Wed. Dec 1st, 2021
  • Revision of EU’s financial regulation should bolster the protection of EU’s financial interests and ensure respect for the rule of law
  • More transparency through a public EU database with information on ultimate beneficiaries of EU funds
  • Better gender and climate mainstreaming

For the upcoming revision of the EU’s Financial Regulation, Parliament wants a stronger role in the budgetary scrutiny, respect for the rule of law and more transparency.

In a resolution adopted on Wednesday with 534 against 98 votes and 57 abstentions, MEPs say they believe that the planned revision of the EU’s Financial Regulation (FR) should “seek to modernise the rules applicable to the EU budget in line with its latest evolutions and in line with the budgetary principles and respect for Union values, and to increase parliamentary oversight, democratic accountability, transparency, civic engagement and the ability to respond to citizens’ needs quickly and effectively, particularly at times of crisis.”

Democratic accountability for a modern budget

The “NextGenerationEU” (NGEU) recovery plan has greatly increased the EU budget. However, the bulk of these additional funds enter the EU budget under provisions which exclude Parliament from the decision-making process. MEPs underline that, while crisis management requires swift action, this “must never be an excuse to bypass Parliament and undermine democratic accountability”. They note with concern the increasing use of such “off-budget instruments” and insist on an appropriate role of the Parliament in the budgetary scrutiny and discharge of such initiatives. The principle of democratic accountability and oversight in decision-making “needs to be reflected in the Financial Regulation”, they add.

They furthermore emphasise the “clear relationship between respect for the rule of law and the efficient implementation of the Union budget” and call on the Commission to include the content of the Conditionality Regulation into the FR.

Detecting fraud, corruption and conflicts of interest

In order overcome the lack of transparency and to know how EU funds are spent, and who truly benefits from them, MEPs propose a “compulsory centralisation of information within a single, interoperable reporting and monitoring system, and within a user-friendly public EU database with information on direct and ultimate beneficiaries”.

In this context, in order to ensure better control of spending including the avoidance of

misuse, corruption, fraud and of conflicts of interests, Parliament has adopted a separate legislative initiative on “digitalisation of the European reporting, monitoring and audit”, by rapporteur Maria Grapini (S&D, RO) on Tuesday, 23 November, with 659 votes against 28 and 1 abstention (background information available here, and procedure file here).

MEPs furthermore insist that gender mainstreaming be better reflected in the drafting and implementation of the budget. Hence, gender mainstreaming and gender budgeting should be integrated in the relevant provisions of the FR. Also, for climate mainstreaming, they expect the Commission to develop a “robust and clear methodology for tracking climate spending and its performance”, and underline “the importance of accurately monitoring the expenditures contributing to halting and reversing the decline of biodiversity”.

Quotes

Co-rapporteur Monika Hohlmeier (EPP, DE): “The member states, amazingly enough, who are always talking about digitalisation, suddenly have reservations when we want to take a look: Where has all the money actually gone? At the moment, it is not possible to see easily and quickly which final beneficiary receives how much from the recovery fund – for one thing, because the rules do not currently require that the final beneficiaries and their economic beneficiaries – and here I mean the natural persons behind companies and conglomerates who benefit from their support – are recorded uniformly. We want to be able to see whether someone is behind 20 companies or whether a small SME is actually receiving the help it really needs.” (Read the full speech in German here, or see the video here)

Co-rapporteur Nils Ušakovs (S&D, LV): “We have the new MFF package that includes now NGEU and it’s a new reality for everyone. We need a regulation that’s in line with these changes to the whole EU budget. But revision of the Financial Regulation is not about technicalities only. Well-designed, ambitious revision shall make our Union stronger and better capable of protecting both its values and its money. It’s our opportunity to ensure everyone respects the rules of the game and introduce clear costs for anyone who fails to follow this regulation, from beneficiaries to top national government representatives.” (Read the full speech here, or see the video here)

Background

The Financial Regulation (FR) is the main point of reference for the principles and procedures governing the establishment, implementation and control of the EU budget. The current version of the FR applies from 2 August 2018.

The Commission announced in March 2021 a revision of the FR to align it with the legal acts adopted in the context of the 2021-2027 Multiannual Financial Framework (MFF) package. The FR is reviewed whenever it proves necessary to do so and in any case at the latest two years before the end of each multiannual financial framework.