The Protection of EU Financial Interests between the EU and Member States. Insights from the Betkosol Project

The execution of the EU budget has been the target of increasing criticism over the last few years. The multiple crises that hit the EU showed the deficiencies of the long-standing arrangements for the EU budget. The adoption of the Next Generation EU package represents an unprecedented attempt to face some of these criticisms, while it triggers further legal issues of budgetary governance. Conditionality, in particular, has been revamped as a tool to preserve the fulfillment of the EU objectives while enforcing the principle of sound financial management. This paper focuses on such use of conditionalities as an instrument of internal governance. It aims at understanding whether it effectively protects the EU financial interests, or it is instead a tool to raise the protection of the EU financial interests to a general principle of EU law setting specific solidarity rules for the Member States.

For twenty years, OLAF, entrusted with the power to conduct administrative investigations, has been the main anti-fraud controller at the EU level. Despite the significance of its activities, however, the rate of recovery of financial resources that had been irregularly used has long been unsatisfactory. This is one of the reasons that lead the establishment of the European Public Prosecutor Office (EPPO). In turn, also OLAF has been reformed. Do the recently approved reforms address the shortcomings of the system of protection of the financial interests of the EU? And what type of cooperation is deemed to take place between EPPO and OLAF? What type of interaction is established between administrative and criminal tools in the protection of the EU financial interests? Finally, how will the EPPO and the national prosecutors manage their coexistence? The paper seeks to answer to these questions.

The paper examines three case studies: RescEU, SURE, and Strategic investments supporting small and medium enterprises (EIB) for the green sector. These case studies represent three relevant EU actions that responded to the Covid-19 emergency first phase in the sectors of health, work, and economic support for businesses. The research questions to which the paper will try to answer are: a) What kind of actions has been financed in these sectors with EU funds? b) What kind of checks is carried out for this EU emergency funds? c) Has there already been any fraud in these areas? The paper will deal with these issues in a multilevel perspective: from the EU framework it will reach the national levels (especially the Italian, Polish and German ones). In conclusion, the paper will try to understand how the EU emergency actions were taken promptly and whether the planned controls prevented fraud.

Since joining the European Union, Poland has been the largest beneficiary of funds from the European Union's budget under the cohesion policy, which creates conditions for the country's economic and social development and its citizens. However, the EU funds must be spent effectively, in accordance with the law, and above all, free from any abuse. The paper aims to present the already existing and planned legal solutions and the control mechanisms provided within their framework, which serve to protect the financial interests of the European Union. It will also describe examples of practices of selected offices, which refer to the areas of the greatest risk and concern, both prevention and detection of fraud (especially in the area of public procurement). The authors will also draw attention to the systematically increasing role of IT tools in increasing the transparency of public spending.

In Germany, the EU financial interests in the subsidy area are often at risk at the operational level of the administrative procedure. As shown by the empirical study, critical issues relate mainly to access to information on aid granted: the limited traceability of individual subsidies results from the compliance to the so-called De Minimis Regulation and the exclusion of double founding. About criminal law profiles, the research emphasized the need to expand the forensic information technology of the state criminal investigation offices in terms of personnel, skills, and competences. This could help reduce and prevent criminal offenses. Furthermore, in this data sharing perspective, it would be useful to set up a central German national de minimis register to allow access to information on the aid granted. Research also shows that it could be useful to establish shared management of funds that allows for opening the scope and implementation of a national risk assessment strategy.

Quite recently, the Government has prepared a governance scheme for the implementation of NRRP. The challenge of the protection of the EU‘s financial interest appears now even more complex. Italy is one of the EU countries with the highest number of judgments linked to suspect fraud or irregularities on EU funds. The data hint to the fact that the domestic judicial system is well reactive. Yet, there are a series of critical aspects to point out, referring to the administrative and criminal systems. First of all, there is the “ex ante-in itinere-ex post“ paradigm regarding the system of controls. Secondly, there is the “internal-external“ dichotomy that synthesises the complexity of the actors involved. Lastly, an “administrative-criminal“ co-ordination is necessary. Not surprisingly, all the three issues arose in the pandemic scenario, as in the case of Stockpile capacities in RescEU framework and in those of the SURE mechanism and money laundering in access to credit by SMEs.