Commission reproached for ‘inadequate’ loan checks

Date: 04/04/02

By David Cronin

THE European Commission has come under attack for failing to properly check whether countries receiving major loans and grants meet the conditions attached to the funding.

Financial watchdogs at the EU Court of Auditors say there has not been adequate monitoring of whether states benefiting from 'macro financial assistance' (MFA) have honoured commitments to introduce political and legislative reforms.

The court's criticisms are contained in a new report on the Union's release of €822 million in MFA - mostly loans - to the Balkans and the ex-Soviet Union from 1998-2000, and of €995 million in 'structural adjustment' funding to Mediterranean countries from 1992-2000.

According to the report, the Commission's 'monitoring does not follow up whether the legislation [sought] is actually adopted and the reform actions ultimately carried out'.

Jordan, for example, was allocated €100 million in 1996, with a proviso that its government should approve a new law on fostering competition. Although the Jordanian cabinet endorsed that bill, it was not rubber-stamped by the national parliament.

'There are no job descriptions, no internal rules and no specific tools in the Commission units responsible for monitoring setting out how to verify whether the reform policy in the beneficiary countries is satisfactory and whether the specific conditions are fulfilled,' the auditors complained.

They added that 'systematic independent evaluations' of financing for the Mediterranean countries had not been conducted. In theory, MFA provided by the Union is supposed to be of an 'exceptional' nature. The EU is 'not an international financial institution like the World Bank or the IMF [International Monetary Fund],' said the auditors.

They found, though, that in several cases the assistance 'has become regular and continuous rather than exceptional'; in November 1999 Romania and Bulgaria were promised MFA for the fourth time in eight years. The auditors also highlighted significant time-lags between money decisions being taken and the payments actually being made.

In April 1999, the Council of Ministers decided that Albania qualified for a loan of €20 million. But none of this had been handed over by the time the Court examined the Albania file in February 2001. Tirana, it observed, 'no longer seems willing to take loans' as other governments were receiving MFA in the form of grants.

In a reply to the auditors, the Commission said it was planning to 'initiate independent evaluations of MFA programmes from 2003 onwards'.

But it said evaluations may not be needed for some of the Mediterranean undertakings as it 'works in close coordination with the World Bank, which carries out reviews of public spending in the region'.

THE European Commission has come under attack for failing to properly check whether countries receiving major loans and grants meet the conditions attached to the funding.