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Corruption always thrives in the EU Fraud, theft and bribery fuel its wasteful projects

Protesting against peculation (Konstantinos Tsakalidis/Bloomberg via Getty Images)

Protesting against peculation (Konstantinos Tsakalidis/Bloomberg via Getty Images)


December 14, 2021   5 mins

The word peculation has largely been forgotten since it was used in the 18th century and beyond when the likes of Warren Hastings, the ruler of British territories in India, were busy defrauding the public purse. It means monetary misappropriation, especially of governmental resources — and perfectly captures an affliction at the European Union’s core.

For decades, the EU has been providing heroic floods of funding for peculators, perhaps the greatest such flows the world has seen. From 2014 to 2020, the bloc spent €960 billion, and to 2027 has plans for €1,820 billion more. Of these scarcely fathomable sums, around two-thirds goes on various forms of regional and industrial support.

Estimates in the relatively well-policed UK suggest you can expect anything from 2% to 10% of project money to be syphoned off via fraud, collusion, or bribery. But Brussels has long been reluctant to exert central control over its cascades of cash. Only this year has it established a European Public Prosecutor’s Office to pursue malfeasance: despite a tiny budget, in its first few months EPPO has accumulated more than 300 cases. Yet the value encompassed, €4.5 billion, is microscopic compared to the scale of the problem.

This is largely a result of the lack of central oversight, which means you can’t disaggregate skewed spending from theft. You’ll never tally which eye-watering sums have been misallocated, misappropriated, or simply stolen. The best you can do is survey the mechanisms that foment intellectual corruption, and can lead to all the criminal ills.

Take one of its biggest programmes: agriculture, fisheries, and environmental good works, which account for €774 billion of the 2014-27 totals. Leave aside, if you can, the “small scale” rural defraudations over many decades, which by now must total many billions. It’s the essence of the EU’s rural policy that’s obscene, for it’s built on tariffs around food that are passed onto the consumer. Development economists will tell you that, even as latterly reformed, this costs Europe’s consumers over €20 billion a year. This number is a good surrogate for the income denied annually to the poor farmers in the global South who would love to feed the EU’s people.

Astronomical sums are also spent on space, where the EU works with outfits such as the European Space Agency. The numbers here are deliberately obscured, but in recent years, upwards of €36 billion has been budgeted. The EU’s space policy amounts to a me-first system of outdoor relief for a charmed circle of giant French-controlled firms, with others involved for cosmetic decoration. Step forward Arianespace, run by Airbus (France-Germany-Spain) and Safran (France). Offshoots of Leonardo (Italy’s state-run defence champion) and Thales (France) are also prominent. The Union’s space trajectories reached their apogee with the Galileo scheme to send GPS satellites whizzing above the earth. As far as the numbers tell you, this wheeze has so far absorbed over €10 billion. The bizarre rationale was to rival the perfectly adequate American system, which reserves its tightest accuracy for military use by the US and its allies. Was the EU expecting America to invade? In a further moment of madness, the Chinese were asked to join, though they were later disinvited. After Brexit, Britain was scandalously expelled, though non-EU members Israel, Norway and Switzerland are kept in.

Also among the big boondoggles are central allocations to R&D under programmes dubbed Horizon. From 2014 to 2027 they will total €176 billion. Here, too, the beneficiaries are mainly an established club of “Old EU” companies in France and Germany, plus selected chums in academia. (Britain was a major taker until it left.) The in-built bias was underscored during the latest seven-year spending round, when the newish 11 members in Central and Eastern Europe, despite having a fifth of the EU’s population, were vouchsafed a mere 5% of the largesse available. Meanwhile, famous EU states such as Israel and Switzerland received much more. And has anyone monitored the real-world sales and profits resulting from all that spending? What do you think?

Ensconced in Luxembourg is the European Investment Bank. This is a huge machine for channelling financial subsidies to the Union‘s banks and projects. The EIB does this by borrowing ultra-cheaply on the back of guarantees from the member states. As of the middle of this year the EIB had €179 billion out to financial institutions and €342 billion to other borrowers. The EIB is forever trying to reconcile bankerly professionalism with massive political pressures. It often fails. It’s especially lax in its subsidies to financial institutions, as the modus operandi is to offer overall funding lines that the entities in question use to on-lend at will. Full disclosure: I spent some time as a Head of Division at the EIB, and saw the political machinations first-hand.

Many peculative possibilities come from the plethora of mainstream EU schemes for regional and industrial spending. Even when the goal is a worthy hospital, road, railway or factory, abusive opportunities abound. Start with the local or central governmental satrapies which sponsor many of the projects. They have an inherent tendency to over-specify (the EU’s grants are “free”, after all) and to mismanage the implementation. Greedy advisers and construction firms egg them on. Contractual fiddles can cut links between performance and payment. Central governments (which provide counterpart financing) and EU bureaucrats are complicit, as it’s in everyone’s interest to get the money out of the door. As we’ve seen, when it’s embroiled, the EIB is often swayed by the politicians too.

Yes, public tenders are stipulated by the EU for most procurement: there are €1,900 billion-worth each year. But it’s easy to fiddle the specifications and the criteria for selection. In particular, Italy, Austria, Spain, Greece, and Portugal have long had poor reputations with their public tenders. In recent years, Hungary, Cyprus, Romania, and Bulgaria have come galloping up the track, and are poised to overtake. Hungary has already won some sort of prize, as PM Viktor Orbán notoriously rewards his chums via hand-steered EU contracts; the country is to receive €22 billion in regional funds to from 2021 to 2027, and more in post-Covid aid.

For decades, the resultant cases of waste and theft have been scattered across Europe. Among the thousands of suspect schemes, notable clumps are in southern Italy, Spain, and in Germany’s once new LĂ€nder. A classic of over-investment is Spain’s high-speed rail network. It has absorbed €56 billion over the past 35 years, €14 billion from the Union, but remains chronically underused. One external report put the inappropriate allocation of public funds (to 2016) at €26 billion. The euphemistic plea was voiced for “Transparency in hidden agendas behind public works”. Compared with such herculean Hispanic achievements, the case of Berlin’s new airport seems modest. Supported by the EIB, its cost has exploded from €2.8 billion to €10.3 billion or more. Finally open after 14 years, it’s still not fully functional.

The cases keep coming. Just the other day, the Financial Times revealed to a shocked German railways and to bemused German public prosecutors that the prized scheme for rebuilding the central Stuttgart station, part-funded by Brussels, was allegedly riddled with peculative ills. The original cost, €2.5 billion, has more than tripled to €8.2 billion (and counting). The FT suggested that much of the inflation was due to glaring mismanagement and corruption, one source putting the scale of the peculation so far at €600 million.

Until EPPO came along the Union’s only policeman was the notoriously feeble control body OLAF, which was supposed to work with another weak entity, the European Court of Auditors. They might as well not have bothered: last year, OLAF itself recommended recoveries of a paltry €293 million. However glaring the case, OLAF was duty-bound to pass it to the given country’s justice system. And all too frequently, local jurisprudence has proved ineffective. This is down to incompetence (Germany) or design (the newish East have underinvested in their legal systems, in many countries prosecutors and courts have been suborned).

From now, EPPO will have criminal law powers while OLAF will concentrate on administrative ills. But don’t expect them to do more than dent the peculation that travels along with the Brussels money juggernaut. They are a mere few hundred-strong. And the vested interests are simply too great, the huge sums of money too tempting. When, in the 19th century, Lord Acton famously said that power corrupts but absolute power corrupts absolutely, peculation was still in common use. In today’s EU, a variant of this still holds true: lack of control over spending corrupts, absolute lack of control can cause absolute corruption.


Matthew Olex-Szczytowski is a banker and historian who has advised several Polish premiers and ministers.


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Terence Fitch
Terence Fitch
2 years ago

I’ll fess up straight away and say I voted Remain though the idea of a binary vote always seemed moronic. Mainly cultural reasons-eldest has business in EU and married to Finn plus hatred of Putinand his minions and and denying him any comfort. I’ve changed my mind since then- realising details such as this article and how monolithically clonky the EU is. Plus the attitude of the French eurocracy who see it still as their way of keeping La France relevant- see Macron yesterday toddling off to see Orban probably to lecture him on ‘EU values’ aka a photo op.

Chris Wheatley
Chris Wheatley
2 years ago
Reply to  Terence Fitch

Is it because I am British that I always see France as the centre of the sleaze-pit? I thought that the whole idea of the EU was to pay French farmers for being inefficient.

Now that the Eastern Block countries have joined the EU, even the French farmers will learn a trick or two.

Francis MacGabhann
Francis MacGabhann
2 years ago
Reply to  Chris Wheatley

Am I right in suspecting you’re actually English? And if you are, then yes, it’s because you’re English.

Francis MacGabhann
Francis MacGabhann
2 years ago

I’m actually Irish. And the French are to the English what the English are to us. It’s an atavistic thing.

Chris Wheatley
Chris Wheatley
2 years ago

The Irish have already lost their identity. They are floating in a soup of EU officials, waiting to be told what their next policy is going to be.

Last edited 2 years ago by Chris Wheatley
Jeremy Bray
Jeremy Bray
2 years ago
Reply to  Terence Fitch

Like you I voted to remain because I had little faith that the political class, who for the most part were wedded to remain, would be able to pull off the necessary hard negotiations to untangle us in a satisfactory manner from the EU.
I had little faith that Boris, a deeply flawed and widely distrusted maverick – like many of our war time leaders (Pitt, Lloyd George, Churchill, Thatcher) – would lead us in the negotiations since he wasn’t in the picture to lead the Conservative party, as Cameron had assured us he would stay on to carry out the wishes of the electorate. By the time Boris gained office as PM his negotiating hand had been deeply compromised.
I was less impressed by the dire economic predictions since working in the City I had learnt that British financial, insurance and legal institutions were regarded as relatively trustworthy, hence the success of our insurance industry and the fact that so many international contracts involving foreign principals provide for High Court Jurisdiction or Arbitration in London.

Colin Elliott
Colin Elliott
2 years ago
Reply to  Jeremy Bray

You were correct, about the negotiations, and I await the day when I can find out whether the poor performance was deliberate or not.

Katharine Eyre
Katharine Eyre
2 years ago
Reply to  Terence Fitch

I think the visit to OrbĂĄn was more about electioneering. Macron has been hanging back, waiting to see which way the political winds in France are blowing before getting into the fight. Basically, to the right: the candidates on that side all seem to be arguing to defend France’s sovereignty, create a bit more distance to the EU. Macron has positioned himself as thoroughly pro-EU but needs to find his own way of addressing the dominant concerns among the electorate (migration, sovereignty) in a way which involves more, not less integration. Hence the visit to OrbĂ n: strict on migration, all about traditional values, critical of the EU while still wanting to be in it, not prissy about defending the border. Macron is hoping that being seen with him is enough to convince right-leaning voters that he understands their concerns and will do something about it.
Personally I think Macron is super creepy – but the strategy is always thought out and he seems to have absorbed Machiavelli’s “The Prince” word for word.

Chris Wheatley
Chris Wheatley
2 years ago
Reply to  Katharine Eyre

They even named the new Covid virus after him, “O Macron.”

Ian Stewart
Ian Stewart
2 years ago
Reply to  Chris Wheatley

Yeah I’ve been using that too. I wonder if his wife in the throes of ecstasy has found it awkward. Funny how the WHO dodged the bullet of naming it after Xi and accidentally(?) named it after Macron.

Colin Elliott
Colin Elliott
2 years ago
Reply to  Katharine Eyre

My guess is that Hungary will shortly be placing a multibillion € order with the French armament industry.

Chris Wheatley
Chris Wheatley
2 years ago
Reply to  Colin Elliott

And the EU will give them money to buy the arms. So France sleazes through again.

Cheryl Jones
Cheryl Jones
2 years ago
Reply to  Terence Fitch

I voted Remain too. Somewhat reluctantly. But the derangement I saw from the EU and our own establishment over the result of a democratic vote and the denigration of a legitimate political choice, changed my mind.

Katharine Eyre
Katharine Eyre
2 years ago
Reply to  Cheryl Jones

Ditto.

Ian Stewart
Ian Stewart
2 years ago
Reply to  Cheryl Jones

Jeez pleased you’ve changed your mind but a bit shocked that intelligent readers here on Unherd could be so deluded about the EU benefits or defeatist about getting out of the EU’s drowning embrace.

John Riordan
John Riordan
2 years ago
Reply to  Terence Fitch

I’m interested to know what alternative set of choices you’d have recommended for the vote in 2016?

Terence Fitch
Terence Fitch
2 years ago
Reply to  John Riordan

Sadly a highly complex issue couldn’t be reduced to yes or no. Both answers are wrong- Remain because of the EU’s failure to address internal paradoxes and faults like those described in the article plus a profound anti democratic tendency- Leave because the consequences were oversimplified. The whole thing is a dog’s breakfast that will take 20+ years to judge. Many Leave voters will be kicking up daisies by then and the young may have turned full woke. Gawd.

John Riordan
John Riordan
2 years ago
Reply to  Terence Fitch

But you can say much the same about any vote, surely? Running a country is more complex than the matter of whether it’s in the EU or not, yet we still have a tiny selection of boxes where we much mark one “X” when the time comes. And each of us is unique of course, so the choice in each case is balanced on a set of priorities possessed by no other voter, yet the system still “works” in the sense that it’s better than any system yet devised in which people don’t have any choice who governs them.

The issue of whether EU membership is beneficial is of course very complex and there is a long list of prons and cons involved in trying to assess whether it’s a good thing or not on balance. The fact of whether a country is an EU member or not, conversely, is a simple one, and that, for better or worse, was what we voted upon in 2016.

Terence Fitch
Terence Fitch
2 years ago
Reply to  John Riordan

So we agree.

Colin Elliott
Colin Elliott
2 years ago
Reply to  Terence Fitch

In my opinion, the issue couldn’t have been simpler; in the EU, or out? And if illustration is necessary, France is in the EU, Australia is not.
Complexity was introduced for two reasons; the first was to obfuscate the result, e.g. ‘they didn’t know what they were voting for’, and the second when various parties tried to stay in to a greater or lesser extent while claiming to be out. One could say that that complexity has been incorporated into the current agreement.

Last edited 2 years ago by Colin Elliott
Terence Fitch
Terence Fitch
2 years ago
Reply to  Colin Elliott

Agree, but it’s a dangerous idea to say complexity was ‘deliberately’ introduced. Certainly nit by the vapid Remain campaign. Certainly Leave ran a good campaign by simplifying the issue and psychologically we know change appeals more than stay the same. Worth remembering that the appalling Corbyn is anti EU throughout his ‘career’ as is Marxist Claire Fox though she masquerades as a libertarian. Strange bedfellows.

Ian Stewart
Ian Stewart
2 years ago
Reply to  Terence Fitch

Yes of course it’ll take 20 years to process – it’s a major strategic pivot, and these take a generation to happen. I know plenty of Leave voters who accepted this longer frame, but Remain voters seemed to think it was all about benefits tomorrow.

Peter LR
Peter LR
2 years ago

Thanks – all the reasons (well fleshed-out) as to why I voted to Leave. I see the EIB still owes us ÂŁ3.5b: why can’t we just wipe that off the ridiculous severance payment we agreed (is that ÂŁ39b going into these creaming-off funds too)? The CET (Common External Tariff) always seemed obscene: charging at least 8% extra on the goods of poor countries to make them less competitive compared to EU suppliers. It’s a revolting sham by affluent gamers wearing identical “ever closer” masks.
(end of rant – before I get going on HS2 which sounds like an even more expensive version of the failing Spanish one)

Brendan O'Leary
Brendan O'Leary
2 years ago

Thanks for this succinct overview Matthew.
As a small fish, running independent engineering contracts, I have seen much of this going on at local level in Italy and Spain and even in north of the Alps. As well as blatant theft, there is the “official” kind of corruption where everything has to go through ever-expanding bureaucracies which add no value or unique oversight but merely serve as giant job creation and money-funnelling schemes
So it’s interesting to read of how it looks from the top and unfortunately my worst suspicions are confirmed.
Although I valued free movement of goods and personnel on a business level (although, contrary to Remainer myth, France and Italy operate incredible levels of protectionism on personnel), my gut feeling was that UK should jump off this train while we had the chance. But I was still ambivalent, originally 51/49 maybe in favour of Remain but the certainty that we would never get another chance was tipping me back toward Leave.
Due to logistical reasons, unexpectedly being at meetings in Norway on the day of the vote, I did not vote on the day and was surprised that Leave won, since the media was telling me Remain was certain.
I was also surprised that the “racist/xenophobe” narrative took hold immediately and without question, since this played no part in the thinking of businesspeople I had discussed this with in the lead-up, nor did we pay much attention to campaigners since we had been discussing these issues long before the referendum was announced.

Chris Wheatley
Chris Wheatley
2 years ago

I used to work in Italy with one 6-month period when I didn’t leave the country. Compared to the UK Italy is corrupt at all levels. It used to be said that when new EU legislation came out, Italy was the first to agree and the UK the last. Italy then carried on as before, virtually ignoring the legislation whilst the UK kept to every word.

I have worked in industry in Spain and bribery is normal. Portugal has a wonderful 4/5G system, a fabulous health system but normal working people earn a pittance. In heavy industry a man who works rotating shifts in charge of a team of ten men is lucky to earn 10,000 Euros a year. I have seen in Portugal a march of government employees striking for better pensions being stoned by hundreds of unemployed people. Greece is desperately poor.

My point is that I believe the EU only works for the original six countries. The others get a quick injection of money and realise that they have to give up on their national character. Poland has fought for hundreds of years to be a nation and it will not give that away for anything.

Brendan O'Leary
Brendan O'Leary
2 years ago
Reply to  Chris Wheatley

“march of government employees striking for better pensions being stoned by hundreds of unemployed people.”

A vision of things to come under the top-down technocracy.
In the UK, we stood on our balconies and clapped for them, but for how much longer?

Jeremy Bray
Jeremy Bray
2 years ago

Peculation in the EU has not been highlighted and pursued because none of the nomenclatura of the EU wants the scale of waste to be highlighted in case it weakens public enthusiasm for the project. There is also a concern that if the peculation was found to be concentrated in certain countries that would be politically embarrassing.
Those dispensing the largess don’t want it known how much is wasted and stolen any more than foreign aid agencies want it known how much is stolen and is actually harmful to the recipient populations. For this reason efforts will continue to be made to deny or diminish the extent of the problem.
A bit like all those old people who are too embarrassed to admit they have been scammed, at least before banks were encouraged to compensate the gullible for their naivety.

John Lee
John Lee
2 years ago
Reply to  Jeremy Bray

Twenty years ago, Kinnock was sent out to sort out the EU’s finances.
He stayed out there and became rich, the EU finances changed not one jot.

Colin Elliott
Colin Elliott
2 years ago
Reply to  Jeremy Bray

Think, too, of all the EU supporters the system creates, and it even provides them with funds with which to support political parties with EU-supporting policies.

Nicky Samengo-Turner
Nicky Samengo-Turner
2 years ago

The EU is merely Hitler’s failed architectural framework, adapted by Germany, without Uncle Adolf’s discipline!

Ian Stewart
Ian Stewart
2 years ago

Or Napoleon’s.
They like being told what to do, and then ignoring the instruction, as others here have already stated.

Nicky Samengo-Turner
Nicky Samengo-Turner
2 years ago

Ps- Just look at the EU racket in Ireland where farmers are paid millions for fake and phoney leases of unproductive land upon which a few farm animals are put… so the farmers can breed racehorses somewhere else…

Alan Thorpe
Alan Thorpe
2 years ago

Who cares about the 10% that might be siphoned off? What do (did) we get for the rest? This is all our taxes that the governments think they are entitled to take and yet they all remain completely unaccountable for the expenditure. It is time for all governments to be cut down to size. I saw a comment saying the governments we have now are exactly the governments that the Founding Fathers of America were trying to avoid and they understood that the power should be held by the people. The EU believes the opposite.

Giles Chance
Giles Chance
2 years ago

No good applying Brit values to European countries. They have their own system, and have had for hundreds of years. I know this is an argument for Brexit. I did vote Remain, but since have seen the error of my ways. I think redemption is possible. Isn’t it ? (plaintive)

Ian Stewart
Ian Stewart
2 years ago
Reply to  Giles Chance

It’s worth reflecting on why you thought Remain was the best option. It seemed so clear to me it wasn’t in the long term.
In a similar vein I’ve been reflecting too after watching Impeachment on TV about Clinton/Lewinsky – I can’t recall my view of Lewinsky at the time, but I was probably, and wrongly I now believe, in the camp of blaming her as a tart instead of blaming him as a creep. Funny how developments can change your fundamental views.

AC Harper
AC Harper
2 years ago

I’ve said before that the EU (and its previous forms) was in fact a New Hanseatic League (the old Hanseatic League – whose traders enjoyed duty free treatment, protection, and diplomatic privileges in affiliated communities and their trade routes). The Politicians were bought off with the idea of preventing future wars and extending paternalistic control over the rude mechanicals.
Is it any wonder that ‘business’ finds it tempting to find inappropriate financial opportunities? It has been alleged that the ban on domestic incandescent light bulbs went hand in hand with spare capacity in a CFL factory. Countries outside the EU face steep tariffs on finished goods, but smaller tariffs on raw materials which are ‘finished’ by industries within the EU.
The lack of control over spending does lead to peculation – but I suspect the true answer is not ‘more control’ for that would still be open to interference by trade. The true answer is less central control and more local control, although this is contrary to the ideas baked into the New Hanseatic League.

Last edited 2 years ago by AC Harper
George Knight
George Knight
2 years ago

This is no surprise and is nothing new. The real question is what is it all leading to for it isn’t being done for no good reason. Could it be that Europe will once again be known as “Europe of the Dictators”? All that money buys a lot of compliance and buy-in. Don’t be surprised if at some point the EU morphs into a Chinese style of control.

David Bell
David Bell
2 years ago

indeed, following in the hallowed footsteps of the great Joseph Conrad.

Anna Bramwell
Anna Bramwell
2 years ago

It is the management of the regional and structural funds by the Member States that is the main problem.