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EU withholds all funds from Poland, not just National Recovery Plan. The government is silent on that matter

Since the beginning of February 2023, the Ministry of Funds and Regional Policy has been announcing further competitions under EU cohesion policy programmes for 2021-2027. However, it fails to mention that the disbursement of these funds is currently impossible due to Poland's violation of the rule of law

Paulina Pacuła oko.press 7th February 2023

The competitions of the new EU programmes 2021-2027 are starting!" - announces the Ministry of Funds and Regional Policy on its website. And it encourages: the call for applications from the programme European Funds for Modern Economy, Kid plus, Digital Poland has started. A total of 23 competitions: seven from national programmes and five from regional programmes.

Meanwhile, cohesion policy funds for 2021-2027, in total EUR 76.5 billion, more than twice the amount of the NRP, are not flowing to Poland.

It is from these funds that the fair transition, the Kid plus programme, the construction of high-speed railways and thousands of other key investments across the country are to be financed. EUR 31 billion was supposed to go to local authorities. It is not clear when it will go.

Those who decide to apply for funds and make investments do so at their own risk.

"Competitions can be made, beneficiaries selected, contracts signed. The beneficiaries will start implementing some of the activities with their own money, because these cohesion funds are mostly granted as refunds. They can get some small advances, commit their funds, and then apply for reimbursement of the so-called qualified costs. And will there be funds for these refunds? That remains to be seen," says - Marcin Wajda, Director of the Department of Regional Development and European Funds at the Mazovian Marshal's Office, tells OKO.press.

Programmes approved, funds allocated, but....

"In theory, all the national and regional programmes under which these funds were to be disbursed are ready and accepted by the EC," - Marcin Wajda emphasises.

Mazovia is waiting for €2.09 billion, or almost PLN 10 billion. The province's regional programme was approved by the EC in December 2022. The Marshal's Office is planning investments in low-emission transport, renewable energy sources, support for seniors and people with disabilities. Entrepreneurs, local authorities, hospitals, schools or scientific and research institutions are expected to apply for the funds. There is one BUT.

"The government maintains that disbursements are not threatened. But Poland still does not fulfil one of the so-called basic conditions for disbursement," - Wajda says. This is about one of the so-called horizontal criteria introduced by the Regulation of the European Parliament and of the EU Council of 24 June 2021 on provisions common to all EU funds.

"Poland does not meet the criterion concerning the EU Charter of Fundamental Rights. As a result, the European Commission does not have the possibility to implement disbursements." - The European Commission confirms in correspondence with OKO.press.

As long as this criterion is not fulfilled, only small advance payments and funds under the so-called technical assistance are possible. This is about 1, maybe 1.5 per cent of the allocation. We are informed by the Lubuskie Voivodeship that these small payments are made.

"According to information provided by the Ministry of Funds and Regional Policy, by 28 December 2022, advances totalling just over PLN 5 billion had been received under the 2021-2027 financial perspective. Part of this amount is to be transferred to the follow-on national programmes. The launch of the first calls for proposals is planned for February this year," - Paweł Kozłowski, spokesman for the Lubuskie Voivodeship Board, wrote to OKO.press.

New rules, strengthening of the rule of law

The fact that the disbursement of EU funds is linked to the need to meet certain conditions is new. In order to receive EU funding from the new 2021-2027 perspective, each Member State must meet a series of requirements called 'horizontal criteria'. This is the result of changes to the design of cohesion policy introduced in 2021.

The idea is that funds should not be granted unconditionally, but that access to EU money should be conditional on the rule of law.

The new requirements oblige member states to:

- to effectively monito the public procurement;

- to effectively monitor the provision of state aid;

- to effectively implement the principles of the Charter of Fundamental Rights;

- effective implementation of the principles under the UN Convention on the Rights of Persons with Disabilities.

The purpose of introducing horizontal criteria is to prevent corruption, discrimination and to ensure effective control over the spending of EU funds. It is also a kind of extension of the conditionality mechanism. The allocation of EU funds is no longer absolute and unconditional.

These criteria apply to the entire cohesion policy, i.e. grants from:

- European Regional Development Fund;

- European Social Fund Plus;

- Cohesion Fund;

- The Fair Transition Fund;

- European Maritime, Fisheries and Aquaculture Fund;

- The Asylum, Migration and Integration Fund;

- Internal Security Fund;

- the Financial Support Instrument for Border Management and Visa Policy.

It is these funds in total that make up the EU's cohesion policy, from which Poland is to receive €76.5 billion for the period 2021-2027 - the most of any Member State. From these come the allocations for specific objectives for individual countries.

Cohesion policy is blocked by the same thing as the NRP

The introduction of horizontal criteria as a condition for receiving EU funds is another step by member states to link disbursements to the rule of law. When signing a partnership agreement, a document that details the plan for disbursing funds, a member state has to declare itself whether it meets these basic conditions.

What does it turn out?

In the partnership agreement signed in June 2022, the Polish government states that Poland does not meet the criterion regarding the Charter of Fundamental Rights.

Poland is not in a position to declare that all projects financed from EU funds will be implemented with respect for the principles of the Charter of Fundamental Rights, as this is what this criterion is all about. The Charter of Fundamental Rights is a set of fundamental human and citizens' rights which came into force in 2007 together with the Treaty of Lisbon. The purpose of the document is to ensure the protection of fundamental rights throughout the EU.

"By declaring the fulfilment of this criterion, the Member State is declaring that EU funds will be spent respecting the principle of non-discrimination, equality or with due and fair working conditions," - explains Marcin Wajda.

In addition, there must be a clear appeal path and the possibility to challenge a project or an allocation decision before an 'impartial court established by law'. This is mentioned in Chapter VI of the CFR, Article 47. The details of this criterion are described in detail in Annex III of the EP and Council Regulation (p. 160).

Meanwhile, Poland has very accurately diagnosed problems with respecting the principle of non-discrimination, or the right to an 'impartial court established by law'.

These problems have been pointed out more than once by the European Parliament in its resolutions (e.g. on discrimination against LGBT+ persons and the state of the rule of law in Poland), or by the periodic evaluation of the Member States as part of the European Semester.

These are partly the same criteria as a result of which KPO money is also not flowing to us.

Despite the fact that Poland's failure to meet this horizontal criterion has been known since at least June 2022, the European Commission confirms to OKO.press that nothing has yet changed in this regard. "A dialogue is ongoing," confirms the EC in correspondence with OKO.press as recently as 6 February 2023.

Local government officials don't know where they stand

What does all this mean? Apparently, the programmes are approved, competitions can be launched and measures can be implemented, but there is still no guarantee that these funds will actually flow to Poland. A regulation of the European Parliament and the EU Council does not give the European Commission any room for manoeuvre in this matter.

"If the basic conditions are not met, the expenditure incurred by the national authorities for the implementation of the programmes can be declared to the Commission.

However, the Commission will not reimburse them as long as the Member State does not comply with all the basic conditions." - explains the EC press office.

The government is silent on the matter and is trying to play for time. The partnership agreement between Poland and the EU was only signed at the end of June 2022. The distribution of competitions is ongoing. The government hopes that the lack of funds will go unnoticed, as it will still be some time before the first beneficiaries apply for reimbursement of eligible costs.

Hence the constant assurances from ministers and the Prime Minister that the disbursement of EU funds is not threatened.

The fact that the king is naked may come out after the elections

But for local authorities, this means that investments have to be put on hold. "No serious person will commission tasks without being sure that there will be money for reimbursement," stresses Marcin Wajda. This is because most cohesion policy funds are granted as reimbursements of eligible costs. The entrepreneur commits his funds and then applies for reimbursements.

"It is all designed in such a way that the fact that the king is naked turns out only after the elections," emphasises the local government officer. - emphasises the local government official.

What are the risks? "The first competitions will start, people will start submitting applications, signing contracts, implementing tasks, commissioning work, buying machinery, etc. and if it collapses [i.e. Poland fails to meet the criterion for payment - editor's note], we won't refund them, because from what? And whose fault will it be? The local governments'. - Wajda emphasises.

And he draws attention to an important fact: there is a key paragraph in every funding agreement."

"Eligible costs are reimbursed subject to the availability of funds. If Poland does not meet the basic conditions, there will be no funds." - Marcin Wajda emphasises.

Something else is alarming. The last official communication on the matter from the Ministry of Funds and Regional Policy was in February 2022. At that time, the voivodship marshals received an official letter informing them that - note - Poland had met the criterion for the Charter of Fundamental Rights. OKO.press has seen this letter.

Four months later, a partnership agreement was signed indicating that the criterion was not met.

"We don't know where we stand". - says a local government official.

This situation is confirmed by local government officials from the Lubuskie, Wałbrzych and Kujawsko-Pomorskie regions contacted by OKO.press. This results in many investments having to be put on hold.

High-speed railways, energy transition? Everything is on hold

Money from the 2021-2027 funds was supposed to feed a total of eight national programmes and 16 regional programmes.

- 17.9 billion euro was to be invested in renewables and the circular economy.

- 20 billion was to be allocated to the decarbonisation of the transport sector, including investment in rail, clean public transport, zero-emission fuels and the development of trans-European transport networks.

- EUR 3.85 billion was to be invested in the Fair Transition Fund to finance the transformation of the regions hardest hit by the transition to a climate-neutral economy. The regions concerned were the Śląskie, Wielkopolskie, Dolnośląskie, Łódzkie and Małopolskie voivodships.

- EUR 12.9 billion was to be earmarked to support employment, the creation of new crèches and kindergartens and the integration of people with disabilities and a migrant background into the labour market.

These are just a few examples of key activities whose implementation is in question. Uncertainty about cohesion funds, for example, is bringing railway investments to a complete halt.

"Railway companies, unlike, for example, road builders, have no access to investment funds other than from EU funds. Road builders still have the National Road Fund, which is fed with funds from fuel duty and motorway tolls. Railway workers do not. Lack of access to EU funds means a complete halt to investment on the railways. There are still funds from the previous perspective this year, as they have to be settled by the end of 2023. But if funding from the new perspective does not start, next year everything will come to a standstill," stresses Adrian Furgalski, vice-president of Zespół Doradców Gospodarczych (economic advisers group) TOR.

Will court reform settle the matter?

What must Poland do, then, for the European Commission to consider the condition related to the Charter of Fundamental Rights fulfilled? For reasons we do not understand, the European Commission refuses to comment precisely on the matter. It only emphasises that "there is an ongoing dialogue with Poland".

However, one can guess that the issue of access to cohesion policy funds could be unblocked by KPO-compliant justice reforms. This is, after all, one of the milestones required to restore the independence of the courts in Poland and to implement the judgments of the EU Court of Justice.

The European Commission does not confirm such a scenario. Unofficially, however, we learn that the two are linked. "Reforms to unblock the KPO could be considered sufficient to unblock cohesion funds," says an EC official who wishes to remain anonymous.

For this, an overhaul of the judiciary is necessary, which the ruling camp does not want to allow. Subsequent proposals to amend the law on the courts as they are proposed by the ruling coalition will not lead to an overhaul of the judiciary or the restoration of the rule of law.

This puts at risk the disbursement of all EU funds to Poland - both the billions from the KPO (€23.9 billion in grants and €11.5 billion in loans) and from cohesion policy (€76.5 billion).

Unless the European Commission makes a rotten compromise and accepts the changes to the Courts Act as sufficient to unblock the KPO. And this despite the fact that they do not address the fundamental problems of the progressive dismantling of judicial independence in Poland since 2015.

This could also entail the unblocking of cohesion policy funds.

Meanwhile, Elisa Ferreira, the EU Commissioner for Cohesion and Reform, is due to arrive in Poland tomorrow, Wednesday 8 February. Ferreira is due to meet with Prime Minister Mateusz Morawiecki and Funds and Regional Policy Minister Grzegorz Puda. On the websites of the Prime Minister's Office and the MFiPR, one looks in vain for information about this meeting. The ruling camp does not pay much attention to reliable communication - neither with journalists and journalists nor with citizens.

However, Commissioner Ferreira's team informs us that this is a normal visit related to the finalisation of the approval of national and regional programme contracts. Will the issue of Poland fulfilling the basic conditions for the disbursement of EU funds also be discussed? We will follow this up tomorrow.