Of the 35 departments that underpin the government of the European Union, the number-crunching Eurostat would seem one of the least likely to spark controversy. A unit answerable to the European Commission, the EU's executive branch, Eurostat gathers and publishes statistics on everything from wages and inflation to emissions of greenhouse gases and municipal waste. Prosaic stuff.
But the news out of Eurostat these days is making headlines. Allegations of mismanagement and fraud at the Brussels-based agency have stirred up a political maelstrom that is rocking the government of EC President Romano Prodi. European Parliament members were already fuming over the revelations -- which involve everything from secret slush funds and fictitious contracts to the looting of millions of euros -- but their ire grew when three separate reports on the scandal delivered to the EU Budget Control Committee on Sept. 24 failed to provide a full accounting of the misdeeds.
Getting to the truth will be difficult, given the penchant for secrecy displayed by the EC over the years. Auditors are unable to account for millions of euros in missing funds or determine the full extent of the fraud. "Something is wrong in the House of Europe," says Herbert Bösch, deputy chairman of the Parliament's powerful Budgetary Oversight Committee. "We are fighting for documents. It's like looking into a dark room with a flashlight."
The PMs have good reason to be displeased. After all, Prodi pledged "zero tolerance" for fraud in 1999, when his Commission took power following the collapse of the previous Jacques Santer administration, under charges of financial misconduct and nepotism. Speaking before a gathering of parliamentary leaders on Sept. 25, Prodi defended his own ranks by declaring neither he nor other top political officials were informed of the corrupt practices until May, 2003. He also insists that most of the misdeeds took place before 1999.
If Prodi's comments were intended to calm the waters, they didn't. European PMs say there's ample evidence that early warnings of the troubles at Eurostat, including a previous audit, were ignored at the highest levels. "They had a killer audit which sat in a box for three years," says Chris Heaton-Harris, a Briton who sits on the EU's Budget Control Committee. "This is a symptom of what could be a much much bigger problem."
It's time to come clean. Fact is, Europe's institutions aren't held in high regard these days. The Swedes have just voted against membership in the euro zone. The vote was seen as a rejection of the whole European idea of ceding sovereignty to nonelected bureaucrats in Brussels. And the EU is just about to bring the nations of Eastern Europe into the fold -- nations that have been battling their own local corruption for years. The last thing these candidates need is the lesson that Brussels cannot police itself.
What to do? To safeguard the credibility of his Commission, Prodi needs to take the offensive. That means turning over to the European Parliament all the evidence related to the Eurostat case. "If the Commission has nothing to hide, why not provide documents?" says Bösch.
Second, heads should roll. Political accountability is the only way to send a powerful message to EC members and staff that it's serious about rooting out fraud and corruption.
Finally, Prodi and his team need to speed long overdue accounting reforms, making the EU's entire spending and control process more transparent to auditors and Parliament members. In May, 2002, the Commission's chief accountant warned that the EU'S opaque accounts were vulnerable to internal looting worse than that at Enron Corp. (ENRNQ ) If the fraud at Eurostat is much larger than EC officials admit, it'll surprise no one. It's time to finally put Europe's house in order.
By Gail Edmondson