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28th Jul 2017

Euro bail-out funds lack oversight, auditors say

  • MEPs worry that huge sums of public money will go unaccounted for (Photo: Images_of_Money)

Scrutinised neither by national audit offices nor by the European Parliament, the two eurozone bail-out funds amounting to €700 billion lack democratic oversight and accountability, several auditors and MEPs said on Tuesday (24 March).

The new financial architecture of the eurozone - set up under market pressure in successive phases resulting in different funds and financing methods - is putting up unprecedented amounts of public money to contain the sovereign debt crisis.

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But according to the Dutch Court of Auditors, the Luxembourg-based funds - the temporary European Financial Stability Facility and the upcoming European Stability Mechanism (ESM) - are neither transparent, nor accountable enough for the amount of public funding they will be able to draw on.

"Democratic control and public scrutiny only exist to the limited extent that ministers of finance can be held to account by their national parliament for their individual share in the functioning of the ESM and not for the functioning of the ESM bodies or the organisation as such," a report presented to MEPs on Tuesday by the Dutch Court of Auditors reads.

The report warns that waning public support for all these financial contributions will be even less certain given this democratic deficit, especially since the ESM is to be established as a permanent institution.

After lengthy back-and-forths, a coalition of national auditors late last year managed to introduce a provision in the ESM treaty creating a board of five auditors, including two from member states and one from the European Court of Auditors.

But implementing laws on what powers these auditors will have - to check only financial flows or also to look in depth at how the money is used - is still under discussion.

Meanwhile, parliamentary scrutiny remains limited to national legislatures approving bail-outs - as in Germany's case. But the European Parliament has no say and will only be "informed" in yearly reports submitted by the ESM.

"This mechanism for 17 countries has no parliamentary dimension, no public scrutiny over how these public funds are being used. We are constructing an economic governance based on inter-governmentalism, sanctions, but we don't have a parliamentary dimension for this sub-structure of the EU," said French centre-right MEP Jean-Pierre Audy.

His Dutch colleague from the Liberal group, Jan Mulder, warned that this lack of parliamentary control "is a very dangerous development" that risks undoing whatever was achieved in the past 20-30 years in terms of public accountability.

Legal challenges may delay eurozone bail-out fund

Legal challenges in Germany, Ireland and Estonia, as well as political uncertainty in the Netherlands, may delay the setting up of a permanent eurozone bail-out fund at a time when Spain's economic woes require a strong firewall.

Greece looking at bond market return

Greece could issue 3-year bonds as early as this week, for the first time in three years, amid mixed signs from its creditors and rating agencies.

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