Tom Nicolson in Bratislava -

bne talked to Zuzana Polackova, head of the European Social Fund in Slovakia, about the murkiness surrounding the distribution of millions of euros in EU structural funds.

bne: After eight months in the job, what is your view of how structural funds for the 2007-2013 have been used in Slovakia?

ZP: On the one hand everyone knows there was an awful lot of corruption, and our project managers are always saying that they were under orders from above not to ask questions about the budgets of certain projects, even when they were clearly grossly overpriced. On the other hand, no one wants to testify. What I can say is that it [corruption] was highly sophisticated and difficult to prove. Often reputable institutions and individuals were drawn into these practices because they needed funding and realised that in Slovakia there was no other way to get access to structural funds. That they had to accept the rules of the game and pay bribes. The result was a kind of public resignation that moral principles don't apply, because everyone is doing it. For me this has been the most difficult thing to handle, because I've come to realize that giving up on moral principles has become the norm in this country. And no one is doing anything about it.

bne: How did this corrupt system work, through bribes?

ZP: I don't think any cash actually changed hands. People aren't that stupid. What we have found so far is that everything worked through procurement tenders [held by structural fund recipients], especially for various studies and market analyses, where it is very difficult to set any universal quality standards. The fact that these analyses were almost always included in the first requests for funding tells us that the money was going towards the people who had arranged for the project to be approved. Then there were educational services, which were horribly overpriced across the board. This has been confirmed by audits and is one of the European Commission's most common findings. They often laugh at the money we were approving for personnel costs or training courses.

bne: Could it be argued that little of value was achieved with structural funds, even when we disregard the corruption involved? What is the benefit to society of teaching factory floor workers how to speak English, or truck drivers how to manage stress?

ZP: I have no problem with educating people. But the question is always what we teach them and how we do it. If we teach them in a systematic manner, I think that's fantastic. But when they only get a one-off course of 10 hours of English for which the company providing the service charges an exorbitant fee - that's a tragedy. The problem was that these calls for projects were made so broad that anyone could participate. In a civilized society this is a good thing, because if you relax the conditions you create room for more original project proposals. But in Slovakia these broad definitions were grossly abused. The worst problem was that the project selection process was totally incompetent. The people evaluating the projects often knew nothing about project management or about the field they were judging. This allowed worthless projects to be approved because they met the formal requirements, or because they had protection from someone higher-up.

bne: How is it that until now no-one has known that structural funds corruption worked through procurement? Why doesn't your internal IT system provide a picture of which companies were earning millions through these mini-tenders?

ZP: Because it wasn't in the interest of the people running the process that these things should be generally known. The IT system we have - ITMS - is supposed to be a cutting-edge technology providing a central database of all projects that have drawn money from structural funds, but we are unable to access information on other operating programmes, which means we can't verify whether applicants are drawing from more than one structural fund for the same project. It's common for a single person to be doing the same thing for a dozen projects in various operating programs, under the heading of "services". There is simply no public control over structural funds, meaning that regional and municipal authorities have no idea of what projects are taking place on their turf. And so it is that in a single village you could have the same work being performed by five, seven or nine various institutions of whom the mayor has never heard.

bne: A high-level policeman told me recently that if the EU knew what had happened with structural funds in Slovakia, they would cut the country off. What is your opinion?

ZP: My experience with European Social Fund auditors is that they know a great deal. They know the percentages involved in kickbacks; they know even more than the police. But cutting off a country from structural funds is easier said than done. Part of the problem is that the European Commission finds it difficult to take radical decisions. I don't mean to play down the extent of theft in Slovakia, but I think older EU member countries are better at cleaning up their messes at home and not getting the European Commission involved. We're still rookies at this. On the other hand, rather than admit our system is bad, we tend to try to defend it. We have a three-level control mechanism that is one of the most complicated in Europe, and people are still able to steal from the system. The problem is that we verify paperwork and nothing else.

bne: While writing this article, I received several suggestions to leave well enough alone, because Slovakia could lose millions in potential funding. What is your opinion?

ZP: At the moment I am a state employee, and the majority opinion in the state administration is that we should take care of this at home, not talk about it, and not let anyone find out because we would just be creating other problems for ourselves. Brussels has a very good press monitoring system, and after every article we get questioned. Questions could also arise in the European Parliament, which at the moment is deciding on budgets for the next programme period. There are a lot of risks attached, and I am beginning to understand my colleagues, even though for six months I completely rejected their point of view. It's just the way bureaucrats look at things. My own opinion - and I stress that this is my view as a citizen and not as the head of the ESF - is that this approach amounts to burying your head in the sand, and even though you don't worsen the situation you don't improve it either. It just prolongs the agony in this country, our resignation of any moral principles. I actually believe that the best thing that could happen to Slovakia is to be cut off from structural funds, so that people here would finally understand that stealing is wrong. I would have no problem going to the European Parliament and telling them what is going on with structural funds, and not just in Slovakia but in all EU member countries. I believe these things need to be said, because people have a right to this information. It's not just German taxpayers' money, it's ours as well. And if I were a German taxpayer, I wouldn't send another cent to Central Europe.