Will corruption threaten Europe’s economic recovery? by Luis Garicano


The European Union’s recent agreement on issuing common debt to support post-pandemic economic recovery represents an unprecedented step towards deeper integration. But the success of the effort will depend on how the financial aid is allocated and monitored.

BRUSSELS – The European Union’s post-pandemic recovery plan represents a historic opportunity – as well as a major risk. After intense negotiations, the EU agreed to issue a common debt – for the first time – to finance the Recovery and Resilience Facility, a common fund that will provide grants and loans to EU member states. EU to green the economy, digitize our public administrations and reform the sluggish economies of the bloc. But, despite all the praise the new fund deserves, its success will be judged by its results.

In short, Europeans expect results, not scandals. These EU stimulus funds cannot end up being misappropriated for fraudulent schemes. The prospects for a closer and stronger fiscal union will be jeopardized if all Europeans learn from the recovery effort is that the funds have benefited corrupt politicians, cronies and crooks.

The European Parliament was aware of this danger when creating the Recovery and Resilience Facility. As a result, the legal text governing the distribution of funds includes strict reporting and transparency obligations, as well as essential supervisory roles for the EU’s supervisory bodies: the European Anti-Fraud Office, the new European Public Prosecutor’s Office operational and the Court of Auditors.

The fight against the misuse of European funds is not new. The embezzlement of EU subsidies has already featured prominently in reporting across the continent. In 2018, a series of investigations linked the murders of journalist Ján Kuciak and his fiancée Martina Kušnírová to its investigation into the embezzlement of EU funds in Slovakia. The following year, several Bulgarian government ministers resigned after revelations that they had embezzled EU agricultural funds to acquire real estate. In Hungary, the EU’s anti-fraud office discovered serious irregularities in a € 1.7 billion ($ 2 billion) transport project and in contracts negotiated with the Prime Minister’s son-in-law for public lighting . In total, between 2014 and 2019, the anti-fraud body recommended the recovery of more than 6 billion euros in subsidies.

These examples illustrate the challenges the EU faces in effectively allocating stimulus funds. The European Parliament has sought to protect funds by establishing rigorous evaluation criteria for disbursements. These criteria are the key to understanding the current stalemate between the European Commission and Hungary and Poland. EU governments must explain how they plan to protect themselves against fraud when requesting funds. The legislation also includes language giving oversight bodies the right to access data relating to the use of recovery funds.

But these efforts will be in vain if the EU does not fund its audit and control systems adequately. For example, in the latest EU budget proposal, the European Commission assumes that each staff member of the Anti-Fraud Office will monitor 900 million euros of EU spending. In 2010, the same staff member was said to have been tasked with controlling 300 million euros. The latest cut follows a ten-year trend of reducing the resources of the anti-fraud agency. In 2010, the office had 466 employees; this year that number is 376, although the money to watch has more than doubled. The resources of the European Court of Auditors and the European Public Prosecutor’s Office are also insufficient.

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The situation becomes even more dramatic when you consider that the EU is embarking on the biggest expansion of its budget in its history. The risk of fraud has never been greater. The EU is spending more money than ever, but the institutions necessary to maintain the credibility of its spending are underfunded.

This dangerous combination prompted Renew Europe (the successor to the Alliance of Liberals and Democrats for Europe in the European Parliament) to introduce budget amendments to significantly increase the resources of the EU’s audit and control bodies. . Giving the European Anti-Fraud Office, the European Public Prosecutor’s Office and the European Court of Auditors the financial means they need to protect European taxpayers’ money against embezzlement and fraud is essential to preserve the integrity of the unprecedented effort by the EU.

It took the longest EU summit in recent memory to create the stimulus package. Some leaders had to spend considerable political capital to make the deal possible. They are unlikely to be as successful next time around if what Europeans take away from the program is a series of corruption scandals and contentious efforts to recover the stolen money.

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