Article 158 of the Treaty provides that, in order to strengthen its economic and social cohesion, the Community is to aim at reducing disparities between the levels of development of the various regions and the backwardness of the least favoured regions or islands, including rural areas. Article 159 of the Treaty requires this action to be supported by the Structural Funds, the European Investment Bank (EIB) and the other existing Financial Instruments.
(2)
Cohesion policy should contribute to increasing growth, competitiveness and employment by incorporating the Community's priorities for sustainable development as defined at the Lisbon European Council of 23 and 24 March 2000 and at the Göteborg European Council of 15 and 16 June 2001.
(3)
Economic, social and territorial disparities at both regional and national level have increased in the enlarged European Union. Actions for convergence, competitiveness and employment should therefore be increased throughout the Community.
(4)
The increase in the number of the Community's land and sea borders and the extension of its territory mean that the value added of cross-border, transnational and interregional cooperation in the Community should be increased.
(5)
The Cohesion Fund should be integrated into the programming of structural assistance in the interest of greater coherence in the intervention of the various Funds.
(6)
The role of the instruments providing aid for rural development, namely the European Agricultural Fund for Rural Development pursuant to Council Regulation (EC) No 1698/2005 of 20 September 2005 on support for rural development by the European Agricultural Fund for Rural Development (EARDF) (5), and for the fisheries sector, namely a European Fisheries Fund (EFF), should be specified. Those instruments should be integrated into the instruments under the common agricultural policy and the common fisheries policy and coordinated with those under the cohesion policy.
(7)
The Funds providing assistance under the cohesion policy are therefore limited to the European Regional Development Fund (ERDF), the European Social Fund (ESF) and the Cohesion Fund. The rules applicable to each Fund are to be specified in implementing regulations adopted under Articles 148, 161 and 162 of the Treaty.
(8)
Under Article 55 of Council Regulation (EC) No 1260/1999 of 21 June 1999 laying down general provisions on the Structural Funds (6), the Council is to review that Regulation on the basis of a proposal from the Commission by 31 December 2006 at the latest. In order to implement the reform of the Funds proposed by this Regulation, Regulation (EC) No 1260/99 should be repealed.
(9)
To increase the value added of Community cohesion policy, the work of the Structural Funds and of the Cohesion Fund should be concentrated and simplified and the objectives set out in Regulation (EC) No 1260/1999 redefined accordingly as seeking the convergence of the Member States and the regions, regional competitiveness and employment and European territorial cooperation.
(10)
Within those three objectives, both economic and social characteristics and territorial characteristics should be taken into account in an appropriate fashion.
(11)
The outermost regions should benefit from specific measures and additional funding to offset the handicaps resulting from the factors referred to in Article 299(2) of the Treaty.
(12)
The problems of accessibility and remoteness from large markets confronting areas with an extremely low population density, as referred to in Protocol 6 on special provisions for Objective 6 in the framework of the Structural Funds in Finland and Sweden to the 1994 Act of Accession, require appropriate financial treatment to offset the effects of these handicaps.
(13)
In view of the importance of sustainable urban development and the contribution of towns and cities, particularly medium-sized ones, to regional development, greater account should be taken of them by developing their role in programming to promote urban regeneration.
(14)
The Funds should take special and complementary action over and above that of the EAFRD and of the EFF to promote the economic diversification of rural areas and of areas dependent on fisheries.
(15)
Action for areas with a natural handicap, i.e. certain islands, mountainous areas and areas with a low population density, as well as for certain border areas of the Community following enlargement, should be strengthened to cope with their particular development difficulties.
(16)
Objective criteria for designating eligible regions and areas should be fixed. To this end, the identification of the priority regions and areas at Community level should be based on the common system of classification of the regions established by Regulation (EC) No 1059/2003 of the European Parliament and the Council of 26 May 2003 on the establishment of a common classification of territorial units for statistics (NUTS) (7).
(17)
A Convergence objective is to cover the Member States and regions whose development is lagging behind. The regions targeted by the Convergence objective are those whose per capita gross domestic product (GDP) measured in purchasing power parities is less than 75 % of the Community average. The regions suffering from the statistical effect linked to the reduction in the Community average following the enlargement of the European Union are to benefit for that reason from substantial transitional aid in order to complete their convergence process. This aid is to end in 2013 and is not to be followed by a further transitional period. The Member States targeted by the Convergence objective whose per capita gross national income (GNI) is less than 90 % of the Community average are to benefit under the Cohesion Fund.
(18)
A Regional competitiveness and employment objective is to cover the territory of the Community outside the Convergence objective. The regions eligible are those under Objective 1 in the 2000 to 2006 programming period which no longer satisfy the regional eligibility criteria of the Convergence objective and which therefore benefit from a transitional aid, as well as all the other regions of the Community.
(19)
A European territorial cooperation objective is to cover regions having land or sea frontiers, the areas for transnational cooperation being defined with regard to actions promoting integrated territorial development and support for interregional cooperation and exchange of experience.
(20)
The improvement and simplification of cooperation along the external borders of the Community entail the use of the instruments of the Community's external assistance, in particular a European Neighbourhood and Partnership Instrument and the Instrument for Pre-Accession Assistance established by Council Regulation (EC) No 1085/2006 (8).
(21)
The contribution from the ERDF to such cooperation along the external borders of the Community assists in redressing the main regional imbalances in the Community and thus in strengthening its economic and social cohesion.
(22)
The activities of the Funds and the operations which they help to finance should be consistent with the other Community policies and comply with Community legislation.
(23)
Action by the Community should be complementary to that carried out by Member States or seek to contribute to it. The partnership should be strengthened through arrangements for the participation of various types of partner, in particular regional and local authorities, with full regard to the institutional arrangements of the Member States.
(24)
Multiannual programming should be directed towards achieving the Funds' objectives by ensuring the availability of the necessary financial resources and the consistency and continuity of joint action by the Community and the Member States.
(25)
Since the Convergence, Regional competitiveness and employment, and European territorial cooperation objectives cannot be sufficiently achieved by the Member States by reason of the extent of the disparities and the limit on the financial resources of the Member States and regions eligible under the Convergence objective and can therefore be better achieved at Community level through the multiannual guarantee of Community finance which allows cohesion policy to be concentrated on the Community's priorities, the Community may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty. In accordance with the principle of proportionality, as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve those objectives.
(26)
It is appropriate to set measurable targets for Member States of the European Union as constituted before 1 May 2004 to aim to achieve through expenditure under the Convergence and Regional competitiveness and employment objectives with a view to promoting competitiveness and creating jobs. It is necessary to identify appropriate ways to measure and report the attainment of those targets.
(27)
It is appropriate to strengthen the subsidiarity and proportionality of the intervention of the Structural Funds and of the Cohesion Fund.
(28)
Under Article 274 of the Treaty, in the context of shared management, the conditions allowing the Commission to exercise its responsibilities for implementation of the general budget of the European Union should be specified and the responsibilities of cooperation by the Member States clarified. Applying these conditions should enable the Commission to satisfy itself that Member States are using the Funds in a legal and regular manner and in accordance with the principle of sound financial management within the meaning of the Financial Regulation.
(29)
In order to ensure a genuine economic impact, contributions from the Structural Funds should not replace public expenditure by Member States under the terms of this Regulation. Verification, through partnership, of the principle of additionality should concentrate on the regions under the Convergence objective because of the extent of the financial resources allocated to them and may result in a financial correction if additionality is not observed.
(30)
In the context of its effort in favour of economic and social cohesion, the Community, at all stages of implementation of the Funds, has as its goals to eliminate inequalities and to promote equality between men and women as enshrined in Articles 2 and 3 of the Treaty, as well as combating discrimination based on sex, racial or ethnic origin, religion or belief, disability, age or sexual orientation.
(31)
The Commission should establish the indicative annual breakdown of available commitment appropriations using an objective and transparent method, taking into account the Commission's proposal, the conclusions of the European Council of 15 and 16 December 2005 and the Interinstitutional Agreement of 17 May 2006 between the European Parliament, the Council and the Commission on budgetary discipline and sound financial management (9) with a view to achieving a significant concentration on the regions whose development is lagging behind, including those receiving transitional support because of the statistical effect.
(32)
Financial concentration on the Convergence objective should be increased because of the greater disparities within the enlarged European Union, the effort in favour of the Regional competitiveness and employment objective to improve competitiveness and employment in the rest of the Community should be maintained and the resources for European territorial cooperation objective should be increased in view of its particular value added.
(33)
The annual appropriations allocated to a Member State under the Funds should be limited to a ceiling fixed with regard to its capacity for absorption.
(34)
Three per cent of the Structural Funds appropriations allocated to Member States under the Convergence and Regional competitiveness and employment objectives may be placed in a national reserve for rewarding performance.
(35)
The appropriations available under the Funds should be indexed on a flat-rate basis for use in programming.
(36)
To increase the strategic content and promote the transparency of cohesion policy through integration with the Community's priorities, the Council should adopt strategic guidelines on a proposal from the Commission. The Council should examine the implementation of those guidelines by Member States on the basis of strategic reporting by the Commission.
(37)
On the basis of the strategic guidelines adopted by the Council, it is appropriate that each Member State prepare, in dialogue with the Commission, a national reference document on its development strategy, which should constitute the framework for preparing operational programmes. On the basis of the national strategy, the Commission should take note of the national strategic reference framework and take a decision on certain of its elements.
(38)
The programming and management of the Structural Funds should be simplified having regard to their specific features by providing for operational programmes to be financed by either the ERDF or the ESF, with each being able to finance in a complementary and limited fashion actions which fall under the scope of the other Fund.
(39)
With a view to improving complementarities and simplifying execution, the assistance of the Cohesion Fund and the ERDF should be jointly programmed in the case of operational programmes on transport and the environment and should have a national geographical coverage.
(40)
Programming should ensure coordination of the Funds between themselves and with the other existing financial instruments, the EIB and the European Investment Fund (EIF). Such coordination should also cover the preparation of complex financial schemes and public-private partnerships.
(41)
It is appropriate to ensure that improved access to finance and innovative financial engineering are available primarily to micro, small and medium-sized enterprises and for investing in public-private partnerships and other projects included in an integrated plan for sustainable urban development. Member States may decide to set up a holding fund through the award of public contracts pursuant to public procurement law, including any derogation in national law compatible with Community law. In other cases, where Member States are satisfied that public procurement law is not applicable, the definition of tasks of the EIF and the EIB justifies that Member States award them a grant that is a direct financial contribution from operational programmes by way of donation. Under the same conditions, national law may provide for the possibility of awarding a grant to other financial institutions without a call for proposal.
(42)
When appraising major productive investment projects, the Commission should have all necessary information to consider whether the financial contribution from the Funds does not result in a substantial loss of jobs in existing locations within the European Union, in order to ensure that Community funding does not support relocation within the European Union
(43)
The programming period is to last for a single period of seven years in order to maintain the simplification of the management system defined in Regulation (EC) No 1260/1999.
(44)
Member States and managing authorities may organise within the operational programmes co-financed by the ERDF the arrangements for interregional cooperation and may take account of the special features of areas with natural handicaps.
(45)
In order to address the need for simplification and decentralisation, programming and financial management should be carried out at the level of the operational programmes and priority axes alone; the Community support framework and the programme complement provided for in Regulation (EC) No 1260/1999 should be discontinued.
(46)
Within the operational programmes co-financed by the ERDF under the Convergence and the Regional competitiveness and employment objectives, Member States, regions and managing authorities may organise sub-delegation to urban authorities in respect of priorities concerning the regeneration of towns and cities.
(47)
The additional allocation to offset the additional costs faced by the outermost regions should be integrated into the operational programmes financed by the ERDF in those regions.
(48)
There should be separate arrangements for implementation of the European territorial cooperation objective financed by the ERDF.
(49)
The Commission should be able to approve major projects included in operational programmes, if necessary in consultation with the EIB, in order to evaluate their purpose and impact, as well as the arrangements for the planned use of Community resources.
(50)
It is useful to specify the types of action which the Funds should support as technical assistance.
(51)
There is a need to ensure that sufficient resources are devoted to assist Member States in project preparation and appraisal. The EIB has a role to play in providing such assistance and could be awarded a grant by the Commission to this end.
(52)
Similarly it is appropriate to provide that the EIF could be awarded a grant from the Commission to undertake an evaluation of the needs of innovative financial engineering instruments available for micro, small and medium-sized enterprises.
(53)
For the same reasons as mentioned above, the EIB and the EIF could be awarded a grant by the Commission to undertake technical assistance actions in the area of sustainable urban development or to support restructuring measures for sustainable economic activity in regions significantly affected by economic crisis.
(54)
The effectiveness of assistance from the Funds also depends on the incorporation of a reliable evaluation into programming and monitoring. The responsibilities of Member States and the Commission in this regard should be specified.
(55)
Within their national envelope under the Convergence and Regional competitiveness and employment objectives, Member States may provide for a small reserve to respond swiftly to unexpected sectoral or local shocks resulting from socio-economic restructuring or the effects of trade agreements.
(56)
It is appropriate to define what expenditure in a Member State can be assimilated to public expenditure for the purpose of calculating the total national public contribution to an operational programme; to this end it is appropriate to refer to the contribution of the ‘bodies governed by public law’ as defined in the Community public procurement directives since such bodies comprise several types of public or private body established for the specific purpose of meeting needs in the general interest not having an industrial or commercial character and which are controlled by the State, or regional and local authorities.
(57)
It is necessary to determine the elements for modulating the contribution from the Funds to operational programmes, in particular, to increase the multiplier effect of Community resources. It is also appropriate to establish the maximum ceilings which contributions from the Funds cannot exceed on the basis of the type of Fund and objective.
(58)
It is also necessary to define the notion of a revenue-generating project and to identify the community principles and rules for calculating the contribution from the Funds; for some investments it is objectively not possible to estimate the revenue in advance and it is therefore necessary to define the methodology for ensuring that this revenue is excluded from public funding.
(59)
The starting and closing dates for the eligibility of expenditure should be defined so as to provide a uniform and equitable rule applying to the implementation of the Funds across the Community. In order to facilitate the execution of operational programmes, it is appropriate to establish that the starting date for the eligibility of expenditure may be prior to 1 January 2007 if the Member State concerned submits an operational programme before that date.
(60)
In accordance with the principle of subsidiarity and subject to exceptions provided for in Regulation (EC) No 1080/2006 of the European Parliament and of the Council of 5 July 2006 on the European Regional Development Fund (10), Regulation (EC) No 1081/2006 of the European Parliament and of the Council of 5 July 2006 on the European Social Fund (11) and Council Regulation (EC) No 1084/2006 of 11 July 2006 on the Cohesion Fund (12), there should be national rules on the eligibility of expenditure.
(61)
To ensure the effectiveness, fairness and sustainable impact of the intervention of the Funds, there should be provisions guaranteeing that investments in businesses are long-lasting and preventing the Funds from being used to introduce undue advantage. It is necessary to ensure that investments which benefit from assistance under the Funds can be written off over a sufficiently long period.
(62)
Member States should adopt adequate measures to guarantee the proper functioning of their management and control systems. To this end, it is necessary to establish the general principles and the necessary functions which the control systems of all operational programmes are to fulfil on the basis of the body of Community law in force for the programming period 2000 to 2006.
(63)
It is therefore necessary to designate a single managing authority for each operational programme and to clarify its responsibilities as well as the functions of the audit authority. It is also necessary to guarantee uniform quality standards for the certification of expenditures and of payment requests before they are sent to the Commission. It is necessary to clarify the nature and quality of the information on which these requests are based and, to this end, to establish the functions of the certifying authority.
(64)
Monitoring of operational programmes is necessary to ensure the quality of their implementation. To this end, monitoring committees should be set up and their responsibilities defined, together with the information to be transmitted to the Commission and the framework for examining that information. In order to improve the exchange of information on the implementation of operational programmes, the principle of exchange of data by electronic means should be established.
(65)
In accordance with the principles of subsidiarity and proportionality, Member States should have the primary responsibility for the implementation and control of the interventions.
(66)
The obligations on the Member States as regards management and control systems, the certification of expenditure, and the prevention, detection and correction of irregularities and infringements of Community law should be specified to guarantee the efficient and correct implementation of operational programmes. In particular, concerning management and control, it is necessary to establish the procedures by which Member States give the assurance that the systems are in place and function satisfactorily.
(67)
Without prejudice to the Commission's powers as regards financial control, cooperation between the Member States and the Commission in this field should be increased and criteria should be established which allow the Commission to determine, in the context of its strategy of control of national systems, the level of assurance it can obtain from national audit bodies.
(68)
The extent and intensity of Community controls should be proportionate to the extent of the Community's contribution. Where a Member State is the main provider of the financing for a programme, it is appropriate that there should be an option for that Member State to organise certain elements of the control arrangements according to national rules. In these same circumstances, it is necessary to establish that the Commission differentiates the means by which Member States should fulfil the functions of certification of expenditures and of verification of the management and control system and to establish the conditions under which the Commission is entitled to limit its own audit and rely on the assurances provided by national bodies.
(69)
The payment on account at the start of operational programmes ensures a regular cash flow which facilitate payments to beneficiaries in the implementation of the operational programme. Therefore, provisions should be made for payments on account for the Structural Funds of 5 % (for Member States of the European Union as constituted before 1 May 2004) and of 7 % (for Member States that acceded to the European Union on or after 1 May 2004), and for the Cohesion Fund of 7,5 % (for Member States of the European Union as constituted before 1 May 2004) and of 10,5 % (for Member States that acceded to the European Union on or after 1 May 2004), to help speed up implementation of operational programmes.
(70)
In addition to the suspension of payments where a serious deficiency is detected in the management and control systems, there should be measures allowing the authorising officer by delegation to interrupt payments where there is evidence to suggest a significant deficiency in the sound operation of these systems.
(71)
The rules on automatic decommitment will speed up the implementation of programmes. To this end, it is appropriate to define the arrangements for their application and the parts of the budgetary commitment which may be excluded from them, notably when delays in implementation result from circumstances which are independent of the party concerned, abnormal or unforeseeable and whose consequences cannot be avoided despite the diligence shown.
(72)
The procedures for closure should be simplified by offering the possibility to those Member States which so wish, in accordance with the schedule which they select, to partially close an operational programme in respect of completed operations; the appropriate framework for doing so should be provided.
(73)
The measures necessary for the implementation of this Regulation should be adopted in accordance with Council Decision 1999/468/EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the Commission (13). The Commission is to adopt the measures implementing this Regulation for ensuring the transparency and clarifying the provisions applicable to the management of operational programmes as regards the categorisation of expenditure, financial engineering, management and control, electronic exchange of data and publicity after obtaining the opinion of the Coordination Committee of the Funds acting as a management committee. It is appropriate that the Commission publishes the list of eligible areas for the European territorial cooperation objective in application of the criteria set out in this Regulation, the indicative guidelines on the cost-benefit analysis necessary for the preparation and submission of major projects and for revenue generating projects, the indicative guidelines on evaluation and the list of actions eligible under technical assistance at the initiative of the Commission after consultation of the Coordination Committee of the Funds acting as a consultative committee,
