Pressure on De Palacio over subsidy fraud probe

Date: 25/01/01

By Simon Taylor

SPAIN'S top judge has asked European Commission Vice-President Loyola de Palacio to Madrid to answer questions about an alleged fraud case involving EU subsidies to flax growers.

Supreme court judge Baltasar Garzón wants the energy and transport Commissioner to provide further information on the case, which dates back to her tenure as Spanish agriculture minister.

De Palacio's court appearance, set for 2 February, comes amid increasing signs that Socialist MEPs will step up pressure on her to resign if an investigation by the EU's anti-fraud unit OLAF finds evidence of wrongdoing.

"If the [OLAF] report confirms the serious allegations of fraud in the Union's support for the flax industry that were recently made by Spain's anti-corruption prosecutor, our group will act in an appropriate manner so that the legal consequences can be drawn for those politically responsible," said Hannes Swoboda, vice-president of the Socialist group.

But members of the Parliament's European People's Party group say if the Socialists try to force De Palacio out, they will target other members of the Commission, potentially setting off a political firestorm. "If they touch De Palacio, I will do everything possible to make the European Commission fall," Spanish MEP Gerardo Quecedo Galeote warned.

Socialist MEP Juan de Dios Izquierdo Collado has written to Commission President Romano Prodi asking him to clarify what action he plans to take based on findings by Spanish investigators that there was "generalised fraud" in the flax fibre-crop sector.

When the new EU executive took office in September 1999 each Commissioner promised Prodi that he or she would resign if asked to do so by the President.

Prodi has expressed his "full confidence" in De Palacio. Jonathan Faull, Prodi's spokesman, said the President was waiting to see the OLAF report, adding that the Commissioner had been invited to appear before the Spanish court after taking legal action to clear her name.

De Palacio has denied any responsibility for fraud involving subsidies to flax growers, saying the case was a "concoction" by the opposition Socialist party and arguing that regional authorities were in charge of payments to the industry.

But her political opponents argue that she cannot escape blame for the affair because she appointed senior officials involved in the case.

The Spanish investigator recently found evidence of wrongdoing in 1997 and 1998 because the amount of flax for which growers claimed subsidies did not match the figure indicated by an analysis of energy consumed by processing plants, the labour force employed and the per hectare yields. According to Izquierdo, the total area of land used for growing flax rose from just 185 hectares in 1993-94 to 91,400 hectares in 1998-99 before slumping again to less than 1,000 hectares in 2000-01, when investigations were launched by judicial authorities.

He added that senior officials serving under De Palacio were implicated in the case, not only because they had been involved in drafting the rules on paying aid but also because they or their relatives were owners of flax processing plants which received subsidies.

Farm ministers agreed major reforms to the EU's flax and hemp support regime in July 2000 in a bid to prevent fraud.

A spokesman for OLAF said the Union's inquiry is limited to establishing evidence of fraud and would not identify who was politically responsible for any wrongdoing. Any prosecutions would have to take place under Spanish law, he added.

Socialist MEPs said it was unlikely that OLAF would fail to find evidence of fraud. "It's not looking very good for Mrs De Palacio," said Dutch MEP Jan Mulder.

But the EPP group in Parliament is ready for a fight if the Socialists try to force her out. Centre-right MEPs are expected to target trade chief Pascal Lamy for his alleged role in a case in which the Commission reduced the fine on a firm accused of fraudulent use of EU subsidies to export dairy products.

A committee investigating the Fléchard case is not expected to incriminate Lamy.

Spain's top judge has asked European Commission Vice-President Loyola de Palacio to Madrid to answer questions about an alleged fraud case involving EU subsidies to flax growers.