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The Mysteries surrounding the EU Structural Fund

By Tim Rich

There were a few perks to being Liviu Drangea’s driver; a nice car, a uniform and the ear of the man who ran Romania’s southern province of Teleorman as his private fiefdom. Another benefit was that Drangea’s driver won the bid to take over a newly-privatised state construction firm, which was then given big, EU-funded projects.

Drangea, who is still nominally the leader of Romania’s Social Democrats and is appealing against a three-year and six-month prison sentence for abuse of office, is one of the many abusers of EU structural funds.

The Structural Fund was established by the European Union to promote an unwieldly list of aims from research and development to transport and a transition to a low-carbon economy. As well as electoral fraud, Drangea has been accused of misusing millions of euros given to Romania to improve its road system.

The Romanian Social Democrats, who are looking to replace him as leader, claimed the corruption charges are the major reason behind their slump in the opinion polls. ‘His legal situation has been a constant source of mistrust domestically and abroad,” said his deputy, Paul Stanescu.

The EU’s Structural Fund has long been a source of mistrust. For the fourth year running it has been the subject of more investigations by the EU’s anti-fraud office, OLAF, than any other part of the budget.

Of the 362 investigations OLAF carried out last year, 73 were directed at the Structural Fund. The greatest number of offences took place in Romania, Hungary, Poland, Greece and Bulgaria, who between them made up more than half the total.

Overall, the number of fraud cases investigated by OLAF has declined. In 2014 there were 102 abuses of the Agricultural and Social Funds. In 2017 the number was 27.
Alleged abuses of the Structural Fund have remained stubbornly high because of the sheer amounts of money involved and the fact that the money is given to governments to administer. The European Fund for Strategic Investment, which has similar objectives, is administered directly by the European Investment Bank.

In 2014, 300m euros was given directly to Slovakia’s Education Ministry for research and development projects. Officials in Bratislava were solely responsible for determining who received the funds. One official told The Financial Times: ‘It went to companies with no record of doing research, no laboratories and with no actual scientists on the payroll.’
Another stumbling block is the complexity of the frauds. One of the smaller ones uncovered by OLAF was the misuse of a 1.4m euro grant by an Italian-led consortium to build hovercrafts that would be able to reach remote areas during environmental disasters. Most of the money went to pay off the mortgage on a castle. It was a straightforward piece of deception. Even so, the investigation processed 1,200 documents.

There is also opposition from government to overcome. In 1998 work began on Line Four of the Budapest Metro. It was due to open in five years. It was cancelled by Viktor Orban in his first term as Hungarian prime minister and then, when Orban lost power, it was restarted.

The opening was delayed 17 times and the EU committed 696m euros to the eventual 1.7bn bill. Of that EU grant, 228m is still unaccounted for.
In 2014 the metro line was opened by Viktor Orban, the man who had first cancelled the project and in a statement in January last year, his ministerial spokesman, Janos Lazar, said the OLAF report was ‘a crime by the international left’, the alleged abuses were carried out under a previous administration and they would not be handing back any money.

 

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