In the 2007-13 period, for example, funding for those policies amounts to €347 billion. That represents a colossal 36 percent of the total EU budget for that period and has long been the second-largest outlay after farm subsidies. The European Commission flagged it as ‘‘the greatest investment ever made’’ to support growth and job creation.
But EU economic growth is almost stagnant, living standards are sinking, and jobless rates are rising to unprecedented levels in the hardest-hit countries.
When governments request EU aid, they have to come up with supplementary funds for a project — usually between 15 and 50 percent, either from their own Treasury or bank loans.
For years, European financial watchdogs have complained about difficulties tracking and assessing the benefits of allocated money. In an appraisal of the measures enacted in the 2000-2006 period, the European Commission concluded the funds had helped economic development but was unable to quantify by how much. ‘‘Identifying achievements so far from the funding provided ... is made difficult not only by delays in implementing programs but also by the unsatisfactory nature of the information available to do so,’’ another Commission report acknowledged last year.
The European Audit Court, which oversees EU spending, has repeatedly scolded officials for lax accounting and inadequate oversight covering a spider’s web of funds, organizations and acronyms generated by Brussels bureaucracy.
‘‘Put simply, the Court found too many cases of EU money not hitting the target or being used sub-optimally,’’ Vitor Caldeira, President of the European Court of Auditors, said this month, when presenting the body’s report on 2011 spending.
Across southern Europe examples of questionable spending decisions are easy to find.
EU funds stoked Spain’s overheated construction sector, helping to inflate a real estate bubble that burst with devastating effect in 2008.
Almost a third of the roughly €35 billion of structural funds that went to Spain over the 2007-2013 period was channeled to infrastructure projects — ignoring perilous over-investment by the country’s regional governments that now are appealing for financial rescues. Despite the billions poured into the Spanish economy, the country is in the grip of a double-dip recession with a 25 percent unemployment rate.
A three-year investigation by European and Italian authorities into EU-funded road-building programs in Sicily, meanwhile, unearthed illegal sub-contracting, a lack of proper oversight and conflicts of interest, among other shortcomings. Italy had to repay €389 million.
Italy’s southern Mafia heartland also yielded some of the more scandalous cases of abuse. According to an inventory compiled by the Open Europe think-tank, one program in Sicily involved around €300 million to improve trash collection and recycling. The recycling target was fixed at 35 percent, but the island achieved only 6 percent. Also, €230 million was used to improve Sicily’s railway network, but only eight kilometers (five miles) of track was repaired.
The EU’s anti-fraud agency, OLAF, says last year it recouped about €690 million after investigations across the bloc. The biggest amount — €525 million — was recovered from structural funds.
In Portugal, which has collected almost €50 billion from the EU over the past two decades, an infrastructure construction spree became so notorious it got its own moniker — ‘‘a politica do betao’’ (the politics of concrete) — as politicians plundered the aid programs for vote-winning projects. In 1989, Portugal had just 210 kilometers (130 miles) of highways; 20 years later, it had 2,860 kilometers (1,777). That’s a lot of highway in a country about 550 kilometers (240 miles) long and less than 200 kilometers (125 miles) wide.
With EU aid looking like a free lunch, Portugal neglected to modernize, and the excessive emphasis on infrastructure had a negative impact on its economy. The upshot: Due to low productivity, low education levels and low technology, Portugal languished in the first years of the new century with average annual growth below 1 percent. It has now gone into reverse with its third recession in four years amid a mountain of debt.
The windfall produced notorious excesses in the Madeira Islands. But just two years ago, European Commission President Jose Manuel Barroso, a former Portuguese prime minister, touted the region as a model of EU growth. The aid for years delivered spectacular returns, helping lift the standard of living above that in Italy and just lower than in France. Thirty years earlier it was one of the bloc’s five poorest regions.Continued...