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Czech PM says Government not satisfied with pace at which EU funds are being drawn

25.7.2018 17:22
Czech PM Andrej Babiš (PHOTO: Government of the Czech Republic)
Czech PM Andrej Babiš (PHOTO: Government of the Czech Republic)

The Czech Government is not satisfied with how much EU money the Czech state is drawing and must dedicate more attention to the process than has been paid so far. Speaking at a press conference after a meeting of the Council for the European Structural and Investment Funds (ESIF), Czech PM Andrej Babiš (ANO) made the announcement today.

As of June the European Commission has paid the country CZK 76.6 billion [EUR 3 billion] or just 13.2 % of the total money awarded for the 2014-2020 program period. By the end of this year, according to the PM, the country must draw another EUR 1.5 billion.

"We are dissatisfied with the way the EU funds are being drawn. We must dedicate even more attention to this than has been given in the past. We need an overview of how much financing is actually flowing because that has an essential influence on fulfilling the state budget. The colleagues have been tasked with sending [Regional Development] Minister Dostálová an overview of the calls they have planned to expend money through by the end of this year," the PM said.

All communications between the EU and the ministries, according to the PM, will now have to be approved by the Finance Ministry and Regional Development Ministry. "It is important that we coordinate these activities and decide about them together. On the one hand we do not have, for example, enough money for revitalizing cultural heritage sites, there is a deficit there of about CZK 3 billion [EUR 117 million]. On the other hand, we are absurdly funding projects about 'Healthy Fish Production' or 'Research into Healthy Aging'," the PM said.

The European Commission, from Januar y thorugh the end of June, has paid those receiving EU subsidies in the Czech Republic roughly CZK 12 billion [EUR 470 million]. The country has contracted to receive a total of CZK 334.5 billion, or 57.6 % of all the anticipated project costs.

Analysts have warned that the drawdown is deficient and that the Czech Republic is in danger of having to rapidly draw on the funds as it did in 2015. According to the Regional Development Ministry, project calls worth CZK 662 billion have been announced, which is 114 % of the amount allocated. 

"We are doing our best to put more resources into the calls. We are aware that something can be saved during the selection procedures, some projects will not turn out. The drawing of the funds must accelerate," the Regional Development Minister said.

By the end of the year the Czech Republic must draw CZK 1.5 billion [EUR 58 million] or lose some funding as part of the N+3 rule. According to the Regional Development Minister that means the money the EU allocated to the Czech Republic in 2015 must be drawn by the end of this year.

"For the current programming period that rule did not begin to apply here until 2015 because not all of the programs were approved until 2015. Therefore, the drawing of the funds could only begin that year. For the time being all the managing authorities are reporting that they are fulfilling the rule," said the Regional Development Minister.

The programs most endangered, according to the Regional Development Minister, are the Integrated Regional Operational Programme, Prague - A Field of Growth, Entrepreneurship and Innovation for Competitiveness, and Research, Development and Education. "The managing authorities are reporting that the market is overheated, and for that reason they have a problem with completing the competitions for many tenders. Vendors are also frequently withdrawing from contracts, " she said.

Investment programs, according to the Regional Development Minister, are dependent on the construction season, which lasts from the beginning of April until the end of the calendar year. "During this period interest has been growing. During the first 20 days of this month alone, CZK 10 billion [EUR 390 million] was paid. We anticipate the biggest interest in getting invoices paid will run from September to November," the minister said.

By year-end the Commission will assess the countries and their programs according to how they are fulfilling their obligations with respect to the Europe 2020 strategy. Should the Czech Republic fail, it could lose as much as 6 % of the allocated funding for the entire programming period, i.e., CZK 36.8 billion [EUR 1.4 billion] of CZK 617.5 billion [EUR 24 billion].

The volume of funding contractually pledged and the monies disbursed are assessed by the Regional Development Ministry with respect to that overall sum, without taking the 6 % reserve into account. During the 2007-2013 programming period the Czech Republic was able to draw on roughly CZK 700 billion [EUR 27 billion] from the EU funds, while approximately 4 % of the funds were not drawn.

Of the 10 Operational Programmes in the Czech Republic, the best-managed one is said to be the Program for Rural Development, which has drawn 36 % of the allocated roughly CZK 60 billion [EUR 2.3 billion]. The Employment Operational Programme has drawn 24 % of the funds allocated.

The programs drawing the funds most slowly are the Integrated Regional Operational Programme and Prague - A Field of Growth, which have drawn roughly 3 % of the funds allocated. "The Czech Republic continues to be, within the EU, a country with a below-average volume of actually-implemented, paid-up drawing of EU funds. Most of the countries that have been allocated an even bigger absolute volume of subsidies are more successful at drawing them down. The Czech Republic, therefore, cannot argue that it has been allocated an above-average volume of financing and for that reason the drawdown is necessarily more demanding," said Lukáš Kovanda, an analyst with the Cyrrus company.

In terms of actually-disbursed monies, Kovanda says the Czech Republic is the seventh-slowest EU Member State. In the countries of the Visegrad 4 group, Hungary and Poland are more active in drawing funds, while Slovakia is slightly worse at it than the Czech Republic.

"The Czech Republic should, therefore, accelerate the tempo at which it draws down this funding, otherwise there is a danger, again of a rapid drawdown of the kind that happened in 2015. That, unfortunately, has the consequence of projects of a lesser added value being financed just so the money can be spent in time. That means bicycle paths are financed or local roads repaired while time runs out to design bigger infrastructure projects, such as highways, for example," Kovanda warned.

According to an analyst with the BH Securities company, Štěpán Křeček, this unsystematic drawing of EU subsidies creates economic shocks. Because of this behavior, firms suffer a lack of orders during some years and during others must refuse them for capacity reasons.

"Despite the fact that we are approaching the end of the programming period, the Czech Republic has less than CZK 77 billion paid out total. The current tempo of drawdown is slower than was planned by Prime Minister Andrej Babiš (ANO), who wanted CZK 80 billion this year alone to be paid out. By mid-year we have managed to get less than CZK 12 billion paid," Křeček said.

ČTK, translated by Gwendolyn Albert
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