Just A Summary | Reforming The European Union: Realizing The Impossible
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LODZ, Poland: The European Union has given Poland more than 100 million euros ($125 million) to build at least three "ghost" airports in places where there are not enough passengers to keep them in business. The result is gleaming new airport terminals which, even at the peak of the holiday season, echo to the sound of empty concourses and spend millions trying to attract airlines. Poland is not the only country in Europe to have built airports that struggle to attract flights. Around 80 airports in Europe attract fewer than 1 million passengers a year, and about three-quarters of those are in the red, according to industry body Airports Council International. Some cost much more to build than the Polish projects. One airport in eastern Spain, open for three years, has so far received not a single flight. But Poland is striking because the country received so much money for its projects from EU funds. Poland received 615.7 million euros in EU support for airports between 2007 and 2013, according to figures supplied to Reuters by the European Commission. That was almost twice as much as the next biggest recipient, Spain, and more than a third of all member states' money for airports. The government declined to provide all the information on which it based its decisions to invest in the airports, but Reuters has reviewed data on three sites where traffic fell dramatically short of forecasts. Poland is often touted by Brussels as one of the most efficient users of EU aid, and there is no suggestion the country used EU airport money corruptly. European help has been vital in improving Poland's aviation infrastructure, only a small share of the country's airport spending has been on white elephants, and passenger shortfalls may have been exacerbated by the 2008 global financial crisis. Spokespeople at some airports said the projects could be considered a success because they were creating jobs, bringing in tourists, and driving investment in the regional economy. But it is clear mistakes were made in Poland, planning officials and aviation executives say. The whole experience raises questions about how the government will handle the next big injection of EU money, which it expects to be 82 billion euros over the next seven years. The problem is most striking at the recently rebuilt Lodz passenger terminal, where passenger numbers in 2013 fell almost one million short of forecasts, according to European Commission documents examined by Reuters. On a relatively busy day this summer, just four flights arrived and four departed. In between, the place was almost deserted. In the early afternoon a single passenger, a woman in a blue-and-white striped T-shirt, sat in a 72-seat waiting area. Outside on the tarmac, five sets of movable steps stood waiting for a jet to land. Where there aren't enough passengers to make an airport viable, local governments keep them on life support through subsidies, according to a report by CEE Bankwatch Network, a non-governmental watchdog. The beneficiaries have often been the airlines that use them. Jacek Krawczyk, the former chairman of the board of Polish national airline LOT who sometimes advises the European Commission on aviation policy, said Poland was no worse than other EU countries at building airports, but the sheer volume of EU money it was trying to absorb in a short space of time explained some problems. The European Union has now tightened up the rules on state aid that airports can receive. Krawczyk, who was not directly involved in planning any of the airport investments, said that in those Polish cases where things did go wrong, "there was no corruption, just wrong priorities."
FAULTY FORECASTS Between 2007 and 2013, the European Union promised funding to help build and upgrade 12 Polish airports. Some of the projections underlying the plans were highly ambitious. The government declined to detail its predictions for passenger numbers. But figures for three of the airports Lodz, Rzeszow and Lublin are contained in letters on a related topic sent by the European Commission to the Polish foreign minister. The letters show Polish authorities projected combined passenger numbers for the airports to be more than 3 million passengers a year. In 2013, the actual number was just over 1.1 million. Together, the investments in the three airports totaled about 245 million euros. Around 105 million of that came from the European Union. The rest came from central government in Warsaw, local governments and the airports themselves. The airport with the biggest projected traffic was in Lodz. In its heyday, the city was a thriving textile manufacturing center. Now, many of the elegant 19th-century merchant's houses lining the main drag, Piotrkowska Street, are crumbling. Jerzy Kropiwnicki, mayor of Lodz between 2002 and 2010, wanted to attract foreign investment and tourists. The city had a small airport that handled domestic flights; but Kropiwnicki felt a big international terminal would revive the local economy. "I used to endlessly answer questions like: 'How do we get to you?' and 'How do we fly there?'" Kropiwnicki told Reuters. Poland, which had joined the European Union in 2004, was gearing up for a massive injection of EU cash to be spent on development projects between 2007 and 2014. To get the funds, the country had to prepare a strategic plan for civil aviation. At the Transport Ministry, this task fell mainly to Andrzej Korzeniowski. He was given three months to draft the plan and meet the EU funding deadline. "I slept on a camping mattress under my desk," Korzeniowski, now retired, told Reuters. "I had no time to eat." Looking back on the 160-page document he drafted, Korzeniowski says it was, under the circumstances, a good program. But it had a big shortcoming: It let local governments decide where new airports should be built, and how big they would be. "That was the biggest mistake, for which we're now paying the price," he said. "The local governments decided, 'I'm a prince in my domain, the government doesn't tell me what I'm supposed to do, we do what we want.'" By 2005, passenger numbers in Lodz were shooting up. Wojciech Laszkiewicz, an adviser to the mayor who went on to be deputy chief executive of the airport, said the team decided to rebuild the terminal entirely. The airport commissioned a feasibility study from advisory firm Ernst & Young (EY), published in November, 2009. EY predicted a minimum of 1.042 million passengers in 2013 for Lodz. That was less than the government forecast but many more than the 353,633 who actually passed through the airport last year. EY declined to comment. Lodz's mayor, Kropiwnicki, left office in 2010, two years before the new terminal opened. The aim of the airport was to help stimulate the local economy, he said, and it is achieving that. "From my point of view, the airport wasn't supposed to make a profit."
"CANNIBALIZATION" The problem, say aviation industry officials and consultants, is that passenger numbers for any individual airport are impossible to predict with confidence. Even if national forecasts hold true, local factors can pull passengers away from one airport and attract them to another. Lodz quickly became a victim of this "cannibalization," as the airline industry calls it, because Warsaw airport was also upgraded, and a new highway built which brought the capital within 50 minutes' drive of Lodz. "To have an airport in Lodz from that point of view makes no sense at all," said Krawczyk, the former airline chairman. He is now president of the Employers' Group of the European Economic and Social Committee, a Brussels-based consultative body that advises on EU decision-making. In a statement, a spokesman for the Ministry of Infrastructure and Development said it could issue guidelines, but could not directly influence local authorities: "A decision on expanding or building an airport for a particular region is the prerogative of the local authorities." Under EU rules, though, the initial cash for airports comes from national governments. They are reimbursed by the EU when it approves a scheme. Only investments worth over 50 million euros have to seek the Commission's prior approval, and many of the Polish airport investments were below that threshold. The Commission has since said its approach to funding the airports will undergo a radical change. In February, it introduced stricter criteria, and said loss-making airports will be forced to wean themselves off state aid. It did not name any countries.
PAYMENTS TO AIRLINES For now, the Polish airports still need help, and that can be expensive. Senior managers in the Polish aviation industry said the cost of running a small regional airport would be at least 3 million euros a year. At the moment in Europe, they are often propped up through financial injections from local authorities, which are often their biggest shareholders. The state also has indirect methods of helping the airports, in particular by giving money to the airlines mainly low-cost carriers like Ryanair. "In practice, these payments serve as an incentive for airlines," CEE Bankwatch Network, the non-governmental watchdog, said in its report. Lodz and Rzeszow airports did not respond to questions about how much they pay airlines. A spokesman for Lublin airport said only that it was successfully boosting communications to help the local economy. But public records for Podkarpackie, the mountainous, forested region where Rzeszow airport sits, show that between 2011 and 2014 its government paid 5.7 million euros to Ryanair in exchange for advertisements promoting the region, which appeared on Ryanair's website and in its in-flight magazines. Podkarpackie spent another 3 million euros to advertise with Polish carrier Eurolot over a three-year period. In all, 70 percent of the region's 2013 promotional budget went to airlines that fly into Rzeszow airport. These payments are problematic, say several people involved in Polish aviation, because the airports are at the mercy of the airlines. With so many airports to choose from, airlines can easily shift routes. "The relationship between the local airports and low-cost carriers is suicidal," said Krawczyk, the former airline chairman. For low-cost carriers, he said, "nothing will ever be enough. ... At some point they will say, 'If you don't give us more, we'll go.' And they go." A spokesman for the region where Rzeszow is located said the deals were good value because they allowed it to target the kind of travelers it wants. He said tourist numbers in 2013 were double the level in 2010. A Eurolot spokeswoman said such marketing deals were widely used in the aviation business in Europe. She said the airline provided marketing exposure for the region, for example by painting its jets in the region's colors. Ryanair Chief Executive Michael O'Leary told Reuters such advertising was a good deal for local governments because the Ryanair website reached a huge audience. He said Ryanair brought economic benefits to places that are off the beaten track, in part by flying in tourists. But "if the airport doesn't want me, that's fine. I've 80 other airports in Europe who want the growth. We don't force any airports" to pay. "If Rzeszow has enough low fares, Rzeszow can grow to 1 million visitors, 5 million visitors, 10 million visitors," said O'Leary. "They provide well, I don't know what Rzeszow is famous for, but it's famous for something."
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European Union gives $125m to Poland to build ghost airports
BRUSSELS: Italy's Federica Mogherini pledged as European Union foreign policy chief that the EU would play a stronger role in tackling world crises. Her resolve is about to be tested as the bloc debates whether it is time to mend its relationship with Russia.
A year after Ukraine's former President Viktor Yanukovich backed out of an EU trade deal and lit the ongoing crisis, the EU's new top diplomat must steer senior officials to a decision whether to keep up strong pressure on Moscow or "re-engage."
Mogherini travels to Kiev on Tuesday for talks with President Petro Poroshenko, then attends Thursday's EU summit - new European Council President Donald Tusk's first - where Ukraine will be high on the agenda. Foreign ministers then formally discuss the EU's relationship with Russia in January, though behind-the-scenes talks have already started.
Ex-communist EU states worried about Russia initially blocked Mogherini's nomination for the EU role because she was foreign minister for Italy, which expressed reluctance to impose sanctions. She was accepted only when the top job went to Tusk, the former Polish prime minister who takes a much tougher line.
Since then Mogherini has won mainly praise from EU governments but is still under scrutiny. Moscow's annexation of Crimea and support for pro-Russian rebels in eastern Ukraine has driven relations with the EU to their lowest ebb since the Cold War and led the EU to impose economic sanctions on Russia.
With Moscow showing no sign of reversing its decisions, Mogherini must tread a fine line between EU governments such as the Baltics, Poland and Britain which back tough sanctions on Russia and those such as Italy, Cyprus, Greece and Bulgaria that are sceptical about them.
Speaking after chairing her first EU foreign ministers' meeting last month, Mogherini said the talks focused on "how to re-engage in a dialogue - given that Russia is for sure part of the problem but it is also for sure part of ... the possible solution to the crisis."
Mogherini, who says she does not see sanctions as an end in themselves, is ready for personal diplomacy to try to end the Ukraine conflict and restart dialogue with Russia.
She has said she is prepared to travel to Moscow if conditions are right for progress in the matter: Diplomats suggest that could happen early next year. SUSPICIOUS
Russia is important to the 28-nation EU not only because it is the bloc's leading energy supplier but also because of its influence on issues such as Syria or Iran's nuclear programme.
Read more:
European Union's Russia debate a challenge for top diplomat Federica Mogherini
The European Union has given Poland more than 100 million eurosto build at least three "ghost" airports in places where there are not enough passengers to keep them in business.
The result is gleaming new airport terminals which, even at the peak of the holiday season, echo to the sound of empty concourses and spend millions trying to attract airlines.
Poland is not the only country in Europe to have built airports that struggle to attract flights. Around 80 airports in Europe attract fewer than 1 million passengers a year, and about three-quarters of those are in the red, according to industry body Airports Council International. Some cost much more to build than the Polish projects. One airport in eastern Spain, open for three years, has so far received not a single flight.
But Poland is striking because the country received so much money for its projects from EU funds.
Poland received 615.7 million euros in EU support for airports between 2007 and 2013, according to figures supplied to Reuters by the European Commission. That was almost twice as much as the next biggest recipient, Spain, and more than a third of all member states' money for airports. The government declined to provide all the information on which it based its decisions to invest in the airports, but Reuters has reviewed data on three sites where traffic fell dramatically short of forecasts.
Poland is often touted by Brussels as one of the most efficient users of EU aid, and there is no suggestion the country used EU airport money corruptly. European help has been vital in improving Poland's aviation infrastructure, only a small share of the country's airport spending has been on white elephants, and passenger shortfalls may have been exacerbated by the 2008 global financial crisis. Spokespeople at some airports said the projects could be considered a success because they were creating jobs, bringing in tourists, and driving investment in the regional economy.
But it is clear mistakes were made in Poland, planning officials and aviation executives say. The whole experience raises questions about how the government will handle the next big injection of EU money, which it expects to be 82 billion euros over the next seven years.
The problem is most striking at the recently rebuilt Lodz passenger terminal, where passenger numbers in 2013 fell almost one million short of forecasts, according to European Commission documents examined by Reuters.
On a relatively busy day this summer, just four flights arrived and four departed. In between, the place was almost deserted. In the early afternoon a single passenger, a woman in a blue-and-white striped T-shirt, sat in a 72-seat waiting area. Outside on the tarmac, five sets of movable steps stood waiting for a jet to land.
Where there aren't enough passengers to make an airport viable, local governments keep them on life support through subsidies, according to a report by CEE Bankwatch Network, a non-governmental watchdog. The beneficiaries have often been the airlines that use them.
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EU funds help Poland build 'ghost' airports
In the financial years 2007 2013, Romania benefited of over EUR 32 billion (including national allocations) from behalf of the European Union. By the end of the year 2012, our country had consumed no more than a little over 10 per cent of the funds attributed.
There were many reasons this engine of development failed to work. Some people blamed it on the fact that we were beginners, that we had no specialists to elaborate and finish eligible projects for payment out of European funds.
Yet, the truth is actually different. It is the hunger after effortlessly gained money. It is a mentality to be encountered frequently with other nations as well. Many civil servants and employees of administrative structures thought they could get advantage by various tricks of the money we deserved from the European funds allocated to Romania. It was not so, because bureaucrats in Brussels discovered that many projects were merely on paper and were not applied in reality. As a result, many Sectoral Operational Programs POS (out of the eight) were closed.
POS for Human Resources was not functional for over one year. Many issues were also encountered in programs dedicated to competitiveness, transportation and environment.
It was just after solving trials between the Romanian authorities and the European Commission that the attraction of European funds returned to the attention of local and central officials, as a factor of growth and modernization.
For a good coordination of activity after the parliamentary elections in 2012, the structure of the present Government featured a special Ministry, that of European Funds. This Ministry proved its capability to a great extent. Especially that Romania, as well as other states, demanded the European Commission a two year postponement of the deadline in the absorption of European funds to the period of financial years 2007 2013. It was the famous N + 2. A formula other EU member states have benefited of previously as well. Therefore, until December 2015, we still have the right to use European funds out of the EUR 32 billion we mentioned above.
At the beginning of the year 2013, the rate of absorption had reached over 25 per cent. Recently, a high official in the Ministry of European Funds outlined the fact that the absorption of European funds could reach 51 to 53 per cent by end of this year, for the period 2007 2013. By the end of November, the rate of absorption reached 44.64 per cent and the value of expenses declarations sent to the European Commission reached EUR 8.576 billion.
Ar the end of this year, we will probably reach absorption of over 50 per cent. Up to this moment, I think we have transmitted to the European Commission EUR 400 million, I cannot tell you precise figures. The objective we have established is to assure 80 per cent of absorption until the end of the year 2015, a percentage that might be similar to that of many member states, the representative of the Ministry of European Funds showed.
There are also fields that performed outstandingly as absorbers of European funds. An example is represented by the programs coordinated by the Ministry of Agriculture and Rural Development (MADR). The absorption of European funds in rural development will reach a percentage of 82 per cent by the end of this year, Vice-Prime Minister Daniel Constantin, Minister of Agriculture and Rural Development declared at a conference that took place last week. The absorption of European founds for the program of rural development 2007 2013 went outstandingly and, by the end of this year, I hope we will reach a per cent of absorption of 82 per cent of PNDR. It is the program with the highest rate of absorption and I hope that, by the end of 2015 or, if the European Commission accepts Polands request, joined by Romania as well, to prolong by six months the N + 2 regulations, up to June 2016, Romania will reach a rate of absorption as close as possible to 100 per cent, Constantin mentioned.
On its turn, the Ministry for Informational Society (MSI) will reach a rate of fund absorption of 95 per cent by the end of 2015, and the IT & C department will represent direct investments in economy of EUR 1 billion during 2014 2020, Razvan Cotovelea, Informational Minister declared on Wednesday in a specialized conference.
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European fund absorption a hard nut to crack for Romania