Von der Leyen’s £685bn bailout is massive fraud risk – EU’s own corruption watchdog admits

Italexit: Expert says recovery fund 'binding countries to EU’

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Ville Itala, director-general of the Olaf anti-corruption watchdog, warned Brussels does not have sufficient tools to oversee the distribution of billions of euros to pandemic-stricken regions and industries. His remarks come as the first funds from the landmark Covid bailout scheme are set to be dished out to member states. Eurocrats are anxious to prevent misuse of the vast funding bonanza that aims to help heal the economic wounds caused by the pandemic.

Mr Itala told the FT: “It’s such a huge amount of money – prevention is important.”

The Olaf boss said he was disappointed that some EU nations had decided to block attempts to require the use of bloc-wide financial oversight and risk-assessment mechanism Arachne.

It’s the refusal by some countries to sign up to a common transactions database that gives the anti-corruption chief the most concerns.

“We see that it’s a big risk, that’s for sure,” he said.

“Because we don’t have the same possibilities to follow the money flows and the information – and find the final beneficiaries.”

The European Commission this week launched its borrowing programme aimed at raising money for the recovery fund – known as Next Generation EU.

Brussels issued £17 billion of debt, a small step in its bid to spend £685 billion to help kickstart Covid-battered economies.

Commission President Ursula von der Leyen is currently on a mini-tour of the bloc as officials sign off on member states’ recovery and resilience plans.

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On Wednesday, she gave the green light to bids from Spain and Portugal.

Mr Itala insisted that stringent oversight at both national and EU levels was vital for ensuring money was not lost to waste and fraud.

He highlighted previous scandals over the misuse of EU funds and warned of a repeat if a bloc-wide data set was not made available for analysis.

Ultimately, it will be too difficult to establish the recipients of the recovery cash because of complex layers of companies and transactions across multiple jurisdictions, he added.

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Mr Itala said: “We can do it but it’s much, much more complicated.

“And it’s much more work to do if you don’t have these IT tools to follow through to the final beneficiary.”

More than 20 EU governments use the Arachne tool to monitor existing EU cohesion funding, and many are expected to use it voluntarily for the recovery fund.

But under current EU rules, it is not mandatory for member states to sign up for the programme.

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Currently, the tool is not used in Germany, Poland, Sweden, Denmark or Cyprus, with capitals opting for their own domestic systems.

Brussels believes it has introduced a new, stronger weapon for countering fraud and corruption in the bloc’s recovery fund.

Member states are required to set up national systems to record and report the end beneficiaries of EU cash disbursed under the scheme.

Commission vice-president Valdis Dombrovskis said eurocrats had put in place a “robust system” that allows them to police national “control systems”.

He said Brussels would suspend any payments if there were signs that national governments were not delivering on the demanded reforms or putting the funds into pre-agreed investments.

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