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---

### I. INTRODUCTION
- Transfers from the EU are increasingly impacting the economies of the EU’s new member states in Central and Eastern Europe (NMS).
- Paper focus:
  - EU-related financial flows from and to the NMS during the first 2 ½ years of membership and under the EU’s new financial perspective (NFP) for 2007-13.
  - Creating correspondence between conventional EU funds data presentations and categories needed to assess impacts on fiscal and external accounts and aggregate demand.
  - Providing preliminary back-of-the-envelope estimates of expected magnitudes.
- Limitations:
  - Not a full macroeconomic analysis (implications for growth, employment, and real exchange rate left for a model-based approach).
- Covered countries (NMS): Estonia, the Czech Republic, Hungary, Latvia, Lithuania, Poland, Slovakia, Slovenia (EU8), plus Bulgaria and Romania (the latter two included only with respect to the new financial perspective 2007-13).

### II. EU FUNDS AVAILABLE TO THE NMS: OVERVIEW
- Purposes:
  - EU funds serve three broad purposes: income convergence, agricultural support, and development of internal market institutions.
- Budget classification changes:
  - New Budget headings 2007-13 mapped to Old Budget headings 2004-06 (excerpt):
    - Preservation and management of natural resources -> Agriculture (Market measures; Direct payments; Rural development; EAFRD; EAGGF; FIFG)
    - Sustainable growth -> Structural actions; Competitiveness for growth and employment; Nuclear safety; Community initiatives
    - Cohesion for growth and employment -> Structural funds (ESF, ERDF); Cohesion Funds
    - Citizenship, freedom, security and justice -> Internal Policies; Schengen; Institutional building
    - EU as a global player -> Pre-accession
    - Compensations (Budget compensation) retained
- Commitments and relative size:
  - Overall funds committed to the NMS are set to increase under the NFP.
  - Nominal allocations under the NFP are substantially greater than 2004-06 (Copenhagen agreement) and pre-accession aid.
  - In GDP terms increases are smaller, reflecting high projected nominal GDP growth in the NMS.
  - EU funds likely to decline as a percentage of GDP in fast-growing countries (example cited: Latvia).
  - Hungary and Czech Republic expected to enjoy a steep increase in EU funds relative to GDP, partly due to lower medium-term growth assumptions.
  - Differences in allocations primarily reflect degree of real income convergence.
- Structural and cohesion funds:
  - Will account for a large share of payments in less wealthy NMS and are set to increase under the NFP, at the expense of unconditional lump sum budget payments granted in the first years of membership.
- Agricultural direct payments phasing:
  - Starting from 40 percent of the level in old member states in 2007, payments to farmers will be increased by 10 percentage points a year to reach parity with the old members by 2013.
- NMS contributions to EU budget:
  - NMS contribute about one percent of GDP to the EU budget (own resources).
  - Own resources include GNP-based resources, VAT-based resources, the British rebate, and traditional revenue sources (sugar levies and 75 percent of tariffs on non-EU imports).
  - Capped at 1.24 percent of gross national income.
  - NMS annual payments were around one percent of GDP in 2005 and 2006 and are expected to remain at that level (including Bulgaria and Romania).

### III. STRUCTURAL FUNDS: PURPOSE, SIZE, ABSORPTION
- Purpose:
  - Finance investment in physical infrastructure and human resource development to increase productive potential and speed up real convergence.
- Committed amounts (examples):
  - Annual average commitments range from 1 ½ percent of GDP in Slovenia to over 3 percent of GDP in Hungary.
- NSRFs and priorities:
  - National Strategic Reference Frameworks (NSRFs) define country priorities and differ substantially.
  - Larger countries like Poland allocate a big portion to regional programs.
  - Baltics dedicate larger shares to human resource development.
  - NSRFs expected to be finalized in 2007.
- Absorption experience and problems:
  - Absorption picked up only slowly in some countries; risk of de-commitment under EU rules if funds not drawn within timeframes.
  - Contracting of funds committed under 2004-06 proceeding swiftly; likely to be completed by end-2006 in most countries.
  - Bottleneck is absorption: administrative capacity to control projects, ensure implementation, provide co-financing, and receive EU refunds after documentation submission.
  - Measured absorption (requests for interim payments) differs greatly:
    - Czech Republic and Poland initially performed poorly but have recently caught up.
    - Slovenia, Estonia, and Hungary performing particularly well.
- n+2 / n+3 rule:
  - Under n+2 rule, countries need to submit claims for refunds by end-2008; extension to n+3 will help until 2011 when n+3 reverts to n+2.
  - Trend extrapolation based on 2004-06 drawings shows Estonia on track; Czech Republic, Lithuania, Slovakia, and Poland need to sharply accelerate absorption over the next two years to avoid losing funds.
- Institutional frameworks:
  - Two distinct management models:
    - Baltic model: management centered around the Finance Ministry acting as paying and managing authority.
    - Central European model: less centralized; managing and paying authorities assigned to separate institutions (paying authority always in the Ministry of Finance).
  - Initial lessons:
    - Initial frameworks were over-regulated to prevent misuse.
    - Absorption is helped by a strong central managing authority.
  - Policy responses:
    - Poland created a new ministry of regional development in late 2005 to consolidate oversight, greatly speeding up absorption.
    - The Czech Republic retained a disaggregated approach.

### IV. FISCAL IMPLICATIONS: ACCOUNTING, TIMING, AND POLICY RELEVANCE
- Key measurement issues:
  - Countries commonly use cash-based accounting rather than accrual-based ESA95.
  - Deficit according to ESA95 rules ultimately determines compliance with EU deficit limits.
- Ultimate user of funds and ESA95 treatment:
  - Under ESA95, only funds that end up with “government units as final beneficiaries” are recorded as expenditure and offsetting revenue in fiscal accounts.
  - In practice:
    - Funds for agricultural support virtually all go to the private sector.
    - Funds for internal policies and cohesion go to the public sector.
    - Structural funds: country information suggests 45 percent of ERDF, 70 percent of ESF, and 100 percent of community initiative funds end up in the public sector.
- Co-financing:
  - Under EU rules, countries must cofinance projects at rates ranging from 15 percent for cohesion funds to 25-50 percent for structural funds.
  - For structural funds committed under the NFP, this ratio has been reduced to 15 percent.
  - In practice co-financing amounts may be larger depending on national preferences and largely rely on budgetary resources (though private sector co-financing is possible).
- Substituted spending (additionality rules):
  - Member countries can use EU funds to substitute national spending for some purposes (e.g., agriculture) but not for others (e.g., structural).
  - Difficult to establish how much a government would have spent absent EU funds.
  - Paper uses simplified assumption that countries substitute domestic spending to the maximum extent possible under EU rules.
- Policy relevance:
  - Identifying additional budgetary pressures from EU funds is important for fiscal surveillance and Euro adoption plans.
  - Ex-post assessment of fiscal impact becomes possible with data for at least two budget years.

### Box 2 — Accrual (ESA95) and cash-based fiscal reporting for EU funds
- Coverage differences:
  - ESA95: Only transfers to government beneficiaries included in general government accounts; transfers to non-government beneficiaries intermediated by government agencies are reported below-the-line.
  - Cash-statistics: Most NMS include all EU transfers above-the-line regardless of final beneficiary. Poland and Czech Republic initially included only transfers to government beneficiaries, but changed to include transfers to non-government beneficiaries.
- EU-financed part of projects:
  - ESA95: Expenditures and revenues are booked simultaneously; EU transfers for project financing are deficit neutral.
  - Cash-statistics: Expenditures and revenues are booked when incurred; not deficit neutral in the short-run due to time lags.
- National co-financing:
  - ESA95 and cash-statistics: Co-financing is booked as expenditure; deteriorates fiscal balance other things equal.
- Budget compensation:
  - ESA95 and cash-statistics: Booked as budget revenue when received; improves fiscal balance ceteris paribus.
- Contributions to the EU budget:
  - ESA95: Payments to the EU recorded at time of transfer, implying a negative impact on fiscal balance. Traditional Own Resources (TOR) are not counted as a contribution because they are treated as the EU’s budget direct revenue.
  - Cash-statistics: Booked as expenditure when transferred to the EU and thus deteriorates fiscal balance. Except for Hungary, NMS include TOR in their contributions to the EU.
- Advances for EU funds:
  - ESA95: Advances are off-budget and have no fiscal impact.
  - Cash-statistics: Baltic states book advances as revenues which temporarily improves fiscal balance. CEE countries book advances off-budget.

Lithuania example (percent of GDP)
- EU related revenues (cash-based): 2004: 2.2; 2005: 2.8; 2006p: 3.2
- EU related revenues (Accrual (ESA95)): 2004: 0.9; 2005: 1.0; 2006p: 1.4
  - Budget compensation (cash): 0.2 (2004), 0.0 (2005), 0.0 (2006p)
  - Agriculture (cash): 0.3 (2004), 1.3 (2005), 1.6 (2006p)
  - EU refundable transfers (cash): 1.7 (2004), 1.5 (2005), 1.5 (2006p)
    - o/w advances (cash): 0.5 (2004), 0.3 (2005), ... (2006p)
  - EU refundable transfers (Accrual): 0.7 (2004), 0.9 (2005), 1.4 (2006p)
- EU related spending (cash-based): 2004: 1.7; 2005: 3.6; 2006p: 4.3
- EU related spending (Accrual (ESA95)): 2004: 1.3; 2005: 2.0; 2006p: 2.4
  - Contributions to EU (cash): 0.7 (2004), 1.0 (2005), 1.0 (2006p)
  - Agriculture (cash): 0.1 (2004), 1.4 (2005), 1.5 (2006p)
  - EU refundable transfers (cash): 1.0 (2004), 1.2 (2005), 1.8 (2006p)
  - EU refundable transfers (Accrual): 0.7 (2004), 0.9 (2005), 1.4 (2006p)
- Domestic co-financing (cash and Accrual): 2004: 0.3; 2005: 0.5; 2006p: 0.6
- Net fiscal impact (percent of GDP):
  - Cash-based: 2004: 0.2; 2005: -1.3; 2006p: -1.8
  - Accrual (ESA95): 2004: -0.7; 2005: -1.5; 2006p: -1.6

Net fiscal impact across NMS and fiscal stimulus adjustment
- Net impact of EU-related transfers on the fiscal balance is negative in all countries.
- Using ESA95 accounting, the net effect is estimated by adding unconditional budget transfers received from the EU and substituted spending, and subtracting contributions to the EU and budgetary cofinancing of projects; EU funds passed on to government beneficiaries cancel out on revenue and spending sides.
- Estimated fiscal drag:
  - Could be in the range of ½ and 1 ½ percent of GDP (depends mainly on assumed amount of substituted spending).
- Measurement advice:
  - Payments to and from the EU need to be excluded from both expenditures and revenues to approximate demand impact.
  - Since net transfers from the EU are increasing in all countries, excluding them generally leads to larger estimates of the fiscal stimulus (or less withdrawal of stimulus) than suggested by headline balances.

### V. MACROECONOMIC IMPLICATIONS (DEMAND AND EXTERNAL)
- Aggregate demand measurement issues:
  - Advance payments bear no relation with economic activity and need to be excluded from demand-side estimates.
  - Timing issues: EU refunds are received after documentation approval (may require up to six months); demand impact is better captured at time beneficiaries sign contracts or pay bills.
  - Uncertainty on crowding out vs augmenting domestic spending; structural funds have additionality rules that are hard to verify.
  - Second-round or Keynesian multiplier and general equilibrium effects require broader model settings.
- Simplified demand formula:
  - D = α(T + NC − C − A) with 0<α<1 (α is the crowding-out factor; α=1 if no substitution).
- Estimated first-round demand effects:
  - Under official additionality assumptions (α ranges from 0.55 to 0.65), demand impact in first 2½ years: less than ½ percent of GDP in Central Europe; up to 1 percent of GDP in the Baltics.
  - Under full additionality (α =1), effects can be much larger, up to 4 percent of GDP under the NFP.
- Balance of Payments:
  - EU transfers affect either current or capital account depending on use (investment vs current expenditures).
  - Initial effect: increase in inward capital transfers; current account affected to a much lesser extent initially because contributions to the EU partly offset agricultural and other current transfers from the EU.
  - Import-intensive projects may deteriorate current account in short term, but could be funded by capital transfers from the EU with a low risk of sudden stops. Real appreciation from FX inflows affects external sustainability.

Quantitative summaries and projections (reported findings)
- Fig 7: EU-related transfers increasingly create a drag on fiscal deficits across EU8; estimated range ½ to 1 ½ percent of GDP.
- Fig 8: Net inflows of EU funds (percent of GDP, current prices):
  - Baltic countries received between 1 and 2 percent (2004-06 avg) vs about ½ percent for Central European neighbors.
  - Net transfers projected to increase to above 2 percent of GDP per year under the NFP for all NMS except Slovenia.
  - Romania and Bulgaria projected average annual inflows at about 3 ½ percent of GDP under the NFP.
- Fig 9:
  - 9a (Official additionality, α =0.55–0.65): demand effects modest (<½ percent GDP Central Europe; up to 1 percent Baltics for 2004-06 avg); larger under 2007-13 avg.
  - 9b (Full additionality, α =1): demand effects up to 4 percent of GDP under the NFP for some countries.
- Fig 10: BoP impact of EU-related transfers (in percent of GDP) shows rising capital account inflows from 2004 through 2013; current account effects substantially smaller in initial years.

### VI. POLICY RECOMMENDATIONS AND TRADEOFFS
- Key tradeoffs:
  - Exploit investment opportunities from EU funds while guarding against destabilizing macroeconomic side-effects (fiscal drag, overheating).
- Fiscal policy guidance:
  - Restructure budgetary spending to ensure co-financing needs do not lead to unwarranted fiscal expansion — prioritize reductions in current expenditures to accommodate cofinancing and shift budget composition toward capital spending (consistent with purpose of structural funds).
  - Where overheating is present and monetary/wage policy have limited room, tightening non-EU-related fiscal spending may be necessary to offset demand stimulus from EU funds.
- Measurement and institutional recommendations:
  - Exclude advances and EU payment timing distortions when assessing demand impact.
  - Exclude payments to and from the EU from both expenditures and revenues when estimating fiscal stimulus to better approximate domestic demand impact.
  - Recognize uncertainty due to substitution (α); policy and modeling should account for a range of α values.

### VII. AGRICULTURE, STRUCTURAL FUNDS, COHESION, AND OTHER INSTRUMENTS (KEY FACTS)
- Agriculture (CAP components available to NMS):
  - Market measures: purchase of unprocessed food at intervention price and subsidies to non-EU exports.
  - Direct payments phasing:
    - 25 percent of EU-15 level in 2004.
    - Increase by 5 percentage points a year reaching 40 percent in 2007.
    - Increase by 10 percentage points a year between 2008-13 to equalize by 2013.
    - NMS may top-up direct payments: top-ups cannot exceed 30 percent of the EU-15 level, and the sum of EU payments and top-ups cannot be higher than payments received by farmers in EU-15.
  - Rural development (EAGGF guidance / EAFRD) — CAP pillar II.
  - Fisheries (EFF): replaces FIFG under 2007-13.
- Structural funds and objectives:
  - Objectives:
    - Objective 1 — GDP per capita less than 75 percent of EU average.
    - Objective 2 — areas facing structural difficulties.
    - Objective 3 — training and promotion of employment in regions not eligible under Objective 1.
  - Four structural funds: ERDF, ESF, EAGGF (guidance)/EAFRD, FIFG/EFF.
  - Community Initiatives accounted for some 5 percent of structural funds in 2004-06.
- Cohesion Fund:
  - Eligibility: GDP per capita below 90 percent of the EU average.
  - Purpose: directly supports large infrastructure projects in transportation and environment.
- Internal policies:
  - NMS receive funding mainly for nuclear safety and Schengen-related compliance.
- Pre-accession aid:
  - Instruments: PHARE, ISPA, SAPARD.
  - Aimed at facilitating adjustment to full membership and building absorption capacity for EU funds.
- Budget compensation:
  - Unconditional payment agreed at last stage of accession negotiations; NMS that acceded in 2004 will not receive compensation after 2006; Romania and Bulgaria will receive budget compensation until 2009.

### VIII. DATA, METHODOLOGY, AND KEY NUMERIC RULES
- Commitments data mainly based on European Commission (EC) publications; information expressed at constant 2004 prices.
- Deflator used for converting to 2004 prices: two percent annual.
- Commitments divided into structural funds based on national program priorities.
- Agriculture assumptions:
  - EU support to production and exports assumed to remain unchanged from current levels.
  - Direct payments based on farmed area assumed to increase gradually to reach EU-15 levels by 2013.
- Payments 2004-06 based on actual data from national authorities and EC information; where inconsistent, EC data were used.
- Estimates for 2007-15 based on information from authorities and country-specific absorption capacities; projected absorption rates assumed relatively high.
- Given the uncertain future of CAP, assumed that there will be no such payments after 2013.
- Payments are divided between current and capital components using the classification explained in text Table 3.
- Spending is calculated as total payments received from the EU minus advance payments.
  - Advance payments are assumed to be finally settled by 2015.
- Split between government and non-government beneficiaries reflects estimates from Czech Republic, Hungary and Slovenia; applied to other NMS and kept constant over time.
- Specific numeric rules reiterated:
  - Direct payments percentages and phasing: 25 percent (2004) -> +5 percentage points/year to 40 percent (2007) -> +10 percentage points/year 2008-13 to reach parity by 2013.
  - Top-ups cannot exceed 30 percent of EU-15 level.
  - Objective 1 eligibility threshold: GDP per capita less than 75 percent of EU average.
  - Cohesion Fund eligibility threshold: GDP per capita below 90 percent of EU average.
  - Community Initiatives share: some 5 percent of structural funds in 2004-06.
  - Advance payments: assumed finally settled by 2015.
- Source data: European Commission, national authorities, IMF staff estimates.

*Source: IMF staff compilation from Appendix I of the referenced IMF working paper.*

### Appendix I. EU funds available to the new member states (NMS)............................................. 21

### Appendix I. EU funds available to the new member states (NMS)

### I. INTRODUCTION
- Transfers from the EU are increasingly impacting the economies of the EU’s new member states in Central and Eastern Europe (NMS).
- Paper focus:
  - EU-related financial flows from and to the NMS during the first 2 ½ years of membership and under the EU’s new financial perspective (NFP) for 2007-13.
  - Creating correspondence between conventional EU funds data presentations and categories needed to assess impacts on fiscal and external accounts and aggregate demand.
  - Providing preliminary back-of-the-envelope estimates of expected magnitudes.
- Limitations:
  - Not a full macroeconomic analysis (implications for growth, employment, and real exchange rate left for a model-based approach).
- Covered countries (NMS): Estonia, the Czech Republic, Hungary, Latvia, Lithuania, Poland, Slovakia, Slovenia (EU8), plus Bulgaria and Romania (the latter two included only with respect to the new financial perspective 2007-13).

### II. EU FUNDS AVAILABLE TO THE NMS: AN OVERVIEW
Findings and structure:
- EU funds serve three broad purposes: income convergence, agricultural support, and development of internal market institutions.
- Classification changed under the NFP, complicating comparisons before and after 2007.
- Box 1 maps new Budget headings 2007-13 to Old Budget headings 2004-06 (excerpted headings that affect transfers to NMS):
  - New: Preservation and management of natural resources -> Old: Agriculture (Market measures; Direct payments; Rural development; EAFRD; EAGGF; FIFG)
  - New: Sustainable growth -> Old: Structural actions; Competitiveness for growth and employment; Nuclear safety; Community initiatives
  - New: Cohesion for growth and employment -> Old: Structural funds (ESF, ERDF); Cohesion Funds
  - New: Citizenship, freedom, security and justice -> Old: Internal Policies; Schengen; Institutional building
  - New: EU as a global player -> Old: Pre-accession
  - Compensations (Budget compensation) retained
- Commitments and relative size:
  - Overall funds committed to the NMS are set to increase under the NFP.
  - Nominal allocations under the NFP are substantially greater than 2004-06 (Copenhagen agreement) and pre-accession aid.
  - In GDP terms increases are smaller, reflecting high projected nominal GDP growth in the NMS.
  - EU funds likely to decline as a percentage of GDP in fast-growing countries (example cited: Latvia).
  - Hungary and Czech Republic expected to enjoy a steep increase in EU funds relative to GDP, partly due to lower medium-term growth assumptions.
  - Differences in allocations primarily reflect degree of real income convergence.
- Structural and cohesion funds will account for a large share of payments in less wealthy NMS and are set to increase under the NFP, at the expense of unconditional lump sum budget payments granted in the first years of membership.
- Agricultural direct payments: starting from 40 percent of the level in old member states in 2007, payments to farmers will be increased by 10 percentage points a year to reach parity with the old members by 2013.
- NMS contributions to EU budget:
  - NMS contribute about one percent of GDP to the EU budget (own resources).
  - Own resources include GNP-based resources, VAT-based resources, the British rebate, and traditional revenue sources (sugar levies and 75 percent of tariffs on non-EU imports).
  - Capped at 1.24 percent of gross national income.
  - NMS annual payments were around one percent of GDP in 2005 and 2006 and are expected to remain at that level (including Bulgaria and Romania).

Key figures and graphical summaries referenced (as presented in source):
- Fig 1a: Average annual commitments (in euro bn, 2004 prices) — shows increases for individual NMS (Poland largest nominal recipient).
- Fig 1b: Average annual commitments (in percent of GDP, current prices) — country comparisons.
- Fig 2: Commitments vs. GDP at PPS in 2004 (EU15=100) — relationship between commitments (percent of GDP, 2004 prices) and GDP at PPS.
- Fig 3: Structure of commitments (shares: Structural actions; Agriculture; Other) across NMS.

### III. STRUCTURAL FUNDS
Findings on purpose, size, and absorption:
- Structural and cohesion funds finance investment in physical infrastructure and human resource development to increase productive potential and speed up real convergence.
- Committed amounts range from an annual average of 1 ½ percent of GDP in Slovenia to over 3 percent of GDP in Hungary.
- National Strategic Reference Frameworks (NSRFs) define country priorities and differ substantially (Figure 4):
  - Larger countries like Poland allocate a big portion to regional programs.
  - Baltics dedicate larger shares to human resource development.
  - NSRFs expected to be finalized in 2007.
- Absorption experience and problems:
  - Absorption picked up only slowly in some countries; risk of de-commitment under EU rules if funds not drawn within timeframes.
  - Contracting of funds committed under 2004-06 proceeding swiftly; likely to be completed by end-2006 in most countries.
  - Bottleneck is absorption: administrative capacity to control projects, ensure implementation, provide co-financing, and receive EU refunds after documentation submission.
  - Measured absorption (requests for interim payments) differs greatly between countries:
    - Czech Republic and Poland initially performed poorly but have recently caught up.
    - Slovenia, Estonia, and Hungary performing particularly well.
- n+2 / n+3 rule and absorption challenge:
  - Under n+2 rule, countries need to submit claims for refunds by end-2008; extension to n+3 will help until 2011 when n+3 reverts to n+2.
  - Trend extrapolation based on 2004-06 drawings shows Estonia on track; Czech Republic, Lithuania, Slovakia, and Poland need to sharply accelerate absorption over the next two years to avoid losing funds.
  - Figure 6 plots cumulative commitments vs. country-specific absorption trajectories (cumulative in Euro billion) for individual NMS (Czech Republic, Hungary, Poland, Slovenia, Slovakia, Estonia, Lithuania, Latvia).
- Institutional frameworks:
  - Two distinct management models among NMS:
    - Baltic model: management centered around the Finance Ministry acting as paying and managing authority.
    - Central European model: less centralized; managing and paying authorities assigned to separate institutions (paying authority always in the Ministry of Finance).
  - No conclusive evidence on which model is more efficient; initial lessons:
    - Initial frameworks were over-regulated to prevent misuse.
    - Absorption is helped by a strong central managing authority.
  - Policy responses:
    - Poland created a new ministry of regional development in late 2005 to consolidate oversight, greatly speeding up absorption.
    - The Czech Republic retained a disaggregated approach.

### IV. FISCAL IMPLICATIONS
Key issues and methodological difficulties:
- EU-related transfers directly impact fiscal balances. Importance:
  - Many NMS are exiting the excessive deficit procedure and aiming to meet Maastricht fiscal criteria for Euro adoption.
  - EU funds can obscure the size and direction of fiscal stimulus.
- Measurement challenges:
  - Accounting method:
    - Treatment of EU funds differs across countries because national budgets commonly use cash-based accounting rather than accrual-based ESA95.
    - Deficit according to ESA95 rules ultimately determines compliance with EU deficit limits.
  - Ultimate user of funds:
    - Under ESA95, only funds that end up with “government units as final beneficiaries” are recorded as expenditure and offsetting revenue in fiscal accounts.
    - In practice:
      - Funds for agricultural support virtually all go to the private sector.
      - Funds for internal policies and cohesion go to the public sector.
      - Structural funds: status uncertain; country information suggests 45 percent of regional development funds (ERDF), 70 percent of social funds (ESF), and 100 percent of community initiative funds end up in the public sector.
  - Co-financing:
    - Under EU rules, countries must cofinance projects from national resources at rates ranging from 15 percent for cohesion funds to 25-50 percent for structural funds.
    - For structural funds committed under the NFP, this ratio has been reduced to 15 percent.
    - In practice co-financing amounts may be larger depending on national preferences and largely rely on budgetary resources (though private sector co-financing is possible).
  - Substituted spending (additionality rules):
    - Member countries can use EU funds to substitute national spending for some purposes (e.g., agriculture) but not for others (e.g., structural).
    - Difficult to establish how much a government would have spent absent EU funds.
    - Paper uses simplified assumption that countries substitute domestic spending to the maximum extent possible under EU rules.
- Relevance for policy:
  - Identifying additional budgetary pressures from EU funds is important for fiscal surveillance and Euro adoption plans.
  - Ex-post assessment of fiscal impact becomes possible with data for at least two budget years.

*Source: IMF staff compilation from Appendix I of the referenced IMF working paper.*

### Box 2. Accrual (ESA95) and cash-based fiscal reporting for EU funds

### Box 2. Accrual (ESA95) and cash-based fiscal reporting for EU funds

### Coverage and accounting differences (ESA95 vs Cash-statistics)
- Coverage:
  - ESA95: Only transfers to government beneficiaries are included in general government accounts. If transfers to non-government beneficiaries are intermediated by government agencies, they are reported below-the-line.
  - Cash-statistics: Most NMS include all EU transfers above-the-line regardless of the ownership of the final beneficiaries. Poland and Czech Republic initially included only transfers to government beneficiaries, but changed this to include also transfers to non-government beneficiaries in the government accounts.
- EU-financed part of projects:
  - ESA95: Expenditures and revenues are booked simultaneously, even if spending is financed by government borrowing and refunded by the EU with a delay. Thus, EU transfers for project financing are deficit neutral as expenditures have an automatic revenue counterpart.
  - Cash-statistics: Expenditures and revenues are booked when they are incurred. This is not deficit neutral in the short-run due to time lags between expenditures and corresponding refunds. In the longer-run, the fiscal impact should be neutral to the extent that expenditures are fully refunded by the EU.
- National co-financing of EU supported projects:
  - ESA95: Co-financing, required for most EU projects, is booked as expenditure; this deteriorates fiscal balance other things equal.
  - Cash-statistics: Same treatment as in ESA95; usual cash/accrual discrepancies related to timing of commitments and cash spending may apply.
- Budget compensation received from the EU:
  - ESA95: Booked as budget revenue when it is received; ceteris paribus, it improves fiscal balance.
  - Cash-statistics: The same treatment as in ESA95.
- Contributions to the EU budget:
  - ESA95: Payments to the EU are recorded at the time of their transfer, implying a negative impact on the fiscal balance. Traditional Own Resources (TOR) are not counted as a contribution because they are treated as the EU’s budget direct revenue rather than a transfer from member states.
  - Cash-statistics: Booked as expenditure when transferred to the EU and thus deteriorates fiscal balance. Except for Hungary, NMS include TOR in their contributions to the EU.
- Advances for EU funds:
  - ESA95: Advances are part of structural commitments paid upfront to provide liquidity; they are an off-budget item and have no fiscal impact.
  - Cash-statistics: Baltic states NMS book advances as revenues which temporarily improves the fiscal balance. CEE countries book advances off-budget.

### Lithuania example (cash-based vs accrual (ESA95)) — percent of GDP
- EU related revenues (cash-based): 2004: 2.2; 2005: 2.8; 2006p: 3.2
- EU related revenues (Accrual (ESA95)): 2004: 0.9; 2005: 1.0; 2006p: 1.4
  - Budget compensation (cash): 0.2 (2004), 0.0 (2005), 0.0 (2006p)
  - Agriculture (cash): 0.3 (2004), 1.3 (2005), 1.6 (2006p)
  - EU refundable transfers (cash): 1.7 (2004), 1.5 (2005), 1.5 (2006p)
    - o/w advances (cash): 0.5 (2004), 0.3 (2005), ... (2006p)
  - EU refundable transfers (Accrual): 0.7 (2004), 0.9 (2005), 1.4 (2006p)
- EU related spending (cash-based): 2004: 1.7; 2005: 3.6; 2006p: 4.3
- EU related spending (Accrual (ESA95)): 2004: 1.3; 2005: 2.0; 2006p: 2.4
  - Contributions to EU (cash): 0.7 (2004), 1.0 (2005), 1.0 (2006p)
  - Agriculture (cash): 0.1 (2004), 1.4 (2005), 1.5 (2006p)
  - EU refundable transfers (cash): 1.0 (2004), 1.2 (2005), 1.8 (2006p)
  - EU refundable transfers (Accrual): 0.7 (2004), 0.9 (2005), 1.4 (2006p)
- Domestic co-financing (cash and Accrual): 2004: 0.3; 2005: 0.5; 2006p: 0.6
- Net fiscal impact (percent of GDP):
  - Cash-based: 2004: 0.2; 2005: -1.3; 2006p: -1.8
  - Accrual (ESA95): 2004: -0.7; 2005: -1.5; 2006p: -1.6
- Source note: Data from the authorities and staff estimates.

### Net fiscal impact across NMS and fiscal stimulus adjustment
- Net impact of EU-related transfers on the fiscal balance is negative in all countries.
- Using ESA95 accounting, the net effect is estimated by adding unconditional budget transfers received from the EU and substituted spending, and subtracting contributions to the EU and budgetary cofinancing of projects; EU funds passed on to government beneficiaries cancel out on revenue and spending sides.
- Estimated fiscal drag:
  - Could be in the range of ½ and 1 ½ percent of GDP (depends mainly on assumed amount of substituted spending).
- EU-related transfers obscure size and direction of fiscal stimulus:
  - Payments to and from the EU need to be excluded from both expenditures and revenues to approximate demand impact.
  - Since net transfers from the EU are increasing in all countries, excluding them generally leads to larger estimates of the fiscal stimulus (or less withdrawal of stimulus) than suggested by headline balances.

### Text Table 2 — illustrative fiscal stimulus and adjustments (selected figures extracted)
- Adjusted balances and fiscal stimulus are reported for multiple NMS and years in Text Table 2 (values as in the source). Examples (selected lines):
  - Revenue and o/w EU funds (example rows): Revenue values and EU funds shares vary by country and year (2005–2008); o/w EU funds entries include values such as 0.5, 0.6, 1.1, 0.9, 1.6, 1.5, 1.7, etc.
  - Expenditure and o/w contribution (1/): contribution entries frequently equal 1.0 or 0.8 depending on country/year.
  - Balance and Adjusted balance entries show headline and adjusted balances (examples): Headline balance entries include -3.1, -4.8, -3.8, -3.3, 2.3, 2.7, 1.3, 1.4; Adjusted balances include -2.5, -4.3, -3.4, -3.4, 2.3, 2.1, 0.8, 0.7.
  - Fiscal stimulus (headline and adjusted) examples: headline 1.7, -1.0, -0.5, -0.4, 1.4, -0.1; adjusted 1.8, -1.0, 0.0, 0.3, 1.2, 0.1.
- Legend:
  - "+" = additional stimulus; "-" = withdrawal of stimulus.
  - 1/ Excluding TOR.
  - 2/ Estimated distribution between government and non-government institutions may not exactly correspond to ESA actuals.

### Broader macroeconomic implications
- Aggregate demand:
  - Conceptual issues for demand impact measurement:
    - Advance payments bear no relation with economic activity and need to be excluded from demand-side estimates. In 2004 advances largely remained unspent on government accounts; Poland initially used most advances to finance its state budget deficit.
    - Timing issues: EU refunds are received after documentation approval (may require up to six months); demand impact is better captured at time beneficiaries sign contracts or pay bills.
    - Uncertainty on crowding out vs augmenting domestic spending; structural funds have additionality rules that are hard to verify.
    - Second-round or Keynesian multiplier and general equilibrium effects require broader model settings.
  - Simplified demand formula (back-of-the-envelope):
    - D = α(T + NC − C − A) with 0<α<1 (α is the crowding-out factor; α=1 if no substitution).
  - Estimated first-round demand effects:
    - Under official additionality assumptions (α ranges from 0.55 to 0.65), demand impact in first 2½ years: less than ½ percent of GDP in Central Europe; up to 1 percent of GDP in the Baltics.
    - Under full additionality (α =1), effects can be much larger, up to 4 percent of GDP under the NFP.
  - Policy implication: If economies show overheating (e.g., Baltics), offsetting the unwarranted demand stimulus from EU funds may require tightening non-EU related fiscal spending; restructuring budgets to reduce current spending and increase capital spending is preferable.
- Balance of Payments:
  - EU transfers affect either current or capital account depending on use (investment vs current expenditures). Classification summarized in Text Table 3 (source: Statistical Office of The European Communities, 1996).
  - Initial effect: increase in inward capital transfers; current account affected to a much lesser extent initially because contributions to the EU partly offset agricultural and other current transfers from the EU.
  - Implication: Traditional external indicators (e.g., overall current account deficit) require caution; import-intensive projects may deteriorate current account in short term, but could be funded by capital transfers from the EU with a low risk of sudden stops. Real appreciation from FX inflows affects external sustainability.

### Quantitative summaries and projections
- Fig 7 finding: EU-related transfers increasingly create a drag on fiscal deficits across EU8; exact size depends on substituted spending; estimated range ½ to 1 ½ percent of GDP.
- Fig 8 finding: Net inflows of EU funds (percent of GDP, current prices):
  - Baltic countries received between 1 and 2 percent (2004-06 avg) vs about ½ percent for Central European neighbors.
  - Net transfers projected to increase to above 2 percent of GDP per year under the NFP for all NMS except Slovenia.
  - Romania and Bulgaria projected average annual inflows at about 3 ½ percent of GDP under the NFP.
- Fig 9 findings:
  - 9a (Official additionality, α =0.55–0.65): demand effects modest (<½ percent GDP Central Europe; up to 1 percent Baltics for 2004-06 avg); larger under 2007-13 avg.
  - 9b (Full additionality, α =1): demand effects up to 4 percent of GDP under the NFP for some countries.
- Fig 10 finding: BoP impact of EU-related transfers (in percent of GDP) shows rising capital account inflows from 2004 through 2013; current account effects substantially smaller in initial years.

### Policy recommendations and tradeoffs
- Key policy tradeoffs:
  - Exploit investment opportunities from EU funds while guarding against destabilizing macroeconomic side-effects (fiscal drag, overheating).
  - Restructure budgetary spending to ensure co-financing needs do not lead to unwarranted fiscal expansion — prioritize reductions in current expenditures to accommodate cofinancing and shift budget composition toward capital spending (consistent with purpose of structural funds).
  - Where overheating is present and monetary/wage policy have limited room, tightening non-EU-related fiscal spending may be necessary to offset demand stimulus from EU funds.
- Measurement and institutional recommendations:
  - Exclude advances and EU payment timing distortions when assessing demand impact.
  - Exclude payments to and from the EU from both expenditures and revenues when estimating fiscal stimulus to better approximate domestic demand impact.
  - Recognize uncertainty due to substitution (α); policy and modeling should account for a range of α values.

*Source: _wp0777 - Box 2. Accrual (ESA95) and cash-based fiscal reporting for EU funds*

### APPENDIX I. EU FUNDS AVAILABLE TO THE NEW MEMBER STATES (NMS)

### APPENDIX I. EU FUNDS AVAILABLE TO THE NEW MEMBER STATES (NMS)

### Agriculture
- CAP components available to NMS:
  - Market measures: purchase of unprocessed food at intervention price and subsidies to non-EU exports.
  - Direct payments:
    - In the NMS these are lower than in the EU-15: direct payments were 25 percent of the EU-15 level in 2004 and have been increased by 5 percentage points a year reaching 40 percent in 2007.
    - The increase will be 10 percentage points a year between 2008-13 to equalize payments with the EU-15 by 2013.
    - NMS may top-up direct payments: such top-ups cannot exceed 30 percent of the EU-15 level, and the sum of EU payments and top-ups cannot be higher than payments received by farmers in EU-15.
  - Rural development (EAGGF guarantee section) — CAP pillar II: support to farms in less favorable areas (LFA), forestation of land, structural pensions (paid to those who transfer farms to young farmers), food-processing, or training of farmers.
    - EAGGF guarantee and guidance sections are merged under the 2007-13 financial perspective into the European Agricultural Fund for Rural Development (EAFRD).
  - Fisheries (EFF): fund created to support the fisheries sectors under the 2007-13 financial perspective; this task was financed with the structural fund FIFG in 2004-06.

### Structural funds and objectives
- Structural funds finance programs under Objectives:
  - Objective 1 — economic catch-up in less developed regions (GDP per capita less than 75 percent of EU average).
  - Objective 2 — economic and social cohesion in areas facing structural difficulties (e.g., rural, fisheries).
  - Objective 3 — training and promotion of employment in regions not eligible under Objective 1.
  - These objectives account for 94 percent of structural allocations for the NMS.
- Four structural funds:
  - European Regional Development Fund (ERDF): financing Objectives 1 and 2.
  - European Social Fund (ESF): financing Objectives 1, 2 and 3.
  - European Agricultural Guidance and Guarantee Fund (EAGGF) — guidance section: financing Objective 1 in agriculture; merged with guarantee section under 2007-13.
  - Financial Instrument for Fisheries Guidance (FIFG): financing Objective 1 in the fisheries sector; converted into the European Fund for Fisheries (EFF) and classified with agricultural funds in 2007-13.
- Community Initiatives (other structural funds) included Interreg III, Urban II, Equal, and Leader +; Community Initiatives accounted for some 5 percent of structural funds in 2004-06.

### Cohesion Fund
- Eligibility: countries with GDP per capita below 90 percent of the EU average.
- Purpose: does not finance programs, but directly supports large infrastructure projects in transportation and environment.

### Internal policies
- NMS receive funding mainly for:
  - Nuclear safety: decommissioning of power plants.
  - Schengen: strengthening control of the EU border and complying with the Schengen Treaty.

### Pre-accession aid
- Aimed at facilitating adjustment to full membership and building absorption capacity for EU funds; not part of the 2004-06 package but disbursements continued after accession.
- Instruments:
  - PHARE (Poland and Hungary: Assistance for Restructuring of the Economy).
  - ISPA (Instrument for Structural Policies for pre-Accession): role close to cohesion funds; ISPA and cohesion funds usually merged in reporting.
  - SAPARD (Special Accession Program for Agriculture and Rural Development).

### Budget compensation
- Unconditional payment from the EU budget agreed at the last stage of accession negotiations.
- Goals: ensure new members did not become net contributors and to improve budget liquidity.
- Financing: partly from the EU budget and partly from resources shifted from structural funds allocated to NMS.
- Not a regular EU fund: NMS that acceded in 2004 will not receive compensation after 2006; Romania and Bulgaria will receive budget compensation until 2009.

### Data, sources and classification (methodology and assumptions)
- Commitments data mainly based on European Commission (EC) publications; information expressed at constant 2004 prices.
- Where necessary, data recalculated at 2004 prices using an annual deflator of two percent (i.e., the same deflator as applied by the EC).
- Commitments divided into structural funds based on priorities set in national programs.
- Agriculture assumptions:
  - EU support to production and exports assumed to remain unchanged from current levels (in practice depends on actual production, exports and market prices).
  - Direct payments, based on farmed area, are assumed to increase gradually to reach amounts paid to farmers in the EU-15 by 2013.
  - Support under internal policies assumed to remain unchanged, except allocations for nuclear plants decommissioning.
- Payments 2004-06 based on actual data from national authorities and EC information; where inconsistent, EC data were used.
- Estimates for 2007-15 based on information from authorities and country-specific absorption capacities.
  - Projected absorption rates are relatively high: NMSs assumed to perform somewhat better than previous entrants such as Portugal and Spain.
- Given the uncertain future of CAP, assumed that there will be no such payments after 2013.
- Payments are divided between current and capital components using the classification explained in text Table 3.
- Spending is calculated as total payments received from the EU minus advance payments.
  - Advance payments are assumed to be finally settled by 2015.
- Split between government and non-government beneficiaries reflects estimates from Czech Republic, Hungary and Slovenia; the ratio between public and private beneficiaries calculated for these countries was applied to other NMS and kept constant over time.

### Key numeric rules and specific figures reported in the source
- Direct payments percentages and phasing:
  - 25 percent of EU-15 level in 2004.
  - Increase by 5 percentage points a year reaching 40 percent in 2007.
  - Increase by 10 percentage points a year between 2008-13 to equalize by 2013.
  - Top-ups cannot exceed 30 percent of EU-15 level.
- Deflator used for converting to 2004 prices: two percent annual.
- Objectives' eligibility thresholds:
  - Objective 1 eligibility: GDP per capita less than 75 percent of EU average.
  - Cohesion Fund eligibility: GDP per capita below 90 percent of EU average.
- Community Initiatives share: some 5 percent of structural funds in 2004-06.
- Advance payments: assumed finally settled by 2015.
- Source data: European Commission, national authorities, IMF staff estimates.

*Source: APPENDIX I. EU FUNDS AVAILABLE TO THE NEW MEMBER STATES (NMS) — IMF staff (text and tables as provided in the source content).*

### 3. Internal Policies211205202120120130140150160180

### 3. Internal Policies211205202120120130140150160180

### Overview
- The document presents estimated EU commitments and payments by category (Agriculture, Structural actions, Internal Policies, Compensations, Pre-accession assistance) across multiple years (2004–2015) and for specific countries (Hungary, Latvia, Lithuania).
- Source: European Commission, national authorities, IMF staff estimates.

### Estimated totals (selected figures as presented)
- TOTAL1764210723774090427044654681489151165351
- TOTAL70713051569242234004096424544594750508937512171
- TOTAL50811871569182428613503424544594750508937514218
- TOTAL39838653672013621672203921192241240822332659
- TOTAL1108011033110415001831220623402510268115181559

### Breakdown by major categories (examples extracted from tables)
- Agriculture (example rows)
  - 1. Agriculture96715837945102911241275140815421642443205
  - 1. Agriculture6469683782696111241275140815421642443443
  - 1. Agriculture139201218209213215227236244253
  - 1. Agriculture3314917395141162186205225235120120
  - 1. Agriculture50264368282355402454498541568221221
- Market measures (examples)
  - Market measures319415916816816816816816816800
  - Market measures000000000000
  - Market measures025555555500
  - Market measures1456565656565656565
- Direct payments (examples)
  - Direct payments030937139949859869879789799700
  - Direct payments02834395060708090100
  - Direct payments07593106132159185211238264
  - Direct payments0809310613215918521123826400
- Rural development and subitems (examples)
  - Rural development93212308379363358409443477477443205
  - o/w EAGGF (guidance)/EAFRD3142132375358355406439473473439203
  - EAGGF (guaranteee)/EAFRD61169176000000000
  - FIFG/EFF000453444442
  - Rural development129149157144137129131130128127
  - o/w EAGGF (guidance)/EAFRD243233136128122123122121119
  - FIFG/EFF6998888887

- Structural actions and funds (examples)
  - 2. Structural actions 209296525134322632855284529163064328533081966
  - Structural funds16820434188613231755193219322004214921721247
  - o/w ERDF124157269648969135514681468152416371693960
  - ESF444772189306351415415431463479287
  - Cohesion Funds42931844579401100913984106011361136719

- Internal Policies (examples)
  - 3. Internal Policies921009810810811712613514416200
  - Existing policies37464510810811712613514416200
  - Nuclear safety000000000000
  - Institutional building 000000000000
  - Schengen5454540000000
  - Schengen555453000000000

- Compensations (examples)
  - 4. Compensations17131310000000
  - 4. Compensations1703329000000000
  - 4. Compensations22440000000
  - 4. Compensations2144000000000
  - 4. Compensations38770000000
  - 4. Compensations4896074970000000
  - 4. Compensations3977000000000

- Pre-accession assistance (examples)
  - 5. Pre-accession assistance2592201370000000
  - 5. Pre-accession assistance139160792700000000
  - 5. Pre-accession assistance94108531800000000
  - 5. Pre-accession assistance10995570000000
  - 5. Pre-accession assistance10459451100000000
  - 5. Pre-accession assistance16533224900000000
  - 5. Pre-accession assistance10719095620000000

### Payments by type (examples)
- Current payments51010149831191137115221728186020082157775424
- Capital payments197291586123120292574251725992743293129771747
- Capital payments47144236404486449453490517553561318
- Capital payments89170196582811984794779846897910553

### Memo items and advance payments (as listed)
- MEMO ITEMS:
  - Advance payments:
    - EAGGF (guidanve)/EAFRD3119118118
    - FIFG/EFF0011
    - ERDF12473226339226
    - ESF4426649664
    - Cohesion Funds00189303303
- Additional advance payment listings (examples)
  - EAGGF (guidanve)/EAFRD963030
  - FIFG/EFF2122
  - ERDF3822446644
  - ESF1389149
  - Cohesion Funds00345454
  - EAGGF (guidanve)/EAFRD1275454
  - FIFG/EFF1155
  - ERDF5834619161
  - ESF1811192919
  - Cohesion Funds00497979
  - EAGGF (guidanve)/EAFRD1275454

### Country excerpts (selected figures presented under country headings)
- HUNGARY
  - COMMITMENTS FROM THE EU 2004-2013 (EUR MILLION, 2004 PRICES)
  - ESTIMATED PAYMETS FROM THE EU 2004-2015 (EUR MILLION, 2004 PRICES)
  - ESTIMATED BREAKDOWN OF PAYMENTS FROM THE EU 2004-2015(EUR MILLION, 2004 PRICES)
  - Examples of lines: Current payments51010149831191137115221728186020082157775424; TOTAL1764210723774090427044654681489151165351

- LATVIA
  - COMMITMENTS FROM THE EU 2004-2013 (EUR MILLION, 2004 PRICES)
  - ESTIMATED PAYMETS FROM THE EU 2004-2015 (EUR MILLION, 2004 PRICES)
  - ESTIMATED BREAKDOWN OF PAYMENTS FROM THE EU 2004-2015(EUR MILLION, 2004 PRICES)
  - Examples of lines: TOTAL984112411821326138314411518159316691745; Direct payments07593106132159185211238264

- LITHUANIA
  - COMMITMENTS FROM THE EU 2004-2013 (EUR MILLION, 2004 PRICES)
  - ESTIMATED PAYMETS FROM THE EU 2004-2015 (EUR MILLION, 2004 PRICES)
  - ESTIMATED BREAKDOWN OF PAYMENTS FROM THE EU 2004-2015(EUR MILLION, 2004 PRICES)
  - Examples of lines: TOTAL65848165906211118117111230012587131771375314331; EAGGF (guaranteee)/EAFRD86394210030000000

*Source: European Commission, national authorities, IMF staff estimates.*

### 4. Compensations490600536000000000

### 4. Compensations490600536000000000

### Key reported compensation figures
- Compensations490600536000000000
- Compensations490600536000000000 (repeated in breakdown)
- Compensations7013130000000 (reported under ESTIMATED SPENDING OF EU FUNDS TO PRIVATE BENEFICIARIES)
- Compensations701413000000000 (reported under ESTIMATED SPENDING OF EU FUNDS 2004-2015, current payments / capital payments split)
- Compensations1138960000000000 (reported under SLOVAKIA / SLOVENIA estimates)
- Compensations10593590000000 (reported under SLOVAKIA estimated spending to private beneficiaries)

### Contextual placement in tables (selected)
- Appears as item 4 in multiple country tables (POLAND, SLOVAKIA, SLOVENIA) within:
  - COMMITMENTS FROM THE EU 2004-2013 (EUR MILLION, 2004 PRICES)
  - ESTIMATED PAYMENTS FROM THE EU 2004-2015 (EUR MILLION, 2004 PRICES)
  - ESTIMATED BREAKDOWN OF PAYMENTS FROM THE EU 2004-2015 (EUR MILLION, 2004 PRICES)
- In POLAND tables, Compensations entry: Compensations490600536000000000
- In private/public beneficiary spending tables, compensation amounts differ by country and by current vs capital payment categorization (see reported values above).

### Memo and advance-payment notes referencing compensation context
- MEMO ITEMS sections appear alongside advance payment breakdowns (EAGGF (guidanve)/EAFRD, FIFG/EFF, ERDF, ESF, Cohesion Funds) but do not list separate advance-payment values specifically for "Compensations" beyond the table line items above.

*Source: European Commission, national authorities, IMF staff estimates.*

### 1. Sustainable growth1258177023332746289930563211

### _wp0777 - 1. Sustainable growth1258177023332746289930563211

### Sustainable growth
- 1. Sustainable growth1258177023332746289930563211
- competitiveness for growth and employmen
- cohesion for growth and employment125817702333274628993056321117273
- Repeated breakdowns by period (as presented):
  - 2007200820092010201120122013 (period headings appear in source)
  - 1. Sustainable growth5351576197121932193219321932193980
  - cohesion for growth and employment535157619712193219321932193219398016028
  - 1. Sustainable growth16910121518219321932193219321932362
  - cohesion for growth and employment16910121518219321932193219321932362

### Preservation and management of natural resources
- 2. Presevation and management of natural resources2234237925352680281729333039
- Detailed components (as presented):
  - rural development1077105610351015995975956
  - direct payments923113113311522170618812049
  - market measures2341921691431167734
  - EFFn.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.
- Alternative period presentation:
  - 2. Presevation and management of natural resources1476199821392588274528813006923497
  - rural development320675639923923923923923497
  - direct payments92311311331152217061881204900
  - market measures234192169143116773400
  - EFFn.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.
- Another period presentation:
  - 2. Presevation and management of natural resources1228174921392588274528813006923994
  - rural development71426639923923923923923994
  - direct payments92311311331152217061881204900
  - market measures234192169143116773400
  - EFFn.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.

### Citizenship, freedom, security and justice
- 3. Citizenship, freedom, security and justice50000000
- 3. Citizenship, freedom, security and justice5000000000

### EU as a global player
- 4. EU as a global player12731667103521910400
- 4. EU as a global player1273166710352191040000

### Administration
- 5. Administration0000000
- 5. Administration000000000

### Compensation (Schengen and cash flow facility)
- 6. Compensation (Shengen and cash flow facility)2971321310000
- 6. Compensation (Shengen and cash flow facility)297132131000000

### Totals, commitments, and allocations (as presented)
- Total  commitments511359476035564558205989625140799
- Total  commitments363253725276500150425074519931161477
- Total  commitments301745604824500150425074519931163356
- MEMO/Allocation headings and items (presented without modification):
  - Allocations:
    - CF418590778915966101810705755#NAME?
    - ESF2333314645255455705683236
    - ERDF514760114213541404136613417881
    - EARDF611824104011081139117212067100
  - Advances:
    - NSRF
    - CF144230230
    - ESF659765
    - ERDF158236158
    - EARDF249249
- Labels for spending/payments:
  - ESTIMATED SPENDING OF EU FUNDS 2007-2015 (EUR MILLION, 2004 PRICES)
  - ROMANIA
  - COMMITMENTS FROM THE EU 2007-2013 (EUR MILLION, 2004 PRICES)
  - MEMO ITEMS:
  - ESTIMATED PAYMETS FROM THE EU 2007-2015 (EUR MILLION, 2004 PRICES)

### Source, notes, and references excerpt
- Source: National authorities, European Commission, IMF staff estimates.
- Selected references listed in source (titles only, as presented):
  - European Commission (2006), “Allocation of 2005 EU Expenditure by Member State”, Directorate-General Budget
  - European Commission (2006), “Analysis of the Budgetary Implementation of the Structural Funds in 2005”, Directorate-General Budget
  - European Commission (2006), EU Support for Cohesion and Rural Development 2007-13
  - European Commission (2003), “Final Financial Package Agreed in Copenhagen on 13 December 2002 – Indicative Allocation of Commitment and Payment Appropriations”, Directorate-General Budget
  - European Commission (2007), “Own Resources Mechanism”, Directorate-General
  - European Commission (2005), “Proposals from the Presidency on the Financial Perspective 2007-13”
  - European Commission (2004), “Working for the Regions”, Directorate-General Regional Policy
  - Eurostat (2005), New Decsision of Eurostat on Deficit and Debt: Tretament of Transfers from the EU Budget to the Member States, Eurostat News Release, 15 February, 2005
  - Hallet, M., and Keereman F. (2005), “Budgetary Transfers Between the EU and the New Member States: Manna from Brussels or a Fiscal Drag?”, European Commission Directorate-General Economic and Financial Affairs
  - Sommer Martin (2003), “Financial and Fiscal Implications of EU Accession”, International Monetary Fund, mimeo

*Source: National authorities, European Commission, IMF staff estimates.*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2007/_wp0777.pdf_