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26/08/2016

Graft costs EU states €323 billion, ‘three times’ earlier estimates

Justice & Home Affairs

Graft costs EU states €323 billion, ‘three times’ earlier estimates

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Corruption is costing EU countries €323 billion annually, says a new report, defying Europe's image as a global front-runner in the fight against graft.

A report on corruption published on Tuesday (9 April) by the Hertie School of Governance in Berlin showed the real cost of corruption to be well above previous estimates – €100 billion .

The study showed a correlation between corruption rates and budget deficits across the EU, particularly in Greece and Italy.

The rates were calculated by taking Denmark, ranked as the least corrupt country in the EU, as a reference point to estimate the total losses incurred by the EU countries in general.

“It's scandalous as the figures are much higher than what we previously thought,” said German MEP Jens Geier (Socialists and Democrats), who sits on the Parliament’s budget committee.

“The figure previously known stood at around €100 billion, but this is three times what they expected, which really shows that corruption and fraudulent behaviour is a massive problem in European member states,” he told EurActiv.

The estimated cost of corruption cited in the report amounts to nearly one-third the proposed EU budget for 2014-2020.

‘Tip of the iceberg’

The bottom-scoring countries in the report are Slovakia, Romania, Italy, Latvia, Hungary and Greece.

The study correlates government corruption and low levels of tax collection, as well as budget deficiencies, all of which could help explain the current economic climate in Greece and Italy.

Alina Mungiu-Pippidi, a professor at the Hertie School and author of the report, said the sums indicate that EU institutions may have underestimated corruption costs.

“As can be seen in the report, some of the major consequences of corruption are economic problems, which are tied to lacking tax collection and high budget deficits.” Mungiu-Pippidi told a conference at the European Parliament on Tuesday.

The German study questions long-held beliefs about the positive impact on corruption levels obtained through EU membership.

Spain, Greece and Italy show a clear regression in the corruption index, despite being long-standing EU members.

“Does Europeanisation really help governance? Well, Italy and Greece regressed a lot over the past years. So, it looks like it didn’t help improve their governance,” said Mungiu-Pippidi.

The speakers at the event also pointed out the gravity of the situation based on the new figures, which appear to reveal a larger than expected problem of corruption across EU member states.

Mungiu-Pippidi told EurActiv that “this is just the tip of the iceberg. We will come up with more figures. This is just a start.”

Errors go undetected

Over 60% of financial errors go undetected by EU member states’ control management systems, according to Geier.

“This shows that member states have to take their responsibility in managing the EU budget correctly,” the MEP said.

“The commission is increasingly suspending funds for member states based on corruption levels, it’s just not being talked about in public. The problem is that the first frontline of anti-corruption, that of members states, is really lacking,” he said.

Under EU law, the European Commission and European Parliament cannot interfere on how regions and member states spend their funding, although they can be held accountable for potential mismanagement.

“We need a European public prosecutor. This is the only way and it’s an opportunity for the EU to protect its financial interests better, while fighting corruption. But be aware, you will see which of the member states will opt out from this,” Geier told the conference.

Positions

MEP Franziska Brantner, member of the Greens in the European Parliament said: "I’m always surprised to see how tough we are on countries joining and how lax we are when countries are inside the EU." 

She said that there appeared to be a correlation between corruption and lacking economic growth, while EU funds could also an important factor leading to corruption in Europe. 

“I'm on the budget committee and I have been fighting for better controls - we controls the numbers, but not always the substance" she said.

“We really want to hold national ministers accountable. We want them to declare exactly where our EU funds go. Ministers are vehemently against those concepts. Ministers say no because then they can be held accountable.” said Brantner.

Background

The European Union has long used corruption indexes as a measuring tool for candidate countries and developing countries.

Only a limited amount of corruption index have been conducted in EU countries, as member countries are usually perceived as the forerunners of transparency and lower levels of corruption.

The index on state sector corruption, published by anti-corruption watchdog Transparency International (TI) in December 2012, shows serious corruption issues in struggling euro zone countries like Italy, Greece and Romania.

TI's index ranks 176 countries, measuring perceptions of graft rather than actual levels, due to the secrecy that surrounds most corrupt dealings.

The five worst performers in last years ranking were Greece, Bulgaria, Italy, Romania and Slovakia.

In the 2011 index, Greece was 80th with Bulgaria scoring worst among the EU nations in 86th place.

Portugal and Ireland, which like Greece have received eurozone bailouts, were placed 33 and 25 respectively in the table.

TI cautioned that the 2012 rankings did not entirely reflect relatively recent developments such as the advent of a reform-minded Italian government because some of the research shaping the index dated back more than a year.

 

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