How the EU squandered almost €11 billion of its common budget last year

Good morning. EU home affairs ministers will today discuss a possible delay to the continental rollout of a new digital border system amid fears it is not yet ready for action, as the FT revealed last month.

Today our financial correspondent reports on a warning from the EU comptroller that billions of euros are being misspent, and I explain why Ursula von der Leyen is in Moldova.

Unreliable expenses

Auditors have found EU funds are increasingly being misspent just as discussions begin on an ambitious overhaul of the bloc’s next common budget. writes Paola Tamma.

Context: Every year the European Court of Auditors reports on how the EU budget of over €100 billion per year is spent. The vast majority consists of payments to Member States, for example to finance infrastructure, regional development projects or agricultural subsidies.

The increased misspending was largely due to time pressure, the auditors said, as the period in which countries could spend some leftover funds from the previous budget period ended in 2023. In addition, countries need to spend hundreds of billions on post-pandemic recovery funds. by 2026.

“Some of it is purely down to the body’s ability to keep spending under control in an orderly way, and they are just overwhelmed,” Tony Murphy, head of the ECA, told the FT ahead of the publication of today of its annual budget report.

Last year, according to the auditors, almost 11 billion euros of the 191.2 euros in budget expenditure was misspent, partly due to accounting errors. That amounts to 5.6 percent – ​​an increase from 4.2 percent in 2022 – an increase that has continued over the past three years. Auditors also discovered 20 cases of suspected fraud.

The cohesion funds, which are intended for regional development and make up a third of the EU budget, were responsible for the largest share of misspending, with a margin of error of 45 percent compared to last year.

Auditors also assessed 53.5 billion euros in post-pandemic reparations, which countries will receive once they implement pre-agreed reforms. But auditors found that in 16 of the 452 cases examined, payouts were granted even though the countries had not met the required conditions.

This is problematic, especially for countries that are net recipients of EU funds. The European Commission is planning a budget review that would link all disbursements to reforms and pre-agreed investments – just like under the recovery fund – something these countries are wary of.

It also complicates Brussels’ plans to ask net budget contributors, such as Germany, to inject more money into the next EU budget, which starts in 2028.

The committee said it “agrees that improvements are needed and is acting accordingly.”

Chart du jour: Dark side

An FT investigation has revealed how Russia built up its ‘dark fleet’ of oil tankers, acquiring at least 25 ships through London and Dubai to avoid Western sanctions.

Brussels bear hug

European Commission President Ursula von der Leyen will meet Moldovan Maia Sandu today with gifts – and moral support.

Context: Moldova is an EU candidate country and began formal accession negotiations in June. The country applied for membership in response to Russia’s war against neighboring Ukraine, a conflict that has threatened its security and economic stability.

Von der Leyen will use the visit to draw up an EU ‘growth plan’ for Moldova. The initiative, that already launched for the countries of the Western Balkans implies more financial support and trade benefits, in return for reforms to integrate their economies into the EU’s internal market, and prepare them for eventual membership.

The Moldovan package will be “significant and substantial,” according to a person involved in the preparations.

A Moldovan official said it would “provide the economic leap that Moldova urgently needs to overcome the consequences of the war next door, implement reforms and improve the lives of all Moldovans.”

However, the EU’s economic bear hug is not just about economic growth. Brussels is also aiming to keep Moldova on the pro-EU path and prevent Sandu and her pro-Western government from being toppled by a destabilization campaign orchestrated and financed by Moscow.

Russia is trying to influence a two-person vote within 10 days in which Moldovans will be asked to choose their next president and vote in a referendum on whether to enshrine EU membership in the constitution.

Officials in both Brussels and Chisinau fear that Sandu – who is running for a second term – will be replaced by a pro-Russian rival, or that the referendum will fail.

Brussels’ growth plan “will help Moldova become stronger, more resilient and more deeply integrated with Europe as we move towards EU membership,” the Moldovan official added.

“It will also demonstrate that democracy, even under pressure from Russia, brings real progress and improves lives across the country.”

What to watch today

1. The EU Home Affairs Ministers meet in Luxembourg.

2. NATO Secretary General Mark Rutte meets British Prime Minister Sir Keir Starmer in London.

3. Ukrainian President Volodymyr Zelenskyy travels to London and Paris.

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