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2019 EU accounts: Clean, but too many spending errors

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In the European Court of Auditors’ annual report for the 2019 financial year, published on 10 November, the auditors sign off the EU accounts as giving “a true and fair view” of the EU’s financial position. At the same time, they conclude that payments were affected by too many errors, mainly in the category classified as ‘high risk expenditure’.

Against this background, and despite improvements in certain spending areas, the auditors issue an adverse opinion on expenditure. They also take the opportunity to stress the need for robust and efficient management of the financial package that was agreed in response to the coronavirus crisis, which will almost double EU spending in the next few years.

The overall level of irregularities in EU spending has remained relatively stable, at 2.7 % in 2019, compared with 2.6% in 2018. There are also positive elements in EU spending, such as the development in natural resources and sustained results in administration. However, due to the way the EU budget is composed and evolves over time, high-risk expenditure in 2019 represents more than half of the audited spending (53 %), an increase on 2018. This mainly concerns reimbursement-based payments, for instance in the fields of cohesion and rural development, where EU spending is managed by member states.

High-risk expenditure is often subject to complex rules and eligibility criteria. In this category, material error continues to be present at an estimated rate of 4.9 % (2018: 4.5 %). Concluding that the level of error is pervasive, the auditors have therefore given an adverse opinion on EU expenditure. The auditors take the opportunity to look ahead. In July 2020, the European Council reached a political agreement combining an EU budget for 2021-2027 with a temporary recovery instrument ‘Next Generation EU’, addressing the economic and social impacts of the COVID-19 crisis. As a result, in the next few years EU spending will be significantly higher.

“Our adverse opinion on EU spending for the year 2019 is a reminder that we need clear and simple rules for all EU finances – and we also need effective checks on how the money is spent and whether the intended results are achieved,” said ECA President Klaus-Heiner Lehne. “This is particularly important in view of the planned recovery fund to combat the effects of the COVID-19 pandemic. In these times of crisis, the European Commission and the member states have a tremendous responsibility for managing the EU’s finances in a sound and efficient way.”

In the meantime, member states’ absorption of the European Structural and Investment (ESI) funds has continued to be slower than planned. Up to the end of 2019, the penultimate year of the current seven-year budget, only 40 % (€184 billion) of the agreed EU funding for the 2014- 2020 period had been paid out, and some member states had used less than a third. This has served to inflate outstanding commitments, which reached €298 billion by the end of 2019, the equivalent of almost two annual budgets. The situation has brought additional challenges and risks owing for the need for the European Commission and member states to allow additional time for absorption in the new budgetary period.

Background information

In 2019, EU spending totalled €159.1bn, the equivalent of 2.1 % of Member States’ public spending and 1.0 % of EU gross national income. ‘Natural resources’ made up the largest share of funds audited (47 %), ‘Cohesion’ spending accounted for 23 % and ‘Competitiveness’ represented 13 %. About two thirds of the budget is spent under ‘shared management’, where it is the member states that distribute funds, select projects and manage the EU’s expenditure. 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 by 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 previous 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 that 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, the auditors test samples of transactions to provide statistically based estimates of the extent to which revenue and individual spending areas are affected by error. They measure the estimated level of error against a threshold of 2 %, this being the rate above which irregular revenue or spending is considered to be material. 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 ECA is the independent external auditor of the European Union. Its 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 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 '2019 EU audit in brief' can be found here.  On 13 November, the ECA will publish for the first time a report on the overall performance of the EU budget.

EU

7th EU-Kazakhstan High-Level Business Platform focused on transition to low-carbon and green technologies

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The EU-Kazakhstan High-Level Platform of dialogue on economic and business matters (Business Platform) held its 7th meeting in Nur-Sultan on 11 June, chaired by Prime Minister Askar Mamin.

The event brought together representatives of business and EU Heads of Mission led by the Ambassador of the EU to the Republic of Kazakhstan, Sven-Olov Carlsson. Visiting EU Special Representative for Central Asia Ambassador Peter Burian joined the event.

The High-level Business Platform complements the technical dialogue between the EU and Kazakhstan within the Enhanced Partnership and Cooperation Agreement, in particular the Cooperation Committee in Trade Configuration, which took place in October 2020.  

The EU has committed to climate neutrality by 2050 and is fully translating the implementation of the Paris Agreement into legislation. Ambitious targets and decisive actions demonstrate that EU is and will remain to be a global leader in the transition to green economy. The climate challenge is inherently global, the EU is only responsibly for approximately 10% of all global Greenhouse Gas emissions. The EU expects from its partners to share a comparable level of ambition to fight climate change and is ready to deepen co-operation with Kazakhstan in this area, including exploring new opportunities for trade and investment.

The recent EU-Kazakhstan Cooperation Council welcomed the progress made in the framework of the Business Platform chaired by the Prime Minister Mamin. The Platform acknowledges the importance of the EU in Kazakhstan's external trade, and discussions on a range of issues contribute to attract more investment in Kazakhstan.

Background Information

The EU-Kazakhstan Enhanced Partnership and Cooperation Agreement (EPCA), fully in force from 1 March 2020, aims at creating a better regulatory environment for businesses in areas such as trade in services, establishment and operation of companies, capital movements, raw materials and energy, intellectual property rights. It is a tool of regulatory convergence between Kazakhstan and the EU, with some “WTO plus” provisions, notably on public procurement. Even in a year as difficult as 2020, the EU has consolidated its position as Kazakhstan’s first trade partner and first foreign investor, and Kazakhstan remains the main trade partner of the EU in Central Asia. Total EU-Kazakhstan trade reached €18.6 billion in 2020, with EU imports worth €12.6bn and EU exports €5.9bn. The EU is by far Kazakhstan's first trading partner overall, representing 41% of total Kazakh exports.

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Belgium

Iranian Opposition rally in front of US embassy in Brussels to ask US and EU for a firm policy towards Iranian regime

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Following the G7 summit in London, Brussels hosts the NATO summit with US and EU leaders. It is the first trip of President Joe Biden outside the US. Meanwhile, the Iran deal negotiations have started in Vienna and despite the international efforts to return Iran and the US to compliance with the JCPOA, Iranians regime showed no interest to return to its commitments under JCPOA context. In the recent IAEA report, important concerns have been raised that the Iranian regime failed to address.

The Iranian diaspora, supporters of the National Council of Resistance of Iran in Belgium, held a rally today (14 June) in front of the US embassy in Belgium. They held posters and banners with the picture of Maryam Rajavi, the leader of the Iranian opposition movement who has declared a non-nuclear Iran in her 10-point plan for the free and democratic Iran.

In their posters and slogans, Iranians asked the US and the EU to work harder to hold the mullahs’ regime accountable for its human rights violations too. The protesters emphasized the need for a decisive policy by the US and the European countries to harness the mullahs’ quest for a nuclear bomb, stepped up repression at home, and terrorist activities abroad.

According to the new IAEA report, despite the previous agreement, the clerical regime refuses to answer IAEA questions on four disputed sites and (to kill time) has postponed further talks until after its presidential election. According to the report, the regime's enriched uranium reserves have reached 16 times the limit allowed in the nuclear deal. The production of 2.4 kg of 60% enriched uranium and about 62.8kg of 20% enriched uranium are of grave concern.

IAEA Director-General Rafael Grossi said: Despite agreed terms, “After many months, Iran has not provided the necessary explanation for the presence of the nuclear material particles…We are facing a country that has an advanced and ambitious nuclear program and is enriching Uranium very close to weapons-grade level.”

Grossi’s remarks, also reported by Reuters today, reiterated: “The lack of clarification of the agency’s questions regarding the accuracy and integrity of Iran’s Safeguard Declaration will seriously affect the agency’s ability to ensure the peaceful nature of Iran’s nuclear program.”

Maryam Rajavi (pictured), the President-elect of the National Council of Resistance of Iran (NCRI), said that the recent report of the International Atomic Energy Agency (IAEA) and the remarks by its Director-General once again show that to guarantee its survival, the clerical regime has not abandoned its atomic bomb project. It also shows that to buy time, the regime has continued its policy of secrecy to mislead the international community. At the same time, the regime is blackmailing its foreign interlocutors into lifting sanctions and ignoring its missile programs, export of terrorism, and criminal meddling in the region.

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Brexit

Ex-EU Brexit negotiator Barnier: UK reputation at stake in Brexit row

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Head of the Task Force for Relations with the UK, Michel Barnier attendsthe debate on EU-UK trade and cooperation agreement during the second day of a plenary session at the European Parliament in Brussels, Belgium April 27, 2021. Olivier Hoslet/Pool via REUTERS

Michel Barnier, the European Union's former Brexit negotiator, said on Monday (14 June) that the reputation of the United Kingdom was at stake regarding tensions over Brexit.

EU politicians have accused British Prime Minister Boris Johnson of not respecting engagements made regarding Brexit. Growing tensions between Britain and the EU threatened to overshadow the Group of Seven summit on Sunday, with London accusing France of "offensive" remarks that Northern Ireland was not part of the UK. Read more

"The United Kingdom needs to pay attention to its reputation," Barnier told France Info radio. "I want Mr Johnson to respect his signature," he added.

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