EU Funds in Central and Eastern Europe – Progress Report

Iulie 2010

DANIELA NEMOIANU ISTOCESCU - Advisory Partner KPMG ROMÂNIA S.R.L.

Romania and the Central and Eastern Europe (CEE) region continue to be affected by the global recession. As the downturn hit these countries later than the U.S. and Western Europe, it is quite likely that there are still some tough months ahead before the recovery begins. Romania and the CEE countries have suffered a significant reduction in foreign investment since the start of the recession, as investors have moved away from emerging markets in a search for security.

In these circumstances, it is even more important for Romania to take advantage of the large amounts available in EU funding for the 2007-2013 period. Yet the latest issue of the annual survey by KPMG member firms in the region EU Funds in Central and Eastern Europe, indicates that Romania’s takeup of EU funds continues to lag behind other CEE countries in many sectors.

Since countries in the CEE region have joined the European Union in 2004 and 2007, it has become apparent that effective utilisation of EU support can foster the success of their economic performance. It is the responsibility of the individual member states to utilise the support appropriately, thus accelerating development and meeting the objectives of the European Union.

Developing an appropriate, focused strategy for the allocation of EU funds is only the first, though perhaps the most important step in implementing the EU cohesion policy. The successful implementation and absorption of EU co-funded projects is contingent not only upon the effectiveness of these countries’ administrative systems, but also on the activity of the potential beneficiaries.

The purpose of the KPMG report is to give an overview of the progress and absorption achieved by the CEE countries during the first three years of the 2007–13 EU co-funded programmes. Furthermore, our review outlines the impact of the financial crisis on these CEE economies and the subsequent steps which were taken Romaniain order to facilitate EU funds utilisation. We trust that our report will assist stakeholders to develop a comprehensive picture of the implementation status in each of the CEE countries and within the region as a whole.

KPMG CEE has prepared a progress report in March 2010, involving 10 KPMG practices in the region. All data used have been based on individual, publicly available country level information derived from CEE countries covered by the report. Country figures have been collected by local KPMG practices, GDP and population data originate from the Eurostat database. They have been aggregated to provide a basis for an analysis of the CEE region as a whole, identifying the similarities and differences across countries.

Objectives

• Providing an overview of basic CEE country information
• Aggregating data for EU funds and available budget in CEE countries for the period 2007–13
• Presenting contracted and paid grants, contracted ratio and absorption achieved in implementation of EU funds in the 2007–09 period
• Giving a short description about the impacts of the financial crisis on EU Funds implementation

General approach

• Amounts of financial resources originate from the financial table of the related framework programmes of 2007–13.
• Classification of intervention types is identical to previous KPMG studies: EU Funds in the CEE, 2008 and EU Funds in the CEE – Progress 2007–08.
• The KPMG report focuses on three types of framework programmes, including the following:
• National Strategic Reference Frameworks (co-funded from ERDF, ESF and CF)
• Rural development programmes (co-funded from EAFRD), and
• Fisheries programmes (co-funded from EFF).

The 10 CEE countries joined the European Union in two stages:

• On May 1st, 2004 the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia
• On January 1st, 2007 Bulgaria and Romania

In the 2007–13 period the 10 CEE countries can allocate an EUR 214.7 bn in EU funds, which is 22% of the annual GDP of the region according to Eurostat data, 2008.

The following table shows the population, GDP and breakdown of EU funds by country.

The total of EU funds available for CEE countries is EUR 214.7 bn. The majority of this amount originates from Structural Funds resources, while rural development and fisheries related funds constitute almost 19% of the total contribution.

Poland and the Czech Republic account for more than 50%, which, together with the share of Hungary and Romania, constitutes 79% of the total EU funds available in CEE. Countries with a relatively smaller population altogether hold a 21% share.

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