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Corruption ‘costs EU 120 billion euros a year’

By Agencies - Feb 03,2014 - Last updated at Feb 03,2014

BRUSSELS — Corruption across the European Union’s (EU) 28 countries costs some 120 billion euros ($162 billion) per year, almost the size of the Romanian economy, the European Commission pointed out Monday, urging member states to do more to stamp out the problem.

According to EU’s Home Affairs Commissioner Cecilia Malmstroem, the actual figure could be even higher, despite amounting to the EU’s entire annual budget or a little less than one per cent of the bloc’s total economic output.

“This is an estimation,” Malmstroem said as she presented the report, the bloc’s first, “so probably it is much higher”.

The report will hopefully “spur the political will and the necessary commitment at all levels to address corruption more effectively across Europe”, she added. “The price of not acting is simply too high.”

The report does not rank the countries as to the seriousness of the problem nor suggest legal remedies, with Malmstroem saying that could follow after talks with member states.

But “one thing is very clear — there is no ‘corruption-free’ zone in Europe,” she said.

The report reviews how existing laws and policies work and suggests what further effort could be made.

According the European Commission s survey, corruption is a problem for almost half the companies doing business in Europe, and an increasing number of EU citizens think it is getting worse.

The report places the EU, often portrayed as one of the globe’s cleanest regions, in an unflattering light. Among businesses, belief is widespread that the only way to succeed is through political connections.

Experiences of corruption vary across the 28-country bloc. Almost all companies in Greece, Spain and Italy believe it is widespread, according to the report, the first by the commission. Corruption is considered rare in Denmark, Finland and Sweden.

That mirrors the finding of Transparency International’s corruption perception index. It named Greece as the worst performer in the EU, sharing 80th place with China. Denmark was seen as the least corrupt. 

“Corruption undermines citizens’ confidence in democratic institutions and the rule of law, it hurts the European economy and deprives states of much-needed tax revenue,” said Malmstrom.

Construction companies, which often tender for government contracts, are the most affected. Almost eight in ten of those asked complained about corruption. 

Overall, 43 per cent of companies see corruption as a problem. 

Graft 

The report says belief that corruption is commonplace is also widespread among EU citizens. A growing number believe it has grown worse in recent years. They think Greece, Italy, Lithuania, Spain and the Czech Republic are the most corrupt.

Citizens also suspect corruption is common in business. Eight out of ten believe that close links between business and politics lead to corruption.

“Europe’s problem is not so much with small bribes on the whole,” said Carl Dolan of Transparency International in Brussels. “It’s with the ties between the political class and industry.

“There has been a failure to regulate politicians’ conflicts of interest in dealing with business,” he added. “The rewards for favouring companies, in allocating contracts or making changes to legislation, are positions in the private sector when they have left office rather than a bribe.” 

The report was published shortly after Romania’s former prime minister, Adrian Nastase, was sent to jail for four years for taking bribes. He was the first premier to be put behind bars since the collapse of communism in Europe in 1989.

The EU has repeatedly raised concerns about a failure to tackle high-level graft in Romania and Bulgaria, the bloc’s two poorest members. They have been blocked from joining the passport-free Schengen zone over the issue since their entry.

In October 2012, former European health commissioner John Dalli was forced to quit after an associate was accused of asking for 60 million euros from a tobacco company in return for influencing EU tobacco law.  

Separately, a report found recently that governments of major exporting nations are backsliding in their readiness to crack down on companies that use bribery to win international market share.

Thirty of the 40 developed countries that have signed up to the Organisation for Economic Cooperation and Development (OECD) Anti-Bribery Convention are barely investigating or prosecuting cases, Transparency International pointed out. 

The convention sets the gold standard for combating corporate bribery in foreign contracting. 

Those countries with active anti-bribery enforcement programmes in 2012 were the United States, Germany, United Kingdom and Switzerland, which account for 26.2 per cent of world exports, it indicated. 

That is a retreat from the prior year when 7 countries had active programmes. Italy slipped into the moderate enforcement camp, while Norway and Denmark, which have reduced their activity over the past 4 years, fell even further, it said. Only 8 countries have fully met their OECD commitments.

Russia for the first time had no enforcements of anti-bribery laws in 2012.  Those with no record of enforcement at all over the past 4 years were Estonia, New Zealand, Greece, Israel, Chile, Mexico and Ireland. 

The failure to crack down on foreign bribery in contracts, licensing, tax dodging and other forms of corruption reflects budget cuts to enforcement agencies, a lack of expert knowledge or skill on how to pursue cases and a failure to apply the laws, the global anti-corruption group said. 

“The 40 countries, which represent more than two thirds of global exports, would make it very hard to get away with bribery if they lived up to the requirements of the OECD Anti-Bribery Convention,” said Transparency International Chair Huguette Labelle. 

Transparency International urged all major exporters to join the OECD Anti-Bribery Convention, which the Group of 20 has repeatedly recommended. China, India, Indonesia and Saudi Arabia are large exporters that have not yet done so.

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