Procedia Economics and Finance 32 ( 2015 ) 1590 1597 [613157]

Procedia Economics and Finance 32 ( 2015 ) 1590 – 1597
2212-5671 © 2015 The Authors. Published by Elsevier B.V . This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/4.0/).
Selection and peer-review under responsibility of Asociatia Grupul Roman de Cercetari in Finante Corporatiste
doi: 10.1016/S2212-5671(15)01550-6 ScienceDirectAvailable online at www.sciencedirect.com
Emerging Markets Queries in Finance and Business
Flexibility and simplification of EU’ Financial Regulation in t he
future programming period 2014 -2020
'LDQD6DEăX –Popaa,*, Ramona Marab
a8QLYHUVLW\RI2UDGHD)DFXOW\RI(FRQRPLF6FLHQFHV8QLYHUVLW ăĠLLStreet, code 410087, Bihor, România
b%DEHú -Bolyai University of Cluj -Napoca, 58 -60 Teodor Mihali, 400591, Cluj -Napoca, Romania

Abstract
The paper examines some of the new trends in EU Financial regul ation that directly impact the EU budget execution. The
New EU financial regulation, valid from 01.01.2013, allows a more effective use of its own resources and establishes
simpler rules and clearer implementation procedures for benefic iaries. In this way, an easier, faster and integral access to
the Community funds is possible, allowing the EU budget to exer cise its role of stabilizing the Union. In the future
programming period 2014 -2020, different instruments, such as loans, equity or guarantee s will be used to enhance the
effectiveness of EU funds and thus to enhance their financial i mpact. The paper also makes reference to other pieces of EU
regu
lation, which have the purpose of addressing the weaknesses i d e n t i f i e d a s a c o n s e q u e n c e o f t h e f i n a n c i a l c r i s i s .
Structural Funds Regulations, applicable in the future programm ing period 2014 -2020, aimed to increase the efficiency of
s
tructural instruments, so important in the current economic and fiscal climate. However, the debate continues about the
pos
sibility of improving the EU budget, its revenue and expendi ture, to comply with several financial relevant principles
(economic efficiency, equity, stability, visibility and simplic ity, effectiveness administrative costs, autonomy financial).

© 2015 Published by Elsevier Ltd. Selection and peer review under resp o nsibility of Emerging Markets
Queries in Finance and Business local organization.

Keywords: common strategic framework, financial regulation, simplification, f inancial instruments, EU funds

* Corresponding author. Tel.: +4 0-264-418-652/3/4/5 .
E-mail address: d [anonimizat] .
© 2015 The Authors. Published by Elsevier B.V . This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/4.0/).
Selection and peer
-review under responsibility of Asociatia Grupul Roman de Cercetari in Finante Corporatiste

1591 Diana Sabău–Popa and Ramona Mara / Procedia Economics and Finance 32 ( 2015 ) 1590 – 1597
1. Introduction
The economic and financial crisis of 2007, which, according to so me, is not over yet in some UE Member
States, has had a significant negative impact on the public fin ances of the European Union, as it determined the
drastic reduction of the budgetary revenues, the increase of th e g o v e rn m e n t d e f i c it i n m os t of th e U E M em b e r
States and the decrease of the revenues of the natural persons and of the legal entities. The UE response to the
crisis consisted in: support to Member States in financial diff iculty, the creation of new legislative and institutional
acts ("Six – Pack", "Two -Pack", Fiscal Compact, ESM, Single Supervisory Mechanism at the ECB), legislation to
support entrepreneurship, obtaining funding by means of grants and the increased use of the UE financial
instruments, identification of the political priorities of the European Union (the Europe 2020 Strategy).
In this context, the challenge to overcome the economic crisis lead s to considerations on how non -repayable
f
unds made available by the European Union can be used in a sim pler more accountable, effective and efficient
way. This also means knowing and respecting the New Financial R egulation of the European Union, published the
Official Journal of the UE on the 26.10.2012 and entered into f orce on the 1.01.2013.
The Financial Regulation of the European Union is the document c ontaining the financial norms of the
European Union and establishing the way in which its budget is spent. The European Commission must
continuously assess the way it manages the EU funds, but there i s a l s o a f o r m a l r e q u i r e m e n t t o r e v i s e t h e E U
Financial Regulation and its Implementing Rules of Application at leas t on ce ev ery th ree y ears . Th e legis lativ e
procedure of simplifying the EU Financial Regulation was initia ted by the European Commission by the proposal
C
OM (2010) 815 final, on the 22.12.2010, after a public consult ation which started on the 19.12.2009 and led to
235 contributions of all the interested parts having benefited of or implementing EU funds.
In the context of the new financial perspective 2014 -2020 and in order to better contribute to the achievement of
t
he Europe 2020 goals, the new UE Financial Regulation brings t hree major types of changes in terms of:
x simplification: cutting red tape, speeding up procedures and sh i fting the focus from paperwork to
performance;
x accountability: ensuring enhanced sound financial management an d t he protection of the EU's financial
interests;
x leverage: introducing financial mechanisms which will enable th e mobilization of third -party funds as
l
everage on EU funds
The Council Regulation of 25.11.2013 laying down the multiannual financial framework f or the years 2014-
2020 stipulates, besides the general dispositions, the use of c ertain special instruments to react to specified
unforeseen circumstances: the Emergency Aid Reserve, the European Union So lid arity Fund, the Flexibility
Instrument, the European Globalization Adjustment Fund, the Con tingency Margin and the ways of revising the
multiannual financial framework. This multiannual financial fra m ew o rk f o r t h e y e a r s 20 1 4 -2020 amounts to
EUR
959.988 million in commitment appropriations and EUR 908.40 0 million in payment appropriation. Most
of the commitments for the period 2014 -2020 are destined to Smart and Inclusive Growth, Sustainable Gr ow th;
Natural Resources benefits of 38,87% of the total amount.
I n t h e p a p e r R e s t r u c t u r i n g F i n a n c i a l R e g u l a t i o n i n t h e E u r o p e a n M o n e t a r y U n i o n , b y X a v i e r V i v e s , C S I C ,
Barcelona, Spain, published in the Journal of Financial Service s Research 2001, the author shows that the
Financial Regulation has been traditionally revised and develop ed as a response to the crisis and also indicates
the role of the financial regulation institutions within the Eu ropean Monetary Union for maintaining stability
and stimulating the European economic integration. In the paper EU Financial Instruments Landscape for RDI and Gro w
th 2014- 2020 of June 2013, by Jean -David
Mal
o, published in the EuroNanoForum 2013, the author presents the former financial instruments used in the
programming period 2007 -2013 in order to enhance research, development and innovation, t he new financial
instruments to be used in the current programming period and comparative aspects.
In COM(2012) 42 final, laying down the multiannual financial fra mework for the years 2014 -2020, based on

1592 Diana Sabău–Popa and Ramona Mara / Procedia Economics and Finance 32 ( 2015 ) 1590 – 1597
public consultations and the request of the Member States and of the European Instit ut ions the Commission
invites to reduce the administrative burden for beneficiaries o f funds and for all actors involved in spending the
EU funds and to speed up the absorption of EU funds by the Memb er States.
The simplification efforts made in the European Union will not be fully effective unless they are accompanied
by parallel efforts on a national and regional level, especiall y concerning actions within the Common
Agricultural Policy and the Regional Policy.
The simplification process of the European Union budgetary norm s does not end with the adoption of the new
financial regulation and of the other related acts. The Europea n Commission will follow -up the implementation
o
f the final acts in order to monitor how the simplified rules will function in practice and in order to assess and
quantify, if possible, their effect on the ground, and to propo se modification of the rules agreed at the EU level,
if necessary. This process will be implemented by the periodic release of a scoreboard, meant to survey the
simplification measures proposed by the Commission.
2. The simplification of the EU financial regulation
The European Commission must take measures in response to the n eed of simplifying the implementation of
EU programmes, thus reducing the administrative burden and the costs for beneficiaries of funds and for all
actors involved.
To achieve this, the Commission has proposed the rationalizatio n of programmes for the financial period
2014- 2020 and the use of simplified implementation mechanisms and pr ocedu res. The experience of the last
two programming periods has shown that frequent changes in rule s can also reduce legal certainty for
beneficiaries and create instability for national and regional administrations. Since a radical overhaul of the
legislative framework could increase the complexity of manageme nt, the Commission's proposals focus on
areas where practical simplific ation can be attained. (COM (201 2) 42 final, 2012).
The simplification of the UE Financial Regulation refers mainly to the alternative s to actual costs, that is
lump sums (payments against delivery), flat rates (percentages meant to cover certain categories of costs) and
unit costs. The simplified forms of grants have considerable po tential to lessen the administrative burden of all
stakeholders by reducing the requirements of financial reportin g in the case of flat rates, or even replacing it by
reporting of outputs and results in the case of standard scales of unit costs and lump sums. This should enable
beneficiaries to focus on the results estimated in the grant ap plication.
The maximum threshold per lump sum payment (currently EUR 25 00 0 ) will be removed and the European
Commission will determine the amounts depending on the nature of the programme. The lump sums and the
u
nit costs will be calculated on the basis of the historical da ta of the individual beneficiary or on the basis of
usual accounting practices.
Beneficiaries will be entitled to receiving money due to them within the deadlines of 30, 60 or 90 days;
m
issing a deadline will create an entitlement to late -payment interest for the beneficiary. Beneficiaries applying
f
or grants of up to EUR 25,000 are already exempt from submitti ng certain documents. This threshold will be
raised to EUR 60,000.
Under the new rules, national fund managers for structural and o ther EU funds destined to agriculture and
rural development under shared management will have to issue an nual management declarations that will be
subject to independent audit. Provisions on indirect management where Member States' national agencies, third
countries, international organizations or other authorized bodies implement EU funds will be harmonized and
str
eamlined.
The new Financial Regulation makes it possible for the commitment appropriations which have not been
u
sed by the end of a financial exercise to be carried over to t he next year, for the projects funded under the
Connecting Europe Facility and in case of the Emergency Aid Res erve, amounting to EUR 280 million.

1593 Diana Sabău–Popa and Ramona Mara / Procedia Economics and Finance 32 ( 2015 ) 1590 – 1597
Other simplifications brought about by the new Financial Regula tion refer to common complementary rules
covering several funding instruments and programmes (COM(2012) 42 final, 2012):
x To bring together the three main sources of funding for researc h and innovation and technological
development within a single common strategic framework for rese arch and innovation in the Horizon 2020
Framework Programme;
x To establish the Connecting Europe Facility (CEF), a unique ins tr ument for EU priority infrastructure
investments (transport, energy and telecommunication);
x To establish the Common Strategic Framework (CSF), for the ERDF , ES F, CF, EAFRD and EMFF;
x To establish a common instrument for the Asylum and Migration F un d and all components of the Internal
Security Fund;
x To provide for a horizontal instrument laying down common rules an d procedures for the implementation of
the Union's instruments for external action.
The Commission's sector -specific legislative proposals for the post 2013 develop and co m plete the
simplification exercise with rationalized spending programmes and instruments for all EU policy areas. Th es e
proposals enhance the harmonization of funding rules, improve legibility and transparency of rules i n order to
increase legal certainty and introduce a series of specific pra ctical simplification measures, including more
proportionate control measures attuned to the risk environment and aimed at providing reasonable assurance at
a reasonable cost. Simplification can take many forms: reductio n i n t h e d i v e r s i t y o f r u l e s a c r o s s d i f f e r e n t
instruments, measures which simplify performance assessment, th e possibility to choose arrangements which
are suitable for particular circumstances, more proportionate c ontrol and reporting requirements, widespread
use of e -Governance tools.
To conclude, the simplification is a common challenge and respo n sibility for the EU institutions and for the
EU Member States.
3. New financial instruments of the EU
EU’s financial instruments help to mobilize additional public or private co -investments in order to address
m
arket failures in line with Europe 2020 and cohesion policy pr iorities. Their delivery structures entail
additional expertise and know -how, which helps to increase the efficiency and effectiveness o f public resource
allocation.
Financial instruments have been used for delivering investments for Structural Funds since the 1994 -1999
prog
ramming period. Their relative importance has increased dur ing the programming period 2007 -2013 and
t
hey now represent around 5 % of total European Regional Develo pment Fund (ERDF) resources. In the light
of the increasing scarcity of public resources, financial instr uments are expected to play an even stronger role in
cohesion policy in the 2014 -2020 programming period.
In the 2014- 2020 programming period, in contrast to the previous periods, M em ber States and managing
authorities may use financial instruments in relation to all th ematic objectives covered by operational
programmes and for all Funds, where it is efficient and effecti ve to do so. The new framework also contains
clear rules to enable better combination of financial instrumen ts with other forms of support, in particular with
grants, as this further stimulates the design of well -tailored assistance schemes that meet the specific needs of
Me
mber States or regions.
Managing authorities may design financial instruments on the basi s of an ex ante assessment that has
identified market failures or sub -optimal investment situations, possible private sector particip atio n and
resulting added value of the financial instrument in question.
Across Member States and regions, the operational environment f or financial instruments, as well as the
administrative capacity required for their successful implement ation, very significantly. Against this
background, the European Commission’s proposal offers different implementation options from which Member

1594 Diana Sabău–Popa and Ramona Mara / Procedia Economics and Finance 32 ( 2015 ) 1590 – 1597
States and managing authorities may choose the most suitable solution. (European Commission’s Facts he et –
Financial Instruments in Cohesion Policy 2014 -2020):
x Financial instruments set up at EU level and managed directly by the Commission: operational programmes
co
ntributions to the financial instruments will be ring fenced for investments in regions and actions covered
by those programmes from which resources were contributed.
x Financial instruments set up at national/regional level and und er shared management: managing authorities
have the possibility of contributing programme resources to already existing or newly created instruments,
tailored to specific conditions and needs; or to standardized instruments, for which the terms and conditions
wi
ll be pre -defined and laid down in a Commission Implementing Act. These i ns truments should be ready –
to-use for a swift roll -out.
x loans or guarantees may be implemented directly by managing authorities themselves. I n s u c h c a s e s ,
managing authorities will be reimbursed on the basis of the act ual loans provided or guarantee amounts
blocked for new loans, and without the possibility to charge ma nagement costs or fees to the CSF Funds.
In terms of financial incentives, the EU co -financing share will be increased by 10% in cases where a
p
riority axis is fully implemented through financial instrument s.
In the 2014 -2020 programming period the importance of Smart and inclusive g ro wth increases. If during the
2007- 2013 financial framework, the resources allocated to Smart and inclusive growth represented 44,6% of
th
e total commitment appropriations, during the current financi al framework, they represent 49,96% of the total
com
mitment appropriations, as the volume of commitment appropri ations has increased by 11,09%. Instead,
the share of resources allocated to Sustainable Growth diminishes: Natural Growth decr eas es from 42,57% to
38,87%
of the total commitment appropriations.
Therefore, we estimate the increase of EU resources allocated to research, development and innovation in
t
he current programming period. In the 2007 -2013 programming period, the debt instrument for large R&D
p
rojects was used as an incentive to research and innovation: t he Risk Sharing Finance Facility under FP7,
offering loans and guarantees for research and innovation proje cts and the SME Guarantee Facility (SMEG)
under the Competitiveness and Innovation Framework Programme (C IP). In the current 2014 -2020
p
rogramming period, the debt instrument for large R&D projects will be used under Horizon 2020 Programme:
Loans and guarantees to R&I (non -SMEs) for activities of mid -caps and large firms, universities, research
in
stitutes, research infrastructures, guarantees and securitiza tion on loans for all types of SMEs under COSME
P
rogramme, guarantees on loans for R&I -intensive SMEs, under Horizon 2020 Programme, guarantees for
loan
s to creative and cultural e ntities under Creative Europe Programme. (Jean -David Malo, 2013).
The new financial regulation allows the EU to establish trust funds. They will be managed by the
Commission and implemented at accountability standards as high as those applicable to the EU budget. Trust
funds in external action are funds pooled from a number of dono rs, in particular the EU, its Member States,
third countries, international organizations or private donors such as citizens to provide support to agreed
ob
jectives. These can relate to the fight against a certain dis ease, or focus on providing relief in cases of
urgency, such as a natural disaster. The new possibility of EU Trust Funds will increase European coordination
of financial support in external action and will also enhance t he visibility of EU and Member States' external
aid.
4. New regulations of the structural funds applicable in the progr a mming period 2014 -2020
The reformed cohesion policy in the future programming period 2 01 4-2020 will be the EU's principle
i
nvestment tool for delivering the Europe 2020 goals: creating growth and jobs, tackling climate change and
energy dependence, and reducing poverty and social exclusion. T his implies three goals:
x Smart, sustainable and inclusive growth
x Attaining common indicators, sp ecif ic to programmes, reporting, monitoring , evaluation;

1595 Diana Sabău–Popa and Ramona Mara / Procedia Economics and Finance 32 ( 2015 ) 1590 – 1597
x Maximizing the impact of the available EU funding
Overall, the reformed cohesion policy will make available up to EUR 366.8 billion to invest in Europe's
regions, cities and the real economy. In figure 1 we have the a llocation of EU budgetary resources, according to
the cohesion policy goals.
Fig. 1. Total EU allocations of Cohesion Policy 2014-2020* (mil lion €, current prices)
In order to improve the coordination and harmonization of struc tural funds implementation: the European
Regional Development Fund (ERDF), the European Social Fund (ESF ) , t h e C o h e s i o n F u n d ( C F ) w i t h t h e
European Agricultural Fund for Rural Development (EAFRD) implem entation and the European Maritime and
Fisheries Fund (EMFF) implementation, the regulation proposed b y the European Union contains common
provisions for ERDF, ESF and CF, but which do not apply to EAFR D, as well as common provisions for
ERDF, ESF, CF and EMFF, but which do not apply to EAFRD. The fi rst part of the regulation establishes
common rules which govern the European Regional Development Fund, the European Social Fund, the
Cohesion Fund, the European Agricultural Fund for Rural Develop m e n t a n d t h e E u r o p e a n M a r i t i m e a n d
Fisheries Fund. The second part establishes common rules which govern the three structural funds used to
deliver the cohesion policy goals: the European Regional Develo pment Fund, the European Social Fund and
Cohesion Fund (CF).
The new”common strategic framework” (CSF), proposed by the EC a nd adopted in April 2013 will offer a
unique guideline for the CSF funds of the EU: ERDF, ESF, CF, EAFRD ;I EMFF, so that it will increase the efficiency of structural instruments and will simplify the procedures.
The CSF funds will be allocated on the basis of a fait system o f three categories of regions, classified
according to the GDP per capital:
x less developed regions: GDP per capita of less than 75% of the EU average
x transition regions: GDP per capita of less than 90% of the EU a verage
x more developed regions: GDP per capita above 90% of the EU aver age
According to the Europe 2020 Strategy, in the 2014-2020, the ER DF resources will concentrate on fields
such as energetic efficiency, renewable energy sources, innovat ion, support to small and medium enterprises
(SME) – at least 80% of the funds in the case of more developed regions and at least 50% in the less developed

1596 Diana Sabău–Popa and Ramona Mara / Procedia Economics and Finance 32 ( 2015 ) 1590 – 1597
ones. Also, a minimum of 5% of ERDF resources will be allocated to sustainable and integrated urban
development and to the creation of an urban development platfor m meant to promote cities exchanges. Special
atten
tion will be granted to the areas with specific natural or demographic characteristics, as well as a special
al
location for outermost regions… (Cohesion Policy 2014 -2020 – Investments in economic growth and
e
mployment – http://ec.europa.eu/regional_policy/index_fr.cfm)
In the current programming period, the Cohesion Fund, Member Stat es with GDP per capita above 90% will
focus, just as during the previous periods on: investments in c limate change adaptation and risk prevention,
in v es tm en ts in w ater an d w aste s ectors , an d als o in th e u rban e nvironment, energetic projects, provided that
they constitute obvious benefits for the environments, investme nts in transeuropean transport networks, as well
as in urban transport systems with low carbon emissions. For the first time, a part of the Cohesion Fu n d will be
directed towards the “Connecting Europe” mechanism, which aims to develop a European competitive and
sustainable transport system.
The new ESF regulation brings the following changes:
x Targeting the funds on four thematic objectives in line with th e Eu rope 2020 Strategy, in order to maximize
the financing impact.
x A greater emphasis is placed on combating youth and disadvantage d groups (such as migrants)
unemployment; at least 20 % of the ESF should be allocated to prom oting social inclusion
x Support to specific measures of promoting the equality between m en and women and combating exclusion.
x Simplification of the ESF, with a greater emphasis of the simpl i fication of procedures for small
beneficiaries.
x A results -oriented approach in operational programmes management, through t he common action plans.
CLLD is a specific tool for use at sub -regional level, which is complementary to other development sup port
at local level. CLLD can mobiliz e and involve local communities and organizations to contribute to achieving
t
he Europe 2020 Strategy goals of smart, sustainable and inclus ive growth, fostering territorial cohesion and
reaching specific policy objectives.
For the period 2014 -2020, the Commission proposes a single methodology regarding CL L D f o r t h e C S F
Funds, allowing their connected and integrated use:
x focuses on specific sub- regional territories;
x is community- led, by local action groups;
x is carried out through integrated and multi -sectoral area -based local development strategies;
x includes innovative features in the local context, networking a n d, where appropriate, co -operation.
5. Conclusions
Still, the simplification and the flexibility of rules is a comm on responsibility of EU institutions and of the
Member States, which means that combined efforts are necessary throughout the legislative process.
The simplification and flexibility efforts made in the European Union will not be fully effective unless they
are accompanied by parallel efforts on a national and regional level, especially concerning actions within the
Common Agricultural Policy and the Regional Policy.
The simplification process does n o t end with the adoption of le gislation. The European Commission will
follow -up how the simplified rules will function in practice and in order to as sess and quantify, if possible, their
effect on the ground, and to propose modification of the rules agreed at the EU level, if necessary.
From the budgetary point of view, the consolidation of financia l instruments, as catalysts of public and
private resources aims to support the Member States and regions to reach the levels of strategic investments
which are necessary for the implementation of the Europe 2020 S trategy.

1597 Diana Sabău–Popa and Ramona Mara / Procedia Economics and Finance 32 ( 2015 ) 1590 – 1597
References
European Investment Bank Financial Instruments: A Stock -taking Exercise in Preparation for the 2014 -2020 Programming Period – Final
R
eport, March 2013
Jean-David MALO EU Financial Instruments Landscape for RDI and Growt h 2014 -2020, European Commission – DG Research and
I
nnovation, Dublin, 19 June 2013, EuroNanoForum 2013
6DEăX -3RSD&ODXGLD'LDQD%XJHWXO8QLXQLL(XURSHQHúLIRQGXULOHFRPXQ LW DUH(GLWXUD(FRQRPLFD%XFXUHúWL
Axel V olkery Use of financial instruments: the way forward in th e 2014 -2020 EU MFF ‘Next MFF: Incentives and safeguards for climate
f
riendly investments’, Institute for European Environmental Pol icy, Brussels, 26 March 2013
Regulation (EU, EURATOM) No 966/2012 of the European Parliament and of the Council on the financial rules applicable to the g eneral
budget of the Union and repealing Council Regulation (EC, Eurat om) No 1605/2002
5HJXODWLRQRIWKH(XURSHDQ3DUOLDPHQWDQGRIWKH&RXQFLOOD\LQ J GRZQFRPPRQSURYLVLRQVUHJDUGLQJ(5')(6)&)($)5'úL(0) F,
as the object of the Common Strategic Framework, aand laying do wn general provisions regarding ERDF, EFS and CF and repealing
Regulation (CE) no. 1083/2006.
COM(2012) 42 final – Communication from the Commission to the European Parliament, t he Council, the European Economic and Social
Committee and the Committee of the Regions – A Simplification Agenda For The MFF 2014 -2020 http://eur –
lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2012:0042:FIN:RO 😛 DF
http://ec.europa.eu/regional_policy/sources/docoffic/official/r e gulation/pdf/2014/proposals/regulation/erdf/erdf_proposal_ro.p df
http://ec.europa.eu/regional_policy/sources/docoffic/official/r egu lation/pdf/2014/proposals/regulation/cohesion/cohesion_propo sal_ro.pdf
http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2013:0 56 0:FIN:RO:PDF
http://ec.europa.eu/regional_policy/what/future/legi_en.cfm
http://ec.europa.eu/regional_policy/sources/docgener/informat/2 0 14/financial_instruments_ro.pdf