Monday

15th Apr 2024

Auditors flag EU's 'weak' handling of rescue plans

  • The EU Court of Auditors says the commission 'was not prepared' to face the financial crisis (Photo: Jorge Franganillo)

The EU Commission's handling of the financial crisis was "generally weak", the European Court of Auditors (ECA) said Tuesday (26 January) in a report assessing assistance programmes in five EU countries.

The guardian of EU finances said that Hungary, Ireland, Latvia, Portugal and Romania "were not treated in the same way".

Read and decide

Join EUobserver today

Get the EU news that really matters

Instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

  • The auditors also flag 'limited quality control, weak monitoring and shortcomings in documentation' (Photo: European Court of Auditors)

"In some programmes, the conditions for assistance were less stringent, which made compliance easier. The structural reforms required were not always in proportion to the problems faced, or they pursued widely different paths. Some countries’ deficit targets were relaxed more than the economic situation would appear to justify," the report says.

The auditors also flag "limited quality control, weak monitoring and shortcomings in documentation".

Despite this criticism, they also conclude that "the programmes did meet their objectives".

"The revised deficit targets were mostly met. Structural deficits improved, although at a varying pace. Member states complied with most conditions set in their programmes, albeit with some delays," the report says.

'Not auditing political decisions'

While pointing at the shortcomings in the management of the programmes, the ECA stopped short of expressing an assessment of the rescue plans themselves.


"We are not auditing political decisions," an auditor said.

Auditors did not either assess the work of the troika, comprised of the commission, the European Central Bank and the International Monetary Fund, nor controversial issues like debt sustainability.

The report is more focused on process than on actual choices made and policies implemented. But despite the plaudits granted to the rescue programmes, the auditors' recommendations include leads as to what went wrong.

In the future, the ECA says, the commission should: include variables in the memoranda of understanding which it can collect with short time-lags; distinguish conditions by importance and target the truly important reforms; make the debt management process more transparent; further analyse the key aspects of the countries’ adjustment after programme closure.

Among problems, the report mentions "significant forecasting errors, such as double counting of some variables, use of incorrect amounts in foreign reserves or unrealistically high assumptions of debt rollover rates".

"Discovery of the errors … could have resulted in a different set of policies to close the financing gap," the report says.

Auditors also found that when reporting on the programmes to the EU Council, the commission did not use the same methods for the fives countries.

"Only for Portugal and, in part, for Hungary, Latvia and Ireland, did the commission systematically report on the member state’s compliance with structural conditions," they write.

"Non compliance was rarely reported. Only for a very small number of conditions (4 percent in the Portuguese programme) did the commission clearly state 'non observed'; although almost half of the conditions were not complied [with] in time."

'Steep learning curve'

"Despite existing warning signs, the commission did not predict and was not prepared to deal with a crisis of such a magnitude, Baudilio Tomé Muguruza, the auditor responsible for the report, told reporters in Brussels.

"That explains the significant initial weaknesses we found in the initial management process. The commission had to design and implement assistance programmes under extreme time pressure."

But Muguruza assured that "the commission has already improved its procedures".

"If they implement our recommendations, we think [they] will be in a better position to design and manage programmes in the future," he said.

The crisis was unprecedented and policymakers faced a steep learning curve and acute resource constraints, EU spokeswoman Annika Breidthardt said in reaction to the report.

"The commission accepts there were weaknesses in the management of the early programmes. It will focus on improving processes even further," she told reporters.

The ECA report is the first of a series on the management of the financial crisis and the rescue plans by the commission.

Next month a first part of an audit on the response to the Greek crisis should be presented.

Resist backlash on deforestation law, green groups tell EU

European environmental groups have urged the EU Commission to stand firm on implementing the bloc's landmark anti-deforestation legislation — despite a backlash from governments in South America, Africa and some EU ministers.

Opinion

This 'deregulation' lobbying now threatens EU economy

Next week's EU summit (17-18 April) will discuss the strategic agenda for the next five years. The current "competitiveness agenda" is to a large extent driven by a big lobbying campaign — so far, not well covered by the media.

Latest News

  1. EU puts Sudan war and famine-risk back in spotlight
  2. EU to blacklist Israeli settlers, after new sanctions on Hamas
  3. Private fears of fairtrade activist for EU election campaign
  4. Brussels venue ditches far-right conference after public pressure
  5. How German police pulled the plug on a Gaza conference
  6. EU special summit, MEPs prep work, social agenda This WEEK
  7. EU leaders condemn Iran, urge Israeli restraint
  8. UK-EU deal on Gibraltar only 'weeks away'

Stakeholders' Highlights

  1. Nordic Council of MinistersJoin the Nordic Food Systems Takeover at COP28
  2. Nordic Council of MinistersHow women and men are affected differently by climate policy
  3. Nordic Council of MinistersArtist Jessie Kleemann at Nordic pavilion during UN climate summit COP28
  4. Nordic Council of MinistersCOP28: Gathering Nordic and global experts to put food and health on the agenda
  5. Friedrich Naumann FoundationPoems of Liberty – Call for Submission “Human Rights in Inhume War”: 250€ honorary fee for selected poems
  6. World BankWorld Bank report: How to create a future where the rewards of technology benefit all levels of society?

Stakeholders' Highlights

  1. Georgia Ministry of Foreign AffairsThis autumn Europalia arts festival is all about GEORGIA!
  2. UNOPSFostering health system resilience in fragile and conflict-affected countries
  3. European Citizen's InitiativeThe European Commission launches the ‘ImagineEU’ competition for secondary school students in the EU.
  4. Nordic Council of MinistersThe Nordic Region is stepping up its efforts to reduce food waste
  5. UNOPSUNOPS begins works under EU-funded project to repair schools in Ukraine
  6. Georgia Ministry of Foreign AffairsGeorgia effectively prevents sanctions evasion against Russia – confirm EU, UK, USA

Join EUobserver

EU news that matters

Join us