Corruption: why it matters and what the EU can do!

Cecilia Malmström, the EU Commissioner for Home Affairs (Wikimedia Commons, Hans Doverholm).

Cecilia Malmström, the EU Commissioner for Home Affairs (Wikimedia Commons, Hans Doverholm).

Corruption is one of our world’s main plagues. Less visible than environmental disasters, less mediatised than epidemics, it nevertheless costs a lot of money and many lives around the globe. So, corruption needs to be addressed not only because it is morally wrong – this is obvious, except probably to those who practice it – and is a source of unfairness, but also because of the high costs it entails for “normal” citizens: in times of economic crisis and of budgetary restrictions, recovering money used for the purpose of corruption would be particularly welcome to reduce deficits and give some fiscal margin of discretion to governments. 

The state of corruption in the EU

On Tuesday 3 February, the European Commission published its first EU Anti-Corruption Report. It reveals that, over the whole EU, corruption has an annual cost of around €120 billion (a sum only slightly below that of the yearly EU budget!). A summary of the main findings is available here (the whole report – 41 pages – is accessible here).

Before going further, it may be good to ask: what exactly is considered as corruption? In the report, corruption is defined as any “abuse of power for private gain”. So, it includes very different things such as briberies to a local official to avoid paying a fine, paying politicians to obtain their vote, corruption of a businessman to be awarded a contract, etc.

Let us, then, note that, contrary to the prejudices, corruption is not limited to Italy or Greece, or some Eastern European countries. Admittedly, Italy accounts for half of the €120 billion that corruption costs to EU countries, but precisely because corruption has multiple facets and can become very complex, even Member States with a strong reputation for integrity shall permanently monitor the risks of corruption.

In addition, free movement of goods, services, capital and, within limits, people makes corruption more likely to become a cross-border phenomenon calling for an EU-wide oversight.

How can the EU contribute to the fight against corruption?

The EU has no autonomous police or judiciary. Moreover, it cannot define criminal sanctions, as this is a competence of Member States. In particular, Member States shall enforce the rule of law and make sure they do not only adopt the adequate legislation but also effectively enforce it! However, the EU can contribute to the coordination of the anti-corruption legislation and fight corruption through indirect channels.

  • Identification/Definition of best practices

The Anti-Corruption Report directly contributes to the definition of best practices. Indeed, it relies on multiple sources of data and information to identify what kind of corruption specifically affects each Member State and which actions are undertaken to tackle it: the ones that are successful and the ones that should be improved. A summary of the Report’s national chapters for each Member State is available here.

  • Rules on money laundering

In the case of crimes with a potential cross-border dimension (also called ‘Euro crimes’), “the EU can adopt directives providing for minimum rules regarding the definition of criminal offences, i.e. rules setting out which behaviour is considered to constitute a criminal act and which type and level of sanctions are applicable for such acts.” This includes corruption and money laundering. EU rules already exist: directive 2005/60/EC (26.10.2005) “on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing” and the implementing directive 2006/70/EC (01.08.2006). The Commission issued last year proposals to update the rules and also published some studies on the impact that these new rules would have. Until now, however, the reform has not been adopted. If properly enforced, money laundering rules are very useful against corruption, because they allow identifying sources of corruption and intercepting/recovering “criminal money”.

  • Public procurement rules

A reform to EU public procurement rules has been adopted in January 2014. Now, Member States have 2 years to implement the directive. The reform has extended the scope of the European rules which aim at ensuring better value-for-money of public expenditure. These EU rules also force Member States and local authorities to respect high transparency standards during the tendering procedure and to exclude bidders that are not suitable (for diverse reasons: violation of their legal obligations, conflict of interest, unsatisfactory performance during a previous contract, etc.). So, public procurement rules are a European tool to fight corruption.

  • State aid rules

I am not sure State aid rules have ever been used to recover money earned thanks to corruption but I believe it would be conceivable to do so. Indeed, if an economic operator wins a public contract or obtains public support (e.g., aid to export, guarantees, etc.) only because of corruption, we may say that: there is an intervention by the State/through State resources; it confers an advantage on the recipient; it distorts competition (the better competitor loses the contract); and it is also liable to affect trade between Member States. So, it seems that the Commission could order a Member State to recover the sum paid to a corrupt co-contractor in the framework of a contract.

Pierre-Antoine KLETHI

3 thoughts on “Corruption: why it matters and what the EU can do!

  1. Pingback: What has Europe done for you? 3-9 February 2014 | Europe's Café

  2. Southern Europe as a deep rooted culture of corruption, as the construction industry within Spain clearly as been proved. In Italy and Greece getting anything done or accomplished most likely involves some form of state or local corruption or bribes.

    The bloated CAP within the agriculture and farming as also been proved to be wide open to corruption and false accounting. The EU talks about corruption, but is it going to do anything to actually fight corruption? As usual Europe talks but does very little?

    • In some areas, corruption is deeply rooted. But we should not give free way to prejudice: a big financial centre as well can be a place where corruption develops precisely because it is a less visible form of corruption and organised crime.

      The CAP in itself has nothing to do with corruption. Regarding the risk of abuse/false claims, it bears the same risks as any subsidies programme.

      The EU can act in the framework of its competences! You can’t invoke national sovereignty over the police & judiciary, and then criticise the EU because it does not act enough, in your eyes, to fight corruption. As I wrote in the article, the EU can act through a number of indirect instruments, but it does not have the power to define precise sanctions (as this power remains with the Member States).

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