Dalia Grybauskaite, European Union commissioner for financial planning and budgeting, issued a report Sept. 21 criticizing the Czech Republic for failing to access its EU funds.

When it joined the EU in 2004, the country was entitled to more than 2.2 billion euros through the end of this year. But Czechs have only spent 522 million euros in EU funds through September — a paltry 23.5 percent.

Only Cyprus has been worse.

Now, if the Czech Republic fails to draw the money before a new budgetary period starts at the beginning of next year, the country will lose it.

With the cash-strapped government unable to put enough money toward co-financing EU projects, some government officials even admit that the Czech Republic could end up paying more into EU funds in 2006 than it will be able to draw.

"Co-financing EU projects is getting more and more difficult," then-Deputy Finance Minister Eduard Janota said while discussing the 2007 draft state budget in mid-September.

In 2004, the country drew 7 billion Kč more than it paid into EU funds. But the mandatory payments through the first eight months of this year were nearly 1 billion Kč higher than the country got from EU sources.

Grybauskaite insisted that extra effort was necessary so that the Czech Republic and the other nine new EU member states could increase their absorption capabilities.

"It is not yet a disaster, but a warning," Grybauskaite said. "We want all new member states to be prepared for 2007. The new member states have time to learn, but time is short."

Threat of decommitment

Between 2007 and 2013, the Czech Republic could draw up to 748 billion Kč from Brussels, assuming that the government could pay 132 billion Kč from the state budget to co-finance projects.

Janota expressed concern that particular ministries did not have the financial reserves needed to co-finance potential projects.

Transportation Minister Aleš Řebíček admitted his ministry did not have sufficient funds to do so.

"We could draw up to 23 billion Kč from EU funds for transportation projects, but we so far do not have enough money to co-finance them," he told the daily Mladá fronta Dnes.

EU officials expressed their concern that "under-spends" will increase when new rules come into effect in 2007. After that, new member states will be eligible to get even more money, but there is a substantial danger that they will not have the administrative capacity to spend it.

So far, countries are able to draw the allocated money throughout an entire budgetary period. From 2007 onward, however, they will have only two years to secure funding for particular projects. Otherwise, the money will be lost.

"In 2007, for the first time, money not spent will be decommitted," Grybauskaite said. "This means that if money available for member states is still unspent after two years, it is automatically canceled."

Softer approach

Grybauskaite said that complicated bureaucratic procedures in the Czech Republic and Poland stood as obstacles to accessing EU funds in those countries, adding that the process of shortlisting particular business projects to EU subsidies was too complicated and strict.

In response to the report, Regional Development Minister Petr Gandalovič announced that the selection process would be simplified.