Commission warns of legal action over structural funds

The European Commission is threatening EU member states with legal action if they fail to provide summary reports of national controls over spending of Community funds by mid-February.

The Commission is coming under pressure from MEPs to get tougher over national controls on EU spending, following criticism in the European Court of Auditors report, published in November, into the 2006 financial year.

The auditors estimated that, because of errors, 12% of structural funds payments, or around €4 billion, should not have been reimbursed to national authorities from the EU’s budget.

The Commission and MEPs are insisting that member states provide by 15 February summary reports vouching for their national control measures on structural funds. Member states acknowledge the obligation contained in the EU’s financial regulations to provide this summary, but they argue that it only applies to spending from 2007 under the 2007-13 budgeting period. The Commission, on the other hand, insists that the obligation applies to all spending declared in 2007, whether it is from the 2007-13 period or the earlier budgeting period 2000-06.

On 18 January, Danuta Hübner, the European commissioner for regional policy, wrote to the foreign ministers saying: "Failure by member states to provide useful information on the 2000-06 period in the annual summaries presented in February 2008 will give out a very negative message at a sensitive moment in the 2006 discharge procedure." The Commission would consider appropriate measures if member states failed to respect the requirement for a summary including "opening an infringement procedure", Hübner’s letter says.

Hübner has also warned that the Commission will suspend payments to member states "without delay" if it finds "serious deficiencies in key controls".

Siim Kallas, the commissioner for audit and anti-fraid, reiterated that warning when he appeared before MEPs last week.

MEPs on the budgetary control committee are stepping up pressure on the Commission. Danish Social Democrat MEP Dan Jørgensen, who is drafting the committee’s report on the 2006 accounts, said that if the Commission failed to provide adequate explanations for the €4bn which the court estimated should not have been reimbursed, Parliament would "at least postpone discharge".

The MEP said that the picture painted by the court was "a serious situation" and accused the Commission of "not living up to its responsibilities". The court had found problems in structural funds spending in previous years, but Jørgensen said that "the criticism from the court is harder this year than in previous years. This year we have the political will to do something".

"We need a clear explanation of where the 12% has gone," he said, "is it lost?" Unless committee members got "clear answers", they could refuse to grant discharge, he said, although he described this as "the nuclear option" which he wanted to avoid.

Usually the full Parliament approves the EU’s accounts in April, but Jørgensen said that the committee was prepared to take another six months to get the information it required from the Commission. This would bring the decision closer to the June 2009 European elections, with the risk that MEPs will confront the Commission for the sake of electoral publicity.

The MEP said that the committee would take a very hard look at member states’ summary reports. "We have suspicions that countries are not making enough effort. If we don’t get the reports as promised or if they’re inadequate that’s also a reason to postpone the discharge," Jørgensen said.

The committee’s members have taken the unusual step of asking Hübner and Vladimír Špidla, the employment and social affairs commissioner, to appear before them again on 25 February. The two commissioners had failed to answer MEPs’ questions satisfactorily in a hearing in December.

Appearing before the regional development committee last week, Hübner told MEPs that the 12% was a "projected error rate" and did not mean that there would be a real loss to the Community budget. She said that detecting and correcting spending irregularities could take up to two years. Kallas has estimated that around €2bn in funds could be recovered if it is found that payments were made without adequate documentation.

The European Commission is threatening EU member states with legal action if they fail to provide summary reports of national controls over spending of Community funds by mid-February.