EU watchdog: insufficient guarantees for pandemic recovery fund

Insufficient controls and safeguards over how EU member states spend a huge aid program designed to help them recover from the crisis caused by the COVID-19 pandemic is creating opportunities for fraud and mismanagement, the bloc’s financial watchdog warned on Wednesday .

The European Court of Auditors warned of a “accountability gap in protecting the European Union’s financial interests” as the 27 member states use €724 billion ($763 billion) to revitalize their economies, which took the biggest blow since the World War II During the Coronavirus Crisis.

“With such large sums at stake, it is imperative that EU taxpayers’ money is adequately protected,” said ECA President Tony Murphy.

Member States should draw up strict plans for the use of the funds and focus on forward-looking sectors that promote, among other things, the green and digital transition of their economies. However, the ECA exposed how such objectives and milestones of the program should be better monitored by the EU executive Commission, especially once they are rolled out. So far, about 20% of the grants and loan program have been disbursed.

Sometimes, it said, the Commission has no way of fully verifying that Member States’ information on how the money is spent is accurate and free from misuse.

“There is a gap in the assurance that the Commission can provide for the EU’s main pandemic recovery fund and a lack of accountability at the EU level,” Murphy said. “This poses a serious risk to the EU’s financial interests.”

“Citizens will only trust new ways of EU funding if they can be sure that their money is well spent,” he added.

And it’s not just the citizens – often Member States’ confidence in how others spend joint funds goes that far too.

The huge fund to face the biggest recession in the EU’s history is partly based on common borrowing and will mainly be used as loans and grants by the countries hardest hit by the crisis. EU member states taking out loans together, sharing debts and spending in a spirit of solidarity was unthinkable within the EU for a long time.

That’s another reason the Court wants to crack down on inappropriate spending, as they are, she said in a statement, “widespread in other EU spending programmes”.

The auditors acknowledged that the EU authorities acted quickly in setting up such a comprehensive system at short notice, especially given the need to reverse the economic fortunes of many Member States.

All too often the bloc has been accused of being too slow to react to urgent events and getting lost in complicated regulations while a crisis raged at the same time. This time, even though it is acting “in a relatively short period of time”, as the auditors noted, the Commission does not want to verify that everything will be well spent and has to rely too much on national controls.

“The Commission has little verified information through its own work on whether and how these national controls are carried out. Without assurance that these rules are being followed, there is a lack of accountability at EU level,” says the ECA report.

The COVID-19 program runs through 2026 and any comments made in the report can still be taken into account to improve the assessment.