EU auditors say Commission’s handling of bailouts is ‘weak’

EU Commission’s handling of bailouts for crisis-hit countries is generally weak, inconsistent ECA says

Photo by: Reuters (Archive)
Photo by: Reuters (Archive)

European Union flags fly in front of the European Commission headquarters in Brussels on October 12, 2012

The European Union’s Court of Auditors (ECA) said on Tuesday that the European Commission’s handling of bailouts for countries hit by the financial crisis was “generally weak” and inconsistent.

The ECA, an EU institution in charge of auditing EU’s finances, analysed the bailouts for Ireland, Portugal, Hungary, Latvia and Romania, all of which are already completed.

The auditors have not analysed the bailouts for Greece, on which they will issue two separate reports later, and Cyprus, due to the ongoing programme.

The ECA also did not analyse Spain because the bailout from the intergovernmental euro zone bailout fund included no EU money.

The auditors said that the analysed bailouts met their objectives, despite the Commission's lack of experience, because they reduced deficits in the targeted countries and prompted structural reforms.

However, "the auditors found several examples of countries not being treated in the same way in a comparable situation," the report said.

"In some programmes, the conditions for assistance were less stringent, which made compliance easier," the auditors said, as "the structural reforms required were not always in proportion to the problems faced, or they pursued widely different paths."

The ECA noted shortcomings in the work of the Commission, which is responsible for financial assistance.

"The review of key documents by the Commission's programme teams was insufficient in several respects," auditors said.

The auditors also noted the “weak monitoring” of the programmes’ implementation by the Commission and “shortcomings in documentation."

"The Commission used an existing and rather cumbersome spreadsheet-based forecasting tool," the report said, while "even for the most recent programmes some key documents were missing," they said.

In 2008, the EU was hit by the financial crisis which started to affect non-euro zone countries first, such as Hungary, Romania and Latvia. The countries received EU help from the Commission’s balance of payments facility, which was finally raised to 50 billion euros.

Besides, the Commission had 60 billion euros for euro zone countries, such as Ireland and Portugal, in the European Financial Stability Mechanism, which was all but exhausted in these two bailouts.

Euro zone governments provided an additional 440 billion euros in their European Financial Stability Facility (EFSF) bailout fund.

TRTWorld and agencies