Charlemagne: Running away with the money

How corrupt is Brussels?

ANYONE wanting to understand Brussels should make a point of leaving town on a regular basis. Like most government cities but more so, Brussels exists in a bubble of its own pre-occupations and belief systems. What seems important in the self-styled capital of Europe can seem totally unimportant in the continent of Europe, and vice versa.

This eternal truth was brought home to your correspondent on a recent trip back to London. To the average EU insider the big concerns at the moment are as follows: referendums on the European constitution, the success or failure of the new European Commission and the future of EU budget negotiations. Back in Britain, however, it seemed that everyone from taxi-drivers to middle-class housewives had only one thought about Brussels. And this is that the whole place is a massive sink-hole of corruption, a funnel into which British taxpayers' money is poured, to be sprayed liberally about by corrupt bureaucrats on a variety of undeserving causes. In Brussels, the reaction to all this is often to dismiss it as typical British Euroscepticism, stoked up by its malign American-owned press. But the image of the European Union as corrupt is not confined to Britain, as any Danish, Dutch or German politician will know. So is it true?

Many of the Britons who have fixed upon the idea that the Union is a cesspool of corruption have two big facts lodged in their mind. The first is that in 2002 the EU's chief accountant, Marta Andreasen, declared that its internal financial controls were wide open to fraud - and was sacked for her pains. The second is that the EU's own Court of Auditors has failed to sign off on its accounts for ten years running.

Mrs Andreasen is inevitably a controversial figure. To her defenders in Britain, she is a heroine and a regular guest on television and radio. In Brussels she is widely regarded as a self-seeking troublemaker, demanding reforms that were already well under way, and now pursuing her own political agenda. But the effort to paint Mrs Andreasen as some sort of loonie took a knock recently with the emergence of an internal European Commission memo, written by Jules Muis, who until last year was the EU's chief internal audit officer. Mr Muis had formerly done the same job at the World Bank and has been a partner at Ernst & Young accountants. He called Mrs Andreasen a “focused and determined professional, who was asking the right questions”. Mr Muis also spoke out strongly against what he regarded as the commission's tendency to intimidate dissenters and its culture of “might makes right”. Privately, a senior commission official now acknowledges that the whole Andreasen affair - which is currently before the courts - has been grossly mishandled and “terribly damaging” to the commission.

Mrs Andreasen's original suggestion that the EU's budget of roughly €100 billion ($130 billion) a year is “completely vulnerable to fraud and error” is, on the face of it, supported by the fact that the Union's own Court of Auditors has failed to clear its accounts for the past ten years. Yet this damning fact does not make the EU unique in the annals of public administration. Mr Muis points out that America's Government Accountability Office (formerly the General Accounting Office) has repeatedly given disclaimers of opinion on the federal government's accounts. And in Britain, the Department of Work and Pensions, which administers the social-security system, has also had its accounts “qualified” for the past 15 years.

The analogy between fraud in the European Union and welfare fraud is a useful one. Some 80% of EU spending goes on the common agricultural policy and “structural funds ” - -which are essentially welfare programmes for farmers and for poor regions. Like welfare programmes anywhere, they are vulnerable to fraud. This potential is all the higher in the EU, because so much of the money is spent in obscure ways, far from Brussels.

Only now, with a new anti-fraud commissioner, Siim Kallas, in place, is the commission taking steps to record all recipients of EU funds on a publicly available register. In Brussels itself, financial controls are often tight. The one part of the EU's accounts that the Court of Auditors did feel able to vouch for was “administrative expenditure”. But this accounts for just 6% of the budget. Once the money is disbursed from Brussels, it is much less clear what happens. An effort by Mr Muis to force national governments to vouch for the integrity of EU spending on their own territory was knocked back a couple of years ago - although this week the European Parliament will repeat the suggestion.

Don't rock the money-go-round

Yet the conclusion that the European Union's sleazy image is all the fault of national governments is far too comforting for Brussels. For the issue is not simply cases of outright fraud. There are many practices in Brussels that are perfectly legal but still reflect extremely badly on the Union. One such is the system that allows EU civil servants to pay a special rate of income tax that is far lower than the European average. And then there is the fact that members of the European Parliament can, perfectly legally, claim travel expenses that are far greater than the costs they have actually incurred.

This impression of an unaccountable elite playing by its own rules is perpetuated by the tendency of the Brussels authorities to round with fury on anyone who rocks the boat. The Andreasen case was not an isolated incident. Mr Muis says that once he started to say things that were uncongenial, he was subjected to “a certain amount of arm-twisting”. There is, he says, “a reluctance to disturb the carousel of money, that keeps going around.” So when Hans-Peter Martin, an Austrian member of the European Parliament, caused a scandal by videotaping MEPs signing for their daily attendance allowance, even on days when they did no work, Parliament reacted swiftly. It proposed a ban on journalists ever filming this sacred ceremony.

Commentary feature examines 'How corrupt is Brussels?'.