Explanatory Memorandum to COM(2016)418 - Amending the regulation on financial management for certain Member States experiencing or threatened with serious difficulties with respect to their financial stability - Main contents
Please note
This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2016)418 - Amending the regulation on financial management for certain Member States experiencing or threatened with serious ... |
|---|---|
| source | COM(2016)418  |
| date | 27-06-2016 |
1. CONTEXT OF THE PROPOSAL
Reasons for and objectives of the proposal
The sustained financial and economic crisis has put national financial resources under pressure as Member States pursue necessary policies of fiscal consolidation. In this context, ensuring a smooth implementation of programmes supported by the European Structural and Investment Funds (ESIF) is of particular importance for investment in growth and jobs.
Programme implementation is often challenging, not least as a result of the liquidity problems resulting from fiscal consolidation. This is particularly the case for those Member States which have been most affected by the crisis and have received financial assistance under an adjustment programme.
To ensure that these Member States continue to implement ESIF programmes on the ground and disburse funds to projects, Article 24 of Regulation (EU) No 1303/2013 of the European Parliament and of the Council of 17 December 2013 1 allows the Commission to make increased payments ('top-up') from 1 January 2014 to 30 June 2016 to those countries which benefitted from financial asistance after 21 December 2013.
Five countries were eligible for the top-up provision in the aformentioned period, namely Cyprus, Greece, Ireland Portugal and Romania.
In addition, Article 120 of Regulation (EU) No 1303/2013 provides that from 1 January 2014 to 30 June 2017, the maximum co-financing rate at the level of each priority for all operational programmes supported by the ERDF and ESF in Cyprus shall be 85% instead of 50% applicable to more developed regions 2 . This exceptional co-financing rate has been provided to Cyprus given the fragile situation of its economy. It helps bridging a period of high public investment needs on the one hand, and sustained fiscal consolidation efforts on the other, by increasing the necessary fiscal space for investments supported by Cohesion policy funding.
Article 24(3) and Article 120(3) of Regulation (EU) No 1303/2013 require the Commission to review these two financial provisions and make, if necessary, a legislative proposal before 30 June 2016 with a view to their possible extension.
The current proposal would allow the Commission to continue making increased payments to any Member State which will benefit from financial assistance after 30 June 2016 for the period it will be under this support mechanism, without modifying the overall ESIF allocation in 2014-2020. Moreover, the proposal would allow Cyprus to apply the maximum co-financing rate of 85% for Cyprus until programme closure.
The measures would provide additional financial resources or the necessary budgetary flexibility facilitating the implementation of ESIF programmes on the ground.
General context and provisions in force in the policy sphere of the proposal
Article 24 of Regulation (EU) No 1303/2013 provides that on the request of a Member State with temporary budgetary difficulties, i.e. those countries which have received financial assistance under an adjustment programme after 21 December 2013, interim payments may be increased by 10 percentage points above the co-fianancing rate applicable to each priority for the ERDF, ESF, and the Cohesion Fund or to each measure for the EAFRD and the EMFF, provided the Member State submits a corresponding request. This provision currently applies until 30 June 2016.
Article 120(3) of Regulation (EU) No 1303/2013 provides that from 1 January 2014 to 30 June 2017, the maximum co-financing rate at the level of each priority for all operational programmes supported by the ERDF and ESF in Cyprus shall be 85% instead of 50% applicable to more developed regions.
Consistency with other Union policies
The proposal is consistent with other proposals and intitiatives adopted by the European Commission as a response to the financial crisis.
2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY
Legal basis
Regulation (EU) No 1303/2013 defines the common rules applicable to the ESI Funds. Based on the principle of shared management between the Commission and the Member States, this Regulation includes provisions for the programming process as well as arrangements for programme (including financial) management, monitoring, financial control and evaluation of projects.
Article 24(3) and Article 120(3) of Regulation (EU) No 1303/2013 require the Commission to review the two aforementioned financial provisions and make, if necessary, a legislative proposal before 30 June 2016 with a view to their possible extension.
Subsidiarity (for non-exclusive competence)
The proposal complies within the subsidiarity principle to the extent that it provides continued increased support through ESIF for certain Member States which experience serious difficulties, notably with problems in their economic growth and financial stability and with a deterioration in their deficit and debt position, also due to the international economic and financial environment. In this context, it is necessary to establish at the European Union level a temporary mechanism which allows the European Commission to increase the reimbursement on the basis of the certified expenditure under ESIF and to provide a higher co-financing rate for all operational programmes supported by the ERDF and ESF in Cyprus.
Proportionality
The proposal conforms to the proportionality principle:
The extension of the period during which the increased interim payments are due is proportional in relation to the sustained economic crisis and to the other efforts undertaken to help Member States in budgetary difficulties benefiting from financial assistance under an adjustment programme.
The extension of the application of the increased co-financing rate for Cyprus is proportional in relation to the fragile situation of the Cypriot economy. It will help bridging a period of high public investment needs in Cyprus on the one hand, and sustained fiscal consolidation efforts on the other, by increasing the necessary fiscal space for investments.
Choice of the instrument
Proposed instrument: amendment of the current regulation.
The Commission has explored the scope for manoeuvre provided by the legal framework and considers it necessary, in the light of experience up to now, to propose modifications to the General Regulation.
3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS
Ex-post evaluations/fitness checks of existing legislation
There was no ex-post evaluation/or fitness checks of the existing legislation.
Stakeholder consultations
Collection and use of expertise
Use of external expertise has not been necessary.
Impact assessment
The proposal would allow the Commission to top up payments to a Member State under an adjustment programme after 30 June 2016. It would cover the period until 30 June of the year following the calendar year in which the Member State stops receiving financial assistance. This approach is in line with the ESI Funds accounting year which covers the period from 1 July to 30 June. It would extend the period of eligibility up to maximum18 months.
The increase will be an amount calculated by applying ten percentage points top-up to the co-financing rates applicable to the priorities (under ERDF, ESF and the Cohesion Fund) or measures (under EAFRD and EMFF) of the programmes to the certified expenditure submitted during the period in question until the ceiling for payments is reached.
Moreover, the proposal would allow the Commission to extend the exceptional co-financing rate of 85% for the ERDF and ESF in Cyprus until programme closure.
The total financial allocation for the period from the Funds to the countries and the programmes in question will not change.
Regulatory fitness and simplification
This is not an initiative within the Regulatory Fitness Programme (REFIT).
Fundamental rights
The proposal has no consequences for the protection of fundamental rights.
4. BUDGETARY IMPLICATIONS
There is no impact on commitment appropriations since no modification is proposed to the maximum amounts of ESIF financing provided for in the operational programmes for the programming period 2014-2020.
For payment appropriations related to the extension of the top-up provision according to Article 24, the proposal can result in a higher reimburserment to the Member States concerned. The additional payment appropriations for this proposal may imply a temporary increase of payment appropriations, which would be compensated by lower payments at the end of the life cycle of the 2014-2020 programmes. It should be noted that the proposed modification does not imply any changes in the Multiannual Financial Framework annual ceilings for commitments and payments, which are set out in Annex I of Regulation (EU) No 1311/2013.
5. OTHER ELEMENTS
Implementation plans and monitoring, evaluation and reporting arrangements
Not applicable. The existing delivery systems of the ESIF can be used to monitor the implementation of this proposal.
Explanatory documents (for directives)
Detailed explanation of the specific provisions of the proposal
Given that Greece, Cyprus, Ireland, Romania and Portugal were under an adjustment programme after 21 December 2013 as defined in Article 24(1) of Regulation (EU) No 1303/2013, five countries were eligible for the 10% top-up on interim payments submitted before 30 June 2016. Since then the financial assistance programmes for Cyprus, Ireland, Portugal and Romania have expired. This means that Greece is the only country under an adjustment programme on 30 June 2016.
A further revision of eligibility for the top-up in 2014-2020 would not appear necessary as countries subject to adjustment programmes need to have certainty about the timing and level of EU payments.
Given that Cyprus signed an adjustment programme with the EU in March 2013, Article 120(3) of Regulation (EU) No 1303/2013 provides an exceptional co- financing rate of 85% for all operational programmes supported by the ERDF and ESF in Cyprus from 1 January 2014 until 30 June 2017.
Cyprus exited its adjustment programme at the end of March 2016. However, the economic situation of Cyprus is still fragile as reflected by its sluggish growth rate, declining investment, high unemployment and stressed financial sector.
To ease the pressure on the national budget and accelerate much-needed investments, it is proposed to extend the co-financing rate of 85% for all operational programmes supported by the ERDF and ESF in Cyprus until programme closure.