EIB Papers Volume 13. n°1/2008 - European Investment Bank

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EU funds provide additional resources but they tilt spending toward EU projects and pose unique challenges to new member states. 132 Volume13 N°1 2008 EIB PAPERS Table 9. Possible policy instruments to help increase total infrastructure investment Short- to Medium-Term Medium- to Long-Term Source: IMF (2005) Private Investment Public Investment Use public-private partnerships. Reallocate public expenditure. Provide government guarantees. Implement tax policy measures. Implement improvements in market- supporting institutions that help strengthen the rule of law, property rights, and the regulatory framework. Relax fiscal targets, financed by debt or the sale of state assets. Carry out structural reforms, incl. civil service reform and social security reform to help reduce current expenditure. Deepen financial markets. Improve tax administration and expenditure management systems to improve efficiency. 5. New sources of infrastructure financing in the new member states 5.1. The role of EU support mechanisms In this general context, a unique challenge for the NMS is posed by the availability of EU funds for infrastructure investment. EU financing schemes provide additional resources for the NMS to upgrade infrastructure, but they also alter government spending patterns toward EU priorities and challenge fiscal, macroeconomic, and absorptive capacities. For example, EU funds provide additional resources to the NMS, but may adversely affect fiscal balances in the short run, particularly due to additionality requirements, which usually lead countries to increase spending on programmes financed with EU support. As most countries have limited room to accommodate additional spending through higher deficits, EU funds are likely to have a significant effect on spending allocation patterns. In addition, the use of EU funds poses challenges from a public expenditure management perspective, requiring countries to step up efforts to effectively absorb the increased allocations. EU accession provided the NMS with access to different types of EU funds. These funds serve three main objectives: Income convergence, agricultural support, and the development of internal market institutions. EU funds are significant from the point of view of the NMS. In the last 15 years, nearly EUR 30 billion has been transferred to the NMS; and, under the new financial perspective 2007-2013, EU transfers would be notably larger than in the pre-accession and 2004-2006 periods. Net transfers (taking into account the NMS contributions to the EU budget) are expected to almost triple from an average of 1 percent of GDP in 2004-2006, with smaller net transfers observed in the beginning of the period and with poorer countries expected to receive more (European Commission 2006) (Table 10).
Table 10. EU funds for NMS, 2004-2013 2004 2005 2006 2007 2008 2009 2010 2011 2012 /2 2013 2/ ( in EUR million) Bulgaria 1/ .. .. .. 1,130 1,543 1,872 1,766 1,838 1,951 2,060 Romania 1/ .. .. .. 5,113 5,947 6,035 5,645 5,820 5,989 6,251 Czech Republic 1,627 1,915 2,028 3,998 4,140 4,255 4,413 4,558 4,694 4,826 Estonia 400 428 474 238 557 754 824 699 629 1,160 Hungary 1,764 2,107 2,377 4,090 4,270 4,465 4,681 4,891 5,116 5,351 Latvia 665 706 699 720 757 794 842 885 930 974 Lithuania 984 1,124 1,182 1,326 1,383 1,441 1,518 1,593 1,669 1,745 Poland 6,584 8,165 9,062 11,118 11,711 12,300 12,587 13,177 13,753 14,331 Slovakia 946 1,057 1,187 1,825 1,907 1,995 2,101 2,208 2,315 2,421 Slovenia 473 527 527 788 789 788 797 803 809 814 (in percent of GDP) Bulgaria 1/ .. .. .. 4.7 5.9 6.5 5.7 5.4 .. .. Romania 1/ .. .. .. 4.8 4.9 4.4 3.7 3.4 .. .. Czech Republic 1.9 1.9 1.8 3.3 3.2 3.0 2.9 2.8 .. .. Estonia 4.4 4.1 3.9 1.8 3.7 4.5 4.5 3.5 .. .. Hungary 2.2 2.4 2.9 4.8 4.7 4.7 4.7 4.7 .. .. Latvia 6.0 5.6 4.6 4.0 3.7 3.4 3.3 3.2 .. .. Lithuania 5.4 5.5 5.1 5.2 4.9 4.7 4.5 4.4 .. .. Poland 3.2 3.4 3.4 4.0 4.0 4.0 3.9 3.8 .. .. Slovakia 2.8 2.8 2.8 3.8 3.6 3.4 3.3 3.1 .. .. Slovenia 1.8 1.9 1.9 2.7 2.6 2.4 2.3 2.2 .. .. Sources: IMF (2006a, b, c, d; and 2007) and Rosenberg and Sierhej (2007) Notes: 1/ “..” indicates data are not available. 2/ GDP projections for 2012 and 2013 are not available. EIB PAPERS Volume13 N°1 2008 133
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EIB Papers • Volume 13 • No1
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Volume 13 • No1 • 2008 EIB Pape
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Preface This year the European Inve
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Infrastructure investment, growth a
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Government investment is not the sa
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Different types of government inves
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Infrastructure accounts for one-thi
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A common feature for the new member
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The share of transport in governmen
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The proxies are subject to caveats.
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The shares of infrastructure and ho
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There have been marked differences
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Government transport investment has
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Transport and other infrastructure
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References 54 Volume13 N°1 2008 EI
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In some countries a shock to public
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The analysis accounts for long-run
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Table 1. Some VAR studies (publishe
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The ratio of private capital to GDP
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Denmark 68 Volume13 N°1 2008 EIB P
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There is no systematic pattern for
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High variability of the public-capi
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Has the impact of public capital on
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Productivity of public capital incr
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The impact of public capital on out
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References 80 Volume13 N°1 2008 EI
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EIB Papers Volume 13. n°1/2008 - European Investment Bank

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