Mayor of Venice arrested over EU-funded project

The prosecutors' charge is that construction contractors created a €25 million fund for kickbacks to politicians overseeing the Moses flood barrier – a €5.5 billion project aimed at keeping Venice safe from floods.

The project is partly funded by the EU – €1.5 billion had been earmarked for this project by the European Investment Bank.

Investigators said they followed a complex cash trail between companies and politicians that passed through offshore accounts.

"As the investigation continued, it emerged that most of these funds were used to buy political power ... and to bribe senior public officials," the prosecutors said in a statement.

Orsoni's lawyer said the charges were "hardly credible" but a former mayor of Venice, Massimo Cacciari, confirmed there was little accountability on the project. "I said it a million times but no one listened," he said.

The main constructor in the Moses project, Mantovani, has also been charged with fraud and was suspected of infiltration by Mafia in connection to another EU-funded project in the proximity of Venice – a motorway bypass around the city of Mestre.

Mantovani settled with the Italian fiscal authorities for a €6 million fine in December, allowing the EIB and the EU commission to continue funding the Mestre project.

But the new arrests in Venice may put the funding on hold.

"We are still gathering information necessary to form a view," a spokesperson for the EIB said in an email. The bank notes that it was the Italian ministry of infrastructure who "certified all the expenses" reimbursed by the EIB. It added that the total amount of loans signed to date is €1.255 million.

Transparency campaigners are not satisfied, however.

"The EIB is effectively handing out cheques backed by public money to a corrupt system," said Elena Gerebizza from Counter Balance, an NGO monitoring the activities of the EIB.