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Eesti Panga ülevaadete esitlus9. mai 2014, 11:00-12:30
EU Cohesion Policy Funding in Estonia: Background, Trends and Challenges
Karin Kondor-TabunKarsten Staehr
All opinions are personal!
22
1.1 Introduction10 years of EU membership
EU cohesion policy “to enhance economic, social and territorial cohesion” Support regions, income convergence, social issues EU “regional policy”
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1.2 IntroductionNext 18½ minutes EU cohesion policy funding Background, trends and challenges
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2.1 The EU cohesion policy Treaty of Rome (1957) 1957 European Social Fund (ESF)– Employment, education, mobility
1975 European Regional Development Fund (ERDF) – Infrastructure, innovation, small businesses
55
2.2 The EU cohesion policy 1988 reform after introduction of single market– “Objectives”– Multi-annual programming – Increased resources
1992 Cohesion Fund (CF) / Ühtekuuluvusfond– Transnational transport networks, environment
EU cohesion policy funding = ESF + ERDF + CF
Structural funds
66
2.3 The EU cohesion policyAllocation of funding 7-years programming periods total allocation
decided before
Recent programming periods 2000-2006 + 10 new Member States 2007-2013 + Bulgaria and Romania 2014-2020 + Croatia– Focus on growth support Europe 2020 growth strategy
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2.4 The EU cohesion policy Eligibility – Different objectives vs. different funds – Main Convergence objective funded by ESF and ERDF
“Less developed regions” GDP per capita < 75% of EU average “Transition regions” GDP per capita = 75-90% of EU average
Allocation– Complicated calculations (GDP, unemployment, etc.) – Ceilings and floors – Final political decision
88
3.1 Foreign aidStarting point 1st theorem of welfare economics Market equilibrium efficient no resources wasted
But… Spillovers externalities– Positive (transport), negative (pollution)
Solidarity distributional concerns – Compensation to losers of reforms
Compensation to gain support for reforms
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3.2 Foreign aidConditionality Funding conditional on… (e.g. roads, trains, training) Most foreign aid (including EU cohesion policy
funding)– If spillover motive – If solidarity motive ?
1010
3.3 Foreign aidChallenges Efficiency of aid – Projects with most highest social return per $
Growth potential…
Substitution = lack of “additionality”– Even if conditionality
Aid dependence – Policymakers, bureaucracy, businesses – Transfer effect real appreciation crowding out export
Macroeconomic management– Aid useful during recessions… but may fuel booms!
1111
4.2 Empircal studies from EU15Empirical studies of substitution (few) Ederveen et al. (2003) EU funding ↑ 1 € domestic
funding ↓ 0.17 € Wostner & Slander (2009) substantial substitution
in countries with EU cohesion policy funding > 2.3% of GDP
1212
4.2 Empircal studies from EU15Empirical studies of growth effects Many rely on meta-analyses (not CEE countries) Simulation models investment ↑ – Generally large effect
Econometric studies different cohesion policy funding to different regions – Generally no effect – Large variation across time, regions and methods
Ederveen et al. (2006) background important (openness, institutions)
Marzinotto (2012) implementation important
1313
4.2 Empircal studies from EU15NBs Different results for different methods… Maybe only effects in very long term Other objectives than growth (social, environment) Still improve welfare even if no growth effect
1414
5.1 Cohesion policy funding in Estonia Pre-accession funding from EU May 2004 – 2006 –Weight on environment satisfy EU directives on
drinking water, sewage, waste 2007-2013 (participated in negotiations)– Initially most weight on infrastructure, less on
social policy 2014-2020 – Operational programme approved on 25 Feb. 2014– Focused spending priorities + long-term impact
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May 2004 - 2006 2007 - 2013 2014 - 20200
500
1000
1500
2000
2500
3000
3500
4000
0
500
1000
1500
2000
2500
3000
3500
4000
Cohesion Fund
European Social Fund
European Regional Development Fund
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5.2 Cohesion policy funding in EstoniaEstonian cohesion policy funds, different programming periods,
million current EUR and % of GDP
2.4%
3.0%?%
1616
5.3 Cohesion policy funding in Estonia
Hunga
ry
Lithua
nia
Latvia
Estoni
a
Polan
d
Bulga
ria
Czech
Rep
.
Slova
kia
Roman
ia
Slove
nia
0
1
2
3
4
0
1
2
3
4
Cohesion policy funding allocated to 10 CEE countries, 2007-2013, % of GDP
1717
5.4 Cohesion policy funding in Estonia
Payment of EU cohesion policy funding to beneficiaries in Estonia, mill. EUR
2004 2005 2006 2007 2008 2009 2010 2011 2012 20130
100
200
300
400
500
600
700
0
100
200
300
400
500
600
700
Programming period 2007-2013
Programming period 2004-2006
1818
5.5 Cohesion policy funding in EstoniaSumming up EU cohesion policy funding around 3% of GDP Rapid payment of 2007-2013 allocation– Reduce risk of losing allocation due to deadline– “Jump” in 2009
1919
6.1 Experiences and challengesEffect of EU cohesion policy funding Numerous projects funded – Specific project targets met– … but challenges remain
2020
6.2 Experiences and challenges Efficiency Mid-term review (CDP & RAKE, 2011)– Lack of priorities, too dispersed lack of synergies– Lack of funding for subsequent operation
Riigikontroll (2010) – Adult education programmes lack management
Riigikontroll (2012) – Lack of analysis users for schools and roads?
2121
6.3 Experiences and challenges Cases of misallocation – But many and detailed analyses + controls...
Detailed programming Detailed description of requirements Pre-selection requirements, incl. cost benefit analysis Monitoring and evaluation Co-financing
– Feedback to other areas of government spending
2222
6.4 Experiences and challenges Substitution (counter-factual not available ) Cutbacks in 2009 eased by cohesion policy funding Additionality?
2323
6.5 Experiences and challenges Aid dependency Varblane (2013, 2014) Cohesion policy funding in 2007-2013 programming
period– ≈ 11.1% of total fixed investment– ≈ 9.3% of government tax revenue (2007-2013)
Funding secured for 2014-2020 Current rules gradual phase out from EU cohesion
policy funding (“transition region”)
2424
6.6 Experiences and challenges Macroeconomic management Relatively small payments during 2006-2007 boom
(≈ 1.5% of GDP) Large payments during 2008-2010 crisis Future challenges?
2525
7.1 ConclusionEU membership cohesion policy funding
… and potential for faster convergence Challenges– Efficient use, substitution, dependence, macro economy– How generate rapid, stable and sustainable economic
growth in Estonia?
Will EU cohesion policy funding stimulate growth?– Meet in 10 years…
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Karin Kondor-Tabun [email protected]
Karsten Staehr [email protected]
All opinions are personal!
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Last slide