Following threats in Parliament to block the budget for EU development aid, Commission President Jacques Santer was this month forced by MEPs to open up EU accounts to Parliamentary scrutiny. MEPs welcomed the Commission's climbdown as a key victory for improved Parliamentary control over the spending of taxpayers' money in Europe.
The threat marked a response to allegations of fraud in the €2.4 million ECHO food aid programme, in a month which has seen the Commission dogged by one attack after another. Problems with the food aid programme, which date back to 1994, will return in December to haunt the Commission, when MEPs pass judgement on the administration of the 1996 budget. A negative vote then could lead to the Commission resigning en bloc, although MEPs would prefer a single Commissioner to accept responsibility.
The problem with the food aid budget is that the allegations date back to a period before the present Commission's term-of-office. Nevertheless, the Commission President vigorously defended his institution against attack and outlined reforms of financial management undertaken. Responding to criticisms in a Parliamentary report on the EU's anti-fraud unit UCLAF, and implications that there was a tendency to cover up corruption in it own ranks, the Commission President said: "I take this as a personal attack which I absolutely refute and which is not borne out by the facts."
The proof was the fact that, since 1995, some nine cases involving Commission officials had been referred to the judicial authorities. In addition, since 1995 the Commission has dealt with 49 disciplinary cases resulting in eight officials being sacked. The truth was, said the Commission President, that the development aid fraud only came to light following investigations by UCLAF.
MEPs however would like to see the antifraud body strengthened by making it independent from the Commission and increasing its personnel from 130 officials to 300. It is currently investigating some 950 cases and for 1997 discovered fraud involving €1.4 billion.
Irregularities
The Commission has embarked on an ambitious reorganisation programme with a view to putting management on a sound footing. It is, however, necessary to distinguish between deliberate fraud and administrative irregularities which concern a failure to observe often complex financial rules.
The Commission's problem has been compounded by an increase in responsibilities without extra staff. This has increased the pressure on existing officials to ensure that money has been allocated towards areas such as development aid voted by Parliament. Since 1995 however, new rules have been introduced to ensure greater controls especially in the food aid area.
Notwithstanding these new controls, fraud in the tourism sector was only discovered following persistent questioning by Edward McMillan-Scott (UK, EPP) and a subsequent investigation by the Court of Auditors.
Enlargement
As Budget Committee Chairman Samland explained, the focus for EU spending now switches to the Agenda 2000 programme and paying for enlargement. The 1992 Edinburgh agreement which laid down ceilings for different categories of expenditure such as agriculture and regional spending expires next year and the Commission's proposed options for reforms have already prompted an outcry from some member states reluctant to envisage an increase in national contributions.
At present, the EU's budget which amounts to just 1.10 per cent of the Union's GNP is raised through a mix of customs duties, agricultural levies, up to 1 per cent of VAT and a national contribution related to the wealth of each member state. The latter's share has increased from 10 per cent in 1988 to just under half of next year's budget.
This has, however, resulted in new imbalances. Germany continues to be the EU's long-term paymaster with a net contribution of some €11 billion. This has led to demands from Germany and other net contributors such as the Netherlands, Austria and Sweden for a UK-style rebate - ruled out by the Commission - and indeed has called into question the annual British rebate itself, worth around €3 billion.
A decision to change the system for refinancing the rebate requires unanimous agreement between the 15 member states, and the UK Chancellor is pledged to defend it. Parliament's Budget Committee Chairman, Detlev Samland, pointed out that the rebate was negotiated at a time when agriculture, from which the UK does not benefit as much as continental states with a larger farming base, accounted for 70 per cent of the budget. Now it has been reduced to just 47 per cent so it was time to change the rules, he felt.
Furthermore, in addition to the extra costs for enlargement, some €5 billion now goes on foreign aid outside the EU so it is just not feasible to look at the budget in terms of expecting an exact return on payments made. One of the Commission's proposed options envisages national governments paying more of agricultural spending. Negotiations are just beginning.