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Billion-euro refund for taxpayers - 29/10/2009

Boat on a canal in the Netherlands ©EC

More than €1.1bn EU regional funds to be recovered this year.

The EU devotes 35% of its total annual budget to regional and social policy. Most of the money is earmarked for nationally-administered programmes to boost poorer regions.

These programmes often involve hundreds of projects, from building railways and nursery schools to training workers and supporting small business.

EU member countries are supposed to make sure a project is eligible for funding before submitting payment claims to the commission. But the EU also conducts its own audits.

The European court of auditors estimated in its last report that at least 11% of the total amount reimbursed in 2007 did not qualify for EU financing. That prompted a host of measures to help national administrators do a better job of checking eligibility and to recover money that has been misspent.

A new report says the effort is paying off. The EU recovered €1.5bn in 2008, when the plan began. That's more than five times the €287m retrieved in 2007.

So far this year the commission has recovered more than €629m in EU regional funds. A further refund of €500m is expected by the end of 2009.

The mistakes often stem from complex rules that are not correctly understood or applied. The commission is working to simplify the regulations. The European anti-fraud office (OLAF) has detected only isolated cases of fraud.

Many of these mistakes were detected by EU countries themselves. In these cases, countries can still use the money for other regional projects. Countries lose the money if the commission discovers irregularities and requests a payback.

When auditors find serious problems, the commission can suspend payments to the whole programme. So far in 2009, five programmes have been suspended, one each in Italy and Spain and three involving regional programmes that cross national borders. Suspension procedures are in the pipeline for 28 other programmes.

As the measures are still new, the commission does not expect to see a big drop in the error rate before 2010.

More on EU regional policy

European Social Fund

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