The Impact of Cohesion Policy on Corruption and Political Favouritism

In this short study we strive to take stock of the most relevant empirical evidence for systemic corruption and political favouritism in the distribution of cohesion policy funds, and suggest policy directions to improve the situation.

The declared goal of European cohesion policy is to reduce economic and social disparities. Political Scientists, however, show that the conditions and sums of the transfers between the EU budget and the budgets of the targeted member states are the outcome of negotiations between powerful political actors. Efforts to measure the effects of cohesion policy on the economic development of the regions and countries which receive funds, however, are beset with methodological difficulties.

The literature also points out a number of dangers, the severity of which depends on the local policy context and political institutions. These range from “aid dependence” to rent-seeking, and from shifting priorities to corruption.

Thus the latter is one of the channels through which cohesion policy, can end up yielding less social welfare than expected, and even, effectively, doing harm.

When it comes to the use of structural funds in less developed member states, corruption can affect the political and bureaucratic process related to cohesion policy at many points, from the setting of development goals, through project selection and the public procurement process all the way to the spending of funds.

What is to be done? We argue for a political push in the direction of several of the following goals: raising awareness for the issue both in recipient and developed countries, improvement of honest EU-wide evaluation, feedback and learning mechanisms; directly targeting local actors: local governments or NGOs; establishing more result-based conditionality and more frequent and thorough democratic scrutiny of the implementation of all stated goals of cohesion policy.

We also argue that serious consideration might be given to a scheme to redirect some of the cohesion fund resources to provide a Europe-wide social safety net to the materially most deprived citizens in Europe, uniformly defined.

In November, 2015, the Budapest Institute was invited by  the Greens/EFA Group of the  European Parliament to write a literature review and make recommendations concerning corruption and European Cohesion Policy.