Why the ritual of the bearded Swede makes for a dreary Parliamentary merry-go-round

Date: 15/11/01

By Gareth Harding

IT IS one of the most depressing rituals in the Strasbourg calendar.

Every November, a bearded Swede stands up in front of a rapt chamber of MEPs to tick off the European Commission and EU governments for wasting billions of euro of taxpayers' money.

The budget commissioner responds by saying that steps are being taken to iron out irregularities but that the lion's share of the blame rests with member states, which are responsible for keeping an eye on four-fifths of the budget. Members from all parties then seek to make as much political capital out of the report as possible by threatening not to sign off the budget.

The Commission promises to do better next time, Parliament naively believes it and the whole institutional merry-go-round starts spinning again. The European Court of Auditors' Report for 2000, which was unveiled by its President Jan Karlsson earlier this week, is no exception to the rule. It is the first report to analyse how the Prodi Commission has handled the EU's purse-strings and its conclusions do not make for happy reading.

Evidence of dodgy book-keeping is rife, billions of euro are lost annually through fraud, waste and mismanagement and the Court notes that there is still an "unacceptable incidence of error" in the way agricultural and structural funds are doled out. For these reasons, the Luxembourg-based watchdog refused to sign off accounts relating to almost 90 of the EU's expenditure.

The main problem, the Court notes, is that programmes are so poorly defined that it is impossible to assess whether money has been well spent or not. For example, last year the EU spent €900 million on potato starch aid but the Court observed that the Commission has "never assessed whether the basic objectives of the system are being achieved".

Where programmes are poorly defined and open to abuse, staggering levels of waste are bound to follow. Despite repeated warnings from Karlsson and Co, weaknesses in rules governing aid for olive oil and flax have not been put right, leading to losses of €195 million.

Likewise, irregularities in the use of export refunds - which cost the EU taxpayer about €9 billion last year - are estimated to amount to some €100 million. The Commission argues that reforms in the pipeline will lead to a more efficient use of funds.

This is probably true, but as many of these changes are not due to take effect until 2003, European taxpayers will have to wait another four or five years to see the fruits of this Commission's labours.

But even then, unacceptable levels of waste are likely to occur because of the absurdity of the EU's spending priorities. Less than 5 of Europeans work in agriculture, yet farmers receive half the EU's budget. Aside from flouting World Trade Organisation rules, polluting Europe's rural environment and destroying developing countries' export markets, the Common Agricultural Policy seems purposefully designed to waste large amounts of money while providing few benefits to consumers.

The Court gives one telling example. Taxpayers currently subsidise milk surpluses to the tune of €3 billion a year, yet the reform of the EU's dairy sector plans a 2.5 increase in milk production between 2000-2005.

Roll those figures around your tongue for a while. Some €3 billion to pay European farmers to produce too much milk. Add this to the €9 billion to flood the world market with abnormally cheap agricultural exports. These two funds alone equal the amount the EU spends on aid to poor countries.

One way of reducing fraud and improving the EU's image would be to scrap the CAP as it currently exists. Instead of subsidising farmers to the tune of €40 billion a year, the Commission's role would simply be to make sure that state aid rules are not abused and that both consumers and the environment are protected.

At a stroke this would slash shopping bills, cut red tape, help developing countries and allow the EU to spend its money on more pressing concerns like tackling unemployment, fighting poverty and cleaning up the environment.

It would also show European citizens that the Union is not a one-way street in which powers are endlessly siphoned off by Brussels. Unfortunately though, there is one snag - a tiny minority of Europeans profit from the status quo and their governments have neither the vision nor the courage to pull the plug on them. So don't expect the bearded Swede ritual to disappear in a hurry.

Commentary on the presentation of the European Court of Auditor's annual report.