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European Style Corruption

​CORRUPTION IS COSTLY. In fact, it is costing the European Union (EU) about €120 billion ($165 billion) per year—an amount not much less than the EU’s entire annual budget, according to the recent Anti Corruption Report researched and issued by the European Commission.

“The extent of the problem in Europe is breathtaking,” EU Home Affairs Commissioner Cecilia Malmstroem said when the report was released in February. And most seem aware of the problem: 76 percent of Europeans surveyed said they believe corruption is widespread in Europe, and more than half (56 percent) believe that the level of corruption in their country has increased over the last three years, the report found.

The report assesses corruption in all of the EU’s 28 member countries, analyzing different levels of illegal activity in different industry sectors. The nature and level of corruption, and the effectiveness of measures taken to fight it, vary widely from one country to another, the report finds. And it comes with a clear message: Anticorruption efforts are falling short in all European countries.

“Member states have taken many initiatives, but the results are uneven, and more should be done to prevent and punish corruption,” the report says, adding that officials often talk a good game about fighting corruption, but fail to follow through. “Declared intentions are still too distant from concrete results, and genuine political will to eradicate corruption often appears to be missing.”

Janina Berg, senior EU policy and legal officer with the global anticorruption coalition Transparency International (TI), says that the report is a “stark warning” on persistent corruption in Europe.

“Its findings did not come as a surprise,” says Berg, who is based in TI’s office in Brussels, Belgium. “The report confirms our own research findings of the anticorruption efforts of 25 EU member states, which draw a picture of systemic corruption risks in such areas as the awarding of public contracts, parliamentary ethics, and political party financing.”

The report is the result of anticorruption-related actions that the EU adopted in 2011. It defines corruption broadly as “any abuse of power for private gain.” Under this definition, corruption covers political wrongdoing, bribery of public officials, and private sector corruption. It also assesses corruption from different perspectives. The report uses recent surveys by Eurobarometer, the commission’s polling service, to measure public perceptions of corruption and to assess how much corruption companies doing business in Europe experience.

These perceptions of corruption vary from country to country. In 10 countries, more than 90 percent of respondents thought that corruption was widespread in their own countries. They were Greece (99 percent); Italy (97 percent); Lithuania, Spain, and Czech Republic (all 95 percent); Croatia (94 percent); Romania (93 percent); Slovenia (91 percent); and Portugal and Slovakia (both 90 percent).

On the other end of the scale is Denmark, where 75 percent of respondents thought that corruption in their country was rare. Denmark was followed by Finland (64 percent believing corruption was rare) and Sweden (54 percent); they were the only three countries in which a majority of respondents believed that corruption was rare.

The EU’s findings are fairly consistent with TI’s Corruption Perceptions Index, which ranks countries annually on a scale of zero (highly corrupt) to 100 (very clean). TI’s 2013 index ranked seven European countries below 50: Greece (40), Bulgaria (41), Romania (43), Italy (43), Slovakia (47), Czech Republic (48), and Croatia (48). And like the EU report, the TI’s index featured Denmark (91) atop its “clean” list, followed by Finland (89) and Sweden (89).

In the business community, perceptions of corruption were not as widespread as they were in the general public, according to the EU report. About 40 percent of the businesses surveyed described corruption as an obstacle to doing business in Europe. From the business practitioner’s point of view, the most problematic countries to work in were the Czech Republic, Portugal, Greece, and Slovakia; two-thirds of the companies surveyed considered corruption to be a problem in all four of these countries.

In terms of sectors, the construction, pharmaceutical and healthcare, and urban development sectors were considered the most vulnerable to corruption in the EU report. In addition, corruption risks were found to be higher at regional and local levels, where checks and balances and internal controls were weaker, than at national levels.

The report contains a separate chapter for public procurement (government bodies buying goods and services), as it makes up roughly 20 percent of the EU’s total GDP. The procurement area is rife with corruption, the report found. Problems included kickbacks, drafting of tailor-made specifications to favor certain bidders, unjustified use of emergency procedures, inadequate analysis of situations where bid prices are too low, and bid rigging.

But all is not completely bleak on the corruption front, Berg says. She cites a few examples of promising practices, such as those in Slovenia. That country, she says, has approved freedom-to-information legislation that allows an individual or organization to obtain information held by any state agency that makes public policy decisions. If the agency fails to respond to the request in a timely manner, information seekers can appeal to a higher agency or even demand judicial review.

A few Baltic nations have also seen progress, Berg says. Perceptions of corruption in Latvia and Estonia decreased by four points in the latest TI Index. Latvia also has strong conflict-of-interest regulations that apply to lawmakers and public officials. The rules require officials to disclose information about income, property, debts, loans, and financial transactions.