For years, corruption has been the European Union's great open secret. Periodically, flaps have broken out--the European Commission would be accused of giving double subsidies to Irish sheep farmers or handouts to nonexistent Italian olive orchards. But Brussels bureaucrats looked the other way. No one wanted to admit that agricultural subsidies often covered political payoffs. In Italy, for example, the money may have ensured support of politicians who endorsed a united Europe, a goal high on Brussels' agenda.
Now, with the successful launch of Europe's single currency bringing political union closer, the time has come for Brussels to tackle corruption head-on. If it wants to remain credible and continue developing European institutions, the EC must build a more transparent and accountable governing system. Concentrating power among country-appointed commissioners engenders corruption and cronyism. "Each commissioner is under pressure to give jobs and perks to his fellow countrymen," complains Stephen Kinsella, a lawyer with Herbert Smith in Brussels. Just as important, the EC must scrutinize and streamline its programs--particularly farm and regional subsidies, which cost about $90 billion a year, or 90% of the EU budget.
HALF PAY. The commission's cavalier attitude toward subsidies and corruption is fanning a political crisis. Just before Christmas, an internal EC auditor leaked information to Green Party officials at the European Parliament about irregularities in $500 million spent on youth training and humanitarian aid, among other programs. Edith Cresson, former French Prime Minister and current EC science commissioner, and Spain's Manuel Marin, responsible for development aid, came under particular fire. Cresson denies charges that she siphoned contracts to relatives and friends. Marin admits money was misspent because of political pressure.
But instead of opening an independent investigation, Commission President Jacques Santer suspended the whistle-blowing auditor at half pay. "Intolerable," he thundered in response to Parliament demands that Cresson and Marin, at least, be forced from office. Parliamentarians have only one, highly impractical option--sacking all 20 commissioners in a censure vote scheduled for Jan. 14. "It's like a nuclear button," says British Parliamentarian Graham Watson. If the commission were to be dissolved, European institutions would be paralyzed for months as new appointments are made and portfolios divvied up.
The all-or-nothing approach to the corruption problem highlights the flaws in Brussels' power-sharing. The European Parliament, freely elected but weak, cannot initiate legislation or impeach individual commissioners. By contrast, the unelected commission wields both legislative and executive powers. This is no way to run a continent, particularly when pressing projects are backed up and the EU is short on cash. The annual $100 billion budget must be cut before the EU can expand to the East or open new global trade negotiations on services and agriculture. Rooting out waste and fraud would not only help trim spending but also would restore public confidence in the Brussels bureaucracy.
In addition, business needs more transparent and independent European institutions. Competition Commissioner Karel Van Miert has a good record of fighting illegal government subsidies and dealing with mergers. But "as things now stand, the same body that investigates makes the final decision, and not always on pure competition criteria," says lawyer Kinsella. "It would be much better to establish an independent antitrust authority free of political influence."
Indeed, if the single currency is to pave the way for more growth and lower costs, the EU needs better watchdogs. Europewide regulatory agencies modeled on America's Securities & Exchange Commission or Food & Drug Administration could improve oversight of everything from stock offerings to biotech advances. And the democratically elected European Parliament should have more ways of checking the commissioners' power.
Meanwhile, the Parliament and the commission should call a truce. Santer needs to step up the battle against corruption. Individual commissioners should be investigated and forced to resign if charges of corruption are proved. But dissolving the commission now would cripple Brussels just when its leadership is badly needed.