Billions of EU's euros going unused: report

30th November 2010, Comments 0 comments

Billions of euros earmarked by the European Union for developing rundown areas are lying idle because member countries cannot find the required matching funds, the Financial Times reported Tuesday.

More than half-way into its spending cycle, the EU has spent only 10 percent of the 347 billion euros (456 billion dollars) allocated until 2013 for promoting growth in poor regions, according to EU documents seen by the paper.

Guidelines for the fund's allocation were agreed in 2006, before national governments were forced by the financial crisis to make severe public spending cuts.

Under the agreement, the EU would only provide money if local bodies, usually local or national governments, contributed up to half of the project's cost.

An internal European Commission report drafted last month and seen by the FT highlighted the problem.

"As public finances came under increasing strain, many cohesion projects had to be cancelled before the contracting phase got under way or during implementation as beneficiaries found it impossible to secure their own contributions," the report said.

EU social affairs commissioner Laszlo Andor warned against overplaying the significance of the statistics.

"This is not a bank that needs to produce a balance at any given moment," he told the newspaper.

The Structural Funds and the Cohesion Fund are the financial instruments the EU uses to even out regional disparities in wealth and consist of the European Regional Development Fund and the European Social Fund.

The cohesion fund is intended to assist small and medium-sized enterprises, but has also been tapped into by multinational giants including Coca-Cola, IBM, and Nokia Siemens -- although this was not illegal, the paper said.

The pool of money is used to fund projects ranging from the building of bridges to the training of staff in fast-food restaurants.

However, those responsible for implementing the funds within the nation states criticised the system's red tape.

"They are not really interested in whether the bridge is built," Marek Kalupa, whose office allocates structural funds in Poland, told the paper.

"All they're interested in are the dates and times."

The investigation, carried out with the Bureau of Investigative Journalism, also criticises the fund for its bureaucracy and a weak oversight system, which it said rarely punished fraud.

The European Commission -- the Union's executive arm -- blamed the slow uptake of funds on the time taken to select suitable projects; for the money eventually allocated to be spent; and for it to be reimbursed by Brussels.

The newspaper's investigation also found that 8.4 billion euros was paid out of the fund in error, 25 percent of which was still to be recovered.

© 2010 AFP

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