Eurostat to get extended auditing powers

Finance minister agree to let the EU’s statistical office to investigate member states’ debt and deficit reports.

EU finance ministers today (8 June) agreed legislation to give Eurostat, the Union’s statistical office, audit powers over member states’ national finances.

Once the changes come into effect, Eurostat will be able to send officials to national capitals to investigate whether governments are accurately reporting data on their debt and deficits.

Eurostat officials will have the right to see data from every level of government on execution of national budgets. They will also have the right to see the accounts of “extra-budgetary bodies, corporations…non-profit institutions and other similar bodies that are part of the general government sector”.

The legislation obliges member states to “take all necessary measures” to facilitate the Eurostat officials’ work.

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Greek concealment

The European Commission proposed the legislation in February. It said that the audit powers were essential to prevent a repeat of Greece concealing the true size of its budget deficit. Greece admitted in October 2009 that its deficit was 12.5% of gross domestic product, far higher than the 6%-8% it had previously notified to Eurostat. Greece blamed the discrepancy on manipulation of statistics by the country’s previous government.

Greece’s announcement caused a sharp decrease in market confidence that many see as the beginning of the eurozone debt crisis.

Olli Rehn, the European commissioner for economic and monetary affairs, welcomed the agreement on the legislation. “These audit powers are…one solid condition for the functioning of economic and monetary union,” he said.

But ministers have watered down aspects of the Commission’s original proposal. The Commission wanted to require member states to punish their civil servants with “effective, proportionate and dissuasive” sanctions if they deliberately misreported data to Eurostat. Ministers have removed this requirement, because they felt it was an unacceptable infringement of national sovereignty.

The Commission also wanted to place a mandatory obligation on member states to provide Eurostat with “experts in national accounting”. These experts would work with Eurostat on a temporary basis, to help it prepare visits. This was also removed by finance ministers.

The Commission had protested against the changes, but backed down because it did not want to threaten the chance of the legislation being adopted.

Parliament consultation

Rehn called on the European Parliament to quickly complete its work on the draft legislation, so that the audit powers could come into effect. Parliament has the right to be consulted on the draft law, which means that it cannot be formally adopted until MEPs have given their opinion.

Rehn said that the first use of the audit powers was likely to take place in Bulgaria. He said that Eurostat, which falls under his responsibility within the Commission, has “some concerns as regards [the country’s] statistical performance”. “We are considering sending a mission shortly,” he said.

Anti-fraud network

Finance ministers also agreed to increase their co-operation against value-added tax fraud. They will do this by creating a permanent anti-fraud network, to be called Eurofisc.

Ministers also agreed changes to the guarantee provided from the EU budget for the European Investment Bank’s (EIB) lending outside the Union. Ministers agreed to increase the guarantee for EIB lending to tackle climate change by €2 billion. They also agreed to remove discrepancies between the EIB’s different regional mandates. Currently, for example, the EIB can provide foreign direct investment in Asia and Latin America, but not in other continents.