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#ECA reports a low 2.6% error rate in use of EU funds

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In its 2018 annual report, published today (8 October), the European Court of Auditors (ECA) has concluded that the EU accounts present a “true and fair view” of the EU’s financial position. For the third year in a row, the auditors have issued a qualified opinion on the regularity of the financial transactions underlying the accounts. This reflects the fact that a significant part of the EU’s 2018 expenditure was not materially affected by errors and that such errors are no longer pervasive across spending areas. At the same time, challenges remain in high-risk spending areas such as rural development and cohesion, say the auditors.

“Thanks to improvements in its financial management, the EU now meets high standards of accountability and transparency when spending public money. We expect the incoming Commission and the member states to sustain this effort,” said ECA President Klaus-Heiner Lehne. “The start of a new legislative term and of a new financial programming period create a window of opportunity. Policymakers should grasp it to focus EU policies and spending on delivering results and added value.”

The overall level of irregularities in EU spending has remained stable within the range observed during the two previous years. The auditors estimate a 2.6% error in 2018 expenditure (2.4% in 2017 and 3.1% in 2016). Errors were found mainly in high-risk spending areas, such as in rural development and cohesion, where payments from the EU budget are made to reimburse beneficiaries for the costs they have incurred. These spending areas are subject to complex rules and eligibility criteria, which may lead to errors.

With a renewed leadership in the EU institutions and following the European Parliament elections this year, the EU is at an important crossroads and must seize the momentum to deliver results, say the auditors. The EU’s budget accounts for no more than 1% of gross national income of all member states, so it is vital that its spending should not only comply with the rules but also deliver results.

The auditors also highlight challenges to EU budgetary and financial management that are of particular relevance for the new long-term budget cycle. The member states’ absorption of structural and investment funds, which account for almost half of the current multiannual financial framework (MFF), remains low despite increased momentum and significantly higher claims in 2018. The Commission needs to take measures to avoid undue pressure on payment needs at the start of the new MFF (2021-2027), which could be caused by delayed claims from the current one. Furthermore, the increase in guarantees supported by the EU budget (€92.8 billion at the end of 2018) adds to the budget’s exposure to risk, which the Commission will have to address under the new MFF.

In 2018, EU spending totalled €156.7 billion, the equivalent of 2.2% of the general government spending of member states taken as a whole and 1.0% of EU gross national income. In 2018, ‘Natural resources’ made up the largest share of funds audited (48 %), while the share of ‘Cohesion’ spending was 20 % and competitiveness represented 15%. Like last year, the auditors examined ‘Cohesion’ based on the work of other auditors in the member states and the Commission’s supervision.

Each year, the auditors audit EU revenue and expenditure, examining whether the annual accounts are reliable and whether income and expenditure transactions comply with the applicable rules at EU and member state level.

The EU’s accounts are prepared applying accounting rules based on international public sector accounting standards, and present the Union’s financial position at the end of, and financial performance over, the 2018 financial year. The EU’s financial position includes the assets and liabilities of its consolidated entities at year-end, both short-term and long-term.

A ‘clean’ opinion means the figures present a true and fair view, and follow the rules of financial reporting. A ‘qualified’ opinion means that the auditors cannot give a clean opinion, but the problems identified are not pervasive. An ‘adverse’ opinion indicates widespread problems.

In order to reach this audit opinion, they test samples of transactions to provide statistically-based estimates of the extent to which revenue and the different spending areas are affected by error. They measure the estimated level of error against a materiality threshold of 2 %, above which revenue or spending is considered to be irregular. The estimated level of error is not a measure of fraud, inefficiency or waste: it is an estimate of the money that should not have been paid out because it was not used fully in accordance with EU and national rules.

The European Court of Auditors (ECA) is the independent external auditor of the European Union. Its audit reports and opinions are an essential element of the EU accountability chain. They are used to hold to account those responsible for implementing EU policies and programmes: the Commission, other EU institutions and bodies, and administrations in Member States. The ECA warns of risks, provides assurance, indicates shortcomings and good practice, and offers guidance to EU policymakers and legislators on how to improve the management of EU policies and programmes.

The annual report on the EU budget, the annual report on the European Development Funds and the summary document “2018 EU audit in brief” can be found here. 

EU

Will the Kremlin go beyond election interference? 

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Once the Kremlin is persuaded that Joe Biden will become the US’s next president, it may go for the jugular. Already today, not election manipulation, but triggering civil conflicts in the United States could be the main aim of Moscow’s mingling in American domestic affairs, write Pavlo Klimkin and Andreas Umland.

Over the past 15 years, the Kremlin has played with politicians and diplomats of, above all, Russia’s neighbors, but also with those of the West, a hare and hedgehog game, as known from a German fairy tale. In the Low Saxon fable’s well-known race, the hedgehog only runs a few steps, but at the end of the furrow he has placed his wife who looks very much like him. When the hare, certain of victory, storms in, the hedgehog's wife rises and calls out to him “I'm already here!” The hare cannot understand the defeat, conducts 73 further runs, and, in the 74th race, dies of exhaustion.

Ever since Russia’s anti-Western turn of 2005, governmental and non-governmental analysts across the globe have been busy discussing and predicting Moscow’s next offensive action. Yet, in most cases, when the world’s smart “hares” – politicians, experts, researchers, journalists et al. – arrived with more or less adequate reactions, the Russian “hedgehogs” had already long achieved their aims. Such was the case with Russia’s invasion of Georgia’s South Ossetia and Abkhazia in 2008, “little green men” on Ukraine’s Crimea in 2014, hackers inside Germany’s Bundestag in 2015, bombers over Syria since 2015, cyber-warriors in the US elections of 2016, or “chemical” assassins at England’s Salisbury in 2018.

Across the world, one can find hundreds of sensitive observers able to provide sharp comments on this or that vicious Russian action. For all the experience accumulated, such insights have, however, usually been provided only thereafter. So far, the Kremlin’s wheeler-dealers continue to surprise Western and non-Western policy makers and their think-tanks with novel forays, asymmetric attacks, unorthodox methods and shocking brutality. More often than not, Russian imaginativeness and ruthlessness become sufficiently appreciated only after a new “active measure,” hybrid operation or non-conformist intervention has been successfully completed.

Currently, many US observers – whether in national politics, public administration or social science – may be again preparing to fight the last war. Russian election interference and other influence operations are on everybody’s mind, across America. Yet, as Ukraine has bitterly learnt in 2014, the Kremlin only plays soft ball as long as it believes it has some chance to win. It remains relatively moderate as long as a possible loss will – from Moscow’s point of view – only be moderately unpleasant. Such was the case, during Russia’s interference into the 2016 presidential elections in the US.

The Ukrainian experience during the last six years suggests a far grimmer scenario. At some point during the Euromaidan Revolution, in either January or February 2014, Putin understood that he may be losing his grip on Ukraine. Moscow’s man in Kyiv, then still President of Ukraine Viktor Yanukovych (though very much assisted by Paul Manafort), may be kicked out by the Ukrainian people. As a result, Russia’s President drastically changed track already before the event.

The Kremlin’s medal awarded to the anonymous Russian soldiers who took part in the annexation of Crimea lists the date of 20 February 2014, as the start of the operation to occupy a part of Ukraine. On that day, pro-Russian Ukrainian President Yanukovych was still in power, and present in Kyiv. His flight from Ukraine’s capital one day later, and ousting, by the Ukrainian parliament, on 22 February 2014, had not yet been clearly predictable, on 20 February 2014. But the Kremlin had already switched from merely political warfare against Ukraine to preparing a real war – something then largely unimaginable for most observers. Something similar may be the case, in Moscow’s approach to the US today too.

To be sure, Russian troops will hardly land on American shores. Yet, that may not be necessary. The possibility of violent civil conflict in the United States is today, in any way, being discussed by serious analysts, against the background of enormous political polarization and emotional spikes within American society. As in Putin’s favorite sports of Judo – in which he holds a Black Belt! – a brief moment of disbalance of the enemy can be used productively, and may be sufficient to cause his fall. The United States may not, by itself, become ripe for civil conflict. Yet, an opportunity to push it a bit further is unlikely to be simply missed by industrious hybrid warfare specialists in Moscow. And the game that the Russian “hedgehogs” will be playing may be a different one than in the past, and not yet be fully comprehensible to the US’s “hares.”

Hillary Clinton was in 2016 a presidential candidate very much undesired, by Moscow, as America’s new president. Yet today, a democratic president is, after Russia’s 2016 hacking of the Democratic Party’s servers and vicious campaign against Clinton, a truly threatening prospect for the Kremlin. Moreover, Joe Biden was, under President Obama, responsible for the US’s policy towards Ukraine, knows as well as likes the country well, and is thus especially undesirable for Moscow.

Last but not least, Moscow may have had more contacts with Trump and his entourage than the American public is currently aware of. The Kremlin would, in such a case, even more dislike a Biden presidency, and a possible disclosure of its additional earlier interventions, in the US. The stakes are thus higher, for the Kremlin, in 2020 than in 2016. If Trump has no plausible chance to be elected for a second term, mere election interference may not be the issue any more. Moscow may already now implement more sinister plans than trying to help Trump. If Putin thinks that he cannot prevent Biden, the Kremlin will not miss a chance to get altogether rid of the US, as a relevant international actor.

Pavlo Klimkin was, among others, the Ukrainian Ambassador to Germany in 2012-2014 as well as minister of foreign affairs of Ukraine in 2014-2019. Andreas Umland is a researcher at the Ukrainian Institute for the Future in Kyiv and Swedish Institute of International Affairs in Stockholm.

All opinions expressed in the above article are those of the authors alone, and do not reflect any opinions on the part of EU Reporter.

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Defence

USEUCOM demonstrates readiness to support NATO in Exercise Austere Challenge

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US European Command (USEUCOM) leaders, strategists, planners and operators joined forces with their NATO counterparts in exercise Austere Challenge 2021 (AC21) to practice a co-ordinated response to a fictional major crisis this week. While the exercise was conducted virtually to protect the health of the participants and our communities from COVID-19 more than 4,000 military and civilian personnel participated.

The exercise brought together USEUCOM and its components who joined Joint Forces Command-Brunssum and Naval Striking and Support Forces NATO for the weeklong, computer-based, biannual command post exercise, which culminated today (23 October).

"We are looking forward to drawing on the lessons learned we have from this exercise as we prepare for future activities together," said German Gen. Jörg Vollmer, commander of Allied Joint Force Command Brunssum. AC21 is part of an exercise series planned and executed since the 1990s and focused upon training combatant command co-ordination, command and control and the integration of capabilities and functions across USEUCOM’s headquarters, its component commands, US interagency and NATO.

The exercise was linked globally to other US combatant command exercises, including US Strategic Command and US Space Command’s Exercise Global Lightning 2021 and US Transportation Command’s Turbo Challenge 2021. “Exercises like AC21 prepare the USEUCOM staff to respond to crises in a timely and well-coordinated manner with our NATO Allies, which ultimately supports regional stability and security,” said US Army Maj. Gen. John C. Boyd, USEUCOM’s director of training and exercises.

While the ongoing pandemic forced a variety of USEUCOM exercises to be modified or canceled this year, training and partnership-building has carried on. “We remain postured and ready to support NATO against any enemy or threat – be it a military crisis or an invisible virus,” Boyd added. “Together on innumerable instances, the US and NATO have demonstrated a strong, unbreakable working relationship to counter any threat to the alliance. AC21 is yet another example of the strength and solidarity of the NATO alliance and USEUCOM’s contributions to Europe’s collective defense.”

About USEUCOM

US European Command (USEUCOM) is responsible for US military operations across Europe, portions of Asia and the Middle East, the Arctic and Atlantic Ocean. USEUCOM is comprised of approximately 72,000 military and civilian personnel and works closely with NATO Allies and partners. The command is one of two US forward-deployed geographic combatant commands headquartered in Stuttgart, Germany. For more information about USEUCOM, click here.

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Brexit

President Sassoli to EU leaders: Help get the budget negotiations moving again

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President Sassoli with French President Macron and German Chancellor Merkel at the 15 October summit © KENZO TRIBOUILLARD / POOL / AFP 

In a speech at the EU summit on 15 October, Parliament President David Sassoli insisted it is now up to EU leaders to unlock the stalled negotiations on the 2021-2027 budget.

President Sassoli urged the EU heads of government to update the negotiating mandate they have given to the German Council presidency to make agreement on the EU long-term budget possible.

He noted that Parliament’s negotiators have asked for an additional €39 billion for key EU programmes that benefit Europeans and promote a sustainable recovery. “This is a paltry sum when set against an overall package worth €1.8 trillion, but one which would make an enormous difference to the citizens who will benefit from our common policies,” President Sassoli said, referring to the total amount of the seven-year budget and the Covid-19 recovery plan.

Sassoli noted that if Parliament’s compromise proposal is accepted by the Council, the budget spending ceiling will have to be raised by only €9 billion and this will bring the ceiling of those programmes to exactly the same level of spending as in the 2014-2020 period in real terms.

He said that the interest payments for the debt that the EU plans to issue to finance the recovery must be counted on top of the programme ceilings so as not to further squeeze the financing of these policies. The recovery plan “is an extraordinary commitment, and therefore the cost of the interest should be treated as an extraordinary expense as well. It should not come down to a choice between these costs and the [budget] programmes”.

The President also stressed the need for a binding timetable for the introduction of new types of budget revenue over the coming years and for flexible provisions in the budget to finance unforeseen future events.

Sassoli defended Parliament’s demand for ambitious emission reduction targets. “We must reduce greenhouse gas emissions by 60% by 2030. We need a target, which acts as a bright beacon on the path to climate neutrality. Protecting the environment means new jobs, more research, more social protection, more opportunities.”

“We should use the economic stimuli provided by public institutions to radically change our growth models while guaranteeing a fair transition that works for us and for future generations. No one should be left behind,” he added.

Commenting on the ongoing negotiations on future EU-UK relations, Sassoli expressed concern about the lack of clarity from the UK side. “I hope that our UK friends use the very narrow window of opportunity that remains to work constructively towards overcoming our differences,” he said, adding that the UK should honour its commitments and remove the controversial provisions in its internal market act.

Sassoli also called for a de-escalation of tensions with Turkey. “The Turkish rhetoric is growing increasingly aggressive and the country's intervention in the Nagorno-Karabakh conflict is certainly not helping matters. Now is the time for the EU to fully support German mediation efforts, to stand united and speak with one voice,” he said.

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