Berlin, Paris face fight on tightening up EU investment

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French-German plans to make EU investment funds for eurozone countries conditional on good their housekeeping face a tough time in the European Parliament and with EU states for whom the cash is crucial.

European Union structural and cohesion funds together accounted for more than one third of all spending, or nearly 350 billion euros ($500 billion) in the period 2007-13, according to the European Commission.

The funds are the physical embodiment of European integration -- the mortar holding together the motorways, bridges and buildings that have for decades symbolised the ideal of an 'ever closer union.'

"In future, payments from structural and cohesion funds should be suspended in eurozone countries that do not conform to recommendations under excessive deficit procedures," wrote German Chancellor Angela Merkel and French President Nicolas Sarkozy in a letter sent Wednesday to EU president Herman Van Rompuy.

Regional, social and cohesion spending allows the EU to grant aid to member states that seek help for for regions whose economic output is less than 75 percent of the EU average.

All states benefit, some more than others depending on wealth and historical factors, but among eurozone members, Portugal, Greece, Spain and Italy are among the leading beneficiaries.

The funds are already the subject of heated debate among states, alongside the executive EU commission and the European Parliament, as they start negotiating the bloc's next budgetary cycle from 2014-2020.

Some want such funding cut or access conditions tightened and checks on spending stiffened; others, like Poland, are insistent that the monies remain ring-fenced almost on an ideological level.

The notion that their disbursement should be conditional is "an old idea principally put forward by Germany," said one EU source in Brussels who asked not to be named.

Those who want to cut or tighten access are invariably met by the counter-argument that these are the very funds that go into infrastructure and therefore generate growth conditions.

Look at island communities brought into mainstream economic life through modern bridges -- or 21st century telecommunications and broadband networks connecting remote communities to city hubs, supporters say.

One source at the commission said "these funds are indispensable for the development of certain regions -- and can ensure a rapid return to equilibrium in public accounts by contributing towards renewed economic growth."

Greece received 26 billion euros of these structural funds between 2000 and 2006, and another 20.4 billion euros was set down for 2007-2013.

Further injections also come from the European Investment Bank and other economic development pots.

Portugal has received a similar amount, roughly equating to some 300 euros per person per year.

While some diplomats point out that the money has not prevented near-bankruptcy in these states, Poland, the current EU chair, insists such funding will not be sacrificed on its watch.

Warsaw warned when setting out its priorities for its six-month presidency that protecting these funds would be a key part of its programme -- and the agreement of the 27 EU states will be required on this issue.

© 2011 AFP

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