Inflation is endangering EU-funded infrastructure constructions across Central and Eastern Europe (CEE), and affected countries say the European Commission (EC) is not reacting fast enough.
The EU’s structural investment scheme – which is widely distributed around CEE in seven-year cycles – has been hit hard by inflation, and the soaring prices of construction materials in particular.
Member states are scheduled to complete current projects by the end of 2023, and failure to meet deadline has historically meant that they have to repay the relevant funds to the EU. The regulations that allow a 10-15% hike for EU-funded projects do not adequately reflect contemporary inflation rates.
Russia’s invasion of Ukraine on 24 February has disrupted global supply chains and exacerbated soaring industrial producer prices, which overtook consumer price rises in June 2020.
Ukraine produces aluminium, iron, plastics and oil, which are essential for steel, cement and polystyrene production, and as supply chains have been hit, CEE countries have been particularly exposed.
Price hikes have already caused delays to the extension of a tram line in the Slovak capital of Bratislava, which the EU is co-funding to the tune of EUR 90mn.
According to Euractiv, the EC is “shirking responsibility” by judging every project that it is co-funding on a “case by case” basis.
“We have problems in every single construction project,” said Pavol Kovacik of the Slovak Construction Firms Association. Overall in Slovakia, EU co-funded projects collectively worth EUR 1.2bn are currently either delayed or halted.
That number is even higher in Czechia, at EUR 1.3bn, and the country’s regional development minister has urged the EC to intervene. According to Ivan Bartos, the EU should extend the deadline to complete this funding cycle’s projects by a year.
For its part, Slovakia revised its law on EU project funding in May, to allow budget hikes for EU-backed projects.
According to a Euractiv insider source, the EC does not intend to introduce extensions, and is considering other solutions while continuing its case by case approach.
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