Closer to Brussels, no 13 EU Budget by Blizej Brukseli

E-magazine â&#x20AC;&#x201C; MaĹ&#x201A;opolska Region Brussels Office

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Closer to Brussels

CLOSER TO BRUSSELS UE BUDGET Budget debate, a debate on the shape of the EU Member states and the EU budget, or a Brussels drama The Europeans' best invention: the united Europe

2 Closer to Brussels

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Closer to Brussels

by Jan Olbrycht

14 What happens next with the EU budget 2014-2020?

by Sidonia Jędrzejewska

22 Polish contribution to the negotiations for the Cohesion Policy for 2014-2020

by Joanna Held

33 Member states and the EU budget, or a Brussels drama

by Jean-François Lhérété

40 A reduction of the EU budget will be to the detriment of all

Interview with

46 EU Budget: SME-(un)friendly?

by Arnaldo Abruzzini

56 The benefits and risks of European funds

by Ignacy Morawski

64 The Europeans' best invention: the united Europe

Interview with

70 MAŁOPOLSKA wins over Brussels

and it's been 10 years!

78 QUESTIO IURIS

Grzegorz Radziejewski

Jan Kozlowski – MEP

W NUMERZE

6 Budget debate, a debate on the shape of the EU

4 Closer to Brussels

Ladies and Gentlemen, We are now at a crucial moment for the future of the European Union. During the November summit of the European Council, decisions which we expected were unfortunately not reached. Another chance to work out a compromise and take decisions which will set the rhythm of the activities of 27 Member States over the next seven years will be provided by the summit planned for early 2013. The process of creating a new financial framework, or the overall objectives and limits of EU activity for the 2014-2020 period, is accompanied by a growing sense of the necessity to make inevitable changes in the functioning of the Common Europe. The experience of the crisis invites us to consider the direction in which Europe should head. The rift between the demands of the net contributor countries (Germany, the UK, France and Sweden), which call for a more rigorous approach and budget cuts, and the arguments of States urging to ensure a pro-investment policy, has left Europe more divided emerged than ever. We will find out soon what amount of European funds Poland, the largest beneficiary of cohesion policy, ultimately receives. It is certain, however, that even greater emphasis will be placed on spending EU

Closer to Brussels

funds for developmental purposes such as support for the R&D sector, investments which strengthen the capacity of small and medium-sized enterprises and the creation of a low carbon economy. For regions such as Małopolska, this provides an opportunity for a quicker development of the local economy. Reading the latest issue of Closer to Brussels e-magazine, which I'm pleased to recommend, will help to understand the interests of the 27 individual states and realise what scenarios the final vote on the EU budget can produce. The publication will also allow you to learn what Poland has already managed to negotiate, where the dividing line between “friends of Cohesion Policy” and their opponents (the advocates of the “better spending“ of EU funds) lies, and what resources the European Union will allocate to generate economic growth. I wish you an enjoyable reading experience.

The Marshal of the Małopolska Region

Marek Sowa

6 Closer to Brussels

Budget debate, a debate on the shape of the EU

Closer to Brussels

Last weeks have been marked by the struggle over the European budget, a context which is usual in internal political debates in member states. Today, accusations are made internally of the lack of commitment to the national interest, and it is quite easy to boost the expectations of budget share to be allocated to each country â&#x20AC;&#x201C; in Poland's case, Euro 72 or even Euro 120 billion.

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Jan Olbrycht Ph.D. in sociology, university lecturer, expert, politician and social activist. In the years 1990‑1998, mayor of the Town of Cieszyn, one of the founders of Cieszyn Silesia – Těšínská Slezsko Euroregion. Vice President of the Association of Polish Cities responsible for contact with European self-government organizations. Vice President of the Council of European Municipalities and Regions and the President of the Polish delegation to the Congress of Local and Regional Authorities of the Council of Europe. In 1998‑2002, Marshal of the Silesia Voivodeship. The initiator of the Convent of Marshals. Board member of the Assembly of European Regions. Member of the Polish Regional Policy Council. Member of the World Organization of United Cities and Local Authorities. An expert for Regional Policy of the Institute of Public Affairs in Warsaw. Member of the Polish Academy of Sciences Spatial Development Committee. Since 2004, Member of the European Parliament for the Civic Platform and Vice-President of the Committee on Regional Development. In 2009, elected for another term.

In this context, it is certainly worthwhile to recall some basic facts: –– The EU operates on the basis of annual budgets ( January-De-

cember), passed every year, and reviewed at the end of the year;

–– The EU decided to determine the upper limit of annual

budgets for the next 7 years (a maximum period that can be

changed), or the so-called financial perspective; at present, the 2007‑2013 perspective is in place;

–– the amount of the membership fee, which is the main source

of income (in addition to the custom duties and VAT), is con-

ditioned by the level of liabilities and expenditure;

–– the structure of the EU budget excludes the possibility of in-

curring debt, and any funding shortcomings require additional payments.

In recent years, budgets were adopted at the level of about 1% of the cumulative GNI (gross national income), and negotiations

in fact concerned tenths of a percent. Before each new perspec-

tive was agreed upon, heated debates took place, in which richer countries generally strove to prove the need to reduce the common budget. This is also the case at present, although there are

Closer to Brussels

The structure of the EU budget excludes the possibility of incurring debt, and any funding shortcomings require additional payments. A heated debate takes place not only between the member countries, but also between the Council and the European Parliament.

new circumstances which affect the atmosphere and the nature of the discussion. First of all, the relationship between the EU institutions has changed after the passing of the Lisbon Treaty. Pres-

ently, the perspective is shaped by the Council (i.e., member state

governments), but it must be ultimately agreed upon by the European Parliament, which, however, has other methods of influence, as it co-decides on all the instruments of budget implementation.

Therefore, a heated debate takes place not only between the mem-

ber countries, but also between the Council and the European Parliament. In fact, the budget can be vetoed not only by each member state, but also by the European Parliament. Â

Another important consideration is introduced by the ongoing

economic crisis and the problems in the Euro zone, which require a serious financial commitment by the strongest countries, and

limit the willingness to increase contributions. At the same time, member state governments unanimously agreed on a common

program of action â&#x20AC;&#x201C; the Europe 2020 Strategy, which requires significant joint expenses, and the European Parliament attempted to present the costs generated by it.

10 Closer to Brussels

the European Parliament submitted its proposal, which provides, among others, for the spending on the main common policies – agricultural and cohesion – to be frozen at the level in force at the end of the current perspective, i.e. in 2013.

In 2011, the European Parliament submitted its proposal, which provides, among others, for the spending on the main common

policies – agricultural and cohesion – to be frozen at the level in

force at the end of the current perspective, i.e. in 2013. The European Commission's proposals are lower concerning some of the expectations, but propose a similar level of financing for major

policies and set upper limits to the cohesion funds’ contribu-

tion to national budgets at the level of 2.5% of the national GDP, which, in Poland's case, produces the much-publicised amount

of € 70 billion over a 7 year period. The proposal provoked strong

reactions among Member States. Some of them responded positively, and declared to actively work to maintain the proposed

level of expenditure. It is no coincidence that this group called

itself the Friends of cohesion and that it is informally headed by the

Polish government. The group of countries which opt for a smaller

budget took the name of Friends of better spending ; those countries argue that the goal is not only to introduce budget cuts, but also to improve the effectiveness of spending, which shall as a result

allow for significant savings. This seemingly artificial opposition

Closer to Brussels 11

The group of countries which opt for a smaller budget took the name of “Friends of better spending”.

reflects the attitudes concerning the debate on determining the

size and shape of the budget, as it shifts the focus to a discussion whether such a budget is actually needed in the present context.

We should keep in mind that the debate is also influenced by the

additional factor of the situation in the Euro zone and the clearly voiced desire to separate it from among all 27 EU countries in

financial and institutional terms.

Parallel to the budget debate, discussion is underway on EU’s

future institutional shape and attempting to answer the ques-

tion whether the long-term institutional strengthening of the EU (i.e. creating a political union) is the appropriate response

to the crisis.

This means that the UK, which has traditionally been planning

to reduce the EU budget, and at the same time fiercely defended

its discount privilege obtained at the time of accession (the limitation of its contribution through payments by the individual

12 Closer to Brussels

Poland and other “Friends of cohesion” strongly defend a bigger budget, the common cohesion policy can have a huge impact on the dynamics of the investment market, especially in times of crisis. Poland, in fighting for the money “for itself”, also seeks to maintain and strengthen community activities.

Member States), does so today in the context of its planned referendum on leaving the EU. Although the United Kingdom is

not the only country which proposes radical cuts (Cyprus sug-

gests a Euro 50 billion reduction of the planned budget of about

Euro 1 billion over a 7-year period, the President of the European

Council, Euro 75 billion, Germany about 100 billion, and Sweden Euro 180 billion), such a tough bargaining approach is in-

terpreted to be clearly motivated not only by a desire to generate

savings, but also to reduce, through a smaller budget, the scope of

the EU activity.

Poland and other Friends of cohesion strongly defend a bigger

budget, arguing that though cuts are inevitable during the cri-

sis, the common cohesion policy can have a huge impact on the

dynamics of the investment market, especially in times of crisis. One cannot fail to note that this attitude places Poland among the supporters of a strong EU which has at its disposal efficient

instruments of development. All observers recognize that Poland, in fighting for the money “for itself ”, also seeks to maintain and strengthen community activities.

Closer to Brussels 13

An agreement between the European Parliament and the countries who have a majority against the remaining ones would result in a completely different nature of the EU and it would constitute an important step towards institutional reforms.

All member country governments have been preparing for negotiations in the European Council, and the most radical (the United Kingdom) have made sure to obtain a binding mandate from the national parliaments. It is quite evident that the multi-annual

budget for the 2014‑2020 period will not be agreed upon, and the

European Parliament does not cease to work on the implementation instruments and seriously considers either vetoing the government decision if the proposed compromise is so “low” that it

shall in fact limit the activities of the entire EU, or bypassing the

obstacle created by the absence of an agreement. The legal framework in place allows to create long-term policies based solely on

annual budgets, with relevant legislation adopted by the Council not by unanimity, as it is in the case of the financial perspective, but by a qualified majority, with the consent of Parliament. An

agreement between the European Parliament and the countries who have a majority against the remaining ones would result in

a completely different nature of the EU and it would constitute an important step towards institutional reforms.

Therefore, the debate is not only about money, but also about the future of the European structures.

14 Closer to Brussels

What happens next with the EU budget 2014â&#x20AC;&#x2018;2020?

The article was written in 2012, December.

November's EU summit unfortunately ended in failure, but we should keep in mind that long-term budget negotiations have never been successful the first time round. This time will be better spent working on a good compromise than trying to reach an agreement quickly, the more so that the European Commission has just tabled its official proposal of creating a separate budget for the Eurozone.

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16 Closer to Brussels

Sidonia Jędrzejewska Is a Member of the European Parliament on behalf of the Civic Platform. Member of the Committee on Budgets (acting as the deputy coordinator of the European People's Party) and the Committee on Budgetary Control. She was also a member of the Special Committee on Policy Challenges (SURE). Sidonia Jędrzejewska graduated in sociology at the Adam Mickiewicz University in Poznań. Scholar of Ministry of Education, the DAAD Foundation and the Batory Foundation. She worked as a research assistant at the University of Central Europe in Warsaw. Later, she was an administrator at the Secretariat of the Committee on Budget in Brussels. In 2006, she was appointed the budget advisor of the European Union in the European People's Party – European Democrats Group in the European Parliament. She worked, among others, on negotiations on the financial perspectives for 2007‑2013. Between January 2008 and June 2009, she served as Secretary of State in the Office of the Polish Committee for European Integration.

Closer to Brussels 17

The final round was fought over an additional reduction of Euro 30 billion. This is a relatively small amount compared to the overall amount of the seven-year budget.

The next round of budget negotiations between the Heads of

States and Governments will be held in the beginning of the next

year. It was generally expected that the original proposal of the

European Commission, which offered slightly over Euro 1,033

billion in obligations resources, would be reduced by the Member

States. After widely criticised proposal of first cuts made by the Cyprus prsidency, the President of the European Council took

over the initiative. Herman Van Rompuy tried to prepare a new

negotiating scheme in a way that would be acceptable to the ma-

jority of EU leaders. A week before the summit, he proposed limit-

ing the future multiannual financial framework to Euro 973 billion.

During the meeting, he revised the amount to Euro 971 billion,

and changed not only the overall amount of the draft budget for

2014â&#x20AC;&#x2018;2020, but also its distribution. The last proposal, although

it offered less than Euro 72.5 billion to Poland within the cohe-

sion policy, guaranteed our country more favourable principles of

spending the EU funds (including a lower own contribution in the

financing of European projects, and the eligibility of VAT).

In addition, the offer was almost Euro 4,5 billion higher than the structural funds allocated to Poland in the current financial per-

spective. However, Mr Van Rompuy's last project turned out to

be unacceptable for the EU leaders.

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At the end of November, the President of the European Commission Jose Manuel Barroso presented a project of strengthening the EMU. This proposal, including among others the proposal of creating over the next 6â&#x20AC;&#x2018;18 months a separate budget for the Eurozone, came as a surprise. The Lisbon Treaty stipulates that the multiannual financial

framework must be adopted unanimously by all the Member

States, with the approval of Parliament. However, the United

Kingdom, Sweden, Denmark and the Netherlands called for

further cuts. Surprisingly, also the German Chancellor Angela

Merkel sided with those countries. The final round was fought over an additional reduction of Euro 30Â billion. This is a rela-

tively small amount compared to the overall amount of the

seven-year budget. However, the areas in which further cuts shall be made could not be agreed on. Importantly, the No-

vember summit represented a rupture of the traditional alliance between France and Germany. President FranĂ§ois Hollande

took the side of the 15 friends of cohesion countries, defending not only the agricultural, but also the structural funds. On the

other hand, Chancellor Angela Merkel, in fear of isolating Great

Britain, which she saw as dangerous for the European Union as

a whole, supported the proposals made by London and other net contributors.

Closer to Brussels 19

The proposal to establish a separate instrument for convergence and competition will further complicate the negotiations, which are very difficult as it is. However, the declarations made by the friends of cohesion indicate that there will be no further cuts of the structural and agricultural funds. The next EU summit devoted to the MFF will be held in the

beginning of the next year, but the issue will probably be infor-

mally discussed during the next meeting of the European Council. The December meeting of the heads of states and govern-

ments is to be devoted to the reform of economic and monetary

union (EMU). At the end of November, the President of the

European Commission Jose Manuel Barroso presented a project of strengthening the EMU. This proposal, including among oth-

ers the proposal of creating over the next 6â&#x20AC;&#x2018;18 months a separate

budget for the Eurozone, came as a surprise. It may adversely

affect the long-term budget negotiations, although the Com-

mission proposes that the so-called Instrument for convergence

and competition be separated from the Community MFF. Initially,

this instrument would support the Eurozone countries in carrying out difficult structural reforms. In the longer term, after the

EU Treaty is modified, it is to be financed from own resources

and transform first into the fiscal capacity, and then an actual Eu-

rozone central budget, preventing cyclical crisis shocks which are

unevenly distributed between the different Eurozone countries.

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In the process of shaping the future EU budget for 2014â&#x20AC;&#x2018;2020, a major role is also played by the European Parliament.

During the December summit, we will probably find out what the chances of reaching agreement on the next multi-annual

budget for the entire Union in the beginning of 2013 are. Presi-

dent Van Rompuy will, in addition to negotiating strengthening

the economic and monetary union, informally probe EU leaders

on this topic. The proposal to establish a separate instrument for

convergence and competition will further complicate the negoti-

ations, which are very difficult as it is. However, the declarations

made by the friends of cohesion indicate that there will be no further cuts of the structural and agricultural funds.

Finally, in the process of shaping the future EU budget for

2014â&#x20AC;&#x2018;2020, a major role is also played by the European Parlia-

ment. In accordance with the Lisbon Treaty, a majority of Eu-

ropean Parliament members must accept the proposals for the

MFF adopted unanimously by the memeber states. MEPs are in

favour of a generous seven-year EU budget in view of ensuring

a continued growth of the EU and fulfilling its treaty obligations.

Therefore, they are the allies of the friends of cohesion, led by

Poland. Therefore, we can expect that the MEPs will not accept

Closer to Brussels 21

a too modest and poorly constructed seven-year budget.

Even though the European Parliament can not officially make

changes to the next compromise proposal of the memeber states,

the European Council must take its stance into account, and

adjust the future budget compromise in such a manner that it be

acceptable for the MEPs.

22 Closer to Brussels

Polish contribution to the negotiations

Joanna Held Advisor in the Department of Regional and Cohesion Policy at the Polish Permanent Representation to the EU in Brussels (PPR). She specialises in European Territorial Cooperation and its relationship with the neighbourhood policy, as well as European Groupings of Territorial Cooperation, territorial cohesion, macro-regional strategies and urban policy in the framework of the cohesion policy. An employee of the Polish Ministry of Regional Development since 2002 (delegated to PPR in

2010). During Poland's Presidency of the EU Council, she chaired a working group in the Friends of the Presidency for EU Strategy for the Baltic Sea Region formula. Between 2002 and 2008, she was involved in the planning and the implementation of programs financed by the European Social Fund, and between 2008 and 2010, in the modernization of national strategic documents and work on effective lobbying for reform of the Cohesion Policy for 2014â&#x20AC;&#x2018;20.

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for the Cohesion Policy for 2014â&#x20AC;&#x2018;2020 compromises achieved and issues for further negotiations

24 Closer to Brussels

1 The draft regulation laying down the general provisions on the European Regional Development Fund (ERDF), the European Social Fund (ESF), the Cohesion Fund (CF) and the European Agricultural Fund for Rural Development (EAFRD), the European Maritime and Fisheries Fund (EMFF); the draft Regulation on the European Regional Development Fund, the draft Regulation on the European Social Fund, the draft Regulation on the Cohesion Fund, and the draft regulation and the European Territorial Cooperation. In addition to the legislative package for Cohesion Policy, also a regulation on amendments to the Regulation on the European Grouping of Territorial Cooperation (EGTC) is negotiated.

Negotiations of the package of regulations for Cohesion Policy 2014â&#x20AC;&#x2018;20201 initiated during the Polish Presidency, have been going on continuously for over a year, or since the European Commission published its proposal on 6 October 2011. They are expected to be completed in the first quarter of 2013 and result in creating the legislative framework for the Structural Funds, which provide such an important development stimulus not only for Poland, but also for many other EU countries.

Closer to Brussels 25

What are the key changes in the package of regulations for

Cohesion Policy 2014â&#x20AC;&#x2018;2020, negotiated so far in the EU Coun-

cil within the so-called partial general approach procedures and including Polish demands?â&#x20AC;&#x2030;2

Reading the texts of proposals formulated by the Commission,

and discussed by the European Parliament and the Council, was

quite a challenge. In order to facilitate the negotiators' task, after the analysis of the original proposals of regulations, it was de-

cided to break down their content into a number of horizontal

themes, divided into the different negotiating blocks, with each

block containing articles with similar content from a number of

The EU Council adopted within the so-called partial general approach the compromise formulations of the different parts of the regulations in the 19 negotiation blocks, Poland was an active player in each of the negotiating blocks, proposing new solutions, skillfully building coalitions and initiating interesting initiatives.

different regulations.

During the last year of its activities, as a result of ongoing negotiations between the Member States, the EU Council adopted

within the so-called partial general approach the compromise formulations of the different parts of the regulations in the 19Â ne-

gotiation blocks, namely: strategic programming, ex-ante conditionality, monitoring and evaluation, management and control; eligibility; large projects, thematic concentration, financial in-

struments, frameworks and assessment of performance; revenuegenerating projects and public-private partnership, management and control, technical assistance and information and com-

munication; territorial instruments, ETC, financial issues other

than the multiannual financial framework (MFF); benchmarks; Council recommendations to the Member States; Common

Strategic Framework and financial management. Poland was an active player in each of the negotiating blocks, proposing new

solutions, skillfully building coalitions and initiating interesting initiatives.

2 As of November 20, 2012.

26 Closer to Brussels

Among the most important undeniable Polish negotiation successes was adopting formulations in the following areas:

Strategic Programming â&#x20AC;&#x201C; the compromise achieved involves not

only structuring the relations between strategic documents, but

in particular implementing a territorially-oriented programming

logic and an efficiency approach. These guiding principles shall translate into a clear link between the objectives, investments,

and results to be achieved. Therefore, the Partnership Agreement (PA) will be the master document for the Operational Pro-

gramme (OP), which will set the frameworks for achieving re-

sults, determine the relationship between the thematic objectives and results to be achieved, regulate transversal issues, and pro-

vide the basis for negotiations with the European Commission.

Moreover, the efficiency of the implementation of the objectives

of the new Cohesion Policy will certainly be enhanced thanks to introducing the possibility of combining several thematic ob-

jectives and funding under a priority axis (up to 20% of the EU contribution to the OP) and the possibility to shape a general

description of the priority axis which will not require initiating

the procedure of modifying the Operational Programme and the Partnership Agreement in the event of minor changes.

Thematic concentration â&#x20AC;&#x201C; the following Polish proposals have

been included in the compromise formulations: a concentration

of 80% (instead of the 100% proposed by the European Com-

mission) of the allocation of the Operational Programme for the European Territorial Cooperation for 4 out of 11 selected the-

matic objectives (TOs), which shall allow a free use of the 20% of the allocation for the remaining objectives; increasing the level

Closer to Brussels 27

of cross-financing to 10% at the level of the priority axis, the

inclusion of urban public transport in the TOs of a low-carbon

economy, the financing of the electricity and gas transmission and distribution networks, and gas storage facilities.

Thematic concentration in more developed regions – thanks to the compromise achieved, these regions, unlike in the original proposal by the European Commission, will be able to fund the

basic transport and environment infrastructure; also a reduc-

tion in the required minimum levels of allocation (the so-called ring-fencing) on selected thematic objectives was negotiated, e.g. from 52% to 45‑50% of the allocation of structural funds

for employment, social exclusion and education; in addition, it

will be possible to further reduce these levels and the minimum

ERDF allocation for R&D, innovation, ICT, SME and low-carbon

economy, provided that allocation in other Polish regions are increased correspondingly.

As for the more developed regions, seeing that Mazovia was the only Polish region which exceeded 75% of EU's average GDP,

one of Poland's most important propositions was negotiating a scope of support and thematic concentration levels for Mazovia which would be similar or the same as for other Polish

regions. Given the fact that the question of the region category in which Mazovia will be classified in the future (transition or

developed region) will only be settled in the coming weeks, during the negotiations on the Multiannual Financial Framework

2014‑2020, concerning the thematic concentration for Mazovia

it was assumed that, as proposed by the European Commission,

the region will belong to the category of more developed regions.

One of Poland's most important propositions was negotiating a scope of support and thematic concentration levels for Mazovia.

28 Closer to Brussels

Ex-ante conditionality: as a result of negotiations, the conditions

imposed ex-ante were tied to investment priorities and specific

program objectives, also the freedom of applying ex-ante conditionality at the level of Operational Programmes and Partnership Agreements was ensured, and the rules of the application

of possible payment suspensions by the European Commission were clarified.

Performance framework – in this area, Poland's proposal concerning the introduction of the fast-track procedure for the modifi-

cation of operational programs, resulting from the allocation of the performance reserve resources, was retained. The procedure will help to accelerate the use of any additional resources from

the performance reserve (its creation is conditional on the result the Multiannual Financial Framework 2014‑2020 negotiations). Management and control – in the field, the Polish proposals were retained after negotiations as for the requirements for Member States relating to reporting of irregularities, i.e., reducing the

bureaucratic requirements by excluding from the obligation to notify the European Commission of irregularities not exceed-

ing 10,000 € and the exemption from reporting to the European Commission of some irregularities.

Major projects – in this area, the most important Polish propos-

als were retained, which shall significantly simplify the approval process of major projects by basing the threshold being the ba-

sis of their assessment on eligible costs (Euro 50 billion), rather than total cost, and setting a higher threshold for the transport

Closer to Brussels 29

sector (Euro 75 billion). In addition, the list of major projects

will not have to be approved by the European Commission, but by the monitoring committee, and its updates will not be limited. Another important achievement is the possibility of cer-

tifying the expenditure after the notification of a major project

by the European Commission and enabling Member States to

decide whether the project shall be accepted by the Commission or by an independent expert.

Public-Private Partnership (PPP) – the compromise achieved is to a large extent based on the Polish proposal, which significantly

simplifies the implementation of future projects in the PPP mod-

el: the particular character of PPP was recognised by ensuring the

primacy of regulations for this mode over general regulations and introducing into the general regulation the definition of PPP.

Financial issues outside the Multiannual Financial Framework – in

this area, increasing the level of flexibility in transferring funds

between categories of regions from the proposed 2% to 3% was

negotiated – it is worth noting that this stipulation is beneficial

for Poland in the context of Mazovia leaving the less-developed region category.

European Territorial Cooperation (ETC) – in this area, it was agreed to allow Member States to decide to transfer an amount not

exceeding 15% of the financial allocation for one of the components of cross-border and transnational cooperation between

these components. It is one of the key issues negotiated by Poland in the block.

30 Closer to Brussels

The most important Polish proposals simplify the approval process of major projects.

Common Strategic Framework (CSF) â&#x20AC;&#x201C; this is a joint document

prepared for 3 Cohesion Policy funds (ERDF, ESF, CF), the European Agricultural Fund for Rural Development (EAFRD) (pillar

II of the CAP) and the European Maritime and Fisheries Fund

(the two funds are overseen by the Ministry of Agriculture and Rural Development). As a result of negotiations, a document

was adopted with Poland's active participation, with a stronger

strategic dimension; it will be adopted as an annex to the Gen-

eral Regulation. Additionally, territorial elements and integrated approach to CSF funds were strengthened, as well as the coor-

dination with other policies and instruments at EU level in the

context of achieving the Europe 2020 Strategy objectives. Poland expects, however, that further work of the Council will allow to improve other elements; an issue which remains of great inter-

est for Poland is an annual strategic debate at the political level,

aimed at a better coordination of CSF funds and other EU policies. The achievement of these results is certainly a very satisfactory

outcome, and the Polish contribution to the process of negotia-

tions on the Cohesion Policy for the period 2014â&#x20AC;&#x2018;2020 has been

very important. What else remains to be determined in the final stage of the negotiations?

First of all, there is the question of the ESF Regulation â&#x20AC;&#x201C;

Article 15 on financial instruments and the comprehensive reading of the regulation. At the last stage of the negotiations, it is

important to merge the text of the ESF Regulation and analyse it thoroughly after the various articles are analyzed separately within each block.

Closer to Brussels 31

Other issues include the preamble, transitional provisions and

questions to be resolved in the framework of the Multi-annual Financial Framework. At present, a number of articles or parts

thereof in the various regulations are placed in square brackets,

which means that determining their contents is suspended until

the MFF negotiations results are known. This is the case because

some elements of the Cohesion Policy Regulations shall be set-

tled in the so-called. nego-box, concerning the MFF, whose stipulations will be determined at the end of 2012.

The next step is regulation ETC – Article 28 on cooperation with third countries and the comprehensive reading of the regulation. As in the case of the ESF regulation, also in this case an analysis of the final shape of the regulation is needed.

And finally, there is the question of the EGTC Regulation –

amendment to Regulation No. 1082/2006 of 5 July 2006. In this area, the main question to determine will be the change in the

deadline for issuing a decision on the establishment of EGTC –

the European Commission proposes a tacit approval procedure

within maximum six months; the current deadline for a consent

by the Member State is 3 months from the date of receipt of the request. Experience shows that the deadline was often not respected and the procedure was delayed considerably.

32 Closer to Brussels

Over the last year, about 80% of the stipulations of the various regulations has been agreed upon, which are part of the legislative package for Cohesion Policy 2014‑2020. 3 3 The article is based on material published on the website of the Ministry of Regional Development entitled List of the most important changes in the legislative package for cohesion policy for 2014‑2020 and updated based on the current progress of the negotiations.

In summary, over the last year, within the so-called partial gen-

eral approach, about 80% of the stipulations of the various regulations has been agreed upon, which are part of the legislative

package for Cohesion Policy 2014‑2020.3 Therefore, starting in September 2012, the Cyprus Presidency began the process of

informal trilogues, or negotiations between the EU Council, the

European Commission, and the European Parliament. Meetings of the group are held on a weekly basis, and despite the original

plans of the Cyprus Presidency to conclude those before the end of 2012, they will probably continue into the Irish Presidency.

Those trilogue work meetings aim to determine the most con-

vergent positions of the three institutions in order to adopt the whole package during the first reading in the first half of 2013.

Closer to Brussels 33

Member states and the EU budget, or a Brussels drama

34 Closer to Brussels

Jean-François Lhérété A graduate of the French National School of Administration, advisor to the French Court of Auditors, former president of a bank, European finance expert, author and essayist.

Budget negotiations between the Member States of the European Union represent a classic Brussels drama, yet another clash between the member states according to the generally known principle of everyone wishing to offer as little as possible and receive as much as possible in return.

Closer to Brussels 35

Ten of the twenty-seven EU countries, located in the south and the east of Europe, receive more from the European budget than they contribute to it.

What is truly at stake in budget negotiations? Since Margaret Thatcher's Homeric tirade in 1984 (the famous I want my money back), United Kingdom has made the issue

a cornerstone of their relationship with the European Union,

constantly condemning the mismanagement of the suprana-

tional creation which less suits its culture than its wishes. In this respect, David Cameron is a worthy heir to all his predecessors,

following the example of the island tradition, which cares more

about the survival of the free trade zone than the financial transfers for subsidies to farmers or balancing the level of development of the various areas of our continent.

But it would be unfair to point the finger only at the UK as far as failing to respect the principle of solidarity is concerned. None

of the member states considers with joy the prospect of increasing its financial participation in the costs of joint activities. Not long ago, Germany, the Netherlands and Finland have negoti-

ated their premiums being lowered. The tendency of tightening

the strings of the national purse manifests itself very strongly in the period of budget deficit and national debt, such as the one

which we are currently dealing with. The necessity to reestablish

36 Closer to Brussels

the financial balance in indebted countries does not encour-

age an attitude of generosity towards specific interventions for

which the return on investment is less than obvious. This applies particularly to countries which are net contributors to common

policies, led by Germany, France and Italy, each of which is dealing with a serious financial imbalance, and which contribute to

the EU budget the amounts of respectively Euro 9 billion, Euro 6.4 billion and Euro 5.9 billion. Ten of the twenty-seven EU

countries, located in the south (Spain and Portugal) and the east of Europe, receive more from the European budget than they contribute to it. This statement illustrates in the most evident

manner the particularistic strategies of the two groups in developing a budget perspective for the coming years.

In order to understand the nature of the budget confrontation

between the 27 countries, we have to observe that the differences are due to the existence of three main categories of countries:

those which ardently defend the Common Agricultural Policy, among them in the first place France and Italy; those which

favour cohesion and which for a long time benefited from the

Closer to Brussels 37

contributions of southern European countries before they be-

gan to provide for the new member countries from Central and

Eastern Europe; and finally those which, if their declarations are to be taken literally, want to reduce all common policies. For its

part, France has always based on the priority of defending its agricultural funding, for which it receives 10 billion Euro, accept-

ing in exchange balancing the expenditure for structural policies, infrastructure support and regional development. This attitude

stems from the historical development of European integration, which based first on the creation of a single internal market,

then on creating common policies, in particular the agricultural policy, and finally on supporting the development of countries

and regions at a disadvantage in order to gradually close the gap between the richest and poorest areas of our continent. Maintaining at the same time the latter two ambitious objectives, whose financial burden is substantially equivalent (about 60

billion Euro each), requires difficult choices, but, above all, ever increasing financial resources.

38 Closer to Brussels

The European budget, which corresponds in 2012 to 1.12% of the cumulative GDP of the 27Â Member States, does certainly not answer the challenges and problems of today's Europe. Relativization of the problem The European budget, which corresponds in 2012 to 1.12% of

the cumulative GDP of the 27 member states, does certainly not

answer the challenges and problems of today's Europe. Further budget cuts will only emphasize the brutal truth of this state-

ment. In a world which is open to all forms of competition by developing countries, Europe needs more than ever policies which will improve the competitiveness of its economy and

foster innovation. In the absence of new resources, it has become

impossible to develop at the same time activities securing the future, the competition in the development of infrastructure, and supporting maintaining the declining sectors of economy. Ac-

rimonious budget discussions result from the necessity to make

difficult strategic choices, which shall have great significance and serious consequences.

Let us place matters in the real context: the accumulated debt

of 27 EU countries (Euro 11,000 billion) at present exceeds the

Community budget fifty-fold. In 2012, the annual deficit in the

public finances of the 27 Member States is twice higher than the latter. It is clear, therefore, that as a consequence, the European

Closer to Brussels 39

The European budget is not of primary importance in comparison with the much more pressing issue of public deficit and the Euro zone crisis.

budget is not of primary importance in comparison with the

much more pressing issue of public deficit and the Euro zone crisis, which threatens the stability of the member states.

European Union is a large basin of unifying projects, but it lacks the spirit and zeal of the Founding Fathers.

So should we focus on the issue of the EU budget? We should, if we consider that it is the material realization of the will to

act together, a barometer of cooperation and solidarity between

states. We should not, if we consider that the specific methods

of the EU activity are being extremely reduced and will for a long time be shaped by external factors, and are in any case dispro-

portionate to the enormous challenges that Europe has to face in the era of globalization. However, regardless of the lack of

resources, the European Union is still a large basin of unifying

projects, but it lacks the spirit and zeal of the Founding Fathers.

It is striking that the energy of major European leaders is directed more towards the financial rescue of states and nations than

the management of EU policy, which is largely left to the Brussels technocracy. This state of affairs will certainly evolve, but

today, the European centre of gravity is placed more at the seat

of the European Central Bank than at the European Parliament or the European Commission.

Today, the European centre of gravity is placed more at the seat of the European Central Bank than at the European Parliament or the European Commission.

40 Closer to Brussels

A reduction of the EU budget will be to the detriment of all, not just the biggest beneficiaries

Closer to Brussels 41

interview with Grzegorz Radziejewski, Deputy Head of Cabinet of Commissioner Janusz Lewandowski

Grzegorz Radziejewski A graduate of Warsaw School of Economics in International Economic and Political Relations. Between 1999 and 2006, he worked for the EU Department of the Polish Ministry of Finance, among others, as Head of the Polish financial flows in the EU analytical department. Between 2007 and 2012, Head of the Budget and Finance Department of the Permanent Representation of Poland to the EU in Brussels; he currently serves as Deputy Director of the Cabinet of Commissioner Janusz Lewandowski.

42 Closer to Brussels

European Commission's budget proposal of €1,033 bn in obligations was reduced

Renata Jasiołek – Malopolska

by the European Council President Herman

Region Brussels Office:

Van Rompuy to the level of first 973, and

During the November summit on the

then 971 billion Euro. If this proposal is

EU budget for the years 2014‑2020,

adopted by the 27 member states, where

no compromise was reached: was

do you think cuts will be made, given that

this expected? What are the chan-

the funding for agricultural and cohesion

ces of reaching an agreement at the

policy, which account for about 71% of

summit at the beginning of 2013?

the EU budget, have been frozen?

Grzegorz Radziejewski:

However, there is no guarantee,

It is hard to say where cuts

dictable, but it certainly was not

plicated, and we can only keep

to talk about details, and it is

I do not know if this was pre-

in line with our expectations, as

because the issue is very com-

our fingers crossed that the ef-

will be made; it is far too early difficult to foresee the final

we wanted the negotiations to

forts of the European Council

help to start the new program-

main burden of finding a com-

efficient, and fast enough man-

that the Commission, which

proposed before the meeting

resources. Unfortunately, we

participate in the process and

see that the cuts are made in

end in November, which would

ming period in an appropriate,

ner to allow access to the agreed could not reach an agreement,

results at this stage. However,

leaders, who will now carry the

if we look at the Commission's

promise, shall bear fruit, and

dent Herman Van Rompuy

always acts as a facilitator, will

will try to help in reaching an

proposal and what the Presi-

of the European Council, we all the fields. From the Com-

but many claim that this type of agreement.

mission's point of view, if we

cluded at the first attempt and

of cuts, they should be made

negotiations can not be con-

are already thinking in terms

this has never happened before.

in such a way that the inner

dramatise. As for the beginning

sion proposal, made in June

So I think there is no reason to

of 2013, we hope that an agree-

ment will be reached then.

balance of the initial Commis-

2011, and updated in July 2012,

be maintained. In other words,

Closer to Brussels 43

It is hard to say where cuts will be made; it is far too early to talk about details.

we would like the cuts to be

also perceive it as working to

proportional. Mainly because

that effect. However, of course,

proposal took into account

the expenditure in section 1A as

we believe that the original

some experts tend to classify

certain political realities. Here

those which are the conducive

concerning the cohesion policy

Given the crisis which we are

policy, their importance and

tabled responded to the current

countries - I am talking pri-

political realities, and it is the

I mean of course the envelopes and the common agricultural significance for individual

to innovation and development. facing, the proposal which we challenges, and respected the

marily about the budget ben-

version which is advocated by

uted sufficient weight to the

the negotiations. Regardless of

eficiaries. Secondly, it attrib-

the European Commission in

spending proposals that could

what cuts will have to be made,

ment. If we assume that cohe-

count the element of balance

be described as a pro-invest-

sion policy is not one of those,

which of course would be

unfair, or untrue, because we

we want them to take into ac-

and that is the way in which we

will conduct further discussions.

44 Closer to Brussels

All cuts, all reduction of the budget size will be bad both for Poland and for the net contributors. Assuming a worst-case scenario, i.e. Member States which are the

It seems that the budget will be reduced it would be to the detriment of everyone.

biggest net contributors winning and budget cuts being made, what consequences will the budget reduction have for the Union, and for Poland? Unfortunately, I do not think

the conclusions formulated by

worst-case scenario, but rather

2012 – in this context, all cuts,

would be to the detriment of

is exactly what all this is going

will be bad both for Poland

are in theory the biggest ben-

logic of the cuts is prevalent

beneficiaries, and for the net

And to answer the second part

tunately, for the time being, the

whether anyone will come out

most important, key priority

that we can describe this as the as the realistic one, because this

to come to. Unfortunately, the and we cannot change this.

of the question – I do not know as a winner, because there are

the European Council in June all reduction of the budget size and the countries which are

contributors. Of course, unfor-

latter group believes that the

in the negotiations is reducing

too many cuts planned. If we

their payments to the budget,

economic situation, and the

priate structure of expenditure

take into account the current

rather than creating an appro-

manner in which the EU can

which would help them achieve

through investment, economic

with thinking in “accounting”

new jobs – I must refer you to

that the budget will be reduced

contribute to fighting the crisis

growth, and the creation of

any benefits; we are confronted

terms. Unfortunately, it seems

and we can state in full aware-

ness and responsibility that it

everyone, not only those who eficiaries.

Thank you for the interview.

46 Closer to Brussels

EU Budget:

SME- (un) friendly?

Arnaldo Abruzzini Is the Secretary General of EUROCHAMBRES, the Association of European Chambers of Commerce and Industry, representing over 20źmillion enterprises in Europe – 93% of which are small and medium enterprises – through members in 45 countries and a European network of 2000 regional and local Chambers. An Italian national, Mr Abruzzini has been Secretary-General of EUROCHAMBRES since 1999. Prior to that, he worked as Managing Director of several companies active in strategic development, marketing, communication and business consulting. He is a graduate of the Rome University “La Sapienza”.

Closer to Brussels 47

People only accept change when they are faced with necessity, and only recognize necessity when a crisis is upon them. Jean Monnet

48 Closer to Brussels

Itâ&#x20AC;&#x2122;s not a conventional recession period that Europe is currently

encountering. Itâ&#x20AC;&#x2122;s a structural problem that requires a redefini-

tion of the concept of economic growth and the current crisis

might be an opportunity for that. Leading the EU should be like managing a company with a good corporate social responsibil-

ity policy, and every manager knows that cuts without a strategy

wonâ&#x20AC;&#x2122;t help the company to survive in the long run. European

businesses are aware that austerity measures are necessary, but

they are also aware that they are not sustainable if they are not implemented in a consolidated framework, including concrete growth measures and much needed structural reforms. In this

context, paraphrasing the renowned economist Joseph Stiglitz, indeed austerity as the (only) solution is just wrong. Restoring business confidence Business confidence for 2013 is at a 20 year low and this con-

fidence has to be restored. In general, Polish businesses are as negative about their future as their counterparts in Austria,

Spain and Denmark, but their prospects regarding total turnover, employment or investment are still much higher than the

Closer to Brussels 49

EU average. Moreover, key findings from the latest EUROCHAM-

BRES Economic Survey show that, despite balanced employment

and investment prospects, forecasts in the Eurozone are negative, while non-Eurozone and non-EU countries expect to hire more staff next year. Turnover expectations remain positive, with only

a few countries registering negative expectations. Domestic sales

are set to stabilise for EU countries as a whole, while non-Euro-

zone countries predict an increase. Export forecasts remain positive for the vast majority of participants. link > Europe needs innovative companiesâ&#x20AC;Ś Small & medium enterprises (SMEs) represent 98% of EU busi-

nesses. Europe needs innovative companies that are more confi-

dent for the future and European companies need a skilled labour

force and access to finance to meet the expectations of policy makers and society by delivering jobs and growth.

The messages coming from the European institutions provide

a blurred picture often contradicting the original statements on

restoring jobs and growth. At the opening of the summit of the

50 Closer to Brussels

European Council 21th of november 2012, a draft conclusion suggested a cut of Euro 81 billion to the European Commissionâ&#x20AC;&#x2122;s

2014-2020 EU Budget proposal. That could imply slashing the proposed programmes for innovation, education & training,

such as Horizon 2020, COSME (Programme for the Competi-

tiveness of Enterprises and SMEs), or Erasmus for All. Such cuts would be to the detriment of SMEs. Innovation & Competitiveness High-growth SMEs often do not have a dedicated R&D strategy or resources and this is where the demand-driven, innovationfocused approach of Horizon 2020 comes into play. It would

help a wide range of smaller businesses to have access to tailored

research and capitalise on market opportunities. That is why it is crucial to maintain the budget allocated to Horizon 2020 at the

level of Euro 80 billion and 20% of this amount should be dedicated to the SME Instrument.

Closer to Brussels 51

The real solutions are rooted in the kinds of jobs we have, the kind we need, and the kind we’re losing, and rooted as well in the kind of workers we want and the kind we don’t know what to do with Joseph Stiglitz

Taking into account growth restoring orientation of policy makers, it is also hard to comprehend that COSME (Programme for

the Competitiveness of Enterprises and SMEs), proposed to

provide much needed support for SMEs’ access to finance and

markets, to reduce their regulatory burdens and stimulate entrepreneurship, represents a mere 0.2% of the total EU Budget. Skills The annual cost to the EU of its almost 14 million NEETs

(young people who are not in education, employment or train-

ing) is over Euro 153,000 billion, or 1.21% of the EU's GDP. This figure, significantly more than the entire EU Budget package,

highlights the value of a strong EU education and training programme. Chambers thus argue that Erasmus for All’s Euro 19

billion should be maintained, with a significant proportion allo-

cated to improving skills through vocational training.

52 Closer to Brussels

Access to finance Going beyond the EU 2014-2020 Budget, European leaders must recognise that, as a result of existing debt and equity gaps, in

addition to the financial crisis and forthcoming changes in capital requirements for banks, access to finance is one of the most pressing problems for SMEs.

According to the OECD, the overall sources of financing for SMEs comprise of:

Credit line/overdrafts (42% of surveyed SMEs),

–– Bank loans (36%),

–– Leasing/hire purchase/factoring (35%), –– Trade credit (29%),

–– External equity (6%). The debt financing gap resulting from structural market failures and asymmetry of information has an even more severe impact on obtaining financing in the case of economic downturns and

crises. In relatively wealthy economies such as France, Germany,

Closer to Brussels 53

Italy, Spain and the UK, the equity gap is expected to increase to Euro 2.5 trillion by 2020. Economies with less developed financial markets usually suffer from an even higher equity gap.

Taking into account the problems emerging on debt and capital markets, as well as the debt-financing focus of European SMEs,

access to credit must be stimulated more efficiently through

various guarantee schemes at European, national and local levels. Credit guarantee schemes generate the highest stimulus as they reduce both default risk and capital absorption of lenders. The

guarantee scheme landscape differs between countries. For ex-

ample in Poland there is one-level guarantee system, which lacks a counter-guarantor and where the efficiency of the credit guarantee scheme could be increased by the existence of a European

Guarantee Platform acting as guarantor and counter-guarantor and providing a higher multiplier effect. Current schemes have highly variable impacts on credit available to SMEs (Euro 1 of

stimulus can generate from less than â&#x201A;Ź 1 to tens of â&#x201A;Ź of credit).

54 Closer to Brussels

Towards change During the Great Depression, the economy shifted from agri-

culture to manufacturing and today we are once again experiencing a transition, but this time from a manufacturing to a service

economy. Both policy makers and businesses have to respond

to this. The transition needed is from a factory economy to the

creative economy, in which both manufacturing and services play a role. It is an economy in which the driving force is in-

novation. The exit from the European economic crisis must be

based on innovation, sustainable growth and investment to meet the expectations of the forthcoming change. As a starting point,

European policy makers must ensure that the EU budget reflects this trend.

Closer to Brussels 55

56 Closer to Brussels

The benefits and risks of European funds EU funds undoubtedly raise the standard of living in Poland and allow it to make up more quickly the civilisational development delays. However, there are numerous indications that they do not significantly increase the growth potential of the Polish economy. It is worth to note this distinction in analysing the economic impact of the new financial perspective.

Closer to Brussels 57

Negotiations on the new financial perspective for the European Union meet many obstacles, but there are indications that they may be successful in the first months of 2013. Whatever their

outcome, Poland will receive a fairly large piece of the pie – at

least Euro 72 billion from the cohesion fund, or nominally

6 percent more than in the previous financial perspective. In

real terms, we will receive less money, but it's hardly surprising given the fact that we are a much wealthier country than seven

years ago. Observing the nation-wide support for the govern-

ment to the slogan let us obtain as much as possible, we should ask the question what the balance of benefits and costs associated

with European funds is. And this balance, despite appearances,

is not so easy to make. I would, therefore, suggest distinguishing

two distinct categories, which will help us better understand the impact of the funds on the Polish economy. On the one hand,

there is what we might call prosperity, which can be described in broad terms as the usefulness of goods and services purchased. On the other hand, there is the development potential, or the ability for long-term economic growth and the possibility to

provide the broadest groups of citizens with opportunities for

self-development. Let us take real-life examples. Generous gifts that we find under the Christmas tree increase our prosperity,

Ignacy Morawski chief economist for the Polish Entrepreneurship Bank, an associate of the Polish Academy of Sciences. He was an economic journalist of the Reczpospolita weekly, writing, among others, on monetary policy and financial markets. He graduated from the University of Warsaw with a Degree in Political Sciences and from the Bocconi University in Milan with a Degree in Economy.

58 Closer to Brussels

I advocate the claim that the EU funds increase Poland's prosperity, but their impact on the growth potential is ambivalent.

but not our development opportunities. On the other hand, ex-

pensive and difficult courses that will pay for expensive universi-

ties reduce our (short-term) prosperity, but increase the development potential.

I claim that the EU funds increase Poland's prosperity, but their impact on the growth potential is ambivalent. This thesis is

controversial, but I believe that a very strong justification can be

found for it in evidence and empirical experience.

Let us first talk of prosperity. Here, the calculation is very sim-

ple. Thanks to European funds, we have been able to build hundreds of miles of highways and roads, modernise the rolling

stock and other transport infrastructure, enhance the quality of the environmental protection, and improve the life standard in cities and villages. We are undergoing a civilisational progress,

which in other circumstances could take 30-40 years instead of 10. According to a study commissioned by the Ministry of Regional Development, in 2013, Poland's gross domestic product

will be between 6 and 8 percent higher than in the scenario in

which the EU funds are not available. That translates into PLN

80-120 billion or PLN 2,000-3,000 per capita.

Since the influx of money from the European Union will remain

Closer to Brussels 59

high at least until 2020, it is expected that the cumulative benefit of these funds will be in fact considerably higher. These are the

real results. We're simply better off: we drive on better roads, in

more comfortable (and soon, probably also faster) trains, we have

more airports, bike lanes began to appear, and swimming pools are being built in every city and town. These are just some examples. But when we think about the future of the economy, it is best

to ask ourselves whether the country in which our children will live will offer them the opportunity to develop at the worldclass level and ensure satisfactory participation in the global

distribution of income? The question of economic development concerns more than just the length of highways, the number of airports and bike lanes. It is the question of the ability to pro-

duce goods and services which will meet the needs of the broadest sections of the population and ensure the ability to compete

on the global market. In my opinion, the impact of the European funds on this aspect of economic activity is limited. I wish to

explain why. Economists, historians and sociologists have long

been wondering where the ability of some societies for economic development comes from. And this ability is unique: since at

least a hundred years ago, the percentage of countries that have

In fact, the potential for economic development is determined principally by the so-called inclusive social, political and economic institutions which promote citizen participation in public life and the development of entrepreneurship and innovation.

60 Closer to Brussels

Research conducted at the Polish Academy of Sciences demonstrates that productivity, or the intensity of the use of capital and labour resources, has not increased at all in Polish companies benefiting from European funding.

achieved the highest level of development has essentially not

changed â&#x20AC;&#x201C; there is no phenomenon of global convergence. The

conclusions of research are of course very different, but I would

like to draw your attention to the topic which appears very often. In fact, the potential for economic development is deter-

mined principally by the so-called inclusive social, political and economic institutions which promote citizen participation in

public life and the development of entrepreneurship and innovation. It is quite easy to reach the average level of income â&#x20AC;&#x201C; it is

enough to liberalise the economy, ensure the protection of property and open up to trade with the world. However, the passage from middle to high level requires institutions that foster the

growth of productivity. Among such institutions are the system of law protection and enforcement, the financial system, the

education system, business regulations, etc., However, informal

institutions, reflected for example in social trust, respect for the law, etc., are also of great importance.

European funds do not naturally have a greater positive effect on the development of good institutions, and in some cases,

they may even have a negative impact. For example, research by Professor Krzysztof Rybinski shows that the propensity to in-

novate in Polish enterprises has significantly decreased in recent

Closer to Brussels 61

years. Why is it so? We can hypothesise that the availability of

EU funds weakens the need to innovate, as entrepreneurs direct

their efforts to meet the requirements of the officials rather than the market. Research conducted at the Polish Academy of Sci-

ences demonstrates that productivity, or the intensity of the use

of capital and labour resources, has not increased at all in Polish companies benefiting from European funding. The telling and depressing conclusion is that investments increase capital resources, but do not lead to an increase in productivity.

It is no coincidence that the vast majority of countries exporting raw materials are either poor or have their wealth concentrated in the hands of a few. In fact, easy access to money decreases the incentives to change. Which regions of Europe received

the greatest assistance from the Structural Funds before 2004?

Greece, Spain, and Southern Italy. I do not need to remind any-

one of their current problems.

History also provides many telling examples. When the Roman Empire expanded to the limits of the possibilities, the inflow

of goods from the provinces ensured the citizens of the impe-

rial capital such a high standard of life that they were willing to give up their political rights and subject to the absolute power

of the emperor (the Roman Republic fell in 27 AD). In turn, the

62 Closer to Brussels

dystrophy of republican, i.e. inclusive, institutions was the beginning of the end of the empire, as it deprived the political system of flexibility and vitality. Another telling example is provided by Spain at the beginning of the modern era. Thanks to the colo-

nisation of South America, Spain gained access to the limitless

source of agricultural commodities and gold. In the sixteenth and seventeenth centuries, Madrid was one of the wealthiest cities in Europe. However, the easy access to the raw materials reduced the monarchy's incentive for quasi democratic changes, which occurred at the same time in Great Britain. It is in the British

Isles that a better climate for business development was created, thanks to which Great Britain became significantly more prosperous than Spain as early as in the eighteenth century.

Therefore, facts and empirical experiments clearly demonstrate

that easy access to money can constitute a factor which removes

the motivation for the changes conducive to development. I'm

not claiming of course that the European funds reduce the Poland's development potential â&#x20AC;&#x201C; there is no evidence for such

a claim â&#x20AC;&#x201C; but I want to point out the risks that are often overlooked in the public debate.

Closer to Brussels 63

Therefore, if we want our children to live in a country which of-

fers them the opportunity to develop at a world-class level, we

need to create good legal, educational and business institutions. There is much to change in Poland. According to all interna-

tional rankings, Poland significantly lags behind most developed countries in terms of the quality of law development and en-

forcement, the transparency of economic regulations and the tax

system, higher education, etc. Suffice it to mention that in terms of the length of the judicial procedures, we rank among the last in Europe, and in terms of research we are stuck in the lowest

regions in most rankings; in terms of economic transparency, we place somewhere between certain Asian and African countries.

European funds may not have any positive impact of these challenges and problems. Let's use the new financial perspective

of the European Union in the wisest manner, as it constitutes

a unique opportunity to catch up a lot of delays, mainly in infrastructure. But let us not forget that the answer to the question

what opportunities Poland will offer to our children is not dependent on EU funds.

64 Closer to Brussels

The Europeans' best invention: the united Europe

Interview with Jan Kozlowski â&#x20AC;&#x201C; MEP

Closer to Brussels 65

European Commission President Jose Manuel Barroso described the current negotiations as the most difficult in history.

Karina Rembiewska | Association Pomorskie in the EU: What does the failure of the November summit mean for citizens? What consequences can be expected if a compromise is not reached in February? Jan KozĹ&#x201A;owski: First, it should be noted that the failure of the November summit was the most likely scenario, and I am not so surprised that the negotiations on the MFF continue.

In the history of the EU negotiations on the issue, traditionally

more than one meeting was necessary to reach a compromise. We must also remember that the present discussion is situ-

ated in the context of an extremely difficult economic situation, which does not facilitate reaching an agreement. Some countries, including the net contributors to the European budget:

the United Kingdom, Germany, the Netherlands, Sweden and Finland, demand significant budget cuts, while the countries

which are the main beneficiaries of the cohesion policy insist on maintaining the largest possible budget for the purpose.

This is compounded by the political interests of the different

national leaders: Angela Merkel is already thinking about next year's election in Germany, and David Cameron has to reckon

66 Closer to Brussels

Jan Kozlowski MEP since 2010, a member of the Committee on Budgets and a vice-chairman of the Committee on Employment and Social Affairs. An active member of the Baltic Europe Intergroup and the President of the Rugby League Intergroup. For many years involved in European debate and consultation processes on cohesion policy, employment, transport, maritime policy and strategy for the Baltic Sea. He graduated from the Technical University of Gdańsk, and has experience in research and education. Mayor of the Town of Sopot for two terms starting in 1992. Between 1998 and 2001, he was the Undersecretary of State in the Polish Office of Physical Culture and Tourism. Then he served as Pomorskie voivodeship Deputy Marshal and, between 2002 and 2010, the Marshal. Between 2007 and 2010, he held the position of President of the Association of Polish Regions, and organised, among others, regular discussions between the representatives of Polish regions and European institutions. He has won numerous awards, including the “Local Government Oscar”, (the G. Palka award) and F.Cegielska award; he was also awarded the title of Man of the Year of the Pomorskie Voivodeship by the FORBES magazine. The Minister of Culture and National Heritage awarded him a silver Gloria Artis medal; he was also awarded a gold medal for those whose distinguished themselves in the field of sports and tourism. Since 1995, he has been the President of the Society of the Friends of Sopot, and since 2000, the President of the Polish Rugby Union.

with the British Eurosceptics, who are increasingly growing in

strength. That is why the European Commission President Jose Manuel Barroso described the current negotiations as the most

difficult in history. I think, however, that the November summit, although it failed to reach an agreement, allowed the leaders of

the Member States to confront their positions and in fact creat-

ed the basis for reaching a compromise at the beginning of 2013. Failure to reach an agreement would affect first of all the Cohesion Policy, as the majority of projects implemented under this

policy are long-term. A budget set each year would not provide such projects with certainty of funding in the coming years, which would produce catastrophic effects for the economy.

However, the lack of the MFF would be the worst possible solu-

tion for all parties involved, which is why I remain optimistic

and believe that we should not fear the worst-case scenario. It should also be noted that what is the most important is that

the new multiannual financial framework to be adopted, and its contents, not the moment in which it is adopted.

Closer to Brussels 67

The UK is certainly known for its scepticism towards European structures, but I doubt that this Euroscepticism will lead Britain to leave the EU structures.

Could a compromise be reached among 26 States, excluding the United Kingdom? Should the rumours on UKâ&#x20AC;&#x2122;s possibly leaving the Union be taken seriously? The Multi-annual Financial Framework is adopted by the

Council unanimously, which means that the consent of the

United Kingdom is necessary to reach an agreement. The UK is

certainly known for its scepticism towards European structures, but I doubt that this Euroscepticism will lead Britain to leave

the EU structures.

68 Closer to Brussels

For a long time, we have been witnessing far-reaching reforms. In the economic and financial sector, this is illustrated by a package of six legislative acts on economic governance, the so-called â&#x20AC;&#x153;six-packâ&#x20AC;?, and the creation of financial supervision institution.

The press often cite the opinion that we should not treat the crisis as an opportunity and seek to carry out the necessary reforms. What are the chances for a further integration of Europe; will the Member States permit this? If they do not, does the European Parliament of the Commission have sufficient influence to carry out the project? I do not agree with the thesis that the EU does not use the op-

portunity that the crisis provides. For a long time, we have been witnessing far-reaching reforms. In the economic and financial sector, this is illustrated by a package of six legislative acts on

economic governance, the so-called six-pack, and the creation of financial supervision institution. In terms of social issues, very

important initiatives have been proposed, such as the employ-

ment package, the Youth Opportunities Initiative, or the Youth Employment Package announced in December of this year,

which includes, among others, guarantees for young people.

Of course the question remains whether the EU shall decide

to move towards deeper integration, as suggested in this year's

State of the Union speech by President Barroso. This, however, depends on the Member States and the fact whether and to

Closer to Brussels 69

Deepening the integration requires the consent and involvement of the Member States, but I hope that European leaders will remember the words which the Polish Prime Minister Donald Tusk pronounced in his speech inaugurating the Polish Presidency: the united Europe is the best invention of the Europeans.

what extent they are ready for such a solution. Certainly both the European Parliament and the European Commission are

of the opinion that the only way to increase Europe's competi-

tiveness on a global scale consists in more Europe, the deepening of European integration, while departing from the intergovernmental approach. Deepening the integration requires the

consent and involvement of the Member States, but I hope that

European leaders will remember the words which the Polish

Prime Minister Donald Tusk pronounced in his speech inaugurating the Polish Presidency: the united Europe is the best invention of the Europeans.

70 Closer to Brussels

authors: MaĹ&#x201A;gorzata Ratajska-Grandin and Renata JasioĹ&#x201A;ek

Malopolska wins over Brussels

and it's been 10 years!

Closer to Brussels 71

It is worth recalling that the Malopolska was one of the first Polish regions to open, on 13 May 2002, its office in Brussels. Initial difficulties were quickly overcome thanks to the support provided by the partner regions of Thuringia, Rhone-Alps and Tuscany. The year 2012, marking the 10th anniversary of the existence of the Office, was also a year of change: the Malopolska office celebrated its anniversary in the new headquarters, located at rue du Luxembourg 3Â â&#x20AC;&#x201C; close to the European Parliament.

72 Closer to Brussels

Closer to Brussels 73

Club of Friends of MaĹ&#x201A;opolska, the 6th of December 2012 fot. Tomasz Cibulla ZBS Studio

74 Closer to Brussels

Reconnections, art instalation by LATALAdesign Studio, Mont des Arts, 22.09.2012 Brussels

The past decade has allowed us to understand the importance of being present in Brussels. In the place where we can witness the policy makings but also where intertwine the influences of the many actors from all over Europe.

The core activities of our Office consists in lobbing for deci-

sions relevant to the interests of the region, and in engaging in

projects and ventures thanks to which the Malopolska region is increasingly recognised in the capital of the EU and, as a result,

throughout Europe. Because unlike large regions, such as Tuscany, Catalonia or Bavaria, Malopolska still has to build its brand. That is why, in 2011, during the Polish Presidency of the EU

Council, the "Club of Friends of MaĹ&#x201A;opolska" was created. It is an informal association of those who come from Malopolska

and its sympathisers. The Club was created, on the one hand, in hopes of winning over special ambassadors for the Malopolska

region, who would be ready to give it support and involve in the promotion of its interests. On the other hand, the Club aims

to create and support among those living in Brussels a sense of

belonging to the Malopolska community. The meetings of the

Club honoured by personalities from the world of science and culture are held several times a year.

Closer to Brussels 75

Last year edition of the Malopolska Days (September 2012), a key

event for our Region was organised for the sixth time in Brussels. The concert Music for Solaris organised at the prestigious

BOZAR arts centre inaugurated the celebrations. The event was

part of the Brussels Electronic Art Festival and attracted over 800 people – not just fans of electronic music. Another part of the Malopolska Days in Brussels was the Reconnections art instal-

lation, which adorned the Mont des Arts hill in the city centre. The work by the LATALAdesign Studio invited the audience

to experience the Malopolska region and to discover its beauty

through all the five senses. This unique combination of traditional and modern forms immediately attracted crowds of visitors.

In addition to cultural events, Malopolska’s voice could be heard during the EU – China Mayors' Forum, a historic moment,

the first summit between the representatives of local authori-

ties from China and Europe. During the meeting, Jacek Krupa, a member of the Malopolska Regional Board, presented the re-

gion’s energy policy priorities and its achievements in the field of energy-efficient technologies. He was accompanied by a delega-

tion of Councillors from the Regional Assembly of Malopolska.

76 Closer to Brussels

The President Bronislaw Komorowski meeting representatives of regional offices, 13.11.2013 Brussels

Extremely prestigious and absolutely unique event was the

meeting of the President BronisĹ&#x201A;aw Komorowski with representatives of regional offices in Brussels (13 November 2012).

The gesture highly appreciated by foreign guests present at the meeting. During the evening the Head of State several times

stressed his recognition of the role of the regions and their rep-

resentation in Brussels, in the implementation of foreign policy, not only at the EU level but also in bilateral Polish â&#x20AC;&#x201C; Belgian relations.

This year's Office activities culminated in an evening dedicated

to the memories of Poland's first steps in the EU. In the historic

setting of the former Polish Embassy in Brussels, a truly magi-

cal ambience was created on the evening of December 6, pro-

viding a perfect background for the stories told by Ambassador

Marek Grela, former head of the Permanent Office of Poland to the EU, and Boguslaw Sonik, MEP, former director of the Pol-

ish Cultural Institute in Paris; the Special Guests of the Club of Friends of MaĹ&#x201A;opolska.

Participants had an opportunity to listen to the stories of those

who were not only witnesses, but also the architects of Poland's

Closer to Brussels 77

accession to the European Union. If the memory recalled by

Mr B. Sonik, of Jerzy Giedroyc urging as early as in 1983 to start

working towards preparing Poland to join the EU sounds hard to believe today, imagine how they appeared in those days! Ambas-

sador Grela described in a very lively and vivid manner the touch-

ing moments of the historical day of Poland's accession to the EU, which he personally participated in at Brussels's Grande Place. Â

Further negotiations on the EU budget scheduled for the be-

ginning of the 2013 and the ongoing efforts to strengthen the

economic and monetary union justify the opinion that the year

2013 will be crucial for the EU. Also for our Office, the next year promises to be very intense and interesting. We would like to

take this occasion to invite our readers to follow the new initiatives of the Office by frequent visits to our website: www.malopolskaregion.eu.

Mr Adam DomagaĹ&#x201A;a, Regional Councillor meeting Chinese Delegation, EU-China Mayors' Forum, 20.09.2013 Brussels

78 Closer to Brussels

Questio Iuris Treaty on the Functioning of the European Union Chapter 2 THE MULTIANNUAL FINANCIAL FRAMEWORK Article 312

Closer to Brussels 79

The multiannual financial

The Council, acting in accord-

The financial framework shall

Union expenditure develops in

procedure, shall adopt a regula-

the annual ceilings on com-

framework shall ensure that

ance with a special legislative

an orderly manner and within

tion laying down the multian-

It shall be established for a pe-

Council shall act unanimously

the limits of its own resources. riod of at least five years. The annual budget of the Union

shall comply with the multiannual financial framework.

nual financial framework. The after obtaining the consent

of the European Parliament,

which shall be given by a ma-

jority of its component members. The European Council

may, unanimously, adopt a de-

cision authorising the Council to act by a qualified majority

when adopting the regulation referred to in the first subparagraph.

determine the amounts of

mitment appropriations by

category of expenditure and

of the annual ceiling on pay-

ment appropriations. The cat-

egories of expenditure, limited in number, shall correspond

to the Union's major sectors

ofÂ activity. The financial framework shall lay down any other provisions required for the

annual budgetary procedure to run smoothly.

80 Closer to Brussels

Where no Council regulation

Throughout the procedure

framework has been adopted

financial framework, the Euro-

determining a new financial

by the end of the previous

financial framework, the ceil-

ings and other provisions corresponding to the last year of that framework shall be ex-

tended until such time as that act is adopted.

leading to the adoption of the pean Parliament, the Council

and the Commission shall take any measure necessary to facilitate its adoption.Â

Closer to Brussels 81

The Multiannual Financial Framework a mechanism aiming to ensure that EU spending is both predictable and subject to strict budgetary discipline. ***

The MFF in fact defines policy priorities for the coming years and therefore constitutes both a political and budgetary framework.

What is the Multiannual Financial Framework? The Multiannual Financial

The MFF in fact defines policy

Framework (further on, MFF,

priorities for the coming years

the EU budget for the period of

a political and budgetary frame-

formerly financial outlook) is not seven years, but rather a mechanism aiming to ensure that EU

and therefore constitutes both

work (answering the question in which areas the EU should in-

spending is both predictable and vest more or less in the future). subject to strict budgetary dis-

amount (ceiling) available for

began in 2007 and will last until

(item/section) of the EU budget.

taining from 2014 to 2020.

cipline. It defines the maximum each major area of expenditure Within the financial frame-

work, the European Parliament and the Council, which are the

budgetary authority of the Un-

ion, are responsible for adopting annually a budget for the next

year. In reality, the adopted an-

nual budget is always below the overall ceiling of the MFF.

The current period of MFF

2013, with the next period ob

The overall ceiling of the obli-

gations proposed by Commission for the 2014-2020 period amounts to Euro 1.025 bil-

lion. This amount equals the

amount of the final year of the current MFF (2013) multiplied by 7 years. It constitutes 1.05%

82 Closer to Brussels

The comparison between the multiannual financial framework of the 2007-2013 and 2014-2020 periods 2007-2013

In 2011 prices Commitments appropriations

Payment appropriations

2013

in € billion

993.6

146.4

as a% of GNI

1.12%

in € billion

942.8

137.8

as a% of GNI

1.06%

1.05%

2013 x 7 1,024.8

2014-2020 1,025 1.05%

964.4

972.2 1.00%

The overall figures given in the European Commission proposal The multiannual financial framework for the 2014-2020 period (in € mill.– 2011 prices) in EUR mill.– 2011 prices

2014

2015

2016

2017

2018

2019

2020

ogołem 2014‑20

1 Smart and inclusive growth

64 696

66 580

68,133

69,956

71,596

73,768

76,179

490,908

including: economic, social and territorial cohesion

50 468

51 543

52,542

53,609

54,798

55,955

57,105

376,020

2 Sustainable growth: natural resources

57 386

56 527

55 702

54,861

53,837

52,829

51,784

382,926

including: market-related expenditure and direct payments

42 244

41 623

41 029

40 420

39 618

38 831

38 060

281 825

3 Security and Citizenship

2 532

2 571

2 609

2 648

2 687

2 726

2 763

18 535

4 Global Europe

9 400

9 645

9 845

9 960

10 150

10 380

10 620

70 000

5 Administration

8 542

8 679

8 796

8 943

9 073

9 225

9 371

62 629

6 967

7 039

7 108

7 191

7 288

7 385

7 485

50 464

142 556

144 002

145 085

146 368

147 344

148 928

150 718

1 025 000

as a percentage of GNI

1,08%

1,07%

1,06%

1,05%

1,04%

1,03%

1,05%

TOTAL PAYMENT APPROPRIATIONS

133 851

141 278

135 516

138 396

142 247

142 916

137 994

972 198

1,01%

1,05%

0,99%

1,00%

1,01%

1,00%

0,94%

1,00%

including: administrative expenditure for institutions

COMMITMENTS OVERALL

as a percentage of GNI

Closer to Brussels 83

Multi-annual Financial Framework for the 2014-2020 period of EU’ assumed GNI, compared

Smart and inclusive growth 48%

Payment ceiling oscillates

Administration 6%

the 2007-2013 period).

Sustainable growth,

to 1.12% in the current MFF.

Security and Citizenship 2%

around 1.00% of GNI (1.06% in

Global Europe 7% natural resources 37%

These figures do not include

a number of flexibility mecha-

nisms which are traditionally not included in the MFF, as

they can not be “programmed”.

84 Closer to Brussels