CELEX: 51992PC0339
Language: en
Date: 1992-07-31
Title: Draft COUNCIL REGULATION (EC) establishing a Cohesion Fund

COMMISSION OF THE EUROPEAN COMMUNITIES
                                                      COM(92) 339 final
                                                      Brussels, 31 July 1992
                             COMMUNICATION FROM THE COMMISSION
                                             and
                                            Draft
                                   COUNCIL REGULATION (EC)
                                establishing a Cohesion Fund
                               (presented by the Commission)
* • • ' ; * • $ » .
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                      COMMUNICATION FROM THE COMMISSION
Introduction
The broad outline of the Commission's initial thinking on the Cohesion Fund
has been set out in two previous communications, viz. "From the Single Act
to Maastricht and beyond - the means to match our ambitions" (COM(92) 2000)
and "Community structural policies - review and outlook" (COM(92) 84).
To facilitate discussion and further progress, but recognizing that the
Treaty has not yet been ratified, it is desirable that the Commission
should provide an indication of its thinking on the nature of the Fund and
how it will operate.
The European Council at Lisbon decided that the Cohesion Fund should be put
in place early in 1993. The Commission therefore needs to put forward
proposals for the establishment and implementation of the Fund in time to
set up the Fund as decided by the European Council. This Communication and
the draft proposal for a regulation attached thereto are intended to
facilitate the rapid adoption of a regulation establishing the Cohesion
Fund. It will thus be possible to adopt the Regulation formally once the
Maastricht Treaty has been ratified. It should be recalled that the formal
procedure for adoption will require the assent of the European Parliament,
the opinion of the Economic and Social Committee and the Committee of the
Regions to be set up after ratification.
1.    Objectives
Article 130d of the Treaty establishing the European Community states that
the Council shall, before 31 December 1993, set up a Cohesion Fund
providing a financial contribution to projects in the fields of environment
and trans-European networks in the area of transport infrastructure.
The protocol on economic and social cohesion annexed to the Treaty
establishes the criteria of eligibility for this Fund, and reaffirms the
role of the existing Structural Funds and the EIB in the field of cohesion.
2.    Characteristics
Although different in concept from the existing Structural Funds, the
Cohesion Fund is also structural in nature. This is evidenced both by the
fact that the provision for its establishment is inserted in Article 130d
of the Treaty, which governs the tasks, objectives and organization of the
Structural Funds, and by the fields it covers.
Like the existing Structural Funds, the Cohesion Fund is intended to reduce
economic and social disparities in the Community. But whereas the former
have a wide range of regional and social objectives, the Cohesion Fund has
the more specific purpose of contributing to cohesion via financing of
projects in the field of transport infrastructure and environmental
programmes in Member states faced with structural weaknesses and a limited
funding capacity.
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By contributing to national governments' expenditure in the field of
transport infrastructure and environment, the Cohesion Fund will reinforce
the structure and improve the prospects of balanced growth of the economies
concerned.
The use of the Cohesion Fund will allow a recipient Member State to enhance
its transport and environmental facilities more quickly without a
corresponding    increase   in domestic public      expenditure, since no
additionality will be required for the Fund.
The protocol makes an explicit link to the convergence programmes. These
programmes constitute the framework for defining the overall macroeconomic
effort which is needed for integration into the EMU. The Community will
contribute to this effort through the Cohesion Fund. This contribution
constitutes a commitment spread over several years.
3.     Geographical coverage
The geographical coverage concerns Member States with a per capita 6NP of
less than 90% of the Community average which have a programme leading to
the fulfilment of the conditions of economic .convergence as set out in
Article 104c of the Treaty. At present four Member States have a per
capita GNP of less than 90% of the Community average, viz. Greece, Ireland,
Portugal and Spain.
4.     Projects to be financed by the Cohesion Fund
Projects to be considered for Cohesion Fund financing must contribute to
the achievement of Community objectives for the environment and trans-
European transport networks. The selection of the projects or groups of
related projects and more especially the distribution between environment
and transport infrastructure are matters for the Member States concerned
and the Commission.
There should be no a priori breakdown between environment and transport
infrastructure, but a reasonable balance should be ensured between the two
fields of intervention.
For the field of the environment, projects financed by the Fund should
contribute to the realization of Community environmental objectives.
Moreover, the Fund should permit adaptation to the requirements of
 legislation, including future legislation which involves investment costs
 deemed to be disproportionate for the public authorities of the Member
 States concerned. The implementation of the guidelines of the Fifth
 Programme of Environmental Action will be facilitated.
 The Cohesion Fund will provide support for transport infrastructure
 projects consistent with guidelines where such guidelines exist. The
 absence of guidelines in any particular field of transport networks should
 not prevent the financing of projects in that field. However, in order to
 ensure that projects assisted are as consistent as possible with the
 objectives of Community policy on trans-European networks the ComK«issior
 will speed up the presentation of guidelines to the Council for aspects not
  yet covered.
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5.    Economic conditionality
The protocol states that Member States benefiting from the Cohesion Fund
must have a programme leading to the fulfilment of the conditions of
economic convergence. This requirement must be translated into a practical
form of economic conditionality which takes account of the nature of the
Fund.
Economic conditionality must be based on the economic convergence programme
for the Member State concerned and on the examination by the Council of
that programme and its implementation by the Member State.
If it is established by the Council on the basis of a proposal from the
Commission that in spite of recommendations a Member State is not making
satisfactory progress towards the fulfilment of the conditions of economic
convergence as set out in Article 104c of the Treaty, the Council may
invite the Commission to make no commitments to new projects in that Member
State.
The European Parliament should be informed immediately about any decision
concerning the   suspension of the granting of assistance from the Fund.
Once such a decision has been taken the Commission is in favour of
convening, should the need arise, a consultation between the European
Parliament, the council and the Commission in order to examine possible
budgetary consequences which may arise pursuant to the suspension of Fund
assistance.
This suspension shall cease once the council finds that the Member State
has resumed convergence.
The Commission will have to manage the Fund in a manner which allows
economic conditionality to be effectively applied. Mechanisms for ensuring
appropriate conditionality are outlined in point 6 below. However, the
precise arrangements for the procedure will be established at a later
stage.
since the Cohesion Fund should be concerned with large projects or groups
of related projects, it is important that projects are actually carried
out, i.e. not stopped mid-way through realization. Conditionality can
therefore apply only to the possibility of not undertaking commitments for
new projects before the Member State has resumed convergence as set out in
Article 104c.
6.    Distribution and management
Given the need for Member states to be able to plan the programming of
projects, an indicative distribution for the whole period of the total
resources between Member States will be made by the Commission in the light
of economic, social and other relevant factors.
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The commission will approve an initial set of projects such as to ensure a
substantial flow of payments on the basis of the first three years'
commitment appropriations. Further projects for the following years will be
approved in good time. The approval of the latter projects may be suspended
if it is established in the multilateral surveillance procedure that a
Member State * s convergence programme is not proceeding in a broadly
satisfactory manner. In managing the approval of projects the Commission
will also ensure that it has the necessary flexibility to cater for the
accompaniment of environmental legislation with financial assistance, which
may be required in accordance with Article 130s(5).
7.     Rates of assistance
Community assistance granted by the Cohesion Fund in respect of the various
objectives listed will be set at 85% to 90% of public or similar
expenditure. If assistance is given to a project which yields revenue, the
cost basis for assistance from the Fund will be established by the
Commission in agreement with the Member State concerned.
The Fund may contribute 100% of the cost of preparatory        studies and
technical support measures.
8.     Volume and timing of Community financing
The contribution proposed by the Commission in the financial perspectives
1993-1997 rises from ECU 1.5 billion in 1993 to ECU 2.5 billion in 1997
 (1992 prices) in commitment appropriations. This amount should make the
Cohesion Fund an adequate instrument, both in terms of the size of the
projects to be financed and in relation to the need for financial transfers
to the beneficiary Member States.
There is a particular need for substantial transfers early in the period in
order to achieve the objectives of the Fund. Therefore adequate commitment
and payment appropriations must be available so that they can be deployed
as soon as the Fund is set up, i.e. as early as possible in 1993. It will
also be necessary to ensure that the Fund can make sufficient advance
payments at an early stage towards projects already identified. This will
make it possible to avoid a system of mere reimbursement of expenditure
which would weaken the impact of Community assistance. The financial
figures included in the draft regulation take account of these
considerations.
9.     Complementarity and consultation
Projects to be financed will be established      in agreement between the
Commission and the Member state concerned.
For Cohesion Fund operations, the Community's partners are the national
rather than the regional authorities; consultation arrangements have thus
to be made with the Member States; these arrangements have tc be kept as
simple as possible but they must ensure coherence with the Structural Fund
operations in which regional authorities are fully involved. The principle
of concentration will be complied with by the financing of a limited number
of projects or groups of related projects; it should be applied in c.
flexible way taking into account the general objective of contributing tc
cohesion.
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10.   Coordination between the Cohesion Fund, the Structural Funds, the EIB
      and the other financial instruments
The Structural Funds, given their general role of supporting development,
operate essentially on the basis of programmes agreed between regional,
national and Community partners. The Cohesion Fund will be based on
projects. Although the criteria for intervention are different, the fields
in which they operate overlap at least partly, and it is therefore
necessary to ensure practical coordination between their operations.
For any given period, projects assisted by the Cohesion Fund may contribute
to the implementation of programmes financed by the Structural Funds, but
an individual project may not benefit simultaneously from the Fund and from
one of the existing structural Funds or EAGGF Guarantee section.
coordination at Community level and within the Member states between the
activities of the Structural Funds, the Cohesion Fund, the EIB, the ECSC
and other financial contributions to support Community policies in the
fields of the environment (Life, Habitat, agri-environmental measures) and
transport infrastructure (budget support for European networks) should be
carried out in particular through the assessment of coherence between
operations financed under the different instruments.
 ---pagebreak---                                     - 7 -
                                    Draft
                           Council Regulation (EC)
                        establishing a Cohesion Fund
The COUNCIL OF THE EUROPEAN COMMUNITIES,
Having regard to the Treaty establishing the European        Community,  in
particular the second paragraph of Article 130d thereof,
Having regard to the proposal from the Commission,
Having obtained the assent of the European Parliament,
Having regard to the opinion of the Economic and Social Committee,
Having regard to the opinion of the Committee of Regions,
Whereas Article 2 of the Treaty includes the task of promoting economic and
social cohesion and solidarity between Member States; whereas the
strengthening of economic and social cohesion is mentioned under point j of
Article 3 as one of the activities of the Community for the purposes set
out in Article 2;
Whereas Article 130a of the Treaty provides for the Community to develop
and pursue its actions leading to the strengthening of its economic and
social cohesion and in particular for it to aim at reducing disparities
between the levels of development of the various regions and the
backwardness of the least-favoured regions, including rural areas; whereas
Community action through the Cohesion Fund should support the achievement
of the objectives set out in Article 130a;
Whereas the Protocol on economic and social cohesion annexed to the Treaty
reaffirms the Community's task of promoting economic and social cohesion
and solidarity between Member States and specifies that a Cohesion Fund to
be set up before 31 December 1993 will provide a financial contribution to
projects in the fields of environment and trans-European networks in the
Member States with a per capita GNP of less than 90% of the Community
average which have a programme leading to the fulfilment of the conditions
of economic convergence as set out in Article 104c of the Treaty;
Whereas the special situation of the Member States concerned calls for a
determined effort to help them meet the convergence criteria which are a
precondition for moving to the third stage of Economic and Monetary Union;
Whereas the second paragraph of Article 130d of the Treaty states that the
Council shall set up a Cohesion Fund to provide a financial contribution to
projects in the fields of the environment and trans-European networks in
the area of transport infrastructure;
Whereas Article 129c(1) of the Treaty provides that the Community may
contribute through the Cohesion Fund to the financing of specific projects
in the Member States in the area of transport infrastructure taking into
account the potential economic viability of the projects;
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Whereas by virtue of Article 130s of the Treaty the Cohesion Fund may
provide financial support for action by Member States in pursuit of the
objectives of Community policy on the environment; whereas the Cohesion
Fund is to contribute to the financing of new measures if the Council
decides that they involve costs deemed disproportionate for the public
authorities of a Member State;
Whereas the operational rules of the cohesion Fund should be in keeping
with the principle of subsidiarity as set out in Article 3b of the Treaty;
Whereas in accordance with Article 198e of the Treaty the EIB is to
facilitate the financing of investments in conjunction with assistance from
the structural Funds and other Community financial instruments;
whereas it is necessary to coordinate action in the field of the
environment and trans-European networks in the area of transport
infrastructure taken through the cohesion Fund, the Structural Funds, the
EIB and the other financial instruments in order to enhance the
effectiveness of the Community operations;
Whereas, with a view to helping Member States in the preparation of
projects, the Commission should be in a position to supply the necessary
technical support;
Whereas the operations of the Cohesion Fund must be consistent with
Community policies, inter alia as regards environmental protection,
transport, competition and the award of public contracts;
Whereas an indicative allocation of commitment appropriations between the
Member states should be provided for in order to facilitate the programming
of projects;
Whereas it is necessary given the requirements of economic and social
cohesion to provide a high rate of assistance;
Whereas it is necessary to ensure effective methods of monitoring,
assessing and carrying out checks in respect of Community operations;
Whereas provision should be made to give adequate publicity to Community
assistance provided by the Cohesion Fund,
HAS ADOPTED THIS REGULATION:
                                 Article 1
                          Definition and Objective
1. A Cohesion Fund    (hereinafter referred to as "the Fund") is hereby
    established.
2.  The Fund shall contribute to the strengthening of the economic and
    social cohesion of the Community and shall operate according to the
    provisions set out in this Regulation.
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                                 Article 2
                                   Scope
The Fund shall provide financial contributions to projects in the fields of
environment and trans-European networks in the area of transport
infrastructure in Member States with a per capita GNP of less than 90% of
the Community average which have a programme leading to the fulfilment of
the conditions of economic convergence as set out in Article 104c of the
Treaty.
                                 Article 3
                             Eligible projects
The Fund may provide support for:
    environmental projects contributing to the achievement of the
    objectives of Article 130r of the Treaty, including projects resulting
    from measures adopted pursuant to Article 130s of the Treaty;
    transport infrastructure projects which contribute to the achievement
    of the objectives of Article 129b of the Treaty, including projects
    resulting from the guidelines adopted pursuant to Article 129c of the
    Treaty;
    preparatory studies and technical support measures related to eligible
    projects.
                                 Article 4
                            Financial resources
1. For the period 1993-1997 the total commitment appropriations deemed
    necessary for the Fund shall be ECU 10 000 million at 1992 prices.
2.  in accordance with paragraph 1, the commitment appropriations for 1993
    shall amount to ECU 1 500 million and for each subsequent year from
    1994 an annual increase of ECU 250 million in commitment appropriations
    shall be added, resulting in 1997 in a figure of ECU 2 500 million at
    1992 prices.
                                 Article 5
                           Indicative allocation
In order to facilitate the planning of assistance in the Member States
concerned the Commission shall establish on the basis of an indicative
allocation of the total resources of the Fund the commitment appropriations
for each Member State. The indicative allocation shall take account of
social, economic and other relevant factors such as population, GNP per
head and surface area.
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                                 Article 6
                          Conditional assistance
1. If the Council, acting by a qualified majority on a proposal from the
   Commission, establishes that a Member State is not acting consistently
   with the Council recommendation which would allow it to make
   satisfactory progress towards the fulfilment of the conditions of
   economic convergence as set out in Article 104c of the Treaty, the
   Council, acting by a qualified majority, may request the Commission to
   suspend the granting of assistance from the Fund for further projects
   in that Member State.
2. A decision to suspend the granting of assistance shall not be taken
   before the third year of the implementation of this Regulation. It
   shall take effect from the end of the calendar year in which it is
   taken.
3. The suspension shall cease when the Council decides that the situation
   described in paragraph 1 has been corrected.
                                 Article 7
                            Rate of assistance
1. The rate of assistance granted by the Fund shall be 85% to 90% of
   public or similar expenditure as defined for the purposes of the
   Structural Funds.
2. Preparatory studies and technical support measures necessary for the
   implementation of eligible projects may be financed at 100%.
                                 Article 8
                   Coordination and compatibility with
                            Community policies
1. Projects financed by the Fund shall be in keeping with the provisions
   of the Treaties, with the instruments adopted pursuant thereto and with
   Community   policies,    including    those   concerning  environmental
   protection, transport, competition and the award of public contracts.
2. The commission shall ensure coordination and coherence between projects
   undertaken in the framework of this Regulation and measures undertaken
   with contributions from the Community budget, the EIB and the other
   Community financial instruments.
                                 Article 9
                       Combination and overlapping
1. A project may not benefit simultaneously from the Fund and from the
   European Agricultural Guidance and Guarantee Fund, the European Social
   Fund or the European Regional Development Fund.
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   2.  Where a project benefits from other Community assistance, the
       combined grant assistance from the Community shall not exceed 90%
       of public or similar expenditure.
                              Article 10
                         Approval of projects
1. The projects to be financed under the Fund shall be decided upon by
   the Commission in agreement with the Member State concerned.
2. The Member States concerned and the Commission shall ensure an
   appropriate balance between projects in the field of environment and
   of transport infrastructure. This balance shall take account of
   Article 130s(5) of the Treaty. To that end, the Commission may take
   appropriate financial measures for each Member State concerned.
3. Applications for assistance in accordance with Article 3 shall be
   submitted by the Member State concerned. Projects, including groups
   of related projects, shall be of a sufficient scale to have a
   significant impact in the fields of environmental protection or the
   improvement of trans-European transport infrastructure networks.
4. Applications shall contain the following information: the body
   responsible for implementation, the nature of the investment, its
   location and costs, the implementation schedule, the financing plan
   and the total financing the Member State is seeking from the Fund and
   any other Community source. They shall also contain any information
   necessary to establish that projects are in accordance with this
   Regulation.
5. Subject to Article 6 and to the availability of commitment
   appropriations, the Commission shall decide on assistance from the
   Fund generally within three months of receipt of the applications
   from the Member State. Commission decisions approving projects or
   groups of related projects shall determine the amount of financial
   support, a financing plan as well as all the provisions and
   conditions necessary for the realization of the projects.
6. The Commission decisions shall be published in the Official Journal
   of the European Communities.
                              Article 11
                         Financial provisions
1. Budgetary commitments shall be made in ECUs on the basis of the
   Commission decisions approving assistance referred to in Article 10.
   Commitments shall be made in annual instalments for each project.
2. Payments shall be made in ECUs and shall be subject to the specific
   arrangements laid down in the implementing provisions pursuant to
   Article 15.
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                                 Article 12
                             Financial control
In order to guarantee successful completion of the projects financed by the
Fund, Member States shall take the necessary measures:
    to verify on a regular basis that operations financed by the Communuity
    have been properly carried out;
    to prevent and to take action against irregularities;
    to recover any amounts lost as a result of an irregularity or
    negligence. Except where the Member State and/or the implementing
    authority provide proof that they were not responsible for the
    irregularity or negligence, the Member state shall be liable in the
    alternative for reimbursement of any sums unduly paid.
Member States shall inform the Commission of the measures taken for those
purposes and, in particular, of the progress of administrative and judicial
proceedings. In this context the Member States and the Commission shall
take the necessary measures to ensure that the information exchanged will
remain confidential.
When submitting requests for payment, Member States shall make available to
the Commission any appropriate national control reports on the projects
concerned.
Without prejudice to checks carried out by Member States in accordance with
national laws, regulations and administrative provisions, and without
prejudice to the provisions of Article 188b of the Treaty or to any
inspection arranged on the basis of Article 209(c) of the Treaty, the
Commission may carry out on-the-spot checks, including sample checks, in
respect of projects financed by the Fund and examine the systems and
measures of control established by the national authorities who shall
inform the Commission of measures taken to this effect.
Further arrangements for the implementation of financial control shall be
established in accordance with Article 15.
                                 Article 13
                         Monitoring and assessment
1. The Member states and the Commission shall ensure that the
    implementation of Community projects under this Regulation is
    effectively monitored and assessed.
2.  The arrangements for monitoring and assessing of Community projects
    shall be established by the provisions referred to in Article 15.
                                Article 14
                         Information and publicity
1. The commission shall present an annual report on the activities of the
    Fund to the Council, the European Parliament, the Economic and Social
    Committee and the Committee of the Regions.
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2.  Member States shall ensure that adequate publicity is given to the
    operations of the fund with a view to making the general public aware
    of the role played by the Community in relation to projects. They shall
    consult the Commission on, and inform it about, the initiatives taken
    for this purpose.
                                 Article 15
                               Implementation
The Commission shall establish detailed rules for the application of this
Regulation.
                                 Article 16
                                   Review
On a proposal from the Commission, the Council shall re-examine this
Regulation four years after its entry into force. It shall act on the
proposal in accordance with the procedure laid down in Article 130d of the
Treaty.
                                 Article 17
                              Entry into force
This Regulation shall enter into force on the day following its publication
in the Official Journal of the European Communities.
This Regulation shall be binding in its entirety and directly applicable in
all Member States.
Done at Brussels,                                   For the Council
                                                     The President
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                                                                     ISSN 0254-1475
                                                               COM(92) 339 final
                                                      DOCUMENTS
EN                                                                              01
                                 Catalogue number : CB-CO-92-390-EN-C
                                                             ISBN 92-77-47318-5
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