European spending audit - John Consiglio
The European Court of Auditors (ECA) is probably that EU institution which, possibly because it works in silence but also effectively, receives least coverage from the media. This is a pity, because here we have a body of serious and capable officials who are continuously doing their best to see that what leaves national member states’ coffers to go to “Europe”, and then comes back to us for spending, is in fact spent in ways and means that are, firstly, spent in a perfectly legal manner, and secondly in a fruitful one in the direction of the EU’s objectives.
Two publications from the ECA have in recent months hit my desk outlining in detail what is being done in the direction of two objectives, one essentially legal, the other institutional. The first is a 2018 landscape review of what member states are doing at putting EU law into practice.
Although this publication is a landscape review, and therefore not an audit, it manages to really go into the whys and whens of the relationships between EU states and what comes their way in terms of laws, regulations and other requirements which the states are required to implement.
In the simplest of terms, if EU legislation and regulation is not implemented by a member state, it amounts to an infringement. But the EU Commission actually identifies four main types of potential infringements:
Member states failing to notify the Commission within set deadlines about what has been done to transpose a directive into national legislation; actual non-conformity or non-compliance in a member state’s laws with what is stipulated in an EU directive; clear and blatant breaking by a member state’s existing (or even non-existing) legislation of EU laws, i.e. the laws of a member state would be directly infringing the EU’s treaties, regulations and decisions; and incorrect, even faulty, non-application of EU law.
Just as there is an infringement procedure when member states’ budgets go awry of the existing Stability and Growth Pact rules, there is also a five-step process when the European Commission learns from the ECA that a country is infringing the simple EU rule that what the European Parliament decides on has to be accepted and followed by every member state. But the Commission isn’t only all fire and brimstone.
This publication also speaks about a number of other tools which the Commission has developed to help member states apply EU law correctly and in a timely manner.
No doubt there are always various sorts of legislative or parliamentary cultures, plus administrative governance ineptitudes which, rather than ill will, hamper timely and total absorption by member states of all that comes their way via Brussels.
But it would be tragic for the EU’s own objectives if these obstacles are simply allowed to exist with no reaction from the community. This publication is therefore an excellent oversight of all those areas and issues that come across the eyes and ears and actions of the ECA’s officers when they monitor how the EU legislative process is working in real day-to-day life in all the different EU states.
The second publication which has reached me is a special report about the ‘European Fund for Strategic Investments’ (EFSI).
This is a study on what type of action is needed to make EFSI a complete success. EFSI was set up in 2015 as part of the EU’s investment plan for Europe. The EU must, in honesty, tap its chest in correct mea culpa fashion that it took it as long as seven years from 2008 to react to the financial and economic crisis.
When it eventually did, the European Investment Bank (EIB) was immediately roped in with various component amounts that total some €21 billion of available funding that could generate, by July 2018, as much as €315 billion of strategic investments in, on the one hand, vital infrastructure, and on the other help to operating SMEs.
As always the ECA’s objective is to assess whether EFSI is an effective operation. By and large the ECA considers that EFSI has been effective in raising finance to support substantial investment in the EU.
There is still much that can be done to make the European Fund for Strategic Investments the success that first inspired it
But it must also be said that some of the results from EFSI’s activities should, for proper assessment, be taking into account various realities. For example, some EFSI operations replaced other EIB operations and EU financial instruments, or the fact that a part of EFSI’s support went to projects that could have been financed from other sources.
How EFSI will be panning out into the coming few years is very important for the EU. As the EU once again moves to its only exercise of popular democracy (the European Parliament) over the coming months, various observers are justifiably criticising and faulting it as being very weak on leadership and bold initiatives.
Others have expressed the view that it is only through massive new investment projects across the whole of the continent that it can again raise the continent’s profile in the whole world.
Infrastructure, research and innovation, education, massive transport networks, renewable energies and energy efficiency, these are all investment areas where higher-risk finance will have to be invested in massive amounts. This is a very delicate topic also in political terms.
EU states can very easily fall out of idealism-synch if perceptions come in that most investments are only being spent in some of the fewer larger EU member states rather than across the whole of the Union. But pan-EU eventual benefit will have to rise above such pettiness attitudes.
There is still much that can be done to make EFSI the success that first inspired it. So far it has increased the EIB’s higher-risk financing less than originally expected. It has replaced other financial instruments supported by the EU budget.
Regrettably it has financed projects (mainly infrastructure and innovation) that could in fact have been financed from other existing EU sources. There are some serious suspicions of overstating investment mobilisation and multiplier effects in some results presented. And, as also hinted, there is geographical non-balance in EFSI’s directional focus.
But all of these criticisms should not blank out the EFSI’s original ideals, all indeed highly praiseworthy. If the ECA’s audit of EFSI serves to, yes, push it into taking on the higher risk EIB projects that the EU so badly needs, if EFSI and the EU budgeting structures work closer together but also more dynamically, if better estimating of specific project funding is made, and, yes, if a better geographical spread becomes visible in EFSI’s activities, then its role in the European Union will be enhanced, and important objectives achieved.
Meanwhile, however, the ECA’s role and activities remain constantly of paramount importance. These, after all, are the funds of European citizens that we are talking about.
John Consiglio teaches in the Faculty of Economics, Management and Accountancy at the University of Malta.
This is a Times of Malta print opinion piece