Why the rule of law link to EU funds is unlikely to make a real difference

Why the rule of law link to EU funds is unlikely to make a real difference

The emphasis on rule of law in the next EU budget framework (2021-2027) is a first step in addressing the risk of corruption in the Visegrad Four (Czech Republic, Hungary, Poland and Slovakia). It is likely that a soft coercive mechanism will be chosen in on-going negotiations due to its political soundness and will not be effective in targeting the corruption cycle as a whole.

The European parliament estimates that the annual cost of corruption within the EU is between €179 billion and €990 billion, which accounts for approximately 5% of the GDP. An exceptional category is public procurement, which is considered to be an area where risks are the highest and loss reaches €5.33 billion annually. The V4 has always been on the list of countries with above EU-average levels of corruption.

In the V4, the disclosure and subsequent publicity of corruption scandals predominantly related to euro funds became awfully common. It makes everyone wonder how many more fraudulent activities remain undetected. The international community has been shocked after the murder of investigative journalist from Slovakia, Jan Kuciak and his fiancé, who specifically pointed out multiple cases of fraud worth millions of euros. In the neighbouring Czech Republic, the Rath case gained also extensive publicity, where a private party illegally gained approximately €300 million by manipulation of public procurement within the Regional Operational Program of Central Bohemia (2008-2012). Poland is not lagging behind. In 2013, €897 million funding scandal has been revealed in regards to the road-building project. Lastly, in Hungary, the public medical centre purchased a device from a Slovak company for €1.7 million, while its value was estimated at only €262 000. 

Based on these examples, it is apparent that the regulations tackling corruption are insufficient. Key institution to combat the corruption on the EU level is OLAF, which investigates cases initiated by MSs, further supports the European Commission to create appropriate policy and facilitates the exchange of information.

Emphasis on the rule of law in the new budget is a positive development. Furthermore, to address Brexit, the upcoming EU budget (2021-2027) for these countries will most likely shrink. The exact details are currently a matter of negotiations.

Brussels’s officials stress the importance of rule of law conditionality in order to access EU’s financial resources. The mechanism aims to tackle the judicial and audit inefficiencies in the Member States and also include the role of the European Public Prosecutor’s Office (EPPO). These propositions were met with considerable resistance from V4. Notably, Hungary and Poland have not yet signed up to the EPPO. Some members of the European Parliament further reject EU’s efforts in the area of the judiciary as non-acceptable interference with domestic affairs and question the administrative capability of the least developed regions to adhere to the formal procedures.

Nevertheless, the role of the EU institutions and majoritarian decisions are important. It may not be in the interest of some of the national or local authorities. They may be directly or indirectly linked to cases of corruption and fraud as the examples above demonstrate. Therefore, a more active role of the EU and its ability to initiate investigations is an important step forward.

Germany and Belgium proposed a peer review procedure that would open up a discussion and monitor the rule of law on a voluntary basis. On the one hand, procedures would not substantially interfere with domestic affairs. But on the other hand, the overarching problem in V4 of incorrect implementation and weak enforcement would not be addressed as it is rather a reflection of political will and informal rules. Peer reviews are unlikely to break the cycle of corruption as countries would produce paper-friendly outputs and avoid real change. Soft methods such as shaming are insufficient considering the potential financial benefits for the officials involved. So, the oversights over the implementation of these conditionalities is even more important.

For anti-corruption measures to bear tangible results, a more coercive procedure is needed, however, it may be politically implausible due to anti-EU sentiments and the resistance of some national governments. The ability to initiate cases by the EU or other member states, to possibly monitor and discuss best practices is only a first step but does not eradicate the core of corruption. Active civic participation may be essential for soft procedures like peer reviews to be remotely effective, as proven by the positive impact of protest in Romania or Slovakia.

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