EU 'dumping food' on East Europe

THE European Union has been dumping food surpluses in Eastern Europe in the form of food aid, disrupting Eastern Europe's fledgling market economies, according to a report from the EU's financial watchdog.

EU aid to Eastern Europe has in some cases actually hindered reform, the annual report of the European Court of Auditors says. Assistance has been poorly administered, badly thought out and sometimes has harmed the people it was intended to help.

The report will be released later this year, but a draft has been obtained by the Independent. The EU has given large- scale food aid to several countries in Central and Eastern Europe, but this has often done more damage than good, it says. In the Baltic states sales of aid at 'far below world prices . . . produced many negative effects'. And 'once a food aid measure had been launched, the (European) Commission did not prove capable of adapting the operation to changes in the situation or stop and suspend it when the reasons for the measure had disappeared'.

In Latvia, for instance, the EU sent rye as food aid from its grain mountains. This led to saturation of the local market, drastically reducing prices and 'sparking off discontent among farmers'. In November 1992 Latvia raised the problem with the EU and in January 1993 asked that the aid be either stopped or converted to a different crop. But a further 32,500 tons were sent in April. After this the government threatened to return food shipments. By December 1993 40,000 tons of rye were still in storage.

The quality of food aid was often poor: five-year-old wheat was sent to Lithuania and substandard meat was sent to Albania. And, in Albania, all the available warehouses in the main port were requisitioned for storage of EU aid. 'There was, in the autumn of 1993, no further capacity for private business', the report says.

It says that EU assistance is 'indispensable', but adds that it is 'sometimes counter- productive for the reform process, especially for the newly developing private sector'. In addition to criticism of food aid, the report targets the Phare and Tacis programmes of technical assistance, saying 'no clear strategy' for assistance is apparent and the programme 'still fails sufficiently to take national priorities into consideration'.

The report raises many problems with the use of outside consultants and experts and says that co-ordination of assistance is poor. 'This task should not, in future, be substantially delegated to a group of experts, low-level employees or supply companies.'

In the Phare and Tacis programmes, the report alleges that there has been abuse of internal financial controls, slow implementation, overlapping programmes and irregular charging of expenditure. In some cases, national officials in Eastern Europe were paid directly out of EU funds. So cumbersome were the procedures for approval of expenditure that in Hungary the government had to offer special bonuses to persuade officials to use Phare funds.

The role of consultants is criticised. 'The Commission no longer has sufficient control over the interventions that are carried out,' the report says. There are accounts of contracts which have only been tendered for in English and Italian, large scale oversupplies of some goods to Albania, and reports of frequent criticism for those consultants engaged in assistance to the nuclear industry, who are labelled 'nuclear tourists'.

Since the report - which covers 1993 - was completed, there have been reforms of the Phare and Tacis programmes which deal with some of the criticisms. Officials say there is now more control, greater decentralisation and more attention to local interests.

Nevertheless, the report is likely to lead to heavy criticism from the European Parliament, which last year froze funds for Tacis. The report will also add to the pressure for reforms of the Common Agricultural Policy, which the European Commission now accepts is doing serious damage to Central and Eastern Europe.