Kalousek: Regions to pay for mistakes in drawing EU subsidies

Prague/Jihlava, March 21 (CTK) - Regions Ustecky and Karlovarsky will have to pay Kc2.6bn from their own budgets for the projects for which the EC has refused to pay subsidies due to mistakes, Finance Minister Miroslav Kalousek said in a press release Thursday.

Kalousek has now proposed that to keep the ROP North-West running, the state can lend up to Kc1.5bn to them. The regions would be repaying the loan from their own resources till the year 2020.

Both regions' administrations are responsible for the mistakes, he added.

"It is therefore unacceptable that taxpayers from other regions would pay for the mistakes, shortcomings and manipulation concerning money from the EU in these two regions," Kalousek declared.

The loan will be granted under standard conditions corresponding to budget rules, that is interest free for a set purpose, according to the Finance Ministry.

"If both regional assemblies approve the proposal, we can provide the money to them within weeks," Finance Ministry spokesman Ondrej Jakob said.

The Karlovarsky region's deputy governor Jaroslav Borka considers Kalousek's words as unrealistic.

"If he is to lend us Kc1.5bn, it would have to be on instalments. It is not in the regions' powers to cope with such an amount of money," he told CTK Thursday.

The payment of the correction in its full amount would be liquidating for the Ustecky region, the region's governor Oldrich Bubenicek (Communist Party, KSCM) said, adding it would paralyse life in the region, including transport services and operation of social care facilities.

Both regions' assemblies will hold talks about the settlement of the billion worth correction on Monday, March 25.

The Finance Ministry is now trying not to get involved in the ROP's problems, Borek added.

"The ministry should defend the Czech Republic against the EC's demands," Borek said, noting that the ministry should first settle the matter with the EC and only then hold talks with regions.

Prime Minister Petr Necas (Civic Democrats, ODS) said the responsibility for errors during the drawing of European subsidies from regional operational programmes lies above all with regions that decide about them.

Regions should therefore pay for the errors from their own budgets, according to Necas. But he said a part of European money, that has not been drawn from large national programmes, could be transferred to regions.

Necas was asked for the transfer by regional governors at the meeting of the Council of the Association of Regions of the Czech Republic in Jihlava Thursday. However, such a step would be a last resort solution, Necas said.

Association of Regions chairman and South Bohemian governor Michal Hasek (Social Democrats, CSSD) said governors do not agree with Necas in the question of the so-called corrections in regional operational programmes.

Governors believe they should not pay the sanctions for wrong drawing of subsidies because the entire system was set by the state. "However, we are ready to continue talks in the matter," Hasek said.

The Finance Ministry suspended the drawing of money from the EU regional operational programme (ROP) North-West last year due to mistakes.

The EC refused to pay Kc2.6bn in total for the projects from this regional operational programme in February, pointing at mistakes.

Instead of subsidies from the EU, regions Ustecky and Karlovarsky will have to pay the proportional part. Their reps wanted half of the amount to come from the state budget but the government has rejected it.

The only thing Kalousek is willing to do is to lend Kc1.5bn to both regions.

"If the regional assemblies do not accept this helpful offer, they will bear the full political responsibility for the definitive stop to the programme. This, among other things, would mean that a further around Kc7bn will be impossible to draw for new projects," Kalousek warned, adding that such decision would also have an impact on the current recipients of subsidies.

According to original calculations, region Ustecky should pay some 66 percent and Karlovarsky 34 percent of the amount for the correction.

Karlovarsky will have Kc5.5bn budget expenditures and Kc5bn budget revenues this year. The Kc477m deficit will be covered from loans and reserve funds.

Ustecky counts on Kc12.194bn revenues and Kc12.277bn expenditures this year.

The subsidies are first paid from the state budget and the EC then pays them retroactively. The EC tolerates a 2 percent fault rate at most. When a problem is found, the retroactive payment can be stopped.

In the years 2007 to 2013, the Czech Republic can gain around Kc780bn from Brussels.