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Pozor Prague! Corruption and EU funds in CZ

Czech to lose at least Euro 1 bil in EU aid.The European Commission (EC) will cut the subsidies awarded to the Czech Republic’s development projects by one billion euro as a sanction for numerous cases of fund mismanagement and abuse.The sum may further increase.According to unofficial information, the sanction will be imposed on four operational programs (OP). The “Transport” and “Environment” programs will lose nearly CZK 20 billion, the “Northwest” program another CZK 3.4 billion, and the “Entrepreneurship and Innovation” program CZK 2 billion.

A spectre is haunting the Czech parliament, in the hottests summer for the government of Petr Necas. The partial freezing of EU funds by Brussels, a decision which is linked to embezzlement and bribe scandals involving EU-funded projects, could get Prague into serious trouble.

If all or most of the structural and operational fund made available to the CZ in 2007-2013 was block, the government of the East European country risks seeing its deficitGDP ratio rise to 6% in just a year, despite its objective to bring the percentage down to below 3%. Also at risk of becoming withe elephants are the many vitally important structural projects, such as schools, hospitals and road junctions amounting to about four bilion crowns , just considering the year 2012. 

As a worse case scenario, the prime minister stated , the public deficit may rise to 6% of GDP, thus shattering the consolidation strategy of our government”. However , the last word has not been said yet and Czech diplomacy is working to prevent such eventuality, which has already been partially rescaled by the decision of the European commission on 23rd July to reopen a few taps: just 7 of the 17 operating programs. Brussel wanted to have a clear idea of the corruption scandals that have broken out and is waiting for clarification from Prague on a number of unpleasant issues.

Quite astonishing is the case involving the social democratic deputy David Rath, caught with 7 milion crowns of fraud money, a matter which will also be investigated by European Anti-Fraud Office ( David Rath risks a 12 year prison sentence). Meanwhile, Czech authorities are trying to patch up the loss of credibility related to the scandals, which also Foreign Minister Karel Schwarenberg has complained about: since 1st of June, stricter regulations have been put in place on the way tenders are to be assigned.

The Ministry of Transport explained that Brussels”will ot be asked to pay the costs that have been incurred while infringing Cezech and European laws”. The Ministry had not given a full explanation of what is to be considered legal or illegal, but the documentation shows that the two sectors involved might be public tenders and inflated contract-work costs.According to a preliminary reconstruction, the “Czech System” had adopted a rather simple method: contracts had been awarded to influential companies by fixing tenders and inflating costs and had been carried out with false documentation and lax supervision.For the period 2007-2013, Prague should receive just under 40 billion euro of European aid, and amount that is equal to two thirds of its yearly public budget spendig.

“We need timely, efficient and corrective measures in order to resume the flow of payments within the established time”, Manuel Barroso pointed out, who also asked for transparency from Prague and the other countries such as Slovakia and Hungary.Certainly, all the elements for orchestrating a “trial” against Prague are at hand and according to well-informed circles there are increasing rumours that the EU wants to use the structural funds issue as a way to put the Czech Republic with its back to the wall and force it to bow its head on issues regarding its sovereignty. An issue which the country will not give up, the Fiscal Compact in particular. A message , in other words, to show” who is in charge” and to keep the Czech Rep. in check.

Andrea Ronco

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