Brussels has insisted it is putting in place tough new processes to ensure the EU’s unprecedented recovery fund is not frittered away, amid mounting concerns about the potential for fraud and waste in the €750bn programme.
Valdis Dombrovskis, the European Commission’s executive vice-president in charge of economic policy, said spending of the recovery cash would be governed by a tighter set of rules that would prevent the kind of misspending scandals that had occurred in the past with EU regional aid programmes.
“The system we have put in place is a robust system that will guarantee proper use of this EU funding,” Dombrovskis said, noting that the commission was both policing national “control systems” for spending the money, and applying its own checks.
He added that Brussels was ready to suspend payments if there were signs that a national government was not delivering on competitiveness-enhancing reforms or not channelling cash directly into pre-agreed investments. “There are quite strict criteria.”
Brussels is under intense pressure to ensure that the vast pot of Covid-19 recovery money is well spent, given the unprecedented volumes of EU borrowing on the capital markets that will be necessary to finance it. The programme comes at a time of mounting worries about corruption and the rule of law in some member states.
Spending scandals in recent years linked to European funds have included the EU’s anti-fraud office calling on Hungary to repay money for a metro line because of fraud and corruption concerns. In February this year, the European Anti-Fraud Office concluded that Bulgaria’s interior ministry had “violated the terms” of a €6m EU grant to purchase 350 all-terrain vehicles for the police, a case that comes amid a series of corruption revelations in the country.
The latest concerns about Hungary centre on its plans to place universities under the control of foundations that critics say will tie them to the current government and its allies. Hungary plans to allocate €2.8bn, approximately 20 per cent of its EU recovery funds, to a scheme to “modernise the universities”. A group of MEPs has urged the commission not to disburse the money.
Asked about the situation with Hungary, Dombrovskis said: “There are quite strict criteria set in the Recovery and Resilience Facility Regulation and we are following through to make sure those criteria are really being observed and respected by member states.”
The recovery fund also includes a new mechanism tying payments to “rule of law” principles after Hungary and Poland dropped their objections to the link in December.
Dombrovskis also said that, when it comes to fraud, the EU could turn to the European Public Prosecutor’s Office — an organisation set up in 2017 with the power to prosecute crimes against the EU budget — to pursue wrongdoing, as well as other organisations such as the bloc’s anti-fraud watchdog.
However, Hungary is not one of the 22 EU countries covered by the EPPO. Brussels also has to grapple with the longstanding problem that national governments are, in practice, responsible for much EU spending.
Under the terms of a deal reached by EU leaders last year, access to the money is linked to reform commitments covering areas such as pension and social security systems, labour law, the business environment, quality of public administration and public procurement.
“If some reforms stall, if some investment project is not moving forward for whatever reason, then this part of the money is not flowing,” Dombrovskis said. “Disbursement of money is directly linked with progress in reforms and investments.”
Dombrovskis said he expected a large number of governments to submit their national plans for spending the money to Brussels by an “indicative” April 30 deadline — France and Germany jointly presented theirs this week. Brussels will then review the proposals.
There has already been dialogue between capitals and Brussels.
“Initially, with many member states’ plans, we saw that there was not sufficient focus on reforms and that country-specific recommendations are not being addressed to a satisfactory extent,” Dombrovskis said, adding that the situation had now “evolved”.