
3% of GDP deficit reference value in 2008, the December 2008 stability programme 
envisaged a return to budgetary consolidation from 2009 onwards. There were risks 
to  the  achievement  of  the  deficit  and  debt  targets  stemming  from  the  favourable 
macroeconomic  scenario,  the  reliance  on  volatile  revenue,  the  possibility  of 
expenditure slippages and the lack of information on the consolidation measures in 
the  outer  years.  The  Council  invited  Malta  to  resume  fiscal  consolidation  so  as  to 
bring the deficit below 3% of GDP in 2009 and ensure that the general government 
debt  ratio  was  reduced  accordingly.  Malta  was  also  invited  to  strengthen  the 
medium-term budgetary framework and enhance the efficiency and effectiveness of 
public spending. 

1.1.11.  Poland 

In 2007, Poland’s GDP  per  capita in  PPS attained 53.7% of the EU-27 average. In 
2008  growth  started  to  decelerate  due  to  deteriorating  external  demand  and  lower 
investment activity and real GDP in 2008 grew by 4.9%. Unemployment continued 
to  fall  and  reached  roughly  7%  in  2008.  The  general  government  deficit  increased 
strongly to 3.9% of GDP in 2008 from 1.9% in 2007, well above the initial targets. 
Besides  slower  growth,  this  result  stems  mainly  from  both  lower-than-expected 
revenues and expenditures executed above the planned levels. The debt-to-GDP ratio 
increased to 47.1% in 2008.  

According  to  the  most  recent  update  of  the  convergence  programme  the  general 
government deficit was expected to reach 2.5% of GDP in 2009, despite the planned 
rise  in  public  investment,  a  personal  income  tax  reform  and  a  reduction  of  the  tax 
burden  for  businesses.  In  the  April  2009  fiscal  notification  the  government  revised 
the expected deficit to 4.6% of GDP owing partly to a further slowdown in growth. 
Nonetheless, the new target for 2009 remains lower than the deficit of about 6.5% of 
GDP  projected  in  the  Commission's  spring  2009  forecast.  The  difference  stems 

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mainly from less favourable growth assumptions in the spring forecast According to 
the Commission services, GDP is expected to contract by 1.4% in 2009. The Polish 
authorities  may  also  anticipate  some  corrective  measures,  to  be  included  in  an 
amended  budget,  which  are  not  yet  publically  known.  For  2010,  the  Commission 
projects,  under  the  "no  policy  change"  assumption,  that  the  general  government 
deficit will further deteriorate to more than 7% of GDP. 

In its Opinion of 10 March 2009 on the convergence programme update, the Council 
concluded that given  the optimistic GDP growth  forecasts, the  budgetary outcomes 
projected  in  the  programme  were  subject  to  downside  risks,  according  to  the 
Commission's forecasts, throughout the whole period covered by the current update. 
In  addition,  for  the  outer  years,  the  planned  spending  restraint  would  have  to  be 
backed up with specified measures, as appropriate. In view of the above assessment, 
Poland  was  invited  to  implement  the  2009  fiscal  plans,  including  the  stimulus 
measures in line with the European Economic Recovery Plan and the framework of 
the Stability and Growth Programme, while avoiding to breach the reference value, 
as targeted by the Government; back up the consolidation strategy for 2010 and 2011 
with  specific  deficit-reducing  measures;  and  reinforce  the  budgetary  framework 
through  better  control  over  expenditure,  including  the  swift  implementation  of  the 
amended public finance act and performance budgeting. 

1.1.12.  Slovakia 

Slovakia's GDP per capita in PPS reached 67.0% of the EU-27 average in 2007 while 
economic growth decelerated to 6.4% in 2008 from 10.4% recorded in 2007. Against 
the  background  of  strong  employment  growth,  unemployment  fell  significantly  to 
9.5%  in  2008  from  roughly  11%  in  the  previous  year.  In  2008,  annual  inflation 
averaged  3.9%  compared  with  1.9%  in  2007.  The  increase  in  annual  inflation  was 
mainly driven by rising food and energy prices in the first half of 2008. According to 
the  April  2009 EDP notification, the 2008 general government deficit was  2.2% of 
GDP, just below the initial target of 2.3 % of GDP foreseen in the November 2007 
update  of  the  convergence  programme.  The  better-than-expected  budgetary  outturn 
in  2008  was  the  outcome  of  the  revenue-increasing  measures  implemented  in  2008 
(e.g.  broadening  of  the  corporate  and  personal  income  tax  base,  increase  in  the 
maximum ceiling on social contributions), which offset the shortfall in revenues due 
to worsening economic conditions.  

Slovakia  submitted  its  stability  programme  on  30  April  2009,  covering  the  period 
2008-2012.  The  macro-economic  scenario  underlying  the  programme  projects  that 
real  GDP  growth  will  decelerate  from  6.4%  in  2008  to  2.4%  in  2009,  before 
rebounding to 3.6% in 2010. Growth should be mainly driven by domestic demand, 
in  particular  private  consumption  and  fixed  investment.  The  general  government 
deficit is projected to increase from 2.2% of GDP in 2008 to 3.0% of GDP in 2009 
and decline to 2.9% of GDP in 2010, reflecting slower growth as well stimulus and 
structural  measures  adopted  in  line  with  the  European  Economic  Recovery  Plan  of 
0.4% of GDP. These measures are aimed at boosting internal demand, improving the 
business  environment  and  alleviating  the  impact  of  the  crisis  on  labour  markets. 
According to the Commission's 2009 spring forecast, the general government deficit 
is  set  to  widen  more  markedly  to  4.7%  of  GDP  in  2009  and,  under  the  no-policy 
change  assumption,  to  5.4%  of  GDP  in  2010.  The  difference  in  the  budgetary 
projections  stems  mainly  from  the  much  weaker  macroeconomic  outlook  for  2009 

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and  2010  in  the  Commissions'  forecast,  which  expects  GDP  growth  to  contract  by 
2.6% in 2009 and slightly rebound by 0.7% in 2010. 

In its Opinion of 7 July 2009 on the stability programme, the Council noted that the 
budgetary projections underlying the programme are based on markedly favourable 
macroeconomic  assumptions  and  the  risks  to  the  budgetary  targets  are  therefore 
clearly  negative.  The  envisaged  expansionary  fiscal  stance  in  2009,  including  the 
stimulus measures, was deemed appropriate and in line with the European Economic 
Recovery Plan and within the framework of the Stability and Growth Pact, especially 
in  view  of  an  ensuing  competitiveness  challenge.  The  Council  invited  Slovakia  to 
implement  the  planned  anti-crisis  measures  and  ensure  consolidation  as  of  2010, 
which would be backed up by concrete expenditure measures and further supported 
by  the  introduction  of  binding  expenditure  ceilings  for  the  general  government. 
Finally,  in  order  to  preserve  the  long-term  sustainability  of  public  finance  in  the 
context  of  an  ageing  population,  the  Council  recommended  Slovakia  to  continue 
reforming  the  concerned  pillar  of  the  pension  system  and  avoid  undermining  the 
stability of the fully-funded pension pillar. 

1.1.13.  Slovenia 

In 2007, Slovenia's GDP per capita in PPS reached 89.2% of the EU-27 average. As 
a highly open economy Slovenia was strongly affected by the global downturn in the 
second  half  of  2008  and  real  GDP  growth  slowed  to  3.5%  in  2008  from  6.8%  in 
2007.  Inflation  picked  up  markedly,  averaging  5.5%  in  2008.  The  general 
government balance recorded a deficit of 0.9% of GDP in 2008, which is the same as 
the target set in the end-2007 update of the stability programme. 

The  macroeconomic  scenario  underlying  the  April  2009  update  of  the  stability 
programme projects real GDP to fall by 4% in 2009, followed by a mild recovery of 
1%  in  2010.  The  Commission  services'  spring  2009  forecast  projects  real  GDP  to 
drop by 3.4% in 2009, followed by a modest positive growth of 0.7% in 2010. The 
update of the stability programme targets a deficit of 5.1% of GDP, including also as 
yet  unspecified  measures.  Taking  into  account,  as  usual,  only  fully  specified 
measures, the Commission services' spring 2009 forecast projects a deficit of 5.5% of 
GDP. The government has responded to the crisis with two stimulus packages in line 
with  the  European  Economic  Recovery  Plan.  A  wage  subsidy  for  shorter  working 
hours as well as subsidies and tax allowances for investment and R&D, estimated by 
the  government  to  cost  around  1%  of  GDP,  are  the  main  measures  in  2009.  In 
addition, companies benefit from tax relief decided earlier, namely a one percentage 
point cut in the corporate income tax rate and the phasing-out of the payroll tax from 
1 January 2009. The Commission services’ spring forecast expects a further increase 
in the deficit in 2010 on a no-policy change basis, to 6.5% of GDP. 

On 7 July 2009, the Council adopted an opinion on the updated stability programme 
of  Slovenia.  The  overall  conclusion  is  that  fiscal  policy  in  Slovenia  will  be 
expansionary  in  2009  in  line  with  the  European  Economic  Recovery  Plan.  At  the 
same  time,  as  the  room  for  fiscal  manoeuvre  is  constrained  by  the  long-term 
sustainability  challenge,  consolidation  measures  to  help  finance  the  stimulus 
measures have been adopted. The programme plans a return to fiscal consolidation, 
with improvements in the primary structural balance in 2010 and, to a lesser extent, 
2011, but the deficit is not foreseen to be brought below the 3% of  GDP reference 

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value  by  2011.  The  budgetary  strategy  is  subject  to  downsize  risks,  as  economic 
growth could be lower than projected. In addition, it might be difficult to reverse the 
stimulus measures and expenditure overruns cannot be excluded. Although the debt 
ratio  is  low  (albeit  increasing  rapidly),  Slovenia  is  assessed  to  be  at  high  risk  with 
regard  to  the  long-term  sustainability  of  public  finances  due  to  the  significant 
projected budgetary impact of ageing. The Council invited Slovenia to: (i) implement 
the  stimulus  measures  in  2009;  (ii)  start  reversing  the  fiscal  stimulus  as  planned  in 
the  programme  in  2010  and  implement  a  significant  consolidation  thereafter;  (iii) 
improve  the  long-term  sustainability  of  public  finances  by  further  reforming  the 
pension system. 

1.2. 

Conditionality 

Article  6  of  the  Council  Regulation  (EC)  No  1164/94  which  governs  the  Cohesion 
Fund  for  projects  approved  prior  to  the  end  of  2006  attaches  budgetary  policy 
conditions to the disbursements by the Fund. It provides that "no new projects or, in 
the event of important projects, no new project stages shall be financed by the Fund 
in  a  Member  State  in  the  event  of  the  Council,  acting  by  a  qualified  majority  on  a 
recommendation from the Commission, finding that the Member State […] has not 
implemented [its stability or convergence programme] in such a way as to avoid an 
excessive deficit".  

At the end of 2008 one Member State eligible for support under the Cohesion Fund 
(Hungary)  remained  in  the  excessive  deficit  procedure  (EDP),  which,  according  to 
the aforementioned Regulation, may under certain conditions be associated with the 
suspension of transfers from the Fund. There was however no need to adopt such a 
measure  since  the  Council,  on  the  basis  of  available  information,  decided  that  the 
Hungarian  government  had  acted  in  a  manner  consistent  with  its  recommendation. 
As noted in the previous annual report, the Council decided to abrogate the EDP for 
Slovakia, Portugal, Poland and the Czech Republic in July 2008. 

Hungary  entered  EDP  immediately  upon  accession  in  2004,  based  on  a  general 
government deficit of 5.9% for 2003. Since then, Hungary's failure to take effective 
action in response to Council recommendations has been noted on two occasions, in 
January  2005  and  in  November  2005.  Since  Hungary  is  not  a  member  of  the  euro 
area, it has a specific derogation from the application of further steps of the EDP. In 
July 2007, the Council issued a new set of recommendations under Article 104(7) of 
the  treaty1.  On  neither  of  these  occasions  did  the  Commission  recommend  a 
suspension of Cohesion Fund commitments to the Council. In July 2009 the Council 
decided, in view of the economic crisis, to issue a new deadline of 2011 to put an end 
to the excessive deficit in accordance with Article 107(7). 

1 

Treaty establishing the European Community, Article 104 on excessive government deficits. 

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2. 

FINANCIAL  EXECUTION  OF  THE  2000-2006  PERIOD  IN  2008  AND  CLOSURE  OF 
PROJECTS 

2.1. 

Payments made in 2008 for projects adopted under the 2000-2006 period 

In 2008 there were 15 Member States (12 new Member States and Greece, Portugal 
and Spain) eligible to the Cohesion Fund in which projects were co-financed by the 
Fund  under  the  2000/04-2006  period.  Since  1  January  2004,  Ireland  is  no  longer 
eligible.  Bulgaria  and  Romania  became  eligible  for  the  Cohesion  Fund  with  their 
accession on 1 January 2007.  

Given  that  all  commitments  for  the  Cohesion  Fund  projects  financed  under  2000-
2006  programming  period  have  been  executed  by  31 December 2006,  the  financial 
resources  available  for  the  Cohesion  Fund  in  2008  were  made  only  of  payment 
appropriations.  

The 2008 initial budget amounted to € 1,937 million. However, the submission pace 
of  payment  requests  quickly  required  reinforcements  in  terms  of  payment 
appropriations.  The  Directorate  General  for  Regional  Policy  requested  increases  of 
payment appropriations for a total amount of around € 553 million. The increase of 
the  credits  was  the result  of  an  overall  good  performance  of Member  States  and  in 
particular  for  four  beneficiary  Member  States  that  exceeded  their  forecasts,  namely 
Slovenia, Slovakia, Lithuania and Estonia.  

As far as the ex-ISPA budget lines are concerned, at the end of the year, the situation 
resulted in 100 % execution rate of the available appropriations.  

At the end of 2008, the average absorption rate (payments vs.  commitments)  of  all 
current beneficiary countries for both the Cohesion Fund and former ISPA projects 
was  66.3 %.  Bulgaria  presents  the  lowest  absorption  rate  (39.8 %),  whereas  Malta 
shows  the  highest  absorption  rate  at  79.8 %.  The  other  Member  States  range  from 
50.9 % to 76.1 % of the decided amount.  

Table  1  presents  the  overall  payments  implementation  in  2008  (including  technical 
assistance) for the Cohesion Fund and the ex-ISPA payments: 

Table 1: Implementation of the Cohesion Fund and ex-ISPA payments in 2008 (Euro) 

Payment 
Appropriations 

Initial 

Movements 

Final 
Resources 

Outturn 

Cancelled 

Carryovers 
2009 

Cohesion Fund 

1.936.747.200 

+ 250.000.000 

2.489.526.618 

2.489.299.691 

+ 300.000.000 

+ 2.779.418 

Ex-ISPA 

650.000.000 

-100.000.000 

540.000.000 

531.454.029 

-10.000.000 

TOTAL 

2.586.747.200 

+442.779.418 

3.029.526.618 

3.020.753.720 

- 

- 

-

-

Table 2 shows the level of payments in 2008 for each Member State. The payments 
done  in  the  framework  of  the  ex-ISPA  contribution  are  included,  as  they  have  all 
been  turned  into  Cohesion  Fund  projects  at  the  date  of  the  accession.  Main 

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beneficiary Member States are Spain among the EU-3 Member States, Poland in the 
EU-10 Member States and Romania in the EU-2 Member States.  

Table 2: Payments made in 2008 to Cohesion Fund and ex-ISPA projects per Member 
State (including technical assistance) 

Member State 

Environment 

Transport 

Technical 
Assistance 

TOTAL 

Amount 

% 

Amount 

% 

Amount 

Amount 

% of  

total EU 15 

Greece 

81.235.894  40,7% 

115.853.539  58,0% 

2.518.623 

199.608.056  6,6% 

Portugal 

121.124.899  62,3% 

73.149.733  37,6% 

181.537 

194.456.170  6,4% 

Spain 

EU 3 

Cyprus 

401.570.546  62,3% 

242.969.772  37,7% 

644.540.318  21,3% 

603.931.339  58,1% 

431.973.044  41,6% 

2.700.160 

1.038.604.543  34,4% 

5.814.955  65,0% 

3.134.086  35,0% 

8.949.040  0,3% 

Czech Republic 

86.699.762  50,3% 

84.954.613  49,3% 

633.784 

172.288.158  5,7% 

Estonia 

Hungary 

Latvia 

38.398.994  54,6% 

29.140.155  41,4% 

2.765.566 

70.304.714  2,3% 

40.777.254  51,3% 

36.533.591  46,0% 

2.110.617 

79.421.462  2,6% 

64.544.604  64,5% 

32.774.486  32,8% 

2.746.852 

100.065.942  3,3% 

Lithuania 

114.458.156  62,2% 

61.109.392  33,2% 

8.370.251 

183.937.800  6,1% 

Malta 

Poland 

Slovakia 

Slovenia 

EU 10 

Bulgaria 

5.212.565  99,4% 

  0,0% 

29.765 

5.242.331  0,2% 

528.130.703  67,3% 

247.053.953  31,5% 

9.419.180 

784.603.837  26,0% 

82.362.076  53,1% 

71.696.734  46,3% 

927.381 

154.986.191  5,1% 

22.326.262  45,3% 

26.911.481  54,7% 

49.237.743  1,6% 

988.725.331  61,4% 

593.308.491  36,9% 

27.003.396 

1.609.037.218  53,3% 

30.643.656  57,3% 

6.944.044  13,0% 

15.863.224 

53.450.924  1,8% 

Romania 

180.683.377  56,5% 

122.030.336  38,2% 

16.947.321 

319.661.035  10,6% 

EU 2 

211.327.034  56,6% 

128.974.380  34,6% 

32.810.545 

373.111.959  12,4% 

TOTAL 

1.803.983.704  59,7% 

1.154.255.915  38,2% 

62.514.101 

3.020.753.720  100,0% 

2.2. 

Outstanding commitments from the 2000-2006 period 

At  the  end  of  2008,  the  outstanding  commitments  ("reste  à  liquider",  RAL) 
corresponding to the 2000-2006 period (including two new Member States: Bulgaria 
and  Romania)  amounted  to  € 11.77 billion,  down  from  2007  (€  14.80  billion).  The 
2000-2006 regulatory framework for commitments and payments implies a relatively 

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large stock of outstanding commitments. They are equal to the amount corresponding 
to almost three years of commitments. 

Table 3: Cohesion Fund and ex-ISPA accepted amounts in 2000-2006 (including RAL) 

Country 

Net Committed 
(until 12/2008) 

Paid  
(until 12/2008) 

RAL  
as at 31/12/2008 

Greece 

Spain 

Ireland 

Portugal 

EU 4 

Cyprus 

2.503.744.174 

2.450.738.235 

1.152.286.728 

11.788.531.423 

9.838.026.775 

3.094.434.304 

573.575.321 

570.010.223 

55.745.185 

3.156.539.424 

2.427.127.170 

1.077.862.318 

18.022.390.343 

15.285.902.403 

5.380.328.535 

54.014.695 

31.793.262 

22.221.433 

Czech Republic 

1.228.077.241 

796.786.963 

431.290.278 

Estonia 

Hungary 

Latvia 

Lithuania 

Malta 

Poland 

Slovakia 

Slovenia 

EU 10 

Bulgaria 

Romania 

EU 2 

TOTAL 

427.034.848 

289.151.602 

137.883.246 

1.482.597.185 

780.102.018 

702.495.167 

713.862.336 

499.522.087 

214.340.249 

846.449.583 

559.974.524 

265.380.251 

21.966.289 

17.529.702 

4.436.587 

5.634.539.614 

2.871.741.538 

2.762.798.076 

766.250.297 

539.212.844 

227.037.453 

254.198.103 

162.579.583 

91.618.520 

11.428.990.190 

6.548.394.123 

4.859.501.260 

879.941.333 

350.021.546 

529.813.137 

2.043.037.858 

1.040.128.078 

1.002.599.040 

2.922.979.191 

1.390.149.624 

1.532.412.177 

32.374.359.723 

23.224.446.150 

11.772.241.972 

2.3. 

Closure of projects from the 2000-2006 period 

During  2008,  49  Cohesion  Fund  and  ex-ISPA  projects  were  closed,  representing 
around € 750 million of payments. At the end of 2008, the total number of closed CF 
projects for the 2000-2006 period (including ex-ISPA projects) reached 216 and the 
number of projects remaining open decreased to 976 out of 1.192 projects. Table 4 
provides information on the projects closed until the end of 2008 per Member States.  

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Table 4: Number of CF projects closed until the end of 2008 (including ex-ISPA) 

Country 

Total 
number 
of CF 
projects 

Projects closed as of end 2008 

Number 
of 
Projects 

Total Paid in 
Euro 

Number of 
open 
projects as 
of end 2008 

Greece 

Spain 

Ireland 

Portugal 

EU 4 

Czech Republic 

Estonia 

Cyprus 

Latvia 

Lithuania 

Hungary 

Malta 

Poland 

Slovenia 

Slovakia 

124 

407 

10 

109 

650 

58 

37 

2 

46 

51 

47 

3 

130 

28 

39 

14 

14 

0 

10 

9 

10 

0 

5 

6 

4 

EU 10 

441 

72 

Bulgaria 

Romania 

EU 2 

38 

63 

101 

1 

2 

3 

34 

80 

3 

24 

886.825.780 

90 

2.363.473.998 

327 

250.368.797 

580.082.620 

7 

85 

141 

4.080.751.195 

509 

192.671.263 

75.086.815 

0 

44.331.604 

82.084.499 

11.153.890 

0 

44 

23 

2 

36 

42 

37 

3 

27.825.974 

125 

55.213.444 

6.880.841 

495.248.330

950.121 

1.794.822 

2.744.943 

22 

35 

369 

37 

61 

98 

TOTAL 

1.192 

216 

4.578.744.468 

976 

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3. 

THE IMPLEMENTATION OF THE 2000-2006 PROJECTS BY MEMBER STATES 

3.1. 

Greece 

3.1.1.  Environment 

The  solid  waste  management  interventions  are  based  on  the  2003  National  Solid 
Waste Management Plan which in turn is linked to Regional Management Schemes. 
The strategic objective is the appropriate integrated management of urban solid waste 
and, where necessary, the rehabilitation of polluted or degraded areas. A similar plan 
has  been  drawn  up  for  the  collection  and  treatment  of  urban  waste  water,  in 
accordance with the requirements of Directive 91/271/EEC. 

Progress  is  noted  in  particular  in  relation  to  those  Cohesion  Fund  projects  that 
concern  waste  water  treatment  plants  and  closure  of  illegal  landfills.  The  rate  of 
performance  of  the  environment  projects  differs  per  sector.  While  the  waste  water 
treatment  projects  are  relatively  well  advanced,  solid  waste  infrastructure,  drinking 
water  and  nature  protection  projects,  and  in  particular  large  projects  such  as  the 
construction of dams, are seriously delayed. Close monitoring and accelerated efforts 
are required in order to ensure that they are completed and put into operation within 
the  timeframes  set.  One  of  the  main  problems  in  the  implementation  of  projects 
presenting  a  very  low  absorption  remains  in  particular  in  the  field  of  infrastructure 
works for solid waste management in Attiki region. 

However, it should be noted that delays in the implementation of projects may also 
occur  due  to  social  reactions,  in  particular  as  regards  waste  management  projects. 
Furthermore, the implementation of projects may also be linked to the application of 
a  number  of  requirements  deriving  from  relevant  Directives  and  reflected  in  the 
specific terms of the funding decisions. Since 2002, Cohesion Fund decisions include 
certain specific clauses whose fulfilment, in a number of cases, is a precondition for 
the  execution  of  either  the  advance  or  interim  and  final  payments.  These  specific 
terms  ensure  that  the  projects  co-financed  are  sustainable  and  comply  with  the 
requirements of the Community environmental legislation. These specific terms can 
be  divided  into  those  of  an  administrative  nature  (e.g.  setting  up  of  a  solid  waste 
management body or of an agency to manage the operation of a dam), and those of a 
legal or technical character (e.g. the completion of the legal framework relating to the 
solid  waste  management  or  certain  actions  considered  necessary  for  the  integrated 
management  of  solid  waste).  The 
timely  and  efficient  application  and 
implementation  of  these  requirements  are  directly  related  to  the  implementation  of 
the projects concerned. 

Modification  requests  in  the  field  of  the  environment  received  by  December  2007 
were  treated  in  2008.  Very  few  remain  pending,  mainly  because  there  is  a  need  to 
update  environmental  terms  or  there  are  pending  legal  proceedings.  These 
modification decisions concerned mainly the extension of the final date of eligibility, 
the adaptation of the physical object and the financing plan. 

3.1.1.  Transport 

The  strategy  for  transport  projects  seeks  to  develop  the  following  corridors  and 
projects: 

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– the priority trans-European (TEN) road axes in Greece, i.e. the PATHE, EGNATIA 
and IONIAN axes, as well as the Korinthos – Tripoli – Kalamata / Sparti motorway; 

– the modernisation of the PATHE railway axis, also part of the TEN, including its 
electrification and signalling systems, and construction of a freight railway line from 
the Ikonio port to the railway freight centre of Thriassio; 

–  the  infrastructure  facilities  of  Igoumenitsa  and  Iraklion  ports  including  the 
construction of new port infrastructure at Lavrio; 

–  the  airports  of  Thessaloniki  and  Iraklion  and  the  air  traffic  control  system  in 
Greece; and 

– public transport infrastructures in Attica and Thessaloniki, such as metro, tramway, 
and bus transport. 

In  2008,  two  modification  requests  for  transport  projects  were  processed.  These 
modifications  mainly  concern  the  extension  of  the  final  date  of  eligibility,  the 
adaptation of the physical object and the financing plan. It is clear that the transport 
projects are progressing better than the environment projects with motorway projects 
being particularly well advanced. 

3.2. 

Spain 

3.2.1 

Environment and transport 

Activity  in  2008  was  limited  to  physically  following  up  and  financially  auditing 
ongoing  projects,  accompanied  by  interim  payments  to  projects  depending  on 
progress recorded, closure of finalised projects and adjustments to reflect the reality 
of  the  situation  on  the  ground,  through  amendments  to  the  Commission  Decisions 
granting Community aid. 

Altogether, 12 projects were closed in 2008, all from the period 2000-2006. Almost 
all (11 of them) were environment projects. The outstanding commitments in respect 
of  these  projects  stood  at  €  3.1  billion.  This  represents  a  17%  reduction  in  the 
outstanding commitments associated with the Cohesion Fund for 2008. 

In  addition,  in  order  to  create  wider  awareness  and  a  better  understanding  of  the 
"Guidelines  on  the  Closure  of  Cohesion  Fund  and  Ex-ISPA  Projects  2000-2006" 
adopted by the Commission in April 2008 (SEC (2008)415), a seminar was held in 
Madrid on 16 and 17 October 2008, attended by over 300 participants. This provided 
an  opportunity  to  remind  the  players  involved  in  the  closure  of  projects  of  the 
deadlines and the regulatory requirements involved in the closure procedure. 

As regards amendments to project decisions, 29 amending decisions were approved 
in 2008. Of these, 18 concerned the environment sector and 11 the transport sector. 
In  general,  the  amendments  involved  extending  the  projects'  scheduled  completion 
dates,  often  accompanied  by  modifications,  mostly  minor,  to  the  physical  object  of 
the projects. The amendments had no impact on the total eligible cost of projects or 
on the level of Community assistance. 

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The inclusion of some flexibility in the rule for amending 2000-2006 Cohesion Fund 
decisions was presented to the Member States in February 2008. As a result, a total 
of  69  amendment  requests  were  sent  by  the  Spanish  authorities,  the  vast  majority 
(65) relating to environment projects. They are still under examination. 

As  regards  interim  payments  and  payment  of  balances,  184  payment  requests  were 
received,  with  a  total  of  €  644.5  million  paid  out.  This  is  less  than  in  2007  and 
significantly  less  than  in  2006,  when  the  total  payouts  were,  respectively,  €  742.6 
million (for 229 payment requests) and € 1 283 million (for 255 payment requests), 
which reflects the decreasing number of open projects. 

Finally, the Commission services, in compliance with Commission Regulation (EC) 
No 621/2004 of 1 April 2004 concerning information and publicity measures, were 
very  attentive  to  measures  aimed  at  increasing  the  visibility  of  projects  and  raising 
public awareness on the role of the European Union. In particular, given its economic 
and  social  impact  and  the  amount  of  money  invested,  the  national  authorities  took 
care  to  emphasise  in  2008  the  role  the  Community  has  played  in  financing  port 
infrastructures in Spain. 

In  this  framework,  a  press  conference  was  held  in  Madrid  on  15  December,  in  the 
presence of the Spanish Secretary of State for Transport and representatives from the 
Commission, to publicise the Community's involvement in providing and improving 
port infrastructures in Spain. Indeed, European co-financing for this type of transport 
infrastructure  over  the  period  2000-2006  was  considerable,  representing  €  2 157 
million in eligible costs through the co-financing of 22 projects, with € 1 169 million 
having been provided through the Cohesion Fund. 

3.3. 

Portugal 

3.3.1.  Environment 

According  to  the  environment  strategic  reference  framework  for  Cohesion  Fund 
interventions under the 2000-2006 period, the priority sectors financed by the Fund 
are  "Water  Supply",  "Sewerage  and  Wastewater  Treatment"  and  "Urban  Waste 
Management". 

The  strategic  reference  framework  was  updated  in  the  mid-term  review  exercise 
conducted in 2004, which emphasized the need for reinforcing coordination between 
the  Cohesion  Fund  and  Structural  Funds.  In  this  context,  the  regional  programmes 
have also focused on projects that contribute to the accomplishment of the municipal 
systems of water supply, urban waste water treatment and solid waste treatment, in 
the  latter  case  with  a  particular  emphasis  in  the  development  of  recycling  and  the 
reduction of landfills. The integrated water networks in the areas of Minho-Lima and 
Vale  do  Ave  and  the  waste  treatment  system  in  Madeira  are  worth  mentioning,  in 
view of the overall financial support involved from the Cohesion Fund. 

Seventeen amending decisions were adopted during the year, generally to adjust the 
final  specifications  of  projects,  mostly  in  order  to  include  new  elements  and/or 
amending  others,  and  to  extend  the  date  of  projects'  completion.  In  2008,  four 
environmental projects were closed. 

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3.3.2.  Transport 

As  for  the  environment  sector,  transport  infrastructure  development  under  the 
Cohesion Fund is programmed within a strategic reference framework for the 2000-
2006  period,  in  coordination  with  the  Transport  and  Accessibilities  Operational 
Programme, and notably its priority axis 1 relating to the TEN-T network. 

The  projects  under  implementation  contribute  to  the  development  of  the  Trans-
European  Transport  Network  and  enhance  the  multimodal  articulation  amongst  the 
various  means  of  transport  in  place,  in  line  with  the  objectives  of  the  strategic 
reference framework. The ongoing investments in railway infrastructures, upgrading 
the north-south railway axis and northern and southern links from Portugal to Spain 
are  of  particular  importance  in  this  context.  Other  important  areas  are  the 
enlargement  of  the  harbours  in  Madeira  and  Açores  and  the  development  of  the 
underground networks in Lisbon and Porto. 

Four amending decisions were adopted during the year which related to adjusting the 
projects' description and extending the dates of completion. 

3.4. 

Cyprus 

The  Cohesion  Fund  allocation  for  Cyprus  amounts  to  approximately  €  54  million. 
Two  projects  are  co-financed  by  the  Fund:  one  transport  project  (upgrade  of 
Limassol  motorway)  and  one  environmental  project  (solid  waste  management 
covering the regions of Larnaka-Ammochostos). 

In  the  framework  of  the  partnership  with  the  Cypriot  Authorities  and  in  order  to 
ensure  sound  financial  management  of  Cohesion  fund  projects,  both  projects  were 
surveyed. The transport project is advancing satisfactorily, with an absorption rate of 
more than 80%. 

Concerning  the  environment  project,  it  is  to  be  underlined  that  its  implementation 
was delayed, due to reactions from the residents of nearby municipalities, resulting in 
the relocation of part of the project. In view of this situation and the subsequent slow 
absorption, this project was subject to a specific technical meeting with the Cypriot 
Authorities  in  December. An  updated  modification request, including the extension 
of the eligibility date, is expected to be submitted to the Commission. 

3.5. 

Czech Republic 

3.5.1.  Environment 

The  implementation  of  the  Cohesion  fund  projects  in  the  sector  of  environment  is 
progressing  well.  Out  of  38  projects  approved  in  2000-2006  programming  period, 
five  were  closed  during  the  year  and  the  closure  procedure  was  launched  for  three 
other projects. Most of the ongoing projects are in the final stage of implementation. 

In 2008, the Commission received five requests for modification of the Commission 
decision.  By  the  end  of  the  year,  two  amending  decisions  were  adopted.  One 
modification concerned the correction of technical errors in the text and the second 
one  the  extension  of  the  eligibility  end  date  (which  is  also  the  reason  for  the  other 
already submitted modifications). 

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24 

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In  order  to  help  the  Czech  authorities  to  cope  with  the  fulfilment  of  the  specific 
condition  on  private  operators  in  the  water  sector  inserted  in  most  of  2004-2006 
Commission  decisions,  the  Commission  decided  to  make  use  of  the  technical 
assistance.  The  assignment  started  in  September  2008  and  should  be  achieved  by 
May 2009. 

3.5.2.  Transport 

In  the  sector  of  transport,  the  progress  of  the  implementation  is  well  advanced  for 
most of the projects. In 2008, one project was closed. At the same time, the closure 
procedure  was  launched  for  another  transport  project  in  2008.  One  modification 
request  for  technical  assistance  in  the  transport  sector  was  approved  in  2008.  This 
modification concerned the extension of the eligibility end date and an update of the 
indicative list of projects. 

3.6. 

Estonia 

3.6.1.  Environment 

Due to the overheating of the construction market, cost overruns were observed (on 
average  217%  since  2006).  Up  to  end  2007,  the  implementation  of  projects  was 
delayed by these cost increases. For several projects, the implementing bodies were 
not  able  to  accept  tender  results  in  2007  due  to  too  high  prices  and  possible  cartel 
agreements. The situation reversed in 2008 and this enabled to go forward with the 
projects.  Estonia  planned  an  extra  EEK  720  million to be financed out of the State 
budget for the years 2007 and 2008 in order to cover these cost overruns. 

The  Commission  approved  one  modification  decision  concerning  a  technical 
assistance  project  for  preparation  and  management  of  the  Cohesion  Fund.  The 
decision consisted in extending the eligibility end date and modifying the list of sub-
projects and their cost without any modification of the project's total cost. 

Delays  in  the  progress  of  project  implementation  were  mainly  due  to  delays  in  the 
design and/or construction, and/or to cost overruns. 

The  Estonian  authorities  had  some  difficulties  in  meeting  the  requirements  of  cost-
benefit  analysis  during  the  closure  process  of  projects.  Consequently,  closure  of 
environment  projects  took  between  six  months  and  one  year.  In  the  meantime,  the 
Estonian authorities decided to take measures to improve their compliance with cost-
benefit analysis. Nevertheless, at the end of 2008, nine projects were closed and two 
were under the process of being closed. 

3.6.2.  Transport 

Works  on  all  transport  projects  have  started  on  the  ground.  Three  modification 
requests  were  submitted  in  2008  in  the  transport  sector.  They  concerned  "Tallinn-
junction"; 
Tartu-Võru-Luhamaa  road  Vaida-Aruvalla  section  and  Puurmanni 
"Eastern extension of Muuga harbour", and "Jõhvi-Tartu-Valga road". 

Technical  assistance  has  helped  prepare  transport  infrastructure  projects  for 
implementation  in  the  2007-2013  programming  period.  The  use  of  the  JASPERS 
facility enabled a better preparation of major projects to be submitted in future.  

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By the end of 2008, seven projects (including two technical assistance projects) were 
closed.  Among  the  closures,  one  technical  assistance  project  that  did  not  reach  its 
objectives  was  identified.  The  Estonian  authorities  agreed  to  correct  the  final 
payment request accordingly. 

3.7. 

Hungary 

3.7.1.  Environment 

In 2008, further progress towards the completion of ongoing projects was observed 
and  the  first  projects  adopted  in  2000  and  2001  are  in  their  final  stage  of 
implementation.  In  spite  of  the  initially  slow  development,  projects  adopted  in  the 
last  years  of  the  2000-2006  programming  period  show  in  general  an  improved 
performance. 

A number of projects in the solid waste sector show significant cost overruns due to 
the  underestimation  of  initial  budget  for  the  rehabilitation  of  landfills,  which  were 
non-compliant  with  the  European  and  national  legislations.  Most  of  these  projects 
were  modified  and their scope reduced.  The rehabilitation works  which  were  taken 
out from the 2000-2006 period, will be carried out in the 2007-2013 period. 

In  the  case  of  two  solid  waste  projects  (North-East  Pest  and  North  Balaton) 
notoriously lagging behind, the contracting rate improved significantly in 2008 (58% 
and 92% respectively). These projects are now on track and will be completed by the 
end of 2010. 

Waste water projects are mostly faced with cost savings, which shall be used within 
the  projects  by  the  end  of  2010  for  financing  additional  elements  in  line  with  the 
initial project objectives. The savings within the biggest ongoing environment project 
–  the  Budapest  Central  Municipal  Wastewater  Treatment  Works  and  Collector 
Systems  –  amount  to  €  63  million.  Due  to  the  financial  corrections  to  the  main 
contract, additional € 62 million are likely to be replaced with new elements within 
the framework of the current modification request. 

The  Győr  wastewater  project  and  two  technical  assistance  projects  (Zagyva-Tarna 
river basin management plan; Preparation of Ex-ISPA projects) were closed. 

Closure  documentation  for  two  projects  (Miskolc  waste  and  Szeged  wastewater) 
were  submitted  to  the  Commission  in  the  fourth  quarter  of  the  year.  Their  closure 
procedure is ongoing. 

3.7.2.  Transport 

The projects' implementation continued at an increased pace, due to the fact that four 
modification decisions were adopted by the Commission. 

Cost overruns were encountered in a number of rail projects, but the necessary funds 
to cover overruns in the railways projects were made available from national sources 
at the end of 2008. 

In several projects public procurement problems have led to the re-launch and review 
of a number of contracts. This caused serious delays and puts certain projects at risk 

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26 

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of  not  completing  all  elements  by  the  currently  foreseen  eligibility  end  date.  In 
certain projects important works contracts have still not been contracted. 

Problems  related  to  land  acquisition  are  present  in  a  number  of  projects.  While  in 
some  cases  the  outstanding  issues  are  purely  procedural,  there  are  instances  where 
work is being delayed because of this. 

No  transport  projects  were  closed  or  are  in  the  process  of  being  closed.  Four 
modification  requests  (three  rail  projects;  one  road  project)  were  received  in  the 
fourth quarter of the year. 

3.8. 

Latvia 

3.8.1.  Environment 

Closure  payments  for  two  projects  were  effected:  "Solid  waste  management  in 
Ziemeļvidzeme region" and "Technical assistance for environmental projects". 

The Commission also adopted four modifying decisions for the following projects:  

"Development  of  Water  Services  in  Rēzekne  City";  "Technical  assistance  for 
projects for water services development in Latvian municipalities"; "Development of 
Water  Services  in  Daugavpils, Stage II"; "Technical assistance for the environment 
sector in Latvia". The modifications mainly concerned an extension of the eligibility 
en  date;  adjustment  to  some  of  the  physical  indicators  and  consequently  to  the 
description of the projects; inclusion of additional components. 

3.8.2.  Transport 

Closure payments for three projects were effected: "Improvement of Via Baltica road 
from Gauja to Lilaste", "Improvements of links to Via Baltica (Airport Access Road 
and a related section on A10" and "E67 Via Baltica, section Ķekava – Iecava". 

The Commission also adopted four modifying decisions for the following projects: 

reconstruction"; 
"Riga  Airport:  Runway  extension  and 
"Modernization  of  the  signalling  system  in  Latvia";  "Technical  Assistance  for 
Transport Sector in Latvia"; "Technical Assistance to Ministry of Transport". As for 
environment  projects,  the  modifications  mainly  concerned  the  extension  of  the 
eligibility end date; adjustments of some of the physical indicators; the inclusion of 
additional components. 

lightning 

system 

3.9. 

Lithuania 

3.9.1.  Environment 

The closure procedure for two environment projects was successfully finalised at the 
beginning of 2008; the closure of a third project was initiated in July 2008. 

Four modifying decisions, related to the extension of the end date and adjustment of 
monitoring  indicators,  were  adopted.  In  addition,  nine  modification  requests  were 

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received in the last quarter of the year, of which the majority concern cost overruns 
and the extension of the eligibility end date. 

3.9.2.  Transport 

Four projects were closed before 2008. In 2008, the closure procedures were initiated 
for two transport projects, of which one was successfully completed; the closure of 
the second project was finalised in January 2009. 

Lithuania  also  submitted  four  modification  requests  for  transport  projects.  All  of 
them  were  infrastructure  projects.  The  modifications  included  the  extension  of 
eligibility end dates and adjustments to the physical monitoring indicators. 

3.10.  Malta 

3.10.1  Environment 

The project "Upgrading of Sant' Antnin waste treatment facilities" aims at reducing 
the negative environmental impact of the waste cycle, which is of utmost importance 
for the Malta main island due to its very high population density. 

The  Commission  decision  was  modified  on  13  August  2008  with  the  result  that  a 
new mechanical treatment plant will be built instead of upgrading the existing one. 
An extension of the eligibility end date until 31 December 2010 was also included. 

The project is progressing well. The material recycling facility has been completed; 
the acceptance certificate for the final handover was issued in May 2008. 

3.10.2.  Transport 

The  project  "Restoration  and  upgrading  of  sections  of  TEN-T"  consists  in  the 
upgrading of three lots of the TEN-T network in Malta and Gozo (St. Paul's Bay by-
pass,  Civil  Aviation  Avenue  in  Luqa  and  Mġarr  Road  in  Għajnsielem  in  Gozo)  in 
order 
transport  costs  and  facilitate 
competitiveness in the transport of goods. 

time,  accident  rates, 

to  reduce 

travel 

The  Commission  decision  was  modified  on  17  October  2008,  covering  transfer  of 
funds  between  the  project  sections  and  extending  the  eligibility  end  date  until  31 
March 2010. 

The  project  is  physically  complete.  Further  savings  have  arisen  and  an  additional 
modification request to include further section(s) of the TEN-T network is awaited. 

Technical Assistance 

The  project  aims  at  preparing  the  environment  projects  pipeline  for  2007-2013 
(mechanical  biological  waste  treatment  plants  and  storm  water  master  plan).  The 
Commission decision was modified on 30 July 2008 in order to take into account the 
delays  in  the  identification  of  potential  sites  for  the  waste  treatment  plant  and  the 
need to comply with obligations arising from Directive 2001/42/EC. In addition, the 
deadline for the eligibility of expenditure was extended until 31 December 2010. 

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3.11. 

Poland 

In  2008,  the  Commission  adopted  fourteen  amending  decisions  granting  assistance 
from  the  Cohesion  Fund  –  eight  in  the  environment  sector  and  six  in  the  transport 
sector.  In  addition,  the  Commission  adopted  eight  modifying  decisions.  The 
modifications mostly concerned the physical scope and/or the eligibility end date of 
the projects, as well as the increase of the threshold for interim payments. 

A substantial number of projects will be finalised in 2010, which means that the bulk 
of  closures  can  be  expected  in  2011.  Numerous  projects  in  both  sectors  indicated 
significant cost overruns which in total represent approximately 1/3 of the Cohesion 
Fund allocation for Poland. 

In 2008, the Commission authorised payments amounting to € 784.6 million. 

3.11.1.  Environment 

The  level  of  contracting  was  over  100%  of  the  originally  estimated  costs  for 
environment  projects,  taking  into  account  the  cost  overruns.  The  physical  and 
financial progresses aggregated for the sector were about 55% and 50% respectively. 
About one third of projects reached the threshold for interim payments at the end of 
the year. 

At  the  end  of  the  year,  unlike  for  transport  projects,  there  were  still  some 
environment  projects  for  which  the  national  authorities  were  still  seeking  for 
appropriate  solutions  to  finance  cost  overruns.  Seven  environment  projects  were 
subject to pending environmental impact assessments (EIA). 

One closure was ongoing for an environment project. 

3.11.2.  Transport 

The level of contracting was over 100% of the originally estimated costs for transport 
projects,  taking  into  account  the  cost  overruns.  The  physical  and  financial  progress 
aggregated for the sector was about 57% (both physical and financial) for roads and 
62%  (both  physical  and  financial)  for  railways.  Almost  half  of  transport  projects 
reached the threshold for interim payments. 

At  the  end  of  the  year,  three  transport  projects  were  still  subject  to  pending 
environment impact assessments (EIA). 

The  closure  procedures  for  3  investment  projects  were  ongoing.  In  the  sector  of 
transport, the national authorities managed to secure the additional financing for all 
projects concerned by cost overruns. 

Technical assistance 

One  closure  was  ongoing  and  another  one  was  initiated  for  technical  assistance 
projects. 

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3.12. 

Slovakia 

3.12.1.  Environment 

Significant  progress  in  financial  and  physical  implementation  was  recorded  in  the 
majority  of  environment  projects.  Relatively  few  projects  remain  problematic: 
Galanta, Samorin, Home Kysuce, and Velky Krtis water sector projects. In the case 
of  these  projects  the  Slovak  authorities  were  advised  to  draw  up  action  plans  to 
monitor progress closely and identify steps to be taken to ensure their completion by 
the end of 2010. 

Ten  modification  decisions  were  adopted  (Komárno,  Kosice,  Humenne,  Trnava, 
Piestany,  Zvolen,  Zilina  WWTP,  Poprad,  TA  Regional  water  companies,  and  TA 
water  sector).  The  modifications  concerned  mainly  the  extension  of  eligibility  end 
dates to take account of delays incurred in particular during the earlier procurement 
stage,  and  the  adjustment  of  physical  indicators.  Cost  overruns  are  a  growing 
problem  in  a  number  of  projects,  with  final  beneficiaries  (public  water  sector 
companies) having to fund the additional costs. 

Three water sector infrastructure projects were completed in 2008 (Nitra, Považská 
Bystrica,  and  Martin)  plus  one  technical  assistance  project.  The  quality  of  final 
reports was generally considered to be insufficient and final payments were therefore 
interrupted  pending  improvements.  Weaknesses  related  in  particular  to  the  project 
descriptions, statements on achievement of project objectives, and demonstration of 
financial sustainability. 

3.12.2.  Transport 

All  contracting  within  the  transport  projects  had  already  been  completed  in  2007 
(with  some  minor  exceptions)  and  physical  implementation  further  advanced 
satisfactorily during 2008.  As  for environment, the Slovak authorities were advised 
to  draw  up  an  action  plan  for  the  main  problematic  transport  project:  Mengusovce-
Janovce  motorway,  which  has  suffered  implementation  delays,  cost  increases  and 
design changes. 

The  first  transport  project  "Modernisation  of  rail  track  Bratislava  Rača-Tmava 
(section  Bratislava-Rača-Šenkvice)"  was  closed  and  two  other  projects  (one  road 
infrastructure and one for technical assistance) were submitted for closure. The road 
project in question relates to the Bratislava-Vienna Port Bridge. 

3.13. 

Slovenia 

3.13.1.  Environment 

In line with the Strategic Reference Framework for the Cohesion Fund, the main aim 
for assistance from the Cohesion Fund and former ISPA during the period 2000-2006 
was  to  assist  municipalities  and  regions  in  improving  drinking  water  supplies, 
sewerage  networks  and  wastewater  treatment  (a  total  of  12  projects  in  the  water 
sector) and waste management (4 projects). 

In  2008,  after  several  years  marked  by  delays  in  public  procurement,  the  last 
contracts  for  works  were  successfully  concluded.  As  many  projects  are  set  up  as 

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30 

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design  and  build,  the  actual  construction  lagged  several  months  behind  the  date  of 
contract  signature.  However,  those  projects  which  entered  the  construction  phase 
steadily progressed both physically and financially. 

Four projects in the water sector completed already in 2007 yet remain to be closed. 
Construction and/or trial operation on one further water project and one in the waste 
sector were finished as well. In compliance with the relevant procedures, closure of 
these projects is expected in 2009. 

3.13.2.  Transport 

The  national  authorities have  defined in 2003 a National  Cohesion Strategy for the 
Transport  sector  which  identifies  the  objectives  of  its  transport  strategies  and  the 
projects  to  be  financed.  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. To this end, bottlenecks on corridors must first 
be  removed  involving  the  completion  of  the  motorway  network,  upgrading, 
modernisation  and  completion  of  the  rail  network  and  the  increase  of  the  range  of 
logistical services. 

The  Cohesion  Fund  co-finances  six  railway  and  two  motorway  projects.  In  early 
2008 one motorway and one railway project were closed, while construction on the 
second  motorway  project  was  finished.  After  reported  delays  due  to  public 
procurement  in  previous  years,  railway  projects  (except  partially  one)  were  fully 
contracted  and  marked  progress  in  works  as  well  as  in  payments  executed.  The 
closure of remaining transport projects is expected in the beginning of 2010. 

4. 

MONITORING, INSPECTIONS, FINANCIAL CORRECTIONS AND IRREGULARITIES 

4.1.  Monitoring: committees and missions 

4.1.1.  Greece 

One  major  technical  meeting  took  place  in  June  in  Brussels  with  the  managing 
authority of the Cohesion Fund and DG REGIO to review and monitor the progress 
of  all  projects.  Three  other  technical  meetings  took  place  in  Athens  to  ensure  the 
close monitoring, indentify the critical issues, boost further the implementation and 
identify actions that will ensure total absorption of funds by 2010. 

No monitoring missions for ongoing projects were carried out in 2008. 

4.1.2.  Spain 

The monitoring committee met in Madrid on 24 April. In preparation for the meeting 
the  national  authorities  submitted  information  sheets  outlining  the  implementation 
situation  as  at  31  December  2007  in  respect  of  all  the  decisions  (single  projects  or 
groups  of  projects)  still  ongoing.  From  these  information  sheets  the  managing 
authority,  in partnership with the Commission  services, selected  50  projects which, 
by  virtue  of  their  particular  situation,  were  subject  to  specific  monitoring  and 

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31 

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analysis  by  the  Committee  during  its  sessions.  At  the  meeting  the  Commission 
services highlighted three points: 

-  It  was  underlined  that,  although  some  flexibility  was  introduced  in  the  revised 
guidelines  on  the  amendment  of  Cohesion  Fund  projects,  there  was  no  automatic 
entitlement  to  further  modifications;  requests  still  have  to  meet  the  conditions  laid 
down  in  the  guidelines;  the  eligibility  end  date  of  31  December  2010  was  also 
confirmed. 

-  The  Guidelines  on  the  Closure  of  Cohesion  Fund  Projects  were  adopted  by  the 
Commission on 4 April. The Commission services invited the Spanish authorities to 
organise  a  seminar  on  this  question,  which  was  subsequently  held  in  Madrid  in 
October. 

- The third point concerned the recurring problem of the recovery of VAT amounts 
concerned  by  the  Court  of  Justice  judgment  of  16  October  2005.  The  Commission 
services urged the Spanish authorities to effect these recoveries without delay, even 
if this means leaving open the cases affected by tax inspections or legal appeals. 

Finally,  the  Commission  services  mentioned  Commission  Regulation  (EC)  No 
621/2004  of  1  April  2004  concerning  publicity  measures.  They  pointed  out  the 
obligation to take effective information and publicity measures so as to increase the 
visibility  of  Cohesion  Fund  projects  and  raise  public  awareness  on  the  role  the 
European Union is playing through its Cohesion policy. 

Technical and follow-up missions  

On  28  November  a  technical  meeting  was  held  in  Madrid  between  the  managing 
authority,  the  certifying  authority  and  DG  REGIO  to  address  the  problems 
encountered  in  the  day-to-day  management  of  projects  and  possible  measures  for 
solving them. Three main topics were discussed, namely delays in the examination of 
modifying  requests;  difficulties  encountered  during  the  closure  of  projects; 
organisation of the "information and publicity" day concerning port infrastructures. 

In  addition,  two  follow-up  missions  took  place  in  2008.  The  first  was  a  visit  to 
Pamplona  on  19  February,  concerning  project  "Actuaciones  en  materia  de  residuos 
urbanos en la Comunidad Foral de Navarra" (Urban waste management measures in 
Navarra). The object of the visit was to examine alternative waste treatment solutions 
to that proposed in the decision adopted in 2001, as a court decision had brought the 
infrastructure works to a halt. 

The second, on 20 May, was a visit to project "Actuaciones de Suministro de Agua y 
Abastecimiento a poblaciones ubicadas en la Cuenca Hidrográfica del Río Guadiana: 
Comarca  del  Andévalo"  (Water  supply  to  populations  living  in  the  Guadiana  river 
basin, district of Andévalo), to check how the project was progressing on the ground. 
The  visit  was  decided  upon  as  a  result  of  the  Member  State  having  applied  for  a 
second  amendment  to  extend  the  period  of  eligibility.  The  inspectors  were  able  to 
obtain  clarification  from  the  project  leaders  on  the  difficulties  encountered  in 
implementing the project and to evaluate the "force majeure" arguments put forward 
by the project managers. 

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4.1.3.  Portugal 

The  two  monitoring  committee  meetings  concentrated  on  the  follow-up  of  the 
implementation  of  the  projects  and  the  solution  to  the  problems  encountered.  Both 
meetings were held in Lisbon, on 26-27 May and on 25 November. 

The May monitoring committee reviewed approximately half of the ongoing projects 
and  those  approaching  closure.  It  also  examined  the  prospects  for  implementation 
during  the  rest  of  the  period.  It  was  preceded  by  a  technical  meeting  between  the 
Cohesion Fund national authorities and the Commission, in order to discuss the main 
outstanding issues. 

The  November  monitoring  committee  meeting  focused  on  projects  or  types  of 
projects  with  particular  problems  or  outstanding  issues,  as  identified  by  the 
Commission  and/or  the  Member  State.  General  questions  were  also  discussed, 
notably the perspectives for completion of open projects or groups of projects in the 
two full years still available. It was also preceded by a technical meeting between the 
Cohesion Fund national authorities and the Commission. 

During the year, several projects were visited by the Commission services in order to 
take note of their state of progress and, in certain cases, to discuss with the national 
authorities technical or legal problems which have arisen. 

4.1.4.  Cyprus 

Technical  meetings 
the 
implementation  of  the  two  Cypriot  projects  was  presented,  while  other  technical 
issues related to monitoring and reporting were also addressed. 

in  June  and  December.  Progress 

took  place 

in 

4.1.5.  Czech Republic 

In  general,  two  Cohesion  Fund  monitoring  committee  meetings  are  organised  each 
year.  Due  to  heavy  workload  at  the  end  of  2007,  the  second  2007  monitoring 
committee  took  place  on  15-16  January  2008.  Further  monitoring  committees  took 
place  on  24-25  June  and  on  9-10  December.  Discussions  were  organised  on  a 
project-by-project  basis  using  the  monitoring  sheets  and  giving  substantial  time  to 
the national authorities, beneficiaries and the Commission to clarify any outstanding 
issues.  Issues  of  general  character  were  discussed  in  the  Core  Group  meeting  with 
the national authorities. 

In  the  course  of  the  year,  the  Czech  Cohesion  Fund  managing  authority  further 
improved  the  monitoring  of  the  implementation  of  projects  allowing  for  a  better 
overview of the progress on the ground. 

4.1.6.  Estonia 

One  monitoring  committee  was  held  in  2008  covering  implementation,  quality  of 
spending,  financial  progress  and  publicity  actions.  Furthermore,  a  contract  of 
confidence  was  signed  on  12  February  between  the  Commission  and  the  national 
audit authority. The compliance assessment of the monitoring and control system for 
the Operational Programmes 2007-2013 has not been completed in 2008.  

EN 

33 

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Situation regarding lags in the implementation has been followed on a constant basis. 
The  Commission  highlighted  mainly  the  need  to  learn  from  the  past  and  try  to 
improve  and  build  on  existing  experience  for  the  2007-2013  programming  period. 
Issues relating to the Cohesion Fund under the 2007-13 period were covered in the 
two Monitoring Committees held in April. 

4.1.7.  Hungary 

Four  Cohesion  Fund  monitoring  committee  meetings  (two  for  each  sector  – 
environment and transport) were held in Budapest, on 8-10 April and 29-31 October. 
All adopted projects were reviewed and overall presentations were provided. 

The  monitoring  committee  meetings  were  conducted  in  the  form  of  technical 
discussions  on  a  project-by-project  basis,  giving  sufficient  time  to  each  final 
beneficiary to present the progress of each project. 

4.1.8.  Latvia 

Two monitoring committees took place in Riga, on 11 April and on 7 October. The 
meetings  were  used  for  the  monitoring  and  assessment  of  the  progress  in 
implementation  as  well  as  for  discussions  on  any  problem  encountered  and  on 
horizontal issues such as financial execution, publicity, technical assistance. 

During the April meeting, the impact of cost increases on projects was discussed and 
the  Latvian  authorities  reported  on  the  steps  taken  to  combat  inflation.  In  both 
meetings  problematic  projects  were  closely  monitored:  i.e.  "Track  renovation  on 
stages  of  the  East-West  rail  corridor  in  Latvia",  "Modernisation  of  rail  signalling 
systems" and "Development of the district heating supply system in Ventspils". On 
10  April, 
the  project "Solid  Waste 
Management in the Maliena Region" and observed planned administrative, financial 
and technical checks performed by the Ministry of Environment.  

the  Commission  representatives  visited 

On 7 October, the Commission representatives visited two projects: "Modernisation 
of the signalling system" on the upgrading of the Latvian East-West railway corridor; 
and  "Hazardous  waste  management  in  Latvia,  Stage  I"  for  the  establishment  of  a 
national Hazardous Waste Management System. 

4.1.9.  Lithuania 

Two monitoring committee meetings took place, on 21-23 April and 6-7 November. 
The  committee  examined  the  progress  reports  submitted  by  the  national  authorities 
and  discussed  the  implementation  of  all  ex-ISPA  and  Cohesion  Fund  projects  and 
how to accelerate their implementation. In addition, an ad-hoc monitoring committee 
meeting  was  held  on  28-29  July  to  address  the  amendment  of  certain  environment 
projects having encountered significant cost overruns. 

Two technical missions took place in February for on-site visits, meetings with the 
final  beneficiaries,  discussions  on  the  implementation  and  closure  of  projects, 
preparation  of  applications  for  major  projects,  support  from  JASPERS  (Joint 
Assistance  in  Supporting  Projects  in  European  Regions),  and  foreseen  publicity 
measures. 

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4.1.10.  Malta 

The monitoring committee meetings for all three Cohesion Fund projects were held 
on  23  May  and  16  October.  Annual  progress  reports  were  submitted  for  all  three 
projects. 

A  monitoring  mission  on  the  project  "Upgrading  of  Sant'  Antnin  waste  treatment 
facilities" took place on 21 May. 

4.1.11.  Poland 

Two monitoring committees were held, on 27 June and 12 December. The meetings 
were  preceded  by  meeting  of  working  groups  for  the  environment  sector  and  the 
transport sector.  

The  meetings  were  dedicated  to  the  review  of  the  progress  in  implementation  of 
individual  projects.  Besides  that,  a  number  of  horizontal  issues  were  discussed, 
namely: payment rate and financial forecasts, cost overruns, EIA conditions, closure 
forecast,  modifications  of  projects  in  terms  of  scope  and  timeline,  delays  in 
implementation, and compliance with the "M+24" and "M+12" rules. The review of 
end dates revealed that a substantial number of projects will be finalised only in 2010 
which means that the bulk of closures can be expected in 2011. Numerous projects 
indicated substantial cost overruns which in total represent approximately 1/3 of the 
Cohesion Fund allocation for Poland. The sector of transport secured the additional 
financing  for  all  concerned projects. In the environment sector, there was  a limited 
number  of  projects  for  which  the  national  authorities  were  still  seeking  for 
appropriate  solutions.  These  cases  were  closely  monitored  in  both  monitoring 
committees.  A  special  attention  was  paid  to  the  monitoring  of  seven  projects  with 
pending EIA conditions. No projects breaching the M+24 and M+12 rules have been 
recorded. 

No Cohesion Fund monitoring missions were carried out during the year. 

4.1.12.  Slovakia 

Two  monitoring  committee  meetings  were  held,  in  Bratislava  (March)  and  Nitra 
(October). The monitoring committees reviewed the state of progress of all ongoing 
ex-ISPA  and  Cohesion  Fund  projects.  Recommendations  were  made  to  improve 
reporting  on  physical  indicators,  identification  of  legal  and  technical  problems  in 
implementation, and on audit findings. Attention focused in particular on projects at 
risk of not being completed by the end of 2010, for which the Slovak authorities have 
now drawn up action plans. 

In addition, key horizontal issues were discussed: privatization of water companies; 
cost  overruns;  closure  of  projects;  quality  of  final  reports;  and  the  need  to  identify 
lessons learned from the 2000-2006 period to be applied in future major projects. 

Site  visits  to  the  Kosice  and  Humenne  water  sector  projects  took  place  in  April, 
during  which  the  proposals  for  modification  were  discussed  and  progress  on  the 
ground  was  observed.  In  addition,  site  visits  to  the  Komárno  WWTP  project  was 
undertaken during the March monitoring committee, and to two additional projects on 

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the  occasion  of  the  October  committee:  Nitra  WWTP  (completed  project  under 
closure procedure) and Galanta (problematic project). 

The  representatives  of  the  Commission  also  participated  in  two  audit  missions  in 
April  (follow-up  systems  audit  for  the  Cohesion  Fund)  and  in  November 
(retrospective verification of public procurement). 

4.1.13.  Slovenia 

One  monitoring  committee  meeting  was  held,  on  25  November.  It  focused  on  the 
ongoing  implementation  of  projects,  delays  in  public  procurement,  cost  overruns, 
project closure and publicity. The meeting included a detailed review of all ongoing 
environment and transport projects as well as a discussion on payments and payment 
forecasts.  The  Commission  in  particular  highlighted  the  necessity  to  further 
accelerate the implementation of projects where substantial delays occur. 

One project visit was carried out in the framework of the monitoring committee. The 
three  visited  environment  projects  (one  in  the  water  sector  and  two  in  the  waste 
sector) showed satisfactory progress. 

4.2. 

Audits and financial corrections 

2008  was  a  year  of  overlap  between  the  management  of  the  final  stage  of 
implementation of the 2000-2006 programming period including the preparation for 
its  closure,  and  the  opening  of  the  2007-13  programming  period.  The  management 
and control environment in place in 2008 was therefore meant to address both risks 
related to the preparation for closure of past programmes and projects and the risks 
of set up of management and control systems in the new programmes. 

Audit work for Programming period 1994-1999 - EU 4 (Greece, Ireland, Portugal, 
Spain): 

The Cohesion Fund closure enquiry concerning the period 1994-1999 covered 10% 
of  Cohesion  Fund  projects  representing  20%  of  the  co-financed  expenditure  during 
this  period.  The  fieldwork  was  finalised  in  2003  and  the  main  deficiencies  found 
were  insufficient  management  verifications  resulting  in  ineligible  expenditure  and 
breaches of public procurement rules. Financial correction procedures resulting from 
the closure enquiry were concluded during 2008, except for three remaining projects 
(two in Spain, one in Portugal) which will be finalised in 2009. 

Audit work for Programming period 2000-2006 - EU 14 (EU 10 + EU 4): 

For  EU-14  Member  States  in  2008,  four  audit  missions  were  carried  out  which 
focused  on  the  follow-up  of  previous  audit  recommendations.  In  addition,  five 
missions for the review of winding-up bodies were performed in order to verify the 
preparation of Member States for closure and to identify and mitigate related risks. 

In  2008,  DG  Regional  Policy  examined  winding  up  declarations  submitted  for  the 
closure  of  2000-2006  Cohesion  Fund  projects,  of  which  60  (representing  5%  of  all 
projects) related to Spanish projects. 

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Other audit work for the programming period 2000-2006 included the examination of 
the  annual  control  reports  received  under  Article  12  of  Regulation  No.  1386/2002. 
By the end of 2008, the majority of reports had been analysed, and replies sent to the 
Member  States  with  observations  and,  where  necessary,  requests  for  additional 
information  in  order  to  be  able  to  draw  as  much  assurance  as  possible  from  the 
results  of  national  audit  work.  Furthermore,  a  number  of  national  system  audit 
reports were received in 2008. 

The  last  of  the  annual  bilateral  coordination  meetings  with  the  Directorate  General 
for  Regional  Policy  for  the  year  2007  was  held  in  February  2008.  As  2008  was  a 
transitional year, it was decided to reschedule the bilateral coordination meetings for 
2008 to the first half of 2009. Bilateral meetings are held annually with national audit 
authorities  to  exchange  information  on  the  implementation  of  audit  work  and  to 
discuss progress on sample checks and follow-up of audit findings. The meetings in 
2009 will cover issues concerning both programming periods 2000-2006 and 2007-
2013. 

Impact of controls 

Financial corrections 

In the exercise of its supervisory role, DG Regional Policy has implemented a policy 
of  suspending  interim  payments  and  applying  financial  corrections  as  soon  as  it  is 
established that there are serious deficiencies which put at risk the reimbursements of 
Funds made to Member States. It also established a revised manual of procedures to 
streamline  the  internal  arrangements  for  the  adoption  of  suspension  and  correction 
decisions. 

Where, after due verifications, the Commission finds that the expenditure certified in 
an interim payment application is linked to a serious irregularity and not immediate 
remedial  action  is  taken  by  the  Member  State,  the  formal  suspension  of  payments 
procedure is launched. During 2008 DG REGIO adopted for the Cohesion Fund one 
suspension  decision  concerning  Bulgaria  in  relation  to  two  projects  in  the  road 
sector. 

Financial  corrections  totalling  €  92.7  million  were  made  in  2008  as  follow-up  to 
audits  by  the  Commission  or  the  Court  or  Auditors  or  to  OLAF  enquiries.  Of  this 
total,  €  38.2  million  related  to  projects  of  the  1994-99  programming  period  and  
€  54.5  million  to  the  2000-2006  period.  The  corrections  were  either  applied  by 
formal  Commission  decisions  (€  66.2  million)  or  were  accepted  by  the  Member 
States without the need for a decision (€ 26.5 million). 

Four  financial  correction  decisions  related  to  Cohesion  Fund  projects  in  the  1994-
1999 programming period were adopted for an amount of € 31.5 million and nine for 
the 2000-2006 programming period for an amount of € 34.7 million. 

Of  the  €  26.5  million  of  corrections  accepted  by  the  Member  States  €  6.7  million 
related  to  1994-1999  and  €  19.8  million  to  2000-2006.  These  are  implemented  by 
deduction from payment claims or from the balance payable at closure. 

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Table  5  illustrates  the  amount  of  financial  corrections  by  Member  State  and 
programming period. 

Table 5: Cohesion Fund financial corrections in 2008 by period and country (in EUR) 

Member State 

Cohesion Fund 

TOTAL 

Greece  

Spain  

Ireland 

Portugal  

EU 4 

Cyprus 

Czech Republic 

Estonia  

Hungary 

Latvia 

Lithuania  

Malta 

Poland  

Slovenia 

Slovakia 

EU 10 

Bulgaria  

Romania 

EU 2 

TOTAL 

Period 
2000-2006 

Period 
1994-1999 

23,405,436 

5,674,477 

29,079,913 

19,927,164 

32,483,151 

52,410,315 

- 

11,062,188 

- 

- 

- 

11,062,188 

63,259,764 

38,157,628 

92,552,416 

- 

- 

125,073 

- 

- 

65,833 

- 

123 

- 

- 

191,029 

6,156 

- 

6,156 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

125,073 

- 

- 

65,833 

- 

123 

- 

- 

191,029 

6,156 

- 

6,156 

54,591,973 

38,157,628 

92,749,601 

. 

Management and Control systems 

In the Directorate General's Annual Activity Report for 2008, for the functioning of 
the management and control systems (2000-2006), an unqualified opinion, signifying 
that there are no material deficiencies in key elements of the system, was given for 
the  Cohesion  Fund  systems  in  seven  Member  States  (Cyprus,  Estonia,  Hungary  – 

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transport  sector,  Latvia,  Malta,  Portugal  and  Slovenia)  corresponding  to  15.45%  of 
payments made in 2008 as a proportion of total payments for the Cohesion Fund. 

For  ten  Member  States,  representing  84.55%  of  CF  payments  made  in  2008,  the 
opinion was qualified, signifying the existence of material deficiencies in key system 
elements.  This  concerned  Bulgaria, 
the  Czech  Republic,  Greece,  Hungary 
(environment sector), Ireland, Lithuania, Poland, Romania, Slovakia and Spain. In all 
cases the impact of the deficiencies was judged to be moderate, except for the road 
sector in Bulgaria. 

For  the  road  sector  in  Bulgaria  the  opinion  was  qualified  with  the  impact  of  the 
material deficiencies affecting key elements of the system being judged significant. 
Accordingly,  a  reservation  was  made  for  the  road  sector  in  Bulgaria  in  the 
Directorate  General's  Annual  Activity  report  for  2008.  The  Commission  suspended 
payments to the Bulgarian road sector projects between July 2008 and May 2009 for 
this reason. 

4.2.1.  Greece 

In 2008, DG Regional Policy carried out two audit missions for the Cohesion Fund in 
Greece.  For  both  audits  a  qualified  opinion  was  given  with  possible  financial 
implications after the contradictory procedure. As concerns audit work from previous 
years,  three  open  audit  missions  carried  out  in  2007  were  closed  in  2008  or  early 
2009  without  financial  corrections.  Fourteen  winding  up  declarations  for  projects' 
closure were examined in 2008. 

In  2008,  one  important  financial  correction  decision  was  taken  relating  to  systemic 
irregularities  in  the  public  procurement  procedure  for  both  closed  projects  and 
projects under implementation. 

In the Annual Activity Report of 2008 a qualified opinion with moderate impact and 
no reservation was given to the Cohesion Fund in Greece as each project is audited 
by  the  national  authorities  (EDEL)  at  least  once  before  closure  and  as  the 
Commission examines the winding-up declarations before the closure of projects on 
an  individual  basis  and  any  irregular  expenditure  can  be  identified  and  deducted  at 
closure of each project. 

4.2.2.  Spain 

No audits on Cohesion Fund were carried out by the Commission in Spain in 2008. 
As  to  the  follow-up  of  previous  missions,  DG  Regional  Policy  concluded  the 
financial correction procedures for eleven projects during the year 2008 with a total 
corrected amount of € 52.4 million. 

60 winding-up declarations for the closure of Spanish projects were analysed during 
the  year  and,  as  a  result,  irregular  expenditure  declared  to  the  Commission  were 
detected,  mainly  related  to  public  procurement  procedures  and  certain  VAT 
eligibility issues. 

In the Directorate General's Annual Activity Report for 2008 for the functioning of 
the management and control systems (2000-2006), a qualified opinion with moderate 
impact was given for the Cohesion Fund in Spain as a result of material deficiencies 

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affecting key elements of the systems. However, no reservation was proposed as the 
Directorate General concluded that it obtains reasonable assurance for payments and 
the financial risk to the Community budget is mitigated by the fact that the winding-
up declarations are assessed before the closure of projects on an individual basis and 
any irregular expenditure can therefore be identified and deducted at closure of each 
project. Also, the maximum interim payments prior to closure are capped at 80% of 
the Community contribution. 

4.2.3.  Portugal 

In 2008, no missions were carried out by DG Regional Policy in Portugal as regards 
Cohesion  Fund.  However,  the  European  Court  of  Auditors  audited  one  project  in 
Portugal  in  the  context  of  their  DAS  2007  enquiry,  with  findings  on  public 
procurement issues. 

As  to  the  follow-up  of  previous  missions,  DG  Regional  Policy  concluded  the 
financial correction procedures for six projects and launched new financial correction 
procedures  for  two  other  projects  in  2008.  The  financial  corrections  concluded  for 
the  six  projects  amounted  to  €  10  212  814, of  which  only  €  720  731  was  enforced 
through  a  Commission  Decision  and  the  remaining  corrections  were  accepted  and 
executed by the Portuguese authorities themselves. The audits done by DG Regional 
Policy in regard to five other projects were closed without financial corrections. 

At  the  request  of  DG  Regional  Policy,  the  winding-up  body  carried  out  a  specific 
enquiry in 2007 on the implementation of control procedures for the period from 1 
January  2005  onwards.  The  conclusions  of  that  enquiry  revealed  that  the  risks  in 
respect of public procurement were mitigated as the national authorities implemented 
new control procedures following an action plan carried out in 2005. On the basis of 
that  enquiry,  together  with  the  conclusions  drawn  from  Commission  audits  and  the 
analysis of national audit strategy, DG Regional Policy signed on 22 January 2008 a 
contract of confidence with "Inspecção-Geral de Finanças" (Portuguese  winding-up 
body and audit authority) covering the Cohesion Fund and ERDF. 

In  2008,  DG  Regional  Policy  analysed  nine  winding-up  declarations  for  closure  of 
Portuguese Cohesion Fund projects. 

In the Directorate General's Annual Activity Report for 2008, for the functioning of 
the management and control systems (2000-2006), an unqualified opinion was given 
for the Cohesion Fund in Portugal. 

4.2.4.  Cyprus 

One  audit  mission  was  carried  out  by  DG  Regional  Policy  in  2008  in  Cyprus 
reviewing  the  work  of  the  winding  up  body  for  ERDF  and  CF.  There  were  no 
outstanding  issues  concerning  CF  from  previous  years'  audits  to  follow-up  in  2008 
and  no  financial  corrections  were  carried  out  in  2008.  No  projects  were  closed  in 
2008 in Cyprus. 

Based on the positive results of the review of the  winding  up body, of the positive 
conclusions from other audit missions carried out in Cyprus, as well as of the desk 
work carried out, a contract of confidence for ERDF and Cohesion Fund was signed 

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40 

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between the Commission and the Cypriot Internal Audit Service (as the audit body in 
Cyprus) on 17 December. 

In accordance with the above there was an unqualified opinion with no reservations 
for Cohesion Fund expenditure in Cyprus in the Directorate General's 2008 Annual 
Activity Report. 

4.2.5.  Czech Republic 

In 2008 in the context of the Action Plan to strengthen the Commission supervisory 
role in the management of structural actions, the Commission services requested the 
Czech authorities to carry out an exercise of retrospective verifications of Cohesion 
Fund projects with the aim to determining the extent and potential systemic character 
of  previously  detected  audit  findings  in  the  area  of  public  procurement.  The  final 
report on this exercise was due in January 2009. 

The  Commission  services  carried  out  two  audit  missions  for  Cohesion  Fund  in  the 
Czech Republic in 2008. The Commission services also closed one previous audit by 
opening  a  financial  correction  procedure  for  infringement  of  public  procurement 
rules  concerning  a  railway  project.  Eight  winding-up  declarations  for  closure  of 
Czech  projects  were  examined  in  2008  by  DG  Regional  Policy  and  as  a  result  one 
financial correction was proposed on an environment project before closure. 

In the Directorate General's Annual Activity Report for 2008, for the functioning of 
the management and control systems (2000-2006), an unqualified opinion was given 
for  the  Czech  Republic  as  the  winding-up  declarations  are  assessed  before  the 
closure of projects on an individual basis and any irregular expenditure can therefore 
be identified and deducted at closure of each project. 

4.2.6.  Estonia 

On  the  basis  of  audit  work  carried  out  in  2006  and  2007,  a  contract  of  confidence 
was  signed  in  2007  between  the  DG  Regional  Policy  and  Estonia  covering  the 
Cohesion Fund and ERDF. 

No missions were carried out in Estonia in 2008. However, some follow-up work on 
an  audit  mission  carried  out  in  2006  was  done  resulting  in  closure  of  all  findings 
without  financial  correction.  Additionally  four  winding-up  declarations  were 
examined in the context of closure of Estonian projects. 

In accordance with the above there was an unqualified opinion with no reservations 
for Cohesion Fund expenditure in Estonia in the Directorate General's 2008 Annual 
Activity Report. 

4.2.7.  Hungary 

The  Directorate  General's  2008  Annual  Activity  Report  for  the  Cohesion  Fund  in 
Hungary  contained  an  unqualified  opinion  for  the  transport  sector  and  a  qualified 
opinion  for  the  environmental  sector.  The  latter  qualified  opinion  was  linked  to  a 

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reservation  originating  from  a  significant  public  procurement-related  finding2 
identified  during  the  project  audit  of  the  Budapest  Wastewater  Treatment  Plant  in 
November 2007. 

Considering financial impact of irregular procurement procedure, one audit mission 
was  carried  out  by  DG  Regional  policy  in  2008  as  an  extension  to  audit  work 
executed  in  2007.  Based  on  the  work  performed,  it  was  concluded  that  the 
management  and  control  systems  function  effectively,  and  that  they  are  in 
compliance  with  Community  legislation,  in  particular,  with  EU  and  national  public 
procurement  rules.  A  second  audit  mission  carried  out  in  Hungary  in  2008  by  DG 
Regional  Policy  focused  on  the  review  of  the  work  performed  by  the  winding-up 
body in the context of ERDF programmes and CF projects closure. 

Three  winding-up  declarations  related  to  closure  of  Cohesion  Fund  Technical 
Assistance projects, were examined in the course of 2008. 

4.2.8.  Latvia 

DG Regional Policy did not carry out any Cohesion Fund audit missions in Latvia in 
2008. However, findings from previous missions were followed up and during 2008 
the  Latvian  authorities  took  corrective  action,  in  particular  in  the  field  of  public 
procurement procedures by issuing new guidelines and reviewing and correcting all 
non-compliant supplementary contracts. 

One financial correction procedure was launched by the DG Regional Policy in 2008 
for  the  project  "Solid  Waste  Management  in  the  Region  of  South-Latgale"  due  to 
irregularities detected in public procurement procedures. 

The case by case assessment of closure declarations by DG Regional Policy and the 
actions  undertaken  by  the  Latvian  Authorities  to  address  the  risks  identified  in  the 
Cohesion  Fund  management  and  control  systems  were  considered  to  provide 
adequate assurance that all irregularities will be detected and corrected before closure 
of  projects.  Accordingly,  there  was  an  unqualified  opinion  with  no  reservations  for 
the  Cohesion  Fund  in  Latvia  in  the  Directorate  General's  2008  Annual  Activity 
Report. 

4.2.9.  Lithuania 

DG Regional Policy carried out one audit mission in Lithuania in 2008 on Cohesion 
Fund projects. The main findings related to cost increases, tendering issues and the 
IT  monitoring  system.  DG  Regional  Policy  and  the  Lithuanian  winding-up  body 
(NAO) are supervising closely the follow up of these issues. 

All  Cohesion  Fund  audits  from  previous  years  are  closed,  with  one  financial 
correction  procedure  of  €  0.7  million  launched  in  2008  relating  to  public 
procurement  issues.  In  addition,  one  complaint  on  a  public  procurement  procedure 
concerning  Lithuania  was  handled  by  DG  Internal  Market  in  2008  concluding  that 
the public procurement procedure in question was irregular. As the project linked to 

2 

A financial correction of 25% on the contract concerned was accepted by the Member State in 2009. 

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the contract in question was co-financed by the Cohesion fund, the follow-up of this 
case, including possible financial corrections, will be done by DG Regional Policy. 

Three  winding-up  declarations  in  the  context  of  closure  process  of  Lithuanian 
Cohesion Fund projects, were examined by DG Regional Policy in 2008. 

In  the  Directorate  General's  2008  Annual  Activity  Report  a  qualified  opinion  with 
moderate  impact  was  given  for  the  Cohesion  Fund  in  Lithuania  on  the  basis  of  the 
above  material  deficiencies  affecting  key  elements  of  the  systems  in  Lithuania.  No 
reservation was proposed, as the DG is able to exercise a close management of each 
CF  project  and  check  in  detail  the  risk  areas  at  closure,  and  because  the  maximum 
interim payments prior to closure are capped at 80% of the Community contribution 
for CF projects. 

4.2.10.  Malta 

No audit missions or financial correction procedures for Cohesion Fund were carried 
out in 2008 for Malta by DG Regional policy. One previous audit mission carried out 
in 2007 did not give rise to any significant findings. 

Accordingly, there was an unqualified opinion with no reservations for the Cohesion 
Fund in Malta in the Directorate General's 2008 Annual Activity Report. 

4.2.11.  Poland 

In  2007  and  2008  the  Polish  authorities  undertook  to  implement  a  remedial  action 
plan  to  ensure  that  all  bodies  in  charge  of  carrying  out  public  procurement  checks 
apply  financial  corrections  when  irregularities  are  detected,  and  to  revise  their 
methodology for public procurement checks in order to ensure an adequate level of 
checking. The Action Plan was closed in March 2009 by DG Regional Policy. 

In  2008,  DG  Regional  Policy  lifted  the  reservation  given  in  its  Annual  Activity 
Report in 2007 for the Cohesion Fund in Poland as the systemic deficiencies in the 
area  of  public  procurement  had  been  identified  during  previous  audit  work  and  the 
Commission services are in a position to check during the assessment of individual 
winding-up  declarations  whether  the  ineligible  expenditure  resulting  from  these 
deficiencies have been identified and corrected by the Polish authorities. 

No new audit missions were carried out by DG Regional Policy on Cohesion Fund 
projects  in  2008.  All  previous  systems  and  project  audits  have  been  closed.  Most 
important  systemic  findings  were  followed  up  within  the  Action  Plan  for  Poland 
which was closed in March 2009. The only missions remaining open are two public 
procurement audits with findings on discriminatory selection criteria, direct awarding 
of additional works/services, and modification of terms of contract after the contract 
award. The findings were accepted by the Polish authorities during the follow-up of 
the Action Plan, and the financial corrections will be finalised during 2009. 

In  2008,  DG  Regional  Policy  examined  five  winding-up  declarations  for  Polish 
projects. 

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4.2.12  Slovakia 

Two  audit  missions  concerning  Cohesion  Fund  were  carried  out  by  DG  Regional 
Policy  in  Slovakia  in  2008:  The  first  one  was  a  follow-up  audit  to  verify  the 
implementation  of  previous  recommendations  and  to  audit  selected  projects.  The 
second audit mission focused on verifying the quality of the retrospective review of 
public procurement procedures in the Cohesion Fund and ERDF projects, which was 
carried out by the Slovak Managing Authorities at Commission request. 

In  2008,  financial  correction  procedures  were  initiated  for  two  Cohesion  fund 
projects  due  to  public  procurement  issues.  One  winding-up  declaration  and  two 
annual control reports were examined in 2008. An annual audit coordination meeting 
between the Commission and the Slovak audit bodies was held in Brussels. 

A qualified opinion with moderate impact was expressed on Cohesion Fund Slovakia 
in  the  Directorate  General's  2008  Annual  Activity  Report.  The  main  reason  for  the 
qualification  was  shortcomings  detected  in  the  management  verifications  in  public 
procurement.  The  seriousness  of  the  qualification  was  downgraded  from  2007  and 
the reservation expressed in 2007 was lifted in 2008 due to the mitigating measures 
adopted  by  the  Slovak  authorities  in  2008  (retrospective  review  of  public 
procurement). 

4.2.13  Slovenia 

Following the positive results of audit work carried out in previous years, a contract 
of  confidence  was  signed  with  Slovenia  in  February.  No  Cohesion  Fund  audit 
missions  were  carried  out  by  DG  Regional  Policy  in  Slovenia  in  2008.  However, 
follow up work continued for previous missions resulting in the closure of one audit 
mission.  No  financial  corrections  procedures  are  ongoing  or  envisaged  for  the 
Cohesion Fund in Slovenia. 

In  2008,  other  audit  work  included  the  examination  of  the  annual  control  report 
under Article 12 of Regulation (EC) No 1386/2002 and several system audit reports 
from the Budget Supervision Office, and participation in the annual co-ordination of 
controls meeting with national audit body. Annual summary for 2008 confirmed the 
information  available  from  other  reports.  Moreover,  three  winding  up  declarations 
submitted for the closure of three 2000-2006 projects were examined in 2008 with no 
major remarks. 

Accordingly,  there  was  an  unqualified  opinion  with  no  reservations  for  Cohesion 
Fund  expenditure  in  Slovenia  in  the  Directorate  General's  2008  Annual  Activity 
Report. 

4.3. 

Irregularities notified by the Member States 

In  2008,  the  Member  States  communicated  to  the  Commission,  in  accordance  with 
Regulation  (EC)  No  1831/94,  140  notifications  of  irregularities  involving  a  total 
affected  amount  of  €  56,328,911  in  respect  of  co-financed  projects.  Out  of  this 
amount,  €  19,768,042  has  been  recovered,  and  the  remaining  amount  is  to  be 
recovered.  The  Member  States  reporting  the  majority  of  cases  are  Spain,  Portugal, 
Hungary and Greece (64, 21, 13 and 12 respectively). Spain reported more than 46% 

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of the total of the cases and 44% of the involved amount. However, it is to be pointed 
out that Ireland, with three notifications relating to the 1994-1999 period, stands on 
the second highest level in terms of amount involved, followed by Lithuania. 

The  number  of  notifications  shows  an  increase,  with  a  radical  decrease  of  the 
involved  amount,  compared  to  the  previous  year.  The  main  types  of  irregularities 
reported  are  ineligible  expenditure,  and  infringements  to  public  procurement  rules. 
These  two  typologies  cover  almost  75%  of  all  cases  reported.  However,  the 
Lithuanian authorities reported two cases of "suspended fraud". The involved amount 
concerning both cases is yet to be calculated.  

5. 

EVALUATION 

The Commission and the Member States carry out appraisal and evaluation of all co-
financed  projects. The  projects  to  be  financed  by  the  Fund  are  adopted  by  the 
Commission in agreement with the beneficiary Member States. 

Each request for assistance is accompanied by a cost-benefit analysis (CBA) of the 
project. The CBA has to demonstrate that the socio-economic benefits in the medium 
term  are  proportionate  to  the  financial  resources  mobilised. The  Commission 
examines this CBA on the basis of the principles set out in the guide for cost-benefit 
analysis. The guide, first published in 2003, was updated in 2008 to incorporate the 
development  of  Community  policies,  financial  instruments  and  the  new  regulatory 
framework  under  which  major  projects  will  be  financed  during  the  2007-2013 
programming period. 

In  2008,  the  Commission  continued  to  assist  Member  States  through  actions  of 
capacity  building  aiming  to  improve  the  consistency  of  the  ex-ante  financial  and 
economic  analysis  of  the  projects.  As  a  result,  the  Guide  rapidly  achieved  a  wider 
circulation,  both  within  civil  servants  in  Member  States  and  candidate  countries  as 
well  as  within  the  staff  of  financial  institutions  and  consultants  involved  in  the 
preparation  and  evaluation  of  major  projects.  A  printed  version  of  the  Guide  was 
therefore  published,  providing  methodological  guidance  to  project  promoters  in  the 
Member States and candidate countries, while serving as a reference to Commission 
officials involved in the appraisal of major projects. 

In addition, the Commission carries out ex-post evaluation on samples of projects co-
financed  by  the  Cohesion  Fund. The  last  evaluation  was  published  in  2005  and 
looked at a sample of 200 projects implemented over the 1993-2002 period. The next 
ex-post  evaluation  will  be  launched  in  the  last  quarter  of  2009  and  will  look  at  a 
sample of both Cohesion Fund and ISPA projects implemented during the 2000-2006 
period. 

6. 

INFORMATION AND PUBLICITY 

6.1. 

Information to/from the Member States 

As indicated in the annual report for 2007, issues concerning the Cohesion Fund are, 
as  from  1  January  2007,  dealt  within  the  Coordination  Committee  of  the  Funds 
(COCOF, according to Regulation (EC) No 1083/2006). 

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Apart from issues of common interest for ERDF and Cohesion Fund, some issues of 
specific  interest  for  the  Cohesion  Fund  were  presented  or  discussed  during  the 
following meetings of the COCOF: 

February:  Revised  Guidelines  for  the  amendment  of  Cohesion  Fund  projects  2000-
2006. 

April: Guidelines on the closure of Cohesion Fund and Ex-ISPA projects 2000-2006, 
which were adopted by the Commission on 4 April (No (SEC(2008)415). 

6.2. 

Commission measures on publicity and information 

As regards the Commission measures on information and publicity, the focus in 2008 
was on implementation of the publicity requirements for the 2007-2013 period. One 
of the biggest challenges was the examination of compatibility of the communication 
plans,  as  requested  by  Commission  Regulation  (EC  No  1828/2006.  Out  of  the  272 
communication  plans  submitted  to  the  Commission  by  managing  authorities 
(communication  plans  could  cover  one  or  more  Operational  Programmes,  and  thus 
cover Cohesion Fund jointly with other funds), 212 were deemed compliant in 2008 
(78%). 

INFORM - a network of communication officers responsible for implementation of 
the  information  and  publicity  rules  for  ERDF  and  Cohesion  Fund  met  for  the  first 
time in June. The second meeting took place in November. At each meeting around 
130 communication officers exchanged experience and views on the practical aspects 
of  their  work.  Both  meetings  provided  opportunity  for  enhanced  cooperation  with 
Commission  Representations,  Europe  Direct  network,  as  well  as  with  DG 
Employment, Social Affairs and Equal Opportunities. 

DG  Regional  Policy  published  a  "Review  of  EU  Cohesion  Policy  Communication 
Plans  2007-2013  -  Activities  of  national  and  regional  managing  authorities  in  the 
field  of  communication",  which  was  carried  out  in  the  second  half  of  2008.  The 
review,  materials  from  the  INFORM  meetings,  as  well  as  various  information  and 
publicity  tools  prepared  for  both  Cohesion  Fund  and  ERDF,  are  available  at  a 
dedicated website3. 

3 

http://ec.europa.eu/regional_policy/country/commu/index_en.cfm?nmenu=1 

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