Financial assistance

Central and Eastern European candidate countries have benefited from EC financial assistance since the beginning of the transition process through the PHARE programme. PHARE is now complemented by two programmes which help the countries prepare for participation in the Cohesion and Structural Funds. ISPA allocates over EUR 1 billion a year to investment in environment and transport infrastructure in preparation of the Cohesion Fund. SAPARD foresees the allocation of over EUR 500 million a year to agricultural and rural development in preparation of participation in agriculture and fisheries structural funds.

With an annual budget of over EUR 1.6 billion, the PHARE programme co­finances institution building together with associated investment in the infrastructure for the implementation of the acquis and support for economic and social cohesion to help the candidates prepare for the implementation of Structural Funds after accession. Around one third of the funds are allocated to each of these three areas.

PHARE support for Institution Building helps the candidates' strengthen their capacity to implement and enforce the acquis. Twinning is the principal instrument in this respect. It involves the secondment of practitioners from Member States ministries, regional bodies, public agencies and professional associations for at least one year to counterpart institutions in the candidate countries. It has been operational in the Central and Eastern European countries since 1998. Twinning was extended to Cyprus and Malta in 2001 and will be extended to Turkey as from 2002 under their respective financial instruments. There are now about 500 twinning projects covering most areas of the acquis (see annex 5 for more detailed information).

As from the beginning of this year, candidate countries are being offered the possibility of drawing on Member States' experience for smaller projects of short to medium term duration through a new mechanism known as ``twinning light''. The first projects will start at the end of 2001. In addition, TAIEX (Technical Assistance Exchange Office) remains a source of short term advice and SIGMA (PHARE­financed and managed by OECD) provides advice on horizontal government functions in Central and Eastern European countries, focusing on the reform of the civil service, financial control and audit.

SAPARD implementation is fully decentralised. On the basis of rural development plans approved by the Commission, SAPARD co­finances rural development projects selected by the beneficiary countries. The implementation structure for each country is based on a SAPARD Agency, responsible for management and payments, which must be accredited by the Commission. This process has proved to be more complicated but is now under way and has been partially completed in Bulgaria and Estonia. In view of the difficulties encountered, it needs to be speeded up for the other candidate countries.

Under ISPA, each country has prepared national strategies for transport and environment, on which basis the Commission approved projects for the full amount available for the year 2000 with an almost equal share between the two sectors. A similar outcome is expected in 2001.

The European Investment Bank has a loan potential of over EUR 17 billion for 2000-2007 in Central and Eastern European countries - covering also some non candidates­ ( EUR 8.9 billion with Community budget guarantee, EUR 8.5 billion in a pre­accession facility without this guarantee).

Actual lending is expected to reach EUR 3.5 billion in 2001.

The Council adopted in March 2000 a Regulation for both Cyprus and Malta on pre­accession operations. It provides for a financial contribution of EUR 95 million over the period 2000­-2004 towards meeting the priorities of the Accession Partnerships. The budgetary allocation for 2000 is EUR 6 million for Malta and EUR 9 million for Cyprus. These two countries are eligible to the EIB pre­accession facility and to the EUR 6.425 billion EIB facility for Mediterranean countries. EIB loans to Cyprus amounted to EUR 200 million in 1999.

Financial grant assistance to Turkey in 2001 is expected to reach EUR 177 million from MEDA and the two `European strategy/ pre­accession strategy` regulations. These funds are available for structural reforms, institution building and investment in the acquis, in line with the approach for the other candidate countries. The Commission has proposed a new financial assistance regulation to ensure an accession driven approach in the assistance and to bring management and procedures closer to those of the PHARE programme. This regulation will provide the legal base for a single budget line, thus replacing the three existing instruments (although Turkey will remain eligible for multi­country MEDA programmes).

Turkey can obtain EIB loans under the so­called Euromed II Lending Mandate. This amounts to EUR 6.425 billion for the period January 2000 to January 2007. Moreover, Turkey was recently accepted as eligible to benefit from the EIB pre­accession facility (see above). A Special Action Mandate (for EUR 450 million is under implementation. In addition, an earthquake reconstruction facility (TERRA) of EUR 600 million is available. Turkey is, moreover, eligible under a new `Mediterranean Partnership Facility' of EUR 1 billion covering the whole region.

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