The European Court of Auditors published a very critical assessment today (1 September) of the way the Commission spends EU money in Moldova, a country associated with the EU and with an ambition to join the Union in the longer term.
The 50-page report reiterates the well-known fact that Moldova is the poorest country in Europe. Moldova was also the scene of a huge banking scandal, in which $1 billion disappeared from the banking system – roughly one-eighth of Moldova’s gross domestic output.
Corruption risks are high in Moldova. Transparency International’s corruption perceptions index indicates that the situation has worsened since 2012.
In 2015, EU funds for Moldova were frozen, and the IMF and the World Bank made the same decision earlier that year. In the meantime, Moldova managed to put in place a new government, called “last chance government”.
The EU cooperates with Moldova under the European Neighbourhood Policy (ENP) and, more specifically, the Eastern Partnership (EaP). Under the respective schemes, €782 million in bilateral aid were allocated to Moldova from 2007 to 2015. In 2014, aid amounted to nearly €37 per inhabitant — the highest among the EU’s eastern neighbours.
The Court of Auditors’ report says that Moldova’s main problems are widespread corruption and the weakness of its public institutions, which have been a significant recipient of EU assistance since 2007. The auditors examined whether EU assistance had contributed effectively towards strengthening public administration. Their sample covered four budget support programmes in the sectors of justice, public finance, public health and water. It also included 20 projects in various public authorities.
Since little progress had been made in the sectors targeted, the auditors concluded that budget support had a limited effect in strengthening the public administration.
The auditors criticise the European Commission who, they contend, could have responded more quickly when risks associated with the support materialised.
“Programmes were not sufficiently aligned to Moldovan strategies. The potential benefit of the programmes was reduced by the fact that the Commission did not make full use of its ability to set preconditions for disbursement. Some specific conditions were fulfilled between programme negotiation and the start of the sector budget support or were not directly measurable. The Commission could have been more stringent when assessing whether they had been fulfilled. Also, the granting of additional incentive-based funds was not fully justified,” the auditors found.
Regarding the banking scandal, the auditors say it is not possible to prove that EU funds were concerned specifically, since they were merged with the overall state budget.
“At the time of the audit, criminal investigations into the banking fraud had made little progress, and no recovery strategy had been prepared,” the report says.
The auditors are critical of the European Commission for having disbursed funds, even when specific conditions were not met. An example is that in the water sector, one condition required co-financing from the Moldovan side, which was met at only 42% of the required level. And the Commission disbursed its funding nevertheless.
The auditors have formulated recommendations to the executive. The Commission said it accepted all of them.
