COMMISSION STAFF WORKING DOCUMENT accompanying the  ANNUAL REPORT ON THE COHESION FUND (2009)    [COM(2010) 589 final]
Date: 2010-10-21
Institutions: European Commission
Subjects: Cohesion Fund, EU Member State, activity report, environmental policy, transport network

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EUROPEAN COMMISSION 

Brussels, 21.10.2010 
SEC(2010) 1231 final 

COMMISSION STAFF WORKING DOCUMENT 

accompanying the 

ANNUAL REPORT ON THE COHESION FUND (2009) 

[COM(2010) 589 final]

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TABLE OF CONTENTS 

1. 

General Context ........................................................................................................... 6 

1.1. 

Convergence and economic development in the beneficiary Member States.............. 6 

1.1.1.  Greece .......................................................................................................................... 6 

1.1.2.  Spain............................................................................................................................. 7 

1.1.3.  Portugal ........................................................................................................................ 8 

1.1.4.  Cyprus .......................................................................................................................... 9 

1.1.5.  Czech Republic .......................................................................................................... 10 

1.1.6.  Estonia........................................................................................................................ 11 

1.1.7.  Hungary...................................................................................................................... 12 

1.1.8.  Latvia.......................................................................................................................... 13 

1.1.9.  Lithuania .................................................................................................................... 14 

1.1.10.  Malta .......................................................................................................................... 15 

1.1.11.  Poland......................................................................................................................... 16 

1.1.12.  Slovakia...................................................................................................................... 17 

1.1.13.  Slovenia...................................................................................................................... 18 

1.1.14.  Bulgaria ...................................................................................................................... 19 

1.1.15.  Romania ..................................................................................................................... 20 

1.2. 

Conditionality............................................................................................................. 21 

2. 

2.1. 

2.2. 

2.3. 

3. 

Financial implementation of the 2000-2006 period in 2008 and closure of projects. 22 

Payments made in 2009 for projects adopted under the 2000-2006 period............... 22 

Commitments outstanding from the 2000-2006 period ............................................. 24 

Closure of projects from the 2000-2006 period ......................................................... 25 

Implementation of the 2000-2006 projects by Member States .................................. 27 

3.1. 

Greece ........................................................................................................................ 27 

3.1.1.  Environment............................................................................................................... 27 

3.1.2.  Transport .................................................................................................................... 27 

3.2. 

Spain........................................................................................................................... 28 

3.2.1.  Environment............................................................................................................... 28 

3.2.2.  Transport .................................................................................................................... 29 

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3.3. 

Portugal ...................................................................................................................... 29 

3.3.1.  Environment............................................................................................................... 29 

3.3.2.  Transport .................................................................................................................... 30 

3.4. 

3.5. 

Cyprus ........................................................................................................................ 31 

Czech Republic .......................................................................................................... 31 

3.5.1.  Environment............................................................................................................... 31 

3.5.2.  Transport .................................................................................................................... 31 

3.6. 

Estonia........................................................................................................................ 32 

3.6.1.  Environment............................................................................................................... 32 

3.6.2.  Transport .................................................................................................................... 32 

3.7. 

Hungary...................................................................................................................... 32 

3.7.1.  Environment............................................................................................................... 32 

3.7.2.  Transport .................................................................................................................... 33 

3.8. 

Latvia.......................................................................................................................... 33 

3.8.1.  Environment............................................................................................................... 33 

3.8.2.  Transport .................................................................................................................... 34 

3.9. 

Lithuania .................................................................................................................... 34 

3.9.1.  Environment............................................................................................................... 34 

3.9.2.  Transport .................................................................................................................... 35 

3.10.  Malta .......................................................................................................................... 35 

3.10.1.  Environment............................................................................................................... 35 

3.10.2.  Transport .................................................................................................................... 36 

3.11. 

Poland......................................................................................................................... 36 

3.11.1.  Environment............................................................................................................... 37 

3.11.2.  Transport .................................................................................................................... 37 

3.12. 

Slovakia...................................................................................................................... 38 

3.12.1.  Environment............................................................................................................... 38 

3.12.2.  Transport .................................................................................................................... 38 

3.13. 

Slovenia...................................................................................................................... 38 

3.13.1.  Environment............................................................................................................... 39 

3.13.2.  Transport .................................................................................................................... 39 

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3.14.  Bulgaria ...................................................................................................................... 40 

3.14.1.  Environment............................................................................................................... 40 

3.14.2.  Transport .................................................................................................................... 40 

3.15.  Romania ..................................................................................................................... 40 

3.15.1.  Environment............................................................................................................... 41 

3.15.2.  Transport .................................................................................................................... 42 

4. 

Monitoring, inspections, financial corrections and irregularities............................... 42 

4.1. 

Monitoring: committees and missions ....................................................................... 42 

4.1.1.  Greece ........................................................................................................................ 42 

4.1.2.  Spain........................................................................................................................... 42 

4.1.3.  Portugal ...................................................................................................................... 44 

4.1.4.  Cyprus ........................................................................................................................ 44 

4.1.5.  Czech Republic .......................................................................................................... 45 

4.1.6.  Estonia........................................................................................................................ 45 

4.1.7.  Hungary...................................................................................................................... 45 

4.1.8.  Latvia.......................................................................................................................... 45 

4.1.9.  Lithuania .................................................................................................................... 46 

4.1.10.  Malta .......................................................................................................................... 46 

4.1.11.  Poland......................................................................................................................... 47 

4.1.12.  Slovakia...................................................................................................................... 47 

4.1.13.  Slovenia...................................................................................................................... 48 

4.1.14.  Bulgaria ...................................................................................................................... 48 

4.1.15.  Romania ..................................................................................................................... 48 

4.2. 

Audits and financial corrections................................................................................. 49 

4.2.1.  Greece ........................................................................................................................ 52 

4.2.2.  Spain........................................................................................................................... 52 

4.2.3.  Portugal ...................................................................................................................... 53 

4.2.4.  Cyprus ........................................................................................................................ 54 

4.2.5.  Czech Republic .......................................................................................................... 54 

4.2.6.  Estonia........................................................................................................................ 55 

4.2.7.  Hungary...................................................................................................................... 55 

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4.2.8.  Latvia.......................................................................................................................... 56 

4.2.9.  Lithuania .................................................................................................................... 57 

4.2.10.  Malta .......................................................................................................................... 57 

4.2.11.  Poland......................................................................................................................... 58 

4.2.12  Slovakia...................................................................................................................... 58 

4.2.13  Slovenia...................................................................................................................... 59 

4.2.14.  Bulgaria ...................................................................................................................... 59 

4.2.15.  Romania ..................................................................................................................... 60 

4.3. 

Irregularities notified by the Member States.............................................................. 61 

5. 

6. 

6.1. 

6.2. 

Evaluation .................................................................................................................. 62 

Information and publicity........................................................................................... 63 

Information to/from the Member States..................................................................... 63 

Commission measures on publicity and information................................................. 63 

ANNEX: Irregularities and Financial Corrections................................................................... 64 

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1. 

GENERAL CONTEXT 

1.1. 

Convergence and economic development in the beneficiary Member States 

1.1.1.  Greece 

In 2008, GDP per capita in PPS reached 94.3% of the EU-27 average. In 2009, the 
Greek economy contracted by the higher-than-expected rate of 2.0%, as the positive 
contribution from net exports was more than offset by weakened domestic demand. 
Public  finances  have  worsened  much  further  than  could  have  been  expected  as  a 
consequence  of  the  downturn  and  the  measures  to  support  the  financial  sector. 
Expansionary  fiscal  policies,  until  recently,  contributed  to  aggravating  the  external 
imbalances  and  to  protracted  losses  of  competitiveness.  The  2009  general 
government deficit stood at 13.6% of GDP, up from 7.7% in 2008. Upon notifying a 
breach  of  the  3%  of  GDP  reference  value  for  2007,  Greece  entered  the  Excessive 
Deficit Procedure in April 2009. The Council issued a recommendation under Article 
104(7)  TEC  to  end  this  situation  by  2010  at  the  latest.  In  December  2009,  the 
Council  concluded,  in  accordance  with  Article  126(8),  that  Greece  had  not  taken 
effective action in response to the April Council recommendation. 

Greece's updated stability programme, as submitted in January 2010, sets a target of 
8.7% of GDP for its 2010 budgetary deficit. The aim of the programme is to further 
reduce the deficit to 5.6% in 2011 and to 2.8% in 2012. The macroeconomic scenario 
underlying the programme anticipates a small contraction of GDP by 0.3% in 2010 
followed  by  growth  of  1.5%  in  2011  and  1.9%  in  2012.  The  spring  2010  forecast 
made  by  the  Commission  services  projects  that,  assuming  no  change  in  policy,  the 
general  government  deficit  will  be  9.3%  of  GDP  in  2010  and  9.9%  in  2011.  The 
forecast expects real GDP to contract by 3.0% in 2010 and 0.5% in 2011.  

to 

in 

targets 

identified,  related 

the  programme  have  been 

In its opinion on the stability programme, dated 16 February, the Council concluded 
that the programme displays an appropriate degree of ambition given the sheer size 
of the consolidation need and the fact that it is frontloaded. Nonetheless, risks to the 
budgetary 
the 
macroeconomic  scenario,  revenue  and  expenditure  projections.  On  8  March,  in 
compliance  with  the  Council  Decisions  of  16  February,  Greece  submitted  a  report 
which described the progress in implementing its stability programme. The measures 
announced by the Greek government on 3 March, which amounted to 2% of GDP (or 
EUR  4.8bn),  consist  of  permanent  revenue  enhancing  measures  and  permanent 
expenditure  cuts  in  equal  measure.  On  the  basis  of  this  report,  the  Commission 
assessed  progress  with  fiscal  consolidation  and  issued  a  Communication  to  the 
Council on 9 March. Based on that Communication, the Eurogroup concluded on 15 
March that the fiscal measures announced by the Greek authorities on 3 March 2010, 
provided that they are implemented fully, effectively and in a timely manner, appear 
sufficient to safeguard the 2010 budgetary targets. In the Statement by the Heads of 
State and Government of 25 March, the Member States of the euro area reaffirmed 
their willingness to take determined and coordinated action, if needed, to safeguard 
financial stability in the euro area as a whole. 

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1.1.2.  Spain 

Spain's  GDP  per  capita  in  PPS  attained  102.6%  of  the  EU-27  average  in  2008.  In 
2009, GDP fell by 3.6%, reflecting both the global economic downturn and a marked 
correction in the construction sector. The annual inflation rate fell to 0.3% in 2009 on 
the  back  of  lower  oil  and  average  food  prices.  The  downturn  took  a  heavy  toll  on 
public  finances.  For  2009,  the  general  government  deficit  reached  11.2%  of  GDP, 
compared to 4.1% in 2008, which reflects to a large extent the impact of the crisis on 
government  finances,  including  the  working  of  automatic  stabilisers.  However,  the 
deterioration  was  also  caused  by  stimulus  measures,  in  line  with  the  European 
Economic  Recovery  Plan  (EERP),  amounting  to  2¼%  of  GDP.  Upon  notifying  a 
breach  of  the  3%  of  GDP  reference  value  for  2008,  Spain  entered  the  Excessive 
Deficit Procedure in April 2009. The Council issued recommendations under Article 
104(7) TEC to end this situation by 2012 at the latest. In December 2009 the Council 
concluded  that  Spain  had  taken  effective  action  in  response  to  the  Council 
recommendations. The Council issued a revised recommendation in accordance with 
Article  126(7)  TFEU  to  correct  the  excessive  deficit  by  2013,  due  to  unexpected 
adverse  economic  events 
for 
government finances. 

involving  major  unfavourable  consequences 

According  to  the  latest  update  of  the  stability  programme  submitted  in  February 
2010, the targets for the general government deficit are 9.8% of GDP in 2010, 7.5% 
in  2011,  5.3%  of  GDP  in  2012  and  3%  in  2013.  These  figures  are  based  on  the 
programme's assumptions that GDP will contract by 0.3% in 2010 and grow by 1.8% 
in  2011  and  by  3%  on  average  in  2012  and  2013.  According  to  the  Commission 
services' spring 2010 forecast, the government deficit is projected to reach 9.8% of 
GDP  in  2010  and,  based  on  an  assumption  of  no  policy  change,  8.8%  of  GDP  in 
2011. The spring forecast predicts that real GDP will contract by 0.5% in 2010 and 
then increase by 0.8% in 2011. 

The Council, in its opinion of 26 April 2010 on the stability programme, concluded 
that the current crisis is having a severe impact on the Spanish public finances, with a 
very high deficit being predicted for 2009 as well as a rapidly-rising government debt 
ratio. It was considered that additional efforts may be required in order to achieve the 
ambitious  consolidation  path,  while  the  adjustment  path  is  not  fully  supported  by 
specific measures for the years beyond 2010.  

In view of the above assessment, and also in the light of the Recommendation under 
Article 126(7) TFEU of 2 December 2009, Spain was invited to:  

(i) implement rigorously the ambitious fiscal plans proposed in the programme so as 
to correct the excessive deficit by 2013, backing these up with practical measures in 
the  years  beyond  2010,  and  to  be  ready  to  adopt  further  consolidation  measures  in 
case the risks related to the fact that the macroeconomic scenario of the programme 
is  more  favourable  than  the  scenario  underpinning  the  Article  126(7)  TFEU 
the  EDP 
Recommendation  actually  materialise;  seize,  as  prescribed 
recommendation,  any  further  opportunity  in  addition  to  the  fiscal  efforts,  including 
opportunities resulting from better economic conditions, to bring the gross debt ratio 
down at a faster rate towards 60% of the GDP reference value;  

in 

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(ii) in view of the projected increase in age-related expenditure and the rapid rise of 
the  government  debt  ratio,  improve  the  long-term  sustainability  of  public  finances 
including  by  implementing  reforms  to  the  old-age  pension  scheme  as  proposed  by 
the Government;  

(iii) ensure that the budgetary framework effectively supports the achievement of the 
medium-term fiscal plans outlined at all levels of the general government sector, and 
closely monitor adherence to the budgetary targets throughout the year;  

(iv) ensure that fiscal consolidation measures are also geared towards continuing the 
improvement  in  the  quality  of  public  finances  in  the  light  of  the  need  for  further 
adjustment of existing macroeconomic imbalances. 

1.1.3.  Portugal 

Portugal’s GDP per capita in PPS was 77.3% of the EU-27 average in 2008. In 2009, 
GDP contracted by 2.7% in real terms, after having stagnated in 2008, as a result of 
the  sharp  fall  in  investment  and  exports,  due  to  the  global  economic  crisis.  The 
general government deficit came out at 9.4% of GDP in 2009, up from 2.7% in 2008. 
This  outcome  to  a  large  extent  reflects  the  impact  of  the  crisis  on  government 
finances, but it was also caused by stimulus measures amounting to a planned 0.75% 
of  GDP  which  the  government  adopted  in  line  with  the  EERP  and  by  other 
discretionary measures. By notifying a planned breach of the 3% of GDP reference 
value for 2009, Portugal entered the Excessive Deficit Procedure in December 2009. 
The  Council  issued  a  recommendation  under  Article  126(7)  TFEU  to  bring  this 
situation to an end by 2013 at the latest.  

The most recent update of Portugal's stability programme, submitted in March 2010, 
aims to achieve government deficits of 8.3% of GDP in 2010, 6.6% in 2011, 4.6% in 
2012 and 2.8% in 2013. The programme is predicated on the assumption that GDP 
will expand at gradually higher rates: 0.7% in real terms in 2010 up to 1.7% by 2013. 
The  spring  2010  forecast  by  the  Commission  services  projects  the  2010  general 
government  deficit  at  8.5%  of  GDP  and  –  if  based  on  an  assumption  of  no  policy 
change – 7.9% in 2011. Real GDP is expected to grow by 0.5% in 2010 and by 0.7% 
in 2011. 

In  its  opinion  of  26  April  2010  on  the  stability  programme,  the  Council  concluded 
that  the  current  crisis  is  seriously  damaging  to  Portuguese  public  finances.  Yet  the 
considered  view  was  that  the  current  budgetary  situation  also  reflects  prior  fiscal 
weaknesses, in particular the high structural deficits prior to the crisis. 

In view of the above assessment and also in the light of the Recommendation under 
Article 126(7) TFEU of 2 December 2009, Portugal was invited to:  

(i)  rigorously  implement  the  ambitious  fiscal  plans  for  2010  envisaged  in  the 
programme,  and  further  specify  the  measures  to  achieve  the  recommended  average 
annual fiscal effort of 1¼% of GDP and to correct the excessive deficit by 2013 in 
accordance  with  the  Article  126(7)  recommendations;  be  ready  to  adopt  further 
consolidation measures in case risks materialise that the programme scenario is more 
favourable  than  the  scenario  underpinning  the  Article  126(7)  recommendation  and 
any slippage is observed; consider a frontloading of consolidation efforts; seize any 

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opportunity in addition to fiscal efforts, including opportunities resulting from better 
economic conditions, to speed up the reduction in the gross debt ratio to 60% of the 
GDP reference value;  

(ii)  implement  an  effective  multi-annual  budgetary  framework  in  order  to  ensure 
adherence  to  budgetary  targets  across  the  entire  government  sector,  and  to  firmly 
contain and reduce expenditure over the medium term;  

(iii) enhance the quality of public finances, in particular by improving the efficiency 
and  effectiveness  of  public  spending  in  the  various  areas  of  government  action; 
decisively  address  the  situation  of  loss-making  State-owned  enterprises;  and  factor 
into  the  fiscal  sustainability  position  the  spending  commitments  and  risks  arising 
from  public-private  partnerships;  (iv)  combine  fiscal  consolidation  measures  with 
efforts to raise productivity and potential GDP growth in a sustained way, to boost 
competitiveness and to reduce the large external imbalances. 

1.1.4.  Cyprus 

In 2008, GDP per capita in PPS reached 95.9% of the EU-27 average in Cyprus. In 
2009, real GDP in Cyprus appears to have contracted by 1.7%. An adverse external 
environment  resulting  from  the  financial  crisis  and  the  global  downturn  –  in 
particular,  the  worsening  growth  outlook  of  the  key  trading  partners  and  weak 
domestic demand − weighed heavily on growth. In particular, exports of both goods 
and  services  declined  due  to  lower  external  demand  and  the  weak  performance  of 
tourism and shipping services. Investment picked up strongly, amidst a fall in foreign 
demand  for  housing,  low  utilisation  of  capacity  and  the  restructuring  of  corporate 
balance sheets. These unfavourable economic conditions, coupled with the fading of 
the asset boom and an expansionary fiscal policy, partly due to measures amounting 
to 1½% adopted within the framework of the EERP, led to a deterioration in public 
finances. The general government balance posted a deficit of 6.1% of GDP, after a 
surplus of 0.9% in 2008.  

In the latest stability update, submitted in April 2010, the Cypriot authorities predict 
that  the  general  government  deficit  will  reach  6.0%  in  2010  before  falling  back  to 
4.5%  in  2011,  3.4%  in  2012  and  2.5%  in  2013  respectively.  The  macroeconomic 
scenario underlying the programme envisages that real GDP growth will post modest 
growth of 0.5% in 2010, before recovering to an average rate of about 2½% for the 
remainder of the programme period. The Commission services' spring 2010 forecast 
predicts  that  the  deficit  will  rise  to  7.1%  in  2010  and,  assuming  no  policy  change, 
will increase further in 2011. Real GDP is expected to contract by 0.4% in 2010 and 
to grow by 1.3% in 2011. 

The overall conclusion is that Cyprus' public finances have significantly deteriorated. 
The  programme  outlines  a  consolidation  path,  the  aim  of  which  is  to  bring  the 
general  government  balance  to  below  3%  of  the  GDP  reference  value  by  2013. 
However, this adjustment is due to be achieved mainly from the revenue side of the 
budget,  while  the  ratio  of  expenditure-to-GDP  remains  at  historically  high  levels. 
Additionally, the growth assumptions underlying the macroeconomic scenario of the 
programme were deemed to be favourable.  

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In view of the above assessment, Cyprus was invited to: 

the  consolidation  measures,  particularly 

limit  the  2010  deficit  to  not  more  than  6%  of  GDP,  if  necessary  by 
(i) 
strengthening 
if  macroeconomic 
developments  prove  less  favourable  than  under  the  programme  scenario,  and  take 
timely  action  to  define  a  more  expenditure-driven  consolidation  strategy;  seize 
opportunities  beyond  the  announced  fiscal  effort  to  accelerate  fiscal  consolidation 
and reduce the gross debt ratio to below the reference value; 

(ii) 
implement, as planned, an effective multi-annual budgetary framework in order 
to ensure adherence to the budgetary targets and to firmly contain expenditure during 
the medium term;  

(iii) 
improve  the  long-term  sustainability  of  public  finances  by  implementing 
reform measures to control pension and health care expenditure in order to curb the 
projected increase in age-related expenditure. 

1.1.5.  Czech Republic 

Czech  GDP  per  capita  in  PPS  reached  80.4%  of  the  EU-27  average  in  2008.  The 
Czech  economy  experienced  a  sharp  recession  in  2009  when  GDP  contracted  by 
4.2% in real terms. The collapse in external demand was the main drag on growth. 
Annual inflation declined substantially in 2009, to 0.6% on average. This was mainly 
due  to  lower  commodity  prices,  the  vanishing  of  the  effects  of  earlier  changes  to 
indirect taxes, and the economic downturn. The general government deficit in 2009 
is  estimated  to  have  reached  5.9%  of  GDP,  as  compared  to  2.1%  in  2008.  The 
significant  deterioration  reflects  to  a  large  extent  the  impact  of  the  crisis  on 
government  finances,  but  it  was  also  caused  by  stimulus  measures  in  line  with  the 
EERP amounting to 2.2% of GDP. By notifying a planned breach of the 3% of GDP 
reference  value  for  2009,  the  Czech  Republic  entered  the  Excessive  Deficit 
Procedure  in  December  2009.  The  Council  issued  a  recommendation  under  Article 
126(7) TFEU to bring this situation to an end by 2013 at the latest.  

According  to  the  most  recent  update  of  the  convergence  programme,  which  was 
submitted in February 2010, the general government deficit in the Czech Republic is 
due  to  decline  from  5.3%  of  GDP  in 2010  to  4.8%  and  4.2%  of  GDP  in  2011  and 
2012  respectively.  The  macro-economic  scenario  underlying  the  programme 
forecasts  real  GDP  growth  of  1.3%  in  2010,  rising  gradually  to  3.8%  of  GDP  in 
2012. According to the Commission services' spring forecast, the deficit will be 5.7% 
of  GDP  in  2010  and  is  set  to  remain  constant  in  2011,  assuming  no  changes  in 
policy. Real GDP growth is estimated at 1.6% in 2011, rising to 2.4% in 2011. 

In  its  opinion  of  26  April  2010  on  the  convergence  programme,  the  Council 
concluded that the budgetary strategy of the Czech Republic for 2010 is appropriate 
and in line with the Council Recommendation under Article 126(7) TFEU. However, 
it was felt that the fiscal strategy for the following years lacked ambition and fiscal 
targets were thought to be risky on both the revenue and the expenditure side.  

In view of the above assessment, and also in the light of the recommendation under 
Article  126  TFEU  of  2  December  2009,  as  well  as  taking  account  of  the  need  to 
ensure sustainable convergence, the Czech Republic was invited to:  

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(i)  implement  the  2010  budget  rigorously  and  avoid  expenditure  slippages;  in  line 
with  the  Council  Recommendation  under  Article  126(7)  in  the  context  of  the  2011 
and 2012 budgets, target a larger budgetary adjustment than the one planned in the 
programme; and spell out in more detail the measures that are necessary in order to 
correct the excessive deficit by 2013 at the latest;  

(ii)  take  action  to  improve  budgetary  procedures  and  to  enforce  and  monitor  more 
rigorously the medium-term budgetary targets; in particular, avoid upward revisions 
of expenditure ceilings beyond the revisions permitted by the budgetary rules;  

(iii) implement the necessary reforms in order to improve the long-term sustainability 
of public finances. 

1.1.6.  Estonia 

In 2008, Estonia's GDP per capita in PPS amounted to 67% of the EU-27 average. 
After  several  years  of  above-potential  growth,  the  2008-2009  period  marked  an 
abrupt reversal, with the economy contracting by a cumulative 18%. The reversal of 
the  cycle  was  aggravated  by  the  severe  global  financial  crisis.  With  confidence 
plummeting  and  banks  becoming  increasingly  cautious  in  their  lending  decisions, 
domestic demand contracted by more than 10% in 2008 and by 24% in 2009, while 
the downturn was exacerbated by a contraction of external demand (-11% in 2009) . 
Inflation (HICP) declined sharply and turned negative in mid-2009, reflecting a rapid 
fall  in  world  commodity  prices,  the  fading  impact  of  earlier  administrative  price 
increases, and also negative price pressure from lower wages and subdued domestic 
consumption. Following six years of nominal surpluses, the contraction in economic 
activity resulted  in  general  government  deficits  of  2.8%  and  1.7%  of  GDP  in  2008 
and 2009 respectively.  

The  January  2010  update  of  the  convergence  programme  projects  a  general 
government  deficit  of  2.2%  of  GDP  in  2010,  declining  steadily  to  2.0%  in  2011, 
1.0%  in  2012  and  0.2%  in  2013.  In  the  underlying  macroeconomic  scenario,  real 
GDP is expected to be flat in 2010, before reaching an average growth rate of 3.7% 
in 2011-2013. Projections from the Commission services' spring forecast point to the 
deficit reaching 2.4% in 2010, and remaining steady in 2011 on the assumption of no 
policy change. Real GDP is set to grow by 0.9% in 2010 and by 3.8% in 2011. 

In  its  opinion  of  26  April  2010  on  the  convergence  programme,  the  Council 
concluded that Estonia had implemented a decisive consolidation of public finances 
in  2009  against  the  background  of  a  significant  deterioration  in  the  economic 
situation. It was considered, however, that achieving budgetary outcomes is bound to 
involve downside risks in the short and medium term. 

In  the  light  of  the  above  assessment,  and  also  given  the  need  to  ensure  sustainable 
convergence and smooth participation in ERM II, Estonia was invited :  

(i) to ensure that the general government deficit remains below 3 % of GDP and take 
the  necessary  measures  to  underpin  the  targeted  return  to  the  MTO  in  the  medium 
term;  

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(ii) to strengthen the medium-term budgetary framework, particularly by improving 
expenditure planning, and further strengthen the system of monitoring and reporting 
on strategic targets. 

1.1.7.  Hungary 

In 2008, Hungary's GDP per capita in PPS reached 64.4% of the EU-27 average. In 
2009,  GDP  fell  by  6.7%,  due  to  the  marked  slowdown  in  domestic  demand  and 
investments,  partly  offset  by  external  demand  in  view  of  a  slight  recovery  in  the 
global  economic  environment.  Inflation  fell  to  an  annual  average  of  4.2%.  The 
general  government  deficit  is  estimated  to  have  reached  4.0%  of  GDP  in  2009,  up 
from  3.8%  in  2008.  Given  the  sizeable  macroeconomic  and  public  finance 
imbalances, the Government supported the economy by taking measures that did not 
have a significant budgetary impact. Hungary, having been in the Excessive Deficit 
Procedure  since  2004,  received  revised  recommendations  from  the  Council  under 
Article  104(7)  TEC  in  July  2009  due  to  unexpected  adverse  economic  events  with 
major  unfavourable  consequences  for  government  finances.  Under  the  revised 
recommendations,  Hungary  must  bring  the  excessive  deficit  situation  to  an  end  by 
2011. 

The  January  2010  update  of  the  convergence  programme  set  a  general  government 
deficit target of 3.8% of GDP for the year 2010, in line with the 2010 budget adopted 
on 30 November 2009. For 2011 the projected deficit is 2.8%, with a further fall to 
2.5%  in  prospect  in  2012.  The  macroeconomic  scenario  forecasts  a  contraction  of 
0.3% in real GDP in 2010, followed by growth of 3.7% and 3.8% in 2011 and 2012 
respectively.  

In  its  opinion  of  26  April  2010  on  the  convergence  programme  the  Council 
concluded  that,  despite  the  sharp  economic  contraction  in  2009  as  a  result  of  the 
financial  crisis,  the  budget  deficit  had  stabilised.  However,  it  was  noted  that  the 
budgetary path provides the prospect of only a small structural improvement in 2010, 
none in 2011, and a deterioration in 2012. Moreover, this path was considered to be 
subject to considerable downside risks.  

In view of the above assessment and also in the light of the recommendation under 
Article 104(7) TCE on 7 July 2009, Hungary was invited to:  

(i)  ensure  that  the  3.8%  of  GDP  deficit  target  for  2010  is  achieved  through  tight 
expenditure control as well as through a possible freezing of budgetary reserves and 
the implementation of contingency expenditure cuts, if needed;  

(ii)  specify  the  measures  underlying  the  budgetary  targets  from  2011  onwards  and 
stand  ready  to  strengthen  the  fiscal  effort  in  case  the  risks  due  to  the  fact  that  the 
programme  scenario  is  more  favourable  than  the  scenario  underpinning  the 
Article 104(7) TEC Recommendation actually materialise, in order to ensure that the 
deficit  is  brought  below  3%  of  GDP  in  2011;  and  considerably  strengthen  the 
strategy  for  2012  to  ensure  an  adjustment  towards  the  MTO  in  line  with  the 
requirements of the Stability and Growth Pact;  

(iii) improve the quality of public finances by preparing and adopting a 2011 budget 
in  full  compliance  with  the  fiscal  framework  and  by  supporting  expenditure 

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moderation through a further reform of public administration and by addressing the 
situation of loss-making enterprises through structural reforms. 

1.1.8.  Latvia 

In 2008, Latvia's GDP per capita in PPS was 56% of the EU-27 average. The global 
financial crisis amplified the shock of the reversal in Latvia's domestic lending and 
house  price  boom  by  tightening  credit  availability  and  terms.  The  concomitant 
downturn  in  external  markets  hit  the  tradeables  sector.  Despite  the  adoption  of  a 
restrictive supplementary budget on 16 June 2009 in consultation with international 
lenders,  which  involved  a  consolidation  effort  of  4.4%  of  GDP,  the  general 
government  deficit  rose  to  9.0%  of  GDP  in  2009,  up  from  4.1%  in  2008.  By 
notifying  a  breach  of  the  3%  of  GDP  reference  value  for  2008,  Latvia  entered  the 
Excessive  Deficit  Procedure  in  July  2009.  The  Council  issued  a  recommendation 
under Article 104(7) TEC to end this situation by 2012 at the latest. 

The  January  2010  update  of  the  convergence  programme  projects  the  general 
government deficit at 10.0% of GDP in 2010, followed by a decline to 8.5% in 2011, 
6.0%  in  2012  and  2.9%  in  2013.  According  to  the  programme,  and  in  line  with 
commitments  made  in  the  framework  of  international  financial  assistance,  fiscal 
policy  is  set to  remain severely  restrictive  throughout  the programme period, given 
the  absence  of  fiscal  room  for  manoeuvre  and  the  need  to  correct  economic 
imbalances.  The  underlying  macroeconomic  scenario  envisages  that,  after  the 
exceptionally severe fall in output , which is estimated at 18% in 2009, real GDP will 
fall by a further 4.0% in 2010 before rising by 2.0% in 2011, and by 3.8% in 2012. 
The expected transition back to positive growth is led by the external sector and to a 
lesser  extent  by  fixed  investment,  with  private  consumption  and  overall  domestic 
demand  not  registering  significant  expansion  until  relatively  late  in  the  programme 
period.  The  spring  2010  forecast  by  the  Commission  services  projects  the  2010 
deficit at 8.6%, climbing to 9.9% in 2011, assuming no policy change. The economic 
forecast estimates a contraction of 3.5% in real GDP in 2010, followed by growth of 
3.3% in 2011.  

In  its  opinion  of  26  April  2010  on  the  convergence  programme,  the  Council 
concluded that Latvia is undertaking a significant fiscal consolidation and economic 
adjustment  in  line  with  the  Council's  recommendations.  Looking  forward,  it  was 
considered that the risks concern the size of the remaining adjustment in the context 
of a sluggish economy,  uncertainty  over future revenue trends  and which measures 
should be taken to underpin the consolidation.  

In  view  of  the  above  assessment  and  in  the  light  of  the  recommendation  under 
Article 104(7) TEC, and also given the need to ensure sustainable convergence and a 
smooth participation in ERM II, Latvia was invited to:  

(i) fully implement the 2010 budget as adopted on 1 December 2009; prepare a menu 
of  budgetary  options  to  generate  savings  or  additional  revenues  allowing  the  2011 
budget  to  be  adopted  in  accordance  with  the  consolidation  needs;  adopt  a  2012 
budget  that  is  also  consistent  with  the  targeted  fiscal  path,  in  line  with  the  Council 
Recommendation under Article 104(7);  

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(ii)  carry  out  the  thorough  and  forward-looking  analysis  needed  for  a  wide-ranging 
reform of social benefits, with a view to implementing such a reform in the course of 
2011, together with further measures on the revenue side;  

(iii) improve fiscal governance and transparency, inter alia by adopting the draft law 
on  fiscal  discipline,  by  strengthening  the  binding  nature  of  the  medium-term 
budgetary  framework,  and  by  putting  in  place  effective  sanction  procedures  for 
misuses of public funds by individuals; strengthen control, coordination and sanction 
mechanisms aimed at tackling the grey economy;  

(iv) foster economic growth by promoting the shift towards the tradeable sector and 
productivity  improvements,  including  by  ensuring  that  the  available  EU  Structural 
Funds  reach  the  real  economy,  and  by  restructuring  state-owned  banks  in  a  timely 
manner, as part of a medium-term strategy. 

1.1.9.  Lithuania 

In  2008,  Lithuania's  GDP  per  capita  in  PPS  reached  62%  of  the  EU-27  average. 
Several  years  of  rapid  economic  convergence  in  Lithuania  gave  way  to  a  deep 
economic  recession  in  2009,  when  output  fell  by  15%.  The  downturn  reflects  tight 
credit conditions, adjustment in the real estate market and sharp falls in confidence 
among businesses and consumers, exacerbated by the substantial deterioration in the 
external  environment.  Owing  to  the  worsening  macroeconomic  situation  and 
financing constraints, public finances have come under significant strain. The general 
government deficit grew to 3.2% of GDP in 2008 and rose further to 8.9% of GDP in 
2009,  despite  significant  fiscal  consolidation  measures  in  2009.  By  notifying  a 
breach of the 3% of GDP reference value for 2008, Lithuania entered the Excessive 
Deficit Procedure in July 2009. The Council issued a recommendation under Article 
104(7) TEC to end this situation by 2012 at the latest. 

According to the February 2010 update of the convergence programme, the general 
government deficit is due to reach 8.1% of GDP in 2010, 5.8% in 2011 and 3.0% in 
2012.  In  the  underlying  macroeconomic  scenario  real  GDP  is  predicted  to  increase 
by 1.6% in 2010, accelerating to 3.2% in 2011, but slowing back to 1.2% in 2012. 
According  to  the  Commission  services'  spring  2010  forecast,  the  deficit  should  be 
8.4%  in  2010  and  8.5%  in  2011,  under  the  customary  assumption  of  no  policy 
change. Real GDP is set to decline by 0.6% in 2010 and to rise by 3.2% in 2011. 

In  its  opinion  of  26  April  2010  on  the  convergence  programme,  the  Council 
concluded  that  Lithuania  had  implemented  a  decisive  consolidation  of  public 
finances  in  2009  in  the  context  of  a  significant  deterioration  in  the  economic 
situation. The Council took the view, however, that budgetary outcomes are subject 
to downside risks over the whole programme period.  

In view of the above assessment and also in the light of the recommendation under 
Article  126  TFEU  of  16  February  2010,  and  given  the  need  to  ensure  sustainable 
convergence and a smooth participation in ERM II, Lithuania is invited to: 

(i) 
consider additional corrective measures in 2010 if these are necessary in order 
to  achieve  the  envisaged  consolidation,  in  addition  to  implementing  rigorously  the 
measures planned in the budget; 

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(ii) 
specify the necessary measures to fully underpin the required adjustment over 
the programme period recommended by the Council under Article 126(7), and stand 
ready to adopt further consolidation measures in case risks related to the fact that the 
macroeconomic  scenario  of  the  programme  is  more  favourable  than  the  scenario 
underpinning the Article 126(7) Recommendation materialise; 

(iii) 
implement  planned  social  security  system  reforms,  including  pension  reform, 
so  as  to  reduce  the  high  risks  to  long-term  sustainability  of  public  finances  due  to 
significant projected increases in pension expenditure during the coming decades; 

(iv)  strengthen fiscal governance and transparency by enhancing the medium-term 
budgetary  framework  and  improving  reporting  of  budgetary  data,  thus  ensuring 
comparability of the budgetary indicators on a cash and accrual basis. 

1.1.10.  Malta 

In 2008, Malta's GDP per capita in PPS was 76% of the EU-27 average. Real GDP 
declined by 1.9% in 2009 after growing by 2.1% in 2008. The global crisis affected 
Malta primarily through the trade channel, even though the drop in foreign sales in 
2009  was  less  pronounced  than  the  contraction  in  world  trade.  Within  domestic 
demand,  investment  contracted  sharply,  while  private  consumption  remained 
relatively  stable  on  the  back  of  resilient  employment  numbers,  lower  inflation  and 
some recovery measures in line with the EERP. The impact of the downturn led to a 
significant widening of the general government deficit to 4.7% of GDP in 2008 and 
to  3.8%  in  2009.  Upon  notifying  a  breach  of  the  3%  of  GDP  reference  value  for 
2008,  Malta  entered  the  Excessive  Deficit  Procedure  in  July  2009.  The  Council 
issued a recommendation under Article 104(7) TEC to end this situation by 2010 at 
the latest. 

According  to  the  most  recent  update  of  the  stability  programme  submitted  in 
February 2010, the general government deficit is due to broadly stabilise in 2010 at 
3.9%  of  GDP,  before  declining  to  2.9%  in  2011  and  to  2.8%  in  2012.  The 
macroeconomic  outlook  for  2010  projects  real  GDP  growth  at  1.1%,  before 
accelerating to 2.3% in 2011 and 2.9% in 2012. The spring 2010 forecast made by 
the Commission services projects the general government deficit to be 4.3% in 2010 
and  3.6%  in  2011,  assuming  no  policy  change.  Real  GDP  is  expected  to  grow  by 
1.1% in 2010 and 1.7% in 2011. 

In  its  opinion  of  26  April  2010  on  the  stability  programme,  the  Council  concluded 
that,  according  to  the  programme,  the  general  government  deficit  ratio  is  due  to 
broadly  stabilise  in  2010  (at  3.9%  of  GDP),  followed  by  a  return  to  just  below  the 
3% of the GDP reference value in 2011, which is the deadline set by the Council for 
the correction of the excessive deficit. It was considered, however, that both debt and 
deficit are subject to downward risks, which will need to be addressed as a matter of 
importance.  

In view of the above assessment and also in the light of the recommendation under 
Article 126(7) TFEU of 16 February 2010, Malta was called upon to:  

(i)  achieve  the  2010  deficit  target  of  3.9%  of  GDP,  if  necessary  by  adopting 
additional consolidation measures; back up the strategy to bring the deficit below 3% 

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of  GDP  in  2011  with  concrete  measures,  while  standing  ready  to  adopt  further 
consolidation  measures  in  case  risks  related  to  the  fact  that  the  macroeconomic 
scenario  of  the  programme  is  more  favourable  than  the  scenario  underpinning  the 
Article  126(7)  Recommendation  actually  materialise;  and  considerably  strengthen 
the  strategy  for  2012  to  ensure  an  adjustment  towards  the  MTO  in  line  with  the 
requirements  of  the  Stability  and  Growth  Pact;  seize,  as  set  out  in  the  EDP 
recommendation,  any  opportunity  beyond  the  fiscal  efforts,  including  better 
economic conditions, to accelerate the reduction of the gross debt ratio towards 60% 
of GDP reference value;  

(ii) in view of the significant projected increase in age-related expenditure, improve 
the  long-term  sustainability  of  public  finances  by  implementing  further  reforms  of 
the social security system;  

(iii)  strengthen  the  binding  nature  of  the  medium-term  budgetary  framework  and 
improve the monitoring of budget implementation throughout the year, and enhance 
the efficiency of public spending, especially in the area of health. 

1.1.11.  Poland 

In 2008, Poland’s GDP per capita in PPS was 56% of the EU-27 average. The global 
economic  and  financial  crisis  affected  Poland  through  three  main  channels:  lower 
demand  for  exports,  lower  foreign  direct  investment,  and  a  halt  in  credit  growth. 
Nevertheless,  with  real  GDP  estimated  to  have  increased  by  1.8%,  Poland  was  the 
only EU country to record positive growth in 2009. This resistance is explained by 
sound fundamentals at the outset of the crisis, a well capitalised and healthy financial 
sector, the relatively low level of openness of the economy, a sizeable depreciation of 
the  Polish  currency  at  an  early  stage  of  the  crisis,  the  cushioning  effect  of  the 
adjustment  of  real  wages  on  employment,  and  timely  reactions  from  monetary  and 
fiscal  policies.  The  general  government  deficit  rose  to  7.1%  of  GDP  in  2009  from 
3.7%  of  GDP  in  2008.  The  main  reason  for  this  -  besides  slower  growth  -  is  the 
implementation of stimulus measures in line with the EERP amounting to about 2% 
of GDP. By notifying a breach of the 3% of GDP reference value for 2008, Poland 
entered  the  Excessive  Deficit  Procedure  in  July  2009.  The  Council  issued  a 
recommendation under Article 104(7) TEC to end this situation by 2012 at the latest. 

According  to  the  most  recent  update  of  the  convergence  programme,  the  general 
government  deficit  will  reach  6.9%  of  GDP  in  2010,  before  shrinking  to  5.9%  in 
2011 and 2.9% in 2012. The scenario is based on the assumption of real GDP growth 
of 3.0% in 2010, 4.5% in 2011 and 4.2% in 2012. The Commission services' spring 
2010  forecast  projects  that  the  budget  deficit  will  reach  7.3%  in  2010,  before 
declining  slightly  to  7.0%  in  2011.  The  macroeconomic  forecast  puts  real  GDP 
growth at 2.7% in 2010 and 3.3% in 2011. 

In  its  opinion  of  26  April  2010  on  the  convergence  programme  the  Council 
concluded that, although Poland is planning to correct its excessive deficit by 2012 in 
line  with  the  Council  recommendation  under  the  excessive  deficit  procedure,  the 
fiscal adjustment was considerably backloaded and deficit targets in the programme 
were  subject  to  significant  downside  risks,  on  both  the  revenue  and  expenditure 
sides.  

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In view of the above assessment and also in the light of the recommendation under 
Article 104(7) TEC of 7 July 2009, plus the need to ensure sustainable convergence, 
Poland was invited to:  

(i)  implement  the  2010  budget  rigorously,  under-executing  primary  current 
expenditure  plans  wherever  possible  and  allocating  windfall  revenue  to  deficit 
reduction;  

(ii)  strengthen  the  budgetary  adjustment  planned  in  2011  in  order  to  achieve  the 
recommended  average  annual  fiscal  effort  of  1¼%  of  GDP  in  line  with  the  Article 
104 (7) Recommendation and stand ready to adopt further consolidation measures in 
2011  and  2012  in  case  the  risks  related  to  the  fact  that  the  programme  scenario  is 
more  favourable  than  the  scenario  underpinning  the  recommendation  under  Article 
104(7) TEC actually materialise;  

(iii)  proceed  with  strengthening  the  fiscal  framework,  including  by  introducing  an 
expenditure  rule  covering  a  larger  share  of  the  general  government  primary 
expenditure  than  the  "temporary"  rule  presented  in  the  Convergence  Programme, 
with  appropriate  monitoring  and  enforcement  mechanisms.  This  would  require  the 
share of statutory spending in total expenditures to be reduced. 

1.1.12.  Slovakia 

In  2008,  Slovakia's  GDP  per  capita  in  PPS  reached  72.2%  of  the  EU-27  average 
when the economy recorded growth of 6.2%. In 2009, real GDP fell by 4.7% mainly 
due  to  a  steep  fall  in  external  demand  and  a  consequent  collapse  of  industrial 
production.  Tamed  by  the  downturn,  annual  inflation  averaged  0.9%  in  2009.  To 
contain  the  effects  of  the  crisis,  the  authorities  allowed  the  full  operation  of 
automatic  stabilisers  and,  in  line  with  the  EERP,  adopted  anti-crisis  measures 
amounting  to  ½%  of  GDP  for  both  2009  and  2010  (financed  through  reallocations 
within  the  budget).  In  2009,  the  government  deficit  amounted  to  6.8%  of  GDP,  up 
from  2.3%  in  2008.  Due  the  risk  of  breaching  the  3%  of  GDP  reference  value  for 
2009,  Slovakia  entered  the  Excessive  Deficit  Procedure  in  December  2009.  The 
Council issued a recommendation under Article 126(7) TFEU to end this situation by 
2013 at the latest. 

Slovakia's  stability  programme  predicts  a  fall  in  the  headline  deficit  from  5.5%  of 
GDP  in  2010  to  4.2%  and  3.0%  of  GDP  in  2011  and  2012,  respectively.  The 
underlying  macroeconomic  scenario  projects  a  gradual  recovery  with  real  GDP 
growth  reaching  1.9%  in  2010,  4.1%  in  2011  and  5.4%  in  2012.  The  Commission 
services' spring 2010 forecast estimates that the 2010 deficit will be as high as 6.0%, 
declining  somewhat  to  5.4%  in  2011  on  the  assumption  of  no  policy  change.  Real 
GDP growth is likely to be 2.7% in 2010 and 3.6% in 2011. 

In  its  opinion  of  26  April  2010  on  the  stability  programme,  the  Council  concluded 
that  the  fiscal  strategy  presented  in  the  programme  was  broadly  in  line  with  the 
Council  recommendation  under  the  excessive  deficit  procedure.  However,  the 
budgetary  projections  were  considered  to  be  subject  to  risks,  owing  to  favourable 
growth assumptions for the coming years, and might require more specific measures 
in order to achieve the planned savings on the expenditure side.  

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In view of the above assessment and also in the light of the recommendation under 
Article 126 TFEU of 2 December 2009, Slovakia was invited to:  

(i)  implement  the  deficit  reducing  measures  in  2010  as  planned  in  the  budget,  and 
support  the  consolidation  path  for  the  following  years  with  specific  measures  to 
secure the correction of the excessive deficit, if possible by 2012, and at the latest by 
2013;  

(ii) continue reforms of the pension system with a view to ensuring the sustainability 
of government finances;  

(iii) implement the measures envisaged to further strengthen the fiscal framework, in 
particular the introduction of enforceable multiannual expenditure ceilings. 

1.1.13.  Slovenia 

In 2008, Slovenia's GDP per capita in PPS reached 90.9% of the EU-27 average. The 
rapid  expansion  came  to  an  end  in  the  fourth  quarter  of  2008  when  the  Slovenian 
economy – owing to its high degree of openness - was hit hard and rather abruptly by 
the  global  crisis,  chiefly  through  the  trade  channel.  After  an  expansion  of  3.5%  in 
2008, real GDP contracted by 7.8 % in 2009. The economic slowdown after a phase 
of  growing  risks  of  overheating  and  falling  competitiveness  is  prompting  some 
adjustment of the economy: since the end of 2008, the inflation differential with the 
euro  area  and  the  external  deficit  have  both  gradually  decreased,  with  the  latter 
approaching balance in 2009. The general government balance was 5.5% of GDP in 
2009,  up  from  1.7%  in  2008,  due  to  the  working  of  the  automatic  stabilisers  and 
measures  to  respond  to  the  crisis  amounting  to  some  1½%  of  GDP,  which  the 
government adopted in line with the EERP. Upon notifying a planned breach of the 
3%  of  GDP  reference  value  for  2009,  Slovenia  entered  the  Excessive  Deficit 
Procedure  in  December  2009.  The  Council  issued  a  recommendation  under 
Article 126(7) TFEU to end this situation by 2013 at the latest. 

According  to  the  January  2010  update  of  the  stability  programme,  the  general 
government deficit ratio is due to stabilise at 5.7% of GDP in 2010 and to gradually 
decline thereafter to 4.2% in 2011, 3.1% in 2012 and 1.6% in 2013. According to the 
macroeconomic  scenario  underlying  the  programme,  the  rise  in  real  GDP  will  be 
0.9%  in  2010  and  2.5%  in  2011,  accelerating  to  3.7%  in  2012  and  3.5%  in  2013. 
Taking  only  fully  specified  measures  into  account  −  as  is  customary  −  the  spring 
2010 forecast of the Commission services projects a deficit of 6.1% of GDP in 2010. 
Thereafter, it expects the deficit in 2011, on a no-policy-change basis, to fall to 5.2% 
of GDP. Real GDP is projected to grow by 1.1% in 2010 and by 1.8% in 2011.  

In  its  opinion  of  26  April  2010  on  the  stability  programme,  the  Council  concluded 
that under the programme the general government deficit ratio is due to stabilise at 
5.7% of GDP in 2010 and to gradually decline thereafter to well below 3% of GDP 
in 2013, which is the deadline for the correction of the excessive deficit as set by the 
Council.  The  Council  further  concluded  that  the  budgetary  strategy  is  subject  to 
downside  risks,  as  economic  growth  might  be  lower  than  projected  and  as  the 
measures to support the proposed of consolidation of expenditure have yet to be fully 
spelled out and adopted. 

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In view of the above assessment, and also in the light of the recommendation under 
Article 126(7) TFEU of 2 December 2009, Slovenia was invited to:  

(i)  rigorously  implement  the  planned  consolidation  measures  in  2010  and  bring  the 
deficit  below  the  3%  of  GDP  reference  value  by  2013,  as  planned,  by  fully 
specifying, adopting and implementing the indicated measures to contain expenditure 
in line with the average annual fiscal effort recommended by the Council in Article 
126(7), while standing ready to adopt further consolidation measures in the event that 
risks related to the fact that the macroeconomic scenario of the programme is more 
favourable  than  the  scenario  underpinning  the  Article  126(7)  Recommendation 
actually materialise;  

(ii)  pursue  efforts  to  enhance  expenditure  control  and  the  enforceable  nature  of  the 
multi-annual  budgetary  plans,  and 
improve  public  spending  efficiency  and 
effectiveness;  

(iii) in view of the significant projected increase in age-related expenditure, carry out 
further  reform  of  the  pension  system  and  set  a  more  ambitious  MTO  that  takes 
sufficient account of the implicit liabilities related to ageing. 

1.1.14.  Bulgaria 

In 2008, Bulgaria's GDP per capita in PPS reached 41.3% of the EU-27 average. The 
unfolding global economic crisis hit the Bulgarian economy hard, mainly through the 
trade  and  investment  channels,  and  economic  growth  figures  moved  into  negative 
territory  in  2009.  Thus,  real  GDP  contracted  by  5%  in  2009,  against  an  average 
growth  of  above  6%  in  the  period  2003-08.  At  the  same  time  the  financial  crisis 
reinforced  the  need  for  adjustment.  Some  of  the  large  macro-economic  imbalances 
that  had  accumulated  during  the  boom  years  started  to  unwind.  Average  HICP 
inflation decelerated sharply to 2.5% in 2009, down from its peak of 12% in 2008. 
The  current  account  deficit  also  corrected rapidly,  falling  from  24%  of  GDP  at  the 
end  of  2008  to  9.6%  of  GDP  in  2009.  The  crisis  led  to  a  severe  deterioration  in 
public  finances. The  general  government balance swung from  a surplus of 1.8% of 
GDP  in  2008  to  a  deficit  of  3.9%  of  GDP  in  2009.  Reliance  on  public  finances  to 
cushion  the  negative  impact  of  the  crisis  was  restricted  by  the  need  to  maintain  a 
sound budgetary position in order to underpin macroeconomic stability. 

The most recent update of Bulgaria's convergence programme, submitted in January 
2010,  targets  a  balanced  budget  for  general government throughout  the  programme 
period 2010-2012. The macroeconomic scenario underlying the programme projects 
that real GDP will improve to 0.3% in 2010 before recovering to an average rate of 
4¼%  over  the  remainder  of  the  programme  period.  In  the  Commission  services' 
spring 2010 forecast the general government deficit is projected at 2¾% of GDP in 
2010 and, assuming a no policy change, at 2¼% of GDP in 2011. Real GDP growth 
is expected to stagnate at 0% in 2010 before picking up to 2.7% in 2011. 

In  its  opinion  of  26  April  2010  on  the  convergence  programme,  the  Council 
concluded  that  the  programme's  aim  to  maintain  a  sound  budgetary  position, 
reflected  in  planned  balanced  budgets  of  general  government,  was  considered 
adequate  at  the  present  economic  juncture  and  in  view  of  the  need  to  contain  the 
economy's external imbalances. However, it was felt that the planned consolidation 

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in  2010  was  not  fully  underpinned  by  the  measures  outlined  in  the  programme.  In 
addition,  the  full  implementation  of  this  programme  depends  on  an  optimistic 
macroeconomic scenario, with further risks resulting from the upward revision of the 
2009  deficit.  For  the  period  2011  and  beyond,  the  lack  of  specific  information 
concerning  the  measures  in  the  programme  could  further  undermine  the  planned 
adjustment path. 

In  view  of  the  above  assessment  and  given  the  need  to  ensure  sustainable 
convergence, Bulgaria was invited to: 

(i) 
continue  implementing  strict  fiscal  policies  and  adopt  further  consolidation 
measures to achieve the programme target for 2010 with a view to sustaining the on-
going adjustment in the external imbalances and safeguarding investor confidence in 
the economy; in particular, contain public sector wage growth in order to contribute 
to overall wage moderation and improve competitiveness; 

strengthen  the  efficiency  of  public  spending  by  vigorously  implementing  the 
(ii) 
planned structural reforms in the area of public administration, healthcare, education, 
and  pensions,  in  order  to  boost  productivity  and  ensure  sustainable  convergence 
within the European Union. 

1.1.15.  Romania  

Romania's GDP per capita in PPS stood at 48% of the EU-27 average in 2008. After 
expanding  by  7.3%  in  2008,  the  Romanian  economy  contracted  by  7.1%  in  real 
terms  in  2009  as  domestic  demand  fell  sharply.  The  stronger  decline  in  imports 
compared  to  exports  resulted  in  a  less  pronounced  external  imbalance,  with  the 
current  account  deficit  estimated  to  have  decreased  to  4.2%  of  GDP  in  2009  from 
12.7% in 2008. The government deficit, which was 5.4% in 2008, reached 8.3% of 
GDP  in  2009.  By  notifying  a  breach  of  the  3%  of  GDP  reference  value  for  2009, 
Romania entered the Excessive Deficit Procedure in July 2009. The Council issued a 
recommendation under Article 104(7) TEC to end this situation by 2011 at the latest.  

The latest update of Romania's convergence programme, submitted in March 2010, 
sets  a  target  of  a  government  deficit  of  6.3%  of  GDP  in  2010,  followed  by  further 
reductions to 4.4% in 2011 and 3% in 2012 respectively. The achievement of these 
targets  depends  on  a  positive  economic  growth  scenario  of  1.3%  in  2010,  2.4%  in 
2011, and 3.7% in 2012. The Commission services' forecast for spring 2010 projects 
a worse general government deficit of 8% of GDP in 2010 and of 7.4% in 2011. The 
forecast predicts that real GDP growth will increase by 0.8% in 2010 and by 3.5% in 
2011. 

In  its  opinion  of  26  April  2010  on  the  convergence  programme  the  Council  stated 
that, in view of worse-than-expected developments, the macro-economic scenario for 
2010 appeared to be slightly optimistic, but plausible, for 2011-2012. As for public 
finances,  the  Council  concluded  that  the  consolidation  path  projected  in  the 
convergence programme is appropriate, but full implementation of the consolidation 
measures  planned  for  2010  is  essential  if  the  deficit  target  is  to  be  reached.  In 
addition,  the  programme  does  not  go  sufficiently  into  the  specifics  of  the 
consolidation  measures  to  be  taken  in  2011  and  2012.  The  implementation  of  the 
fiscal  governance  reforms  decided  upon  within  the  context  of  the  EU  balance  of 

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payments assistance programme in Romania should help in achieving the budgetary 
targets for 2011 and 2012. 

In view of the above assessment, in the light of the recommendation of 16 February 
2010  under  Article  126(7)  TFEU  and  given  the  need  to  ensure  sustainable 
convergence, Romania was invited to: 

(i) rigorously implement the fiscal consolidation measures for 2010 agreed as part of 
the  balance-of-payments  support  programme  and  take  further  corrective  action,  if 
needed, to achieve the 2010 target for the general government deficit. The Romanian 
authorities are also invited to specify, in the context of the Medium-Term Budgetary 
Framework to be prepared by end May 2010, the fiscal consolidation measures that 
are necessary in order to achieve the programme budgetary targets in 2011 and 2012; 

(ii)  improve  the  fiscal  framework  by  adopting  and  implementing  the  fiscal 
responsibility law. In particular, take into account the analysis by the Fiscal Council 
of the design and conduct of fiscal policy; 

(iii) adopt and implement the draft pension law, which is intended to contribute to a 
significant improvement in the long-term sustainability of public finances. 

1.2. 

Conditionality 

Article 6 of 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  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  2009,  eleven  Member  States  that  were  eligible  for  support  under  the 
Cohesion  Fund  (Greece,  Spain,  Portugal,  Czech  Republic,  Hungary,  Latvia, 
Lithuania,  Malta,  Poland,  Slovakia  and  Slovenia)  were  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.  In 
2009  there  were  three  cases  (Greece,  Spain  and  Hungary)  where  effective  action 
taken  in  compliance  with  the  Council  recommendations  under  Article  104(7)  TEC 
was  assessed.  The  Council  decided  that  Spain  and  Hungary  had  taken  effective 
action and it issued new recommendations under Article 126(7). Only in the case of 
Greece did the Council decide under Article 126(8) TFEU that the authorities had not 
taken  effective  action  in  response  to  the  Council  recommendations  to  end  the 
excessive deficit, although suspension of payments from the Cohesion Fund was not 
recommended at the time. 

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2. 

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

2.1. 

Payments made in 2009 for projects adopted during the 2000-2006 period 

The  report  concerns  a  total  of  sixteen  Member  States  who  are  benefitting  from 
Cohesion  Fund  interventions  in  the  period  2000-2006  (Ireland  has  no  longer  been 
eligible  since  1  January  2004  and  Bulgaria  and  Romania  became  eligible  from 
1 January 2007).  

The Member States can be divided into three groups: a group of four Member States 
already eligible from the beginning of the programming period 2000-2006, a second 
group  of  ten  Member  States  that  joined  the  European  Union  in  May  2004,  and  the 
group  of  two  Member  States  (Romania  and  Bulgaria)  who  joined  the  European 
Union in 2007. The tables present the information by individual Member State and 
by group. 

Given  that  all  commitments  for  the  Cohesion  Fund  projects  financed  under  the 
2000-2006  programming  period  were  executed  by  31 December 2006,  the  financial 
resources  available  for  the  Cohesion  Fund  in  2009  were  confined  to  payment 
appropriations only.  

The  2009  initial  budget  for  the  2000-2006  Cohesion  Fund  projects  amounted  to 
EUR 3,892 million.  However,  the  final  budget  was  reduced  to  EUR 2,777  million. 
The cut is justified by significantly better implementation in 2008, where payments 
exceeded  the  voted  budget  by  nearly  30 %.  In  order  to  bridge  the  gap  between  the 
available resources and the demand for payments, transfers have been made from the 
budget line related to the 2007-2013 Cohesion Fund programmes. This was due to a 
slower start-up of the 2007-2013 period, and thus in 2008 the Member States opted 
to  counterbalance  the  delay  by  focusing  on  the  implementation  of  the  2000-2006 
projects.  In  2009  the  trend  was  reversed  and  the  outstanding  2000-2006  payment 
appropriations  were  transferred  to  the  2007-2013  Cohesion  Fund  and  ERDF 
programmes, which provided for 100 % execution of payment appropriations for the 
Cohesion Fund programmes and projects financed under both programming periods. 
The  available  appropriations  of  EUR 2,777 million  were  fully  implemented  by  the 
end  of  2009,  resulting  in  additional  payments  of  nearly  EUR 300 million  made  in 
2009 when compared with 2008 (EUR 2,489 million).  

As  far  as  the  former  ISPA  budget  lines  are  concerned,  the  budget  voted  in  2009 
amounted to EUR 400 million. In September (during the Global Transfer procedure), 
additional  appropriations  of  an  amount  of  EUR 125 million  were  added  to  the 
relevant  budget  lines.  After  further  reinforcements  in  December  2009,  the  final 
appropriations  amounted  to  some  EUR 529  million  (an  amount  comparable  to  the 
implementation  in  2008,  namely  EUR 531 million).  The  available  appropriations 
were implemented in their entirety.  

As at the end of 2009, the average absorption rate (payments vs. commitments) of all 
current beneficiary countries for both the Cohesion Fund and former ISPA projects, 
was  75.8 %  (Table  3).  Bulgaria's  low  absorption  rate  at  the  end  of  2008  (39.8 %) 
improved significantly in the course of 2009, resulting in a rate of 56.5 %. The other 
absorption rates range from 65.8 % (Poland and Romania) to 92.8 % (Ireland). 

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Table  1  presents  the  overall  execution  of  payments  in  2009  (including  technical 
assistance) for the Cohesion Fund and the former ISPA projects. 

Table  1.  Implementation  of  the  Cohesion  Fund  and  former  ISPA  payments  in  2009 
(Euro) 

Payment 
Appropriations 

Initial 

Movements 

Final 
Resources 

Outturn 

Carryovers 
2010 

Cohesion Fund 

3.892.453.278 

-1.115.315.452  2.777.137.826  2.777.137.825 

Ex-ISPA 

400.000.000 

+128.969.059 

528.969.059 

528.969.059 

TOTAL 

4.292.453.278 

-986.346.395  3.306.106.885  3.306.106.885 

-

-

-

Table  2  shows  the  level  of  2009  payments  for  each  Member  State.  The  main 
beneficiary  countries  are  Spain  in  the  EU  4  group,  Poland  in  the  EU  10  group  and 
Romania in the EU 2 group.  

In 2009, payments were significantly higher in comparison to the payments made in 
2008  for  the  following  countries:  Hungary  (+ EUR  169  million  or  312 %  of 
payments made in 2008), Bulgaria (+ EUR 92 million or 272 % of 2008 payments), 
Portugal 
(+ EUR 119 million  or  161 %  of  2008  payments)  and  Greece 
(+ EUR 68 million or 134 % of 2008 payments). On the other hand, lower payments 
compared  to  the  2008  execution  were  notified,  in  particular,  for  Slovakia 
(- EUR 98 million or 30 % of payments made in 2008) and Latvia (- EUR 58 million 
or 42 % of 2008 payments).  

Table 2. Payments made in 2009 to the Cohesion Fund and former ISPA projects per 
Member State (including technical assistance) 

Member 
State 

Environment 

Transport 

Technical 
Assistance 

TOTAL 

Amount 

% 

Amount 

% 

Amount 

Amount 

% 

(as 
compared 
to the CF 
2009 
outturn 
by MS) 

(as 
compared 
to the CF 
2009 
outturn by 
MS) 

(as 
compared 
to the 
global CF 
amount) 

Greece  

87.787.992 

32,8% 

179.354.927 

67,0% 

483.890 

267.626.809 

8,1% 

Portugal  

217.958.948 

69,4% 

95.310.572 

30,4% 

662.867 

313.932.387 

9,5% 

Ireland  

10.700.000 

46,7% 

12.231.279 

53,3% 

Spain  

438.942.360 

61,6% 

273.080.132 

38,4% 

-  

-  

22.931.279 

0,7% 

712.022.492 

21,5% 

EU 4 

755.389.300 

57,4% 

559.976.910 

42,5% 

1.146.757 

1.316.512.967 

39,8% 

Cyprus  

8.236.548 

100,0% 

-  

-  

Czech 
Republic  

110.536.127 

61,8% 

68.256.254 

38,2% 

-  

-  

8.236.548 

0,2% 

178.792.381 

5,4% 

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Member 
State 

Environment 

Transport 

Technical 
Assistance 

TOTAL 

Amount 

% 

Amount 

% 

Amount 

Amount 

% 

(as 
compared 
to the CF 
2009 
outturn 
by MS) 

(as 
compared 
to the CF 
2009 
outturn by 
MS) 

(as 
compared 
to the 
global CF 
amount) 

Estonia  

26.598.027 

63,9% 

11.887.556 

28,6% 

3.131.117 

41.616.700 

1,3% 

Hungary  

101.174.649 

40,8% 

145.002.371 

58,5% 

1.843.895 

248.020.915 

7,5% 

Latvia  

23.221.184 

55,6% 

18.360.386 

43,9% 

205.401 

41.786.971 

1,3% 

Lithuania  

54.895.917 

54,1% 

43.992.426 

43,4% 

2.548.928 

101.437.271 

3,1% 

Malta  

-  

-  

-  

-  

2.909 

2.909 

0,0% 

Poland  

473.658.296 

56,6% 

351.643.624 

42,0% 

11.512.473 

836.814.393 

25,3% 

Slovakia  

46.574.012 

99,5% 

-  

-  

244.253 

46.818.265 

1,4% 

Slovenia  

20.483.408 

51,4% 

19.354.671 

48,6% 

-  

39.838.079 

1,2% 

EU 10 

865.378.168 

56,1% 

658.497.288 

42,7% 

19.488.976 

1.543.364.432 

46,7% 

Bulgaria  

67.755.746 

46,6% 

69.324.323 

47,7% 

8.384.684 

145.464.754 

4,4% 

Romania  

198.052.988 

65,8% 

95.213.178 

31,7% 

7.498.566 

300.764.732 

9,1% 

EU 2 

265.808.734 

59,6% 

164.537.501 

36,9% 

15.883.250 

446.229.486 

13,5% 

TOTAL 

1.886.576.202 

57,1% 

1.383.011.699 

41,8% 

36.518.983 

3.306.106.885 

100,0% 

2.2. 

Outstanding commitments from the 2000-2006 period 

At  the  end  of  2009,  the  outstanding  commitments  (RAL)  corresponding  to  the 
2000-2006 period amounted to EUR 8.4 billion  

During  2009,  the  outstanding  RAL  was  reduced  by  EUR 3.3  billion.  In  terms  of 
absorption,  the  most  significant  decreases  in  RAL  were  notified  for  Hungary 
points),  Slovenia 
(- 16.8 percentage 
(- 15.7 percentage points), Poland and Romania (both – 14.9 percentage points).  

points),  Bulgaria 

(- 16.7 percentage 

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

Member 
State 

Committed 
(until 12/2009) 

Paid  
(until 12/2009) 

% 
Paid 

RAL  
as at 
31/12/2009 

% RAL 

Greece 

3.565.195.978 

2.715.334.857 

76,2% 

849.861.122 

23,8% 

Spain 

12.915.179.288 

10.519.496.170 

81,5% 

2.395.683.119 

18,5% 

Ireland 

625.755.407 

580.710.223 

92,8% 

45.045.184 

7,2% 

Portugal 

3.497.201.489 

2.741.059.557 

78,4% 

756.141.931 

21,6% 

TOTAL 
EU-4 

20.603.332.162 

16.556.600.807 

80,4% 

4.046.731.356 

19,6% 

Cyprus 

54.014.695 

40.029.810 

74,1% 

13.984.885 

25,9% 

Czech 
Republic 

1.226.581.086 

975.579.344 

79,5% 

251.001.742 

20,5% 

Estonia 

425.431.731 

330.768.303 

77,7% 

94.663.429 

22,3% 

Hungary 

1.481.998.333 

1.028.122.934 

69,4% 

453.875.399 

30,6% 

Latvia 

713.987.456 

541.309.058 

75,8% 

172.553.278 

24,2% 

Lithuania 

825.354.775 

661.411.795 

80,1% 

163.942.980 

19,9% 

Malta 

21.966.289 

17.532.611 

79,8% 

4.433.678 

20,2% 

Poland 

5.634.539.614 

3.708.555.930 

65,8% 

1.925.983.684 

34,2% 

Slovakia 

766.117.246 

586.031.109 

76,5% 

180.086.137 

23,5% 

Slovenia 

254.197.825 

202.417.662 

79,6% 

51.780.164 

20,4% 

TOTAL 
EU-10 

11.404.063.930 

8.091.758.556 

71,0% 

3.312.305.376 

29,0% 

Bulgaria 

876.947.183 

495.486.300 

56,5% 

381.460.884 

43,5% 

Romania 

2.037.250.711 

1.340.892.809 

65,8% 

696.357.902 

34,2% 

TOTAL 
EU 2 

2.914.197.894 

1.836.379.109 

63,0% 

1.077.818.786 

37,0% 

TOTAL 

34.921.593.986 

26.484.738.472 

75,8% 

8.436.855.518 

24,2% 

2.3. 

Closure of projects from the 2000-2006 period 

At  the  end  of  2009,  the  total  number  of  closed  Cohesion  Fund  projects  for  the 
2000-2006 period (including former ISPA projects) was 299. The number of projects 
remaining  for  closure  fell  from  976  at  the  end  of  2008  to  893  at  the  end  of  2009. 

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Table  4  provides  information  on  the  projects  closed  up  to  the  end  of  2009 
(per Member State).  

In total, 83 projects were closed in 2009. The majority of closures were notified for 
the  Member  States  with  the  largest  number  of  Cohesion  Fund  projects:  Spain 
(30 projects closed), Greece (15 projects closed) and Portugal (8 projects closed). 

Table 4. Number of CF projects closed up to the end of 2009 (including ex-ISPA) 

Member State 

Czech Republic 

Estonia 

Greece 

Spain 

Ireland 

Cyprus 

Latvia 

Lithuania 

Hungary 

Malta 

Poland 

Portugal 

Slovenia 

Slovakia 

Bulgaria 

Romania 

Total 
number 
of CF 
projects 

Projects closed as of end 2009 

Number 
of 
Projects 

Total Paid in 
Euro 

Number of 
open 
projects as 
of end 2009 

58 

37 

124 

407 

10 

2 

46 

51 

47 

3 

130 

109 

28 

39 

19 

20 

49 

350.331.885 

106.548.425 

1.150.632.586 

39 

17 

75 

110 

2.969.559.629 

297 

4 

0 

10 

13 

11 

0 

6 

32 

10 

9 

357.368.796 

0 

44.331.604 

159.495.999 

26.071.037 

0 

6 

2 

36 

38 

36 

3 

68.915.348 

124 

810.129.887 

72.460.238 

60.041.606 

77 

18 

30 

EU 14 

1.091 

293 

6.175.887.040 

798 

38 

63 

EU 2 

101 

3 

3 

6 

27.044.270 

2.191.214 

29.235.484 

35 

60 

95 

Total 

1.192 

299 

6.205.122.524 

893 

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3. 

THE IMPLEMENTATION OF THE 2000-2006 PROJECTS BY MEMBER STATE 

3.1. 

Greece 

3.1.1.  Environment 

In  the  environmental  sector  94  projects  were  adopted,  contributing  to  waste 
management, the treatment of waste water, drinking water supply, rehabilitation of a 
lake  and  prevention  of  forest  fires.  The  aim  of  these  projects  is  to  contribute  to 
implementing the relevant EU Directives.  

Progress  was  noted  during  2009,  in  particular  in  relation  to  those  Cohesion  Fund 
projects that involve waste water treatment plants. However, the rate of performance 
of the environment projects differs from one sector to another. While the waste water 
treatment projects are relatively well advanced, projects on solid waste infrastructure, 
drinking water and nature protection projects − and in particular major projects such 
as  the  construction  of  dams  −  are  being  seriously  delayed  due  to  administrative 
hold-ups or public reactions. Close monitoring, including site visits, continued to be 
implemented by the Commission services in 2009 in order to ensure that the projects 
would  be  completed  and  operational  within  the  allotted  timeframes.  A  number  of 
projects continue to pose problems of low uptake and implementation in the field of 
waste  management  mainly  in  Attiki,  including  major  Cohesion  Fund  projects  for 
drinking water supply and a nature project. 

However, it should be noted that delays in the implementation of projects may also 
be due to social reactions. The slow implementation of certain projects may also be 
linked  to  the  requirement  to  implement  a  number  of  requirements  that  derive  from 
relevant  Directives  and  are  reflected  in  the  specific  terms  of  the  funding  decisions. 
Since 2002, Cohesion Fund decisions include certain specific clauses the fulfilment 
of  which,  in  a  number  of  cases,  is  a  precondition  for  the  execution  of  either  the 
advance  or  interim  and  final  payments.  These  specific  clauses  can  be  divided  into 
those  of  an  administrative  nature  (e.g.  setting  up  of  a  management  body  for  solid 
waste  or  of  an  agency  to  manage  the  operation  of  a  dam),  and  those  of  a  legal  or 
technical nature (e.g. the completion of  the legal  framework relating to 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.  

Most  of  the  granting  decisions  have  been  modified  following  the  relevant  request 
from  the  Greek  authorities.  These  modification  decisions  mainly  concerned  the 
extension of the final date of eligibility, the adaptation of the physical object of the 
funding and the financing plan. 

3.1.2.  Transport 

Cohesion Fund projects on transport contribute to the development of a sustainable 
transport  policy  in  Greece  and  concern  in  particular  the  priority  trans-European 
(TEN) road axes in Greece, i.e. the PATHE, EGNATIA, IONIA; the modernisation 
of  the  PATHE  railway  axis,  which  is  also  part  of  the  TEN,  including  its 
electrification and signalling systems; construction of a freight railway line from the 

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port of Ikonio to the railway freight centre of Thriassio; the infrastructure facilities in 
different ports; and public transport infrastructures in Attica, such as the metro. 

A  number  of  requests  for  modifications  were  dealt  with  in  2009  which  mainly 
concern  the  extension  of  the  final  date  of  eligibility,  the  adaptation  of  the  physical 
object and the financing plan. The transport projects are progressing better than the 
environment projects, with motorway projects being particularly well advanced. 

3.2. 

Spain 

The year 2009 was confined to physical and financial monitoring of ongoing projects 
leading, in particular, to interim payments based on their degree of advancement, to 
the  closure  of  completed  projects  and  to  adjustments  of  the  terms  of  assistance  in 
relation  to  the  actual  situation  on  the  ground  via  changes  in  the  Commission 
decisions granting Community assistance. 

On  1  January  2009,  328  Commission  decisions  (projects)  granting  assistance  from 
the  Cohesion  Fund  in  Spain  were  open,  eight  of  them  dating  from  the  period 
1993-1999. RAL associated with these decisions amounted to EUR 3.128 million, of 
which 51.1 million corresponded to the period 1993-1999. 

A  total  of  34  projects  were  closed  in  2009,  six  of  which  related  to  the  period 
1993-1999. Most of the closed projects (28) concerned the environmental sector; the 
remaining eight were related to the transport sector. Therefore, a total of 294 projects 
remained  open  as  at  31.12.2009,  including  two  from  the  1993-1999  period,  with  a 
RAL of EUR 2.394 million, of which EUR 9 million was related to the 1993-1999 
period. This represents a decrease of 23.5% in the RAL associated with the Cohesion 
Fund for 2009. 

Despite  a  significant  acceleration  in  the  pace  of  closures  compared  to  2008,  when 
only  12  projects  were  approved,  the  closure  process  remains  slow  and  complex 
mainly due to the problem concerning the transposition of EU Directives on public 
procurement  into  Spanish  law,  especially  with  regard  to  changes  in  the  contracts 
being implemented by negotiated procedure.  

Many  projects  are  likely  to  present  problems  of  irregularities  related  to  non 
compliance  with  the  said  Directives,  but  they  have  to  be  completed  pursuant  to 
section  H  of  Annex  II  to  Regulation  (EC)  No.  1164/94.  However,  the  organisation 
and management of such a procedure involves an extremely heavy burden, both for 
the Member State and for the services of the Commission and, given the number of 
procedures that need to be initiated in the case of Spain, there is a case for looking 
into the technical and legal feasibility of a flat-rate solution, for example through a 
flat-rate financial correction. 

3.2.1.  Environment  

Regarding changes in the conditions for granting aid, in 2009 a total of 71 amending 
decisions were approved, almost all of which were within the environmental sector. 
In  general,  the  changes  affect  the  date  of  completion  of  works,  which  is  normally 
extended  to  31.12.2010,  often  accompanied  by  -  usually  minor  -  changes  to  the 

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physical subject of the projects. The changes have had no impact on either the total 
eligible costs of projects or Community assistance. 

Also,  in  terms  of  changes,  we  are  seeing  a  significant  increase  compared  to  2008 
when  only  29  amending  decisions  were  approved.  This  is  probably  due  to  the 
presentation  to  the  COCOF  in  2008  of  the  "Guidelines  for  the  amendment  of 
decisions  taken  by  the  Commission  for  Cohesion  Fund  projects  on  the  basis  of 
Regulation  (EC)  No  1164/1994  as  amended"  (COCOF  08/007/01)  laying  down  the 
"one change rule".  

As  regards  payments  (intermediate  and  final  balance),  a  total  of  162  requests  for 
payments  have  been  implemented  for  an  amount  equivalent  to  EUR  712  million. 
Compared  to  the  year  2008,  this  represents  a  decrease  in  terms  of  payment  claims 
(184 in 2008) and an increase in terms of amounts paid (EUR 644.5 million in 2008). 

3.2.2.  Transport 

In 2009, the Commission services paid particular attention to the implementation of 
projects in the port sector and the programming of the sector for 2007-2013, so as to 
ensure  a  coherent  port  policy  in  respect  of  co-financing  by  both  the  ERDF  and  the 
Cohesion  Fund.  In  fact,  the  effort  of  European  solidarity  in  financing  this  type  of 
transport infrastructure during the period  2000-2006  represents  EUR  1,586  million, 
of  which  EUR  1,170  million  is  from  the  Cohesion  Fund.  An  aid  amount  of 
EUR 981 million  is  planned  for  the  period  2007-2013,  of  which  EUR 479 million 
comes from the Cohesion Fund. 

On  1  April  2009,  A  meeting  was  therefore  held  in  Madrid  with  the  Spanish 
authorities in charge of port policy, at which the latter explained their strategic vision 
of port policy as a combination of local traffic forecasts for which the port authorities 
were  responsible,  and  forecasts  of  international  traffic  and  its  distribution  between 
different ports that depended on "Puertos de Estado". This policy is formalised in a 
plan in which the investments funded must be: consistent with the overall strategy, 
technically appropriate, and financially viable. 

3.3. 

Portugal 

3.3.1.  Environment 

The projects under implementation help to promote, develop and complete the basic 
environment  infrastructure  as  well  as  to  ensure  the  conditions  for  sustainable 
development, environmental protection and management of natural resources. These 
projects relate to the priority sectors of "Water Supply", "Sewerage and Wastewater 
Treatment" and "Urban Waste Management", in line with the reference framework. 

During 2009, nine amending decisions were adopted to make general adjustments to 
the  final  specifications  of  projects,  mostly  in  order  to  include  new  additional 
elements and/or to revise others, and to prolong the end date. 

In  2009,  three  environmental  projects  were  closed:  "ETAR  de  Sobreiras", 
"Tratamento de Resíduos do Baixo Támega" and "Tratamento de Resíduos do Norte 
Alentejano"; this left 56 projects/groups of projects open at the end of 2009. 

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As at December 2009, thirteen environmental projects were already in the process of 
closure. From a financial point of view the most significant projects are "Tratamento 
de  Resíduos  da  Madeira"  (with  a  total  Fund  contribution  of  EUR  72  million), 
"Abastecimento e Saneamento de Águas de Trás-os Montes e Alto Douro – Fase 1" 
(EUR 52 million), "Abastecimento e Saneamento de Águas de Raia, Zêzere e Nabão 
–  Fase  1"  (EUR  45  million)  et  "Abastecimento e Saneamento de  Águas de  Trás-os 
Montes e Alto Douro – Fase 2" (EUR 43 million). 

The other 43 open projects were still being implemented and had not got as far as the 
closure  procedure;  the  most  relevant  projects  from  the  point  of  view  of  the  EU 
contribution are "Abastecimento e Saneamento de Águas de Trás-os Montes e Alto 
Douro – Fase 3", "Abastecimento e Saneamento de Águas de Raia, Zêzere e Nabão – 
Fase  2",  "Abastecimento  e  Saneamento  de  Águas  do  Minho  Lima  –  Fase  2"  et 
"Abastecimento e Saneamento de Águas do Oeste (each intervention receiving a total 
assistance of EUR 50 million from the Cohesion Fund). 

It  should  be  noted  that  three  projects  in  the  sector  of  waste  treatment  –  namely 
"Suldouro", "Braval" et "Resitejo" - have not yet received the advance payment.  

3.3.2.  Transport 

implemented  contribute 

The  projects  being 
the 
Trans-European  Transport  Network  and  enhance  multimodal  articulation  between 
the various means of transport in place, in line with  the objectives of  the  reference 
framework. 

the  development  of 

to 

During the year, three amending decisions were adopted for the same general reasons 
of adjusting the description of the project and extending the date of conclusion. 

In 2009, four transport projects were closed, "Linha do Algarve – Ermidas / Faro", 
Linha do Minho – Lousada c/ Nine", "Eurominas" et "Aerogare de Lajes". At the end 
of the year, seventeen projects were still open. 

Nine  transport  investments  were  at  the  closure  procedure  stage  in  December  2009; 
from a financial point of view the most relevant ones are "Linha do Algarve – Coina 
/ Pinhal Novo" (with a total Fund contribution of EUR 86 million), "Linha do Minho 
– Nine / Braga" (EUR 47 million) et "Porto do Caniçal" (EUR 41 million). 

The other eight open projects were still being implemented and had not yet reached 
the  closure  procedure  stage;  five  of  them  receive  a  contribution  in  excess  of 
EUR 100 million  from  the  Fund,  namely:  "Linha  do  Norte  –  Vila  Franca  /  Vale  de 
Santarém",  "Metro  de  Lisboa  –  Oriente  /  Aeroporto",  "Linha  do  Norte  – 
Entroncamento / Albergaria", "Metro de Lisboa – Baixa Chiado / Santa Apolónia" et 
"Linha do Norte – Quintans / Ovar". 

Technical Assistance 

At  the  end  of  2009,  three  technical  assistance  decisions  still  remained  open.  No 
projects were closed. One amending decision was adopted in 2009. 

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3.4. 

Cyprus 

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

A  survey  of  both  projects  was  carried  out  under  the  partnership  with  the  Cypriot 
Authorities in order to ensure the sound financial management of the Cohesion Fund 
projects. The transport project has been completed and the final payment request is 
expected to be submitted in the coming months. 

As for the environmental sector, it should be emphasized that the implementation of 
the  project  has  been  delayed  due  to  reactions  from  the  residents  of  nearby 
communities,  due  to  the  relocation  of  part  of  the  project.  In  view  of  the  above 
situation  and  the  related  slow  absorption,  this  project  was  the  subject  of  a  specific 
technical  meeting  with  the  Cypriot  Authorities  in  June  2009.  An  updated 
modification  request,  which  included  an  extension  of  the  eligibility  date,  was 
submitted at end 2009 and the amending decision adopted in January 2010 fixed the 
eligibility end date for the expenditure and works at 31.12.2010. 

3.5. 

Czech Republic 

3.5.1.  Environment 

The  implementation  of  the  Cohesion  Fund  projects  in  the  environment  sector  is 
progressing  satisfactorily.  Out  of  38  projects  approved 
the  2000-2006 
programming  period,  ten  were  closed,  one  is  in  the  closure  procedure,  and  closure 
procedures have been initiated for four other projects. The majority of the on-going 
projects are in the final stage of implementation. 

in 

In  2009,  the  Commission  dealt  with  eight  requests  to  amend  the  Commission 
decision. By the end of the year, seven amending decisions had been adopted. Most 
of  the  modifications  concerned  the  extension  of  the  end  date  of  eligibility  and 
changes to the scope of the project. 

At  the  request  of  the  Czech  authorities,  the  services  of  the  Directorate-General  for 
Regional  Policy  launched  an  assessment  to  examine  whether  the  specific  condition 
governing  the  private  operating  contracts  in  the  water  sector,  inserted  in  eleven 
Commission  Cohesion  Fund  decisions,  had  been  met.  The  final  assessment  report 
(June 2009) came up with clear recommendations which the Czech authorities have 
now begun to implement. The proper implementation of the recommendations of the 
Directorate-General for Regional Policy will be an important feature of the closure of 
the eleven environmental projects under the CF mentioned above. 

3.5.2.  Transport 

In the transport sector, implementation is well advanced for most of the projects. In 
2009,  the  closure  procedure  was  launched  for  three  projects.  So  far,  five  out  of 
thirteen approved projects have been closed. No modification requests were received 
in 2009 in the transport sector. 

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3.6. 

Estonia 

3.6.1.  Environment 

The Commission has issued financial decisions for 21 environmental projects under 
the  Cohesion  Fund  (four  of  them  are  technical  assistance  projects).  By  the  end  of 
2009, twelve projects were closed and one was in the process of being closed. Eight 
projects - including one technical assistance project -were being implemented, with a 
total  allocation  of  EUR  192,187,936  (the  average  assistance  rate  under  the 
Cohesion Fund is 76.19% or EUR 146,427,988). 

Due  to  the  overheating  of  the  construction  market,  significant  price  increases 
occurred between 2006 and 2008 which delayed implementation, forcing a slimming 
down of the initial scope of projects and requiring an additional national contribution 
in  order  to  finalise  the  projects.  This  situation  was  reversed  in  mid-2008.  All 
environmental projects that had been delayed in 2007 and 2008 made good progress 
in 2009. All environmental projects are expected to be ready by the end of 2010. 

The  main  problems  hindering  proper  implementation  are  due  to  delays  in  the 
progress of project implementation, which themselves are mainly the result of delays 
in the design and/or construction, and/or cost overruns. 

3.6.2.  Transport 

The  Commission  has  issued  financial  decisions  for  fifteen  transport  projects  under 
the Cohesion Fund (five of which are technical assistance (TA) projects). By the end 
of 2009, eight projects were closed.  

Works have started on the ground on all projects. There have been delays due to cost 
increases, but to a lesser extent than in the environmental sector. No projects are at 
risk of not being implemented by the end of 2010. 

Project 2006/EE/16/C/PT/001 "Eastern Extension of Muuga Harbour" was amended 
in  2009  to  take  into  account  the  impact  of  crises  (changed  demands  in  relation  to 
additional port capacity). 

Technical  assistance  has  helped  prepare  transport  infrastructure  projects  for 
implementation  in  the  new  programming  period.  Two  major  project  applications 
were  developed  in  2009  from  the  TA  projects  financed  with  technical  assistance 
from the Cohesion Fund. 

3.7. 

Hungary 

3.7.1.  Environment 

In  the  environment  sector  there  are  25  Cohesion  Fund/ex-ISPA  projects  (one 
investment  projects).  The  overall 
technical  assistance  project  and  24 
payment/commitment rate is 61%. The contracting rate is mainly above 90% and in 
several cases it is 100%. In the case of four projects, the contracting rate is between 
75%  and  85%:  these  projects  concern  Budapest  (75%),  South  Balaton,  North  East 
Pest and the North Great Plain (86%). 

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Two projects - namely the North East Pest and North Balaton waste projects - are at 
risk  of  not  being  completed  by  31  December  2010.  The  test  run  of  the  wastewater 
treatment  plant  at  the  Debrecen  wastewater  project  will  likewise  extend  beyond 
2010. 

In 2009, the Commission adopted ten (10)  amending Decisions,  mainly  concerning 
the  extension  of  the  final  date  of  eligibility  until  31  December  2010,  cost  savings 
(mainly as a result of changes in the tax law of the Member State) and the inclusion 
of  new  project  elements,  as  well  as  cost  overruns  in  the  case  of  waste  projects. 
Decisions  on  another  five  requests  for  modifications  in  environment  projects, 
submitted by the Hungarian authorities, are to be taken in 2010. 

3.7.2.  Transport 

There  are  twelve  Cohesion  Fund/ex-ISPA  projects  in  the  transport  sector  (three 
technical assistance and nine investment projects – one for air transport (closed), six 
for  road  transport  and  two  for  rail).  The  overall  payment/commitment  rate  is  78%. 
The contracting rate is mainly above 90% and in several cases is as high as 100%. 
One project has been closed. 

The  Hungarian  authorities  have  not  signalled  any  risks  of  non-completion  for  any 
specific projects.  

In 2009, the Commission adopted four modification decisions, mainly concerning the 
extension  of  the  final  date  of  eligibility  until  31  December  2010,  cost  savings 
(mainly due to changes in the tax law of the Member State) and the inclusion of new 
project elements, as well as cost overruns in the case of waste projects. 

3.8. 

Latvia 

3.8.1.  Environment 

The Commission has issued twenty-six Cohesion Fund decisions for environmental 
projects (including four technical assistance projects). In total, out of the twenty-six 
projects by the end of 2009, two projects had been closed, eleven closure files were 
pending  with  the  Commission  (although  three  additional  projects  were  closed  in 
early 2010), and thirteen projects were still ongoing. 

During  2009  the  Commission  authorised  ten  interim  payments  amounting  to 
EUR 23.29 million. 

For six of the pending closure files, financial corrections of EUR 1.58 millions were 
proposed as a result of the wrongful award of supplementary contracts. The hearings 
are due to be held in 2010. 

For one project the amount of works to be implemented by the final date of eligibility 
is  still  very  substantial  and,  as  a  result,  this  is  regarded  as  a  high  risk  project.  The 
Commission is monitoring progress closely. 

In  2009,  the  Commission  approved  three  modifying  decisions.  The  approved 
requests for modifications included the following adjustments: 

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33 

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2002LV16PPE009 "Development of Water Services in Rēzekne City" 

•  Extension of the eligibility date until 31 January 2009; 

•  Adjustments  to  some  of  the  physical  indicators  and  to  the  description  of  the 
project  as  a  result  of  a new technical solution  found  for the rehabilitation of the 
waste water treatment plant. 

2005LV16CPE002 "Hazardous waste management system in Latvia, Stage I" 

•  Extension of the eligibility date until 31 December 2010. 

2004LV16CPE001 "Development of Water Services in Ventspils, Stage II" 

•  Ceiling of the cumulative payments raised to 90%; 

•  Amendments  of  the  physical  indicators  and  description  of  the  project  due  to 

readjustments caused by cost increases. 

3.8.2.  Transport 

The Commission has issued eighteen Cohesion Fund decisions for transport projects 
(including four technical assistance projects). In total, by the end of 2009, seven out 
of  the  18  projects  were  closed,  two  closure  files  were  pending  before  the 
Commission  (one  of  which  was  closed  in  early  2010),  and  nine  projects  were 
ongoing. 

During  2009,  the  Commission  authorised  five  interim  payments  amounting  to 
EUR 18.36 million. 

For one project the amount of works to be implemented by the final date of eligibility 
is still very substantial and, as a result, this project is regarded as a high risk project. 
The Commission is closely monitoring progress. 

In  2009,  the  Commission  approved  one  modifying  decision  which  included  the 
following adjustments: 

2005LV16CPT003 "Reconstruction of access roads to Liepaja Port in Latvia" 

•  Extension of the eligibility date until 31 December 2010; 

•  Amendment  of  the  physical  indicators  and  the  description  of  the  project  in  the 

light of updated information obtained from the detailed design. 

3.9. 

Lithuania 

3.9.1.  Environment 

Twenty-nine  environmental  projects  were  adopted  under  the  Cohesion  Fund  (and 
ex-ISPA) in the period 2000-2006, of which 16 are in the waste water sector, 11 are 
in the solid waste sector, and two are technical assistance projects. 

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34 

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Prior  to  2009,  two  waste  water  projects  were  closed.  No  closure  procedures  were 
completed  during  2009.  The  Commission  services  are  currently  assessing  five 
closures: for one project the closure procedure was initiated in 2008 and for the other 
four projects the closure procedures were initiated during 2009.  

Nine amending decisions were adopted in 2009. These mainly covered reduction of 
scope  due  to  cost  overruns,  adjustment  of  physical  monitoring  indicators  and 
extension of the end date. In addition, six requests for modification were received. 

3.9.2.  Transport 

Twenty-one transport projects were adopted under the Cohesion Fund (and ex-ISPA) 
during the period 2000-2006; eleven of these projects are in the road sector, six are in 
the railway sector, and four are technical assistance projects. 

Seven projects were closed before 2009. The closure procedure initiated in 2008 for 
one transport project was successfully completed in 2009. Two further projects were 
closed in the course of 2009 and one was completed in January 2010. 

In  2009,  Lithuania  submitted  four  requests  to modify  transport  sector  projects.  The 
modifications  included  extension  of  eligibility  deadlines  and  adjustments  of  the 
physical monitoring indicators. 

Technical Assistance 

In  addition  to  the  sectoral  assistance,  co-financing  has  been  granted  to  one  project 
aimed at strengthening the administrative capacity of Cohesion Fund management in 
Lithuania. The project is on-going. 

3.10.  Malta 

3.10.1.  Environment 

The project "Upgrading of Sant'Antnin waste treatment facilities" (CCI No. 2004 MT 
16  C  PE  001)  covers  the  construction  of  a  mechanical  treatment  plant  for  the  pre-
treatment  of  household  waste,  a  material  recycling  facility,  an  anaerobic  digestion 
plant for the treatment of biodegradable waste, as well as the installation of a waste 
water treatment facility (a reverse osmosis plant). The main outcome is the reduction 
of  the  negative  environmental  impact  of  the  waste  cycle,  and  in  particular  the 
reduction  of  the  amount  of  landfilled  waste,  which  is  an  issue  of  the  utmost 
importance for the Malta main island on account of its very high population density 
(1.500 inhabitants / km²). 

The Commission decision approving this project was amended on 13 August 2008 in 
order  to  take  into  account  the  availability  of  more  detailed  designs  suggesting  the 
construction  of  a  new  mechanical  treatment  plant  instead  of  upgrading  the  existing 
one,  as  well  as  a  reverse  osmosis  plant  to  treat  the  waste  water  produced.  The 
modification  of  the  initial  Commission  decision  likewise  extended  the  deadline  for 
the eligibility of expenditure until 31 December 2010.  

The  project  is  making  good  progress,  and  the  Commission's  payment/commitment 
ratio for the project reached the ceiling of 80%; the actual ratio of payments to total 

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eligible costs is 73.26%. The material recycling facility has been completed, and the 
acceptance  certificate  for  the  final  handover  was  issued  on  17  May  2008.  The 
digestion  plant  and  the  mechanical  treatment  plant  are  70%  and  80%  completed 
respectively. 

3.10.2.  Transport 

The  project  "Restoration  and  upgrading  of  sections  of  TEN-T" 
(CCI 
No. 2004 MT 16 C  PT  001)  consists  of  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)  with  the  aim  of  reducing  travel  time, 
lowering  accident  rates  and  transport  costs,  and  facilitating  competitiveness  in  the 
transportation of goods. 

The Commission decision approving this project was modified on 17 October 2008, 
to cover the transfer of funds between the project sections and to extend the deadline 
for  the  eligibility  of  expenditure  until  31  March  2010.  A  request  for  a  second 
modification of the project was submitted to the Commission in July 2009 in order to 
utilise  savings  made  in  the  project  (EUR  519,496.91)  for  the  upgrading  of  an 
additional 350 m stretch of the Mġarr Road. The amending decision was adopted by 
the  Commission  on  5  February  2010.  A  Commission  decision  correcting  an 
the  second  amending  decision  was  adopted  on 
administrative  error 
23 March 2010.  The  new  deadline 
is 
31 December 2010. 

the  eligibility  of  expenditure 

for 

in 

The  physical  elements  of  the  original  project  are  completed;  financial  completion 
(actual  payments  made/total  eligible  costs) is at 92.96%. A new works contract for 
the  reconstruction  of  the  additional  stretch  of  the  Mġarr  Road  was  published  on 
14 July 2009. The Commission's payment/commitment ratio  for the project  reached 
the ceiling of 80%. 

Technical Assistance 

The  aim  of  the  TA  project  is  to  prepare  the  environmental  projects  pipeline  for 
Cohesion  Fund  projects  in  the  period  2007-2013  (mechanical  biological  waste 
treatment plants and storm water master plan). 

The  Commission  decision  approving  this  project  was  amended  on  30  July  2008  in 
order to take into account delays in the identification of potential sites for the waste 
treatment  plant  and  the  need  to  comply  with  obligations  arising  out  of  Directive 
2001/42/EC.  Consequently,  the  EIA  component  was  removed  from  the  first  sub-
project and SEA was included in the second sub-project. In addition, the deadline for 
the eligibility of expenditure has been extended to 31 December 2010. 

The  project  is  making  good  progress  and  the  Commission's  payment/commitment 
ratio for the project is 80%; the actual realised payments account for 65.1% of total 
eligible costs. 

3.11. 

Poland 

In  2009,  the  Commission  adopted  14  amending  decisions  granting  assistance  from 
the Cohesion Fund – eight in the environment sector and six in the transport sector. 

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In  addition,  the  Commission  adopted  eight  corrigenda.  These  mostly  concerned 
changes  in the physical  scope, the end date of  the project and raising the threshold 
for interim payments from 80% to 90%. 

A substantial number of projects will not be finalised until 2010, which means that 
the bulk of closures can be expected in 2011 and 2012. So far, six projects have been 
closed  and  thirteen  projects  were  under  closure  procedures  at  the  end  of  2009. 
Numerous  projects  in  both  sectors  posted  significant  cost  overruns  which,  in  total, 
represented  approximately  one  third  of  the  entire  Cohesion  Fund  allocation  for 
Poland.  In  both  sectors  the  national  authorities  secured  the  additional  financing  for 
projects  affected  by  cost-overruns,  with  the  exception  of  three  projects  in  the 
environment  sector  and  one  transport  project.  For  the  three  environmental  projects 
the  managing  authority  has  requested  a  reduction  of  the  physical  scope.  For  the 
transport project the request still has to be submitted.  

On  the  other  hand,  there  were  twenty-six  projects  which  achieved  cost-savings 
totalling EUR 26 million of the Cohesion Fund grant. 

Two  EC  audits  carried  out  on  Cohesion  Fund  projects  in  2005  and  2006  detected 
systemic  errors  in  the  area  of  public  procurement.  The  Directorate-General  for 
Regional  Policy  sent  a  final  position  letter  on  7  December  2009  (English  language 
version sent on 31 July 2009). According to working contacts until the end of 2009, 
the  Polish  authorities  do  not  agree  with  the  financial  corrections  proposed  by  the 
Directorate-General  for  Regional  Policy  which  add  up  to  EUR  23  million  for  the 
twenty audited projects, but which will affect the overwhelming majority of the 130 
Cohesion Fund projects in Poland.  

At the end of 2009, there was only one project left with an outstanding issue relating 
to the Environmental Impact Assessment (EIA). 

In 2009, the Commission authorised payments amounting to EUR 836.8 million. 

3.11.1.  Environment 

The  level  of  contracting  exceeded  120%  of  the  originally  estimated  costs  in 
environmental  projects,  which  represents  95%  of  the  total  expenditure  when  cost 
overruns are taken into account. The physical and financial progress on the ground, 
aggregated for the sector, was calculated at around 81% and 76% respectively. More 
than half of the projects reached the threshold for interim payments at the end of the 
reporting period.  

Two closures were ongoing for an investment project in the environment sector. 

3.11.2.  Transport 

The level of contracting was over 118% of the originally estimated cost for transport 
projects,  or  87%  if  the  cost  overruns  are  taken  into  account.  The  physical  and 
financial  progress  aggregated  for  the  sector  was  about  75%  (both  physical  and 
financial).  All  except  four  transport  projects  reached  the  threshold  for  interim 
payments. 

EN 

37 

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The  closure  procedure  for  eight  investment  projects  was  ongoing  in  the  transport 
sector. 

Technical assistance 

Three closures were ongoing for technical assistance projects.  

3.12. 

Slovakia 

3.12.1.  Environment 

Considerable  progress  was  recorded  in  the  implementation  of  environmental 
Cohesion Fund projects during 2009. Delays in a number of projects have now been 
reduced  thanks  to  the  measures  taken  following  the  action  plans  introduced  by  the 
Managing Authority on the Commission's recommendation. It seems likely that, as a 
result of common efforts, all environmental projects will be physically completed by 
31 December 2010. 

Financial closure was completed for four projects during 2009 - three infrastructure 
projects  (Nitra,  Martin,  Považská  Bystrica)  and  one  technical  assistance  measure  - 
and  all  four  were  initiated.  However,  another  four  environmental  infrastructure 
projects (Poprad, Zvolen, Liptov and South East Zemplín) were interrupted owing to 
additional  checks  on  procurement  procedures.  Closure  procedures  also  started  in 
December  for  another  two  environmental  projects  (Komárno  and  technical 
assistance).  Amending  decisions  were  adopted  for  three  infrastructure  projects 
(Galanta,  Šamorín,  Banská  Bystrica)  in  order  to  extend  the  eligibility  date  and  to 
adjust physical indicators. Another request for modification was received relating to 
the adjustment of physical indicators of the Prešov project. 

3.12.2.  Transport 

Physical  implementation  continued  to  advance  satisfactorily  during  2009.  For  one 
road  project,  the  D1  Mengusovce  -  Jánovce  motorway,  a  modified  decision  was 
approved in order to extend the end date of eligibility until December 2010 so as to 
also include the period for notification of defects. 

Two  railway  projects  were  submitted  for  closure:  modernisation  of  the  Rail  Track 
Šenkvice-Cífer and Stations  Rača-Trnava and modernisation of the  section  Trnava-
Piešťany.  

All Cohesion Fund transport projects will be physically completed in 2010. 

3.13. 

Slovenia 

The Commission did not approve any new projects for Slovenia in 2009, as the full 
allocation had been committed by 31 December 2006. The following table presents 
the  total  number  of  projects  and  the  amounts  committed  by  sector  for  the  entire 
period 2000-2006: 

Number of projects 
adopted in 2000 - 
2006 

Total commitments 
(EUR million) 

% of total 
commitments 

EN 

38 

   EN 

 
 
Environment 

Transport 

Technical 
Assistance  

Total CF 

16

8

4

28

129.5 

122.1 

2.7 

50.9

48.0

1.1

254.3 

100%

In terms of commitments, the desirable 50/50 balance between the two main sectors 
of  intervention,  namely  environment  and  transport,  was  achieved  for  the  period 
2000-2006. 

Two amending decisions were approved in 2009, neither of which had an impact on 
the forecasts of financial allocations. 

3.13.1.  Environment 

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

In 2009, the last contract for works was successfully concluded bringing to an end a 
period  of  several  years  which  had  been  characterized  by  delays  in  public 
procurement.  As  many  projects  are  set  up  as  design-build,  the  actual  construction 
lagged  several  months  behind  the  date  of  the  contract  signature.  All  projects  made 
significant progress, both physically and financially. Construction was completed on 
a  considerable  number  of  projects  and  the  trial  operation  phase  for  infrastructure 
began. 

Four  completed  projects  in  the  water  sector  were  closed.  Two  further  investment 
projects and one technical assistance project entered the closure stage. In compliance 
with  the  relevant  procedures,  closure  of  these  projects  and  processing  of  final 
payments is due in 2010. 

3.13.2.  Transport 

In  2003  the  national  authorities  defined  a  National  Cohesion  Strategy  for  the 
transport  sector  which  identified  the  objectives  of  its  transport  strategies  and  the 
projects  to  be  financed  through  the  Cohesion  Fund.  It  involves  the  country 
establishing  itself  as  a  maritime  transit  country  within  the  European  Union  and 
marketing  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, which involves the completion 
of  the  motorway  network,  upgrading,  modernisation  and  completion  of  the  rail 
network and increasing the range of logistical services. 

The  Cohesion  Fund  co-finances  six  railway  projects  and  two  motorway  projects  in 
the  transport  sector.  Following  reports  of  delays  due  to  public  procurement  in 
previous  years,  all  railway  projects  in  2009  were  fully  contracted  and  made 

EN 

39 

   EN 

 
satisfactory  progress  in  physical  and  financial  terms  (all  projects  reached  the  80% 
ceiling). In 2010 two already completed transport projects are due to be closed. 

3.14.  Bulgaria 

3.14.1.  Environment 

Despite  slow  progress  in  2009,  the  implementation  of  the  25  Cohesion  Fund/ 
ex-ISPA environmental projects (19 in the water sector – two in the waste sector – 
three technical assistance and one in the energy sector) was below target making it 
clear that a number of them will not be completed by the end of the eligibility period, 
i.e. 31 December 2010. So far not a single project has been completed. 

In 2009, the Commission adopted six Modification Decisions, mainly concerning the 
extension of the final date of eligibility until 31 December 2010 and the inclusion of 
new project components in order to absorb accumulated savings. 

Payments  for  two  projects,  "Construction  of  Flue  Gas  Desulphurisation  Plants  at 
Units 5 & 6 of TTP Maritsa East 2 EAD" and "Kardjali Regional Waste Management 
Center" were interrupted in 2009. 

3.14.2.  Transport 

The  implementation  of  the  eleven  transport  projects  –  five  major  projects  and  six 
technical  assistance  projects  –  was  speeded  up  slightly  in  2009.  Nevertheless,  this 
acceleration  will  not  be  sufficient  to  make  up  the  serious  delays  that  these  projects 
had  accumulated  during  the  previous  years  of  implementation.  As  a  result,  some 
projects will inevitably lose Cohesion Fund assistance when eligibility comes to an 
end on 31 December 2010. 

In the transport sector one major project was closed in 2009, while two others were 
successfully  completed.  Although  the  procedures  for  closing  the  two  projects  have 
been initiated, the process will not be finalised in 2010 due to delays in submission 
of the closure documents by the national authorities. 

Decisions were taken in 2009 to modify four technical assistance projects for which 
the  Bulgarian  authorities  had  submitted  modification  requests.  The  requested 
modifications concern the extension of the final date of eligibility and the inclusion 
of new components in the projects in order to absorb the accumulated savings. 

The suspension of intermediate payments for two projects in the road sector has been 
lifted and the related financial correction has been implemented. 

3.15.  Romania 

Article 28 of the protocol concerning the conditions and arrangements for admission 
of the Republic of Bulgaria and Romania to the European Union from the Treaty of 
Accession of Bulgaria and Romania provides for ISPA measures to be considered as 
Cohesion  Fund  measures  and  become  subject  to  Council  Regulation  (EC)  No 
1164/94 of 16 May 1994 establishing a Cohesion Fund, as amended. 

EN 

40 

   EN 

 
In total sixty-three Cohesion Fund projects were approved by the Commission in the 
2000-2006 programming period for Romania: thirty-six were for the environmental 
protection  related  measures  in  the  water  resources  management  and  waste 
management sectors, twelve projects were in the transport sector covering mainly rail 
and roads, and fifteen technical assistance projects linked both the environment and 
transport sectors.  

Considering the 2000-2006 programming period, the total amount of grant decisions 
for  Romania  is  almost  EUR  2,0361  million.  These  commitments  are  shared  evenly 
between the environment sector (50.4%) and the transport sector (49.6%), including 
technical assistance related to these sectors.  

The implementation of Cohesion Fund projects is still ongoing, with several projects 
experiencing delays, but with some measurable progress being achieved during 2009. 
Three  projects  have  made  very  slow  progress,  which  is  reflected  by  payments  that 
are  20%  or  less  than  the  amount  of  the  committed  grants,  partly  because  these 
projects were adopted relatively late (mainly in 2005 and 2006). Nevertheless, this is 
a  substantial  improvement  compared  to  2008,  when  there  were  10  projects  with 
payments that were only 20% or less.  

For  twenty-three  projects  the  Commission  adopted  the  corresponding  amending 
decisions in 2009, mostly to extend the end dates of their eligibility. 

Total payments from the European Commission to Romania fell by 6% compared to 
2008  (from  EUR  319.7  million  to  EUR  300.7  million),  bringing  the  total 
accumulated  payments  to  EUR  1,392  million.  Almost  all  of  the  total  payments  in 
2009 were interim payments.  

Measures  to  improve  the  management  capacity  of  the  responsible  stakeholders  are 
being  planned,  which  should  result  in  an increased  number  of  signed  contracts  and 
progress  on  the  ground.  However,  even  this  improvement  still  leaves  a  substantial 
amount  of  EU  funds  -  almost  EUR  1,109.7  million  –  to  be  absorbed  and  justified 
through eligible expenditure by the end of 2010. 

3.15.1.  Environment 

Payments from the Commission to the environment-related infrastructure projects in 
2009  amounted  to  EUR  193.24  million,  showing  a  clear  increase  of  69.4%  over 
2008.  Additional  projects  reached  payment  levels  that  were  more  than  80%  of  the 
existing EU funding commitment, signifying that works are either well under way or 
have  actually  been  completed.  In  total,  thirty-four  projects  reached  payments 
exceeding 50% of the existing EU funding commitment, which left only four projects 
with a 50% threshold. 

Technical assistance 

There  are  six  technical  assistance  projects  linked  to  the  environment  sector  which 
focus  mainly  on  project  preparation  and  institutional  strengthening.  Four  of  these 
have  been  completed  and two have already been closed from a  procedural  point of 

1 

Sign "." stands for separating decimals and sign "," for thousands.  

EN 

41 

   EN 

 
                                                 
view. One of the two ongoing projects reached a payment level of 80% and the other 
75%,  indicating  that  project  implementation  is  well  advanced.  Payments  from  the 
Commission to technical assistance projects in 2009 amounted to EUR 7.37 million.  

3.15.2.  Transport 

Payments  from  the  Commission  to  transport  projects  in  2009  amounted  to 
EUR 95.21 million − a decrease of about 22% compared to 2008. In addition, three 
projects  reached  payment  levels  exceeding  50%  of  the  existing  EU  funding 
commitment.  

Technical assistance 

There are eight technical assistance projects in the transport sector focusing mainly 
on project preparation. Two of them have been completed and one is already closed 
from the procedural point of view. One new project has payments that exceed 50% of 
the  existing  commitments.  Payments  from  the  Commission  for  technical  assistance 
projects  in  2009  amounted  to  EUR  4.44  million,  which  is  a  decrease  of  67% 
compared to the situation in the previous year (2008).  

There  is  one  technical  assistance  project  for  supporting  the  meetings  of  the 
monitoring committee. 

4. 

MONITORING, INSPECTIONS, FINANCIAL CORRECTIONS AND IRREGULARITIES 

4.1.  Monitoring: committees and missions 

4.1.1.  Greece 

A  meeting  of  the  monitoring  committee  was  held  in  June  2009  in  Thessaloniki, 
during which all current Cohesion Fund projects were discussed. In a spirit of good 
collaboration with the Greek authorities, a series of technical meetings and site visits 
took place to ensure close monitoring and follow up, identify the critical issues, give 
a further boost to implementation and identify actions that will ensure that all of the 
funds are utilised by 2010. 

4.1.2.  Spain 

Monitoring Committees 

The  meeting  of  Monitoring  Committee,  which  reviews  projects  co-financed  by  the 
Cohesion Fund, was held in Madrid on 22 April 2009. 

To  prepare  the  meeting,  national  authorities  sent  the  reports  reflecting  the  state  of 
implementation  as  at  31  December  2008  for  all  decisions  (covering  a  project  or  a 
group of projects) that were being implemented on that date. From among these, the 
managing  authority  -  in  partnership  with  the  Commission  -  selected  45  projects 
which,  by  virtue  of  their  particular  situation,  were  subject  to  monitoring  and  a 
specific analysis during the sessions of this Committee. 

EN 

42 

   EN 

 
In  the  course  of  the  meeting,  the  Commission  services  sent  all  participants  the 
following information: 

Given the large number of applications for the amendment of decisions taken by the 
Commission, it was recalled that, although the guidelines on the amendments to the 
Cohesion  Fund  decisions  presented  to  the  Committee  of  the  Coordination  of  the 
Funds  (COCOF)  on  27  February  2008  allow  greater  flexibility  for  the  second 
amendments,  these  latter  amendments  are  not  automatic  and  must  meet  the 
conditions stipulated by December 2010. 

The  need  to  submit  all  closure  documents  (final  payment  claim,  final  report,  audit 
declaration)  within  the  established  deadlines  was  also  recalled.  In  fact,  current 
practices  reveal  significant  delays  in  the  submission  of  certain  documents,  and  of 
audit declarations in particular.  

Lastly,  the  Commission  wished  to  discuss  the  Commission  Regulation  (EC)  No 
621/2004 of 1 April 2004 concerning publicity measures. Committee members were 
reminded of the vital importance of effective information and publicity measures, in 
order to give greater visibility to the CF projects and raise awareness of the role that 
the  European  Union  is  playing  through  the  Cohesion  policy.  The  Commission 
thanked the Spanish authorities for the "information and publicity days" organised in 
2007  by  Puertos  de  Estado  and  by  the  national  railway  infrastructure  company 
(ADIF) in 2008 and asked the Ministry of Environment to organise a similar day in 
2009 for the projects that it manages. 

Monitoring missions 

Three technical meetings took place in Madrid on 19 February, 3 April and 17 June 
2009  respectively.  Represented  at  the  meeting  were  the  managing  authority,  the 
certification  authority  and  the  Directorate-General  for  Regional  Policy.  Their  aim 
was to address the problems faced during the day-to-day management of projects and 
the measures required to overcome them. One of the topics widely discussed was the 
analysis  of  closure  dossiers of projects with proposed financial corrections so as to 
prepare for a hearing under section H of Annex II to Regulation (EC) No 1164/94. 

In  addition,  four  monitoring  missions  were  conducted  in  2009,  during  which  ten 
projects  were  visited.  The  first  mission  was  the  follow-up  meeting  with  port 
authorities  mentioned  above,  which  allowed  the  Commission  to  visit  the  ports  of 
Barcelona, Valencia and Sagunto on 17 and 18 September 2009. 

The second mission was a visit to the projects CCI 2005ES16CPE032 (desalination 
of  seawater  of  Santa  Eulalia)  and  CCI  2002ES16CPE030  (waste  water  treatment 
plant of San Antonio) on 15 November 2009, in order to check the progress of these 
projects on the ground as well as to verify the related certified expenditure. 

The  third  mission  took  place  on  25-27  November  2009  and  concerned  the  projects 
CCI  2002ES16CPE006  (desalination  of  seawater  Tordera),  CCI  2001ES16CPE054 
(EDAR of Granllers) and CCI 2002ES16CPE064 (improved treatment of residues in 
Tarragona).  

EN 

43 

   EN 

 
The visits were necessary in order to verify certain environmental conditions in the 
first project, to investigate a problem of description of the works in the second case 
and to ensure that the project was functioning correctly in the last case. 

The fourth and last visit took place on 26 and 27 November 2009, to see and discuss 
the project CCI 2000ES16CPE140 (underground containers for selective recycling in 
Ciudad Real) and CCI 2005ES16CPE020 (wastewater treatment in Tablas Daimiel). 
For the first project, the purpose of the visit was to verify certain points included in 
the  Winding-Up  Declaration  to  accelerate  project  closure,  whereas  -  in  the  second 
case - the objective was to discuss on the ground a request by the Member State for 
an amendment to the decision. 

4.1.3.  Portugal 

Monitoring Committees 

Pursuant to the internal regulation of the Portuguese Monitoring Committee relating 
to  the  Cohesion  Fund  infrastructures  for  the  2000-2006  period,  these  meetings  are 
held twice a year. 

The two 2009 Monitoring Committee meetings were held in Lisbon, the first taking 
place on 14 May 2008 and the second on 27 November 2008.  

Given  that  it  has  been  impossible  since  the  end  of  2006  to  approve  any  financial 
changes,  the  aim  of  the  Committee  was  to  follow  up  the  implementation  of  the 
projects, and to resolve problems related to deadlines, closures and audits, as well as 
to examine the prospects for completing their implementation in the short time that 
remained available. At the end of 2009, of the 54 projects that had not yet got as far 
as  the  closure  procedure,  38  investments  had  a  closing  date  of  31  December  2010 
and  only  22  investments  had  received  Fund  payments  below  50%  of  the  total  EU 
contribution. 

Both  meetings  of  the  Monitoring  Committee  were  preceded  by  technical  meetings 
between  the  Cohesion  Fund  national  authorities  and  the  Commission,  in  order  to 
discuss the main outstanding issues, such as closure of projects, amending decisions 
and procedures that were interrupted for various reasons. 

Monitoring missions 

In  the  course  of  2009,  the  Commission  services  visited  four  projects  ("Saneamento 
de Águas de Braga", "Abastecimento e Saneamento de águas do Minho Lima – Fase 
4", "Tratamento de Resíduos do Grande Porto – LIPOR" and "Saneamento de Águas 
da Ria de Aveiro – Barrinha de Esmoriz") in order to take note of their progress and, 
in  certain  cases,  to  discuss  with  the  national  authorities  any  technical  or  legal 
problems which had arisen. 

4.1.4.  Cyprus 

A meeting  of  the Monitoring  Committee for the Cohesion Fund took place in June 
2009  in  Cyprus.  Progress  in  implementing  the  two  Cohesion  Fund  projects  was 
presented, while other technical issues related to monitoring and reporting were also 
addressed.  In  addition,  a  specific  technical  meeting  for  the  environmental  project 

EN 

44 

   EN 

 
(solid  waste  management  covering  the  regions  of  Larnaka-Ammochostos)  was  also 
held, during which a detailed presentation was made of the progress achieved. 

4.1.5.  Czech Republic 

In general, meetings of the Cohesion Fund Monitoring Committee are held twice a 
year.  In 2009,  the  first  meeting  of  the  Monitoring  Committee  took  place  on  23-24 
June  2009  and  the  second  one  was  held  on  15 December  2009.  Discussions  in  the 
Monitoring  Committees  are  organised  on  a  project-by-project  basis,  using  the 
monitoring  sheets  and  allowing  substantial  time  for  the  national  authorities, 
beneficiary and the Commission to clarify any outstanding issues. Issues of a general 
nature are discussed in the Core Group meeting with the national authorities.  

No monitoring missions for ongoing projects were carried out in 2009. 

4.1.6.  Estonia 

There were no major changes in the management and control system. A contract of 
confidence  was  signed  on  12  February  2008  between  the  Commission  and  the 
National  Audit  Authority.  One  monitoring  committee  meeting  was  held  in  2009 
covering  implementation,  quality  of  spending,  financial  progress  and  publicity 
actions. 

The  situation  with  regard  to  time-lags  in  implementation  has  been  continuously 
monitored. The Commission has mainly highlighted the need to learn from the past 
and  to  try  to  improve  and  build  on  existing  experience  for  the  2007-2013 
programming period. 

4.1.7.  Hungary 

Monitoring committees 

Two  Monitoring  Committee  meetings  were  held,  in  April  and  October  2009 
respectively.  Horizontal  issues  and  progress  in  individual  projects  were  discussed. 
None of the projects reported non-completion by the end of 2010. Beneficiaries were 
confident of completing their projects by this deadline, except Debrecen (where the 
test run period is to be extended until mid 2011) and Budapest wastewater projects. 
The latter will most probably be extended until 2012. 

Monitoring missions 

The  Directorate-General  for  Regional  Policy  took  part  in  a  five-day  monitoring 
mission,  involving  the  European  Investment  Bank,  and  visited  six  wastewater 
projects and one drinking water project. 

4.1.8.  Latvia 

In 2009, two Cohesion Fund Monitoring Committees took place: 

•  The  10th  Cohesion  Fund  Monitoring  Committee  meeting  was  held  in  Riga  on 

24 March 2009; 

EN 

45 

   EN 

 
•  The  11th  Cohesion  Fund  Monitoring  Committee  meeting  was  held  in  Riga  on 

15 October 2009. 

The meetings were used for monitoring and assessing progress in implementation, as 
well  as  for  discussions  on  any  problems  that  were  encountered  and  on  horizontal 
issues  such  as  financial  implementation,  publicity,  and  technical  assistance  for  the 
Cohesion Fund Managing Authority.  

In  both  meetings  the  following  problematic  projects  were  closely  monitored  and 
discussed:  2004LV16CPT002  "Track  renovation  on  stages  of  the  East-West  rail 
corridor  in  Latvia",  2001LV16PPT006  "Modernisation  of  rail  signalling  systems" 
and  2005LV16CPE001  "Development  of  the  district  heating  supply  system  in 
Ventspils". 

4.1.9.  Lithuania 

Two  Monitoring  Committee  meetings  took  place  in  Lithuania,  on  28-29  April  and 
21-22 October 2009. The committee examined the progress reports submitted by the 
national  authorities  and  discussed  the  implementation  of  all  ex-ISPA  and  Cohesion 
Fund projects.  

Four technical meetings of the Cohesion Fund took place during 2009:  

March 2009 (Mission to Vilnius, Lithuania) – Meeting with the Managing Authority 
to discuss the proposed amendment of the TA project 2001LT16PPA002;  

June 2009 (Mission to Luxembourg) - Trilateral meeting concerning the preliminary 
findings by the Court of Audit during their review of 10 CF projects in Lithuania;  

July  2009  (Mission  to  Panevezys,  Lithuania)  -  Monitoring  visit  to  a  waste  project 
2005LT16CPE003,  combined  with  a  meeting  on  Cohesion  Fund  Major  Projects  of 
2007-2013;  

November  2009  (technical  meeting  in  Brussels,  Belgium)  -  Meeting  with  the 
Managing Authority and National Audit Authority on the issues related to the closure 
of Cohesion Fund projects. 

4.1.10.  Malta 

Monitoring Committees 

Meetings  of  the  Monitoring  Committee  for  all  three  Cohesion  Fund  projects  were 
held  on  11 May 2009  and  on  20  November  2009.  The  Commission  representatives 
attended both Monitoring Committee meetings.  

Annual  progress  reports  were  submitted  for  all  three  projects  under  Article  F.4  of 
Annex II to Council Regulation (EC) 1164/1994, as amended.  

Monitoring missions 

No monitoring missions took place in 2009. 

EN 

46 

   EN 

 
4.1.11.  Poland 

Monitoring Committees 

Two meetings of the Cohesion Fund Monitoring Committee were held in 2009 (on 
26  May  and  2 December).  The  meetings  were  preceded  by  meetings  of  working 
groups  for  the  Environment  sector  (on  22-23  June  and  28-29  October)  and  the 
Transport  sector  (on 28  April  and  3  November).  The  meetings  were  attended  by 
representatives of the managing authority, the paying authority, intermediate bodies, 
implementing  agencies,  social  and  economic  partners  and,  in  the  case  of  working 
groups, also the final beneficiaries of ongoing projects. 

The meetings were dedicated to a review of the progress in implementing individual 
projects.  In  addition,  the  following  horizontal  issues  were  discussed:  payment  rate 
and financial forecasts, cost overruns, EIA conditions, closure forecast, modifications 
to projects in terms of scope and timeline, and delays in implementation. Particular 
attention was paid to the monitoring of projects that were making poor progress and 
to the results of the audits performed by the Commission in 2005 and 2006. For more 
than  one  third  of  the  overall  number  of  projects  the  managing  authority  submitted 
proposed  modifications  concerning  the  end  date,  physical  scope  and  threshold  for 
interim payments to be presented to the Commission by the end of 2009.  

Monitoring missions 

No monitoring missions specific to the Cohesion Fund were carried out. 

4.1.12.  Slovakia 

Monitoring Committees 

Two monitoring committee meetings were held in 2009: in Štrbské Pleso, Northern 
Slovakia  (March)  and  Vyhne,  Central  Slovakia  (October).  The  monitoring 
committees reviewed the state of progress of all current ex-ISPA and Cohesion Fund 
projects. 

In  addition,  key  horizontal  issues  were  discussed  at  these  meetings:  closure  of 
projects,  quality  of  final  reports,  impact  of  financial  corrections,  and  the  need  to 
apply  lessons  learned  from  the  2000-2006  period  in  future  major  projects.  It  was 
suggested  that  the  Managing  Authority  should  undertake  a  review  of  positive  and 
negative  aspects  of  project  implementation  in  the  period  2000-2006.  It  was  also 
recommended  that  appropriate  publicity  should  be  given  to  projects  completed  and 
successes  achieved  (through  press  conferences,  publicity  leaflets,  etc.)  in  order  to 
emphasize the benefits of the EU's cohesion policy.  

Monitoring missions 

The  geographical  unit  made  a  site  visit  to  the  Mengusovce-Jánovce  project,  which 
had been identified as a project at risk of non-completion by end-2010. However, the 
mission  proved  the  contrary,  i.e.  the  project  was  on  track  to  be  completed  by  mid 
2010  and,  consequently,  a  request  for  modification  of  this  project  was  able  to  be 
discussed on site. In addition, on the occasion of the same March 2009 monitoring 
committee meeting, a visit was made to the completed Poprad wastewater treatment 

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project.  During  the  October  2009  monitoring  committee,  water  supply  and  waste 
water  treatment  projects  in  Banská  Bystrica  and  Veľký  Krtíš  were  visited,  both  of 
which were nearing completion. 

4.1.13.  Slovenia 

Monitoring Committees 

Two Cohesion Fund Monitoring Committee meetings were held in Slovenia in 2009. 

The  meetings  took  place  on  21  April  and  4  December  2009  and  focused  on  the 
ongoing  implementation  of  projects,  delays  in  public  procurement,  cost  overruns, 
project closure and publicity. The meetings included a detailed review of all ongoing 
environment and transport projects, as well as a discussion of financial data including 
payments and payment forecasts. The Commission highlighted in particular the need 
to  further  accelerate  the  implementation  of  those  projects,  which  are  experiencing 
substantial delays.  

Monitoring missions 

One project visit was carried out as part of the April Monitoring Committee meeting 
in 2009. The two projects visited (one for waste water and one for a railway) showed 
satisfactory progress towards completion. 

4.1.14.  Bulgaria 

In  2009  two  Monitoring  Committee  meetings  took  place  and  a  number  of  projects 
site-visits  were  made.  The  meetings  of  the  committee  were  divided  into  two  parts: 
project  and  sector  based  technical  discussions,  followed  by  the  official  meeting  to 
address horizontal issues and draw conclusions from the technical discussions. 

National  authorities  were  asked  to  prepare  Action  Plans  indicating  the  steps  to  be 
taken in order to speed up project implementation. Furthermore, they were requested 
to estimate and secure the national funds that might be needed in order to complete 
the projects after the Cohesion Fund eligibility period had expired. 

In order to enhance co-ordination and co-operation between Bulgaria and Romania, a 
Monitoring Sub-Committee for the construction of the Danube Bridge was set up at 
the initiative of the European Commission, involving all relevant parties with a stake 
in the construction of the Bridge. Two meetings were held in 2009, one in Bucharest 
and the other in Sofia. 

4.1.15.  Romania 

Monitoring Committees 

Two  meetings  of  the  Cohesion  Fund  Monitoring  Committee  for  the  former  ISPA 
environment  and  transport  projects  were  held  in  combined  sessions  in  2009.  Some 
visits were also made to project sites. 

The Committee discussed project specific issues, in particular for those projects that 
were regarded as more critical in terms of the progress of their implementation and 

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the  horizontal  aspects  of  implementation  that  were  currently  affecting  overall 
implementation  as  a  whole,  such  as  low  rates  of  payment  and  the  need  to  improve 
payment  forecasts  and  contract  management  in  order  to  achieve  a  better  level  of 
expenditure to ensure timely completion of projects and full absorption of EU funds. 
Discussions also covered public procurement, contract management, projects at risk 
of non-completion by the current end dates, problems of land acquisition which were 
one of the reasons for delays in some of the transport projects, cost overruns and the 
corrective  measures  planned  by  the  Romanian  authorities  to  improve  overall 
implementation and absorption of EU funding.  

Monitoring missions 

Specific  missions  were  conducted  for  one  of  the  transport  projects  relating  to 
navigation  on  the  Danube,  for  which  a  specific  monitoring  subcommittee  had  been 
set up. 

4.2. 

Audits and financial corrections 

In 2009, the focus of the audit services for the 2000-2006 period was on preparing 
for closure, with missions to review the work of national winding-up bodies and the 
practical  closure  of  the  Cohesion  Fund  projects  for  the  2000-2006  period  via  an 
analysis of the winding-up declarations.  

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

The closure enquiry by the Cohesion Fund for 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  verification,  resulting  in  ineligible  expenditure  and  breaches  of  public 
procurement rules. The follow-up and financial correction procedures resulting from 
the closure enquiry were all concluded by the end of 2009, apart for one remaining 
case (in Spain) which is due to be finalised in spring 2010.  

Audit work for Programming period 2000-2006 EU 16 (EU 10 + EU 4 + EU 2) 

For EU-14 Member States, three audit missions for the review of winding-up bodies 
were  carried  out  by  the  Directorate-General  for  Regional  Policy  in  2009  (in  Spain, 
Portugal,  and  Greece)  in  order  to  check  the  preparations  of  Member  States  for 
closure  and  to  identify  and  mitigate  related  risks.  In  addition,  six  further  audit 
missions were carried out (one each in Bulgaria, Czech Republic, Greece, Hungary, 
and two in Romania). 

For  the  closure  of  2000-2006  Cohesion  Fund  projects,  the  audit  services  of  the 
Directorate-General  for  Regional  Policy  examined  the  winding-up  declarations 
submitted by the Member States.  

Other audit work undertaken for the Cohesion Fund included the examination of the 
national  annual  control  reports  under  Article  12  of  Regulation  (EC)  No  1386/2002 
and the review of national system audit reports submitted to the Commission. By the 
end of 2009, the majority of reports had been analysed, and replies had been sent to 
the  Member  States  with  observations  and,  where  necessary,  requesting  additional 

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information  in  order  to  be  able  to  extract  as  much  assurance  as  possible  from  the 
results of national audit work.  

Annual  coordination  meetings  are  held  bilaterally  between  the  Commission  and 
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 covering audit work conducted in the year 2008 were held during the spring 
and summer of 2009. The annual bilateral coordination meetings covering audit work 
carried out in 2009 were held in spring and summer 2010. 

Impact of controls 

Cohesion Fund suspension decisions and financial corrections in 2009  

As  part  of  its  supervisory  role,  the  Directorate-General  for  Regional  Policy 
established  a  policy  in  2008  to  ensure  more  rapid  adoption  of  decisions  for  the 
suspension of payments and financial corrections when serious systems weaknesses 
are detected. This more rigorous approach was continued in 2009. 

The  overall  figure  of  financial  corrections  for  Cohesion  Fund  in  2009  was 
approximately  EUR  70  million,  compared  to  approximately  EUR  92.7  million  in 
2008. This increases the total cumulative financial corrections for the Cohesion Fund 
in the period 2000-2009 to EUR 227 million. No suspension decisions were adopted 
for Cohesion Fund projects in 2009. 

At the end of 2009, suspension and correction procedures were in progress for a total 
of  approximately  99  Cohesion  Fund  projects  (2000-2006)  for  an  amount  of  around 
EUR 153 million.  

Table 5: Cohesion Fund financial corrections in 2009 by period and country (in EUR)2 

Table: Cohesion Fund financial corrections in 2009 by period and country 
(in EUR)  

(Includes corrections made by Member States, following agreement under the 
relevant procedure or as a result of implementation of action plans - which may 
cover more than one programme - and formal Commission decisions.) 

(Includes corrections implemented as a result of Commission audit work, but 
also  corrections  carried  out  in  the  course  of  implementation  or  closure  of 
projects) 

Member State  

Cohesion Fund 

TOTAL 

Period  

Period  

2 

Includes corrections made by Member States, following agreement under the relevant procedure or as a 
result  of  implementation  of  action  plans  and  formal  Commission  decisions.  Includes  corrections 
implemented  as  a  result  of  Commission  audit  work  but  also  corrections  carried  out  in  the  course  of 
implementation or closure of projects.  

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2000-2006 

1994-1999 

Bulgaria  

Cyprus  

2.413.615 

- 

Czech Republic  

113.008 

Estonia  

Greece  

Spain  

- 

2.452.289 

21.592.738 

4.771.861 

Hungary  

40.497.367 

Ireland  

Latvia  

- 

- 

Lithuania  

649.156 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

205.714 

4.987.861 

8.067.402 

- 

- 

- 

- 

- 

Malta  

Poland  

Portugal  

Romania  

Slovenia  

Slovakia  

TOTAL 

2.413.615 

-  

113.008 

- 

2.452.289 

26.364.599 

40.497.367 

- 

- 

649.156 

- 

- 

5.193.575 

8.067.402 

- 

- 

75.991.289 

9.759.722 

85.751.011 

Audit opinions in the Directorate-General's Annual Activity Report for 2009 

In  the  Annual  Activity  Report  of  the  Directorate-General  for  Regional  Policy  for 
2009,  an  unqualified  opinion  was  given  for  the  Cohesion  Fund  systems  in  six 
Member States (Cyprus, Estonia, Greece, Malta, Portugal and Slovenia) In respect of 
the functioning of the management and control systems (2000-2006). 

For nine Member States, the opinion was qualified as having a moderate impact due 
to  material  deficiencies  affecting  key  elements  of  the  systems  (Bulgaria  -  transport 
sector, Czech Republic, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and 
Spain). 

Only  one  CF  sector  in  a  single  Member  State  (Bulgaria  -  environment  sector)  was 
under  a  reservation  in  the  Directorate-General's  Annual  Activity  report  for  2009, 
primarily  owing  to  breaches  of  public  procurement  rules.  Work  is  on-going  in 
conjunction with the national authorities in 2010 to rectify the problems identified.  

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4.2.1.  Greece 

In 2009, the Directorate-General for Regional Policy carried out two audit missions 
in  Greece  for  the  Cohesion  Fund.  The  first  involved  a  closure  audit  of  four  closed 
projects. The mission found one sub-project which was not completed or operational, 
but which had not been identified as ineligible by the winding-up body. Secondly, a 
follow-up  audit  of  ERDF  and  the  Cohesion  Fund  winding-up  body  (EDEL)  was 
carried  out  in  2009,  in  which  an  action  plan  for  the  winding-up  body  was  closed, 
since  EDEL  had  finalised  its  guidance  documents  for  closure  and  updated  its 
categorisation  of  the  findings  and  assessment  of  the  systemic  nature  of  the 
irregularities. 

As  regards  the  follow-up  of  previous  audits,  in  2009  the  Commission  closed  the 
follow-up  of  two  missions  which  had  been  carried  out  in  2008  and  in  2007.  One 
audit carried out in 2008 is still open in 2010. These missions identified delays in the 
issues  around  revenue-generating  projects,  and 
implementation  of  projects, 
weaknesses in public procurement procedures.  

In 2009, a financial correction of EUR 313,503 was applied by the Greek Authorities 
for the use of an irregular selection criterion in the public procurement procedure. In 
addition,  as  a  result  of  an  OLAF  investigation  of  one  Greek  water  supply  project 
during 2008 and 2009, the national authorities took some corrective measures. 

The  Greek  authorities  submitted  twelve  national  audit  reports  and  seventeen 
winding-up declarations, which were examined by the Commission services in 2009.  

The  annual  bilateral  meeting  with  Greek  audit  bodies  covering  audit  activities  in 
2008  was  held  in  May  2009.  The  annual  bilateral  meeting  covering  the  year  2009 
took place in spring 2010. 

In  the  Annual  Activity  Report  of  the  Directorate-General  for  2009,  an  unqualified 
audit  opinion  was  issued  in  respect  of  Cohesion  Fund  Greece  as  an  action  plan  for 
the winding-up body EDEL had been closed in 2009, and the issues identified with 
public  procurement  were  addressed  with  a  large  financial  correction  in  2008. 
Furthermore,  each  Cohesion  Fund  project  is  audited  by  EDEL  at  least  once  before 
closure. In addition, as the Commission examines the winding-up declarations on an 
individual basis before the closure of the projects, any irregular expenditure can be 
identified and deducted at the closure of each project.  

4.2.2.  Spain 

The Commission conducted one audit mission relating to the Cohesion Fund closure 
2000-2006,  which  took  place  in  Spain  in  2009.  The  aim  was  to  assess  four  closed 
Cohesion  Fund  projects  and  the  procedure  used  by  the  winding-up  body  for  these 
closures.  The  main  finding  of  the  mission  was  related  to  irregularities  involving 
changes  to  the  contract  not  being  detected  by  the  national  authorities  during  the 
closure procedure. 

As to the follow-up of previous Commission audit missions and Court of Auditors' 
findings, the audit services of the Directorate-General for Regional Policy concluded 
the financial correction procedures for ten Cohesion Fund 2000-2006 projects during 

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the  year  2009  with  a  total  corrected  amount  of  EUR  6.8  million.  In  six  cases  the 
corrections  were  accepted  and  implemented  by  the  Spanish  authorities,  and  in  four 
cases  a  Commission  correction  of  1.3 million  was  made,  with  Spain  accepting  the 
financial  correction.  The  final  Commission  correction  relating  to  the  CF  closure 
enquiry for the period 1994-1999 will be finalised during spring 2010. 

A  total  of  87  winding-up  declarations  for  the  closure  of  Spanish  Cohesion  Fund 
projects  had  been  analysed  by  the  audit  services  of  the  Directorate-General  for 
Regional Policy by the end of 2009 (and 157 by 24.3.2010). In many cases, irregular 
expenditure  declared  to  the  Commission  was  detected,  mainly  in  relation  to  public 
procurement procedures and certain issues of VAT eligibility.  

The  Article  12  reports  received  and  examined  by  the  Commission  covered  all  the 
Regional  Communities  of  Spain,  except  Navarra  and  Cantabria  and  the  part  of  the 
fund that was centrally managed. 

The  annual  bilateral  co-ordination  meeting  between  Commission  and  Spanish 
auditors covering the 2008 audit exercise took place in Madrid in June 2009. During 
the meeting the auditors of the Directorate-General for Regional Policy regretted the 
absence  of  corrective  measures  by  the  national  authorities  in  relation  to  irregular 
additional  contracts  included  in  Cohesion  Fund  projects,  compared  to  the  effective 
corrective actions taken for the ERDF to resolve the same issue. The annual bilateral 
meeting covering year 2009 is to be held in Madrid in May 2010.  

In  the  Annual  Activity  Report  of  the  Directorate-General  for  2009,  a  qualified 
opinion with moderate impact was given for the management and control systems of 
Cohesion  Fund  Spain  2000-2006,  owing  to  material  deficiencies  affecting  key 
elements of the systems. However, no reservation was proposed, as it was concluded 
that  the  financial  risk  to  the  Community  budget  is  mitigated  by  the  fact  that  the 
winding-up  declarations  are  assessed  on  an  individual  basis  before  the  closure  of 
projects, and any irregular expenditure can be identified and deducted at the closure 
of each project. 

4.2.3.  Portugal 

In 2009, one closure audit mission concerning the Cohesion Fund was carried out by 
the  Directorate-General  for  Regional  Policy  in  Portugal.  As  a  result,  financial 
corrections  were  proposed  for  four  projects.  The  adversary  procedure  with 
Portuguese authorities was on-going in early 2010. 

As  for  the  follow-up  of  previous  audit  work,  financial  corrections  proposed  by  the 
Commission  were  accepted  by  the  Member  State  in  2009  as  follows:  (i)  a  total  of 
EUR 1,962,691.22 EUR relating to the 1994-1999 programming period; (ii) a total of 
EUR 181,162.39 EUR concerning the 2000-2006 programming period. 

The Article 12 report and one national audit report were submitted and examined by 
the Commission in 2009. Certain elements of the report were followed up during the 
audit mission of the Directorate-General for Regional Policy in 2009. 

Six  winding-up  declarations  for  the  closure  of  Portuguese  Cohesion  Fund  projects 
were  analysed  by  the  Directorate-General  for  Regional  Policy  in  2009.  Financial 

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53 

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corrections  were  proposed  for  two  projects  as  a  result  of  the  WUD  review  for  one 
project and in the light of the audit mission carried out in 2009. 

The annual bilateral meeting between Community and Portuguese audit bodies was 
held in May 2009 and concerned the controls implemented as at the end of 2008. The 
annual bilateral meeting covering 2009 audit issues is due to be held in Brussels in 
April 2010. 

In  January  2008,  the  Directorate-General  for  Regional  Policy  signed  a  contract  of 
confidence  with  "Inspecção-Geral  de  Finanças"  (Portuguese  winding-up  body  and 
audit authority) covering the Cohesion Fund and ERDF.  

In  the  Annual  Activity  Report  of  the  Directorate-General  for  2009  an  unqualified 
opinion was given for Cohesion Fund Portugal since the winding-up declarations are 
assessed  individually  before  the  closure  of  projects,  in  order  that  any  irregular 
expenditure can be identified and deducted at the closure of each project. 

4.2.4.  Cyprus 

The Directorate-General for Regional Policy carried out no audit missions in Cyprus 
in  2009.  One  audit  which  had  been  carried  out  in  2008  to  review  the  work  of  the 
winding up body for the ERDF and Cohesion Fund was closed in 2009. No financial 
corrections  were  made  and  no  Cohesion  Fund  projects  were  closed  in  2009  in 
Cyprus.  The  Directorate-General  for  Regional  Policy  received  and  analysed  the 
Article 12 report and four national audit reports in 2009. 

Based on the positive results of the review of the work of the winding up body, the 
positive conclusions from other audit missions in Cyprus, and the desk work carried 
out, a contract of confidence for the ERDF and Cohesion Fund was signed between 
the Commission and the Cypriot Internal Audit Service (as the official audit body in 
Cyprus) in December 2008.  

In accordance with the above, an unqualified opinion was issued for Cohesion Fund 
expenditure in Cyprus in the Annual Activity Report 2009 of the Directorate-General 
for Regional Policy. 

4.2.5.  Czech Republic 

At  the  beginning  of  2009,  the  Czech  authorities  submitted  their  final  report  on  the 
retrospective  verification  exercise  initiated  in  2008  at  the  Commission's  request,  in 
the context of the Action Plan to strengthen the Commission supervisory role in the 
management of structural actions. The Commission services reviewed the quality of 
the  verifications  carried  out  by  the  Czech  authorities  during  an  audit  mission  in 
July 2009.  Some  systemic  findings  concerning  public  procurement  were  reported 
from  the  exercise  and  the  Czech  authorities  were  requested  to  take  appropriate 
corrective action. 

The  Czech  authorities  submitted  the  winding-up  declarations  and  final  payment 
claims  for  eight  Cohesion  Fund  projects  in  2009.  After  examining  the  winding-up 
declarations,  the  Commission  services  requested  further  information  on  six 
declarations,  in  relation  to  the  systemic  findings  identified  by  the  retrospective 
verification exercise. 

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A financial correction procedure that was opened in 2008 with respect to a railway 
project  was  closed  in  2009  without  correction,  after  completion  of  the  required 
adversary  procedure.  The  Commission  services  opened  two  other  correction 
procedures in 2009 following two audits performed in the previous years, including 
one  carried  out  by  the  European  Court  of  Auditors  as  part  of  its  declaration  of 
assurance  for  2006.  For  this  case,  the  Czech  authorities  accepted  a  correction 
amounting  to  EUR  52,452  in  the  Cohesion  Fund  assistance.  The  Czech  authorities 
applied  another  correction  of  EUR  60,608  (corresponding  to  a  Cohesion  Fund 
amount of EUR 45,456) in 2009 following the detection of an infringement of public 
procurement rules in one Cohesion Fund project. It is expected that further financial 
correction  procedures  will  be  opened  during  2010  as  a  result  of  the  retrospective 
verification exercise and the scrutiny of the winding-up declarations. 

An  annual  bilateral  coordination  meeting  with  the  Czech  auditors  covering  2008 
issues was held in Brussels in April 2009. The coordination meeting covering issues 
from 2009 will be held in early 2010. 

In  the  Annual  Activity  Report  of  the  Directorate-General  for  2009  a  qualified 
opinion with moderate impact was given for Czech Republic Cohesion Fund projects 
for the period 2000-2006 on the basis of the above material deficiencies affecting key 
elements of the systems. No reservation was proposed, as the Commission is able to 
exercise  close  management  of  each  Cohesion  Fund  project  and  make  a  detailed 
check of the risk areas at closure. 

4.2.6.  Estonia 

Following the positive results of audit work carried out in previous years, a contract 
of  confidence  had  been  signed  with  Estonia  in  2007,  covering  both  the  Cohesion 
Fund and the ERDF. 

The  Directorate-General  for  Regional  Policy  carried  out  no  Cohesion  Fund  audit 
missions in Estonia in 2009, and the previous audit missions were followed up and 
closed in 2008. No financial correction procedures were either carried out or in the 
pipeline for Cohesion Fund Estonia in 2009. 

Five  winding-up  declarations  were  examined  in  the  context  of  the  closure  of 
Estonian Cohesion Fund projects in 2009 and, additionally, the Directorate-General 
for  Regional  Policy  received  and  analysed  the  Article  12  report  for  the  Cohesion 
Fund.  The  annual  bilateral  meeting  with  the  Estonian  Authorities  was  held  on  30 
April 2009. The next meeting is scheduled for April 2010.  

In  the  Annual  Activity  Report  of  the  Directorate-General  for  2009,  concerning  the 
functioning  of  the  management  and  control  systems  (2000-2006),  an  unqualified 
opinion was given for Cohesion Fund Estonia.  

4.2.7.  Hungary 

One  public  procurement  audit  mission  was  carried  out  in  Hungary  by  the 
Directorate-General  for  Regional  Policy  in  December  2009  in  relation  to  the 
Cohesion  Fund.  The  audit  report  is  already  being  prepared  in  early  2010.  Some 
possible breaches of public procurement have been identified. 

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The  Directorate-General's  2009  Annual  Activity  Report  for  the  Cohesion  Fund  in 
Hungary  expressed  a  qualified  opinion.  The  qualified  opinion  was  linked  to  a 
reservation in 2008 originating from a significant public procurement-related finding 
identified  during  the  project  audit  of  the  Budapest  Wastewater  Treatment  Plant  in 
November 2007. A follow-up of an ECA DAS 2008 finding, which was based on an 
audit conducted by the Directorate-General for Regional Policy (which reached the 
same findings), was carried out in 2009. The resulting financial correction amounted 
to EUR 40.5 million and was accepted by the Member State in February 2009. 

One  Article  12  report  was  examined  in  2009.  Some  shortcomings  of  a  systemic 
nature  were  revealed  in  respect  of  accounting  for  and  registering  financial 
transactions, and error rates above the materiality level were identified for projects in 
both the transport and environmental sectors.  

The annual bilateral meeting between Commission and Hungarian auditors covering 
audit  work  in  2008  was  held  in  April  2009.  The  annual  bilateral  meeting  covering 
2009 issues took place in March 2010. 

Three winding-up declarations relating to the closure of Cohesion Fund projects were 
examined during 2009.  

4.2.8.  Latvia 

The  Directorate-General  for  Regional  Policy  carried  out  no  Cohesion  Fund  audit 
missions in Latvia in 2009, and all audit missions from previous years are closed.  

However, during the assessment of several winding-up declarations submitted at the 
closure of Latvian Cohesion Fund projects, it was noted that the award of additional 
works  did  not  comply  with  the  EU  public  procurement  directives,  which  allow  the 
use  of  negotiated  procedure  for  additional  works  only  on  the  basis  of  unforeseen 
circumstances.  The  same  issue  was  also  detected  during  an  ERDF  project  audit  in 
Latvia.  In  the  case  of  ERDF,  the  Latvian  authorities  agreed  to  make  the  required 
financial  corrections.  For  the  Cohesion  Fund,  however,  the  issue  of  supplementary 
contracts  requires  further  follow-up  by  the  Commission  services.  As  a  mitigating 
factor, the Latvian Authorities have issued revised guidance, to ensure that the same 
irregularities do not recur in future contract amendments.  

As  a  result  of  the  above,  a  hearing  concerning  one  of  the  Cohesion  Fund  projects 
under  the  closure  procedure  was  held  in  October  2009,  and  five  further  projects 
under the winding-up process will be subject to a hearing to be held in the first half 
of 2010 with the possibility of financial corrections as a result. 

Consequently, the opinion on Latvian projects under the 2000-2006 Cohesion Fund 
expressed  in  the  2009  Annual  Activity  Report  of  the  Directorate-General  for 
Regional Policy is a qualified opinion. However, given that the main risks are being 
identified  by  the  winding  up  body  at  closure  of  the  projects  and  the  fact  that  the 
Commission  services  are  in  a  position  to  correct  ineligible  expenditure  from  these 
deficiencies  by  assessing  individual  winding-up  declarations,  the  impact  of  such 
deficiencies is deemed to be moderate. 

EN 

56 

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In addition to the above, the Commission received and analysed the Article 12 report, 
four national system audit reports and three winding-up declarations in the course of 
2009.  The  annual  bilateral  coordination  meeting  with  the  Latvian  audit  bodies 
covering  2008  issues  was  held  in  May  2009  in  Brussels  and  the  meeting  covering 
2009 issues took place in March 2010 in Riga.  

4.2.9.  Lithuania 

The Directorate-General for Regional Policy carried out no audits on Cohesion Fund 
projects in Lithuania in 2009, although a DAS 2008 audit by the European Court of 
Auditors, covering nine Cohesion fund projects, did identify some deficiencies in the 
public  procurement  procedures  (lack  of  competition,  inadequate  use  of  negotiated 
procedure).  The  DAS  2008  case  was  followed  up  by  the  Commission  services  in 
conjunction with the Lithuanian authorities in 2009.  

Apart  from  one  mission  conducted  in  2008,  and  followed  up  in  2009,  all  other 
Cohesion Fund audits from previous years are closed. The main findings of the 2008 
mission related to cost increases, tendering issues and the IT monitoring system. One 
financial correction of EUR 0.7 million in respect of public procurement issues was 
concluded in 2009, with  the  Lithuanian authorities agreeing to apply the correction 
themselves.  

Altogether,  by  the  end  of  2009,  the  Directorate-General  for  Regional  Policy  had 
analysed 15 winding-up declarations in the context of the closure of Cohesion Fund 
projects  in  Lithuania.  The  Article  12  report  was  received  and  analysed  by  the 
Commission  in  2009.  The  national  authorities  raised  no  major  issues.  No  national 
system audit reports were received in 2009. 

The annual bilateral meeting covering audit issues in 2008 was held in spring 2009 
and  the  annual  bilateral  meeting  covering  audit  issues  in  2009  was  held  in 
April 2010. 

In  the  Annual  Activity  Report  of  the  Directorate-General  for  Regional  Policy  for 
2009  a  qualified  opinion  with  moderate  impact  was  given  in  respect  of  Cohesion 
Fund Lithuania on the basis of the above material deficiencies affecting key elements 
of the systems in Lithuania. No reservation was proposed, as the Directorate-General 
is  able  to  exercise  close  management  of  each  Cohesion  Fund  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  Cohesion  Fund 
projects. 

4.2.10.  Malta 

The  Directorate-General  for  Regional  Policy  carried  out  no  audit  missions  or 
financial  correction  procedures  for  the  Cohesion  Fund  for  Malta  in  2009.  Previous 
audit  missions  conducted  in  2005  and  2007  did  not  give  rise  to  any  significant 
findings.  

The  Article  12  report  was  received  and  examined;  it  highlighted  sufficient  audit 
coverage  and  a  zero  error  rate  for  Cohesion  Fund  projects  in  Malta.  No  national 
system audit reports were received in 2009.  

EN 

57 

   EN 

 
Accordingly,  an  unqualified  opinion  with  no  reservations  was  issued  for  Cohesion 
Fund  2000-2006  expenditure  in  Malta  in  the  2009  Annual  Activity  Report  of  the 
Directorate-General  for  Regional  Policy.  The  management  and  control  system  in 
Malta can be classified as good practice. 

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 
verification. The Directorate-General for Regional Policy closed the Action Plan in 
March 2009.  

In its letter dated 16 July 2009, the Audit Authority confirmed that the winding-up 
exercise for Cohesion Fund projects will include checking for the findings identified 
by  the  audit  of  2008  of  the  Directorate-General  for  Regional  Policy  and  that  the 
winding-up  documents  will  contain  clear  conclusions  in  that  regard.  Given  that  the 
Audit  Authority  is  identifying  the  main  risks  and  the  fact  that  the  Commission 
services  are  in  a  position  to  correct  any  ineligible  expenditure  resulting  from  these 
deficiencies  by  assessing  individual  winding-up  declarations,  a  qualified  opinion 
with moderate impact was issued for Cohesion Fund Poland in the Annual Activity 
Report 2009 of the Directorate-General for Regional Policy. 

The  Directorate-General  for  Regional  Policy  on  Cohesion  Fund  Poland  carried  out 
no  new  audit  missions  in  2009.  The  Polish  version  of  the  Final  Position  Letter  in 
respect  of  two  audits  where  systemic  deficiencies  and  findings  with  a  financial 
impact  in  the  area  of  public  procurement  were  detected  (discriminatory  selection 
criteria,  direct  awarding  of  additional  works/services,  and  modification  of  terms  of 
contract  after 
in 
December 2009.  A  financial  correction  of  EUR  22  million  was  proposed.  As  the 
Polish Authorities are contesting some of the findings, it is likely that the follow-up 
of  the  abovementioned  audits  will  lead  to  a  financial  correction  decision  by  the 
Commission in 2010. All other previous systems and project audits have been closed. 

the  contract  award)  was  sent 

the  Polish  authorities 

to 

In  2009,  the  Directorate-General  for  Regional  Policy  examined  ten  winding-up 
declarations  and/or  additional  information  requested  in  connection  with  them.  An 
annual bilateral meeting with Polish audit bodies was held in Warsaw in June 2009. 
The next annual bilateral meeting was due to be held in Warsaw in April 2010. 

In September 2009, the Directorate-General for Regional Policy organised a hearing 
for  one  Polish  Cohesion  Fund  project  for  which  a  financial  correction  of 
EUR 812,562  had  been  proposed  at  the  closure  of  the  project.  As  the  Polish 
Authorities  are  contesting  the  proposed  correction,  it  is  likely  that  a  Commission 
decision on financial correction will be necessary. 

4.2.12  Slovakia 

No audit missions were carried out by the Directorate-General for Regional Policy in 
Slovakia in relation to the Cohesion Fund in 2009.  

EN 

58 

   EN 

 
In  2009,  financial  corrections  were  proposed  for  four  Cohesion  Fund  projects  in 
connection  with  public  procurement  issues  for  a  total  amount  of  EUR  12  million. 
The contentious procedure is on-going. Ten winding-up declarations and the Article 
12  control  report  were  received  and  examined  in  2009.  An  annual  bilateral  audit 
coordination  meeting  between  the  Commission  and  the  Slovak  audit  bodies  took 
place in April 2009 in Brussels. The following annual coordination meeting was held 
in May 2010. 

A  qualified  opinion  with  moderate  impact  was  expressed  in  respect  of  Cohesion 
Fund  Slovakia  in  the  Annual  Activity  Report  2009  of  the  Directorate-General  for 
Regional  Policy.  Shortcomings  detected  in  the  verifications  by  management  with 
regard  to  public  procurement  procedures  were  the  main  reason  for  the  qualified 
opinion.  Mitigating  measures  taken  to  reduce  the  financial  risk  for  the  Cohesion 
Fund included: 

•  A  retrospective  verification  carried  out  by  the  Slovak  Authorities  to  identify  the 
extent  of  deficiencies  and  to  make  the  necessary  corrections  for  each  project 
separately at closure; and 

•  A thorough review by the Commission services of the closure documents for each 
Cohesion Fund project to be closed (the final expenditure statement, the winding 
up declaration and the final report).  

4.2.13  Slovenia 

On  the  basis  of  audit  work  carried  out  in  the  years  2005-2007,  a  contract  of 
confidence was signed with Slovenia in February 2008, covering the Cohesion Fund 
and  ERDF.  Following  that  contract,  no  Cohesion  Fund  audit  missions  were  carried 
out by the Directorate-General for Regional Policy in Slovenia in 2009.  

The  audit  work  included  the  examination  of  the  annual  control  report  under 
Article 12  of  Regulation  (EC)  No  1386/2002  and  of  the  annual  summary  for  2009. 
Moreover,  three  winding  up  declarations  submitted  for  the  closure  of  three 
2000-2006  Cohesion  Fund  projects  were  examined  in  2009;  these  gave  rise  to  no 
major remarks.  

No  financial  correction  procedures  are  ongoing  or  envisaged  for  Cohesion  Fund 
Slovenia. 

Accordingly,  the  Annual  Activity  Report  of  the  Directorate-General  for  Regional 
Policy  for  2009  presented  an  unqualified  opinion  with  no  reservations  for 
Cohesion Fund expenditure in Slovenia. 

4.2.14.  Bulgaria 

Following  the  suspension  of  Cohesion  Fund  payments  to  the  National  Road 
Infrastructure  Agency  (NRIA)  in  July  2008,  the  Directorate-General  for  Regional 
Policy  carried  out  a  verification  mission  in  January  2009  to  examine  the  follow-up 
actions taken by the national authorities which had been outlined in the Commission 
Decision.  On  the  basis  of  the  verification  mission  of  the  Directorate-General  for 
Regional  Policy  and  the  latter's  subsequent  examination  of  additional  information 

EN 

59 

   EN 

 
provided  by  the  Bulgarian  authorities,  the  Commission  concluded  that  the  required 
actions had been carried out satisfactorily and the suspension was lifted in May 2009. 

The Directorate-General for Regional Policy also raised concerns around the issue of 
the direct award of contracts in the environment sector in possible breach of national 
and  EU  public  procurement  rules  in  Bulgaria.  In  2009,  it  requested  the  Executive 
Agency for the Audit of EU Funds (EAAEUF) to examine this issue in respect of a 
number of contracts in the environment sector. The results of this audit were received 
in February 2010. The findings related to the illegal use of the negotiated procedure 
without  prior  advertising  (i.e.  direct  award)  for  16  contracts  in  the  environment 
sector. Financial corrections of approximately EUR 4.5 million have been proposed 
by the EAAEUF.  

Furthermore,  weaknesses  noted  during  an  audit  mission  carried  out  by  the 
Directorate-General  for  Regional  Policy  in  November  2008  led  to  a  road  project 
being re-audited by the winding-up body (EAAEUF) in 2009. Financial corrections 
amounting  to  approximately  EUR 2.4  million  were  proposed  due  to  a  possible 
conflict of interest in the public procurement area.  

As  for  other  audit  work  during  2009,  the  Commission  received  and  examined  the 
Article  12  report  for  the  year  ending  31 December  2008,  but  no  winding-up 
declarations were submitted for Bulgarian CF projects. The annual bilateral meeting 
between the Commission and the Bulgarian audit body took place in April 2009. 

In  the  Annual  Activity  Report  of  the  Directorate-General  for  2009,  a  qualified 
opinion  with  moderate  impact  was  given  for  the  Cohesion  Fund  transport  sector  in 
Bulgaria  due  to  weaknesses  in  public  procurement,  the  absence  of  effective 
management verifications and continuing weaknesses in the EAAEUF. 

For  the  environment  sector,  a  qualified  opinion  with  significant  impact  and  a 
reservation were noted in the Directorate-General's Annual Activity Report for 2009 
due  to  significant  weaknesses  in  public  procurement,  the  absence  of  effective 
management checks and continuing weaknesses in the EAAEUF. 

4.2.15.  Romania 

One  closure  audit  mission  was  carried  out  by  the  Directorate-General  for  Regional 
Policy in Romania as regards the Cohesion Fund project, Piatra Neamţ Solid Waste, 
in  2009.  Financial  corrections  made  by  the  national  authorities  amounted  to  EUR 
2,614,915. The adversary procedure with Romanian authorities is on-going in 2010. 
A second audit mission by the Directorate-General for Regional Policy in May 2009 
dealt with the decentralisation of functions to final beneficiaries. 

A hearing with the Romanian authorities was held on 5 March 2009 concerning six 
audit missions carried out between 2006 and 2008. Financial corrections for a total 
amount  of  EUR  8,064,402  proposed  by  the  Commission  were  accepted  by  the 
Member State in 2009. 

A  second  hearing  with  the  Romanian  authorities  was  held  on  29  April  2010 
concerning  a  public  procurement  audit  mission  in  2009.  The  Romanian  authorities 
accepted  financial  corrections  in  respect  of  the  irregular  use  of  the  experience 

EN 

60 

   EN 

 
criterion  in  the  award  phase  of  an  evaluation  procedure.  The  Romanian  authorities 
disagreed with the financial corrections in respect of the shortening of the deadline 
for the submission of bids. A Commission (correction) decision is to be adopted for 
the latter. 

The  Article  12  report  was  submitted  and  examined  by  the  Commission  in  2009. 
Certain  aspects  of  the  report  were  followed  up  with  the  national  authorities.  A 
satisfactory reply has been received from the Romanian authorities. 

Three  winding-up  declarations,  related  to  the  closure  of  Cohesion  Fund  projects, 
were examined in the course of 2009. No financial corrections were proposed on top 
of those already carried out following the control activities of the national authorities.  

The annual bilateral meeting between the Commission and the Romanian audit body 
was  held  in  June  2009  and  related  to  controls  carried  out  by  the  end  of  2008.  The 
annual  bilateral  meeting  covering  2009  audit  issues  was  held  in  Brussels  in 
April 2010. 

In  the  Annual  Activity  Report  of  the  Directorate-General  for  2009,  a  qualified 
opinion with moderate impact was issued for Cohesion Fund Romania, mainly owing 
to  weaknesses  in  the  area  of  public  procurement,  management  verifications  and 
computerised monitoring system. In 2010, work is on-going to rectify the problems 
identified, in conjunction with the national authorities. 

4.3. 

Irregularities notified by the Member States 

In  2009,  in  accordance  with  Regulation  (EC)  No  1831/943,  the  Member  States 
communicated to the Commission 109 notifications of irregularities involving a total 
amount of EUR 67,304,951 in respect of projects co-financed by the EU. An amount 
of  EUR  56,673,503  has  been  recovered,  and  the  remaining  amount  has  yet  to  be 
recovered.  The  countries  which  reported  the  most  cases  are  Portugal,  Spain  and 
Poland (27, 20, and 19 respectively). Portugal reported 39% of the amount involved. 
It is also worth noting that Hungary, with four notifications, is the second highest on 
the list in terms of the amount involved. In addition, during the same period, pursuant 
to  Regulation  (EC)  No  1828/20064  which  applies  to  the  programming  period 
2007-2013,  Bulgaria  communicated 
the  Commission  17  notifications  of 
to 
irregularities involving a total allocated amount of around EUR 3.6 million in respect 
of projects co-financed by the EU. 

Although  the  number  of  notifications  has  decreased  significantly  compared  to  the 
previous  year5,  the  amount  involved  remains  the  same.  The  main  types  of 
irregularities  reported  are  ineligible  expenditure  and  infringements  of  public 
procurement rules. These two typologies cover nearly 75% of all reported cases. 

3 
4 
5 

OJ L 191, 27.07.1994, p.9, as amended by Regulation (EC) No 2168/2005, OJ L 345, 28.12.2005 
OJ L 371, 27.12.2006, p.1, as amended by Regulation (EC) No 846/2009, OJ L 250,23.09.2009 
2008:  number  of  communicated  cases  140;  overall  amount  related  to  the  communications  EUR 
56,328,911. 

EN 

61 

   EN 

 
                                                 
Table 6: Irregularities communicated by Member States in 2009 (in EUR) 

Member State 

Bulgaria  

Cyprus  

Czech Republic  

Estonia  

Greece  

Spain  

Hungary  

Ireland  

Latvia  

Lithuania  

Malta  

Poland  

Portugal  

Romania  

Slovenia  

Slovakia  

TOTAL 

Number of 
irregularities 

Financial amounts  Amounts awaiting 

recovery 

17 

0 

3 

0 

14 

20 

4 

0 

0 

2 

1 

19 

27 

0 

1 

1 

3.578.740 

3.578.740 

0 

1.924.920 

0 

0 

0 

0 

4.780.520 

1.684.211 

4.351.765 

3.622.443 

18.449.851 

40.387 

0 

0 

4.491.703 

39.133 

2.275.178 

0 

0 

0 

39.133 

49.542 

24.575.760 

1.332.009 

0 

2.552.398 

0 

0 

284.983 

284.983 

109 

67.304.951 

10.631.448 

5. 

EVALUATION 

The Commission and the Member States carry out the 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. 

The  Commission  carries  out  the  ex-post  evaluation  of  the  Cohesion  Fund. The 
previous  evaluation  was  published  in  2005  and  looked  at  a  sample  of  200  projects 
implemented during the period 1993-2002. A  new ex-post evaluation was launched 
in 2009 examining all Cohesion Fund and former ISPA projects implemented during 
the  years  2000-2006.  As  part  of  a  set  of  three  interlinked  "work  packages",  the 
evaluation  will  assess  the  contribution  of  the  Cohesion  Fund  and  ISPA  (i)  to  the 
development of the EU transport system, (ii) to achieving the EU acquis in the field 
of environment and (iii) to the impact of ISPA as a preparation for the programmes 
of the Structural and Cohesion Funds. In addition, ex post cost-benefit analyses will 

EN 

62 

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be conducted for a sample of transport and environment projects, to identify lessons 
for future programming periods. 

6. 

INFORMATION AND PUBLICITY 

6.1. 

Information to/from the Member States 

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

Several issues of common interest for ERDF and the Cohesion Fund were presented 
or discussed during the meetings of the COCOF. These include: 

•  Commission  Regulation amending  Regulation  (EC)  No  1828/2006  setting  out 
rules  for  the  implementation  of  Council  Regulation  (EC)  No  1083/2006  laying 
down  general  provisions  on  the  European  Regional  Development  Fund,  the 
European  Social  Fund  and  the  Cohesion  Fund  and  of  Regulation  (EC) 
No 1080/2006  of 
the 
European Regional Development Fund; 

the  European  Parliament  and  of 

the  Council  on 

•  Commission  Decision  amending  the  Decision concerning  the  financing  of  the 
programme for the use of operational and non-operational technical assistance at 
the  initiative  of  or  on  behalf  of  the  European  Commission  under  the 
European Regional  Development  Fund  (ERDF)  and  the  Cohesion  Fund  (CF) for 
2009; 

•  Commission Decision concerning the financing of the programme for the use of 
operational and administrative technical assistance at the initiative or on behalf of 
the  European  Commission  under 
the  European  Regional  Development 
Fund (ERDF) and the Cohesion Fund (CF) for 2010; 

•  Fraud indicators for ERDF, European Social Fund (ESF) and CF; 

•  Evaluation  Methods:  Reporting  on  Core  Indicators  for  the  European  Regional 

Development Fund and the Cohesion Fund (2007-2013). 

6.2. 

Commission measures on publicity and information 

As regards the Commission measures on information and publicity, the focus in 2009 
was two-fold. First, to ensure the publication of the list of beneficiaries of EU Funds 
managed by the Commission in partnership with Member States in line with Article 
7.2  of  Commission  Regulation  (EC)  No  1828/2006.  Second,  publication  by  the 
Directorate-General  for  Regional  Policy  of  the  details  of  major  projects,  including 
those  financed  by  the  Cohesion  Fund,  for  both  of  the  periods  2000-2006  and 
2007-2013.  The  details  of  many  of  these  projects  are  available  in  a  searchable 
database on the INFOREGIO website. To date, there are over 300 projects listed in 
the  database  (which  include  major  projects  and  other  projects  financed  through  the 
2007-2013 programmes).  

EN 

63 

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ANNEX: IRREGULARITIES AND FINANCIAL CORRECTIONS 

During 2009, one decision on a financial correction was adopted for the 2000-2006 
Cohesion Fund projects for an amount of EUR 1.8 million. In addition, at the request 
of the Commission, the Member States agreed to exclude a further EUR 72 million 
from their statements of expenditure. 

As  a  result,  for  the  2000-2006  programming  period,  the  financial  corrections 
adopted/agreed  (on  an  accrual  basis)  resulting  from  the  audit  work  of  the 
Directorate-General for Regional Policy, amounted to EUR 76 million. 

The table illustrates the amount of financial corrections per Member State. 

Table: Financial corrections in 2009 for the Cohesion Fund, period 2000-2006 

Member State 

Accepted by 
MS 

EC Decision 

Bulgaria 

Cyprus 

2.413.615

-

Czech Republic 

113.008

Estonia 

Greece 

Spain 

-

313.503

2.138.786

19.802.272

1.790.466

Hungary 

40.497.367

Ireland 

Latvia 

-

-

Lithuania 

649.156

Malta 

Poland 

Portugal 

Romania 

Slovenia 

Slovakia 

TOTAL 

-

-

205.714

8.067.402

-

-

72.062.037

3.929.252

TOTAL 

75.991.289 

-

-

-

-

-

-

-

-

-

-

-

-

-

-

EN 

64 

   EN 

 
The  above  table  does  not  include  the  results  of  the  Member  States'  own  checks  of 
Cohesion Fund expenditure.  

EN 

65 

   EN