October 23, 2016

EU Commission handling of bailouts was weak, inconsistent – auditors

The European Commission building

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

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.

It did not analyse the bailouts for Greece, on which they will issue two separate reports later, or Cyprus, because that programme is still ongoing.

Spain was not analysed either, because the bailout from the intergovernmental eurozone bailout fund included no EU money.

The auditors said the analysed bailouts met their objectives, despite the Commission’s lack of experience, because they reduced deficits 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,” it added, while “the structural reforms required were not always in proportion to the problems faced, or they pursued widely different paths”.

The Commission said it believed its approach was right.

“We believe the content of programmes should not be standardised,” Commission spokeswoman Annika Breidthardt said. “Flexibility is desirable given the diverse set of economic political and administrative conditions in different countries.”

The ECA also pointed out other shortcomings in the work of the Commission, which has been in charge of the financial assistance.

“The review of key documents by the Commission’s programme teams was insufficient in several respects,” auditors said, noting the “weak monitoring” of implementation and “shortcomings in documentation”.

The financial crisis hit the EU in 2008, starting with non-eurozone countries like Hungary, Romania and Latvia which received help from the Commission’s balance of payments facility, which was eventually raised to 50 billion euros.

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

Eurozone governments provided an additional 440 billion euros for eurozone bailouts in their European Financial Stability Facility (EFSF) bailout fund.

Related posts