Europe's anti-corruption office, OLAF, could do more, says Balázs Váradi of the Budapest Institute

March 5, 2017

Translation of József Barát’s interview with Budapest Institute founder, lead researcher and Magyar Narancs publicist Balázs Váradi appearing in the March 2, 2017 edition of print weekly 168óra under the title “The Types of Corruption,” (pp. 20-22).

Giovanni Kessler, the main director of the European Union Anti-Fraud Office (OLAF), was recently in Budapest meeting with chief prosecutor Péter Polt, calling their relationship good.  He did not speak about why the Hungarian government has only published one of twenty reports on domestic affairs:  one of which is about violations surrounding the Metro 4 project committed during the time of the Socialist government and when the Budapest mayor’s office was controlled by the Free Democrats.  Authorities, including OLAF, are quiet on the subject of the “Heart of the City” program, the Felcsut small-gauge railway, or Elios Zrt., that is, investigations into matters to which Fidesz leaders can be connected.  OLAF did not answer our questions, so we turned to the Budapest Institute.  Balázs Váradi is the leading researcher there whose group prepared a study about abuse of the EU’s development and coherence funds at the behest of the Green faction of the European Parliament.

Many interpret this as Kessler affixing OLAF’s stamp in Budapest to the practice whose goal is gaining political advantage.  Do you agree?

Kessler is a bureaucrat.  Honorable, thorough, enthusiastic officials work in the European Union Anti-Fraud Office within narrow limits determined by OLAF’s statutes.  They are compelled to maintain a correct working relationship with the authorities of the affected member states.

Even if those are not entirely correct?

Especially then.  OLAF works by making recommendations to the European Commission and the member states after completing lengthy investigations.  They operate under the assumption that the given country’s prosecutors perform their work conscientiously.

Hungary holds the record for failing to act on OLAF reports.  Between 2008 and 2015 the European office investigated 22 cases in Hungary, of which four resulted in procedures but only one actually came to be investigated.  OLAF itself does not release any data about its investigation.  Isn’t it helping the cheaters by being so secretive?

I would happily say that it does.  Except that this is more complicated.  In order for bureaucracies to work, there needs to be clear rules regarding what is released to the public and how.  These provisions place such decisions in the hands of the governments.  Our study also shows that OLAF could do more, and do it more openly, and that the EU’s bodies should be given more power to investigate abuses.  This is precisely the goal that would be served by the European Prosecutor’s Office plan which has been on the desk of the European decision makers for nearly a decade.  The point of it is that in matters relating to EU money spent in member states, Europe should be able to collectively turn to the courts of a given country.

The establishment of a European prosecutor’s office is being blocked by precisely the governments which are suspected of building a system of clientelism.

I won’t speculate as to their motivation.  Hungary is resolutely opposed to the European Council with regard to the creation of this institution.

The declared goal of cohesion politics is decreasing regional inequalities within the European Union, and improving the situation of citizens in the least developed regions.  Does it serve this goal well?

Based on the data available to us we suspect that it does not serve this goal well enough.  It’s clear that the EU spends a lot of money on the integration of the less developed of its countries, and we see evidence of this, subways, highways.  However, we also see strange projects of a doubtful value, of which my favorite is the bizarre shaped, zig-zagged bicycle bridge over the Zagyva, whose construction cost over a billion forints and which is not only absurd but life-threatening as well.

Within European circles the saying is that ten percent of the money is basically stolen.  Is there a firm estimate of how much disappears from the structural funds?

Expert estimates are careful and talk about a smaller ratio than this.  But what is certain is that quite a lot of money ends up in the pockets of private individuals without counter value.  However, we maintain that the biggest problem is not, say, if public tenders are ten percent overpriced.

It’s a pretty big problem if we say that 10 percent of the 8 trillion forint (USD 28.5 billion) spent on Hungary between 2007 and 2010 disappeared.

There are many types of corruption.  There is the kind where a planned loss is superimposed on the project from the outset.  This is obviously bad.  But a greater problem is that if the decision makers are interested in spending the investment money in a pointless direction.  Let’s say when enthusiastic people develop an educational video at work that is inferior to what can be found with a single click for free on YouTube, and we pay one million forints for this from the taxes of EU citizens at market price.

But why does it happen?

Because the decision makers have a friend who makes videos who is lobbying him.  And perhaps he supports the decision maker’s campaign.  If we only look at the administration of spending money, then sometimes it is difficult to decide whether a given project serves the common good.  However, the result often speaks for itself.  If, for example, two parallel highways are built a few dozen kilometers away from each other, then probably this does not serve the common good.

Or a small-gauge railway on which nobody travels.

Or a subway whose stations are 500 meters from each other, and above which buses and trams run, and for this reason hardly anybody rides it.

You recommended some methods for combating corruption.

One of the most important is for there to be continuous political feedback.  Follow the progress of a project, how much money was spent. And of course, whether they use what was created.  Is it even useable?  The control framework exists, but nowadays it is largely up to the beneficiary member state governments whether they conscientiously complete the inspection and especially the evaluation.  The question is whether they just want to complete alibi work or whether they actually want to show, for example, how many find jobs of those who completed a floral arrangement course, or how many travel on a given subway line.

They will give alibis, because it would be naive to think that the elite of the beneficiary countries, who themselves want to profit from this, will participate in their own exposure.

There can be no doubt that the EU officials could do a better job.  The European Parliament could also keep better track of what is happening, the OLAF evaluations could be made public, the monitoring data base could be put online, thereby facilitating the work of investigative journalists.

In your material a recurrent theme is the important role that civil organizations and investigative journalists play in exposing corruption.  However, in Hungary a campaign is under way against civil society, and the opposition media is held hostage by the state:  the government’s economic hinterland receives advertising revenues, and only those can survive who behave themselves.  Do you have any ideas what to do about this?

More of the EU’s huge budget could go to support investigative journalism.  The possibility of conditioning payments has also come up:  for example, a condition for EU transfers could be that the given country does not obstruct the work of supported civil organizations.  However, it was naive to await such a recommendation.  The EU works on the basis of cooperation among the member state governments.  In order to significantly change the conditions for distributing resources, the European Council made up of member state leaders also has to accept it.

I understand that the rules of a club made up of gentlemen does not prohibit spitting on the floor, because this would never occur to the members.  But if new members happen to join who do this, then the club cannot do anything else than to punish spitting.

It can also probingly turn its head.

And it even does so.  You have suggested a more radical solution:  that development funds be given, in part or whole, directly to the citizens living in a poor region.

Social policies are characteristics of the competency of the member states in the EU.  But nobody and nothing prohibits part of the budget from being used to support the poorest citizens within the framework of basic income.

Of course, this is science fiction, given that governments opposed to this can block it in the European Council.  

Our study was prepared for the EU Green faction.  Other recommendations result from following other political ideologies: for example, that the cohesion funds should be completely done away with, and in their place decide that these countries should pay less to the common budget. At least in this way payment from EU citizens would not wander off into private pockets.

And of course it is possible to cautiously step away from member states which call their citizens to wage war with Brussels in exchange for the support.  It is possible, for example, to announce the multi-seed European project, about which there will be discussions at Versailles in a few days at the German-French-Italian-Spanish summit.

Yes.  It is possible to announce that as well.