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EU Has Funds for Growth – They're Under Red Tape

Billions of euros of EU funds to promote growth in Europe’s rundown regions are lying idle because cash-strapped national governments cannot find the necessary matching funds to release the money.

Euro bills and coins in cash register tray
AP
Euro bills and coins in cash register tray

Internal documents from the European Commission, obtained by the Financial Times, show that the EU has paid out only 10 percent of €347 billion ($451.1 billion) allocated by its flagship fund up to 2013, more than halfway through its seven-year spending cycle.

Other EU figures show that $8.4 billion has been paid out in error under this structural funds program over the previous two seven-year funding periods, of which 75 percent has so far been recovered. Official investigators also suspect tens of millions of euros have been siphoned off by organized crime, including the Italian Mafia.

An investigation into the EU’s structural funds by the FT, in collaboration with the Bureau of Investigative Journalism, highlights several concerns about the way the program is administered. The cohesion funds, one of the biggest multi-national public spending programs in the world, account for more than one-third of the EU’s total budget.

- The complexity of the funding program means there is little effective central oversight of how the money is spent. The FT and the Bureau were only able to create a database to analyze the spending by downloading more than 600 national files in 21 different languages.

- Some of the world’s biggest multinational companies, including IBM , NokiaSiemens , and Coca-Cola , have been allocated subsidies from the program, which is primarily intended to support small and medium-sized enterprises.

- Other companies are using EU funds to help them move factories to countries with cheaper workforces in spite of rules specifically prohibiting this practice

Other EU figures show that $8.4 billion has been paid out in error under this structural funds program over the previous two seven-year funding periods, of which 75 percent has so far been recovered. Official investigators also suspect tens of millions of euros have been siphoned off by organized crime, including the Italian Mafia.

The Commission said there were several reasons for the low take-up of funds, including the time it takes for the projects to be selected and the money to be spent and then reimbursed by Brussels. Laszlo Andor, EU social affairs commissioner, said: “This is not a bank that needs to produce a balance at any given moment.”

The Commission has already launched a public consultation on how to reform its cohesion policy. It wants to target funds at fewer priority areas and to introduce stricter performance targets. Some member states are also pressing the Commission to shift all future funding to poorer countries.

EU officials fiercely defend cohesion spending as a means of realizing one of the organization's core aims: to stimulate economic growth in Europe’s poorer regions and to narrow income gaps.