Watchdog slams EU's handling of bailouts

The handling of bailouts by the EU's executive arm was "generally weak" as it was unprepared for the size of the financial crisis, the bloc's auditors said in a report Tuesday. In a study of bailouts given to Hungary, Latvia, Romania, Ireland and Portugal, the European Commission was found to have a series of problems including countries being held to varying standards.
"The European Commission was not prepared for the first requests for financial assistance during the 2008 financial crisis because warning signs had passed unnoticed," the European Court of Auditors said in a statement accompanying the report. In their findings, the auditors acknowledged that the bailouts managed by the Commission, the executive of the 28-nation European Union, had brought about reforms and had some success.
"But they also identify several areas of concern relating to the Commission's 'generally weak' handling of the crisis: countries treated differently, limited quality control, weak monitoring of implementation and shortcomings in documentation," it said. The European Commission said it "takes note" of the findings but insisted that it had improved. "Most of the shortcomings ... have been fixed," Commission spokeswoman Annika Breidthardt told a news briefing. "Some of these countries now have some of the highest growth rates in Europe."
The EU's handling of debt-wracked Greece, which has received three distinct bailouts, is to be handled in separate audit. The five countries covered in the report were among Europe's worst affected by the global financial crisis that began in the US with the collapse of Lehman Brothers in 2008, but quickly spread to across the Atlantic. "It is imperative that we learn from the mistakes which were made," said Baudilio Tome Muguruza, the report's lead author.
The auditors cited evidence that showed eurozone countries received tougher standards than countries not using the euro. For example, Ireland was viewed approvingly by its EU overseers after introducing a central bank reform, even though the actual implementation took place only two years later. The Commission teams denied this latitude to non-eurozone countries such as Hungary, which were forced to deliver on a law's actual implementation.
In another fault, the Commission poorly assessed the exposure of governments to their countries' financial systems, which made a bankruptcy of a big bank, such as the collapse of Allied Irish in Ireland in 2009, a total surprise. Brussels failed to see "the link between large foreign financial flows, the health status of the banks and, ultimately, government finances," the report said. In another embarrassing criticism, the auditors said the Commission carried out poor quality control of their own work. "The underlying calculations were not reviewed outside the team, the work of the experts was not thoroughly scrutinised and the review process was not well documented," they said.