EU cash use: Lithuania to turn from leader to lagger

  • 2012-05-30
  • By Linas Jegelevicius

KLAIPEDA - Lithuania’s Finance Ministry is ringing alarm bells, warning the country is lagging significantly in signing EU financial support agreements, which is likely to end up in losses of millions from the EU this year. Despite this, the assistance remains crucial for Lithuania: in its 2012 budget, the EU funding makes up nearly one-third. The European Union’s money, the Ministry stresses, has been crucial throughout the 2008 crisis-triggered economic ordeal, as it has helped create new jobs and increase economic competitiveness.

Some are scolded more than others
“However, during the first quarter of 2012, only 44 percent of all the planned EU financial assistance agreements have been signed. Thus out of 951 million litas (275 million euros) that had to be allocated for Lithuanian enterprises, less than half the amount - 419 million litas - has been given out. It is alarming,” says Ingrida Simonyte, the Finance Minister.
EU and Lithuanian budget funding for EU-supported projects in Lithuania totals 4.6 billion litas this year.
Among the most lagging institutions in processing the EU support paperwork are the Economy, Finance, Communication and Transport, Education and Science Ministries, as well as the Information Society Development Committee, the main agency distributing the money.

In stark contrast, until 2012, Lithuania had been praised for leading the EU in employing the EU financing.
The Economy Ministry has been so far scolded for this backwardness most - all agree it has considerably slowed down the evaluation process of submitted applications for EU assistance. Thus, according to the Finance Ministry, evaluation of nearly 100 projects worth about 855 million litas, or 16 percent of all the EU financing for 2007-2013, is behind schedule. The Communication and Transport Ministry is also rebuked for being late in signing projects requiring EU financing.

This has to be reversed “as soon as possible,” says Simonyte.
“The end of the 2007-2013 EU financing period is nearing; therefore, in order not to lose the funding, all the procedures have to be expedited, i.e the agreements have to be signed to have the money paid out by the end of 2015. Some of the projects involve large infrastructure projects that need more time for implementation. Thereby, the agreements have to be signed as early as possible to have them carried out on time,” emphasizes the minister.

More flexibility in needed
Lithuanian entrepreneurs concur unanimously on the importance of the EU funding, and say the EU fund administrators lack “flexibility.”
“Access to EU money is hindered by limits of various bureaucratic hurdles. Here is an example from our dealings with the EU financing distributing agency: if we submit an application to it, having pointed out our need for specific facilities, the process of its evaluation will take so long that at the end, with the EU money given, the machinery will be outdated. However, we won’t be entitled to buy any more up-to-date equipment, as in doing so we’d breach the agreement,” Saulius Valunta, director of Serfas, a company specializing in supplying construction and metal materials, said to Ekonomika.

The businessman is convinced these kinds of restrictions in receiving EU funding should be lifted.
“Unless we change our activity to roll baking, there should be a lot more flexibility,” he says.
Valunta also pays attention to an excessive particularity when it comes to assessing the applications. Like correct punctuation, he says, dismayed. “Not commas and semicolons, but concrete business achievements of a company should be paid heed, as well as profitability, competiveness, ability to create new jobs and pay taxes,” he says.
However, the entrepreneur says he can’t see the future of his company without the EU cash.
Stringency is justified, considering cash volume

Naglis Naranauskas, board chairman of agricultural cooperative Pienas, who blamed the same bureaucratic procedure before for receiving EU funding, employs softer rhetoric after the enterprise was allocated 50 million litas in EU funding.
“If one intends to apply for the EU assistance, he has to put himself in a mood that it won’t be easy,” he says, adding “Speaking of complicity of the support allocation procedures and regulations an enterprise is obliged to follow once the assistance is granted, the current practice is sufficient to defend the public interest and to make sure no one abuses the assistance. From today’s perspective, the difficulties we dealt with in obtaining the support seem adequate and rational, as, for the amount we’ve been given, appropriate safeguards have to exist,” Naranauskas says.

He says that less complicated and expedited procedures for evaluating applications seeking EU financial support would possibly trigger a big inflow of applicants who, under the current strict conditions, do not venture to apply.

Too many bureaucratic hurdles
In contrast, Ilma Ziliene, head of Insubsidium, a company that provides EU support consultations, says she “feels” that lately the applications are being assessed slower. She also stresses that the Finance Ministry-predicted risks of losing part of the EU support set out for 2007-2013 is “real and even unavoidable.”
“It is now quite obvious that not all the resources will be taken over. A lot of the financing will remain unused in banks, or in the small credit fund INVEGA, which was disposed by the banks throughout the financing period and which has helped them to accrue large profits,” says Ziliene.

In consulting with enterprises, Insubsidium mostly deals with the Economy Ministry and its subordinate, the Lithuanian Business Support Agency. The latter, Ziliene claims, is justifiably being criticized for excessive requirements for the applicants and the bureaucratic mechanism in its running. “Besides, the blunders the agency’s staff do show a lack of competence,” the businesswoman says.

More enterprises should share the pie
Ziliene says that her clients most often complain of the agency’s inadequate refusal to compensate business’ expenses. She notes that allocating EU support to B-list, in other words, reserve, enterprises would enliven current quite sluggish and stagnant procedures of EU money allocation.
“Unfortunately, now the resources are being allocated quite ineffectively, according to the most popular and important business fields. And, as a rule, very few applicants share the bulk of the money; meanwhile, the majority of applicants corresponding to all requirements are left with nothing,” notes the consulting firm owner.