COMMISSION STAFF WORKING PAPER accompanying theANNUAL REPORT ON THE COHESION FUND (2010)
Date: 2011-11-14
Institutions: European Commission
Subjects: Bulgaria, Cohesion Fund, Cyprus, Czechia, Estonia, Greece, Hungary, Latvia, Lithuania, Malta, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, audit, financial year

EUROPEAN COMMISSION 

Brussels, 14.11.2011 
SEC(2011) 1352 final 

COMMISSION STAFF WORKING PAPER 

accompanying the 

ANNUAL REPORT ON THE COHESION FUND (2010) 

{COM(2011) 741 final} 

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TABLE OF CONTENTS 

1. 

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

1.1. 

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

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

1.1.2.  Spain............................................................................................................................. 6 

1.1.3.  Portugal ........................................................................................................................ 7 

1.1.4.  Cyprus .......................................................................................................................... 8 

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 .......................................................................................................................... 16 

1.1.11.  Poland......................................................................................................................... 17 

1.1.12.  Slovakia...................................................................................................................... 18 

1.1.13.  Slovenia...................................................................................................................... 19 

1.1.14.  Bulgaria ...................................................................................................................... 20 

1.1.15.  Romania ..................................................................................................................... 22 

1.2. 

Conditionality............................................................................................................. 23 

2. 

2.1. 

2.2. 

2.3. 

2.4. 

3. 

3.1. 

3.2. 

3.3. 

3.4. 

Financial execution of the 2000-2006 period in 2010 and closure of projects .......... 24 

Extension of the final date of eligibility of expenditure ............................................ 24 

Payments made in 2010 for projects adopted during the 2000-2006 period.............. 25 

Outstanding commitments from the 2000-2006 period ............................................. 26 

Closure of projects ..................................................................................................... 27 

The implementation of the 2000-2006 projects by Member State............................. 28 

Greece ........................................................................................................................ 28 

Spain........................................................................................................................... 29 

Portugal ...................................................................................................................... 30 

Cyprus ........................................................................................................................ 32 

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3.5. 

3.6. 

3.7. 

3.8. 

3.9. 

Czech Republic .......................................................................................................... 32 

Estonia........................................................................................................................ 33 

Hungary...................................................................................................................... 34 

Latvia.......................................................................................................................... 35 

Lithuania .................................................................................................................... 35 

3.10.  Malta .......................................................................................................................... 36 

3.11. 

Poland......................................................................................................................... 38 

3.12. 

Slovakia...................................................................................................................... 39 

3.13. 

Slovenia...................................................................................................................... 40 

3.14.  Bulgaria ...................................................................................................................... 41 

3.15.  Romania ..................................................................................................................... 42 

4. 

Monitoring, inspections, financial corrections and irregularities............................... 44 

4.1. 

Monitoring: committees and missions ....................................................................... 44 

4.1.1.  Greece ........................................................................................................................ 44 

4.1.2.  Spain........................................................................................................................... 44 

4.1.3.  Portugal ...................................................................................................................... 45 

4.1.4.  Cyprus ........................................................................................................................ 46 

4.1.5.  Czech Republic .......................................................................................................... 46 

4.1.6.  Estonia........................................................................................................................ 46 

4.1.7.  Hungary...................................................................................................................... 46 

4.1.8.  Latvia.......................................................................................................................... 47 

4.1.9.  Lithuania .................................................................................................................... 47 

4.1.10.  Malta .......................................................................................................................... 47 

4.1.11.  Poland......................................................................................................................... 48 

4.1.12.  Slovakia...................................................................................................................... 48 

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

4.1.14.  Bulgaria ...................................................................................................................... 49 

4.1.15.  Romania ..................................................................................................................... 49 

4.2. 

Audits and financial corrections................................................................................. 50 

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4.2.1.  Greece ........................................................................................................................ 55 

4.2.2.  Spain........................................................................................................................... 55 

4.2.3.  Portugal ...................................................................................................................... 56 

4.2.4.  Cyprus ........................................................................................................................ 57 

4.2.5.  Czech Republic .......................................................................................................... 57 

4.2.6.  Estonia........................................................................................................................ 58 

4.2.7.  Hungary...................................................................................................................... 58 

4.2.8.  Latvia.......................................................................................................................... 59 

4.2.9.  Lithuania .................................................................................................................... 59 

4.2.10.  Malta .......................................................................................................................... 59 

4.2.11.  Poland......................................................................................................................... 60 

4.2.12  Slovakia...................................................................................................................... 60 

4.2.13  Slovenia...................................................................................................................... 61 

4.2.14.  Bulgaria ...................................................................................................................... 61 

4.2.15.  Romania ..................................................................................................................... 62 

4.3. 

4.4. 

5. 

6. 

6.1. 

6.2. 

Irregularities notified by the Member States.............................................................. 63 

Irregularities and financial corrections....................................................................... 64 

Evaluation .................................................................................................................. 65 

Information and publicity........................................................................................... 66 

Information to/from the Member States..................................................................... 66 

Commission measures on publicity and information................................................. 66 

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1. 

GENERAL CONTEXT 

1.1. 

Convergence and economic development in the beneficiary Member States 

1.1.1.  Greece 

In  2010,  Greece's  GDP  per  capita  in  PPS  attained  89%  of  the  EU-27  average.  GDP  fell  by 
4.5% in real terms in the same year, after having contracted by 2.5% in 2009. Annual inflation 
rose to 4.7% in 2010 from 1.3% in 2009, on the back of VAT rates increases and persisting 
market rigidities. The 2010 deficit outturn was 10.5% of GDP, which compares with the 8.0% 
of  GDP  target  established  last  May.  This  was  mostly  because  of  a  more-severe-than-
anticipated revenue shortfall, a worse-than-estimated balance of the social security sector and 
the accumulation of arrears in the other-than-state sectors. In addition, the reclassifications of 
some state-owned enterprises (SOEs) within the general government sector will have a more 
durable impact on the deficit. The debt-to-GDP ratio was at 142.7% in 2010 up from 127.1% 
a year earlier. 

In  its  recommendation  of  20  June  2011  on  the  National  Reform  Programme,  the  Council 
concluded that Greece's growth performance over the last decade was based on unsustainable 
drivers.  The  2008-2009  global  crisis  exposed  the  vulnerabilities  of  the  Greek  economy, 
including: unsustainable fiscal policies, partly hidden by unreliable statistics and temporarily 
high revenues; rigid labour and product markets; loss of competitiveness and rising external 
debt.  The  extent  of  the  deterioration  in  the  fiscal  position  was  revealed  late  due  to  grave 
deficiencies in Greece's accounting and statistical systems. This delayed the implementation 
of  corrective  measures.  As  concerns  about  Greek  fiscal  sustainability  arose  and  global  risk 
aversion  heightened,  market  sentiment  vis-à-vis  Greece  worsened  sharply  in  early  2010.  In 
April  2010,  Greece  asked  for  international  financial  assistance  as  it  was  confronted  with 
sizeable financing needs and not able to access international capital markets. On 3 May 2010, 
Greece presented an encompassing adjustment programme supported by financial assistance 
provided  by  the  euro-area  Member  States  and  the  IMF  amounting  to  EUR  110  billion.  The 
accompanying Memorandum of Understanding and its successive supplements lay down the 
economic policy conditions on the basis of which the financial assistance is disbursed.  

Greece  committed  to  implementing  the  economic  and  financial  adjustment  programme  with 
the  aim  of  correcting  fiscal  and  external  imbalances  and  restoring  confidence  in  the  short 
term. In the medium run, it should lay the foundations for a growth model that relies more on 
investment  and  exports  supporting  growth  and  employment.  The  programme  foresees 
comprehensive action on three fronts: (i) a frontloaded fiscal consolidation strategy, supported 
by structural fiscal measures and better fiscal control; (ii) structural reforms in the labour and 
product markets to address competitiveness and growth; and (iii) efforts to safeguard banking 
system  stability.  The  key  elements  of  policy  conditionality  have  been  enshrined  in  Council 
Decision 2010/320/EU and its subsequent amendments1 addressed to Greece with a view to 

1     Council Decision of 10 May 2010 (2010/320/EU), (OJ L 145, 11.6.2010, p. 6); Council Decision of 7 September 2010 
(2010/486/EU),  (OJ  L  241,  14.9.2010,  p.  12);  Council  Decision  of  20  December  2010  (2011/57/EU),  (OJ  L  026, 
29.1.2011, p. 15); Council Decision of 7 March 2011 (2011/257/EU), (OJ L 110, 29.4.2011, p. 26).  

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reinforcing and deepening fiscal surveillance and giving notice to Greece to take measures for 
the deficit reduction judged necessary to remedy the situation of excessive deficit under the 
provisions of Articles 136 and 126(9) of the Treaty.  

The  Programme  macroeconomic  scenario  is  broadly conservative, with a  cumulative loss in 
real GDP in 2010-11 of around 8%, driven by a decline in domestic demand, which is partly 
compensated  by  a  significant  contraction  in  imports  and  smooth  export  growth.  Real  GDP 
growth  is  expected  to  return  to  positive  territory  in  2012  (0.8%).  The  government  deficit  is 
projected to reach 7.6% of GDP in 2011, 6.3% in 2012, 4.9% of GDP in 2013 and 2.6% of 
GDP in 2014. The debt-to-GDP ratio is projected to peak at about 160% by 2012, decreasing 
thereafter. 

The Council recommended that Greece:  

(i)  fully  implement  the  measures  laid  down  in  the  Decision  2010/320/EU,  as  amended  by 
Decision  2011/257/EU,  and  as  further  specified  in  the  Memorandum  of  Understanding  of 
3 May 2010 and its subsequent supplements. 

1.1.2.  Spain 

Spain's  GDP  per  capita  in  PPS  attained  101%  of  the  EU-27  average  in  2010,  compared  to 
103% in the preceding year. In 2010, GDP fell by 0.1%, reflecting both the global economic 
downturn  and  a  marked  correction  in  the  construction  sector.  The  annual  inflation  rate 
increased to 1.8% in 2010 on the back of higher commodity and administered prices as well 
as an increase in indirect taxes. The downturn took a heavy toll on public finances. For 2010, 
the  general  government  deficit  reached  9.2%  of  GDP,  down  from  11.2%  in  2009.  In  June 
2010,  the  Commission  assessed  the  action  taken  by  Spain  in  response  to  the  Council 
recommendations under Article 126(7) of Treaty on the Functioning of the European Union of 
December 2009, to end this the excessive deficit situation by 2013 at the latest, and concluded 
that Spain had up to then acted in accordance with the Council’s recommendations to correct 
the  excessive  deficit  and  that  no  additional  step  in  the  excessive  deficit  procedure  was 
therefore necessary at that stage.  

According to the latest update of the stability programme submitted in April 2011, the targets 
for the general government deficit are 6% of GDP in 2011, 4.4% in 2012, and 3% in 2013. 
These  figures  are  based  on  the  programme's  assumptions  that  GDP  will  grow  by  1.3%  in 
2011,  by  2.3%  in  2012  and  by  2.5%  on  average  in  2013  and  2014.  According  to  the 
Commission services' spring 2011 forecast, the government deficit is projected to reach 6.3% 
of  GDP  in  2011  and,  based  on  a  no  policy  change  assumption,  5.3%  of  GDP  in  2012.  The 
spring forecast projects that real GDP will grow by 0.8% in 2011 and by 1.5% in 2012. 

In its recommendation of 12 July 2011 the Council delivered an opinion on the 2011 update 
of  the  Stability  Programme  of  Spain  pursuant  to  Regulation  1466/1997.  In  this  opinion  the 
Council  concluded  that  while  the  macroeconomic  scenario  underpinning  the  budgetary 
projections is favourable in 2011 and 2012, the Programme plans to bring the budget deficit 
below the 3% of GDP reference value by 2013, in line with the Council recommendations of 
April  2009,  and  to  reduce  the  deficit  further  in  2014.  The  medium-term  objective  (MTO), 
which remains a balanced budget in structural terms, is not expected to be achieved over the 

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programme period. The adjustment path is appropriate and the annual average improvement 
of  the  structural  balance  of  1.5%  of  GDP  during  2010-2013  is  in  line  with  the  Council 
recommendation. The debt-to-GDP ratio is projected to rise to 69.3% in 2013 and to decline 
slightly in 2014. Downside risks to the consolidation path are related to the macroeconomic 
assumptions and to the respect of budgetary targets at regional level.  

In  relation  to  its  opinion  on  the  2011  update  of  the  Stability  Programme,  also  taking  into 
account  the  Council  Recommendation  under  Article  126(7),  the  Council  recommended  that 
Spain should take action within the period 2011-2012 to: 

(i) implement the budgetary strategy in 2011 and 2012 and correct the excessive deficit in the 
year 2013 in line with the Council recommendation under the EDP, ensuring the achievement 
of deficit targets at all levels of government, including by strictly applying the existing deficit 
and  debt  control  mechanisms  for  regional  governments;  adopt  further  measures  in  case 
budgetary  and  economic  developments  do  not  turn  out  as  expected;  take  any  opportunity 
including from better economic conditions to accelerate the deficit reduction; set out concrete 
measures to fully underpin the targets for 2013 and 2014 which should bring the high public 
debt  ratio  on  a  downward  path  and  ensure  adequate  progress  towards  the  medium-term 
objective. Keep public  expenditure growth below the rate of  medium-term  GDP  growth,  by 
introducing  a  binding  expenditure  rule  at  all  levels  of  government,  as  envisaged.  Further 
improve the provision of information in relation to regional and local government budgets and 
their execution. 

1.1.3.  Portugal 

Portugal’s GDP per capita in PPS attained 81% of the EU-27 average in 2010, having risen by 
1 percentage point compared to the previous year. In 2010, GDP grew by 1.3% in real terms, 
after  having  contracted  by  2.5%  in  2009.  This  positive  growth  rate  was,  however,  largely 
driven by exceptional factors that boosted exports and private consumption. Annual inflation 
rose to 1.4% in 2010 from -0.9% in 2009, on the back of base effects, VAT rates increases 
and  rising  commodity  prices.  The  2010  deficit  outturn  was  9.1%  of  GDP,  which  compares 
with the 7.3% of GDP target established last May. The difference was mostly due to a number 
of deficit-increasing one-off operations, notably the rescue costs of two troubled banks, and 
the reclassification of public-private partnerships (PPPs) into the general government sector. 
In  addition,  the  reclassifications  of  some  state-owned  enterprises  (SOEs)  within  the  general 
government sector will have a more durable impact on the deficit. The debt-to-GDP ratio was 
at 93% in 2010 up from 83% a year earlier. 

In  its  recommendation  of  12  July  2011  on  the  National  Reform  Programme  (NRP)  2011  of 
Portugal, the Council concluded that the macroeconomic and fiscal scenarios included in the 
NRP,  submitted  on  19  April  2011,  have  been  overtaken  by  the  Memorandum  of 
Understanding  (MoU)  signed  on  17  May  2011.  The  MoU  and  the  accompanying  Council 
Decision 2011/0122 are making available to Portugal medium-term financial assistance for a 
period of three years 2011-2014 in accordance with Council Regulation (EU) No 407/2010 of 

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11  May  2010  establishing  a  European  financial  stabilisation  mechanism.2  The  MoU  and  its 
successive  supplements  lay  down  the  economic  policy  conditions  on  the  basis  of  which  the 
financial assistance is disbursed.  

The  Council  recalled  that  unfavourable  developments  in  public  finances  in  2009/10  and  a 
bleak  outlook  for  economic  growth  had  led  to  a  deterioration  of  confidence  and  rising 
pressures  in  sovereign  bond  markets.  As  a  result,  Portugal  had  requested  international 
financial assistance from the European Union and the International Monetary Fund (IMF) on 
7 April 2011.  

The  Economic  Adjustment  Programme  for  Portugal  includes  external  financing  from  the 
European  Union,  the  euro-area  Member  States  and  IMF  of  up  to  €  78  billion  and  a 
commitment  by  Portugal  to  undertake  deep  structural  reforms,  to  follow  a  credible  fiscal 
consolidation strategy and to make efforts to safeguard the financial sector. The Programme 
macroeconomic scenario is broadly conservative, with a cumulative loss in real GDP in 2011-
12  of  around  4%,  mainly  driven  by  a  decline  in  domestic  demand,  which  is  partly 
compensated  by  a  significant  contraction  in  imports  and  smooth  export  growth.  Real  GDP 
growth  is  expected  to  return  to  positive  territory  in  2013  (1.2%).  The  government  deficit  is 
projected to reach 5.9% of GDP in 2011, 4.5% in 2012 and 3% of GDP in 2013. The debt-to-
GDP ratio is projected to peak at about 108% by 2013, decreasing thereafter. 

The Council recommended that Portugal:  

(i) implement the measures as laid down in Implementing Decision 2011/344/EU and further 
specified  in  the  Memorandum  of  Understanding  of  17  May  2011  and  its  subsequent 
supplements.  

1.1.4.  Cyprus 

In  2010,  GDP  per  capita  in  PPS  in  Cyprus  remained  unchanged  compared  to  the  previous 
year,  at  98%  of  the  EU-27  average.  Economic  activity  grew  by  1%  in  the  same  year. 
Domestic demand (excl. inventories), hitherto the key driver of growth, continued to shrink, 
albeit at a slower pace than in the previous year. Private consumption picked up moderately, 
after a contraction in 2009, on the back of continued wage growth. Public consumption also 
supported  growth.  Nevertheless,  with  lacklustre  foreign  demand  for  housing  and  the 
restructuring  of  corporate  balance  sheets,  investment  remained  on  a  downward  path. 
Inventory accumulation provided a considerable positive impulse to economic activity, after 
the  large  destocking  that  took  place  in  2009.  Furthermore,  the  improvement  in  the  external 
environment also led to significant growth in exports of goods. Tourism receipts posted a mild 
recovery  after  a  strong  decline  in  2009.  Moreover,  financial  intermediation  and  business 
services continued to grow solidly. Inventory build-up and one-off factors, such as the import 
of buses and other equipment, led to growing imports, after a significant correction during the 
previous  year.  Public  finances  in  Cyprus  deteriorated  substantially  as  a  result  of  the  global 
economic  crisis  and  discretionary  fiscal  stimulus  measures,  as  well  as  rather  large 

2  The  Council  draws  the  same  conclusion  with  regard  to  the  macroeconomic  and  fiscal  scenario  underlying  a  Stability 
Programme for 2011-2014, submitted on 23 March 2011 by the Portuguese government to the national parliament, which 
rejected it. 

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composition effects due to a less tax-rich GDP growth pattern. The budgetary deficit in 2010 
declined to 5.3% of GDP from 6% the previous year, also benefiting from a one-off revenue 
factor accounting for almost 0.5 percentage point of GDP. 

In  the  latest  update  of  the  Stability  Programme,  submitted  in  May  2011,  the  Cypriot 
authorities plan that the general government deficit would fall to 4.0% of GDP in 2011 and 
remain  of  a  declining  trend  reaching  2.6%  in  2012,  2.0%  in  2013  and  1.6%  in  2014.  The 
macroeconomic  scenario  underlying  the  programme  envisages  that  real  GDP  will  grow 
modestly  by  1.5%  in  2011,  before  recovering  with  an  average  rate  of  about  2.75%  for  the 
remainder of the programme period. The Commission services' spring 2010 forecast predicts 
that the deficit will decrease to only to 5.1% of GDP in 2011 and, assuming no policy change, 
will recede further to 4.9% in 2011. Real GDP is expected to grow by 1.5% in 2011 and by 
2.4% in 2012. 

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  2012.  The  projected  adjustment  is 
planned  to  be  achieved  mainly  from  the  expenditure  side,  while  the  revenue-to-GDP  ratio 
remains  at  around  similar  levels.  However,  most  measures  in  2011  are  on  the  revenue  side. 
Overall, there are downside risks to the consolidation path mapped out in the programme. In 
view  of  these  risks,  additional  measures  may  need  to  be  adopted  if  macroeconomic  or 
budgetary developments turn out to be worse than expected. 

In its recommendation of 12 July 2011 the Council delivered an opinion on the 2011 update 
of  the  stability  programme  of  Cyprus  pursuant  to  Regulaton  1466/1997.  In  this  opinion  the 
Council concluded that the macroeconomic scenario underpinning the budgetary projections 
is plausible until 2012, but rather favourable thereafter, as assessed against the Commission 
services' spring 2011 forecast. The Stability Programme aims to correct the excessive deficit 
in  2012,  in  line  with  the  Council  Recommendation  of  13  July  2010,  and  to  continue 
consolidation  afterwards.  The  programme  projects  the  debt  ratio  to  peak  in  2012  and  to 
decline  thereafter.  The  annual  average  improvement  in  the  structural  balance  for  the  period 
2011-2012 is 1.5% of GDP, in line with the Council Recommendation of 13 July 2010, but 
the  structural  improvement  is  set  to  be  below  the  requirements  of  the  Stability  and  Growth 
Pact  in  both  2013  and  2014.  The  medium-term  objective  (MTO),  reaffirmed  as  a  balanced 
budget in structural terms, will not be reached within the programme period. While the overall 
adjustment  planned  is  based  on  expenditure  restraint,  most  measures  in  2011  are  on  the 
revenue  side.  Overall,  there  are  downside  risks  to  the  consolidation  path  mapped  out  in  the 
programme. In view of these risks, the Council concluded that additional measures may need 
to  be  adopted  if  macroeconomic  or  budgetary  developments  turn  out  to  be  worse  than 
expected. 

In  relation  to  its  opinion  on  the  2011  update  of  the  Stability  Programme,  also  taking  into 
account  the  Council  Recommendation  under  Article  126(7),  the  Council  recommended  that 
Cyprus should take action within the period 2011-2012 to:  

(i)  adopt  the  necessary  measures  of  a  permanent  nature  to  achieve  the  budgetary  target  in 
2011  and  the  correction  of  the  excessive  deficit  by  2012,  in  line  with  the  Council 
recommendations under the EDP. Take measures to keep tight control over expenditure and 

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make  use  of  any  better-than-expected  budgetary  developments  for  faster  deficit  and  debt 
reduction.  Ensure  progress  towards  the  medium-term  objective  by  at  least  0.5%  of  GDP 
annually and bring the public debt ratio on a downward path. Accelerate the phasing-in of an 
enforceable  multiannual  budgetary  framework  with  a  binding  statutory  basis  and  corrective 
mechanisms, as from the preparation of the 2012 Budget. The Programme and Performance 
Budgeting should be implemented as soon as possible;  

(ii) improve the long-term sustainability of public finances by implementing reform measures 
to control pension and healthcare expenditure in order to curb the projected increase in age-
related expenditure. For pensions, extend years of contribution, link retirement age with life 
expectancy or adopt other measures with an equivalent budgetary effect, while taking care to 
address  the  high  at-risk-of-poverty  rate  for  the  elderly.  For  healthcare,  take  further  steps  to 
accelerate implementation of the national health insurance system.  

1.1.5.  Czech Republic 

In 2010, Czech GDP per capita in PPS reached 80% of the EU-27 average. The recovery in 
2010  started  to  take  hold  fuelled  by  robust  export  growth  and  the  ensuing  build  up  in 
inventories  and  real  GDP  rebounded  to  2.3%,  up  from  the  4.1%  decline  in  2009.  Annual 
inflation  increased  only  modestly  in  2010,  to  1.2%  on  average.  This  was  mainly  due  to  the 
only  very  limited  growth  in  domestic  demand.  The  general  government  deficit  in  2010  is 
estimated  to  have  reached  4.7%  of  GDP,  as  compared  to  5.9%  in  2009.  The  lower  deficit 
reflects significant cuts in public investment, together with consolidation measures targeting 
mostly  the  revenue  side  (increase  in  the  two  VAT  rates,  in  excise  duties  and  in  social 
contributions).  In  June  2010,  the  Commission  assessed  the  action  taken  by  the  Czech 
Republic in response to the Council recommendations under Article 126(7) of Treaty on the 
Functioning of the European Union of December 2009, to end the excessive deficit situation 
by  2013  at  the  latest,  and  concluded  that  the  Czech  Republic  had  up  to  then  acted  in 
accordance with the Council’s recommendations to correct the excessive deficit and that no 
additional step in the excessive deficit procedure was therefore necessary at that stage. 

According to the most recent update of the convergence programme, which was submitted in 
May 2011, the general government deficit in the Czech Republic is due to decline to 4.2% of 
GDP  in  2011,  and  further  to  3.5%  and  2.9%  of  GDP  in  2012  and  2013  respectively.  The 
macroeconomic  scenario  underlying  the  programme  assumes  real  GDP  growth  of  1.9%  in 
2011, slightly rising to 2.3% of GDP in 2012 and further accelerating to an average ratio of 
3.7%  over  the  rest  of  the  programme  period. According  to  the  Commission  services'  spring 
forecast,  real  GDP  growth  is  estimated  at  2%  in  2011,  rising  to  2.9%  in  2012.  The  deficit 
would reach 4.4% of GDP in 2011 and is set to decline to 4.1% of GDP in 2012, assuming no 
changes in policy. 

In its recommendation of 12 July 2011 the Council delivered an opinion on the 2011 update 
of the Convergence Programme of the Czech Republic pursuant to Regulation 1466/1997. In 
this opinion the Council concluded that the proposed measures are broadly sufficient to reach 
the target by 2013, as recommended by the Council, but there are risks to the actual budgetary 
outcome of measures as presented in the programme. Moreover, the attainment of the targets 
for  the  outer  years  of  the  programme  seems  to  rely  on  favourable  cyclical  conditions  and 

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further efficiency gains in public administration, which may become increasingly difficult to 
realise. The average annual fiscal effort over the period 2010-2013 would be slightly below 
1% of GDP recommended by the Council under the EDP procedure of 2 December 2009. 

In relation to its opinion on the 2011 update of the Convergence Programme, also taking into 
account  the  Council  Recommendation  under  Article  126(7),  the  Council  recommended  that 
the Czech Republic should take action within the period 2011-2012 to: 

(i)  implement  the  planned  consolidation  in  2011  and  take  countervailing  measures  of  a 
permanent nature as needed in case of any revenue shortfalls or expenditure slippages. Adopt 
fiscal measures as planned in the Convergence Programme for 2012 and underpin the target 
for  2013  by  more  specific  measures;  subject  to  this,  avoid  cutting  expenditure  on  growth-
enhancing items. Improve the efficiency of public investments, and continue efforts to exploit 
the  available  space  for  increases  in  indirect  tax  revenue  to  shift  taxes  away  from  labour, 
improve  tax  compliance,  and  reduce  tax  evasion.  Ensure  an  average  fiscal  effort  over  the 
period 2010-2013 of 1% of GDP, in line with the Council recommendations on correcting the 
excessive  deficit,  which  will  allow  meeting  the  EDP  deadline  with  a  sufficient  margin  in 
2013; 

(ii) implement the planned pension reform in order to improve the long-term sustainability of 
public finances and to ensure the future adequacy of pensions. Additional efforts should focus 
on  further  changes  to  the  public  pillar  to  ensure  that  the  system  is  not  a  source  of  fiscal 
imbalances in the future, and on the development of private savings. With a view to raising 
the effective retirement age, measures such as a link between the statutory retirement age and 
life expectancy could be considered. Ensure that the envisaged funded scheme attracts broad 
participation, and is designed to keep administrative costs transparent and low. 

1.1.6.  Estonia 

In  2010,  Estonia's  GDP  per  capita  in  PPS  amounted  to  65%  of  the  EU-27  average.  The 
deterioration from almost 70% in 2007 was due to a steep contraction in 2008-2009 when the 
cumulative loss of GDP amounted to 18% following the reversal of the economic cycle and 
the  severe  global  financial  crisis.  In  2010,  economic  recovery  started  gaining  ground.  The 
GDP  growth  of  3.1%  was  driven  by  exports  and  inventories,  while  domestic  demand 
remained  subdued.  Inflation  (HICP)  increased  to  2.7%  in  2010  reflecting  a  spike  in  world 
commodity  prices  and  tax  changes,  which  added  about  1%  to  average  inflation.  While  the 
contraction  in  economic  activity  resulted  in  general  government  deficits  in  2008-2009,  the 
general government budget position was a surplus of 0.1% of GDP in 2010 due to a faster-
than-expected  recovery  and  the  sizeable  sales  of  so-called  ‘Kyoto  carbon  credits’,  which 
amounted to 1% of GDP.  

The April 2011 update of the stability programme projects some deterioration of the general 
government  budgetary  position  to  a  deficit  of  0.4%  and  2.1%  of  GDP  in  2011  and  2012, 
respectively,  due  to  the  gradual  expiring  of  several  consolidation  measures  of  a  temporary 
nature and the one-off impact of environmental investment obligations related to sales of the 
‘Kyoto  carbon  credits’.  The  programme  targets  reaching  headline  and  structural  surpluses 
from  2013.  In  the  underlying  macroeconomic  scenario,  real  GDP  is  expected  to  grow  at 
sustainable  rates  of  around  3.75%  on  average  in  2011-15,  with  growth  becoming  more 

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balanced  as  domestic  demand  recovers.  Projections  from  the  Commission  services'  spring 
forecast point to the general government deficit reaching 0.6% and 2.4% in 2011 and 2012, 
respectively, with real GDP growing by 4.9% in 2011 and 4.0% in 2012. 

In its recommendation of 12 July 2011 the Council delivered an opinion on the 2011 Stability 
Programme  of  Estonia  pursuant  to  Regulation  1466/1997.  In  this  opinion  the  Council 
concluded  that  the  macroeconomic  scenario  underpinning  the  budgetary  projections  was 
plausible. The Council also found that the programme provided some information regarding 
measures  to  reach  the  targeted  position,  in  particular  vis-à-vis  efficiency-seeking  reforms  in 
several areas. Taking into account previous track record of the Estonian authorities in meeting 
the  fiscal  targets,  risks  to  the  budgetary  scenario  were  assessed  as  broadly  balanced.  The 
Council  nevertheless  concluded  that  it  would  be  important  for  the  upcoming  budgets  to 
provide the key details of measures to further enhance the efficiency of public spending, thus 
underpinning the implementation of the stability programme. 

In  relation  to  its  opinion  on  the  2011  Stability  Programme,  the  Council  recommended  that 
Estonia should take action within the period 2011-2012 to: 

(i)  achieve  structural  surplus  by  2013  at  the  latest,  while  limiting  deficit  in  2012  to  at  most 
2.1% of GDP, keeping tight control over expenditure and enhancing the efficiency of public 
spending. 

1.1.7.  Hungary 

In 2010, GDP per capita in PPS stood at 64% of the EU-27 average. GDP grew by 1.2% the 
same year (following on the heels of a sharp contraction of -6.7% of GDP in 2009), led by a 
strong  export  performance.  Domestic  demand  continued  to  decline,  with  unemployment  at 
11.2%  and  inflation  relatively  high  at  4.7%.  The  general  government  deficit  was  4.2%  of 
GDP in 2010, slightly down from  4.5% in 2009 but not as  low as targeted (3.8% of GDP). 
This  broad  stabilisation  in  the  deficit  level  was  achieved  through  a  series  of  temporary 
revenue-increasing  measures  as  well  as  expenditure  freezes  adopted  in  the  second  half  of 
2010, which largely compensated for the emerging budgetary slippages and some within-the-
year tax cuts. Given the structural deterioration in both 2010 and 2011 and an expected deficit 
well above 3% of GDP in 2012 shown in the Commission services’ autumn 2010 forecast, in 
January  2011  Commissioner  Rehn  addressed  a  letter  to  Hungary  asking  to  reconfirm  its 
commitment  to  fully  respect  the  recommendations  by  the  Council  and  to  soon  announce 
permanent, concrete and specific measures necessary to underpin this commitment.  

The April 2011 update of the convergence programme contains a general government surplus 
target of 2.0% of GDP for this year, much better than the 2.9% of GDP deficit set in the 2011 
budget adopted on 23 December 2010 thanks to the huge one-off revenues notably stemming 
from the pension reform reversal. Without these one-off revenues the 3% of GDP threshold 
would  have  been  breached.  For  2012,  the  authorities target  a  deficit  of  2.5%  of  GDP  and  a 
further gradual decline to 1.5% in 2015. The macroeconomic baseline scenario forecasts real 
GDP  to  expand  by  3.1%  in  2011,  followed  by  sustained  growth  in  the  range  of  3-3.5% 
thorough the entire programme horizon (until 2015). According to the Commission services' 

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spring forecast, the government balance is projected to be in surplus (1.6% of GDP) in 2011 
and to return to a deficit of 3.3% of GDP in 2012. Real GDP is expected to increase by 2.7% 
in 2011 and again by 2.6% in 2012.  

In its recommendation of 12 July 2011 the Council delivered an opinion on the 2011 update 
of the Convergence Programme of Hungary pursuant to Regulation 1466/1997. In this opinion 
the  Council  concluded  that  the  macroeconomic  scenario  underpinning  the  budgetary 
projections  is  slightly  favourable.  The  consolidation  strategy  is  expected  to  reduce  the 
budgetary deficit in a structural way and put the debt on a downward path  to reach 64% of 
GDP by 2015. On the basis of the spring forecast, it cannot be excluded that the 3% of GDP 
deficit  threshold  may  be  breached  again  in  2012  unless  further  measures  are  taken.  In 
addition, consolidation appears to be rather back-loaded with structural improvement starting 
only  from  2012.  The  cumulative  structural  deterioration  of  over  3%  of  GDP  over  2010  and 
2011 is not in line with the Council recommendation of July 2009 asking Hungary to achieve 
a structural adjustment of at least 0.5% of GDP. 

In relation to its opinion on the 2011 update of the Convergence Programme, also taking into 
account  the  Council  Recommendation  under  Article  126(7),  the  Council  recommended  that 
Hungary should take action within the period 2011-2012 to:  

(i) strengthen the fiscal effort in order to comply with the Council recommendation to correct 
the excessive deficit in a sustainable manner, inter alia by avoiding the structural deterioration 
in 2011 implicit in the planned 2% of GDP budget surplus and ensure that the budget deficit is 
kept safely below the 3% of GDP threshold in 2012 and beyond, contributing to the reduction 
of  the  high  public  debt  ratio.  Fully  implement  the  announced  fiscal  measures  and  adopt 
additional measures of a permanent nature if needed at the latest in the 2012 budget to secure 
the  budgetary  target  for  that  year.  The  2012  budget  should  also  identify  the  additional 
measures in order to attain the 2013 target in the Convergence Programme. Ensure progress 
towards the medium-term objective (MTO) by at least 0.5% of GDP annually until the MTO 
is reached and use possible windfall revenues to accelerate the fiscal consolidation; 

(ii)  adopt  and  implement  regulations  specifying  the  operational  aspects  of  the  new 
constitutional fiscal governance framework, including, inter alia, the numerical rules that will 
be implemented at the central and local level until the debt ratio has declined to below 50% of 
GDP. Regarding the fiscal framework, implement and strengthen multiannual fiscal planning, 
improve the transparency of public finances and broaden the remit of the Fiscal Council.  

1.1.8.  Latvia 

In 2010, GDP per capita in PPS attained 52% of the EU-27 average. It was thus unchanged 
compared  to  2009,  when  it  had  contracted  from  56%  in  2008  and  2007.  After  a  steep 
deterioration in 2008-09, real GDP moved back to positive quarter-on-quarter growth rates in 
2010, although a small decline was recorded in 2010 annualised terms, reflecting the negative 
carry-over from the previous year. Increased export demand supported the economic recovery 
in  2010,  while  domestic  demand  and  investments  remained  relatively  weak.  Sizeable  fiscal 
consolidation, as well as improving macroeconomic conditions, allowed lowering the general 
government  deficit  to  7.7%  of  GDP  in  2010  from  9.7%  in  2009.  In  January  2010,  the 
Commission  assessed  the  action  taken  by  Latvia  in  response  the  Council  recommendations 

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under Article 104(7) TEC of July 2009, to correct the excessive deficit situation by 2012 at 
the  latest,  and  concluded  that,  as  Latvia  had  acted  in  accordance  with  the  Council’s 
recommendations,  no  additional  step  in  the  excessive  deficit  procedure  was  therefore 
necessary.  

The April 2011 update of the convergence programme projects a further decline of the general 
government deficit to 4.5% of GDP in 2011, 2.5% in 2012, 1.9% in 2013, and 1.1% in 2013. 
According  to  the  programme,  and  in  line  with  commitments  made  in  the  framework  of  the 
international  financial  assistance,  fiscal  policy  is  set  to  remain  restrictive  throughout  the 
programme  period,  with  the  envisaged  measures  being  mostly  expenditure  based.  The 
underlying macroeconomic scenario envisages that real GDP will rise by 3.3% in 2011 and by 
4% annually in 2012-14.  The spring  2011 forecast by the Commission services  projects the 
general government deficit at 4.5% in 2011 and 3.8% in 2012 under no-policy-change terms. 
The Commission services’ growth forecast for 2011-12 is fully identical to the projections in 
the convergence programme. 

In its recommendation of 12 July 2011 the Council delivered an opinion on the 2011 update 
of the Convergence Programme of Latvia pursuant to Regulation 1466/1997. In this opinion 
the  Council  concluded  that  the  macroeconomic  scenario  underpinning  the  budgetary 
projections in the programme was plausible although the inflation projection might be on the 
low side for 2011. The Council also found that, taking into account the measures implemented 
since  the  issuance  of  the  recommendation  to  correct  the  excessive  deficit  situation  and 
additional  consolidation  implied  in  the  updated  convergence  programme,  the  planned  fiscal 
effort for 2011-2012 was in line with the required adjustment. While, in view of the starting 
point, the programme did not foresee the achievement of the medium-term objective (MTO) 
by the end of the programme period, the Council found that the planned fiscal effort to reach 
the  MTO  after  the  correction  of  the  excessive  deficit  situation  could  be  accelerated  in 
particular in 2013. 

The Council also concluded that the budgetary targets were subject to downside risks, as the 
programme did not provide full information on measures to underpin the achievement of the 
set  targets;  these  measures  were  expected  to  be  spelled  out  in  the  forthcoming  budgets. 
Finally,  the  Council  found  that  reducing  the  primary  deficit  over  the  medium  term,  as 
foreseen  in  the  programme,  would  help  reduce  the  risks  to  the  sustainability  of  public 
finances. 

In relation to its opinion on the 2011 update of the Convergence Programme, also taking into 
account the central role of  the  medium-term  financial  assistance programme in  bringing the 
economy and public finances on a sustainable path, the Council recommended that Latvia: 

(i) implement the measures laid down in the Decision 2009/290/EC, as amended by Decision 
2009/592/EC, and further specified in the Memorandum of Understanding of 20 January 2009 
and its subsequent supplements, in particular the last supplement of 7 June 2011. 

1.1.9.  Lithuania 

Lithuania's GDP per capita in PPS increased to 58% of the EU-27 average in 2010, up from 
55%  in  2009.  This  reflects  a  recovery  after  a  deep  economic  recession,  when  output 

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contracted by nearly 15% in 2009, following the burst of an externally-financed housing and 
credit bubble. In 2010 the economy returned to growth, expanding by 1.3%, on the back of 
determined policy action of the Lithuanian authorities and the global economic recovery. The 
upturn in the inventory cycle also supported the recovery, offsetting a contraction in domestic 
demand  as  consumers,  non-financial  corporations  and  the  public  sector  continued  to  restore 
their balance sheets. Continued fiscal consolidation efforts and the improved macroeconomic 
environment  resulted  in  a  larger-than-expected  reduction  in  the  general  government  deficit, 
which  declined  to  7.1%  of  GDP  in  2010  (1.0  percentage  point  below  the  target  under  the 
excessive deficit procedure). 

According to the April 2011 update of the convergence programme, the general government 
deficit  is  to  decline  to  5.3%  in  2011  and  2.8%  in  2012.  In  the  underlying  macroeconomic 
scenario,  real  GDP  growth  is  projected  to  stand  at  5.8%  in  2011,  before  slowing  down  to 
4.7%  in  2012.  According  to  the  Commission  services'  spring  2011  forecast,  the  general 
government  deficit  is  expected  to  narrow  to  5.5%  in  2011  and  4.8%  in  2012  under  the 
customary assumption of no policy change. Real GDP is set to expand by 5.0% and 4.7% in 
2011 and 2012 respectively.  

In its recommendation of 12 July 2011 the Council delivered an opinion on the 2011 update 
of  the  Convergence  Programme  of  Lithuania  pursuant  to  Regulation  1466/1997.  In  this 
opinion  the  Council  concluded  that  the  macroeconomic  scenario  underlying  the  2011 
Convergence  Programme  is  plausible  although  economic  growth  and  inflation  may  turn  out 
higher  than  currently  projected.  While  the  programme  plans  to  bring  the  deficit  below  the 
3% reference value by 2012, the deadline set by the Council, it is not sufficiently underpinned 
by measures for 2012. At the same time, the accelerating economic momentum may lead to 
better 2011 budgetary outcomes than expected in the programme. This should allow a faster 
deficit  reduction  than  expected  at  the  time  of  the  Council  EDP  Recommendation.  Yet,  the 
Council foresees that if temporary consolidation measures that will expire at the end of 2011 
are not renewed and complemented by sizable permanent measures, Lithuania is not likely to 
meet the Convergence Programme's budgetary targets for 2012 despite the improving macro-
economic  outlook.  The  average  annual  fiscal  effort  over  the  period  of  2010-2012  is  well 
below the 2.25% of GDP recommended by the Council under the excessive deficit procedure 
adopted on 16 February 2010. The medium-term objective (MTO) of a structural surplus of 
0.5%  of  GDP  is  not  foreseen  to  be  achieved  within  the  programme  period  and  the  Council 
considers  that  progress  towards  the  MTO  should  be  accelerated.  According  to  the 
Commission's  latest  assessment,  the  risks  with  regard  to  long  term  sustainability  of  public 
finances appear to be high.  

In relation to its opinion on the 2011 update of the Convergence Programme, also taking into 
account  the  Council  Recommendation  under  Article  126(7),  the  Council  recommended  that 
Lithuania should take action within the period 2011-2012 to: 

(i) adopt additional fiscal measures of a permanent nature by the time of the 2012 budget to 
correct  the  excessive  deficit  in  line  with  the  Council  recommendations  under  the  EDP; 
reinforce  tax  compliance  and  take  full  advantage  of  the  economic  recovery  to  further 
accelerate  deficit  reduction  and  ensure  progress  towards  the  medium-term  objective  by  at 
least  0.5%  of  GDP  annually.  Strengthen  the  fiscal  framework,  in  particular  by  introducing 
enforceable and binding expenditure ceilings in the medium-term budgetary framework; 

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(ii)  adopt  the  proposed  implementing  legislation  on  Pension  System  Reform.  In  order  to 
enhance participation in the labour market, remove fiscal disincentives to work, especially for 
people at pensionable age. 

1.1.10.  Malta 

In  2010,  Malta's  GDP  per  capita  in  PPS  was  83% of  the  EU-27  average,  having  risen  from 
81% the previous year. After declining by 3.3% in 2009 as a result of the global crisis, real 
GDP  rebounded  strongly  in  2010,  with  growth  estimated  at  3.2%,  driven  by  exports  and 
business investment. The general government deficit remained broadly stable in 2010, at 3.6% 
of GDP, compared to 3.7% in 2009. In February 2010, the Council extended the deadline for 
the  correction  of  the  excessive  deficit  by  one  year,  to  2011.  In  January  2011  the  Council 
concluded,  based  on  a  Commission  communication  and  according  to  the  information 
available at the time, that Malta had taken action representing adequate progress towards the 
correction of the excessive deficit within the time limit set by the Council and that no further 
steps in the excessive deficit procedure were therefore necessary at that stage. 

According  to  the  2011  update  of  the  stability  programme,  the  general  government  deficit  is 
planned  to  decline  gradually,  to  2.8%  of  GDP  in  2011  and  1.0%  of  GDP  in  2014.  The 
macroeconomic scenario underlying  the  programme projects  real GDP  growth to strengthen 
from  2.4%  and  2.3%  in  2011-2012  to  2.6%  in  2013  and  2.8%  in  2014.  The  Commission 
services' spring 2011 forecast projects the deficit at 3.0% of GDP in both 2011 and 2012, the 
latter under the usual no-policy change scenario. Real GDP is expected to grow by 2.0% in 
2011 and 2.2% in 2012. 

In its recommendation of 12 July 2011 the Council delivered an opinion on the 2011 update 
of  the  Stability  Programme  of  Malta  pursuant  to  Regulation  1466/1997.  In  this  opinion  the 
Council concluded that the general government deficit is due to return 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, and to gradually decline thereafter towards the medium-term objective 
(MTO)  of  a  balanced  position  in  structural  terms,  at  a  pace  that  is  broadly  in  line  with  the 
Stability and Growth Pact. The Council further concluded that the budgetary outcomes could 
be worse than targeted because of possible expenditure overruns and lack of information on 
the measures underpinning the consolidation effort after 2011.  

In  relation  to  its  opinion  on  the  2011  update  of  the  Stability  Programme,  also  taking  into 
account  the  Council  Recommendation  under  Article  126(7),  the  Council  recommended  that 
Malta should take action within the period 2011-2012 to: 

(i) ensure correction of the excessive deficit in 2011, in line with the EDP recommendations, 
standing  ready  to  take  additional  measures  so  as  to  prevent  possible  slippages,  and  adopt 
concrete  measures  to  back  up  the  2012  deficit  target.  Bring  the  high  public  debt  ratio  on  a 
downward path and ensure adequate progress towards the MTO. With a view to strengthening 
the credibility of the medium-term consolidation strategy, define the required broad measures 
from  2013  onwards,  embed  the  fiscal  targets  in  a  binding,  rule-based  multi-annual  fiscal 
framework and improve the monitoring of budgetary execution;  

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(ii) take action to ensure the sustainability of the pension system such as by accelerating the 
progressive increase in the retirement age and by linking it to life expectancy. Accompany the 
higher  statutory  retirement  age  with  a  comprehensive  active  ageing  strategy,  discourage  the 
use of early retirement schemes and encourage private pension savings. 

1.1.11.  Poland 

In 2010, Poland’s GDP per capita in PPS was 62% of the EU-27 average. The global financial 
crisis led to a deceleration in the real GDP growth  rate, but Poland avoided recession. Real 
GDP increased by 1.6% in 2009, down by 3.5 percentage points from 2008. In 2010 real GDP 
grew by 3.8%, as rebounding external demand fuelled the domestic manufacturing sector and 
strengthened the turnaround in the inventories cycle and the resilient labour market supported 
private consumption. The economic crisis has taken a heavy toll on public finances. General 
government  deficit  rose  steadily  from  1.9%  of  GDP  in  2007  to  3.7%  in  2008  and  7.3%  of 
GDP  in  2009.  In  February  2010,  the  Commission  assessed  the  action  taken  by  Poland  in 
response  the  Council  recommendations  under  Article  104(7)  TEC  of  July  2009,  to  end  the 
excessive  deficit  situation  by  2012  at  the  latest,  and  concluded  that  Poland  had  up  to  then 
acted in accordance with the Council’s recommendations to correct the excessive deficit and 
that no additional step in the excessive deficit procedure was therefore necessary at that stage. 
The  general  government  deficit  rose  further  to  7.9%  of  GDP  in  2010,  1  percentage  point 
above the target presented in the 2010 update of the convergence programme. The budgetary 
slippage  was  due  to  lower  revenues  from  corporate  income  tax,  higher  consumption  and 
investment  expenditure  by  local  government  entities  and  higher  interest  expenditure.  Given 
the  above,  in  January  2011  Commissioner  Rehn  addressed  a  letter  to  Poland  asking  to 
reconfirm its  commitment to fully respect the recommendations by the Council and to soon 
announce permanent, concrete and specific measures necessary to underpin this commitment. 

According to the 2011 update of the convergence programme, the general government deficit 
will decrease to 5.6% of GDP in 2011, before shrinking further to 2.9% in 2012, driven by an 
ambitious  budgetary  consolidation  package  supported  by  a  strong  GDP  growth  projected  to 
amount  to  4%  in  real  terms  in  both  2011  and  2012.  The  Commission  services'  spring  2011 
forecast projects that the budget deficit will reach 5.8% in 2011, before declining to 3.6% in 
2012. The macroeconomic forecast puts real GDP growth at 4% in 2011 and 3.7% in 2012.  

In its recommendation of 12 July 2011 the Council delivered an opinion on the 2011 update 
of the Convergence Programme of Poland pursuant to Regulation 1466/1997. In this opinion 
the  Council  concluded  that  the  Convergence  Programme  was  based  on  a  plausible 
macroeconomic  scenario  and  noted  that  it  plans  to  bring  the  deficit  below  the  3%  of  GDP 
reference value by 2012, the deadline set by the Council. It further stressed that the average 
annual  fiscal  effort  over  the  period  2010-2012  was  fully  in  line  with  the  1.25%  of  GDP 
recommended  by  the  Council  and  that  the  amendment  to  the  pension  reform  reducing  the 
structural  budget  deficit  by  0.7%  in  2011  and  by  a  further  0.5%  of  GDP  in  2012  did  not 
substantially  improve  the  underlying  budgetary  situation  as  an  improvement  in  the  initial 
budgetary  position  was  accompanied  by  an  increase  in  long-term  liabilities.  The  Council 
stated  that  risks  to  budgetary  targets  are  tilted  to  the  downside  as  direct  tax  revenues  might 
turn  out  lower  than  projected,  programme  projections  on  social  contributions  rely  on 
favourable scenarios for employment and wage growth and potential implementation delays 

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and  changes  to  the  deficit-reducing  measures,  also  beyond  the  direct  control  of  the 
government, could result in a slippage in the consolidation path. 

In relation to its opinion on the 2011 update of the Convergence Programme, also taking into 
account  the  Council  Recommendation  under  Article  126(7), the  Council  recommended  that 
Poland should take action within the period 2011-2012 to:  

(i)  implement  the  measures  announced  in  the  draft  2012  Budget  Law  and  take  additional 
measures of a permanent nature if needed to reduce the general government deficit to below 
3%  of  GDP  in  2012,  in  line  with  the  Council  recommendations  under  the  EDP.  While 
ensuring  adequate  progress  towards  the  medium  term  objective,  minimise  cuts  in  growth-
enhancing expenditure in the future; 

(ii) enact legislation with a view to introducing a permanent expenditure rule by 2013. This 
rule should be based on sufficiently broad budgetary aggregates and should be consistent with 
the European system of accounts. Moreover, take measures to strengthen the mechanisms of 
coordination  among  the  different  levels  of  government  in  the  medium  term  and  annual 
budgetary processes. 

1.1.12.  Slovakia 

In 2010, GDP per capita in PPS in Slovakia further increased slightly to 74% of the EU-27 
average, compared to 73% in the preceding year, and 72% in 2008. In the same year growth 
rebounded  to  4%,  mostly  on  account  of  the  recovery  in  external  demand  and  investment. 
After an unprecedented slump in 2009, investment grew by 3.6% in 2010, partly in response 
to the need to replace fixed capital in the wake of the crisis, but also as a result of a return to 
higher  corporate  profitability  and  a  gradual  improvement  in  access  to  credit.  However,  the 
labour  market  deteriorated  further  and  the  unemployment  rate  reached  14.5%.  Due  to  the 
rapid  worsening  of  labour  market  conditions  and  with  wages  increasing  only  moderately, 
private  consumption  growth  stalled.  Inflation  decelerated  further  to  0.7%.  The  general 
government  deficit  remained  high  at  7.9%  of  GDP  in  2010.  In  June  2010,  the  Commission 
assessed  the  action  taken  by  Slovakia  in  response  to  the  Council  recommendations  under 
Article 126(7) of Treaty on the Functioning of the European Union of December 2009, to end 
the  excessive  deficit  situation  by  2013  at  the  latest,  and  concluded  that  Slovakia  had  up  to 
then acted in accordance with the Council’s recommendations to correct the excessive deficit 
and that no additional step in the excessive deficit procedure was therefore necessary at that 
stage.  

The April 2011 update of the stability programme targets a reduction of the headline deficit 
from 4.9% of GDP in 2011 to 2.9% of GDP in 2013 and 2.8% in 2014. The macroeconomic 
scenario underlying the programme forecasts real GDP growth of 3.4% in 2011 and 4.8% in 
2012-14. The Commission services’ spring 2011 forecast projects the deficit at 5.1% of GDP 
in  2011  and,  on  the  usual  no-policy-change  basis,  4.6%  of  GDP  in  2012.  Real  GDP  is 
projected to grow by 3.5% in 2011 and 4.4% in 2012. 

In its recommendation of 12 July 2011 the Council delivered an opinion on the 2011 update 
of the Stability Programme of Slovakia pursuant to Regulation 1466/1997. In this opinion the 
Council  concluded  that  the  macroeconomic  scenario  underlying  the  programme  is  plausible 

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for  the  initial  two  years  but  favourable  towards  the  end  of  the  programme  period.  The 
proposed consolidation measures appear to be sufficient to meet the fiscal targets but there are 
downside  risks  mainly  related  to  the  implementation  of  proposed  measures.  For  the  period 
2011-2013  meeting  the  budgetary  targets  would  imply  an  average  annual  fiscal  effort  of 
around 1.4% of GDP. In addition, the challenge for Slovakia is to ensure that consolidation 
safeguards  expenditure  on  growth-enhancing  items,  such  as  education  and  transport 
infrastructure.  The  programme  does  not  foresee  the  achievement  of  the  medium-term 
objective (MTO) during the programme period.  

In  relation  to  its  opinion  on  the  2011  update  of  the  Stability  Programme,  also  taking  into 
account  the  Council  Recommendation  under  Article  126(7),  the  Council  recommended  that 
Slovakia should take action within the period 2011-2012 to:  

(i) rigorously implement both the 2011 budget as envisaged and the planned specific measures 
of a permanent nature in 2012 and 2013, to reduce the deficit below 3% of GDP by 2013 in 
line  with  Council  recommendations  on  correcting  the  excessive  deficit  and  ensure  adequate 
progress  towards  the  medium-term  objective.  Subject  to  this,  safeguard  growth-enhancing 
expenditure, and use available room to increase revenue through environmental and property 
taxes and by increasing the efficiency of VAT collection;  

(ii)  strengthen  fiscal  governance  by  adopting  in  2011  and  implementing  from  2012  binding 
multi-annual  expenditure  ceilings,  covering  the  central  government  and  the  social  security 
system. In addition, introduce an independent Fiscal Council and ensure timely publication of 
budgetary data at all levels of the government; 

(iii)  enhance  the  long-term  sustainability  of  public  finances  by  further  adjusting  the  pay-as-
you-go  pillar  of  the  pension  system  also  by  changing  the  indexation  mechanism  and 
implement further measures with a view to raising the effective retirement age, in particular 
by linking the pensionable age to life expectancy. Introduce incentives to ensure the viability 
of the fully-funded pension pillar so as to progress towards fiscal sustainability while assuring 
adequate pensions. 

1.1.13.  Slovenia 

In  2010,  Slovenia's  GDP  per  capita  in  PPS  further  declined  to  87%  of  the  EU-27  average, 
from  88%  in  the  preceding  year,  and  91%  in  2008.  A  halting  export-led  recovery  has  been 
underway since the second quarter of 2009 and in 2010 real GDP is estimated to have grown 
by 1.2%, driven by net exports and the turning of the inventory cycle. A weak labour market, 
high  corporate  indebtedness,  adverse  banking  sector  developments  and  the  slump  in  the 
construction  sector  have  all  contained  domestic  demand.  The  resumption  of  growth  and  the 
first steps made in fiscal consolidation have helped to decrease the general government deficit 
to 5.6% of GDP in 2010, from 6% in 2009. In June 2010, the Commission assessed the action 
taken by Slovenia in response to the Council recommendations under Article 126(7) of Treaty 
on  the  Functioning  of  the  European  Union  of  December  2009,  to  end  the  excessive  deficit 
situation by 2013 at the latest, and concluded that Slovenia had up to then acted in accordance 
with  the  Council’s  recommendations  to  correct  the  excessive  deficit  and  that  no  additional 
step in the excessive deficit procedure was therefore necessary at that stage. 

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The April 2011 update of the stability programme targets a gradual narrowing of the general 
government deficit from 5.5% of GDP in 2011 to 2.0% in 2014. The macroeconomic scenario 
underlying the programme forecasts a gradual strengthening of real GDP growth, from 1.8% 
in 2011 to 2.8% in 2014. The Commission services’ spring 2011 forecast projects the deficit 
at 5.8% of GDP in 2011 and, on the usual no-policy-change basis, 5.0% of GDP in 2012. Real 
GDP is projected to grow by 1.9% in 2011 and 2.5% in 2012. 

In its recommendation of 12 July 2011 the Council delivered an opinion on the 2011 update 
of the Stability Programme of Slovenia pursuant to Regulation 1466/1997. In this opinion the 
Council  concluded  that  the  average  annual  change  in  the  structural  balance  over  the  period 
2010-13,  as  calculated  by  the  Commission  services  based  on  the  commonly  agreed 
methodology, is planned to be below the level recommended by the Council and that deficit 
and debt outcomes could fall short of the targets. 

In  relation  to  its  opinion  on  the  2011  update  of  the  Stability  Programme,  also  taking  into 
account  the  Council  Recommendation  under  Article  126(7),  the  Council  recommended  that 
Slovenia should take action within the period 2011-2012 to:  

(i) achieve the 2011 deficit target, underpin the 2012 deficit target with concrete measures and 
implement  the  necessary  consolidation  rigorously,  standing  ready  to  adopt  additional 
measures  to  prevent  possible  slippages.  Underpin  this  required  adjustment  process  over  the 
programme period with additional measures to ensure the average annual fiscal effort in line 
with  the  Council  recommendations  under  the  EDP  and  adequate  progress  towards  an 
appropriate  medium-term  objective;  To  this  purpose,  use  structural  measures  to  contain 
expenditure and address identified inefficiencies and implement a more binding medium-term 
budgetary  framework.  Accelerate  the  reduction  of  the  deficit  if  economic  or  budgetary 
conditions turn out better than currently expected;   

(ii) take the required steps to ensure the long-term sustainability of the pension system, while 
preserving the adequacy of pensions. Increase the employment rate of older workers through 
later retirement, and by further developing active labour market policies and lifelong learning 
measures. 

1.1.14.  Bulgaria 

In 2010, Bulgaria's GDP per capita in PPS reached 43% of the EU-27 average, thus having 
declined by 1 percentage point from the previous year. Following five consecutive quarters of 
decline,  which  left  real  GDP  around  7%  below  the  peak  reached  at  the  end  of  2008,  the 
economy  bottomed  out  in  2010  with  growth  returning  to  positive  territory  in  the  second 
quarter. Recovery gained momentum in the second half of the year leading to 0.2% real GDP 
growth for 2010 as a whole, against a severe contraction by -5.5% in 2009. A strong upturn in 
exports,  restocking  of  inventories,  and  improved  utilization  of  EU  funds  were  the  main 
growth drivers. The economic downturn led to a significant deterioration of public finances. 
The general government balance turned into a deficit of 4.7% of GDP in 2009 and 3.2% in 
2010  compared  to  a  surplus  of  1.7%  in  2008.  Upon  notifying  a  breach  of  the  3%  of  GDP 
reference value for 2009, Bulgaria entered an  excessive deficit procedure  in July 2010.  The 
Council  issued  recommendations  under  Article  126(7)  of  Treaty  on  the  Functioning  of  the 
European Union to end this situation by 2011 at the latest. In January 2011, the Commission 

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assessed  the  action  taken  by  Bulgaria  in  response  to  the  Council  recommendations  and 
concluded  that  Bulgaria  had  up  to  then  acted  in  accordance  with  the  Council’s 
recommendations to correct the excessive deficit and that no additional step in the excessive 
deficit procedure was therefore necessary at that stage. 

The  most  recent  update  of  Bulgaria's  convergence  programme,  submitted  in  April  2011, 
projects the general government deficit to continue to decline to 2.5% of GDP in 2011, 1.5% 
in 2012, 1% in 2013, and 0.5% in 2014. According to the macroeconomic scenario underlying 
the programme, real GDP will increase by 3.6% in 2011 and further accelerate to an average 
rate  of  4.25%  over  the  remainder  of  the  programme  period.  In  the  Commission  services' 
spring 2011 forecast the general government deficit is projected to decline to 2.7% of GDP in 
2011 and, assuming a no policy change, to 1.6% of GDP in 2012. Real GDP is expected to 
grow by 2.8% in 2011 before picking up by 3.6% in 2012.  

In its recommendation of 12 July 2011 the Council delivered an opinion on the 2011 update 
of the Convergence Programme of Bulgaria pursuant to Regulation 1466/1997. In this opinion 
the  Council  concluded  that  after  the  achieved  considerable  and  frontloaded  budgetary 
adjustment of more than 2 percentage points in structural terms in 2010, fiscal consolidation 
plans for 2011 should be implemented as envisaged and the deficit should be brought below 
the 3% reference value in line with the Council Recommendation under the excessive deficit 
procedure. However, it was considered that the update does not provide sufficient details for 
planned  budgetary  measures  to  achieve  the  fiscal  targets  in  2012-14.  In  addition,  the  full 
implementation of the programme depends on an optimistic macroeconomic scenario, while 
the  projected  expenditure  growth  in  2012-13  seems  to  be  on  the  high  side,  when  assessed 
against a prudent estimate of medium-term rate of growth, posing a risk to the structural fiscal 
position  in  the  medium  term.  In  that  vein,  strengthening  of  the  domestic  fiscal  framework 
would  permit  to  further  enhance  predictability  and  credibility  of  government  policy  in  the 
medium-term, while anchoring fiscal discipline.  

In relation to its opinion on the 2011 update of the Convergence Programme, also taking into 
account  the  Council  Recommendation  under  Article  126(7),  the  Council  recommended  that 
Bulgaria should take action within the period 2011-2012 to: 

(i) proceed with effective budget implementation so as to correct the excessive deficit in 2011, 
in  line  with  the  Council  recommendation  of  13  July  2010  under  the  EDP;  specify  the 
measures underpinning the budgetary strategy for 2012-2014; take advantage of the economic 
recovery  to  ensure  adequate  progress  towards  the  medium-term  objective,  primarily  by 
keeping  tight  control  over  expenditure  growth,  while  prioritizing  growth-enhancing 
expenditure; 

(ii)  take  further  steps  to  improve  the  predictability  of  budgetary  planning  and  the 
implementation  control,  including  on  an  accruals  basis,  in  particular  by  strengthening  fiscal 
governance.  To  this  end,  design  and  put  in  place  binding  fiscal  rules  and  a  well-defined 
medium-term budgetary framework that ensures transparency at all government levels. 

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1.1.15.  Romania  

Romania's GDP per capita in PPS was 45% of the EU-27 average in 2010. In the same year, 
real  economic  activity  declined  by  -1.3%,  after  having  fallen  by  -7.1%  in  2009.  The  long 
duration of the recessionary period was a result of a sharp downward adjustment in domestic 
demand, which in the run-up to the crisis had been fuelled by lax fiscal policy and a boom in 
credit lending, mostly in foreign currencies. The current-account balance in 2009-10 remained 
in  negative  territory  (at  -4.2%  in  both  years)  despite  the  sharp  economic  decline  and 
depreciation of the exchange rate. Following the Council’s decision under Art. 104(6) TEC of 
July  2009  establishing  the  existence  of  an  excessive  deficit,  in  February  2010  the  Council 
issued  revised  recommendations  under  Art.  126(7)  of  Treaty  on  the  Functioning  of  the 
European  Union  to  end  the  excessive  deficit  in  2012  at  the  latest.  In  September  2010,  the 
Commission  assessed 
the  Council 
recommendations, and concluded that Romania had up to then acted in accordance with the 
Council’s recommendations to correct the excessive deficit and that no additional step in the 
excessive deficit procedure was therefore necessary at that stage. 

taken  by  Romania 

in  response 

the  action 

to 

The May 2011 update of the convergence programme projects a further decline of the general 
government deficit to 4.9% of GDP in 2011, 3.0% in 2012, 2.6% in 2013, and 2.1% in 2014. 
The underlying macroeconomic scenario envisages that real GDP will rise by 1.5% in 2011 
and 4% in 2012, rising to 4.5% and 4.7% in 2013 and 2014. The spring 2011 forecast by the 
Commission  services  projects  the  general  government  deficit  at  4.7%  in  2011  and  3.6%  in 
2012  under  no-policy-change  terms.  The  Commission  growth  forecast  for  2011  is  fully 
identical  to  the  projections  in  the  convergence  programme,  for  2012  it  is  slightly  more 
cautious  (3.7%).  The  implementation  of  the  fiscal  governance  reforms  decided  upon  within 
the context of the EU balance of payments assistance programme in Romania should help in 
achieving  the  budgetary  targets.  In  February  2011,  a  follow-up  joint  EU/IMF  precautionary 
financial assistance program was requested to support the re-launch the economic growth with 
a focus on structural reforms, while consolidating fiscal and financial stability. It also contains 
explicit  targets  for  the  absorption  of  EU  structural  funds.  The  World  Bank  will  continue 
providing  earlier  committed  support  to  Romania  under  its  development  loan  programme 
(DPL3)  and  support  for  social  assistance  and  health  reforms.  The  Council  has  adopted  the 
relevant  decisions  for  the  new  precautionary  Balance-of-payments  (BoP)  programme  on  12 
May 2011, thus making available precautionary EU medium-term financial assistance of up to 
EUR 1.4 billion. The last instalment of EUR 150 million under the previous BoP programme 
was disbursed on 22 June, meaning that the total amount of the EU loan to Romania of EUR 5 
billion has been made available.  

In its recommendation of 12 July 2011, the Council delivered an opinion on the 2011 update 
of  the  Convergence  Programme  of  Romania  pursuant  to  Regulation  1466/1997.  In  this 
opinion the Council concluded that macroeconomic assumptions underpinning the programme 
are plausible. The programme aims to limit the general government deficit to 2.6% and 2.1% 
of GDP in 2013 and 2014, respectively. The envisaged consolidation is mostly expenditure-
based and the structural improvement appears to be frontloaded in 2011 and 2012. In contrast, 
no such improvement is foreseen in 2013 and 2014. The medium-term objective (MTO) will 
not be reached in the programme period, according to the structural balance recalculated by 
Commission  services.  The  main  risks  to  the  budgetary  targets  are  linked  to  budget 

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implementation  risks,  arrears  of  state-owned  enterprises,  and  reservations  expressed  by 
Eurostat about Romania’s fiscal notification under the excessive deficit procedure. 

In relation to its opinion on the 2011 update of the Convergence Programme, also taking into 
account  the  Council  Recommendation  under  Article  126(7),  the  Council  recommended  that 
Romania:  

(i)  implement  the  measures  laid  down  in  Decision  2009/459/EC  as  amended  by  Decision 
2010/183/EU,  together  with  the  measures  laid  down  in  Decision  2011/288/EU  and  further 
specified  in  the  Memorandum  of  Understanding  of  23  June  2009  and  its  subsequent 
supplements, and in the Memorandum of Understanding of 29 June 2011 and its subsequent 
supplements. 

1.2. 

Conditionality 

Article 6 of the Council Regulation (EC) No 1164/1994 which governs the Cohesion Fund for 
projects  approved  prior  to  the  end  of  2006  attaches  budgetary  policy  conditions  to  the 
disbursements  by  the  Fund.  It  provides  that  "no  new  projects  or,  in  the  event  of  important 
projects, no new project stages shall be financed by the Fund in a Member State in the event 
of  the  Council,  acting  by  a  qualified  majority  on  a  recommendation  from  the  Commission, 
finding  that  the  Member  State  […]  has  not  implemented  [its  stability  or  convergence 
programme] in such a way as to avoid an excessive deficit". 

At the end of 2010, fourteen Member States that were eligible for support under the Cohesion 
Fund (Greece, Spain, Portugal, Bulgaria, Romania, Cyprus, 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 2010, there were eleven cases (Czech Republic, Spain, Latvia, Lithuania, Hungary, Malta, 
Poland,  Portugal,  Romania,  Slovenia  and  Slovakia)  where  effective  action  taken  in 
compliance  with  the  Council  recommendations  under  Article  126(7)  of  Treaty  on  the 
Functioning of the European Union (TFEU) was assessed. In three of those cases (Lithuania, 
Malta  and  Romania),  the  Council  also  issued  new  recommendations  under  Article  126(7) 
TFEU with a view to bringing the excessive deficit situation to an end, and later that year the 
Commission  also  concluded  that  action  had  been  taken  in  compliance  with  the  renewed 
recommendations. The Council further decided to open an excessive deficit procedure in two 
cases (Bulgaria and Cyprus). For both, the Commission concluded in early 2011 that effective 
action had been taken in compliance with the Council’s recommendations.  

The  Council  decided  to  give  notice  under  Article  126(9)  TFEU  to  Greece,  having  had 
established  in  2009  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.  Since 
then,  compliance  with  the  Council  decision  is  examined  by  the  Commission  on  a  quarterly 
basis. On each of these occasions, the Council (on a recommendation from the Commission) 
also revises its decision under Article 126(9) TFEU.  

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2. 

FINANCIAL  EXECUTION  OF  THE  2000-2006  PERIOD  IN  2010  AND  CLOSURE  OF 
PROJECTS 

The Member States eligible for the Cohesion Fund support can be divided into three groups: a 
group  of  four  Member  States  eligible  from  the  beginning  of  the  programming  period  2000-
2006 (Greece, Spain, Ireland and Portugal), a second group of ten Member States that joined 
the  European  Union  in  May  2004  (Cyprus,  Czech  Republic,  Estonia,  Hungary,  Latvia, 
Lithuania, Malta, Poland, Slovakia, Slovenia), and the group of two Member States (Romania 
and Bulgaria) that joined the European Union in January 2007.  

2.1. 

Extension of the final date of eligibility of expenditure 

The "Guidelines on the Closure of Cohesion Fund and Ex-ISPA projects 2000-2006 refers to 
the period of eligibility of expenditure which is set out in each individual decision granting 
financial assistance. In accordance with the principle of sound financial management, and the 
guidance sent on 9 March 2005 by the Directorate-General for Regional Policy to the Member 
States,  for  all  Cohesion  Fund  projects  the  Commission  set  the  final  eligibility  date,  as  a 
general rule, not beyond 31 December 2010.  

In  April  2010,  the  Commission  adopted  as  one  of  the  measures  in  support  of  the  European 
Economic  Recovery  Plan,  the  "Amendment  of  the  Guidelines  on  the  closure  of  Cohesion 
Fund  and  ex-ISPA  projects  2000-2006"3.This  amendment  stated  that  the  Commission  may 
under justified circumstances decide  to  extend the final date of eligibility.  The Commission 
took into account that projects first approved from 2004 onwards may have been particularly 
affected by issues of providing the required national public or private co-financing, or by the 
ability of beneficiaries to  respect the  original schedule  of  works. The  Commission reflected 
that such projects were in the midst or even only at the start of their implementation when the 
crisis set in.  

For  projects  first  approved  by  Commission  decision  after  1  January  2004  the  Commission 
may decide, on the basis of a duly justified request, to extend the final date of eligibility to 31 
December 2011. If, moreover, it concerns a project with a Cohesion Fund contribution of at 
least EUR 100 million, the final date of eligibility may be extended to 31 December 2012.  

Exception for the extension of the final date of eligibility beyond the dates above is possible 
only  under  exceptional  and  duly  justified  circumstances  (i.e.  administrative  or  legal 
proceedings  having  suspensory  effects,  cases  of  force  majeure  which  have  serious 
repercussions  for  the  implementation  of  the  project  supported  by  the  Cohesion  Fund,  or 
manifest errors attributable to the Commission).  

The amendment of the guidelines on closure was welcomed by the respective Member States 
and the Commission believes it will contribute to more efficient and effective implementation 
of the 2000-2006 Cohesion Fund projects. As a consequence, a number of the Member States 
requested  extensions  of  the  final  date  of  eligibility  for  several  dozens  of  Cohesion  Fund 

3 "Amendment of the Guidelines on the closure of Cohesion Fund and ex-ISPA projects 2000-2006", SEC(2010) 0405 of 
19 April 2010 

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projects in 2010 which would mean that implementation of these projects will continue to the 
end of 2011 or 2012. 

2.2. 

Payments made in 2010 for projects adopted during the 2000-2006 period 

In general, there were fewer final payments for Cohesion Fund projects (and ex-ISPA) for the 
period 2000-2006 than initially expected. Closure payment claims require thorough analysis 
of  the  closure  documents  and,  depending  on  their  completeness  and  quality,  it  can  result  in 
final payments at later stage than initially foreseen.  

The 2010 initial budget for payments for the 2000-2006 Cohesion Fund projects amounted to 
EUR  2,500  million.  The  transfer  of  appropriations  resulted  in  a  final  budget  of  EUR 2,321 
million.  In  order  to  close  the  gap  between  the  available  resources  and  the  demand  for 
payments,  transfers  have  been  made  to  the  budget  line  related  to  the  2007-2013  Cohesion 
the  available  appropriations  of 
Fund  programmes.  For 
EUR 2,321 million were fully implemented by the end of 2010. This is a lower execution than 
in  year  2009  (EUR  2,777  million)  illustrating  the  fact  that  the  Cohesion  Fund  project 
implementation cycle is reaching its final stage.  

the  period  2000-2006, 

As  far  as  the  ex-ISPA  budget  lines  are  concerned,  the  budget  initially  foreseen  for  2010 
amounted  to  EUR 560 million.  In  September  (during  the  Global  Transfer  procedure),  the 
appropriations  were  reduced  by  an  amount  of  EUR 184 million.  After  further  transfers  in 
December 2010, the final appropriations amounted to some EUR 368 million. The available 
appropriations were implemented in their entirety.  

Table  1  presents  the  overall  execution  of  payments  in  2010  (including  technical  assistance) 
for the Cohesion Fund and the ex-ISPA projects. 

Table 1. Implementation of the Cohesion Fund and ex-ISPA payments in 2010 (in EUR) 

Payment appropriations 

Initial 

Movements 

Final Resources 

Outturn 

Cohesion Fund 

2 500 000 000 

-179 383 717 

2 320 616 283 

2 320 616 283 

Ex-ISPA 

TOTAL 

560 000 000 

-191 878 478 

368 121 522 

368 121 522 

3 060 000 000 

-371 262 195 

2 688 737 805 

2 688 737 805 

Table  2  shows  the  level  of  2010  payments  for  each  Member  State  and  for  each  sector.  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 2010, payments were higher in comparison to the payments made in 2009 for the following 
countries: Poland (+ EUR 108 million or 13% increase of payments made in 2009), Slovakia 
(+ EUR 14 million or 29% increase of 2009 payments).  

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Table 2. Payments made in 2010 to the Cohesion Fund and ex-ISPA projects per Member State 
and per sector 

Environment 

Transport 

Technical 
Assistance 

TOTAL 

Member 
State 

Amount 

Greece  

196 285 182 

Portugal  

109 709 657 

% (as 
compare
d to the 
CF 2010 
outturn 
by MS) 

7,3% 

4,1% 

0,0% 

Amount 

% (as 
compare
d to the 
CF 2010 
outturn 
by MS) 

Amount 

Amount 

% (as 
compare
d to the 
global 
CF 
amount) 

60 562 484 

127 564 819 

2,3% 

4,7% 

0 

256 847 666 

9,55% 

985 244 

238 259 720 

8,86% 

Ireland  

Spain  

EU-4 

Cyprus  

Czech 
Republic  

Estonia  

Hungary  

Latvia  

Malta  

Poland  

Slovakia  

Slovenia  

EU-10 

0 

0 

328 329 637 

12,2% 

280 813 392 

10,4% 

0 

0 

0 

0,00% 

609 143 029 

22,66% 

634 324 476 

23,6% 

468 940 695 

17,4% 

985 244 

1 104 250 415 

41,07% 

0 

55 297 256 

15 878 636 

29 331 827 

10 338 526 

0 

0,0% 

2,1% 

0,6% 

1,1% 

0,4% 

0,3% 

0,0% 

0 

30 680 718 

22 039 712 

17 526 811 

25 859 859 

0,0% 

1,1% 

0,8% 

0,7% 

1,0% 

0 

0 

0,00% 

425 379 

86 403 353 

3,21% 

0 

37 918 348 

1,41% 

856 105 

47 714 743 

1,77% 

544 591 

36 742 976 

1,37% 

15 252 592 

0,6% 

6 138 958 

30 132 506 

1,12% 

0 

0,0% 

40 420 

40 420 

0,00% 

448 619 538 

16,7% 

491 467 969 

18,3% 

4 116 085 

944 203 592 

35,12% 

26 049 461 

11 790 480 

1,0% 

0,4% 

34 584 958 

440 792 

1,3% 

0,0% 

0 

60 634 419 

2,26% 

96 250 

12 327 522 

0,46% 

606 046 680 

22,5% 

637 853 411 

23,7% 

12 217 789 

1 256 117 879 

46,70% 

Lithuania  

8 740 955 

Bulgaria  

47 080 251 

Romania  

109 605 808 

1,8% 

4,1% 

68 561 660 

2,5% 

3 351 764 

118 993 675 

4,43% 

97 810 588 

3,6% 

1 959 440 

209 375 836 

7,79% 

EU-2 

156 686 059 

5,8% 

166 372 248 

6,2% 

5 311 204 

328 369 511 

12,21% 

TOTAL 

1 397 057 214 

52,0% 

1 273 166 354 

47,4% 

18 514 237 

2 688 737 805 

100,00% 

2.3. 

Outstanding commitments from the 2000-2006 period 

At  the  end  of  2010,  the  average  absorption  rate  (payments  vs.  commitments)  of  all  current 
beneficiary countries for both the Cohesion Fund and ex-ISPA projects was 83.7% (Table 3). 
The absorption rates range from 70.1% (Bulgaria) and 72.6% (Hungary) to 86.7% (Estonia) 
and 92.8% (Ireland).  

At the end of 2010, the outstanding commitments ("reste à liquider", RAL) corresponding to 
the 2000-2006 period amounted to EUR 5.7 billion. During 2010, the outstanding RAL was 

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reduced  by  EUR 2.7  billion.  In  terms  of  absorption,  the  most  significant  decreases  in  RAL 
compared  to  year  2009  were  notified  for  Poland  (-16.8 percentage  points),  Bulgaria  (- 13.6 
percentage points) and Romania (- 10.3 percentage points).  

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

Member State 

Committed 

Paid 

(until 12/2010) 

(until 12/2010) 

% Paid 

RAL 

as at 31/12/2010 

% RAL 

Greece 

Spain 

Ireland 

Portugal 

3 546 948 416 

2 972 182 523 

12 884 382 648 

11 128 639 199 

625 755 407 

580 710 223 

3 482 652 576 

2 979 319 277 

83,8% 

86,4% 

92,8% 

85,5% 

574 765 893 

1 755 743 450 

45 045 184 

503 333 299 

TOTAL EU-4 

20 539 739 048 

17 660 851 221 

86,0% 

2 878 887 827 

Cyprus 

54 014 695 

40 029 810 

Czech Republic 

1 226 218 717 

1 061 982 697 

Estonia 

Hungary 

Latvia 

Lithuania 

Malta 

Poland 

Slovakia 

Slovenia 

425 431 731 

368 686 651 

1 481 998 333 

1 075 837 677 

713 737 155 

578 052 034 

825 210 750,63 

691 544 300 

21 966 289 

17 573 031 

5 634 539 614 

4 652 759 522 

765 689 903 

646 665 528 

254 129 012 

214 745 183 

74,1% 

86,6% 

86,7% 

72,6% 

81,0% 

83,8% 

80,0% 

82,6% 

84,5% 

84,5% 

13 984 885 

164 236 020 

56 745 080 

406 160 656 

135 685 121 

133 666 450 

4 393 258 

981 780 092 

119 024 375 

39 383 829 

TOTAL EU-10 

11 402 936 200 

9 347 876 435 

82,0% 

2 055 059 765 

Bulgaria 

Romania 

876 877 183 

614 479 975 

2 035 838 573 

1 550 268 645 

70,1% 

76,1% 

TOTAL EU - 2 

2 912 715 755 

2 164 748 620 

74,3% 

262 397 209 

485 569 928 

747 967 135 

TOTAL 

34 855 391 003 

29 173 476 276 

83,7% 

5 681 914 727 

16,2% 

13,6% 

7,2% 

14,5% 

14,0% 

25,9% 

13,4% 

13,3% 

27,4% 

19,0% 

16,2% 

20,0% 

17,4% 

15,5% 

15,5% 

18,0% 

29,9% 

23,9% 

25,7% 

16,3% 

2.4. 

Closure of Cohesion Fund projects  

In total there are 1192 Cohesion Fund projects for 2000-2006 (including the ex-ISPA projects 
and bridge projects 1994-1999), of which 795 were still on-going in the Member States at the 
end of 2010. 

At the end of 2010, the total number of closed 2000-2006 Cohesion Fund projects (including 
ex-ISPA  projects)  was  397  and  102  projects  were  closed  in  2010.  The  majority  of  closures 
were notified for the following Member States: Spain (58 projects closed), Latvia (9), Greece 
and Czech Republic (8). Table 4 provides information on the projects closed until the end of 
2010 per Member State. 

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Table 4. Cohesion Fund projects closed until the end of 2010 (including ex-ISPA) 

Member State 

Czech Republic 

Estonia 

Greece 

Spain 

Ireland 

Cyprus 

Latvia 

Lithuania 

Hungary 

Malta 

Poland 

Portugal 

Slovenia 

Slovakia 

EU-14 

Bulgaria 

Romania 

EU-2 

TOTAL 

Total 
number 
of CF 
projects 

Projects closed as of end 2010 

Total number of 
projects closed 

Number of 
projects closed in 
2010 

Total paid in 
EUR 

Number of 
open projects 
as of end 2010 

58 

37 

124 

407 

10 

2 

46 

51 

47 

3 

130 

109 

28 

39 

1091 

38 

63 

101 

1 192 

27 

21 

58 

164 

4 

0 

19 

16 

12 

0 

6 

36 

13 

11 

387 

4 

6 

10 

397 

8 

1 

8 

549 846 707 

129 290 305 

1 298 010 305 

57 

4 272 630 917 

0 

0 

9 

1 

1 

0 

0 

6 

3 

3 

357 368 796 

0 

143 251 895 

171 791 687 

34 389 692 

0 

68 915 348 

825 206 357 

81 180 871 

145 781 900 

97 

8 077 664 780 

1 

4 

5 

27 407 620 

15 776 582 

43 184 202 

102 

8 120 848 982 

31 

16 

66 

243 

6 

2 

27 

35 

35 

3 

124 

73 

15 

28 

704 

34 

57 

91 

795 

3. 

THE IMPLEMENTATION OF THE 2000-2006 PROJECTS BY MEMBER STATE 

3.1. 

Greece 

3.1.1.  Environment 

In the environmental sector, 60 projects were under implementation in 2010, 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  is  noted  during  2010  in  particular  in  relation  to  those  Cohesion  Fund  projects  that 
concern  waste  water  treatment  plants  however,  the  rate  of  performance  of  the  environment 

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projects differs from one sector to another. Projects on solid waste infrastructure in particular 
in  Attiki  Region,  drinking  water  and  nature  protection  projects,  and  in  particular  major 
projects such as the construction of dams, are seriously delayed due to administrative delays, 
archaeological  findings,  the  economic  crisis,  violent  public/social  reactions  or  not  full 
implementation of the EU relevant Directives. This is due to the condition that a number of 
requirements that should be implemented are deriving from relevant Directives and reflected 
in  the  specific  terms  of  the  funding  decisions  and  are  linked  to  payments.  These  specific 
clauses can be divided into those of an administrative nature (e.g. setting up of a solid waste 
management body or of an agency to manage the operation of a dam), and those of a legal or 
technical  character  (e.g.  the  completion  of  the  legal  framework  relating  to  the  solid  waste 
management or certain actions considered necessary for the integrated management of solid 
waste).  The  timely  and  efficient  application  and  implementation  of  these  requirements  are 
directly related to the implementation of the projects concerned.  

Due to all the above, most of the granting decisions have been modified upon request of the 
Greek authorities.  These  modification decisions concerned mainly the extension of the final 
date of eligibility, the adaptation of the physical object and the financing plan. 

3.1.2.  Transport 

In  the  transport  sector  there  were  12  projects  under  implementation  in  2010  and  there  is  a 
stable  progress  of  the  physical  and  financial  implementation  of  the  projects,  with  higher 
absorption presented in the road projects while the rail and the port projects are still lagging 
behind.  

Cohesion  Fund  transport  projects  contribute  to  the  development  of  the  sustainable  transport 
policy  in  Greece  and  concern  in  particular  the  priority  trans-European  (TEN)  road  axes  in 
Greece, i.e. the PATHE, EGNATIA; the modernisation of the PATHE railway axis, also part 
of  the  TEN,  including  its  electrification  and  signalling  systems,  construction  of  a  freight 
railway line from the Ikonio port to the railway freight centre of Thriassio; the infrastructure 
facilities  in  different  ports;  public  transport  infrastructures  in  Attica  such  as  the  metro.  The 
transport  projects  are  progressing  better  than  the  environment  projects,  with  motorways 
projects being particularly well advanced. 

3.2. 

Spain 

The year 2010 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. 

A total of 57 projects were closed in 2010 and 243 projects remained open as at the end of 
2010,  including  one  from  the  1993-1999  period,  with  a  RAL  of  EUR  1,755.7  million,  of 
which  EUR  5.4  million  was  related  to  the  1993-1999  period.  This  represents  a  decrease  of 
26.7% in the RAL associated with the Cohesion Fund for 2010. 

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Despite a significant acceleration in the pace of closures compared to 2009 and 2008 when 34 
and 18 project's closures was completed, the closure process remains not as fast as desired 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.  1164/1994.  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.  However,  four  hearings  took  place  in  2010  (11  March,  23  June,  14  July  and 
22 November)  dealing  with  a  total  of  30  projects,  compared  to  only  one  hearing  in  2009 
which dealt only with 3 projects. 

As  regards  payments  (intermediate  and  final  balance),  a  total  of  128  requests  for  payments 
have  been  implemented  for  an  amount  equivalent  to  EUR  609.1  million.  Compared  to  the 
year 2009, this represents a decrease in terms of payment claims (162 in 2009) and a decrease 
in terms of amounts paid (EUR 712 million in 2009). 

3.2.1.  Environment  

Regarding changes in the conditions for granting aid, in 2010 a total of 30 amending decisions 
were  approved,  all  of  which  were  within  the  environmental  sector.  In  general,  the  changes 
affect the date of completion of works, often accompanied by - usually minor - changes to the 
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,  there  was  a  significant  reduction  compared  to  2009  when  71 
amending  decisions  were  approved.  This  is  probably  due  to  the  unusual  high  number  of 
modification in 2009.  

3.2.2.  Transport 

In  2010,  the  Commission  services  paid  particular  attention  to  the  implementation  of  high 
speed  trains  projects.  In  particular  in  September  2010  two  new  lines  started  operating: 
Madrid-Albacete  and  Madrid-Valencia  (adding  438  km  to  the  global  network).  The  trip 
between  Madrid  and  Valencia  takes  now  only  1  hour  and  a  half  (for  391  km)  what  can  be 
considered a very good result of the cohesion policy in Spain. The total EU co-financing of 
this infrastructure was EUR 1,949 million. For the programming period 2000-2006 the total 
EU aid was EUR 747.3 million (EUR 574.6 million from the Cohesion Fund). The total cost 
of the infrastructure was EUR 12,410 million. 

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, 

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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 2010, 12 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 extend the final date of eligibility. 

In  2010,  4  environmental  projects  were  closed:  "Resíduos  Cova  da  Beira",  "Sistema 
multimunicipal  de  Valorizaçao  eTratam.  De  RSU  do  Norte  Alentejano",  "Residuos  Solidos 
Acçoes  Vomplementaires  para  o  Ano  2001-EGF"  and  "Sistema  Multimunicipal  de 
Abastecimento de Agua e de Saneamento do Vale do Ave-Estudos/Projectos/Assessorias". 

As at December 2010, 16 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 de 
Água  e  Saneamento  de  Trás-os-Montes  e  Alto  Douro  –  3ª.  Fase"  (EUR  50  millions), 
"Multisectorial  Raia,  Zêzere,  Nabão-  1a  fase"  (EUR  45  millions),  and  "Abastecimento  e 
Saneamento de Águas de Trás-os Montes e Alto Douro – Fase 2" (EUR 43 million). 

The  other  37  open  projects  arrived  at  the  end  of  eligibility  date  on  31  December  2010. 
However, following the Amendment of the Guidelines on the closure of Cohesion Fund and 
ex-ISPA projects 2000-2006, the national authorities requested the extension of the deadline 
of 18 projects/group of projects to the end of 2011 and 1 cancellation (Resitejo). This means 
that 19 projects should enter in the closure procedure soon.  

It should be noted that one project in the sector of waste treatment – "Braval" - has not yet 
received the advance payment.  

3.3.2.  Transport 

The  projects  being  implemented  contribute  to  the  development  of  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. 

During the year, 2 amending decisions were adopted for the same general reasons of adjusting 
the description of the project and extending the final date of eligibility. 

In 2010, 2 transport projects were fully closed, "Porto da Praia da Vitória" and "IC3 – Ligação 
Tomar/IP6" and 1 partially closed due to legal and administrative issues, "Linha do Minho – 
Nine/Braga.  

Six transport projects were at the closure procedure stage in December 2010; 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), and "Porto do Caniçal" (EUR 41 million). 

The  other  9  projects  arrived  at  the  end  of  the  eligibility  date  on  31  December  2010.  The 
national authorities requested the extension of the deadline to the end of 2011 for one project 

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(Porto  do  Funchal)  and  to  the  end  of  2012  for  another  one  (Metro  de  Lisboa  – 
GIL/Aeroporto). In the same request for modification, the Portuguese authorities asked for the 
fusion of this project with another project in the same underground line "Metro de Lisboa – 
Alameda/S. Sebastião". 

3.3.3.  Technical Assistance 

At  the  end  of  2010,  3  technical  assistance  decisions  still  remained  open.  No  projects  were 
closed. One amending decision was adopted in 2010 to extend the final date of eligibility to 
the end of 2011. 

3.4. 

Cyprus 

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

The  payments  made  by  the  Commission  for  2  projects  (including  the  advances)  amount  to 
approximately  EUR  40  million  (absorption  rate  74%).  During  the  year  2010,  no  payment 
claim was submitted by the Cypriot authorities. 

The final payment request including the final report for the transport project was submitted on 
22 June 2010, which is within the 6 months deadline after the final date of implementation. 
The winding-up declaration was submitted on 6 December 2010. All closure documents are 
under assessment and it is expected to complete it during the first semester of 2011. 

For the environment project, the works have been completed and the project is operational. It 
is expected to receive the final payment claim within the 6 months deadline after the final date 
of implementation (at the end June 2011). 

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  in  the  2000-2006  programming  period,  14  were 
closed (4 in 2010), 1 is in the closure procedure, and closure procedures have been initiated 
for 5 other projects. The majority of the on-going projects have been completed or are in the 
final stage of implementation. 81% of the committed amounts have already been paid by the 
Commission. 

In  2010,  the  Commission  dealt  with  4  requests  to  amend  the  Commission  decision  in  the 
sector of environment. Most of the modifications concerned the extension of the final date of 
eligibility. By the end of the year, all of the modification requests had been adopted.  

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3.5.2.  Transport 

In  the  transport  sector,  implementation  is  well advanced  for  almost  all  projects.  86%  of  the 
committed  amounts  have  already  been  paid  by  the  Commission.  In  2010,  the  closure 
procedure was launched for 1 project. So far, 9 out of 13 approved projects have been closed 
(4 in 2010). One modification request was received in 2010 in the transport sector concerning 
the extension of the final date of eligibility.  

In addition, there was also 1 mixed project – environment and transport (Floods 2002 relief: 
Reconstruction  of  transport  and  environment  infrastructure  damaged  or  destroyed  by  floods 
during August 2002) which was closed in 2004. 

3.5.3.  Technical Assistance 

Regarding the technical assistance projects, their implementation is also well advanced - 3 out 
of 6 approved projects (2 in the field of transport, 2 in the field of environment and 2 general 
technical assistance) were closed, none of which in 2010. The closure procedure for one of the 
technical assistance projects in the field of transport has been launched in 2010. 

A  request  for  modification  concerning  the  extension  of  the  final  date  of  eligibility  of  the 
technical  assistance  to  the  managing  authority  of  the  Cohesion  Fund  was  submitted  and 
approved  in  2010.  A  request  for  modification  concerning  the  extension  of  the  final  date  of 
eligibility  was  submitted  and  approved  in  2010  also  for  one  of  the  technical  assistance 
projects in the field of environment.  

3.6. 

Estonia 

3.6.1.  Environment 

The  Commission  has  issued  financial  decisions  for  21  environmental  projects  under  the 
Cohesion Fund (4 of them are technical assistance projects). By the end of 2010, activities of 
all  but  2  projects  were  finished  on  the  ground.  For  2  projects,  the  extension  was  asked  as 
contractors  were  unable  to  fulfil  their  tasks  and  new  contractors  had  to  be  found  at  the  last 
moment. The residual works are minor compared to the whole project and there is no danger 
that the projects will not be operational as a result. 

Cohesion  Fund  projects  were  subject  to  heavy  cost  increases  in  2006  –  2007.  The  situation 
has  normalized  since  2008  and  construction  prices  have  been  going  down  during  the 
economic  crises.  The  changing  conditions  have  required  that  some  projects  had  to  be 
modified  by  the  Commission  and  there  are  pending  requests  to  decrease  the  physical 
objectives of certain projects. These proposals for modification are being analyzed in order to 
ensure  the  delivery  of  working  projects  that  continue  to  fulfil  the  initial  objectives  and  to 
avoid increasing Community contribution except in cases that are justified by unforeseeable 
increase in initial estimated inflation. 

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In environment, Cohesion Fund projects mainly concentrated to water sector. Estonia's larger 
urban areas – Tartu, Narva, Kohtla-Järve, Pärnu etc. were able to carry out separate projects 
while  smaller  settlements  were  grouped  together  according  to  the  river  or  sub-river  basin 
water management plans. In waste management the Cohesion Fund supported closure of one 
hazardous waste landfill and construction of modern landfill for the Western part of Estonia.  

3.6.2.  Transport 

The Commission has issued financial decisions for 15 transport projects under the Cohesion 
Fund  (5  of  which  are  technical  assistance  projects).  By  the  end  of  2010,  all  projects  were 
completed on ground. For a project concerning the extension of Muuga harbour, cost savings 
were encountered and the managing authority proposed to carry out additional works to use 
these savings for the benefit of the project during 2011.  

All Estonian TEN-T roads have been systematically improved with Cohesion Fund resources. 
At  the  initial  stage,  projects  comprised  mainly  improvements  to  existing  roads  that  were  in 
very  bad  condition  when  ISPA  initially  became  available.  At  later  stage,  work  has 
concentrated on full renewal of sections and junctions considered to be bottlenecks or black 
spots in terms of safety. No completely new roads or motorway sections have been built. In 
addition  to  roads,  Tallinn  Airport  passenger  terminal  and  surrounding  area  have  been 
completely  renovated  and  extended,  allowing  the  airport  to  cope  with  increased  passenger 
numbers. Also, major seaport has been extended with the assistance of the Cohesion Fund. 

Technical assistance has helped preparing transport infrastructure projects for implementation 
in  the  new  programming  period.  This  is  demonstrated  by  good  progress  in  transport  sector 
investments from 2007 – 2013 period resources. 

3.7. 

Hungary 

3.7.1.  Environment 

In the environment sector there are 31 Cohesion Fund/ex-ISPA projects, including 6 technical 
assistance projects (5 of which are closed) and 25 investment projects (2 are closed) of which 
10  are  waste  water,  13  are  solid  waste,  1  drinking  water  and  1  recultivation  project.  The 
overall  payment/commitment  rate  is  65%  for  investment  projects  and  87%  for  technical 
assistance projects. The contracting rate is mainly above 90% and in several cases it is 100%. 

In 2010, the Commission adopted 3 amending decisions, 2 of which concerned the extension 
of  the  final  date  of  eligibility  until  31  December  2010  and  2012  respectively  and  another 
relating to the inclusion of new project elements. An additional 8 modifications are on-going. 
These are mainly related to cost savings and extension of the project eligibility date until 31 
December 2011. The requested extension of the final date of eligibility to 31 December 2011 
for 2 projects – namely North East Pest and North Balaton waste projects - was not eligible 
for the extension as these projects were first adopted in 2002 and 2003. 

One environment project was closed in 2010. There are 4 pending project closures. 

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3.7.2.  Transport 

There  are  16  Cohesion  Fund/ex-ISPA  projects  in  the  transport  sector  including  7  technical 
assistance  projects  (4  of  them  are  closed)  and  9  investment  projects  –  1  for  air  transport 
(closed),  3  for  road  transport  and  5  for  rail.  All  transport  projects  reached  the  80% 
payment/commitment rate. There are 3 pending project closures. 

In 2010, the Commission adopted 3 amending decisions, mainly concerning the extension of 
the final date of eligibility until 31 December 2010 and an inclusion of new project elements. 
An additional modification is pending related to cost increase and extension of the final date 
of eligibility until 30 June 2012. 

3.8. 

Latvia 

3.8.1.  Environment 

The  Commission  has  issued  26  Cohesion  Fund  decisions  for  environmental  projects 
(including  4  technical  assistance  projects).  In  total,  out  of  26  projects  by  the  end  of  2010, 
9 projects had been closed, 8 closure files and 1 cancellation request were pending with the 
Commission (7 projects were closed in 2010), and 8 projects were still ongoing. 

For 5 of the pending closure files, financial corrections of EUR 4.45 millions were proposed 
as a result of the wrongful award of supplementary contracts. On 1 July 2010, a hearing was 
held for 4 projects, but no agreement was reached. Therefore a second stage hearing will be 
organized in 2011. Effort is put so that all the 5 remaining cases are closed in 2011. 

In 2010, the Commission approved 5 modifying decisions mainly concerning extension of the 
final date of eligibility to 31 December 2010, increase of the ceiling of cumulative payments 
to the project to 90% and some minor adjustments of the physical scope.  

3.8.2.  Transport 

The  Commission  has  issued  18  Cohesion  Fund  decisions  for  transport  projects  (including  4 
technical  assistance  projects).  In  total,  by  the  end  of  2010,  9  projects  were  closed  (2  were 
closed  in  2010),  1  closure  file  was  pending  with  the  Commission,  and  8  projects  were 
ongoing. 

In 2010, the Commission approved 3 modifying decisions mainly concerning extension of the 
final  date  of  eligibility  to  31  December  2010  and  some  minor  adjustments  of  the  physical 
scope. 

3.9. 

Lithuania 

3.9.1.  Environment 

29  environmental  projects  were  adopted  under  the  Cohesion  Fund  (and  ex-ISPA)  for  the 
period 2000-2006, of which  16 relate to the waste water sector, 11 relate to the solid waste 
sector, and 2 are for technical assistance. 

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Prior to 2010 one waste water project was closed and another one has been closed in 2010. 
Currently 7 other projects are under treatment for closure with the Commission. 

3  amending  decisions  were  adopted  in  2010  and  13  other  modification  requests  were  still 
under treatment at the end of 2010, of which 1 was completed at the beginning of 2011. The 
modifications  mainly  concern  reduction  of  scope  of  the  project,  adjustment  of  physical 
monitoring  indicators,  extension  of  the  final  date  of  eligibility  to  31  December  2011  and 
increase, up to 90%, of the ceiling for advance and interim payments. Out of 13 requests, 9 
included extension of the final date of eligibility and 10 the reduction in scope. 

Two specific problems were identified in the environment sector:  

1) A majority of projects in water and waste water sector showed only partial achievement of 
project  objectives  related  to  the  connection  rate  of  the  new  consumers  to  the  central  water 
supply and waste water collection networks. 

2) A number of projects were affected by cost overruns due to unforeseen inflation, this has 
moved the Member State to request for a reduction of scope. 

3.9.2.  Transport 

21 transport projects were adopted under the Cohesion Fund (and ex-ISPA) for the 2000-2006 
period; 11 of these projects refer to the road sector, 6 refer to the railway sector, and 4 are for 
technical assistance. 

Prior  to  2010,  9  road  projects  and  2  technical  assistance  projects  were  closed.  In  2010,  the 
Commission  services  initiated  closure  procedures  for  3  other  projects  which  are  currently 
under treatment. 

4 amending decisions were adopted in 2010 and 2 more requests for amendment were under 
treatment  end  2010.  These  request  for  modification  mainly  include,  adjustments  of  the 
physical  monitoring  indicators,  inclusion  of  new  components,  extension  of  the  final  date  of 
eligibility and increase, up to 90%, of the ceiling for advance and interim payments. 

3.9.3.  Technical Assistance 

In  addition  to  the  sectoral  assistance,  co-financing  has  been  granted  to  the  project  aimed  at 
strengthening the administrative capacity of Cohesion Fund management in Lithuania. Project 
activities are directly related to the monitoring of the Cohesion Fund projects, verification of 
the closure documents and ex-ante evaluation of all Cohesion Fund projects of the 2000-2006 
programming period.  

3.10.  Malta 

3.10.1.  Environment 

The project "Upgrading of Sant' Antnin waste treatment facilities" covers the construction of a 
mechanical  treatment  plant  for  the  pre-treatment  of  household  waste,  a  material  recycling 

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facility, an anaerobic digestion plant for the treatment of biodegradable waste, as well as an 
installation  of  a  waste  water  treatment  facility.  The  main  outcome  is  the  reduction  of  the 
negative environmental impact of the waste cycle, and notably the reduction of the amount of 
landfilled waste, which is of utmost importance for the Malta main island due to its very high 
population density (1,500 inhabitant / km²). 

The request for the second modification of the Commission decision regarding the extension 
of the final date of eligibility until 31 December 2011 was received by the Commission on 8 
October  2010.  The  modification  request,  motivated  by  the  significant  economic  and  social 
challenges  faced  by  Malta  in  the  light  of  the  global  financial  crisis  and  their  impact  on  the 
timely  completion  of  the  project,  was  accepted  by  the  Commission  and  an  amending 
Commission Decision was adopted on 11 February 2011. 

The project is progressing well, the Commission's payment/commitment ratio of the project 
reached  the  ceiling  of  80%;  the actual  realised  payments/total  eligible  cost  ratio  amounts  to 
83.51%.  The  material  recycling  facility  has  been  completed;  the  digestion  plant  and 
mechanical treatment plant are completed by 85% and 97% respectively. 

3.10.2.  Transport 

The  project  "Restoration  and  upgrading  of  sections  of  TEN-T"  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 objective to reduce travel 
time,  accident  rates,  transport  costs  and  facilitate  competitiveness  in  the  transportation  of 
goods. 

The Commission decision approving this project was modified on 17 October 2008, covering 
transfer of funds between the project sections and extending the deadline for the eligibility of 
expenditure  until  31  March  2010.  A  request  for  the  second  modification  of  the  project  was 
submitted to the Commission in July 2009 to make use of savings encountered in the project 
(519,496.91  €)  for  the  upgrading  of  an  additional  350  m  stretch  of  the  Mġarr  Road.  The 
modifying  decision  was  adopted  by  the  Commission  on  5  February  2010.  A  Commission 
decision correcting an administrative error in the second modifying decision was adopted on 
23  March  2010.  The  deadline  for  the  eligibility  of  expenditure  has  been  extended  until  31 
December 2010. 

The  project  (including  the  additional  works  on  the  Mġarr  Road)  was  physically  and 
financially  completed  in  the  course  of  2010.  The  documents  required  for  the  closure  of  the 
project are to be submitted to the Commission by the end of June 2011. 

3.10.3.  Technical Assistance 

The  technical  assistance  project  aims  at  preparing  the  environmental  projects  pipeline  for 
2007-2013 Cohesion Fund projects (mechanical biological waste treatment plants and storm 
water master plan). 

The  Commission  decision  approving  this  project  was  modified  on  30  July  2008  in  order  to 
take  into  account  delays  in  the  identification  of  potential  sites  for  the  waste  treatment  plant 

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and  the  need  to  comply  with  obligations  arising  from  Directive  2001/42/EC.  Consequently, 
the  environmental  impact  assessment  component  was  taken  out  of  the  first  sub-project  and 
strategic  environmental  assessment  included  in  the  second  sub-project.  In  addition,  the 
deadline for the eligibility of expenditure has been extended until 31 December 2010. 

The project was physically and financially completed in the course of 2010. The documents 
required for the closure of the project are to be submitted to the Commission by the end of 
June 2011. 

3.11. 

Poland 

In  2010,  the  Commission  adopted  43  amending  decisions  granting  assistance  from  the 
Cohesion  Fund  –  36  in  the  environment  sector  and  7  in  the  transport  sector.  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%. In addition, the Commission adopted 2 corrigenda. 
Out of the total 130 Cohesion Fund projects, only 6 projects were closed before 2010.  

27 projects were under closure as at the end of 2010 of which 12 projects were submitted for 
closure  before  2010  and  were  delayed  due  to  a  contradictory  procedure  resulting  from  two 
public  procurement  audits  conducted  by  the  Commission  (Directorate-General  for  Regional 
Policy). Two hearings took place in April and June 2010, which led to an agreement between 
Poland  and  the  Commission  to  apply  a  2%  net  flat-rate  correction  for  5  systemic  public 
procurement  findings  to  all  124  unclosed  projects.  The  complementary  information  to 
winding-up  declarations  reflecting  the  outcome  of  the  hearing  was  submitted  to  the 
Commission  only  in  the  fourth  quarter  of  2010.  Consequently  the  closure  of  these  files  is 
expected to be finalised in 2011. 

As a large majority of the remaining 97 unclosed projects finalised works by December 2010, 
the main bulk of closures will be due on 30 June 2011. However, the Commission registered 
(mostly in the fourth quarter of 2010) 29 requests for extension of the final date of eligibility 
beyond 2010 due to force majeure (floods in spring 2010), implementation difficulties and/or 
impact of the financial and economic crisis. The analysis of these requests would take place in 
the first quarter of 2011. 

The  implementation  of  projects  has  been  strongly  influenced  by  large  cost  overruns 
amounting  to  one  third  of  the  entire  Cohesion  Fund  allocation  for  Poland.  The  national 
authorities  secured  the  additional  financing  for  all  projects  affected  by  cost-overruns  by 
national  funds  and  loans,  with  the  exception  of  5  projects  in  the  environment  sector  and  1 
transport project. Poland has requested a reduction of the physical scope in all 6 projects. The 
decision on these modifications was not taken in 2010 due to pending replies to the requested 
additional  information  by  the  Commission  from  the  national  authorities.  On  the  other  hand, 
there were 29 projects which achieved cost-savings totalling EUR 44 million of the Cohesion 
Fund grant. 

At  the  end  of  2010,  there  was  no  project  left  with  an  outstanding  issue  relating  to  the 
Environmental Impact Assessment (EIA). 

In 2010, the Commission authorised payments amounting to EUR 944.2 million.  

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3.11.1.  Environment 

The  level  of  contracting  corresponds  to  123%  of  the  originally  estimated  costs  in 
environmental projects, or 98% of the total estimated costs when cost overruns are taken into 
account.  The  physical  and  financial  progress  on  the  ground,  aggregated  for  the  sector,  was 
recorded  at  89%  (both  physical  and  financial).  13  closures  were  ongoing  for  an  investment 
project in the environment sector. 

3.11.2.  Transport 

The level of contracting was over 129% of the originally estimated cost for transport projects, 
or  97%  if  the  cost  overruns  are  taken  into  account.  The  physical  and  financial  progress 
aggregated for the sector was about 85% (both physical and financial). The closure procedure 
for 11 investment projects was ongoing in the transport sector. 

3.11.3.  Technical assistance 

3 closures were ongoing for technical assistance projects.  

3.12. 

Slovakia 

3.12.1.  Environment 

As  a  result  of  common  efforts  and  measures  taken  in  the  previous  period  (action  plans  and 
strengthened  monitoring) all Cohesion Fund environment projects  with an exemption  of the 
"Prešov - Drinking water and sewerage in the basin of Torysa river" project were physically 
completed  in  2010.  Prešov  project,  due  to  a  damaged  infrastructure  as  a  result  of  extreme 
flooding in June 2010, asked for extension of the final date of eligibility until 2011.  

Financial closure was completed in 2010 only for 1 technical assistance project – Technical 
assistance  for  the  preparation  of  the  Cohesion  Fund  projects  in  the  water  sector.  Another 
project - Komárno - was interrupted due to additional verifications of the public procurement 
procedure. For 4 projects under closure (Poprad, Zvolen, Liptov, South East Zemplín) due to 
financial  corrections  proposed  by  the  Commission  (additional  works  and  services  not 
fulfilling public procurement requirements), a hearing was organised in December 2010. For 
other 5 projects (Žilina, Šaľa, Pieštany, Košice, Humenné) closure documents were received 
in June 2010 and are being examined by the Commission. Modifying decisions were prepared 
for  Veľky  Krtíš  due  to  adjustment  of  physical  indicators  and  for  Trnava  project  due  to 
adjustment of the text in the granting decision. 

3.12.2.  Transport 

All  Cohesion  Fund  transport  projects  were  physically  completed  in  2010.  Administrative 
closure  of  two  transport  projects  (Construction  of  D61  Motorway  Section  Vienna  Road-
Riverport  Bridge  in  Bratislava  and  Modernisation  of  the  Rail  Track  Šenkvice-Cífer  and 
Stations Rača-Trnava) was also successfully completed with the reimbursement of their final 
payment claims. 

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3.13. 

Slovenia 

The Commission approved 28 Cohesion Fund projects in Slovenia for the period 2000-2006, 
of  which  16  relate  to  the  environment  sector,  8  relate  to  transport  sector  and  4  are  for 
technical  assistance.  Total  commitment  was  EUR  254.3  million  was  distributed  to 
environment  (EUR  129.5  million),  transport  (EUR  122.1  million)  and  technical  assistance 
(EUR  2.7  million).  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.  

During  2010,  about  EUR  12.3  million  were  paid  out  from  the  Cohesion  Fund  in  terms  of 
intermediate and final payments. Three projects were closed during the year. This means that 
the total payments for the Cohesion Fund have reached 85% of the total decided funding for 
2000-2006. 

A close monitoring of implementation has been put in place both by the Commission services 
and  the  national  authorities  so  as  to  ensure  a  timely  closure  of  projects.  There  is  an  overall 
delay  in  implementation  which  is  mainly  attributable  to  delays  in  public  procurement  and 
related  appeals  by  bidders  as  well  as  to  the  negative  impacts  of  the  crisis  (i.e.  shortage  of 
national/municipal  co-financing).  In  addition,  VAT  has  become  a  non-eligible  expenditure 
due to a change of the national legislation (VAT became recoverable for municipalities).  

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  ex-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  12  projects  in  the  water  sector)  and  waste  management  (4 
projects in total). 

In 2010, 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. 

The  crisis  led  to  a  significant  drop  in  municipal  revenues,  reduced  transfers  from  the  state 
budget, worsened access to bank loans and yet an increasing demand for municipal subsidies 
which negatively influenced the municipality's ability to respect the original work schedules 
for infrastructure projects. In addition, VAT has become a non-eligible expenditure due to a 
change  of  the  national  legislation.  In  this  context,  Directorate-General  for  Regional  Policy 
received  at  the  end  of  2010  five  requests  for  an  extension  of  the  final  dates  of  completion 
and/or  payment  until  31  December  2011.  These  requests  have  been  screened  at  the  end  of 
2010 and shall be treated in early 2011. 

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2  completed  projects  in  the  water  sector  and  1  technical  assistance  project  were  closed.  5 
other  environmental  projects  entered  the  closure  stage.  In  compliance  with  the  relevant 
procedures, closure of these projects and processing of final payments is due in 2011. 

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 6 railway projects and 2 motorway projects in the transport 
sector. Following reports of delays due to public procurement in previous  years,  all railway 
projects  in  2010  were  fully  contracted  and  made  satisfactory  progress  in  physical  and 
financial terms (all projects reached the 80% ceiling). 5 transport projects entered the closure 
stage. In compliance with the relevant procedures, closure of these projects and processing of 
final payments is due in 2011. 

3.14.  Bulgaria 

3.14.1.  Environment 

the 

in  2010 

the  25  Cohesion  Fund/ex-ISPA 
implementation  of 
Despite  progress 
environmental  projects  (19  in  the  water  sector,  2  in  the  waste  sector,  1  in  the  energy  sector 
and  3  technical  assistance)  was  significantly  below  target.  Net  financial  implementation 
(without advance payments)  is  approximately 46%  after  10  years  of  implementation.  So  far 
only 1 project (technical assistance) has been completed. 

Further  to  the  Communication  concerning  Cohesion  Fund/ex-ISPA  projects  closure,  the 
national  authorities  requested  for  one  year  extension  of  the  final  of  eligibility  in  June  2010 
also for projects first approved by the Commission in December 2003 and co-signed by the 
Bulgarian authorities in 2004.  

Bulgaria has submitted requests for the extension of the final date of eligibility in relation to 
12 projects in the environment sector. Payments for 10 projects were interrupted in 2010 due 
to  the  extensive  use  of  direct  negotiation  procedure  following  the  cancellation  of  open 
tenders.  Financial  corrections  were  proposed  for  8  of  these  projects.  At  this  stage  the 
responsible managing authority has accepted 6 financial corrections, while the other 2 may be 
the subject of a hearing procedure. In total, 6 of the proposed financial corrections have been 
implemented so far. 

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3.14.2.  Transport 

In  2010  Bulgaria  made  significant  efforts  to  make  up  its  considerable  backlog  in  the 
implementation  of  pre-accession  funds,  reaching  50%  net  financial  implementation  of  the 
total Cohesion Fund allocation after 10 years of implementation. Despite these efforts the end 
of  year  achievement  was  insufficient  and  performance  was  marked  by  a  considerable 
divergence  between  the  projects.  Within  the  transport  sector  a  budget  of  some  90  million  € 
remained unabsorbed and will be de-committed at a later stage.  

In  2010  the  closure  of  1  project  was  concluded,  which  increases  to  2  the  total  number  of 
closed  projects  out  of  the  11  projects  decided  in  the  2000-2006  programming  period. 
Following the modification of the closure guidelines, Bulgaria has submitted requests for the 
extension of the final date of eligibility in relation to 4 projects in the transport sector.  

3.15.  Romania 

In  total  63  Cohesion  Fund  projects  were  approved  by  the  Commission  in  the  2000-2006 
programming period for Romania: 36 for the environmental protection-related measures in the 
water  resources  management  and  waste  management  sectors,  12  projects  in  the  transport 
sector  covering  mainly  rail  and  roads,  and  15  technical  assistance  projects  linked  both  with 
the environment and transport sectors.  

Considering  the  2000-2006  programming  period,  the  total  amount  of  grant  decisions  for 
Romania  is  almost  EUR  2,036  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 situation in terms of implementation progress for 2010 is diverse between the sectors and 
even the individual projects themselves. For about half of the projects, mainly those approved 
before  2004,  measurable  progress  was  achieved  during  2010  and  several  have  works 
completed  by  the  end  of  2010.  The  possibility  to  extend  the  final  date  of  eligibility  beyond 
2010, granted to the other half of all projects, provided a possibility to complete those projects 
in 2011 and increase the absorption of Cohesion Fund. Altogether 4 projects have been closed 
in year 2010, 1 infrastructure in environment and 3 technical assistance projects. 

For  7  projects  the  Commission  adopted  the  corresponding  amending  decisions  in  2010, 
mostly to extend the final dates of their eligibility and initiated the modification procedures 
for  the  extension  of  the  final  date  of  eligibility  beyond  2010  for  24  projects  (17  in 
environment and 7 in transport). 

Total payments from the European Commission to Romania in 2010 fell by 6% compared to 
2009  (from  EUR  300.7  million  to  EUR  209.4  million),  bringing  the  total  accumulated 
payments  to  EUR  1,550.27  million.  Payments  per  sector  were:  EUR  109.61  million  in  the 
environment  sector,  EUR  97.81  million  in  transport  and  EUR  1.9  million  for  technical 
assistance.  

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3.15.1.  Environment 

Payments  from  the  Commission  to  the  environment-related  infrastructure  projects  in  2010 
amounted  to  EUR  109.61  million  with  additional  projects  reaching  in  2010  payment  levels 
that  were  more  than  80%  or  90%  of  their  existing  EU  funding  commitment,  signifying  that 
works are either well under way or have actually been completed. There are only 3 projects 
with total paid per total grant lower than 70%. 

In  the  environment  sector,  most  of  the  projects behind schedule were those approved in the 
2004-2006  period.  For  projects  approved  before  2004,  project  implementation  is  more 
advanced,  but  overall  not  sufficient  to  exclude  the  risk  of  loss  of  EU  funds.  In  this  second 
group,  5  projects  were  not  fully  completed  on  the  ground  in  2010  and  will  in  principle  be 
completed in 2011. 

3.15.2.  Transport 

Payments from the Commission to transport projects in 2010 amounted to EUR 97.81 million. 
There are only 2 projects where the Commission's payment levels are lower than 70% of the 
existing EU funding commitment per project. 

One  particular  transport  project  (Deva-Orastie  by-pass)  achieved  little  progress  in  2010, 
reflected by payments that are 10% of the committed grant, partly because of a re-launched 
tendering procedure following the cancellation of the initial contract. 

Delays in the transport  sector  also affected technical  assistance projects, especially the ones 
dealing  with  the  railway  project  preparation  and  motorways,  therefore  delaying  also  the 
launch  of  major  infrastructure  projects  within  the  Operational  Programme  for  Transport 
(2007-2013). 

In addition, in 2010 the Commission and the Member State decided to cancel 1 infrastructure 
project  in  the  transport  sector  due  to  the  impossibility  to  complete  the  project  within  the 
existing final date of eligibility of the 2000-2006 programming period. 

3.15.3.  Technical assistance 

There are 6 technical assistance projects linked to the environment sector which focus mainly 
on project preparation and institutional capacity. 4 of these have been completed, one of the 
two ongoing projects reached a payment level of 80% and the other is already in the closure 
procedure. There are 8 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. 

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

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4. 

MONITORING, INSPECTIONS, FINANCIAL CORRECTIONS AND IRREGULARITIES 

4.1.  Monitoring: committees and missions 

4.1.1.  Greece 

No  monitoring  committee  meeting  took  place  in  2010  being  the  end  of  the  programming 
period however a number of technical meetings were held with the managing authorities and 
letters were sent as warnings for the risks that could encounter by the closure. In particular in 
2010,  Directorate-General  for  Regional  Policy,  together  with  Directorate-General  for 
Environment and in close collaboration with the Greek authorities made significant efforts to 
ensure proper implementation and respect of the relevant Directives. 

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 29 April 2010. 

To  prepare  the  meeting,  national  authorities  sent  the  reports  reflecting  the  state  of 
implementation  as  at  31  December  2009  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 20 projects which, by virtue of their 
particular situation, were subject to monitoring and a specific analysis during the sessions of 
Monitoring Committee. 

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

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

The Spanish authorities were informed of the Amendment of the Guidelines on the closure of 
Cohesion Fund and ex-ISPA projects 2000-2006. In particular, the extension of the final date 
of eligibility until 31 December 2011 and 31  December  2012  may  be  granted  under  certain 
conditions  for  projects  which  were  first  approved  by  the  Commission's  decision  after  1 
January 2004. The Spanish authorities welcomed this Amendment as this would allow them 
to fulfil the objectives of certain projects in due time.  

Monitoring missions 

Three technical meetings took place in Madrid on 21 April, 21 September and 12 November 
2010 respectively. Represented at the meetings 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 

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overcome them. In addition, three monitoring missions were conducted in 2010, during which 
projects were visited. 

The first mission was on 10 February for a follow-up project of the HST Madrid-Valencia, in 
particular  Motilla  del  Palancar-Valencia.  In  this  mission  Directorate-General  for  Regional 
Policy joined TEN-T European Agency in order to ensure that Commission service response 
was coordinated and systematic across the different funding streams. The meeting was held in 
order  to  determine  what  would  be  the  proposed  solution  to  the  environmental  deficiencies 
found. 

A  second  mission  was  the  visit  to  several  environmental  projects  on  21  September  in 
Catalonia, in particular projects "Planta de selección y biotratamiento de residuos municipales 
de  Sant  Adrià  del  Besòs"  and  "Construccion  y  Adecuacion  de  las  infraestructuras  de 
Tratamiento de Residuos Municipales de Cataluña"(projects 17 and 18). The objective was to 
clarify issues concerning the closure of the projects and findings mentioned by the European 
Court of Auditors. 

The  third  mission  was  the  visit  to  the  high-speed  train  project  Madrid-  Valencia  on 
18 December. The Commission officials took the high-speed train, inspecting 17 projects in a 
return  trip  (Cohesion  Fund  and  ERDF).  The  Spanish  authorities  are  pride  of  the  high-speed 
rail  network  in  Spain  and  the  contribution  of  the  cohesion  policy  has  been  significant  and 
recognised. 

4.1.3.  Portugal 

Monitoring Committees 

According 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. 

Exceptionally, in 2010 only one meeting was held which took place on 1 June 2010 in Lisbon. 
The second Monitoring Committee was postponed to the beginning of 2011 and was replaced 
by a technical meeting held in Lisbon on 15 November 2010.  

The  aim  of  the  Monitoring  Committee  meeting  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  2010,  of  the  49  projects  that  had  not  yet  got  as  far  as  the  closure 
procedure, 26 investments had a closing date of 31 December 2010, 2 have a closure date of 
31  December  2011  and  21  requested  extension  of  closure  date  to  31  December  2011  or  31 
December  2012.  Out  of  49  projects,  40  investments  had  received  Cohesion  Fund  payments 
above 50% of the total EU contribution. 

The  meeting  of  the  Monitoring  Committee  was  preceded  by  technical  meeting  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. 

EN 

45 

   EN 

 
 
Monitoring missions 

In the course of 2010, the Commission services visited two projects ("Metro de Lisboe: GIL-
Aeroporto"and  "Infraestruturas  de  tratamento  de  RSU  –  Tratolixo)  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 

No monitoring committee took place in 2010 while technical meetings review the progress of 
the above mentioned projects. 

4.1.5.  Czech Republic 

In  general,  meetings  of  the  Cohesion  Fund  Monitoring  Committee  are  held  twice  a  year. 
In 2010, the first meeting of the Monitoring Committee took place on 22 June 2010 and the 
second  one  was  held  on  14 December  2010.  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 2010. 

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.  Final  Monitoring  Committee  meeting  was  held  in  2010,  discussing  the  final 
modification proposals and drawing conclusions for new period. 

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 

Two  Monitoring  Committee  meetings  were  held,  in  April  and  October  2010.  Horizontal 
issues  and  progress  in  individual  projects  were  discussed.  Several  projects  have  to  be 
extended beyond end 2010. The Budapest wastewater projects have been extended until 2012. 
Furthermore, a railway project (Budapest – Lokoshaza) is being extended to June 2012. On 27 
October  2010,  a  Commission  representative  was  taken  onboard  a  rail  trip  from  Budapest  to 
Bekescaba to inspect the developments on the corridor 22, financed by three different projects 
under the CF. 

EN 

46 

   EN 

 
 
 
4.1.8.  Latvia 

In 2010, two "electronic" Cohesion Fund Monitoring Committees and one project visit took 
place. Main problems concerning implementation and closure of the projects were discussed. 

4.1.9.  Lithuania 

Two  Monitoring  Committee  meetings  took  place  in  Lithuania,  on  14-15  May  and  24-25 
November  2010.  The  committee  examined  the  progress  reports  submitted  by  the  national 
authorities and discussed the implementation and closure issues of all ex-ISPA and Cohesion 
Fund projects.  

Five technical meetings of the Cohesion Fund took place during 2010:  

(cid:131)  March 2010 (Mission to Vilnius, Lithuania) – Meeting with the managing authority to 
discuss the proposed amendment of the project "Technical assistance for the support to 
the project preparation activities for ISPA projects for environment sector"; 

(cid:131)  April  2010  (teleconference  with  national  authorities)  -  Meeting  with  the  managing 
authority,  Ministry  of  Environment  and  national  experts  on  the  issues  related  to  the 
low connection rates of the new users to the central water and waste water networks; 

(cid:131)  June  2010  (technical  meeting  in  Brussels,  Belgium)  -  Meeting  with  the  managing 
authority, Ministry of Environment and Directorate-General for Regional Policy audit 
on the issues related to the low connection rates of the new users to the central water 
and waste water networks. Non-paper with situation analysis and the action plan was 
presented by the Member State; 

(cid:131)  June-July  2010  (entire  country)  –  Monitoring  visit  to  3  waste  projects  "Hazardous 
Waste", "Regional Waste Management System Development for Taurage region" and 
"Siauliai  Regional  Waste  Management  System  Development"  and  3  water  projects 
"Water  Supply  and  Waste  water  Collection  Network  Development  in  Klaipeda", 
"Nemunas  Lowland  River  Basin  -  1st  Package"  and  "Neringa  waste  water  treatment 
reconstruction,  sewer  network  extension  and  potable  water  network 
plant 
rehabilitation"; 

(cid:131)  October  2010  (Mission  to  Vilnius  region,  Lithuania)  -  Monitoring  visit  to  a  waste 
water  project  "Vilnius:  Rehabilitation  and  extension  of  water  supply  and  sewage 
collections systems", "Neris river basin investment programme, 1st stage (Vilnius city 
and district municipalities)" and waste project "Vilnius: Regional waste management".  

4.1.10.  Malta 

Monitoring Committees 

Meetings of the Monitoring Committee for all three Cohesion Fund projects were held on 20 
May  2010  and  on  17  November  2010.  The  Commission  representatives  attended  both 
Monitoring Committee meetings.   

EN 

47 

   EN 

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

Monitoring missions 

A  site  visit  of  the  project  "Upgrading  of  Sant'  Antnin  waste  treatment  facilities"  (CCI  No. 
2004MT16CPE001) was carried out on 21 May 2010. 

4.1.11.  Poland 

Monitoring Committees 

Two meetings of the Cohesion Fund Monitoring Committee were held in 2010 (on 29 June 
and  8  December).  The  meetings  were  preceded  by  meetings  of  working  groups  for  the 
Environment sector (on 19-20 May and 20-21 October) and the Transport sector (on 29 April 
and 29  October). 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,  environmental  impact  assessment  conditions,  closure  forecast, 
modifications  to  projects  in  terms  of  scope  and  timeline,  and  delays  in  implementation. 
Particular attention was paid to the projects facing delays in the implementation and projects 
requesting extension of the final date of eligibility beyond 2010 due to force majeure (floods).  

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  2010:  in  Terchová,  Central  Slovakia 
(April) and Bratislava, Western 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, the impact of financial corrections. It was suggested to present in the 
last monitoring committee in autumn 2011 evaluation of impacts of projects in both sectors, 
i.e. environment and transport. It was also recommended to organize a press conference on the 
closure  of  the  Cohesion  Fund  projects  of  the  programming  period  2000-2006  and  to 
disseminate positive results and achievements in both sectors. 

4.1.13.  Slovenia 

Monitoring Committees 

EN 

48 

   EN 

 
 
Two Cohesion Fund Monitoring Committee meetings were held in Slovenia in 2010. 

The  meetings  took  place  on  16  April  and  12  November  2010  and  focused  on  the  ongoing 
implementation  of  projects,  delays  in  public  procurement,  changes  in  the  national  VAT 
legislation and their impact on the Cohesion Fund projects, 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 2010. 
The  three  projects  visited  (one  for  waste  water  and  two  for  a  railway)  showed  satisfactory 
progress towards completion or were already completed. 

4.1.14.  Bulgaria 

In  2010  one  Monitoring  Committee  took  place  in  June  and  a  number  of  projects  site-visits 
were made. Due to the workload related to the final date of eligibility on 31 December 2010 
the 2nd meeting took place in January 2011. 

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.  

In January 2010 Directorate-General for Regional Policy organised a seminar for the closure 
of the ex-ISPA projects where all the national competent authorities and relevant beneficiaries 
were invited. 

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 Danube Bridge. One meeting was held in 2010 in Vidin- Calafat. 

4.1.15.  Romania 

Monitoring Committees 

During  the  year  2010  two  monitoring  committee  meetings  took  place,  both  focusing  on  the 
two groups of projects, those with unchanged end dates and those that could benefit from the 
possibility of one year extension. Early preparation for the project closure procedure has been 
encouraged through addressing certain specific risks linked with closure such as contractual 
conflicts, payment to contractors and availability of financial resources necessary to complete 
the projects. 

EN 

49 

   EN 

 
 
 
The  Committee  discussed  also  project  specific  issues,  and  the  horizontal  aspects  of 
implementation that were currently affecting overall implementation: payment forecasts and 
contract management, public procurement, 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 

Ad-hoc monitoring was carried out for projects presenting higher risk of non-completion for 
both  sectors.  Several  projects  were  also  visited  by  the  Commission  services.  The  joint 
Bulgarian-Romanian  Danube  Bridge  had  special  monitoring  arrangements  in  terms  of  more 
frequent reporting and a dedicated monitoring committee joining both the Bulgarian and the 
Romanian part of the project. 

4.2. 

Audits and financial corrections 

4.2.1  On-the-spot audit work by the Directorate-General for Regional Policy  

The Directorate-General for Regional Policy ensured a good audit coverage of the Cohesion 
Fund projects in all Member States concerned up to 2010, thanks to various audit enquiries 
focused on the specific risks linked to implementation. 

Cumulatively, the Directorate-General for Regional Policy has carried out in total 162 system 
audits and 14 closure audits on the 2000-2006 programming period Cohesion Fund projects. 
The  analysis  below  provides  details  on  the  work  carried  out  up  to  2010,  grouped  in 
accordance with the historical development of the Fund. 

EU-4 Member States (Greece, Ireland, Portugal and Spain) 

A significant amount of work has been carried out for EU-4 Member States since 2001 and a 
high  level  of  audit  coverage  has  been  attained  (between  18%  and  56%  of  projects  in  each 
Member State, and up to 80% of allocations covered). Action plans were imposed to correct 
weaknesses  found  (for  example  verification  of  a  representative  sample  of  expenditure 
declared from 2000 to 2004 in Portugal) and/or financial corrections were made (for example 
in  Greece  as  regards  the  award  of  public  procurement  contracts).  For  these  four  Member 
States  the  assessment  on  the  reliability  of  the  winding-up  bodies  is  positive.  In  the  case  of 
Spain,  the  Directorate-General  for  Regional  Policy  established  by  the  end  of  2010  that  the 
many  of  submitted  winding-up  declarations  contain  irregular  expenditures  not  adequately 
quantified  and  corrected  by  the  winding-up  body,  mainly  related  to  irregular  public 
procurement  procedures  (complementary  works,  contract  modifications).  The  Directorate-
General  for  Regional  Policy  takes  mitigating  actions  by  assessing  each  case  individually  at 
closure  and  by  organising  hearings  with  the  Member  State  with  a  view  to  carrying  out  all 
necessary financial corrections at the closure of each project. 

EN 

50 

   EN 

 
 
EU-10 Member States (first enlargement of the Cohesion Fund Member States: Cyprus, 
Czech Republic, Estonia, Hungary, Lithuania, Latvia, Malta, Poland, Slovakia and 
Slovenia)  

As a result of the substantial amount of audit work carried out by the Directorate-General for 
Regional  Policy,  good  audit  coverage  has  been  attained  for  most  of  the  2004  enlargement 
Member  States  (between  5%  and  41%  of  projects).  The  assessment  on  the  reliability  of  the 
work of the winding-up body varies for this group of Member States. When problems were 
detected, the Directorate-General for Regional Policy requested the Member State authorities 
to implement remedial action plans and to carry out additional retrospective verifications, to 
strengthen the preparatory work for closure before sending the winding-up declarations, and 
to  apply  appropriate  financial  corrections  (for  example  audit  findings  in  the  public 
procurement area were addressed by application at closure of a net 2% flat rate correction on 
all Cohesion Fund projects in Poland). The main residual risk factors are: public procurement 
procedures and doubts about some winding-up bodies' ability to detect such irregularities or to 
impose  financial  corrections,  and  weaknesses  in  the  functioning  of  the  winding-up  body.  In 
one  case  (Hungary),  serious  issues  and  a  relatively  high  error  rate  have  been  reported  for 
transport  projects,  resulting  in  a  reservation  in  the  2010  Annual  Activity  Report  for  the 
Directorate-General for Regional Policy. All the risks identified are mitigated by the thorough 
verifications by the Directorate-General for Regional Policy when analysing the winding-up 
declarations at the closure of each project. The Directorate-General for Regional Policy will 
also continue to monitor these risks through audits of samples of remaining open projects. In 
four Member States (Cyprus, Estonia, Malta, Slovenia) there are no outstanding audit issues 
and  the  Directorate-General  for  Regional  Policy  can  place  a  high  degree  of  reliance  on  the 
winding-up declarations to close the projects. 

EU-2 Member States (second enlargement of the Cohesion Fund Member States: 
Bulgaria and Romania) 

As a result of the significant amount of audit work carried out by the Directorate-General for 
Regional  Policy  on  the  EU-2  a  good  audit  coverage  has  been  attained  (47%  of  projects 
audited for Bulgaria and 35% for Romania).  

As  pointed  out  in  the  Directorate-General's  Annual  Activity  Report  for  2010,  public 
procurement  audits  and  project  audits  carried  out  revealed  deficiencies  in  the  public 
procurement  area  (selection  and  award  criteria,  application  of  deadlines,  use  of  negotiated 
procedures)  and  weaknesses  in  management  verifications.  This  led  to  financial  corrections 
initiated by the Commission. The financial corrections reported in 2010 for Cohesion Fund in 
Bulgaria amount to EUR 18.47 million. For Romania, cumulative financial corrections since 
2008  have  amounted  to  EUR  11.41  million.  The  Directorate-General  for  Regional  Policy 
in  Bulgaria,  made 
identified  deficiencies 
recommendations for improvement, and is monitoring closely the situation. For Romania, an 
audit mission on the work of the winding-up body carried out in 2009 has been closed with 
unqualified  opinion,  providing  a  good  basis  for  relying  on  the  winding-up  declarations 
received. 

the  winding-up  body 

the  work  of 

in 

EN 

51 

   EN 

 
 
Other audit work in 2010 

Other  audit  work  undertaken  by  the  Commission  services  for  the  Cohesion  Fund  in  2010 
included the examination of the national annual control reports under Article 12 of Regulation 
(EC)  No  1386/2002,  the  annual  summaries,  and  the  review  of  national  system  audit  reports 
submitted to the Commission by the Member States. By the end of 2010, the majority of the 
received  reports  had  been  analysed,  and  replies  had  been  sent  to  the  Member  States  with 
observations  and,  where  necessary,  requesting  additional  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  2009  were  held  during  the  first  half  of  2010.  The  annual  bilateral 
coordination meetings covering audit work carried out in 2010 were held in spring 2011. 

Management and control systems 

In  the  Directorate-General's  Annual  Activity  Report  for  2010,  for  the  functioning  of  the 
management and control systems (2000-2006), reported audit opinions expressed by the audit 
authorities may lead to three types of possible opinions: unqualified, qualified and adverse.  

An  unqualified  opinion  was  given  for  the  Cohesion  Fund  systems  in  six  Member  States 
(Cyprus, Estonia, Greece, Malta, Portugal and Slovenia). For nine Member States, the opinion 
was  qualified  with  a  moderate  impact  (Bulgaria  –  environment  and  transport  sector,  Czech 
Republic, Hungary - environment sector and technical assistance projects, Latvia, Lithuania, 
Poland, Romania, Slovakia and Spain). 

In  the  2010  Annual  Activity  Report  of  the  Directorate-General,  for  one  transport  sector 
project in Bulgaria managed by the National Roads Infrastructure Agency, a qualified opinion 
with  significant  impact  was  given,  due  to  breaches  of  public  procurement  rules  and  other 
weaknesses identified by the Commission and the European Court of Auditors, resulting in a 
reservation. As regards the Hungarian transport sector, a reservation and a qualified opinion 
with  significant  impact  was  given  due  to  the  high  error  rate  identified  by  the  national  audit 
body,  the  results  of  the  Commission  audit  in  2009  detecting  several  public  procurement 
irregularities,  weaknesses 
implementation  of  financial  corrections 
the 
recommended by the winding-up body, and in detection and correction of public procurement 
related irregularities at national level.  

identified 

in 

Table  5.  Cohesion  Fund  financial  corrections  decided  or  agreed  in  2010  by  period  and  by 
Member State (in EUR) 

Member State 

Reservation 

Cohesion Fund 

2009 AAR 

1994-1999 

2000-2006 

TOTAL 

Reservation 

2010 AAR 

Bulgaria 

YES –
Environment 
sector 

Cyprus 

NO 

18 473 452 

18 473 452 

YES – 1 
project 

  NO 

EN 

52 

   EN 

 
 
 
 
 
Czech Republic 

Estonia 

Greece 

Spain 

Hungary 

Ireland 

Latvia 

Lithuania 

Malta 

Poland 

Portugal 

Romania 

Slovenia 

Slovakia 

TOTAL 

NO 

NO 

NO 

NO 

NO 

NO 

NO 

NO 

NO 

NO 

NO 

NO 

NO 

NO 

6 814 711 

6 814 711  NO 

  NO  

31 141 

-157 142 

-126 001  NO  

115 666 

21 006 031 

21 121 697  NO 

YES – 
transport 
sector 

627 640 

506 270 

30 177 

627 640  NO  

506 270   NO  

30 177  NO  

  NO 

111 246 392 

111 246 392  NO  

12 925 561 

12 925 561  NO  

1 728 070 

1 728 070  NO 

1 668 163 

1 668 163  NO 

  NO 

146 807 

174 869 325 

175 016 132 

Remark:  Includes  corrections  made  by  Member  States,  following  agreement  under  the  relevant procedure  or  as a  result  of 
implementation of action plans (which may cover many programmes) and formal Commission decisions. 

EN 

53 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Closure of 2000-2006 Cohesion Fund projects 

For  the  closure  of  the  1192  projects  of  Cohesion  Fund  2000-2006,  491  winding-up 
declarations have been received and out of this 475 (97%) have been assessed by the end of 
2010  (in  addition  to  the  winding-up  declarations  that  were  rejected  or  sent  back  to  the 
Member States for corrections) by the Directorate-General for Regional Policy.  

Table 6. Result of the review of the winding-up declaration for Cohesion Fund at the end of 2010 

Member State 

Total 
number of 
projects 

Received 

Accepta
nce 
without 
financial 
correcti
on 

Acceptan
ce with 
proposed 
financial 
correctio
ns 

Interrupt
ion 
(missing 
info/addit
ional 
audit 
work to 
be 
carried 
out) 

Rejection 

Total 
reviewed 

Bulgaria 

Cyprus 

Czech Republic 

Estonia 

Spain 

Greece 

Hungary 

Ireland 

Lithuania 

Latvia 

Malta 

Poland 

Portugal 

Romania 

Slovenia 

Slovakia 

Total 

38 

2 

58 

37 

407 

124 

47 

10 

51 

46 

3 

130 

109 

63 

28 

39 

5 

0 

29 

25 

199 

65 

14 

6 

21 

25 

0 

30 

26 

8 

14 

24 

4 

0 

17 

19 

44 

64 

12 

2 

14 

18 

0 

6 

13 

1 

14 

10 

1192 

491 

238 

1 

0 

5 

1 

0 

0 

2 

2 

7 

7 

0 

3 

0 

1 

0 

0 

0 

0 

0 

0 

90 

0 

0 

1 

0 

0 

0 

0 

6 

0 

0 

0 

5 

0 

29 

22 

199 

65 

14 

6 

21 

25 

0 

17 

26 

8 

14 

24 

29 

97 

475 

0 

0 

7 

2 

65 

1 

0 

1 

0 

0 

0 

8 

7 

6 

0 

14 

111 

54 

% of 
winding
-up 
declara
tions 
reviewe
d to 
receive
d 

100% 

0% 

100% 

88% 

100% 

100% 

100% 

100% 

100% 

100% 

0% 

57% 

100% 

100% 

100% 

100% 

97% 

   EN 

EN 

 
 
 
4.2.1.  Greece 

No audits were carried out in Greece on Cohesion Fund projects in 2010 by the Directorate-
General  for  Regional  Policy.  However,  an  audit  carried  out  in  2009  was  followed-up  and 
closed  in  2010.  Previous  audits  have  identified  some  delays  in  implementation  and 
weaknesses  in  public  procurement  procedures  in  Greece,  and  as  a  result  a  large  financial 
correction relating to public procurement issues (use of "mathematical formula") was adopted 
in 2008. In addition, as a result of an OLAF investigation of one Greek water supply project 
during 2008 and 2009, the national authorities took corrective measures. 

Out  of  a  total  124  Greek  Cohesion  Fund  projects,  65  (46  environmental  projects  and  19 
transport  projects)  have  submitted  a  winding-up  declaration.  Most  declarations  have  been 
accepted  by  Directorate-General  for  Regional  Policy,  for  one  project  a  financial  correction 
was  proposed  and  for  another  project  the  closure  was  suspended  for  the  project  not  being 
operational. 

In the 2010 Annual Activity Report of the Directorate-General, 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. The Commission for its part also examines 
the winding-up declarations on an individual basis before the closure of the projects, ensuring 
that any irregular expenditure can be identified and deducted at the closure of each project.  

4.2.2.  Spain 

During 2010 the Commission services undertook the follow-up of an audit mission carried out 
in  November  2009  and  a  financial  correction  amounting  to  EUR  1.3  million  was  proposed. 
The  main  findings  related  to  irregular  modifications  of  contracts  not  being  detected  by  the 
national authorities during the closure procedure. 

In  addition,  the  follow-up  of  several  previous  audit  missions  performed  by  the  Directorate-
General  for  Regional  Policy  and  the  European  Court  of  Auditors  was  concluded,  including 
hearings and Commission correction decisions, resulting in financial corrections amounting to 
a total of around EUR 9 million. The corrections mostly relate to public procurement issues, 
in particular, additional works and irregular award criteria. As a follow-up of previous Court 
of Auditors' audit findings, the audit services of the Directorate-General for Regional Policy 
concluded  the  financial  correction  procedure  for  the  last  DAS  case  of  2006.  The  correction 
proposed by the Commission for this project amounts to EUR 5.66 million. 

Concerning  the  closure  of  Cohesion  Fund  projects  an  improvement  in  terms  of  number  of 
treated  and  finalised  closure  cases  was  experienced  during  2010,  partly  as  a  result  of  the 
creation  of  a  specific  closure  task  force  for  Spanish  Cohesion  Fund  projects  within  the 
Directorate-General  for  Regional  Policy.  In  March,  June,  July  and  November  2010  four 
hearings  were  held  in  Brussels  with  the  purpose  of  finalising  the  closure  of  28  projects 
affected  by  irregularities  not  decertified  by  the  Member  State.  The  Commission  decision  of 

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the  first  hearing  was  adopted  in  September  2010  imposing  a  financial  correction  of  around 
EUR 2.7 million and the other correction decisions will follow.  

Cumulatively a total of 199 winding-up declarations for the closure of Spanish Cohesion Fund 
projects  have  been  received  so  far.  Out  of  these,  75  new  winding-up  declarations  were 
analysed by the audit services of the Directorate-General for Regional Policy during 2010. In 
many  cases,  irregular  expenditure  declared  to  the  Commission  was  detected,  mainly  in 
relation  to  public  procurement  procedures  and  VAT  eligibility.  In  addition  to  the  first 
assessment related to these 75 winding-up declarations, the Directorate-General for Regional 
Policy  audit  services  made  a  second  and  third  assessment  in  several  cases,  having  received 
additional  information  from  the  Member  State.  Following  this  analysis  of  the  winding-up 
declarations,  the  audit  services  identified  irregular  expenditure  amounting  to  around  EUR 
9.35 million which was decertified by the Member State during 2010. 

The  annual  control  report  under  Article 12  of  Regulation  (EC)  No  1386/2002  was  received 
and examined by the Commission in 2010 and it covered all the regional bodies of Spain. 

The  annual  bilateral  co-ordination  meeting  between  Commission  and  Spanish  auditors 
covering the 2009 audit exercise took place in Madrid in May 2010. During the meeting the 
auditors  of  the  Directorate-General  for  Regional  Policy  insisted  on  corrective  measures  in 
relation to irregular additional contracts.  

In the Annual Activity Report of the Directorate-General for 2010, a qualified opinion with 
moderate impact was given for the management and control systems of Cohesion Fund Spain 
2000-2006.  No  reservation  was  proposed,  as  the  financial  risk  to  the  Community  budget  is 
mitigated  by  the  fact  that  the  winding-up  declarations  are  assessed  by  the  winding-up  body 
and  the  Commission  services  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 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.  

The annual control report under Article 12 of Regulation (EC) No 1386/2002 and 11 winding-
up  declarations  for  the  closure  of  Portuguese  Cohesion  Fund  projects  were  analysed  by  the 
Directorate-General  for  Regional  Policy  in  2010.  As  a  result,  financial  corrections  were 
proposed for three projects. 

In  2010,  there  were  no  audit  missions  carried  out  in  relation  to  Cohesion  Fund  in  Portugal. 
However,  as  a  result  of  the  follow  up  of  previous  audit  missions  and  the  assessment  of 
winding-up  declarations,  the  Commission  proposed  financial  corrections  in  the  amount  of 
around EUR 12.9 million which were accepted by the Member State.  

In  the  Annual  Activity  Report  of  the  Directorate-General  for  Regional  Policy  2010  an 
unqualified opinion was given for Cohesion Fund Portugal since the work of the audit bodies 
is  considered  reliable  (contract  of  confidence)  and  the  winding-up  declarations  are  assessed 

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individually  before  the  closure  of  each  project,  allowing  any  irregular  expenditure  to  be 
identified and corrected. 

4.2.4.  Cyprus 

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

An  unqualified  opinion  was  issued  for  Cohesion  Fund  expenditure  in  Cyprus  in  the  2010 
Annual Activity Report of the Directorate-General for Regional Policy. 

4.2.5.  Czech Republic 

During 2010, follow up of Commission audits carried out in Czech Republic in previous years 
was  undertaken.  Two  missions  were  closed  without  financial  corrections  and  for  a  third 
mission the Czech authorities confirmed their acceptance of a finding. As regards a 2009 audit 
mission on retrospective verifications, which identified systemic issues related to the area of 
public procurement, the follow-up was continued in 2010 till 2011. Overall, as a result of the 
audit work the Czech authorities agreed to the implementation of corrections related to public 
procurement issues to the amount of EUR 6.8 million in the context of closure of Cohesion 
Fund projects in 2010. Some further financial correction procedures might be opened during 
2011 as a result of the retrospective verification exercise and the scrutiny of the winding-up 
declarations. 

As  regards  the  European  Court  of  Auditors'  DAS  2006  audit  of  a  Cohesion  Fund  transport 
project, the audit was closed in 2010 with a correction of around EUR 52,000 related to audit 
trail.  

The Czech authorities have submitted the winding-up declarations and final payment claims 
for  29  Cohesion  Fund  projects,  of  which  10  in  2010.  At  the  end  of  2010  five  winding-up 
declarations were interrupted as the Commission services requested further information from 
the Member State.  

The annual control report under Article 12 of Regulation (EC) No 1386/2002 concluded that 
"the functionality of the management and control systems was verified in 2009 with no major 
findings and no substantial discrepancies of a systemic character found". 

In  the  2010  Annual  Activity  Report  of  the  Directorate-General  a  qualified  opinion  with 
moderate impact was given for Czech Republic Cohesion Fund projects. No reservation was 
proposed  following  the  action  taken  by  the  Czech  authorities  under  the  retrospective 
verifications, and as the Commission is able to exercise close management of each Cohesion 
Fund project and to make a detailed check of the risk areas at closure. 

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4.2.6.  Estonia 

Following  the  positive  results  of  audit  work  carried  out  in  previous  years,  a  contract  of 
confidence was signed with Estonia in 2007, covering both the Cohesion Fund and the ERDF. 
No audit missions were carried out in Estonia in 2010, and the previous audit missions were 
followed up and closed before 2010. 

Six  winding-up  declarations  were  examined  in  the  context  of  the  closure  of  Estonian 
Cohesion  Fund  projects  in  2010.  Directorate-General  for  Regional  Policy  also  analysed  the 
annual control report under Article 12 of Regulation (EC) No 1386/2002.  

In  the  2010  Annual  Activity  Report  of  the  Directorate-General  an  unqualified  opinion  was 
given for Cohesion Fund Estonia.  

4.2.7.  Hungary 

A closure audit mission covering two Hungarian environment projects was carried out by the 
Directorate-General  for  Regional  Policy  in  November  2010.  On  the  basis  of  preliminary 
assessments no major deficiencies were identified.  

As  regards  the  follow-up  of  a  public  procurement  mission  covering  five  Cohesion  Fund 
projects  carried  out  in  December  2009,  important  findings  were  identified  on  significant 
variations of the quantities of work items and direct award of additional contracts. As a result, 
a financial correction of EUR 2.5 million has been proposed, and the follow-up of the audit 
continues in 2011. 

At  end  of  2010,  cumulatively  14  winding-up  declarations  had  been  received  for  Hungarian 
Cohesion  Fund  projects  (7  Environment,  4  Transport  and  3  technical  assistance).  No  major 
issues have been detected in the winding-up declarations. 

The  annual  control  report  under  Article 12  of  Regulation  (EC)  No  1386/2002  reported  an 
overall  error  rate  of  1.28%  for  Cohesion  Fund  projects  in  Hungary  (3.8%  for  the  transport 
sector, and 0.3% for the environment sector).  

In  the  2010  Annual  Activity  Report  of  the  Directorate-General,  as  regards  the  Hungarian 
transport sector, a reservation and a qualified opinion with significant impact was given due to 
the high error rate identified by the national audit body, the results of the Commission audit in 
2009  detecting  several  public  procurement  irregularities,  weaknesses  identified  in  the 
implementation  of  financial  corrections  recommended  by  the  winding-up  body,  and  in 
detection and correction of public procurement related irregularities at national level.  

For  the  environment  sector  and  technical  assistance  projects  a  qualified  opinion  with 
moderate impact was given, due to the results of the Commission 2009 audit detecting several 
public  procurement  irregularities,  weaknesses  identified  in  implementation  of  financial 
corrections recommended by the winding-up body, and in detection and correction of public 
procurement related irregularities at national level.  

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4.2.8.  Latvia 

In 2010, there were no audit missions carried out in relation to Cohesion Fund in Latvia. For 
the environmental sector twelve winding-up declarations have been received and analysed by 
the Commission services. Seven of them have been accepted, but for the other five, financial 
corrections  have  been  proposed  for  the  lack  of  compliance  with  the  requirements  of  Article 
7.3  (d)  of  Directive  93/37  (in  particular  direct  award  of  additional  contracts).  First  hearings 
were  organised  in  October  2009  for  one  project  and  in  July  2010  for  four  projects  and  the 
follow-up  continues  in  2011.  For  the  technical  assistance  projects  three  winding-up 
declarations  have  been  received  and  assessed  by  the  Commission.  For  two  cases  additional 
information  has  been  requested  from  the  national  authorities.  For  the  transport  sector,  ten 
winding-up declarations have been analysed and all have been accepted.  

In the Annual Activity Report of 2010, for the Cohesion Fund in Latvia a qualified opinion 
with moderate impact was given, due to the deficiencies raised regarding the independence of 
the  winding-up  body,  the  weaknesses  detected  in  public  procurement  procedures  and  in  the 
implementation of sample checks, the reliability of MIS data and the separation of functions 
between implementing and intermediate bodies. 

4.2.9.  Lithuania 

As follow-up of a mission carried out by the Directorate-General for Regional Policy in 2008 
on  three  Cohesion  Fund  projects,  a  financial  correction  of  around  EUR  2.9  million  was 
proposed by the Commission in 2010 relating to cost increases and public procurement issues. 
Furthermore,  a  European  Court  of  Auditors  DAS  2008  audit  covering  nine  Cohesion  Fund 
projects  identified  deficiencies  in  the  public  procurement  procedures  which  may  lead  to 
financial corrections to be applied in 2011.  

Seven winding-up declarations were submitted in 2010. Altogether, by the end of 2010, the 
Directorate-General  for  Regional  Policy  had  accepted  14  winding-up  declarations  and  a 
further  seven  winding-up  declarations  were  interrupted  due  to  issues  identified  in  public 
procurement,  and  unachieved  projects  objectives.  For  one  project  the  national  authorities 
accepted to withdraw an amount of EUR 30,177 related to public procurement irregularities. 

The  annual  control  report  under  Article 12  of  Regulation  (EC)  No  1386/2002  was  received 
and analysed by the Commission in 2010. The national authorities raised no major issues.  

In the 2010 Annual Activity Report of the Directorate-General for Regional Policy a qualified 
opinion with moderate impact was given in respect of Cohesion Fund Lithuania on the basis 
of  the  deficiencies  identified  in  public  procurement,  cost  increases,  and  unachieved  project 
objectives. No reservation was proposed, as the Directorate-General is able to exercise close 
management of each Cohesion Fund project and assess in detail the risk areas at closure. 

4.2.10.  Malta 

No audit missions or financial correction procedures were carried out for the Cohesion Fund 
in  2010.  Previous  audit  missions  carried  out  in  2005  and  2007  did  not  give  rise  to  any 
significant findings.  

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The  annual  control  report  under  Article 12  of  Regulation  (EC)  No  1386/2002  was  received 
and examined; it highlighted sufficient audit coverage and a zero error rate for Cohesion Fund 
projects.  

An  unqualified  opinion  was  issued  for  Cohesion  Fund  2000-2006  expenditure  in  the  2010 
Annual Activity Report of the Directorate-General for Regional Policy. The management and 
control system in Malta can be considered as good practice. 

4.2.11.  Poland 

In  April  and  June  2010  a  hearing  took  place  in  respect  of  two  Commission  public 
procurement  audits  from  2005  and  2006,  during  which  the  Polish  authorities  and  the 
Commission services reached an agreement on a 2% flat rate correction in respect of the five 
systemic  irregularities  in  public  procurement  area  which  the  Commission  detected  in  its 
audits.  The  2%  net  correction  will  be  applied  to  all  not  yet  closed  Polish  Cohesion  Fund 
projects at closure. In total this correction corresponds to over EUR 111 million. 

In September 2010, the Directorate-General for Regional Policy organised another hearing for 
one Polish Cohesion Fund project for which a financial correction of around EUR 0.8 million 
had  been  proposed  at  the  closure  of  the  project.  A Commission  decision  on  financial 
correction will be adopted in 2011. 

Documentation  in  relation  to  11  winding-up  declarations  (including  Polish  authorities 
responses to the earlier interruption letters) was analysed during 2010. Cumulatively, out of 
30 winding-up declarations received up to the end of 2010, 6 projects have been closed by the 
European  Commission,  11  winding-up  declarations  have  been  analysed  and  for  13  projects 
the procedure was on-going at the end of 2010. Closure documentation received for projects 
in  the  transport  sector  revealed  deficiencies  in  the  quality  and/or  coherence  of  tender 
documentation  (designs,  technical  specifications,  bills  of  quantities).  Consequently  tender 
procedures and contract implementation were in some cases delayed which resulted in claims 
for deadline extensions by contractors and in contract price increases, unjustified direct award 
of additional works and services and litigation, potentially risking irregular expenditure being 
declared to the Commission. 

Consequently,  a  qualified  opinion  with  moderate  impact  was  expressed  in  2010  Annual 
Activity  Report  for  Cohesion  Fund  Poland,  due  to  deficiencies  identified  in  detection  and 
correction  of  public  procurement  issues  (mainly  in  relation  to  direct  awarding  of  additional 
works  and  services).  It  was  considered  that  this  risk  is  mitigated  by  the  agreement  of  the 
Polish  Audit  Authority  to  verify  compliance  with  public  procurement  rules  of  contracts  at 
project  closure  and  by  the  thorough  assessment  of  closure  documents  by  the  Commission 
services at closure. 

4.2.12  Slovakia 

As  for  follow-up  of  Directorate-General  for  Regional  Policy  audit  missions  carried  out  in 
previous  years,  in  2010  for  one  audit,  one  finding  was  closed  with  a  deduction  of  irregular 
expenditure  of  around  EUR  1.7  million  by  the  Member  State,  with  a  further  correction  of 

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around EUR 0.11 million to be followed-up in 2011. A second public procurement audit from 
2005 was closed in 2010 with a proposed financial correction of around EUR 0.86 million.  

For the closure of projects, during 2010, nine winding-up declarations were analysed by the 
Commission services resulting in proposed corrections, some accepted by the Member State 
and  some  having  no  net  financial  impact.  For  five  of  these  projects  a  hearing  was  held  in 
December  2010,  after  which  a  financial  correction  decision  of  around  EUR  1.28  million 
covering  three  projects  is  in  preparation.  There  are  a  further  five  winding-up  declarations 
pending finalisation with potential corrections amounting to around EUR 10.3 million. All the 
financial  corrections  related  to  the  winding-up  declarations  concern  non-compliance  with 
public procurement rules. 

In  the  2010  Annual  Activity  Report  of  the  Directorate-General  for  Regional  Policy,  the 
opinion for Cohesion Fund Slovakia was qualified with moderate impact due to weaknesses in 
management  verifications  of  public  procurement  by  the  intermediate  bodies.  However,  the 
risk  is  mitigated  by  the  fact  that  risks  have  been  identified  during  audits  carried  out  in 
Slovakia  and  can  be  thoroughly  followed  up  by  Commission  services  when  assessing  the 
winding-up declarations for each Cohesion Fund project.  

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 2010.  

The audit work in 2010 included the examination of the annual control report under Article 12 
of Regulation (EC) No 1386/2002 and of the annual summary for 2010. Of the 28 projects to 
close, altogether fourteen winding-up declarations have been submitted and out of these four 
were examined and accepted without major remarks in 2010. 

Accordingly, the 2010 Annual Activity Report of the Directorate-General for Regional Policy 
presented an unqualified opinion for Cohesion Fund expenditure in Slovenia. 

4.2.14.  Bulgaria 

One  closure  audit  mission  was  carried  out  in  April  2010.  The  objective  of  the  audit  was  to 
check  the  adequacy  of  the  audit  work  of  the  winding-up  body  -  Executive  Agency  for  the 
Audit  of  EU  Funds  (EAAEUF).  The  main  findings  relate  to  insufficiency  of  checks  on 
revenues  generated  by  projects  and  public  procurement,  and  a  breach  of  publicity 
requirements.  In  addition,  it  was  noted  that  the  sample  checks  did  not  cover  any  of  the 
Cohesion Fund projects which received EIB loans.  

In  2009  the  EAAEUF  was  requested  to  examine  the  direct  award  of  contracts  in  the 
environment  sector.  The  results  of  this  national  audit  were  received  in  February  2010,  and 
revealed an illegal use of the negotiated procedure without prior advertising (i.e. direct award) 
for  16  contracts  in  the  environment  sector.  In  November  2010  the  managing  authority 
accepted  to  implement  a  correction  of  around  EUR  18  million.  Furthermore,  proposed 

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corrections amounting to approximately EUR 0.7 million in relation to two service contracts 
are followed up by the Directorate-General for Regional Policy in 2011. 

The European Court of Auditors audited in their DAS 2010 exercise two Bulgarian Cohesion 
Fund projects. For one of the projects the Court identified a compliance issue related to delays 
in  the  tender  award  procedure  without  financial  impact.  For  the  second  project,  the  Court 
identified  some  important  findings  in  respect  of  a  lack  of  supporting  tender  documentation, 
irregular direct award of additional works, design issues resulting in safety concerns, and the 
necessity  for  some  of  the  structures  built.  For  these  cases  a  detailed  follow-up  continues  in 
2011. 

During  2010  five  winding-up  declarations  were  received  and  analysed.  The  closure  of  one 
project was interrupted because additional audit work had to be carried out.  

The  annual  control  report  under  Article 12  of  Regulation  (EC)  No  1386/2002  was  received 
and analysed in 2010. The report highlighted weaknesses in public procurement issues for the 
environment sector. For the transport sector the opinion of the Bulgarian audit authority was 
unqualified.  

In the 2010 Annual Activity Report of the Directorate-General, the environment and transport 
(excluding National Roads Infrastructure Agency) sectors were give a qualified opinion with 
moderate  impact,  as  the  management  verifications  are  not  detecting  breaches  of  the  public 
procurement law, and there is limited reliance on the work of the winding-up body. For one 
transport  sector  project  managed  by  the  National  Roads  Infrastructure  Agency,  a  qualified 
opinion  with  significant  impact  was  given,  due  breaches  of  public  procurement  rules  and 
other weaknesses identified by the Commission and the European Court of Auditors. 

4.2.15.  Romania 

During  2010,  follow-up  was  done  for  a  closure  audit  carried  out  in  December  2009.  In 
general, the audit concluded that there was reasonable assurance that the Romanian winding-
up  body  complied  with  its  obligations,  but  improvements  were  recommended  for  future 
winding-up  declarations  in  consistency  of  financial  information,  error  rate  computing,  and 
irregular expenditure arising due to subcontracting.  

As follow-up to a public procurement audit mission carried out in 2009, a hearing was held in 
April  2010.  During  the  contradictory  procedure  the  financial  corrections  relating  to 
irregularities  found  in  public  procurement  contracts  in  amount  of  EUR  1.4  million  were 
accepted by the Member State.  

The annual control report under Article 12 of Regulation (EC) No 1386/2002 was submitted 
and examined by the Commission in 2010. One winding-up declaration was analysed during 
2010, leading to further clarifications being requested from the Romanian authorities.  

In  the  2010  Annual  Activity  Report  of  the  Directorate-General  the  opinion  issued  for 
Cohesion Fund Romania was qualified with moderate impact. 

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4.3. 

Irregularities notified by the Member States 

In 2010, OLAF opened 8 operational cases related to the Cohesion Fund and undertook 4 on 
the spot checks on economic operators4 as well as 2 missions to gather information. Typical 
problems identified by OLAF include the failure to abide by public procurement rules. 

As  this  report  covers  the  implementation  during  2010  of  Cohesion  Fund  projects  adopted 
under the 2000-2006 only notifications made under Regulation (EC) 1831/1994 are taken into 
account.  76  notifications  of  irregularities  involving  a  total  affected  amount  of  EUR 
34 564 486 in respect of projects co-financed by the EU related to the above mentioned period 
have  been  reported  to  the  Commission.  From  the  affected  amount  of  EUR  34 564 486,  an 
amount  of  EUR  9 089 496  still  needs  to  be  recovered.  Most  of  the  cases  were  reported  by 
Greece, Poland, Portugal and the Czech Republic (16, 15, 11 and 10 respectively). However, 
Greece,  Czech  Republic,  Spain  and  Lithuania  reported  approximately  75%  of  the  involved 
amount. Table 7 shows the details by Member State.  

The  two  main  types  of  reported  irregularities  are  infringements  of  public  procurement  rules 
(60%) and ineligible expenditure (30%). 

Table  7.  Irregularities  and  EU  financial  impact  reported  by  Member  State  in  2010  under 
Regulation (EC) N 1831/1994– programming period 2000-2006 (in EUR) 

Member State 

Number of 
irregularities 

Affected amounts 

% 

Amounts to be 
recovered 

% 

Bulgaria  

Cyprus 

Czech Republic 

Estonia 

Greece 

Spain 

Hungary 

Ireland 

Latvia 

Lithuania 

Malta 

Poland  

Portugal 

Romania 

Slovenia 

Slovakia 

TOTAL 

0 

0 

10 

0 

16 

8 

3 

3 

2 

7 

0 

15 

11 

0 

0 

1 

76 

5 900 612 

17,07% 

467 210 

5,14% 

8 011 028 

23,18% 

18 046 

0,2% 

6 661 294 

19,27% 

5 779 950 

63,59% 

1 748 494 

1 627 701 

120 155 

5,06% 

4.71% 

0,35% 

1 748 494 

19,24% 

0 

0 

5 055 374 

14,63% 

626 036 

6,89% 

939 617 

2,72% 

0 

4 372 226 

12,65% 

321 775 

3,54% 

127 985 

0,37% 

127 985 

1,41% 

34 564 486 

100 

9 089 496 

100 

4 Regulation (EC) N° 2185/1996, OJ L 292, 15 October 1996, p.2 

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4.4. 

Irregularities and financial corrections 

During  2010,  two  decisions  on  a  financial  correction  were  adopted  for  the  2000-2006 
Cohesion  Fund  projects  in  Spain  for  an  amount  of  EUR 10.5  million.  In  addition,  at  the 
request of the Commission, the Member States agreed to exclude a further EUR 164.5 million 
from their statements of expenditure. 

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Table  8.  Financial  corrections  decided  or  agreed  in  2010  for  the  Cohesion  Fund,  period  2000-
2006 

Member State 

Accepted by Member State 

Commission Decision 

Bulgaria 

Cyprus 

Czech Republic 

Estonia 

Greece 

Spain 

Hungary 

Ireland 

Latvia 

Lithuania 

Malta 

Poland 

Portugal 

Romania 

Slovenia 

Slovakia 

TOTAL 

18 473 452 

- 

6 814 710 

10 502 068 

627 640 

506 270 

30 177.08 

111 246 392.49 

12 925 560.66 

1 728 070.44 

1 668 162.81 

164 522 505.16 

-157 141.71 

10 503 963 

10 346 821.29 

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

5. 

EVALUATION 

The  Commission  in  close  cooperation  with  the  Member  State  and  managing  authorities 
carries  out  the  ex-post  evaluation.  The  most  recent  Cohesion  Fund  ex-post  evaluation  was 
launched in 2009 examining all Cohesion Fund and ex-ISPA projects implemented during the 
years 2000-2006, and the final report is expected in January 2012. The evaluation assesses 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. As part of 
the overall Cohesion Fund ex-post evaluation, ex-post cost-benefit analyses were  conducted 
for a sample of transport and environment projects, to identify lessons for future programming 
periods. 

The  first  results  from  the  ex-post  evaluation  for  transport  infrastructure  show  that  the 
Cohesion  Fund  co-financed  1,281  km  of  new  roads  and  3,176  km  of  reconstructed  roads 

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(4,457 km roads in total). As regards, the rail sector 2,010 km of new rail and 3,840 km of 
reconstructed rail (5,350 km rail in total) were co-financed by the Cohesion Fund. 

6. 

INFORMATION AND PUBLICITY 

6.1. 

Information to/from the Member States 

As from 1 January 2007 all issues concerning the Cohesion Fund have been dealt within the 
Coordination Committee of the Funds (COCOF, established according to Regulation (EC) No 
1083/2006). 

Several  issues  relevant  for  the  Cohesion  Fund  were  presented  and/or  discussed  during  the 
meetings of the COCOF. These include: 

(cid:131)  DG  Regional  Policy  informed  about  a  proposal  for  a  more  flexible  final  date  of 
eligibility  (33rd  and  34th  meeting  of  the  Coordination  Committee  of  the  Funds, 
Brussels, 28 January 2010 and 10 March 2010); 

(cid:131)  DG  Regional  Policy  informed  the  Member  States  about  the  adoption  of  the 
Amendment of the Guidelines on the closure of Cohesion Fund and ex-ISPA projects 
2000-2006 (April 2010); 

(cid:131)  DG Regional Policy held a debate on the Revised Guidance note on the amendment of 
decisions  taken  by  the  Commission  for  Cohesion  Fund  projects  on  the  basis  of 
Regulation  (EC)  No  1164/1994  as  amended  (38th  meeting  of  the  Coordination 
Committee of the Funds, Brussels, 22 September 2010); 

(cid:131)  DG  Regional  Policy  presented  the  final  version  of  the  COCOF  note  08/0007/03 
"Revised guidance note on the amendment of decisions taken by the Commission for 
Cohesion Fund projects on the basis of Regulation (EC) No 1164/1994 as amended" 
of  24  September  2010  which  became  available  in  all  three  working  languages 
(39th Coordination  Committee  of  the  Funds  meeting,  Brussels  and  Mons,  20  and 
21 October 2010). 

6.2. 

Commission measures on publicity and information 

In 2010, the Directorate-General for Regional Policy has continued to report in great detail on 
the  Cohesion  Fund  in  its  Annual  Activity  Report5  and  to  publish  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.  Cohesion  Fund  projects  have  also  been  included  in  a  specific 
publication showcasing 150 examples of projects co-financed by European regional policy. 

5  Published at http://ec.europa.eu/atwork/synthesis/aar/index_en.htm  

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