Corruption seen as fueling Europe's debt crisis

The failure of some European governments to tackle corruption has helped fuel the euro-zone’s debt crisis, according to a new report released Wednesday.

Transparency International, an anticorruption watchdog, points to a strong correlation between graft and fiscal deficits, with crisis-hit countries Greece, Portugal and Spain suffering the most from corruption in Western Europe.

“The reasons for the crisis differ from country to country, but countries that are worst hit by the crisis are also those where corruption is most pervasive and where there’s a lack of integrity in the public system,” says Finn Heinrich, TI’s research director.

The report, “Money, Politics and Power: Corruption Risks in Europe,” is to be presented to the media in Brussels later Wednesday and investigates more than 300 national institutions across 25 states to assess their capacity to fight corruption. Political parties, business and the civil service performed the worst in the fight against graft and wrongdoing, the report says, and “too many governments are not accountable enough for public finances and public contracts,” the latter worth €1.8 trillion in the European Union each year.

Greece, which triggered the euro-zone’s debt crisis and is under pressure from its international lenders to reform its institutions and economy, received top billing in terms of the prevalence of bribery, feeding into broader fiscal problems such as tax-evasion.

There was a widespread practice in Greece of paying officials “to knock a zero off someone’s tax bill or to speed up health care,” Mr. Heinrich said in an interview. “But as well as front-line bribery there’s also bribery on a grand scale, such as with public procurement, and the oversight of public spending is too weak.”

Greece, Portugal and Spain also performed well below average when it came to the strength of their auditing institution, seen as key to overseeing public spending and promoting transparent financial reporting by governments. TI called into question the independence of Greece’s Court of Audit, citing the fact that it was accountable to the executive and not to the parliament — unlike most European systems — and its head was appointed by the government.

The report’s findings are in line with a recent pan-European poll in which 98% of Greeks considered corruption a major problem, while only 19% of Danes worried about the issue. “When it comes to Western Europe, there is clearly a North-South divide here,” said Mr. Heinrich.

Another risk area singled out in the study is public procurement. Despite EU rules seeking to root out waste and fraud, “high-profile scandals involving public procurement continue to occur,” the report said. Here however, it is mainly among the EU’s newcomers — Bulgaria, the Czech Republic, Slovakia and Romania — where the problem is most acute. One in three managers of small and medium sized enterprises in the Czech Republic believes it is impossible to clinch a public contract without having recourse to bribery, kickbacks or other incentives, the report said.

The Berlin watchdog also sounds the alarm over the lack of transparency in the funding of political groups and in the area of lobbying. It says that 19 of the 25 countries surveyed have yet to regulate lobbying, while many of the rules in place are too weak and not binding.

“Across Europe, many of the institutions that define a democracy and enable a country to stop corruption are weaker than often assumed. This report raises troubling issues at a time when transparent leadership is needed as Europe tries to resolve its economic crisis,” said Cobus de Swardt, TI’s managing director, in a statement.

Three quarters of Europeans view corruption as a growing problem in their country, according to recent EU surveys, showing that Europeans are no longer looking at corruption as something which can be used to their advantage or embracing its potential benefits.