Member states face fines for illegal CAP payments

Date: 29/02/1996

By Rory Watson

EU governments are facing a 1-billion-ecu bill to return illegal payments made to the farming industry in the early Nineties.

The exact sums will be finalised by the Commission within the next fortnight and deducted from future payments to member states under the Common Agricultural Policy (CAP).

The move follows investigations into the way EU farm funds were handled in 1992 which uncovered irregularities in each of the then 12 member states, although the bulk of the money being sought was specifically spent on beef and dairy production.

It also comes as the European Parliament's budget control committee called this week for the reform of the CAP to prevent the misuse of Union funds.

MEPs recommended discharging the EU's farm budget for 1991, but said the CAP should be radically simplified and reformed. While supporting the Commission's practice of fining member states for any financial “irregularities” involving money from the CAP, Euro MPs complained that the system of fixed-rate fines meant the total amount lost from the EU budget was never recovered.

The Commission already has a battle on its hands as it attempts to claw back up to 120 million ecu from Ireland for irregularities in the beef sector, an attempt vigorously resisted by Dublin.

“We accept there was some wrongdoing, but it was not as severe or as widespread as the Commission is trying to make out. We think they are trying to make a political example out of us. The proposed fine on us would be the biggest ever,” complained a senior Irish official.

The 1 billion ecu that the Commission is seeking to recoup as it closes the books on its 1992 CAP spending reflects both better controls on the way EU money is spent and the new emphasis being given to tighter financial management.

The sum is considerably higher than normal annual demands, but less than the record 1.5 billion ecu which member states were ordered to repay last year after illegal practices in 1991 expenditure were uncovered.

Of that 1.5 billion, almost two-thirds were owed by Italy and Spain for breaking EU dairy rules and for failing to respect production ceilings.

“Not everything contained in the clearance of accounts for 1992 concerns fraud. Sometimes it is a matter of the way a member state has interpreted EU rules. Some cases are notified by member states themselves, but the big ones are uncovered by the Commission itself,” explained one senior official.

The bulk of the repayments will come from Italy, Spain and Greece for ignoring their milk quotas. Although the hefty fines were imposed in 1994, despite intense political lobbying by Rome and Madrid, their payment was eventually spread over several years.

Other financial irregularities uncovered by EU investigators include payments to cotton producers in Greece and for durum wheat output in Italy. But it is the proposed penalties on the beef sector which are leading to last-minute negotiations between the Commission and a number of member states on the scale of money being clawed back.

Investigations were carried out into the way Ireland, France, Italy and the United Kingdom operated EU rules. Some of the dispute centres on the way national authorities interpreted intervention rules when buying in surplus beef at a time when the export market had collapsed because of the Gulf War and consumption was falling amid BSE 'mad cow' disease fears.

Ireland has already carried out its own beef tribunal into activities in the sector in 1992. It found irregularities had occurred when some beef supplies were sold into intervention, with false declarations being made on the quality and quantities involved. But the government is challenging the level of the proposed Commission fine, arguing the irregularities were very much the exception rather than the rule.