Daniel Freund

29. June 2023 Anti-Corruption

Parliament and Member States negotiate Europe's most important financial rules - Conflicts loom on these three points

Yesterday (Wednesday) the negotiations between the European Parliament and the EU Member States on the EU’s financial rules started. What may sound very dry at first is one of the most important laws for the EU budget. This is because it regulates how billions in payments from Europe are distributed – and also when they can be withheld if there is a risk of corruption or if European values are being violated. We are negotiating a law that can become a central instrument for enforcing European values and fighting autocracy and corruption in the EU. 

In the negotiations among the parliamentary groups earlier this year, Alexandra Geese and I were already able to push through strong measures. In the negotiations with the Council that now lie ahead, however, the Parliament will have to fight to prevail with this strong position. The Council position envisages a significant watering down of the original Commission proposal. There is a risk that effective protection against corruption will simply be removed from the rules. An overview of the major sticking points between Parliament and Council:

  • Linking the disbursement of EU funds to compliance with fundamental rights: The Parliament wants the Commission to be able to suspend payments of all EU funds in the future if a Member State does not comply with the EU Charter of Fundamental Rights. However, the corresponding amendments were rejected in the Council. This means that the Commission would still not be able to withhold EU funds from certain funding pots, such as the multi-billion euro agricultural fund, if fundamental rights are systematically being violated in a Member State.
  • Transparency about the recipients of EU funds: Due to the chaotic data situation, the EU does in principle not know who actually receives EU funds. With the revision of the Financial Regulation, the Commission and the Parliament want to create a uniform, partly publicly accessible database on the recipients of EU funds. The Council supports the creation of the database, but wants that only the registration of recipients in so-called “indirect management” (via third parties) is mandatory. All recipients who receive EU funds either directly from the Commission (“direct management”) or via the Member States (“shared management”) should not have to be recorded in the database. This would make the database more or less useless, as about two-thirds of all EU funds are allocated through shared management alone. Example: This includes those funds received by Viktor Orban’s son-in-law in the LED streetlight fraud case. They would not be recorded in the database.
  • Expansion of the EU ‘blacklist’: Anyone who has cheated with EU funds should not receive any more funds for at least some time. Sounds obvious – but so far only the recipients of about 20 percent of EU funds could be blacklisted if they were guilty of corruption, fraud, money laundering, child labor, terrorism or similar. The Commission and the Parliament would like to extend the scope of application to “shared management” as well, so that in the future it will be possible to blacklist all recipients of EU funds. The Council, however, would like to retain the existing, very narrow scope of the blacklist. In other words, it is possible to be convicted of serious crimes such as corruption, fraud, money laundering or child labor in connection with the spending of EU funds, but to reapply for EU funds immediately afterwards, according to the Council’s position.

Timetable for the negotiations

The second so-called trilogue negotiation between Parliament, Council and Commission is scheduled for September. The negotiations are expected to last several months. The aim is to adopt the revised Financial Regulation before the end of this legislative term.