The European Court of Auditors reported that errors in the EU’s €240 billion budget last year reached 5.6%, the highest level since the financial crisis. These errors were attributed to complex and overlapping programs, particularly in EU cohesion spending, which saw errors rise to 9.3% in investment intended for the bloc’s poorest regions. The COVID-19 pandemic resulted in the overlap of cohesion spending with the Recovery and Resilience Facility (RRF), leading to capacity constraints and a large number of ineligible projects receiving funding. The ECA expressed concerns about the accountability and traceability of the RRF, highlighting that one third of grant payments were noncompliant.
The EU’s Next Generation EU program, a joint borrowing initiative linked to COVID-19, has made the EU one of the largest debt issuers in Europe. However, there is uncertainty about how the outstanding €460 billion will be repaid. The ECA pointed out that despite the existence of a cascade mechanism to ensure debts are honored, interest costs are already in the hundreds of millions, and repaying capital would further squeeze EU budget spending. The ECA warned that unless new revenue sources are identified, other EU priorities would suffer, leaving the burden of repayment to future generations of EU citizens.
Ideas for new revenue sources for the EU, such as new taxes on polluters or company profits, have faced skepticism from EU member states. The ECA highlighted that budget errors and irregularities, while not necessarily indicating fraud or waste, can have significant implications. In 2023, the ECA reported 20 cases to the EU’s anti-fraud unit, OLAF, a rise from the previous year. Despite this, the European Commission maintained that it has a robust assurance model in place to prevent, detect, and correct errors, aiming to keep the error rate below 2% for each accounting year and program. The Commission disagreed with some of the ECA’s detailed recommendations and affirmed its commitment to sticking to the underlying regulations of the RRF.
The European Commission acknowledged the ECA’s findings and stressed the need for improvement, particularly in light of the unprecedented crises faced over the past five years. The Commission emphasized that while the ECA reported a 5.6% error rate, its own calculations yielded lower rates due to differences in methodology on minor or technical issues. The Commission highlighted its commitment to preventing, detecting, and correcting errors to ensure the accuracy of EU accounts. Despite the differences in assessments, the Commission is taking steps to address the issues raised by the ECA and improve accountability and transparency in EU budget spending.
In conclusion, the European Court of Auditors’ report raised significant concerns about the rising error rates in EU spending, particularly in cohesion spending and the RRF. The implications of these errors, coupled with the uncertainty surrounding the repayment of debts from programs like Next Generation EU, highlight the need for greater accountability and oversight in EU budget management. As the EU grapples with finding new revenue sources and addressing budget irregularities, there is a growing recognition of the challenges ahead in ensuring the financial stability and sustainability of the bloc. Collaborative efforts between EU institutions, member states, and auditors will be crucial in addressing these challenges and safeguarding the financial interests of EU citizens for the future.
