BRUSSELS WATCH:Ecofin To Debate Stronger Semester Tie To Funds

--Debate Planed This Friday At Informal Tallinn Ecofin

--Topic Is Sensitive, Could Stir Wider Polemic

By Jean Comte

     BRUSSELS (MNI) - European Union finance ministers will discuss Friday the

need to have stronger linkage between EU finances and national structural

reforms, in order to support "convergence" among euro area countries.

     In concrete terms, this could mean that access to E350bn of structural

funds be made more conditional in respect of the European Semester -- the yearly

EU cycle of coordination for single currency national economies.

     "Reinforced conditionality, linking the financing side with the required

reforms and actual implementation, stronger built-in elements in the instruments

are in the list of available options," reads the discussion paper published

ahead of the Tallinn meet.

     "EU finances focusing on reforms will increase economic resilience per se,"

it adds.

     Such a link has formally existed since 2013, when EU institutions

implemented a set of provisions allowing Brussels to freeze structural funds for

countries who had not brought their public deficit under 3% of the GDP, or who

hadn't implemented the structural reforms asked of them by the EU executive.

     To date, however, these provisions have never been used. The Commission was

supposed to recommend an EU structural fund freezing in the summer  of2016,

following the lack of "effective action" from Lisbon and Madrid to correct their

excessive deficit.

     But the EU executive gave up after strong criticism from MEPs, who called

the plan "absurd", "counterproductive", "disproportionate" and "stupid".

     SENSITIVE TOPIC

     The topic continues to be highly controversial, with some observers

protesting against the loss of autonomy for EU finances. Structural funds have

been an autonomous EU policy since the 1960s, helping poorer countries develop,

and helping to keep some level of convergence across the EU.

     Approving provisions by linking it to macro-economic considerations in 2013

was complicated, with left-wing groups across the EU vocal opposition.

Associations representing local communities and regions have not stopped

criticising it since, highlighting it as unfair to the recipients of the

EU-funded projects -- who they argue are not responsible for the economic policy

adopted by their government.

     "Structural funds must not become a tool for implementing the European

Semester," Nicolas Brookes, Director of Regional Policy at the Conference of

peripheral maritime regions, told Market News International. "It is an EU

policy, not a budget."

--MNI Brussels Bureau; +44 203-865-3851; email: tara.oakes@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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