The EU Court of Auditors has found serious deficiencies in its analysis of the response that the European Commission and the Member States gave to the recent serious crises, that of covid-19 and the inflationary one aggravated by the invasion of Ukraine. The auditors are sympathetic to the urgency with which Brussels had to act and also that I had to relax requirements. They also understand that governments distributed enormous aid. What they are very critical of is the “lack of reliable data” on the amount of subsidies granted by the capitals to the Community Executive, in such a way that the subsequent evaluation of these policies is hindered. Nor is there any information on “state aid granted, nor information by economic sector or company size”, regrets the analysis published this Tuesday.
The response of the EU—both the European Commission and national governments—to the two major crises in the last two years consisted of a paradigm shift with respect to what was done in the previous decade, in the Great Recession. Brussels relaxed the rules so that States could rescue a private sector in the face of emergency situations. It also did so in March 2023 so that EU governments could respond to multi-million dollar subsidies from other powers, mainly the United States and China. And this is what the Court of Auditors has analyzed, that is, three extraordinary regulations that have made the criteria more flexible so that States can provide aid, in theory, respecting the internal market.
“The Commission reacted promptly to the need for Member States to resort to this type of aid,” conclude the auditors, who then launch their first salvo: “However, its evaluation of the national aid measures was limited. He had difficulties supervising the measures (…). These difficulties largely derived from the lack of reliable information from the Member States.”
This lack of reliability that the Court highlights is seen in several examples. One is that Germany’s data collection process, which covers the federal administration, the regional administration and public banks, “incorrectly” interprets the guidelines for reporting aid to the Commission. This translated into “reporting errors of more than 30 billion.” In France there was also an error that led it to notify 123.7 billion euros in an aid line for covid-19, when in reality it should have notified 100.1 billion, since many of the subsidies did not exceed 100,000 euros.
The auditors highlight that this relaxation of the regulations triggered the total volume of aid granted, from 120,000 million a year before the pandemic to 320,000 in 2020 and 2021, and already close to 230,000 in 2022. And in this context, they emphasize that “there is a lack of information on the measures applied and there are insufficiencies in the control mechanisms of the States.” To which they add that “the Commission reduced its supervision.” “To report on the use of state aid, Brussels relies on data provided by Member States. As not all of them fulfilled their legal reporting obligations, the lack of reliable data undermined the Commission’s ability to assess the effectiveness of crisis time frames and the contribution of state aid to EU industrial policy objectives. , he points out.
One of the trends highlighted in the document is that “increasingly” aid is being used to promote an industrial policy that pursues “increasing the independence of the EU and the transition to a net zero emissions economy.” But this has meant that there is now “a complex variety of state aid frameworks that are not always coherent.”
Greater transparency
All these conclusions and statements lead the Court to propose a series of recommendations that, for the most part, It will be time to attend to the Spanish Teresa Ribera, if she is finally ratified as the head of the Commission’s Competition policy. Sources from the auditors explain that their recommendations are not addressed to anyone in particular or to any general direction of the Executive of the Union, but the control and approval of State aid that exceeds the minimum thresholds corresponds to this department. One of these pieces of advice is, logically, to improve transparency and information to analyze and evaluate these policies.
This was not the first report that the auditors have published this week. Already on Monday they released another in which they warned that there is a risk of “double financing” with the money from the Recovery Fund, on the one hand, and with the Cohesion policy, on the other. “Especially because different EU programs with different rules can be used to finance similar measures at the same time,” noted one of the auditors responsible for the document. The Court regrets that neither the Commission nor the States monitor that there is no duplicate financing.
