26th Oct 2016


The eurozone budget and the maze of EU money

In the run-up to this week's European Council, new proposals for a "eurozone budget" have stirred debate in Brussels, Frankfurt and European capitals.

This "fiscal capacity" has been presented by European Council President Herman Van Rompuy in his interim report as a kind of solidarity and crisis reaction fund that eurozone members would establish for themselves alongside the normal EU budget, including the right to borrow money and empowered through a special "treasury."

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Europe-wide solidarity and protection against economic and financial shocks may be necessary, but trust in the way decisions about European citizens' money are made and in the way billions of euros are channeled around Europe are also of fundamental importance to ensure public accountability.

If a new "eurozone budget" will now be proposed in addition to the existing EU budget, it needs to be ensured that there is proper parliamentary involvement during decision-making and sufficient transparency in the spending of such additional funds, to enable the public to see where the money is going.

Transparency International calls on European leaders to remove the walls of opacity and allow European citizens to see that funds intended to create more solidarity are not actually funds for those who profit from the system anyway.

We know from scandals around the world that where there is big money, there are big corruption risks.

From the UN Oil for Food programme, which has been mired in a series of bribery and corruption scandals, to several hundred million euros in EU money recovered in fraud investigations last year, there is sufficient evidence to be worried.

The more complex the system becomes, the less effective supervision and integrity mechanisms function and the less trust there will be in Europe's actions to tackle the crisis.

The current spending of EU money is already a system that few, if anyone, can oversee.

With 80 percent of the EU budget of about €130 billion a year being spent through EU member states and with a lack of a central European database for all EU funds, there is no way to trace all EU spending until the end beneficiaries.

In addition to that, decisions about trillions of euros in guarantees and loans have been made in past years and new institutions, such as the EFSF and the ESM, have been designed outside or at the edge of the general EU oversight systems.

There is a history of such bailout instruments being inadequately policed.

Most prominently, Neil Barofsky who oversaw the US bailout funds, has criticised the lack of oversight in the spending of billions of US taxpayers' bailout money.

In the EU, the European Parliament appeared to be sidelined in many instances in the creation of recovery funds and bailout mechanisms and national parliaments are de facto put under pressure to accept new financial tools agreed by European and national executives without getting proper accountability mechanisms in return.

In reaction, a draft resolution passed on Monday (15 October) in the European Parliament's economic and monetary affairs committee is calling for more accountability and stronger democratic control through the European and national parliaments.

Thus, while conceptualised as another firewall protecting the Eurozone against shocks in the mid-term future, the fiscal capacity could in our view create another wall in the ever-increasing maze of EU budgets and funds.

In their efforts to address the causes and effects of the financial and economic crises, political leaders risk to create a mishmash of institutions and money flows that can hardly be called a transparent system.

In the view of Transparency International, there will have to remain a balance between the legitimate interest to support the European economy and the interest of European citizens and their directly elected parliaments to be able to hold their leaders to account.

We very much hope that European leaders will work to ensure this balance, and we intend to watch their efforts very closely.

Jana Mittermaier is Transparency International's EU office director


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