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Unwise Spending Exposes Europe's Economic Errors

"Put simply, the Court found too many cases of EU money not hitting the target or being used sub-optimally," Vitor Caldeira, President of the European Court of Auditors, said this month, when presenting the body's report on 2011 spending.

Across southern Europe examples of questionable spending decisions are easy to find.

EU funds stoked Spain's overheated construction sector, helping to inflate a real estate bubble that burst with devastating effect in 2008.

Almost a third of the roughly ⿬35 billion of structural funds that went to Spain over the 2007-2013 period was channeled to infrastructure projects ⿿ ignoring perilous over-investment by the country's regional governments that now are appealing for financial rescues. Despite the billions poured into the Spanish economy, the country is in the grip of a double-dip recession with a 25 percent unemployment rate.

A three-year investigation by European and Italian authorities into EU-funded road-building programs in Sicily, meanwhile, unearthed illegal sub-contracting, a lack of proper oversight and conflicts of interest, among other shortcomings. Italy had to repay ⿬389 million.

Italy's southern Mafia heartland also yielded some of the more scandalous cases of abuse. According to an inventory compiled by the Open Europe think-tank, one program in Sicily involved around ⿬300 million to improve trash collection and recycling. The recycling target was fixed at 35 percent, but the island achieved only 6 percent. Also, ⿬230 million was used to improve Sicily's railway network, but only eight kilometers (five miles) of track was repaired.

The EU's anti-fraud agency, OLAF, says last year it recouped about ⿬690 million after investigations across the bloc. The biggest amount ⿿ ⿬525 million ⿿ was recovered from structural funds.

In Portugal, which has collected almost ⿬50 billion from the EU over the past two decades, an infrastructure construction spree became so notorious it got its own moniker ⿿ "a politica do betao" (the politics of concrete) ⿿ as politicians plundered the aid programs for vote-winning projects. In 1989, Portugal had just 210 kilometers (130 miles) of highways; 20 years later, it had 2,860 kilometers (1,777). That's a lot of highway in a country about 550 kilometers (240 miles) long and less than 200 kilometers (125 miles) wide.

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