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TheStreet Open House

Unwise Spending Exposes Europe's Economic Errors

"I think we have learned a lot of lessons," Johannes Hahn, the EU's head of regional policy, said in an interview. He said "a lot of changes" are being considered to funding in the EU, the world's biggest economy.

Countries in the bloc of 505 million people pool financial resources in the EU's seven-year budget programs. Taxpayers in wealthier northern members like Germany pay the biggest amounts. Some of the money is set aside for so-called structural funds, to help less prosperous areas bring their standards of living closer to the EU average.

In the 2007-13 period, for example, funding for those policies amounts to ⿬347 billion. That represents a colossal 36 percent of the total EU budget for that period and has long been the second-largest outlay after farm subsidies. The European Commission flagged it as "the greatest investment ever made" to support growth and job creation.

But EU economic growth is almost stagnant, living standards are sinking, and jobless rates are rising to unprecedented levels in the hardest-hit countries.

When governments request EU aid, they have to come up with supplementary funds for a project â¿¿ usually between 15 and 50 percent, either from their own Treasury or bank loans.

For years, European financial watchdogs have complained about difficulties tracking and assessing the benefits of allocated money. In an appraisal of the measures enacted in the 2000-2006 period, the European Commission concluded the funds had helped economic development but was unable to quantify by how much. "Identifying achievements so far from the funding provided ... is made difficult not only by delays in implementing programs but also by the unsatisfactory nature of the information available to do so," another Commission report acknowledged last year.

The European Audit Court, which oversees EU spending, has repeatedly scolded officials for lax accounting and inadequate oversight covering a spider's web of funds, organizations and acronyms generated by Brussels bureaucracy.

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