Financial flows between the Czech Republic and the European Union
The Czech Republic's accession to the European Union in May 2004 had a profound effect on the volume and, in particular, structure of transfers vis-à-vis EU institutions. Before 2004 drawings on pre-accession aid funds were included under current government transfers and ranged between CZK 1 billion and CZK 3 billion every year. 2003 was an exception, with overall aid from the EU reaching CZK 10.5 billion, of which CZK 4 billion was received from the Solidarity Fund for flood damage repairs.
Table 1
The Czech Republic's accession to the EU significantly changed the volume and structure of its financial transactions with the EU
(CZK mil)
|
|
2004 |
1-6/2005 |
|---|---|---|
|
Pre-accession aid |
4 877,9 |
415,2 |
|
Phare |
2 576,7 |
135,5 |
|
Ispa |
1 086,8 |
0,0 |
|
Sapard |
1 214,4 |
279,7 |
|
Agriculture |
2 813,7 |
8 603,8 |
|
Market measures |
147,3 |
630,7 |
|
Direct payments |
0,0 |
6 254,7 |
|
Rural development |
2 666,4 |
1 718,3 |
|
Structural operations |
6 082,9 |
3 576,6 |
|
Structural Funds |
5 118,5 |
3 222,9 |
|
Cohesion Fund |
964,3 |
353,7 |
|
Internal policies |
387,4 |
39,5 |
|
Transition Facility |
0,0 |
0,0 |
|
Community programmes |
387,4 |
39,5 |
|
Compensation |
10 466,5 |
4 494,2 |
|
Total income from EU budget |
24 628,4 |
17 129,4 |
|
Total payments to EU |
17 963,2 |
15 189,6 |
|
Net position in respect of EU budget |
6 665,2 |
1 939,8 |
|
Payments to EU institutions |
19 027,9 |
15 189,6 |
|
Payments to EIB |
879,8 |
0,0 |
|
Payments to ECB |
184,9 |
0,0 |
|
Net position in respect of EU institutions |
5 600,5 |
1 939,8 |
|
Source: Ministry of Finance; CNB calculation |
|
|
Since accession, transactions have been included either under current transfers on the current account or under capital transfers on the capital account. Under current government transfers, transfers with the EU ended in a surplus of CZK 1.5 billion in 2004. Transactions included under government capital transfers (the EU Cohesion Fund and transfers of a portion of advance payments under structural operations) recorded a surplus of CZK 5.2 billion on the capital account. The overall balance vis-à-vis the EU budget was CZK +6.7 billion in 2004 and CZK +1.9 billion in 2005 H1.
Most pre-accession aid funds were obtained through the PHARE programme, the priorities of which are institution building and investment financing. On EU accession, agricultural policy became an important transfer item, especially in the form of direct payments to farmers and the Horizontal Rural Development Plan. Payments from structural funds, realised particularly on the basis of the National Development Plan for 2004-2006, became another important source of financing from the EU. The revenue item Compensation is an outcome of the Copenhagen summit and aims at preventing any deterioration in the Czech Republic's net position following EU accession. Compensation is a direct revenue to the state budget and is not tied to the implementation of specific projects. Table 1 (Box 3) shows turnovers by type of transactions performed in 2004 and 2005 H1.
Other government and CNB transactions also had to be executed after EU accession. The government' s payment of EIB capital and reserves and the CNB's payment of ECB capital in 2004 reduced the financial account surplus by CZK 1.1 billion.