A European budget with many more irregularities in expenditure, of which a huge amount can be attributed to Italy. A situation aggravated by the increasingly indebted EU finances, especially due to the growing expenses aimed at financing Ukraine. This is the situation that emerges from the report of the EU Court of Auditors published on 10 October. The judges recalled that in relation to the Recovery Fund, known in Italy as the Restart and Resilience Plan (Pnrr), 75 percent of the investigations into irregular expenditure are attributable to Italy. Another cause for concern: it is not clear whether the accumulated expenses will actually be able to generate growth capable of offsetting this super debt. One gets the impression of a huge “mess”, made up of errors and fraud, with potential damages estimated at over 1.8 billion euros.
The debt risks for Russia’s aggression and for financing Kiev
The Court of Auditors has raised the alarm about “growing financial risks to the budget caused by record debt, Russia’s war of aggression against Ukraine and the high rate of inflation”. Financial assistance to Ukraine more than doubled in 2023, from 16 to 33.7 billion euros. The Court warned that carrying the risks of loan repayment defaults into the future could put the EU budget “under pressure”. It also highlighted the significant risks associated with the Facility for Ukraine established in 2024 to provide financial support of a maximum additional amount of €33 billion in the form of loans for the period 2024-2027, against which there is no provision the obligation to set aside provisions.
Increasing errors in the budget
The judges highlighted that for the 191.2 billion euros of expenditure financed by the budget the level of error increased to 5.6 percent (in 2022 it was 4.2 percent; in 2021 it remained at 3 percent) . Irregularities were also found in the 48 billion euros spent under the Pnnr. The Court highlighted numerous payments made without all applicable conditions having been met, as well as flaws in Member States’ control systems. Recalling the data provided by the European Public Prosecutor’s Office (Eppo), the judges highlighted how out of the 206 active investigations in ten member states, at the end of 2023, 75 percent of the cases refer to Italy. The figures presented by the EPP “confirm that the risk of fraud is present in the Pnrr operation” and “call into question the reliability of Member States’ management declarations in terms of reporting the frauds detected and the corrective measures taken”, they underlined the judges.
Doubts about revenues deriving from the Pnrr
Another sore point concerns the errors in “cohesion” expenditure. According to the Court, one of the reasons why national administrations are unable to secure appropriate funding for cohesion projects is that they have to spend money from competing EU funds under tight deadlines. Among the situations requiring particular attention, the judges referred to the total amount of outstanding commitments, “which will result in future payment obligations if not released”. This is a record figure of 543 billion euros at the end of 2023. At the same time, the debt has surged, reaching 458.5 billion euros in 2023, an increase of 32 percent compared to 2022. This is mainly due to the new loans taken out for Next Generation EU (NGEU), amounting to 268.4 billion euros.
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“EU debt has now almost doubled compared to 2021, when it stood at €236.7 billion. “Thus the EU is now one of the largest debt issuers in Europe, although it is not clear whether the own resources proposal presented from the Commission will generate sufficient revenue to repay the debt related to the NGEU”, reads the audit. “The additional costs of borrowing for Next Generation Europe are estimated to be between 17 and 27 billion euros”, they underlined the judges. Finally, according to the Court, the budget could lose almost 13 percent of its purchasing power by the end of 2025.
