The EU's structural funds are turning the new member states into a big construction site. Billions are being spent on road building rather than on education, new technologies or energy efficiency. Poland is planning to divert even more EU funds to roads in the 2007-2013 period. As the EU's funding policy already invites countries to invest its cash into asphalt, 'New Europe' may be destined to repeat the 'Old Europe's failed formula: build infrastructure and get everyone and everything on the road.

If you have an underdeveloped region that needs to ‘catch up’ with the richer areas, what will you do? The EU's traditional response to that question was to pour in some money to build roads and intensify agriculture. Despite the oft pronounced commitment to an ‘efficient, competitive and sustainable 21 st century knowledge economy’ it seems EU policy is still on the same old track. One would expect the EU to help its new Central and East European member states by supporting their education systems, new technologies, energy efficiency, sustainable public transport systems and environmental protection. But, sad to say the 'good old' formula seems to have been recycled yet again for the new Member States.

The structural and cohesion funds, the main form of EU aid to the new member states besides agriculture subsidies, are now creating an enormous pressure for construction of all sorts, especially of roads. Only a smaller part of the funds goes to the support of training, research, private enterprises and environmental infrastructure (mainly ‘end-of-pipe’ solutions such as waste landfills and water treatment plants).

Is this the best way for poorer regions to catch up with the richer ones? Spain, Portugal and Greece, until now the main beneficiaries of EU funds, invested heavily into massive road building, yet they are still lagging behind. On the other hand, Ireland invested less into transport infrastructure and more into human capital and the knowledge economy – and has overtaken the rest of Europe. After German reunification, billions (much bigger amounts than all EU funds together) spent mainly on infrastructure in the Eastern Länder completely failed to bring convergence with the West. Can't the EU and the new member states learn from these experiences?

Member States have a great deal of choice on how they spend EU money. However, Brussels is urging expansion of the Trans-European Transport Networks. Moreover, the fear of not being able to fully use up all the available funds is pressing the new countries to come up with as many large projects as possible. For many politicians, new roads, bridges or ports seem to be the easiest way how to quickly spend the cash and avoid the nightmare of 'non-absorption'. Investments into education and training or energy efficiency and environmental improvements seem more complicated and results are not immediately visible.

The first EU funds - the so-called pre-accession aid - started to flow to the CEE countries in 2000. While the pre-accession aid helped countries to prepare for accession, it also led to the construction of some damaging projects - paid from public funds and with the approval of the European Commission. Prague-Dresden and Sofia-Pernik motorways, for example, were given the green light despite legal infringements and the availability of shorter or cheaper and definitely environmentally friendlier alternative routes in both cases.

Since the EU enlargement last year, much bigger sums have arrived only to be further increased in the next years. Member states are currently planning how they will use the EU funds for the entire period 2007-2013, and some seem to have curious ideas. Poland , the largest of the new countries, is proposing to spend at least €15 billion on transport and only €5 billion for the environment from the cohesion fund. To date this fund has always been split equally between transport and environment infrastructure. Poland's ability to meet EU environmental standards within its agreed transition periods would thus be jeopardised. What’s more, Poland would spend €11 billion on roads and just €4 billion on railways. Many more billions for road building would be invested from other EU and national sources. The plan comes at a time when the Polish government is closing some of its railway lines due to a lack of funding.

The EU will have to decide whether it allows its taxpayers’ resources to be used in such a blatant violation of its commonly agreed goals: decoupling economic growth from transport growth, shifting transport from roads to rail and achieving Kyoto targets on greenhouse gas emissions. But the bigger problem lies in the EU’s own ‘cohesion policy’ concept that already invites countries to spend the funds on reckless construction, especially road-building. A reform of that policy is currently underway in Brussels (see next article). However, it seems unlikely that this opportunity to make EU funds really efficient and sustainable will be used. In that case, 'New Europe' may be destined to follow the same unsustainable road as 'Old Europe'.

Case study 1: EU funds & corruption in Slovakia

In 2001, a corruption scandal involving misuse of pre-accession funds erupted in Slovakia. The lack of transparency in the management of EU aid had allowed a few individuals to steer the money to companies of their choice as well as for their personal own gain. Revelations by media and NGOs resulted into positive changes in the management of the funds. Afterwards, the Centre for Environmental Public Advocacy (Friends of the Earth Slovakia), which was instrumental in revealing the scandal, initiated the formation of a national NGO watchdog team to monitor EU funds. The watchdog team currently comprises 20 various NGO representatives, who carry out monitoring of the funds, provide independent information to the public, municipalities, and media, and work out policy proposals. The NGO’s proposal for legal measures to increase transparency and prevent corruption in EU funds management was eventually adopted by the Slovak Government in August 2004. These rules can serve as a model for other CEE countries.

Case study 2: EU funds & climate change

If the EU is serious about reaching the Kyoto goals, the structural and cohesion funds, representing one third of the EU’s own budget, must be changed. Up till now, the record of the cohesion policy on climate change has been a complete failure: the four EU-15 cohesion countries ( Greece, Ireland, Portugal, Spain) have witnessed by far the greatest increases of greenhouse gas emissions in the EU. Unless funding priorities are massively shifted towards the three areas of energy efficiency, renewable energy and sustainable transport, the trend is likely to be repeated in the new member states. Their railway and public transport systems and their unused potential for energy savings and renewable energy generation provide clear opportunities for both environmental and economic gains.

Greenhouse gas emissions between 1990 and 2000
Greece : +24%
Ireland: +24%
Portugal: +30%
Spain: +35%
EU-15 average: -4%

Martin Konecny
EU Funds Coordinator
Friends of the Earth Europe - CEE Bankwatch Network