EU processor handouts eyed
This was the year that austerity caught up with the EU, with heads of state agreeing to cut the seven-year budget by 3.3% — the first reduction in the EU’s history.
Now, they have a new readymade target for further budget cuts — the rural development policy grants to improve the competitiveness of agriculture and forestry, made available to enterprises that process and market agricultural products.
These grants totalled €5.6bn for 2007-13, and when complemented by national spending, total public funding came to €9bn.
But the funding is an “untargeted general subsidy that could distort competition and waste public money”, according to the European Court of Auditors, the independent guardian of the financial interests of EU citizens.
They found no proof that paying billions to food processors added value to agricultural and forestry products — which is the main objective of paying the money.
They visited 24 food-processing projects in Spain, France, Italy, Lithuania, Poland, and Romania, including four nominated by member states as best practice examples.
Only two of the 24 projects met all four audit criteria: They were financially sustainable, improved added value, needed the funding, and didn’t displace competitors.
In seven cases, the companies were found to be insufficiently robust in sometimes unfavourable market conditions.
Six projects had a clear effect in adding value, a further 12 had medium effect, and the remaining six added little or no value to agricultural products.
Only eight of the 24 could demonstrate that added value at least partly accrued to farmers (and seven of these were farmer co-ops).
Supply contracts may have had some value for farmers at a further seven beneficiary companies.
But no benefit for farmer suppliers could be demonstrated at nine companies.
Three funded projects had a strong impact on employment, each creating over 20 new jobs.
Nine projects created at least one new job, but a further 11 had no impact on employment, and one led to a reduction in employment.
In Lithuania, projects that showed a high rate of return on investment were given priority — in other words, those with the least need for EU support.
The auditors said Romanian authorities didn’t question why a project with a 90% return on investment needed public support.
In Spain, funded projects showed rates of return of over 30% and payback within three or four years, even without taking the EU grant into account.
The Court of Auditors said many investments had already started or were even completed before award of EU grant aid — which again raised questions on their need for funding.
There were long delays generally for project approval and payments, ruling out applicants that cannot afford risk — the projects with the greatest need for support.
In contrast, at seven of the 24 audited projects, applicants were able to pre-finance investments from their own resources or long-term loans, so the EU aid was a reimbursement rather than complementary financing.
The Court of Auditors found lack of evidence that funded companies needed subsidisation, or of what subsidisation was expected to achieve.
A French wine co-op had received a maximum grant of €50,000 from a local council, and got an additional EU grant of €37,000.
Fault was also found with the European Commission, for approving an untargeted programme.
Monitoring and evaluation of projects were insufficient, and the Court of Auditors says arrangements for 2014-20 funding are unlikely to be sufficient.
The Court of Auditors found funding mostly improved the financial performance of the companies concerned, and added value in some, but not thanks to the design or selection procedures used by member states.
They recommended that the commission only approve funding where a need is clearly identified, and where there are meaningful and measurable objectives.
No doubt, the EU funding to enterprises that process and market agricultural products will be target No 1 for the austerity lobby when they start looking at EU budgets again.
