Development: The low absorption of structural funds in the European Union

Posted by : Radu Oprea
Country : Romania
Date : 21.07.2015
Profession : Economist
From : Young Entrepreneurs Association from the SE Region of Romania
Target institution : European Commission
Problem status :

The European Union (EU) is using the Cohesion policy and its Structural Funds to reduce disparities between regions. These funds are allocated to Member States (MS) under a complex legal framework, according to the level of development of their regions. During the budgetary framework 2007-2013, the EU allocated over €348 billion under its Multiannual Financial Framework (MFF –which establishes the global EU budget for the period), representing the second largest item in the EU budget, after agriculture. In a 2013 report, only 4 countries managed to reach 100% of project selection while the percentage of paid expenditure (absorption rate) varied from 60% in Ireland to as low as approximately 15% in Romania. 

The main reasons that led to these low absorption rates are the economic crisis, insufficient administrative capacity, changes in national and regional governments, and the effects of national sectoral reforms. In April 2013, the Commission reported that, since 2007, nearly 400,000 jobs have been created, over 53,000 start-ups received support, 2.6 million people were served by water-supply projects and 5.7 million people by wastewater projects. Every percentage of the total amount of the structural funds that is not spent means €3.48 billion that is not invested in jobs, growth, education, social services, and entrepreneurship. Also, the most economically disadvantaged regions are also experiencing the greatest difficulties in spending and absorbing these funds. (Source: Ivana Katsarova, Library of the European Parliament). 

What can the EU do in order to reach a 100% absorption rate in the new budgetary framework 2014-2020?

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