European Union Solidarity Fund reform

03 October 2013
by eub2 -- last modified 03 October 2013

The European Commission proposed on 3 October to allocate more than 360 million EUR to Germany in response to the serious flooding in late spring, May and June of this year. The European Solidarity Fund exists to give support to those countries when help is needed to regain economic stability after natural disasters.

1. Why was the European Solidarity Fund (EUSF) set up?

The European Union Solidarity Fund (EUSF) was set up to respond to major natural disasters and express European solidarity to disaster-stricken regions within Europe. The Fund was created in the wake of the severe floods in Central Europe in the summer of 2002. It grants financial aid to Member States and candidate countries (currently Turkey and Montenegro) affected by major natural disasters.

2. How has the fund worked until now?

The EUSF is a relatively straightforward instrument in administrative terms. Its principle characteristics are as follows:

• In the event of a ' major disaster', there is only one single eligibility criterion - damage in excess of a threshold, specific for each country.
• The EUSF can also intervene for smaller so-called 'extraordinary regional disasters' where the majority of the population of a region is affected, and if it is deemed that the disaster will have serious and lasting effects on its economic stability and living conditions.
• The grant is paid upfront in a single instalment. There is no programming, nor co-financing requirement.
• As the EUSF financing is from additional resources over and above the normal EU budget, the Commission cannot decide on financial assistance alone. If it considers that an application meets the conditions it proposes to the budgetary authority (Council and European Parliament) to mobilise the Fund. The aid can only be paid once the money has been made available following a budgetary procedure.
• The EUSF works primarily as a refinancing instrument for emergency operations following a disaster. Once the grant is paid out, it can re-finance certain types of emergency measures from day one of the disaster.

3. What is currently the procedure for submitting an application?

The national authorities of the affected country may submit an application to the Commission no later than 10 weeks after the occurrence of the first damage. The Commission then assesses the application and decides whether to activate the EUSF together with the amount of any aid considered appropriate and proposes its mobilisation to the budgetary authority. The aid is paid in a single instalment after the signing of an implementation agreement with beneficiary State. Once the aid has been paid out, it can be used to re-finance emergency measures from day one of the disaster.

4. What can the Solidarity Fund aid be used for?

In principle, the EUSF supplements Member States' public expenditure to finance essential emergency operations undertaken by the public authorities, such as:

• Restoration to working order of essential infrastructure e.g. energy, water, transport, telecoms, health and education;
• Temporary accommodation and cost of the emergency services to meet the immediate needs of the population;
• Securing of prevention infrastructures such as dam and dykes;
• Measures to protect the cultural heritage;
• Cleaning up operations.

Private damage, such as damage to private property and income losses including in agriculture, are in principle considered insurable and are not covered.

5. How many disasters have been supported by the EUSF?

Since 2002, the Fund has been mobilised for 52 disasters covering a range of different catastrophic events including floods, forest fires, earthquakes, storms and drought. 23 different European countries have been supported so far for an amount of more than €3.2 billion. List of all interventions

6. Why has it been decided to change the current legislation?

Since its creation, is it has become clear changes were needed to live up to the expectations of disaster-stricken countries and regions waiting for EU aid. While the instrument is generally meeting its objectives well, it is considered not to be sufficiently responsive, as certain criteria for its activation are too complicated or not sufficiently clear.

The procedure for granting assistance is lengthy, as it usually takes around one year from the disaster to the payment of the grant. While the instrument has been working well for major natural disasters, two thirds of applications received concern much smaller so-called regional disasters with damage below the threshold. A large majority of those applications did not meet the exceptional criteria and have to be rejected, wasting times, resources and dashing expectations.

The Solidarity Fund therefore needs to become more responsive and visible. This can be achieved by improving and simplifying its procedural operations, introducing advance payments and making certain provisions clearer so that aid can be paid out more quickly than is currently the case.

7. What are the most important elements of the new legislative proposal?

The main aim of the proposal is to facilitate faster and simpler use of the fund. The new legislation will lead to more rapid payments of the aid, in particular through the introduction of advance payments upon request. This would allow for a quicker reaction and presence in the areas affected by disasters. It is also designed to clarify eligibility questions, particularly in the case of regional disasters, and to encourage Member States to implement more effective disaster risk prevention measures. The principles of the fund remain unchanged as do its financing method outside the normal EU budget.

Key reforms:

• Clarification of the scope of the Solidarity Fund limiting it to natural disasters and including a specific provision for drought, which will eliminate existing legal uncertainties and avoid rejection of applications which do not meet the conditions;
• Clearer rules on eligibility introducing one single criterion for regional disasters based on a threshold of 1.5% of regional gross domestic product set at NUTS 2 level. This will allow applicants to know beforehand if they are eligible and it will allow for a much faster assessment of applications by the Commission;
• Introduction of advance payments upon request: not exceeding 10% of anticipated contribution and capped at €30 million allowing for a quicker reaction and presence in the affected countries;
• Shorter administrative procedure by merging grant decision and implementation agreement into a single act;
• Introduction of provisions on implementation of effective disaster risk
• prevention measures.

8. Do the basic criteria for aid stay the same? If so what are they?

The scope of the Fund remains limited to natural disasters; the Fund continues to apply to Member States and countries in the process of negotiating their accession to the Union. Countries have ten weeks to make their applications from the first day of the disaster. The damage threshold for activating the Fund remains the same (0.6% of GNI or EUR 3 billion), just as the type of operations eligible for aid. The implementation of the aid including project selection, audit and control remain in the responsibility of the beneficiary. The expected level of spending is not touched by the modifications.

9. Where does the money for the Solidarity Fund come from?

The Solidarity Fund is in principle financed outside the EU budget. It receives additional money to be raised by the Member States over and above the normal budget, through an amending budget. This is laid down in the agreement between the institutions. Each grant is agreed separately through a proposal from the Commission and approved by Member States and the European Parliament. Currently, up to EUR 1 billion per year may be mobilised for the Solidarity Fund. Under the new Financial Framework this amount could be reduced, if confirmed by the European Parliament in the autumn, but with the possibility to carry over unspent allocations from the preceding year for the first time.

10. How will the Commission ensure that the aid is paid out faster in the future?

The Solidarity Fund is sometimes misunderstood as a rapid response instrument for which it was not designed. The European Civil Protection Mechanism is the tool that facilitates cooperation in disaster response among EU Member States and Iceland, Norway, Lichtenstein, the Former Yugoslav Republic of Macedonia. With support from the European Commission's new Emergency Response Centre, this Mechanism can facilitate joint disaster response by the participating states when a country in Europe – or anywhere else – is unable to cope alone with a disaster. The Commission can co-finance these assistance operations. Recent response operations supported by the EU Civil Protection Mechanism include the forest fires in Greece (2012), the naval base explosion in Cyprus (2012) and the floods in Bulgaria (2012).

In contrast, the Solidarity Fund is rather a financial instrument to help affected countries bear the financial burden inflicted on them by a disaster. As such, it can help cover the cost of emergency operations retroactively from day one of the disaster.

As long as the Solidarity Fund is financed with additional money above the normal EU budget – which has now been confirmed for the 2014-2020 Financial Framework - it is mandatory that Parliament and Council approve the mobilisation of any grant before it can be paid out. There is a legal minimum time required (at least 8 to 10 weeks) for the adoption of any amending budget which has to be respected.

But apart from that, there are ways to reduce delays and that is why the Commission proposed to review the Solidarity Fund Regulation.

11. How will risk prevention and disaster mitigation be encouraged with the new legislative proposal?

The Commission puts great importance minimising disaster risks and investing in prevention.

Unfortunately, disasters cannot be stopped from happening and therefore the Solidarity Fund will still be needed in the future. At the same time, Member States must step up their efforts to prevent disasters and limit their disastrous effects.

The benefit of disaster risk reduction measures has been proven time after time – most recently, by the floods in Central Europe in 2013 which were greater in scope than the floods that affected the same region 12 years ago, but caused far less loss of life and damage thanks to the implementation of preventive measures. According to the World Bank, one euro invested in prevention saves between four and seven euros in disaster damage.

During the new 2014-20 financing period, risk prevention will be one of the key priorities of cohesion policy for which considerable money could be taken up when Member States develop their new Structural Funds programmes. Already in the current period more than EUR 5 billion have been invested in this area. In addition to that, there is disaster related EU legislation to be implemented, in particular the floods directive and the upcoming revision of disaster management legislation, expected to come into force by the end of the year, which envisages better risk monitoring and closer cooperation on both prevention and response.

The revised Solidarity Fund Regulation actively encourages Member States to implement disaster prevention and risk management strategies. This is done through a requirement to report before and after applications. It means the Commission may consider reducing or refusing a grant if a Member State repeatedly infringes its obligation to implement EU law.

12. What will happen if Member States do not respect legislation on prevention?

If a Member States repeatedly does not apply relevant Union legislation (for example the Floods directive) and an infringement procedure has been opened, the Commission reduce the grant or refuse the application. This provision would be applied in the event of the re-occurrence of a similar disaster of the same nature.

13. Should the Solidarity Fund not also cover other than natural disasters, such as industrial accidents as Fukushima?

In 2005, the Commission proposed widening the scope of the Solidarity Fund to include other than natural disasters. This was one of the elements which Member States criticised the most at the time.. However, man-made disasters which are the direct consequence of a natural catastrophe by what could be called an indirect effect should be covered by the Solidarity Fund. The new legislative proposal proposes to include those disasters in the scope of the new Fund.

14. When will the new regulation be adopted?

The proposal for a Regulation amending the European Solidarity Fund was approved by the Commission on 25 July. It is now in the hands of the legislator, i.e. the European Parliament and the Council. The Commission hopes to have the amended Regulation in place before the European elections in May 2014.

Source: European Commission