Saturday

20th Aug 2022

Opinion

EU investment bank 'wide open to abuse by fraudsters'

  • Although on paper the European Investment Bank has procedures in place to reduce the risk of fraud and corruption, the bank's policies are poorly-policed and full of loopholes (Photo: Counter Balance)

Last week, dramatic news came from Italy: a state of emergency had to be declared in Venice following dramatic floods – the city was engulfed by 1.87m high-water levels.

One question now very much on the minds of those affected is why a much-vaunted multi-billion dollar flood protection scheme, known as the Mose project, failed so dismally to keep the flood waters at bay.

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

Many blame corruption associated with the project, which was backed to the tune of €1.5bn by the EU through the European Investment Bank (EIB).

In 2017, eight people were found guilty of corruption in relation to Mose, and 19 more have plea-bargained.

A case in point was the former Italian infrastructure and development minister, Altiero Matteoli, who was judged guilty of corruption for accepting bribes up to millions in euros from the president of Consorzio Venezia Nuova, the main promoter of the Mose project.

The EIB's investment in Mose was the largest for a single infrastructure project ever approved by a public institution.

Three loans were disbursed from 2011 onwards for a total amount of €1.2bn – even though, four years earlier, the Italian Court of Auditors had published a critical report questioning not only the spiralling costs of the project, but also other aspects linked to maladministration.

But what was seen in Italy as a major corruption scandal did not raise many eyebrows at a European level. Despite all the warnings and red flags, the EIB kept on supporting the project, and the EU anti-fraud office (OLAF) concluded that it "did not have a legal basis for launching an investigation" into EIB's financial involvement.

This is not the only case of the EU turning a blind eye to alleged corruption in EIB-backed investments.

At Counter Balance, we have investigated four cases, including the EIB's support for Volkswagen and for projects in Italy and Slovenia.

The sums involved are staggering. In these cases alone, some €2.8bn were funnelled into projects tainted by corruption.

'Zero tolerance'?

However, the EIB remains unfazed, despite its claim to have "zero tolerance" for fraud and corruption.

Back in 2016, for the first time the European Parliament called on the bank to "stop further loan disbursements to projects under ongoing national or European corruption investigations". But no such action was taken by the EIB.

In the new report we are publishing today, we conclude that investments made by the EIB are wide open to abuse by fraudsters, money launderers and corrupt politicians.

Although, on paper, the EIB has procedures in place to reduce the risk of fraud and corruption, the bank's policies are poorly-policed and full of loopholes.

In addition, under current EU law, the EIB is not even required to have anti-money laundering rules.

Furthermore, when these rules are breached, the EIB's internal rules cannot be challenged in courts because they are not enshrined in law.

The EIB is simply not up to the task of tackling fraud and corruption, and this significantly jeopardises the credibility of European investments in and outside of Europe.

Therefore, urgent action is required to set a better framework for the EIB anti-corruption fight and to reinforce its internal anti-corruption mechanisms.

Especially at a time when the EIB is likely to play a pivotal role in the European Green Deal, the European Commission, Parliament and the EIB shareholders (i.e. member states) need to take these issues seriously and strengthen the control over the use of public funds.

Fundamental reforms are needed if the EIB is to become more accountable, democratic and transparent, including a change of institutional culture. Establishing a firm grasp on corruption to ensure that public money no longer feeds corrupt systems both in and outside Europe is a vital first step.

Author bio

Xavier Sol is director of Counter Balance, a Brussels-based European coalition of development and environmental non-governmental organisations which scrutinises the European Investment Bank and other financial development aid.

Disclaimer

The views expressed in this opinion piece are the author's, not those of EUobserver.

Exclusive

EIB blames Ombudsman for not helping redact VW report

Volkswagen Group duped the European Investment Bank, from which it borrowed €400m, by not disclosing it was cheating on emissions tests. Requests by EUobserver to see the anti-fraud report however have been consistently rejected.

EU 'climate bank' won't rule out carbon capture

The European Investment Bank has billed itself as the world's largest climate change action financier as it plans to phase out gas, oil and coal projects. It has, however, not ruled out backing carbon capture and storage technologies.

Column

Is this strange summer a moment of change?

It is a strange, strange summer. The war in Ukraine continues, 60 percent of Europe is in danger of drought, and Covid is still around and could rebound in the autumn. At the same time, everyone is desperate for normalcy.

Russia puts EU in nuclear-energy paradox

There's unprecedented international anxiety about the safety of Ukraine's nuclear reactors, but many European countries are also turning to nuclear power to secure energy supplies.

News in Brief

  1. China joins Russian military exercises in Vostok
  2. Ukraine nuclear plant damage would be 'suicide', says UN chief
  3. Denmark to invest €5.5bn in new warships
  4. German economy stagnates, finance ministry says
  5. Syria received stolen grain, says Ukraine envoy
  6. Truss still leads in next UK PM polling
  7. UN chief meets Zelensky and Erdogan over grain exports
  8. Fighting stalls ahead of UN visit, Ukraine says

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic prime ministers: “We will deepen co-operation on defence”
  2. EFBWW – EFBH – FETBBConstruction workers can check wages and working conditions in 36 countries
  3. Nordic Council of MinistersNordic and Canadian ministers join forces to combat harmful content online
  4. European Centre for Press and Media FreedomEuropean Anti-SLAPP Conference 2022
  5. Nordic Council of MinistersNordic ministers write to EU about new food labelling
  6. Nordic Council of MinistersEmerging journalists from the Nordics and Canada report the facts of the climate crisis

Latest News

  1. European inflation hits 25-year high, driven by energy spike
  2. No breakthrough in EU-hosted Kosovo/Serbia talks
  3. Letter to the Editor: Rosatom responds on Zaporizhzhia
  4. Could the central Asian 'stan' states turn away from Moscow?
  5. Serbia expects difficult talks with Kosovo at EU meeting
  6. How scary is threat to Ukraine's Zaporizhzhia nuclear plant?
  7. Slovakia's government stares into the abyss
  8. Finland restricts Russian tourist visas

Join EUobserver

Support quality EU news

Join us