How the EU squandered nearly €11bn of its common budget last year

Good morning. EU interior ministers will today discuss a possible delay to the continent-wide rollout of a new digital border system, on fears that it isn’t yet ready for action, as the FT revealed last month.

Today, our finance correspondent reports on a warning from the EU’s auditor that billions of euros are being misspent, and I explain why Ursula von der Leyen is in Moldova.

Dodgy expenses

Auditors have found that EU funds are increasingly being misspent, just as discussions start on an ambitious overhaul of the bloc’s next common budget, writes Paola Tamma.

Context: Each year the European Court of Auditors reports on how the EU’s more than €100bn-a-year budget is spent. The vast majority is in payments to member states, for instance to fund infrastructure, regional development projects or agricultural subsidies.

The increased misspending was largely a result of time pressure, the auditors said, as the period for countries to spend certain leftover funds from the previous budget period ended in 2023. In addition, countries have to spend hundreds of billions in post-pandemic recovery funds by 2026.

“Some of it is down purely to the capacity of the body to control expenditure in an orderly fashion, and they’re just overwhelmed,” Tony Murphy, ECA head, told the FT ahead of today’s publication of its yearly budget report.

Last year, nearly €11bn out of €191.2 in budget payouts was misspent, the auditors estimated, including because of accounting errors. That amounts to 5.6 per cent — up from 4.2 per cent in 2022 — continuing an increase over the past three years. Auditors also detected 20 cases of suspected fraud.

Cohesion funds, which are dedicated to regional development and make up a third of the EU budget, accounted for the bulk of the misspending, with errors up 45 per cent compared with last year.

Auditors also reviewed €53.5bn in post-pandemic recovery payouts, which countries receive once they implement pre-agreed reforms. But auditors found that in 16 out of 452 examined cases, payouts were granted even though the countries hadn’t met the requisite conditions.

That is problematic, especially for those countries that are net receivers of EU funds. The European Commission is planning a budget overhaul that would link all payouts to reforms and pre-agreed investments — much like under the recovery fund — something those countries are wary of.

It also complicates Brussels’ plans to ask net budget contributors, such as Germany, to inject more cash into the next EU budget, due to start in 2028.

The commission said that it “agrees that improvements are needed, and it is acting accordingly”.

Chart du jour: Dark side

An FT investigation has tracked down how Russia built its “dark fleet” of oil tankers, acquiring at least 25 vessels via London and Dubai to evade western sanctions.

Brussels bearhug

European Commission president Ursula von der Leyen will meet Moldova’s Maia Sandu today bearing gifts — and moral support.

Context: Moldova is an EU candidate country and began formal accession talks in June. The country applied for membership in response to Russia’s war against neighbouring Ukraine, a conflict that has imperilled its security and economic stability.

Von der Leyen will use the visit to lay out an EU “growth plan” for Moldova. The initiative, which has already been launched for western Balkan countries, involves increased financial assistance and trade benefits, in exchange for reforms to integrate their economies into the EU’s single market, and prepare them for eventual membership.

Moldova’s package will be “significant and substantive”, according to a person involved with the preparations.

A Moldovan official said it would “provide the economic leap Moldova urgently needs to overcome the consequences of the war next door, push forward with reforms, and improve the lives of all Moldovans”.

The EU’s economic bear hug isn’t just about economic growth, however. Brussels is also striving to keep Moldova on a pro-EU path, and not see Sandu and her pro-western government toppled by a destabilisation campaign orchestrated and funded by Moscow.

Russia is seeking to influence a double-headed ballot in 10 days time when Moldovans will be asked to choose their next president, and vote in a referendum on enshrining EU membership in its constitution.

Officials in both Brussels and Chișinău are fearful of either Sandu — who is running for a second term — being replaced by a pro-Russian rival or the referendum failing.

Brussels’ growth plan “will help Moldova become stronger, more resilient, and deeply integrated with Europe as we advance towards EU membership”, the Moldovan official added.

“It will also demonstrate that democracy, even under pressure from Russia, brings real progress and improves lives across the country.”

What to watch today

1. EU home affairs ministers meet in Luxembourg.

2. Nato secretary-general Mark Rutte meets UK Prime Minister Sir Keir Starmer in London.

3. Ukrainian President Volodymyr Zelenskyy travels to London and Paris.

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