EU warns newcomers over absorbing aid funds

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Some European Union newcomers may have problems in absorbing EU aid funds due to weak administration and an inability to meet strict environmental rules, the executive European Commission warned on Wednesday.

But if the 10 ex-communist new member states from central and eastern Europe manage to tap the funds fully, their economic output may be 5-9 percent higher by 2013 than without aid, with 2 million extra jobs created, the Commission said.

"Administrative capacity can be a barrier and environment can be a slowing down factor (to EU aid funds)," Regional Aid Commissioner Danuta Huebner told a news conference, presenting a report on EU regional development policies.

Inefficient and cumbersome public procurement rules may pose another threat to the flow of funds, she added.

Under the EU's long-term budget for 2007-2013, new members are meant to get 167 billion euros ($224 billion) in regional aid, mainly to build motorways, clean up the environment, train people, set up businesses and prop up scientific research.

The funds are notoriously hard to obtain as the EU has created complex allocation procedures for fear of being accused of misspending taxpayers' money.

Huebner said she was sure the newcomers would overcome all obstacles in absorbing the funds.

But some Commission officials privately say some newcomers may find it difficult to reconcile infrastructure development plans with EU environmental laws, such as the Natura 2000 statute protecting habitats of rare animals and plants.

The Commission has recently taken Poland to the EU's highest court over plans to build a highway through a conservation area, although no EU aid funds are involved in the project.

"The projects (involving EU aid) have to be really well prepared," Huebner said.

The Commission has also repeatedly warned Bulgaria and Romania, which joined the EU in its second enlargement wave in 2007, that they may lose some planned aid unless they improve their institutions handling the funds.

But if the funds flow smoothly, Czech and Latvian gross domestic product can be 9.0 percent higher by 2013 than it would be without the aid, the Commission said.

The figure would be 8.5 percent for Lithuania and Estonia, 7.5 percent for Romania, 6.0 percent for Bulgaria and Slovakia and 5.5 percent for Poland.

But it will probable take more than 15 years before Poland and many other newcomers will reach a GDP per capita of 75 percent of the 27-nation EU's average.

($1=.7451 Euro)

Keywords: EU NEWCOMERS/AID

[BRUSSELS/Reuters/Finance.cz]