Thursday

24th Jun 2021

Up to €2.2bn of public funds stolen in eight EU states

  • An Olaf commissioned study identified bid rigging, kickbacks, conflict of interest, and deliberate mismanagement of EU funds in eight member states (Photo: Wikipedia)

Up to €2.2 billion was stolen in public and EU funds in eight member states in 2010, according to a report commissioned by the EU anti-fraud agency Olaf.

The figures, released on Tuesday (1 October) at a European Parliament conference on corruption, represent the estimated overall direct costs of corruption in public procurement in five major sectors like construction and water treatment.

Read and decide

Join EUobserver today

Become an expert on Europe

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

... or subscribe as a group

The results of the study, conducted jointly by accountancy firm PwC EU Services and Ecorys with the support of the University of Utrecht, is based on a methodology that allows for the probability of corruption to be estimated for the product groups.

France, Hungary, Italy, Lithuania, the Netherlands, Poland, Romania and Spain were selected at random for the study.

Speaking at the conference, EU anti-fraud commissioner Algirdas Semeta, said the study proposes a new approach that focuses on calculating the costs of corruption.

“The study puts concrete figures to what we have long recognised as a threat to public finances and it confirms that once a procurement project is affected by corruption, the public losses increase substantially,” he said.

The study said the cost of corruption is equivalent to 3 to 4 percent of the total procurement budget.

“This seems at first sight a higher estimate than the commission first published two years ago,” said Semeta.

The commission put the estimate at 1 percent.

Semeta explained the difference because the study looked at eight member states in five specific sectors most exposed to risk of corruption.

“For the commission, its findings are a useful counterpart and we are committed into looking further into why so few cases are reported by member states,” he noted.

Member states reported nine cases of suspected or established corruption of EU funds in 2012.

He noted that the commission is finalising its first anti-corruption report due sometime in November. The report will look specifically at corruption into public procurement.

The Olaf-sponsored study was critical of the fragmented nature of public procurement procedures and lack of transparency. It noted that no organisation or body is tasked to fight corruption during the process.

Also missing is a national or EU-level authority to integrate all data public procurement for people to scrutinise.

Among the most common ways to steal money is to artificially inflate the price of a contract beyond the actual market value.

One case involves a procurement to reconstruct a historic city centre. The tender had a budget ceiling of €4.32 million. The only bidder submitted an offer for €5.4 million, which was rejected.

The procurement was then relaunched with the same bidder winning the €4.32 million contract.

But later on, costs increased by €1.08 million, making the price of the project the same as the company’s original offer.

Another case involves 10 civil servants from different municipalities who handed over confidential information to a construction company concerning several invitations to a tender on road projects.

In return for the confidential information, the civil servants were rewarded with cash and VIP seats at football matches and Formula One races and flight tickets to exotic destinations.

A legal revolution

To combat conflict of interests, the EU developed a definition, which they included in a revised version of the public procurement directive.

Tabled in 2011, the directive is under legislative scrutiny at the European Parliament.

A high-ranking commission official at the conference said the definition, which covers actual, potential or perceived conflict of interests affecting staff members of the contracting authority or of procurement service providers, would create a legal upheaval in some member states.

“I was told by a series of member states that such a broad concept would be a legal revolution in their systems,” said Joaquim Nunes De Almedia, director of the public procurement department in the commission’s directorate-general on the internal market.

The reformed directive includes setting up national oversight bodies to ensure contracts worth at least €1 million are properly implemented but De Almedia noted that corruption is largely a question of culture and of social acceptance of corrupt practices.

“To change this we need much more than new laws and new databases,” he said.

This article was corrected on Wednesday 2 October at 10:00. The original title 'Up to €2.2bn of EU funds stolen in eight member states' was changed to 'Up to €2.2bn of public funds stolen in eight member states'. The study looked at both national budgets and the EU budget

Frontex chief: 'about time' MEPs probe his agency

Some 14 MEPs have created a group to probe allegations of rights abuse by the EU's border agency Frontex. Its head, Fabrice Leggeri, welcomed its creation and said it "is about time".

Romania denies forcing migrant-boat back to Turkish waters

Romania's ministry of internal affairs wrote to Frontex claiming it did not engage in any illegal pushbacks of people on rubber boats into Turkish territorial waters. The country says it followed EU engagement rules and Greek orders.

LGBTI fears over new Polish member at EU institution

A letter sent to the European Economic and Social Committee by a group of cross-party MEPs fighting for LGBTi rights expresses fears that a recently-appointed Polish member may try to undermine those rights.

EU condemns Slovenian PM's harassment of journalist

Slovenia's populist prime minister Janez Janša attempted to discredit a Brussels reporter after she published a critical article about the state of media freedoms in the country. The European Commission condemned the PM's language - but refrained from naming him.

News in Brief

  1. EU: China 'stifled freedom' with Hong Kong newspaper closure
  2. EU sanctions almost 'declaration of economic war', says Belarus
  3. Lithuania pokes China with Taiwan Covid-vaccine donation
  4. Brussels airport traveller with false Covid test jailed for year
  5. Von der Leyen: Turkey needs more help for Syrian refugees
  6. German MEP adds to pressure to move Euro 2020 finals
  7. Report: Vatican urges Italy to block anti-homophobia law
  8. Dutch coalition talks postponed to August

Feature

Covid-hit homeless find Xmas relief at Brussels food centre

The Kamiano food distribution centre in Brussels is expecting 20 people every half hour on Christmas Day. For many, Kamiano is also more than that - a support system for those made homeless or impoverished.

Top court finds Hungary and Poland broke EU rules

EU tribunal said Hungary's legislation made it "virtually impossible" to make an asylum application. Restricting access to international protection procedure is a violation of EU rules.

Stakeholders' Highlights

  1. Nordic Council of MinistersNineteen demands by Nordic young people to save biodiversity
  2. Nordic Council of MinistersSustainable public procurement is an effective way to achieve global goals
  3. Nordic Council of MinistersNordic Council enters into formal relations with European Parliament
  4. Nordic Council of MinistersWomen more active in violent extremist circles than first assumed
  5. Nordic Council of MinistersDigitalisation can help us pick up the green pace
  6. Nordic Council of MinistersCOVID19 is a wake-up call in the fight against antibiotic resistance

Latest News

  1. EU Commission warns Hungary over anti-LGBTIQ measures
  2. Fourteen EU countries condemn Hungary over anti-LGBTIQ law
  3. EU preparing to lift Burundi sanctions, despite warning
  4. Europol: Extremists exploited pandemic to spread radicalism
  5. Greece dismisses EU states' objections on refugee travel
  6. What are the online risks to Germany's autumn election?
  7. What's missing from agenda for Berlin's Libya conference?
  8. Latest EU sanctions to bite Belarus dictator's income

Join EUobserver

Support quality EU news

Join us