December 11, 2015 / 2:36 PM / in 3 years

Don't shy away from exposing corruption, EU anti-fraud body tells Hungary

BUDAPEST (Reuters) - Hungary needs to do a better job of reporting potential misuse of European Union funds, the head of the European Anti-Fraud Office (OLAF) said on Friday, adding that the authorities must be “able and willing” to expose wrongdoing.

According to its 2014 annual report, OLAF concluded 13 investigations into the use of EU funds in Hungary last year, the second-highest figure in the 28-member bloc, exceeded only by 36 probes in its poorer southern neighbor Romania.

OLAF Director General Giovanni Kessler told an anti-corruption forum that for the 2007-2013 financing period Hungary had reported 0.42 percent of irregularities as a share of the total amount of funds received.

That was well below the EU average of 1.65 percent, he said.

“You report something, but you are far below the average. I leave the answer to you if you are on average more saintly than Europeans or you are more exposed to the temptation of not reporting,” Kessler said.

He said the rate was even lower for reported frauds, where the amount reported by Hungary was 0.02 percent of total payments affected, a fraction of the EU average of 0.35 percent.

“(OLAF) would like to work on things that member states alone cannot do. Transnational crime, very specific situations,” Kessler said.

“But we ourselves would like member states’ authorities to be able and willing to detect and to deal properly with irregularities and possible frauds.”

A government spokesman was not immediately available for comment.

Jozsef Peter Martin, Executive Director of Transparency International Hungary, told the forum that EU development funds, worth about 3.5 percent of economic output per year, were vital for the country but also carried heightened risk of abuse.

He said the possible misuse of EU funds, worth nearly 2 trillion forints ($6.92 billion) this year alone, included what he called “systemic overpricing” of projects worth as much as 20-25 percent.

“The authorities are not interested in strictly controlling expenditures, therefore, overpricing goes essentially unpunished,” he said. “As a result, the beneficiary of part of EU funds is not society, but corruption.”

He said public procurement procedures, how Hungary spends a large chunk of the EU funds it receives, were the most risky part of the process.

“In several sectors there is data to support that companies whose owners are close to those holding public office perform better than their rivals,” he said.

He added that a recent parliamentary amendment to the new public procurement law to allow relatives of politicians to compete for public funds was “alarming” and further increased corruption risks.

“Corruption seriously threatens democratic institutions and the operation of the market economy in Hungary,” he said.

($1 = 288.82 forints)

Reporting by Gergely Szakacs; Editing by Toby Chopra

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