EU says corruption "breathtaking", with CEE among worst offenders

By bne IntelliNews February 3, 2014

bne -

A series of reports released February 3 showed just how much of a problem corruption is becoming in the new member states of the EU.

The European Commission's admission on February 3 that corruption across the EU is "breathtaking" comes as no surprise to those like bne that have extensively covered the worsening problem. Nor does the fact it is most widespread in the states of Emerging Europe and the Mediterranean. A report by Global Financial Integrity (GFI) released the same day revealed that nearly $70bn in illicit financial flows – the proceeds of crime, corruption, and tax evasion – flowed into or out of emerging EU member states in 2011.

In its "EU Anti-Corruption Report", the Commission estimates that corruption in the 28 member states costs the EU economy €120bn a year, just a little less than the annual budget of the EU. Three-quarters of Europeans think that corruption is widespread in their own country.

The report explains that two Eurobarometer surveys were carried out in preparation for the report in early 2013, with the first looking at general perceptions of the prevalence of corruption and the second focusing on actual expectations of having to pay a bribe.

At one extreme there are the countries like Denmark, Finland, Luxembourg and Sweden where the surveys confirmed a positive perception and low experience of bribery. These countries also appear among the good performers on the Transparency International Index, the report notes.

Then there are a group of countries with a high reported personal experience with bribery, but with a clear concentration on a limited number of sectors. In Hungary (13%), Slovakia (14%) and Poland (15%) it is the area of healthcare where the bulk of instances of bribery are found. Corruption in a broader sense is also perceived as widespread in these countries (82% in Poland, 89% in Hungary and 90% in Slovakia).

The countries where respondents are most likely to think corruption is widespread are Greece (99%), Italy (97%), Lithuania, Spain and the Czech Republic (95% in each), with public procurement a particular problem area. "More than three out of ten (32%) companies in the Member States that participated in public procurement say corruption prevented them from winning a contract," it says. "This view is most widely held amongst companies in the construction (35%) and engineering (33%) sectors. More than half of company representatives from Bulgaria (58%), Slovakia (57%), Cyprus (55%) and the Czech Republic (51%) say this has been the case."

Then there are those countries lagging in scores concerning both perceptions and actual experience of corruption, particularly Croatia, the Czech Republic, Lithuania, Bulgaria, Romania and Greece. "In these countries, between 6% and 29% of respondents indicated that they were asked or expected to pay a bribe in the past 12 months, while 84% up to 99% think that corruption is widespread in their country," the report says.

Corruption is most likely to be considered a problem when doing business by companies in the Czech Republic (71%), Portugal (68%), Greece and Slovakia (both 66%).

In combatting corruption, the report says the achievements of some anti-corruption agencies have been "more sustainable" than others. It notes approvingly the work of the Slovenian Commission for Prevention of Corruption (CPC), the Romanian National Anti-Corruption Directorate (DNA), the Latvian Bureau for Prevention and Combating of Corruption (KNAB), and the Croatian Bureau for Combating Corruption and Organized Crime attached to the State Attorney General's Office (USKOK).

Looking at the individual summaries for each member state, Bulgaria and Romania are dealt with particularly harshly - two countries that, together with Italy, are regarded as hotspots of organised crime groups.

"Only 9 percent of Bulgarians - the lowest percentage in the EU - consider that there are sufficient prosecutions to deter people from corrupt practices," the report says. "25 percent of Romanians, the second highest percentage in the EU, have been asked or expected to pay a bribe in the past year, compared to the EU average of 4 percent," it says.

At the other end of the spectrum, Slovenia is lauded as among the most active of the Central and Eastern European states in the fight against corruption," with a well-developed legal and institutional anti-corruption framework."

A particular problem in what the EU calls "convergence countries" (ie. Emerging Europe) are the allocation and use of EU funds. "Their effective implementation poses a real challenge," the report says.

It cites examples where control mechanisms have revealed cases in which officials used local government assets to conclude transactions with companies related to them.

This is backed by an independent study by Czech, Polish and Slovakian watchdogs, also released February 3, entitled: "Public money and Corruption Risks".

This study "identifies major gaps both in the national and EU legal framework that fundamentally increase the risk of political corruption and allow misuse of EU funds."

Analyzing major risks of political corruption in the management of public funds, the study sheds light on why millions of euros continue to be misused and why implementation of EU funds regularly ends up in criminal prosecution in all three studied countries. "It is not surprising that EU funds are linked with chronic political corruption in the three studied states since not even the basic rules against conflicts of interest are in effect. EU hasn't been successful in convincing the governments to do so," comments Martin Fadrny, coordinator of the research team.

Some depressing examples of such corruption cited in the report include:

• Data shows that among companies winning public contracts in the Czech Republic (including EU-funded) 10% had ownership structure with unidentifiable owners and 15% owners from tax havens.

• An analysis of post-election changes in the structure of the government offices that implement EU funds in the Czech Republic and Slovakia shows that majority of key experienced officials frequently change due to political pressures.

• Approx. CZK14 billion (EUR500 million) from EU-funded Czech Operational Program Transport went to the construction company Viamont while its former owner held the position of minister of transport and could easily influence officials managing the EU money.

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