EU warned of misspending risk in Covid-19 recovery fund

14 Jul 20

European Commission plans for a post-pandemic recovery among the EU’s poorer members risk being misspent without greater direction from Brussels, the EU’s spending watchdog has warned.

 

The proposed €750bn Covid-19 recovery package, known as ‘Next Generation EU’, includes a €58bn top-up to cohesion funding, which is set aside for the union’s less-developed countries, with per capita gross national income of less than 90% of the union average.

This money would be used to “lay the groundwork” for economic recovery, with the bulk (€42bn) to be committed in 2021 and the rest the following year.

But while describing this as a “sensible, pragmatic idea”, the European Court of Auditors said there is too little direction planned for governments with regard to how they should spend the money, and not enough time to allow them to make sound decisions.

The watchdog pointed out the “tension” between the Commission’s aims of providing the funding swiftly and also making sure it is used with best effect.

“The proposal gives member states a free hand in terms of how to use the additional funding and lacks detail on how it will be coordinated with other EU instruments and national schemes. This creates the risk of fragmenting or duplicating EU support,” the ECA said in a statement.

“Furthermore, member states would need to commit the extra funding – earmark it for specific purposes – by 2022, which will put extra pressure on their ability to spend it correctly and soundly. This could lead to the risk of rushed spending that prioritises absorption over value for money – ‘use it or lose it’ – and higher risk of irregularity and fraud.”

EU leaders will meet in person this week for the first time since the pandemic began, to try to reach agreement on how to drag the union’s economies out of the crisis.

There has been disagreement over the size of the rescue package, with a group of fiscally conservative northern member states opposed to ‘bailing out’ their southern neighbours with grants.

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